Justia Securities Law Opinion Summaries

Articles Posted in US Court of Appeals for the Fourth Circuit
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Investors filed a claim with FINRA's arbitration division seeking to recover substantial losses from Broker, alleging nine causes of action. Broker counterclaimed, seeking payment of the debt and attorneys' fees. The arbitration panel found in favor of Investors and dismissed Broker's counterclaim. The arbitrators then issued a modified award on remand. The district court subsequently granted Broker's motion to vacate the modified award in favor of the Investors and remanded Broker's counterclaim to a new panel of arbitrators. Investors timely appealed.The Fourth Circuit held that the district court erred in vacating the modified award where the arbitrators' imposition of liability against Broker is not in manifest disregard to the law. The court explained that imposing liability based on a contractual obligation to comply with the FINRA rules is, at the very least, an arguable interpretation of the parties' contracts. In this case, Broker executed trades of iPath S&P 500 VIX Short-Term Futures (VXX) on Investors' portfolio margin accounts, in clear violation of FINRA Rule 4210. Rule 4210 prohibits trades of certain high-risk securities through portfolio margin accounts, including trades of VXX. The court also held that the arbitration panel did not manifestly disregard the law by imposing damages in the amount of Investors' accounts on August 19, 2015. In light of Connecticut law, the court reasoned that the award placed Investors in the position they would have been if the contracts had been properly performed after August 19. Finally, the arbitration panel did not manifestly disregard the law by awarding Investors attorneys' fees. Accordingly, the court vacated and remanded with instructions to confirm the modified arbitration award. View "Interactive Brokers LLC v. Saroop" on Justia Law

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In 2015, the SEC initiated enforcement proceedings in the District of Arizona against appellant for illegitimate investment activities. In 2017, appellant entered into a consent agreement with the SEC, and the United States District Court for the District of Arizona ultimately held appellant liable for disgorgement in the amount of $4,494,900. Then the grand jury in the Eastern District of Virginia returned an indictment charging appellant with, inter alia, securities fraud and unlawful sale of securities, based in part on the same conduct underlying the SEC proceeding. Appellant filed a motion to dismiss the indictment, which the district court denied.The Fourth Circuit joined with every other circuit to have decided the issue in holding that disgorgement in an SEC proceeding is not a criminal penalty pursuant to the Double Jeopardy Clause, such that an individual cannot be later prosecuted for the conduct underlying the disgorgement. Accordingly, the court affirmed the district court's denial of appellant's motion to dismiss the indictment. View "United States v. Bank" on Justia Law

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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

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After the merger of RCA and AFIN, RCA shareholders filed suit alleging that the proxy statement was false and misleading under federal securities laws. In this case, the shareholders alleged that the proxy statements and omissions regarding (A) the AFIN NAV; (B) the sale of the Merrill Lynch properties; (C) SunTrust Bank; and (D) the AFIN Standalone Projections were materially misleading.The Fourth Circuit affirmed the district court's dismissal of the claims, holding that the statements the shareholders complained of were not false or misleading and the alleged omissions were addressed by narrowly tailored warning language. View "Paradise Wire & Cable Defined Benefit Pension Plan v. Weil" on Justia Law

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In these appeals arising from the dismissal of a securities fraud class action complaint, the complaint alleged that the Company conjured up and carried out a scheme that enabled surgeons to utilize the AxiaLIF system and secure fraudulent reimbursements from various health insurers and government-funded healthcare programs. In regard to appeal No. 15-2579, the Fourth Circuit held that the Complaint satisfied the misrepresentation and scienter elements of the section 10(b) claim of the Securities Exchange Act. Therefore, the court vacated the district court's ruling holding otherwise. In regard to appeal No. 16-1019, the court affirmed the district court's ruling that the complaint sufficiently alleged the loss causation element. The court remanded for further proceedings. View "Singer v. Reali" on Justia Law

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In these appeals arising from the dismissal of a securities fraud class action complaint, the complaint alleged that the Company conjured up and carried out a scheme that enabled surgeons to utilize the AxiaLIF system and secure fraudulent reimbursements from various health insurers and government-funded healthcare programs. In regard to appeal No. 15-2579, the Fourth Circuit held that the Complaint satisfied the misrepresentation and scienter elements of the section 10(b) claim of the Securities Exchange Act. Therefore, the court vacated the district court's ruling holding otherwise. In regard to appeal No. 16-1019, the court affirmed the district court's ruling that the complaint sufficiently alleged the loss causation element. The court remanded for further proceedings. View "Singer v. Reali" on Justia Law

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A disinterested observer could not reasonably conclude that the Commission violated SEC Rule of Practice 900(a). Although Rule 900(a) sets timelines by which the Commission would ideally adjudicate cases, the permissive language of the text could not lead an employee to reasonably conclude that failing to meet such aspirational guidelines would amount to a "violation." Plaintiff petitioned for review of the Board's decision affirming the ALJ's determination that plaintiff was not entitled to relief under the Whistleblower Protection Enhancement Act, 5 U.S.C. 2302(b)(8). After plaintiff was fired from his position at the SEC, plaintiff claimed that his supervisor terminated him in reprisal for raising concerns about his section's alleged chronic inefficiency. The Second Circuit held that the ALJ did not err in rejecting plaintiff's Rule 900(a) claim and that the ALJ more than adequately explained why an employee in plaintiff's position could not have reasonably concluded that Rule 900(a) was violated. Because the ALJ did not actually analyze plaintiff's claims that he made protected disclosures when he raised concerns that Adjudication violated Rule 900(b), the court remanded the issue to the ALJ. Finally, the court declined to address plaintiff's claims of evidentiary and discovery error. Accordingly, the court denied in part, granted in part, and remanded for further proceedings. View "Flynn v. SEC" on Justia Law

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The Fourth Circuit affirmed the district court's dismissal of Maguire Financial's amended complaint in a securities fraud class action. The court held that Maguire Financial's amended complaint failed to adequately allege scienter where a statement by the CEO of PowerSecure, to securities analysts that the company had secured a "contract renewal" could not form the basis for liability under section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78(b), and Rule 10b-5, 17 C.F.R. 240.10b-5, and the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4(b)(2). View "Maguire Financial, LP v. Powersecure International, Inc." on Justia Law