Justia Securities Law Opinion Summaries

Defendant-Appellant Brian McKye was charged with eight counts of securities fraud and one count of conspiracy to commit money laundering. The district court refused to give the jury his tendered instruction that would have permitted the jury to decide whether the investment notes at issue were securities under federal securities law. He was convicted and received a 262-month sentence. Upon review, the Tenth Circuit concluded the district court erred by not giving the tendered instruction, and reversed the convictions.View "United States v. McKye" on Justia Law

The Securities and Exchange Commission (SEC) brought a civil enforcement action against Defendant-Appellees GeoDynamics, Inc., its managing director Jeffory Shields, and several other business entities affiliated with Shields, alleging securities fraud in connection with four oil and gas exploration and drilling ventures Shields marketed to thousands of investors as Joint Venture Agreements (JVAs). The district court granted defendants' 12(b)(6) motion to dismiss. The SEC appealed, contending that despite their labels as JVAs, the investment agreements were actually "investment contracts" and thus "securities" subject to federal securities regulations. Because it could not be said as a matter of law that the investments at issue were not "investment contracts," the Tenth Circuit reversed. View "SEC v. Shields, et al" on Justia Law

The issue before the Supreme Court in this case centered on whether a father presented sufficient evidence to rebut the presumption that his transfer of stock to his son was a gift. Upon review, the Supreme Court held that a person seeking to rebut the presumption that a transfer of property from a parent to a child is a gift must show clear and convincing evidence of a contrary intent. That person is limited to evidence antecedent to, contemporaneous with, or immediately following the transfer, and may also adduce proof of statements by the parties concerning the purpose and effect of the transfer. View "Bhagat v. Bhagat" on Justia Law

The Securities and Charities Division of the Mississippi Secretary of State Office brought charges against Marshall Wolfe and Jack Harrington for securities violations pertaining to their operation of SteadiVest, LLC. The Secretary of State found that Wolfe and Harrington had violated Mississippi securities laws, and fines were levied against them. Wolfe and Harrington appealed, and the Chancery Court affirmed. Wolfe and Harrington then appealed to the Supreme Court. After review of the Circuit and Chancery Court records, the Supreme Court found that the chancellor did not err in affirming the Secretary of State's finding that Wolfe and Harrington had violated Mississippi Code Section 75-71-501. The Secretary of State's decision was supported by substantial evidence, was not arbitrary or capricious, did not go beyond the Secretary of State's power, and did not violate Wolfe's or Harrington's statutory or constitutional rights. However, the Court found the method used to assess penalties against Wolfe and Harrington was improper, and reversed on that issue. View "Harrington v. Ofc. of Mississippi Sec'y of State" on Justia Law

The SEC settled an enforcement action against firms that executed trading orders on the New York Stock Exchange and placed the money obtained as a result of the enforcement actions into funds for distribution to injured customers. The SEC ordered the remaining funds to be disbursed to the United States Treasury. On appeal, petitioner, who had filed class actions against the firms, challenged the SEC's disbursement order seeking to invoke the court's statutory jurisdiction under 15 U.S.C. 78y. The court concluded that petitioner failed to plead an injury in fact sufficient to afford it Article III standing. For every Covered Transaction in which petitioner was identified as the injured customer, petitioner had already received a distribution from the Fair Funds that fully compensated it for that Covered Transaction. Accordingly, the court dismissed the petition for lack of subject matter jurisdiction. View "Martin v. U.S. S.E.C." on Justia Law

The issue before the Supreme Court in this matter was whether the Chancery Court was required to dismiss a Delaware derivative complaint after a California federal court entered final judgment dismissing the same complaint brought by different stockholders. The Chancery Court determined it was not required to give preclusive effect to the California judgment. Upon review, the Supreme Court held that the Chancery Court erred in its determination: (1) the lower court held as a matter of Delaware law that the stockholder plaintiffs in the two jurisdictions were not in privity with one another; (2) that the California stockholders were not adequate representatives of the defendant corporation; (3) California law controlled the issue, and derivative stockholders were in privity with one another because they acted on behalf of the corporation; and (4) the Chancery Court adopted a presumption of inadequacy without the record to support it. Accordingly, the Supreme Court reversed and remanded.View "Pyott v. Louisiana Municipal Police Employees' Retirement System" on Justia Law

In 2005, "The Record," a newspaper owned by Defendant North Jersey Media Group, published an article about an SEC complaint. The headline of the article read: "3 N.J. men accused in $9M stock scam." Neither the SEC complaint nor the article suggested that Plaintiffs Ronald Durando and Gustave Dotoli were arrested. The North Jersey Media Group also owns Defendant "The Nutley Sun," which received permission to reprint the Record article about Plaintiffs. In 2008, the Sun prepared the article for publication in its December 8 edition (a promotional issue circulated to 2500 non-subscribers in addition to the weekly's regular subscribers), but wrote a new headline for the article: "Local men charged in stock scheme." The day after publication, Plaintiffs' attorney sent an email to The Sun pointing out that his clients had not been "arrested," and demanded a retraction. The North Jersey Media Group gave approval for the filing of a retraction, and indeed one was published in boldface and large print on the front page of The Nutley Sun's December 22 edition. This edition was not circulated to the 2500 non-subscribers who received the December 8 edition with the erroneous teaser. Subsequently, Plaintiffs filed suit, alleging libel against the Sun and North Jersey Media Group. The trial court ultimately granted summary judgment in favor of Defendants on all claims and dismissed the complaint. The court determined that there was not "sufficient evidence from which a jury could clearly and convincingly conclude that any . . . of the defendants acted with actual malice." In an unpublished opinion, the Appellate Division affirmed, finding no 'clear and convincing' evidence of actual malice to warrant a jury trial on defamation or false light. Upon review, the Supreme Court affirmed: "[a]lthough this case unquestionably involves sloppy journalism, the careless acts of a harried editor, the summary-judgment record before the Court cannot support a finding by clear and convincing evidence that the editor knowingly or in reckless disregard of the truth published the false front-page teaser."View "Durando v. The Nutley Sun" on Justia Law

Appellant John Sterling, Jr. was charged with three criminal offenses: securities fraud, making false or misleading statements to the State Securities Commission, and criminal conspiracy. He was convicted of securities fraud, acquitted of making a false or misleading statement and conspiracy, and received a five-year sentence.  Appellant appealed to the Supreme Court, arguing the trial judge abused his discretion in permitting testimony from investors, in denying appellant's directed verdict motion, and that the trial court committed reversible error in charging the jury. Charges against Appellant stemmed from a business venture related to the retail mortgage lending industry. After a merger between two companies, Appellant ceased being an employee of one of the acquired companies, but remained on the Board of Directors of the newly formed entity. The new entity had financial trouble from the onset, and began moving debts and assets among the surviving entities to hide its financial difficulties. Appellant's defense was predicated in large part on the fact that the financial maneuvers that took place were approved by outside auditors. Upon review of the trial court record, the Supreme Court found no error and affirmed Appellant's conviction.View "South Carolina v. Sterling" on Justia Law

In these consolidated cases, plaintiffs filed shareholder derivative suits in California state court alleging that PICO's compensation policies violated state law. Defendants removed the cases to federal court, arguing that the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. 78n-1(a)(1), barred the suits. The court concluded that Section 27 of the Securities Exchange Act, 15 U.S.C. 78aa(a), did not confer federal jurisdiction; defendants identified no significant federal issue that would confer jurisdiction; and the doctrine of complete preemption did not apply. Therefore, removal was improper and the district court lacked jurisdiction to do anything other than remand them to state court. Accordingly, the court vacated with instructions to remand the cases to state court. The court dismissed defendants' cross appeals for lack of jurisdiction. View "Dennis v. Hart" on Justia Law

Plaintiffs brought this action against the Commission seeking a declaratory judgment that recently adopted regulations of the Commission regarding derivatives trading were unlawfully adopted and invalid, and seeking to vacate and set aside those regulations and to enjoin their enforcement. Plaintiffs contended that the Commission violated the Administrative Procedure Act, 5 U.S.C. 500 et seq., in its rulemaking by: (1) failing to address rationales for broadening Commodity Pool Operators (CPOs) exemptions; (2) failing to comply with the Commodity Exchange Act, 7 U.S.C. 2(a), and offering an inadequate evaluation of the rule's costs and benefits; (3) including swaps in the trading threshold, restricting its definition of bona fide hedging, and failing to justify the five percent threshold; and (4) failing to provide an adequate opportunity for notice and comment. The court concluded, however, that the Commission did not act unlawfully in promulgating the regulations at issue. Accordingly, the court affirmed the district court's grant of summary judgment in favor of the Commission. View "Investment Company Inst., et al. v. CFTC" on Justia Law