Justia Securities Law Opinion Summaries

Several national securities exchanges challenged a 2024 rule adopted by the Securities and Exchange Commission (SEC) that lowered the cap on fees exchanges may charge investors for executing orders. The SEC had previously set a cap of 30 mils ($0.003) per share for stocks priced at or above $1, and 0.3% of the quotation price for stocks below $1. In 2024, after gathering new data and considering market developments, the SEC reduced these caps to 10 mils for stocks priced at or above $1, and 0.1% for stocks below $1. The SEC explained that the changes were necessary to address market distortions and to align fee caps with reduced minimum tick sizes, thereby promoting price transparency and market efficiency.After the SEC adopted the new rule, several exchanges petitioned the United States Court of Appeals for the District of Columbia Circuit for review, arguing that the SEC exceeded its statutory authority and acted arbitrarily or capriciously. The SEC agreed to stay the amendment pending judicial review. The exchanges contended that the SEC lacked authority to impose an industry-wide fee cap and that, if it had such authority, it was required to proceed on an exchange-by-exchange basis. They also argued that the SEC’s decision-making was arbitrary, particularly in its assessment of market effects and its choice of the 10-mil cap.The United States Court of Appeals for the District of Columbia Circuit held that the SEC acted within its statutory authority under the Securities Exchange Act of 1934, as amended, which grants the SEC broad discretion to regulate the national market system, including the power to set universal access-fee caps. The court further found that the SEC’s rulemaking was not arbitrary or capricious, as the agency reasonably considered relevant issues, explained its decision, and relied on both economic theory and empirical data. The petition for review was denied. View "Cboe Global Markets, Inc. v. SEC" on Justia Law

Keith Berman, the appellant, pleaded guilty to securities fraud, wire fraud, and obstruction of proceedings related to a scheme to fraudulently increase the share price of his company, Decision Diagnostics Corp. (DECN). Berman issued false press releases claiming DECN had developed a blood test for coronavirus, which led to a significant increase in the company's stock price. The Securities and Exchange Commission (SEC) investigated and suspended trading of DECN's stock, revealing that Berman's claims were false. Despite this, Berman continued to issue misleading statements and used aliases to discredit the SEC's investigation.The United States District Court for the District of Columbia sentenced Berman to 84 months' imprisonment. The court calculated the loss caused by Berman's fraud using the modified rescissory method, determining a loss amount of $27.8 million. This calculation was based on the difference in DECN's stock price before and after the fraud was disclosed, multiplied by the number of outstanding shares. The court also applied enhancements for sophisticated means and substantial financial hardship to five or more individuals, resulting in a Guidelines range of 168 to 210 months, but ultimately imposed a downward variance.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. Berman challenged the district court's calculation of the loss amount, arguing that the fraud was disclosed earlier and that the loss was not solely attributable to his fraudulent statements. The appellate court found that the district court did not commit clear error in determining the disclosure date or in its loss causation analysis. The court also upheld the enhancements for sophisticated means and substantial financial hardship, finding sufficient evidence to support these determinations. Consequently, the appellate court affirmed the district court's judgment. View "United States v. Berman" on Justia Law

Institutional Shareholder Services, Inc. (ISS), a proxy advisory firm, challenged the Securities and Exchange Commission’s (SEC) interpretation of the term “solicit” under section 14(a) of the Exchange Act of 1934. The SEC had begun regulating proxy advisory firms by treating their voting recommendations as “solicitations” of proxy votes. ISS argued that its recommendations did not constitute “solicitation” under the Act.The United States District Court for the District of Columbia agreed with ISS and granted summary judgment in its favor. The court found that the SEC’s interpretation of “solicit” was overly broad and not supported by the statutory text. The National Association of Manufacturers (NAM), an intervenor supporting the SEC’s position, appealed the decision.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. The court affirmed the district court’s decision, holding that the ordinary meaning of “solicit” does not include providing proxy voting recommendations upon request. The court concluded that “solicit” refers to actively seeking to obtain proxy authority or votes, not merely influencing them through advice. The SEC’s definition, which included proxy advisory firms’ recommendations as solicitations, was found to be contrary to the statutory text of section 14(a) of the Exchange Act. View "Institutional Shareholder Services, Inc. v. SEC" on Justia Law

In early 2020, Robert Goodrich liquidated his stock portfolio due to concerns about the financial market's reaction to the COVID-19 pandemic, resulting in significant financial losses. Goodrich had an investment account with U.S. Trust Bank of America Private Wealth Management, managed by Matthew Lettinga. Despite advice from Lettinga to avoid liquidation, Goodrich insisted on selling his portfolio. Goodrich later sued Lettinga and Bank of America, claiming gross negligence, breach of fiduciary duty, and violations of the D.C. Securities Act, arguing that he was not adequately informed of the risks involved in liquidating his portfolio.The U.S. District Court for the District of Columbia dismissed Goodrich's claims of gross negligence and violations of the D.C. Securities Act, finding them implausibly pleaded. The court allowed the breach of fiduciary duty claim to proceed but later granted summary judgment in favor of the defendants, concluding that Goodrich had explicitly instructed the sale of his portfolio, which precluded liability under the terms of the investment agreement.The United States Court of Appeals for the District of Columbia Circuit reviewed the case and affirmed the District Court's decisions. The appellate court held that the investment agreement's exculpatory clauses were enforceable and that Goodrich's explicit instruction to liquidate his portfolio shielded the defendants from liability. The court also agreed that Goodrich failed to plausibly allege scienter, a necessary element for his claims under the D.C. Securities Act, and found no abuse of discretion in the District Court's limitation of discovery to the dispositive issue of whether Goodrich instructed the sale. View "Goodrich v. Bank of America N.A." on Justia Law

After petitioner was convicted of conspiracy, selling unregistered securities, and mail fraud, the SEC barred petitioner from associating with six classes of securities market participants. The court agreed with petitioner's argument that the Commissioner's imposition of Dodd-Frank’s collateral ban constitutes an impermissibly retroactive penalty because it is premised on pre-Dodd-Frank misconduct. See Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), Pub. L. No. 111–203, 124 Stat. 1376 (2010). Therefore, the Commission abused its discretion in barring petitioner from associating with the investment adviser, municipal securities dealer and transfer agent classes because those bars are impermissibly retroactive, and the court granted that portion of the petition. The court rejected petitioner's "unclean hands" argument and denied the remainder of the petition. View "Bartko v. SEC" on Justia Law

Petitioners seek review of the Commission's decision imposing sanctions for violations of the Investment Advisers Act of 1940, 15 U.S.C. 80b-21, and the rule against misleading advertising. Here, the Commission instituted an administrative enforcement action against petitioners for alleged violations of anti-fraud provisions of the Investment Advisers Act based on how they presented their “Buckets of Money” retirement wealth-management strategy to prospective clients. The court rejected petitioners' contention that the Commission’s decision and order under review should be vacated because the ALJ rendering the initial decision was a constitutional Officer who was not appointed pursuant to the Appointments Clause. The court also concluded that there is substantial evidence to support the Commission’s finding that petitioners’ “Buckets-of-Money” presentation promised to provide an historical-data-only backtest where the analysis would account for “rebucketizing.” Paying deference to the Commission's choice of sanctions, the court upheld the district court's imposition of the lifetime industry bar on Raymond J. Lucia. The court rejected petitioners' remaining contentions and denied the petition for review. View "Raymond J. Lucia Co. v. SEC" on Justia Law

The SEC created a new class of securities offerings freed from federal-registration requirements so long as the issuers of these securities comply with certain investor safeguards (Regulation A-Plus). Petitioners, the chief securities regulators for Massachusetts and Montana, seek review of Regulation A-Plus. The court concluded that, because Regulation A-Plus does not conflict with Congress’s unambiguous intent, it does not falter at Chevron Step 1. Furthermore, because the Commission’s qualified-purchaser definition is not “arbitrary, capricious, or manifestly contrary to the statute,” it does not fail Chevron Step 2. By providing a reasoned analysis of how its qualified-purchaser definition strikes the “appropriate balance between mitigating cost and time demands on issuers and providing investor protections,” the court concluded that the Commission has complied with its statutory obligation under the Administrative Procedure Act, 5 U.S.C. 702. Accordingly, the court denied the consolidated petitions for review. View "Lindeen v. SEC" on Justia Law

Petitioner challenges a joint regulation implementing a section of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. 78o-11. Congress added that particular section to the Exchange Act in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), Pub. L. No. 111-203, 941, 124 Stat. 1376. The court concluded that the Exchange Act provides a limited grant of jurisdiction, and only rules implementing specific, enumerated sections of the Act are entitled to direct review. Because Congress knew how to add sections to that list, but chose not to do so here, the court lacked jurisdiction over the appeal. Accordingly, the court transferred the petitions “in the interest of justice” to the United States District Court for the District of Columbia. View "The Loan Syndications Assoc. v. SEC" on Justia Law