Justia Securities Law Opinion Summaries

IonQ, Inc., a public company developing quantum computers, experienced a significant drop in its stock price from $7.86 on May 2, 2022, to $4.34 on May 12, 2022. A group of investors claimed this decline was due to the Scorpion Report, published on May 3, 2022, which alleged that IonQ had been committing widespread fraud regarding the value of its company. The investors filed a securities fraud lawsuit against IonQ, asserting that the report revealed the truth about IonQ's misrepresentations, causing their financial losses.The United States District Court for the District of Maryland dismissed the investors' first amended complaint for failing to state a claim, particularly for not adequately pleading loss causation. The court found that the Scorpion Report, authored by a short-seller with financial incentives, was not a reliable source of information. The court also noted that the investors failed to show that the report or IonQ's response revealed any new, truthful information to the market. The investors then sought reconsideration and leave to file a second amended complaint, which the district court denied, again citing the failure to plead loss causation.The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's decision. The appellate court agreed that the Scorpion Report, given its disclaimers and the financial motivations of its authors, could not plausibly be seen as revealing the truth about IonQ's alleged fraud. Additionally, IonQ's response to the report did not concede any truth to the allegations but rather dismissed them as inaccurate. Therefore, the investors failed to establish the necessary element of loss causation, making their proposed amendments futile. The court affirmed the district court's judgment. View "Defeo v. IonQ, Inc." on Justia Law

Frank Harmon Black and his securities investment firm, Southeast Investments, N.C., Inc., are involved in an ongoing disciplinary proceeding initiated by the Financial Industry Regulatory Authority, Inc. (FINRA) in September 2015. The proceedings were based on allegations that Black and Southeast failed to establish and maintain an adequate broker supervisory system, failed to preserve business-related electronic correspondence, and submitted false documents and testimony to FINRA examiners, violating FINRA rules and federal securities laws. In March 2017, a FINRA hearing panel found Black and Southeast in violation of these rules and imposed fines and sanctions, including barring Black from associating with other FINRA member firms.Black and Southeast appealed the FINRA decision to the National Adjudicatory Council (NAC), which affirmed the findings but reduced the fines in May 2019. They then petitioned the Securities and Exchange Commission (SEC) for review. On December 7, 2023, the SEC affirmed the NAC's decision regarding the supervisory and record retention violations but remanded the false testimony and fabricated documents issues to FINRA for further proceedings, determining that FINRA's failure to produce certain investigatory notes was not a harmless error.The United States Court of Appeals for the Fourth Circuit reviewed the SEC's decision. The court concluded that the SEC's decision was not a final order because it remanded part of the case to FINRA for further proceedings. As a result, the court determined that it lacked jurisdiction to review the petition and dismissed it. The court emphasized that a final order must mark the consummation of the agency's decision-making process and result in legal consequences, which was not the case here. View "Black v. Securities and Exchange Commission" on Justia Law

Scottsdale are respondents in an ongoing disciplinary proceeding before FINRA for allegedly selling unregistered securities in violation of Section 5 of the Securities Act of 1933, 15 U.S.C. 77e, and FINRA Rule 2010. Scottsdale sought an injunction in federal district court before FINRA completed its proceedings, claiming the FINRA proceeding is unauthorized because FINRA may only discipline members for violations of the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. The district court dismissed for lack of subject-matter jurisdiction. Because Scottsdale can obtain meaningful judicial review of its claim in this court following the appeal process outlined in the Exchange Act, the court held that its challenge to FINRA’s authority is the type of claim Congress intended to be reviewed within the statutory scheme. Therefore, the court concluded that the district court properly dismissed for lack of subject-matter jurisdiction and affirmed the judgment. View "Scottsdale Capital Advisors v. FINRA" on Justia Law

In 2015, the Securities and Exchange Commission instituted an administrative proceeding against Dawn Bennett and her law firm (collectively, Bennett) to determine whether Bennett had violated the anti-fraud provisions of the federal securities laws. The Commission assigned the initial stages of the proceeding to an ALJ, and the ALJ scheduled a hearing on the merits of Bennett’s case. Bennett subsequently filed suit challenging the constitutionality of the administrative enforcement proceeding. Specifically, the Complaint alleged that the SEC’s administrative enforcement proceedings violated Article II of the United States Constitution. The district court dismissed the suit on jurisdictional grounds. The Fourth Circuit affirmed, holding that Congress has impliedly divested district-court jurisdiction over the agency action. View "Bennett v. U.S. Securities & Exchange Commission" on Justia Law