Justia Securities Law Opinion Summaries

Plaintiffs appealed the district court's dismissal of their claims against Sequoia Fund, alleging that Sequoia Fund breached a contractual obligation not to concentrate its investments in a single industry. The Second Circuit agreed with the district court's alternative holding and affirmed the judgment. The court assumed, without deciding, that plaintiffs plausibly alleged the existence of a contract that included the Concentration Policy as an enforceable term that could not be changed without a shareholder vote. Even assuming the existence of a binding contract, however, the court held that plaintiffs failed to plausibly allege a breach. In this case, because the SEC's 1998 Guidance ‐‐ and by extension the Concentration Policy ‐‐ allows for the passive increases at issue, plaintiffs have failed to allege a violation of the Concentration Policy. View "Edwards v. Sequoia Fund, Inc." on Justia Law

A putative class of former shareholders in Towers, Watson & Co. filed suit alleging that several defendants violated the Securities Exchange Act by omitting material facts in proxy documents, rendering statements in those documents false or misleading. The district court dismissed the complaint.The Fourth Circuit vacated and held that the statute of limitations begins to run for a claim governed by 15 U.S.C. 78i(f) when the plaintiff has discovery notice. Applying this standard, the court held that the putative class filed suit within one year of discovering the facts constituting the violation. Therefore, the district court erred in dismissing plaintiffs' suit as time-barred. The court also held that plaintiffs have sufficiently alleged that the omitted facts were material and the district court erred in dismissing the Section 14(a) claim. Finally, the court held that none of the three alternative grounds presented by defendants supported the district court's dismissal order. View "In re: Willis Towers Watson" on Justia Law

Investor plaintiffs filed suit alleging securities fraud under Louisiana law against their former investment adviser and its CEO for fraudulently inducing them to purchase falsely inflated hedge fund securities. The district court sua sponte granted summary judgment for defendants, holding that Delaware law required investor plaintiffs to bring a derivative claim on behalf of the hedge funds.The Fifth Circuit vacated the district court's judgment and held that investor plaintiffs had Article III standing where their injury-in-fact arose immediately upon their purchase of the falsely overvalued securities; were induced and caused by defendant advisers' fraudulent advice and solicitations; and were likely will be redressed by a favorable decision on the merits. The court held that, under the circumstances of this case, it was at least arguable that Delaware law does not relegate the investor plaintiffs to a derivative action on behalf of the hedge funds for losses indirectly caused them by the funds' decline or lack of value, but instead recognizes their cause of action directly against the defendant sellers of the hedge fund securities for securities fraud under Louisiana law. Accordingly, the court remanded for further proceedings. View "Broyles v. Commonwealth Advisors, Inc." on Justia Law

The Ninth Circuit affirmed the district court's grant of summary judgment for the SEC in a civil complaint filed against defendant and his law firm, alleging securities fraud claims. The panel held that the EB-5 visa program investments in connection to defendant and his law firm constitute securities in the form of investment contracts. In this case, the private placement memoranda's (PPMs) identification of the investments as securities, the form of the investment entity as a limited partnership, and the promise of a fixed rate of return all indicate that the EB-5 transactions were securities. The panel rejected defendant's contention that the promised return was effectively nullified by the administrative fees, and his assertion that his clients nonetheless lacked an expectation of profit.The panel agreed with the district court that the uncontroverted evidence established that defendant was acting as a broker and was required to register with the SEC as a broker; defendant engaged in securities fraud in violation of section 17(a) of the Securities Act of 1933 and section 10(b) of the Securities Exchange Act of 1934; and the district court did not abuse its discretion in entering the disgorgement order. View "SEC v. Feng" on Justia Law

Investors filed suit alleging that Pier 1 and its executives violated section 10(b) of the Securities Exchange Act and SEC Rule 10b-5 by failing to disclose Pier 1's significant markdown risk. The district court ultimately granted Pier 1's motion to dismiss the amended complaint with prejudice.The Fifth Circuit affirmed, holding that the investors failed to plead a strong inference of scienter. The court held that the district court did not improperly analyze the investors' scienter allegations, and that each of the three categories of allegations, regarding Pier 1's motive and knowledge of high inventory and significant markdown risk did not create a strong inference of scienter required under the Private Securities Litigation Reform Act. View "Municipal Employees' Retirement System of Michigan v. Pier 1 Imports, Inc." on Justia Law

The DC Circuit denied a petition for review challenging the Commission's 2018 rule allowing investment companies to post shareholder reports online and mail paper copies to shareholders upon request. Petitioners argued that the SEC did not adequately consider the interests of shareholders who prefer reports in paper form. The court held, however, that the consumer organization lacked Article III standing. In this case, the organization could not reasonably have believed that its barebones affidavit, vaguely describing the preferences and burdens of unnamed members and others, sufficed to prove its representational standing; nor could it reasonably have believed that its standing was self-evident from the rulemaking record.The court also held that the paper-industry representatives asserted interests beyond those protected or regulated by the securities laws. Applying Hazardous Waste Treatment Council v. Thomas, 885 F.2d 918, 921–22 (D.C. Cir. 1989), the court held that the conflict between the interests of paper sellers and those of shareholders is likely to increase over time, and this suggests a systematic misalignment with shareholder preferences, which makes paper companies distinctly unqualified to advance the interests of shareholders. View "Twin Rivers Paper Co., LLC v. SEC" on Justia Law

The Retirement System filed a private securities fraud action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and the SEC's Rule 10b-5, claiming that it had detrimentally relied on Ocwen's materially misleading statements and omissions concerning the likelihood of achieving regulatory compliance. The district court dismissed the complaint for failure to identify any material misrepresentations or omissions or otherwise state a claim against Ocwen for securities fraud.The Eleventh Circuit affirmed and held that, even considering the Retirement System's allegations in the most favorable light, the complaint fell short of alleging any actionable misrepresentations or omissions under section 10(b) and Rule 10b-5, or any other cognizable securities law violation. In this case, some statements made by Ocwen were immaterial puffery, some were mere statements of opinion, some fell within the Private Securities Litigation Reform Act's safe-harbor forward-looking statements, and others were simply not alleged to be false. Furthermore, nothing that Ocwen failed to disclose rendered already-disclosed information misleading in context. View "University of Puerto Rico Retirement System v. Ocwen Financial Corp." on Justia Law

NFA is a self‐regulatory organization registered under the Commodity Exchange Act, subject to the authority of the Commodity Futures Trading Commission (CFTC), 7 U.S.C. 21, including review of NFA disciplinary actions. Effex, a closely held, foreign‐currency trading firm controlled by Dittami, is not subject to NFA regulation. NFA determined that its member, FXCM, had violated NFA rules. NFA released several documents related to a settlement, including allegations that Effex was involved in FXCM's misconduct. The press release did not specifically reference Effex but directed the public to the NFA’s website. Effex alleged that NFA’s findings are false and that their publication was defamatory. NFA had not contacted Effex or provided Effex notice of the investigation. CFTC conducted its own investigation, subpoenaed documents from Effex, and took the depositions of Dittami and other Effex employees. Effex alleged that NFA obtained documents from CFTC despite Effex’s request that its responses as a third party be kept confidential. CFTC issued its decision, finding that FXCM had concealed an improper trading relationship with a “high‐frequency trader” and the trader's company (HFT). Although not explicitly named, HFT is Effex. CFTC found materially the same facts as NFA did regarding Effex. The Seventh Circuit affirmed the dismissal of the suit. The Commodity Exchange Act regulates comprehensively all matters relating to NFA discipline, so a federal Bivens remedy is unavailable, and preempts Effex’s state law claims. View "Effex Capital, LLC v. National Futures Association" on Justia Law

Dennis Malouf held key roles at two firms. One of the firms (UASNM, Inc.) offered investment advice; the other firm (a branch of Raymond James Financial Services) served as a broker-dealer. Raymond James viewed those dual roles as a conflict, so Malouf sold the Raymond James branch. But the structure of the sale perpetuated the conflict. Because Malouf did not disclose perpetuation of the conflict, administrative officials sought sanctions against him for violating the federal securities laws. An administrative law judge found that Malouf had violated the Securities Exchange Act of 1934, the Securities Act of 1933, the Investment Advisers Act of 1940, Rule 10b–5, and Rule 206(4)–1. Given these findings, the judge imposed sanctions. The SEC affirmed these findings and imposed additional sanctions, including disgorgement of profits. Malouf appealed the SEC’s decision, but finding no reversible error, the Tenth Circuit affirmed. View "Malouf v. SEC" on Justia Law

Wayne Munson appealed a district court judgment granting Indigo Acquisition Holdings’ (IAH) motion for judgment on the pleadings. In 2009, Munson and other employees of Indigo Signworks entered into an agreement to participate in a Stock Appreciation Rights (SAR) program rather than receive bonuses. Under the program, Munson would be paid for his SARs if Indigo Signworks was sold. In 2016, IAH, a Delaware corporation, purchased Indigo Signworks. Munson and other employees participating in the SAR program were paid for their SARs and had the opportunity to reinvest in IAH’s membership units. In 2016, Munson purchased 12,500 Class A Units of IAH. In July 2018, Munson left his employment at Indigo Signworks to begin a competing sign company. IAH alleged this new business violated Munson’s obligations under IAH’s Amended LLC Agreement and filed suit in Delaware. In September 2018, Munson served IAH with a complaint seeking to void his purchase of the IAH Units. Munson argued the IAH Units he purchased were unexempt, unregistered securities under the North Dakota Securities Act. The North Dakota Supreme Court concluded the transaction at issue was exempt under the North Dakota Securities Act, and affirmed. View "Munson v. Indigo Acquisition Holdings, LLC, et al." on Justia Law