Justia Securities Law Opinion Summaries

Alpine Securities Corporation, a securities broker-dealer and member of the Financial Industry Regulatory Authority (FINRA), faced sanctions from FINRA in 2022 for violating its rules. FINRA imposed a cease-and-desist order and sought to expel Alpine from membership. Alpine challenged the constitutionality of FINRA in federal court, arguing that FINRA's expedited expulsion process violated the private nondelegation doctrine and the Appointments Clause.The United States District Court for the District of Columbia denied Alpine's request for a preliminary injunction to halt FINRA's expedited proceeding. The court held that FINRA is a private entity, not subject to the Appointments Clause, and that the SEC's ability to review FINRA's decisions satisfied the private nondelegation doctrine.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. The court found that Alpine demonstrated a likelihood of success on its private nondelegation claim, as FINRA's expulsion orders take effect immediately without prior SEC review, effectively barring Alpine from the securities industry. The court held that this lack of governmental oversight likely violates the private nondelegation doctrine. The court also found that Alpine faced irreparable harm if expelled before SEC review, as it would be forced out of business.The court reversed the district court's denial of a preliminary injunction, instructing it to enjoin FINRA from expelling Alpine until the SEC reviews any expulsion order or the time for Alpine to seek SEC review lapses. However, the court did not grant a preliminary injunction on Alpine's Appointments Clause claims, as Alpine did not demonstrate irreparable harm from participating in FINRA's expedited proceeding itself. The case was remanded for further proceedings consistent with the appellate court's findings. View "Alpine Securities Corporation v. Financial Industry Regulatory Authority, Inc." on Justia Law

The case revolves around EIG, an American investment fund, which lost $221 million after investing in a project to exploit newly discovered oil reserves off the coast of Brazil. The project was led by Petróleo Brasileiro, S.A. (Petrobras), Brazil’s state-owned oil company. A criminal investigation later revealed that Petrobras executives were accepting bribes from contractors and sharing the proceeds among themselves and Brazilian politicians. When this corruption was exposed, the project's lenders withdrew, causing the project to collapse and EIG’s investment to become worthless.The District Court for the District of Columbia had previously denied Petrobras' motion to dismiss the case, arguing that it was immune from liability under the Foreign Sovereign Immunities Act (FSIA). The court held that EIG had sufficiently alleged that Petrobras’ fraud had a "direct effect in the United States" and therefore fell within the direct-effect exception to the FSIA.The United States Court of Appeals for the District of Columbia Circuit affirmed the lower court's decision. The court concluded that Petrobras had caused a direct effect in the United States because it had engaged with EIG in a sustained course of dealing over many months that conveyed its desire to obtain an investment from EIG. The court also found that the direct effect in the United States was not the result of happenstance or coincidence. It was wholly foreseeable, given that Petrobras had contemplated and tried to attract U.S. investment. The court therefore affirmed the district court’s denial of Petrobras’ assertion of foreign sovereign immunity at this stage and remanded for further proceedings. View "EIG Energy Fund XIV, L.P. v. Petroleo Brasileiro, S.A." on Justia Law

In 2016, Jesse Benton, a political operative, received funds from Roman Vasilenko, a foreign national, and contributed those funds to a fundraiser supporting then-Presidential candidate Donald Trump. Benton was subsequently convicted of six felonies related to the unlawful contribution and related campaign finance filings. Benton appealed his conviction on several grounds, including challenges to the government’s decision to prosecute campaign finance crimes under the Sarbanes-Oxley Act, the admissibility of an earlier pardoned conviction, the sufficiency of the evidence, and the jury charge.The District Court denied Benton's motion to dismiss the charges, ruling that the Sarbanes-Oxley Act could be applied to false campaign finance filings. The court also allowed the admission of Benton's earlier pardoned conviction under Federal Rule of Evidence 404(b) and its use at sentencing. After a three-day jury trial, Benton was found guilty on all counts. He was sentenced to eighteen months' incarceration and twenty-four months' supervised release.On appeal, the United States Court of Appeals for the District of Columbia Circuit affirmed the district court's decision. The court held that the government had discretion to prosecute under either the Sarbanes-Oxley Act or the Federal Election Campaign Act (FECA). The court also found no error in the district court's admission of Benton's pardoned conviction under Rule 404(b) and declined to review Benton's challenge to the use of the pardoned conviction at sentencing. Finally, the court rejected Benton's challenges to the jury instructions, finding that any error was invited by Benton himself. View "United States v. Benton" on Justia Law

The Securities and Exchange Commission recently approved the trading of two bitcoin futures funds on national exchanges but denied approval of Grayscale’s bitcoin fund. Petitioning for review of the Commission’s denial order, Grayscale maintains its proposed bitcoin exchange-traded product is materially similar to the bitcoin futures exchange-traded products and should have been approved to trade on NYSE Arca.   The DC Circuit vacated the order and granted Grayscale’s petition. The court explained that the denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products. The court explained that to avoid arbitrariness and caprice, administrative adjudication must be consistent and predictable, following the basic principle that similar cases should be treated similarly. The court wrote that NYSE Arca presented substantial evidence that Grayscale is similar, across the relevant regulatory factors, to bitcoin futures ETPs. As such, the court found that the Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP. Accordingly, the court explained that in the absence of a coherent explanation, this, unlike regulatory treatment of like products, is unlawful. View "Grayscale Investments, LLC v. SEC" on Justia Law

Petitioner Cboe Futures Exchange (CFE) announced plans to list futures contracts based on the Cboe Volatility Index, more commonly known as the “VIX Index.” The following year, the SEC and the CFTC issued a joint order “excluding certain indexes comprised of options on broad-based security indexes”—including the VIX—“from the definition of the term narrow-based security index.” The petition, in this case, challenged the SEC’s 2020 order treating SPIKES futures as futures.   The DC Circuit granted the petition. The court explained that the SEC did not adequately explain why SPIKES futures must be regulated as futures to promote competition with VIX futures. However, the court wrote that while it vacates the Commission’s order, it will withhold issuance of our mandate for three calendar months to allow market participants sufficient time to wind down existing SPIKES futures transactions with offsetting transactions. The court explained that the Exemptive Order never mentions the futures disclosures. And at any rate, those disclosures only partially fill the void left by the absence of the Disclosure Statement. As with the Exemptive Order’s exceptions and conditions, the futures disclosures do not address any number of matters covered by the Disclosure Statement. And even when the two sets of disclosures overlap, the Disclosure Statement tends to provide much greater detail than the futures disclosures. View "Cboe Futures Exchange, LLC v. SEC" on Justia Law

Plaintiff was employed through various foreign subsidiaries of Morgan Stanely between 2006 and 2016. Plaintiff claims that, between 2014 and 2016, he raised concerns about U.S. securities violations, which occurred overseas but affected U.S. markets. After receiving a pay cut and a recommendation that he find employment elsewhere. In January 2016, Plaintiff resigned. Plaintiff then hired counsel. However, counsel withdrew after Morgan Stanley threatened to pursue an action against counsel for violations of his professional obligations.The Department of Labor Administrative Review Board dismissed Plaintiff's claim under Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes–Oxley Act, finding that Section 806 did not apply because he was not an "employee" at the time of any alleged retaliation. The D.C. Circuit affirmed, finding that Plaintiff did not meet the definition of "employee" at any time during the alleged retaliation. View "Christopher Garvey v. Administrative Review Board" on Justia Law

Petitioner petitioned for review of the Securities and Exchange Commission order granting him a whistleblower award for providing original information leading to successful enforcement action against Citigroup, Inc. Although the SEC agreed the original information Petitioner and his team provided to the Commission warranted an award equal to 15 percent of the fine levied against Citigroup, Petitioner objected to the Commission’s determination that he and his former co-worker were to divide the award equally as joint whistleblowers.   The DC Circuit dismissed Petitioner’s petition for want of jurisdiction insofar as he challenges the amount of the award granted to his co-worker. The court denied the petition insofar as it challenges the co-worker’s eligibility for an award because the Commission’s decision was not arbitrary and capricious, or otherwise contrary to law, nor was its finding of fact unsupported by substantial evidence.   The court explained that the SEC whistleblower statute does not ask who developed the original information that led to a successful resolution of a covered action; instead, it asks who provided that information to the Commission. The SEC did not err as to the law, nor did it lack substantial evidence as to the facts, in determining that both parties acted as joint whistleblowers when they provided information to the Commission, making the co-worker eligible for an award. View "Michael Johnston v. SEC" on Justia Law

Petitioner Bloomberg L.P. (“Bloomberg”) seeks review of the Securities and Exchange Commission’s (the “Commission” or “SEC”) decision to approve new reporting requirements proposed by the Financial Industry Regulatory Authority, Inc. (“FINRA”), Intervenorfor-Respondent, affecting underwriter members in the corporate bond market. The Commission ultimately concluded that FINRA’s proposal would impose a limited burden on competition and enable market participants to obtain broad, uniform access to corporate bond reference data before the first transaction in a new-issue bond. Accordingly, the Commission approved FINRA’s proposal.   The DC Circuit granted Bloomberg’s petition for review in part and denied in part. The court held that the Commission’s approval of FINRA’s proposed reference data service was arbitrary and capricious in one respect: the Commission failed to respond adequately to Bloomberg’s concerns about the cost of building and maintaining the program and the extent to which those costs—which could conceivably amount to millions, or tens of millions, of dollars—will be borne by market participants. As such, the Commission violated the Administrative Procedure Act and failed to engage in reasoned decision-making. However, the court wrote, that Bloomberg’s remaining arguments lack merit. Therefore, Bloomberg’s petition for review is otherwise denied. View "Bloomberg L.P. v. SEC" on Justia Law

In 2005, the SEC promulgated a series of initiatives dubbed “Regulation NMS,” which stands for National Market System. One of those initiatives established the concept of the “[n]ational best bid and national best offer,” which are the best bid and best offer for a security, from the taker’s point of view, across all U.S. securities exchanges. Regulation NMS also classifies some providers’ orders as “protected” bids or offers (collectively “protected quotations”). Protected quotations are “automated,” publicly displayed, and the national best bid or offer.At issue is not whether companies like Petitioner may seek advantages in the market by using advanced technology and ingenious trading strategies, but instead whether the SEC may allow an exchange to innovate, with the D-Limit order, in a way that offers new opportunities to long-term investors.The D.C. Circuit approved the SEC's rule, finding that substantial evidence supported the SEC’s findings and the SEC’s conclusions were reasonable and reasonably explained. View "Citadel Securities LLC v. SEC" on Justia Law

Appellant was convicted of conspiracy to commit securities fraud, securities fraud, and first-degree fraud. On appeal, she mounted a single challenge: the prosecution made improper comments during its rebuttal closing argument that substantially prejudiced her and denied her a fair trial. Appellant objected to most of the prosecution’s statements in the district court, and the court sustained the objections.   The DC Circuit affirmed Appellant’s convictions, finding no reversible error in the district court’s response to the prosecution’s challenged statements. Appellant argued that the court should apply harmless-error review. However, the court explained that harmless-error review is inapplicable in the circumstances of this case. Harmless-error analysis generally applies when a district court erroneously rejects a defendant’s timely claim of an error. Here, though, the district court did not erroneously reject Appellant’s claim of an error. Indeed, the court did not reject any relevant claim of error at all. Appellant’s claim involves the four allegedly improper statements made by the prosecution in the rebuttal closing argument. But Appellant raised no objection in the district court to the fourth of those statements, so there was no claim of any error at trial as to that one. And while Appellant did object to the other three statements, the district court did not erroneously overrule her objections.   Further, Appellant cannot demonstrate plain error. The district court did not err, much less plainly err, in responding to the prosecution’s challenged statements. Lastly, even assuming the district court should have taken any additional actions, the court’s failure to do so did not affect Appellant’s substantial rights. View "USA v. Brynee Baylor" on Justia Law