Justia Securities Law Opinion Summaries

Based on their involvement in promoting or selling stock for Petro America, an unregistered company that had no value, eight coconspirators were charged with conspiracy to commit securities fraud and wire fraud 18 U.S.C. 371. Hawkins was also charged with aiding and abetting securities fraud, 15 U.S.C. 77q and 18 U.S.C. 2, aggravated currency structuring, 31 U.S.C. 5324(a)(3) and (d)(2), money laundering, 18 U.S.C. 1957, and two counts of wire fraud, 18 U.S.C. 1343. Brown was also charged with securities fraud and wire fraud; Heurung was charged with two additional counts of wire fraud; and Miller was charged with money laundering and wire fraud. The others pled guilty to various charges. Hawkins, Brown, Heurung, Miller and Roper proceeded to trial. Hawkins argued that Petro America was a legitimate company and that the government was prosecuting so that it could confiscate the company's substantial assets. The others acknowledged that Petro America was a sham but claimed they had believed in good faith that the company was real and that they could promote or sell its stock. The Eighth Circuit affirmed their convictions on all counts, rejecting challenges concerning jury selection and evidentiary rulings. View "United States v. Hawkins" on Justia Law

Just before investing in Zhongpin on behalf of Prestige, Yang, a Chinese citizen employed at a U.S. investment firm, purchased Zhongpin shares and option contracts for himself. Yang was Prestige’s only officer and employee and sole investment manager. Yang did not disclose the purchases to Prestige. After its purchases, Prestige owned more than five percent of Zhongpin’s common stock, triggering an obligation to file Schedule 13D, 15 U.S.C. 78m(d). Yang and two others associated with Prestige filed Schedule 13D on behalf of Prestige, disclosing that Yang shared voting and dispositive power over Prestige’s Zhongpin shares, but failing to list the shares that Yang had purchased for himself, as required. The Schedule 13D misleadingly stated that, except for transactions listed on the form, “no transactions in the Common Stock were effected by any Reporting Person” in 60 days prior to Prestige’s attainment of its interest. Claiming deceptive “front-running,” the Securities and Exchange Commission instituted a civil suit. The jury found that Yang had violated the law by front-running and by filing a fraudulent disclosure. The court imposed a $150,000 penalty and enjoined Yang from future violations of U.S. securities law. The Seventh Circuit affirmed. Yang forfeited his arguments regarding the illegality of front-running and the materiality of his disclosure. View "Sec. & Eexch. Comm'n v. Yang" on Justia Law

In 2003, the SEC filed a civil suit against Custable, charging fraud involving “penny stocks” that yielded him at least $4 million. Criminal proceedings resulted in a long prison sentence for Custable. In 2010 he consented to entry of a judgment that ordered him to pay a $120,000 penalty plus $6.4 million in disgorgement of profits, 15 U.S.C. 78u(d). The SEC may either to remit the penalty money to the Treasury or to place it in the same fund as the disgorged profits, 15 U.S.C. 7246. Deciding that locating the defrauded victims would not be feasible, the Commission asked the court to allow it to pay to the Treasury all the disgorged profits that it had recovered. Hare, a purported victim of another Custable fraud and not a party, claimed to have an interest in the fund and asked the court to allow him to respond to any motion to disburse. The judge rejected Hare’s argument and granted the SEC’s motion to disburse the entire fund to the Treasury. The Seventh Circuit dismissed an appeal. Hare failed to establish that he is within an exception to the rule that forbids a nonparty to appeal; the grounds that he advanced for relief were frivolous View "Sec. & Exch. Comm'n v. Custable" on Justia Law

This appeal arose out of the settlement of a securities class action brought on behalf of the purchasers of certain common stock of a corporation. Those who objected to the settlement and appealed the rejection of their objection argued that they were given too little time to register objections with the district court and that the district court should not have approved the amount of attorneys’ fees awarded to class counsel. The First Circuit (1) affirmed the district court’s rejection of the objections at issue, as the objectors had notice in fact and a sufficient opportunity to have any of their objections heard by the court before it approved the settlement; and (2) dismissed the objectors’ appeal from the court orders approving the settlement and award of counsel fees, as the objectors had no standing to complain about the fee award. View "Hill v. State Street Bank Corp." on Justia Law

The Bank and a group of States challenged the constitutionality of various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376. The district court concluded that plaintiffs lacked standing and that their claims were not ripe. The court concluded that the Bank has standing to challenge the constitutionality of the Consumer Financial Protection Bureau, and that claim is ripe. Therefore, the court reversed as to that claim and remanded for reconsideration in the first instance the Bank’s constitutional challenge to the Bureau. The court also concluded that the Bank has standing to challenge Director Cordray’s recess appointment, and that claim is ripe. Therefore, the court reversed as to that claim and remanded for reconsideration in the first instance the Bank’s constitutional challenge to the recess appointment. The court further concluded that the Bank lacks standing to challenge the constitutionality of the Financial Stability Oversight Council and affirmed the judgment as to that claim. Finally, the court concluded that the State plaintiffs lack standing to challenge the Government’s orderly liquidation authority, and that claim is not ripe. Therefore, the court affirmed as to that claim. View "State Nat'l Bank of Big Spring v. Lew" on Justia Law

Plaintiffs, purchasers of Green Mountain common stock, filed a putative securities class action, alleging that Green Mountain and some of its executives made fraudulent misrepresentations about Green Mountainʹs inventory, business performance, and growth prospects in a manner designed to mislead investors about the strength of Green Mountainʹs business, in violation of federal securities law. The court held that the complaint alleges misleading statements of material fact and a compelling inference of scienter. Accordingly, the court vacated the district court's grant of defendants' motion to dismiss and remanded for further proceedings. View "Employees' Retirement System v. Green Mountain Coffee Roasters" on Justia Law

Plaintiffs, special-purpose investment entities, filed suit in New York state court against defendants, several parties responsible for structuring, offering, and managing collateralized debt obligations (CDOs). Plaintiffs allege, among other things, fraud in connection with disclosures about the construction of three CDOs. After removal to federal court, the district court dismissed the complaint under Rule 12(b)96) and denied plaintiffs' request to replead. The court concluded that the district court erred in aspects of its dismissal of plaintiffs’ fraud claim and also exceeded the bounds of its discretion in denying plaintiffs leave to amend the complaint as to the remaining claims. Accordingly, the court reversed in part, vacated in part, and remanded for further proceedings. View "Loreley Financing (Jersey) No. 3 v. Wells Fargo Securities, LLC" on Justia Law

In 1996, Bocchino, a stockbroker, learned from a superior that Traderz “might go public” and that the endeavor was supported by “some commitment” from a popular fashion model. Based solely on that, and without any independent investigation into the quality of the entity, Bocchino immediately sought investment from clients. Bocchino received over $40,000 in commissions from Traderz sales. The second involved Fargo. The source of Bocchino’s information regarding Fargo is unclear. Bocchino only obtained cursory documentation about the entity before soliciting sales. He did not conduct any independent investigation, despite awareness that Fargo’s principal’s “full-time ‘job’ was law student.” Bocchino received $14,000 in commissions for his clients’ stock purchases in Fargo. Traderz and Fargo turned out to be fraudulent ventures. The principals of each entity were criminally convicted, and the anticipated value of the investments vanished. The Securities and Exchange Commission brought civil law enforcement actions against those who sold investments in the entities. The bankruptcy court held that those civil judgments against Bocchino were nondischargeable, 11 U.S.C. 523(a)(2)(A). The district court and Third Circuit affirmed, finding that collapse of the private placements was neither abnormal nor extraordinary given Bocchino’s lack of due diligence. View "In Re: Bocchino" on Justia Law

The SEC found that petitioner and his company repeatedly marked the close - buying or selling stock as the trading day ends to artificially inflate the stock's value - and sanctioned them accordingly. The court concluded that the Commission applied the correct legal standard and properly concluded that there is ample evidence petitioner manipulated the market by marking the close; petitioner was properly charged as a primary violator under both the Securities and Exchange Act, 15 U.S.C. 78j(b), and the Investment Advisers Act, 15 U.S.C. 80b-6(1), (4); but the Commission cannot apply the Dodd-Frank Act, Pub. L. No. 111-203, 124 Stat. 1376, to bar petitioner from associating with municipal advisors and rating organizations because such an application is impermissibly retroactive. Accordingly, the court granted in part and denied in part the petition for review. The court vacated the portion of the SEC order that is impermissibly retroactive. View "Koch v. SEC" on Justia Law

Petitioners seek review of the SEC's final order finding that petitioners violated Sections 204, 206, and 207 of the Investment Advisors Act of 1940, 15 U.S.C. 80b-4, 80b-6(1)–(2), 80b-7, and Advisors Act Rule 204-1(a)(2), 17 C.F.R. 275.204-1(a)(2). Determining that, by failing to disclose $210,000 in fees received from an investment manager, petitioners misrepresented that they were providing independent and conflict-free advice, the Commission imposed industry bars and cease-and-desist orders, ordered disgorgement, and levied a total of $650,000 in civil penalties. The court denied the petition for review, holding that the Commission reasonably interpreted Section 4E as not imposing a jurisdictional bar to late-filed actions, and that the Commission acted reasonably in imposing its sanctions. View "Montford and Co. v. SEC" on Justia Law