Justia Securities Law Opinion Summaries

Defendant, the former Chief Executive Officer of Brocade Communications (Brocade or the Company), a company the developed and sold data switches for networks, appealed his conviction in a second criminal trial for securities fraud and making false filings; falsifying corporate books and records; and making false statements to auditors in violation of securities laws. Defendant was previously convicted of violating the securities laws but the court vacated that conviction because of prosecutorial misconduct and remanded for a new trial. In this appeal, the court held that there was no evidence of sufficient facts in the record to support any allegation of prosecutorial misconduct. The court also held that there was sufficient evidence of materiality to support defendant's conviction. The court further held that the district court did not abuse its discretion by not giving defendant's proposed jury instruction. Accordingly, the court affirmed the judgment. View "United States v. Reyes" on Justia Law

The SEC commenced this civil enforcement action against appellant, a registered investment adviser (Jamerica), and a private investment (Brawta)(collectively, defendants), alleging that their fraudulent misrepresentations and diversion of Brawta funds violated securities laws. Initially, the district court granted a preliminary injunction, froze defendants' assets, and ordered Brawta to undertake and submit a sworn independent accounting. Then the district court granted the SEC summary judgment, permanently enjoining appellant and Jamerica from future violations of securities laws, and ordering them, jointly and severally, to disgorge misappropriated investor funds. The court held that, having reviewed the record de novo, summary judgment was appropriate for the reasons stated by the district court and that appellant's other challenges to the court's orders were without merit. Accordingly, the court affirmed the judgment of the district court. View "SEC v. Brown, et al." on Justia Law

Defendant, a licensed financial adviser, pled guilty to 34 counts of mail fraud (18 U.S.C. 1341), wire fraud (18 U.S.C. 1343), and bank fraud (18 U.S.C. 1344) based on his solicitation of bank clients to invest in speculative real estate transactions that he controlled, unrelated to bank products, an illegal practice in the securities industry known as "selling away." The Government accused him of collecting $1.55 million between October 2002 and January 2006. The district court denied his motion to withdraw the plea when he claimed that his prior attorney, unprepared to go to trial, had browbeaten him. The court imposed a sentence of 180 months and $1.3 million in restitution. The Third Circuit affirmed. With no evidence of actual innocence and the death of some of the government's elderly witnesses, there was no "fair and just" reason to allow withdrawal of the plea. Because defendant was an investment advisor when he initiated the fraud, the court properly applied a four-level enhancement at section 2B1.1(b)(16)(A); an obstruction of justice enhancement was justified by defendant's lies concerning his guilty plea and his contact with witnesses. View "United States v. Siddon" on Justia Law

Plaintiffs appealed from a dismissal of their complaint, which sought a declaratory judgment that, inter alia, the Financial Industry Regulatory Authority, Inc. (FINRA) lacked the authority to bring court actions to collect disciplinary fines as imposed. The court held that the heavy weight of evidence suggested that Congress did not intend to empower FINRA to bring court proceedings to enforce its fines and that the 1990 Rule Change did not authorize FINRA to judicially enforce the collection of its disciplinary fines. View "John J. Fiero and Fiero Brothers, Inc. v. FINRA" on Justia Law

UBS appealed the denial of their motion for a preliminary injunction enjoining defendants from proceeding with an arbitration before the Financial Industry Regulatory Authority (FINRA), and alternatively requiring that the arbitration proceed in New York County. In the arbitration, defendants sought damages for UBS's alleged fraud in connection with defendants' issuances of auction rate securities. The court held that defendants were entitled to arbitration because they became UBS's "customer" under FINRA's rules when they undertook to purchase auction services from UBS. The court also held that the enforceability of the forum selection clause was a procedural issue for FINRA arbitrators to address and that the district court lacked jurisdiction to resolve it. View "UBS Financial Servs, Inc. v. West Virginia University Hosp." on Justia Law

In this securities fraud class action, the investor plaintiffs sued the defendant company and three of its principal officers, alleging that they had made a series of eleven false or misleading statements to the public, in violation of section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, 15 U.S.C. 78a et seq. Plaintiffs claimed that the false statements had the effect of artificially inflating the price of defendant's stock until the truth belatedly came out, at which time the stock price dropped and plaintiffs suffered substantial financial losses. The court held that the district court properly dismissed plaintiffs' claims arising from the alleged misstatements made on March 5, 2004 and July 26, 2004, because plaintiffs have inadequately pled scienter and falsity. However, as for plaintiffs' claims arising out of defendant's February 23, 2005 and March 16, 2005 statements, the court vacated the district court's entry of summary judgment. The court held that the securities laws prohibited corporate representatives from knowingly peddling material misrepresentations to the public, regardless of whether the statements introduced a new falsehood to the market or merely confirmed misinformation already in the marketplace. Accordingly, the court affirmed in part, vacated in part, and remanded for further proceedings. View "Findwhat Investor Group, et al. v. Findwhat.com, et al." on Justia Law

In this civil enforcement action, a jury found that appellant aided and abetted a securities fraud by his former employer, in violation of 15 U.S.C. 78t(e). The district court fined appellant and barred him from serving as an officer or director of a publicly held company for five years. On appeal, appellant argued that the district court erred in allowing his trial to proceed in the District of Columbia pursuant to the "co-conspirator theory of venue." The court held that the SEC failed to lay venue in the District of Columbia under the straightforward language of 15 U.S.C. 78aa. Accordingly, the judgment was reversed and the district court was instructed to dismiss the case without prejudice. View "Securities and Exchange Comm'n v. Johnson, Jr., et al." on Justia Law

This case arose when the SEC instituted an enforcement action against several companies, which, among other things, led to the court appointment of a receiver. Debtor was an attorney who represented some of the defendants in this enforcement action. At issue was whether the exception to discharge in 11 U.S.C. 523(a)(19) applied when the debtor himself was not culpable for the securities violation that caused the debt. The bankruptcy court held that the debt was subject to discharge; the district court disagreed and held that the debt was excepted from discharge in bankruptcy. The court held that section 523(a)(19) prevented the discharge of debts for securities-related wrongdoings only in cases where the debtor was responsible for that wrongdoing and debtors who could have received funds derived from a securities violation remained entitled to a complete discharge of any resulting disgorgement order. Therefore, the court reversed the judgment of the district court. View "Sherman, et al. v. Securities and Exchange Comm'n" on Justia Law

Appellants, investors in a commodity pool, brought suit alleging that futures commission merchants violated the Commodity Exchange Act, 7 U.S.C. 1-27f, by aiding and abetting an investment pool operator in his scheme to defraud investors. The district court dismissed the complaint for failure to state a claim against the futures commission merchants. The court held that the district court acted properly in dismissing the investors' aiding and abetting claims where the merchants had no reason to know that the operator was operating as a commodity pool or trading on behalf of other investors, let alone that the operator was running a fraudulent Ponzi scheme. The court also held that, even if the merchants' actions could be construed as negligent, they were not severely reckless. Accordingly, the judgment of the district court was affirmed. View "Amacker, et al. v. Renaissance Asset, et al." on Justia Law

This case stemmed from a tax transaction involving Henry Samueli, the co-founder of Broadcom Corporation, and his investment advisor. At issue was whether a purported securities loan with a fixed term of at least 250 days and possibly as long as 450 days, entered into not for the purpose of providing the borrower with access to the lent securities, but instead for the purpose of avoiding taxable income for the lender, qualified for nonrecognition treatment as a securities loan pursuant to section 1058 of the Internal Revenue Code. The court agreed with the Tax Court's conclusion that the transaction did not meet the requirements of section 1058 and therefore affirmed the judgment of the Tax Court. View "Samueli, et al. v. Comm'r of Internal Revenue; Ricks, et al. v. Comm'r of Internal Revenue" on Justia Law