Justia Securities Law Opinion Summaries

Davis learned that the government was suspending sale of new 30-year bonds.The information was embargoed until 10 AM. He passed the information to traders, who bought futures contracts with an eight-minute head start and reaped profits. The brokerage settled SEC charges. PPP sought to represent a class of traders who held short positions in futures when the brokerage took the long side. The district judge concluded that such a class would be unrelated to trading that occurred during eight minutes of October 31, 2001 and denied certification. Investors, all of whom held short positions during the eight minutes, filed their own suit. The court dismissed because the two-year limitations period (7 U.S.C. 25(c)), had expired, rejecting an argument that claims did not accrue until the SEC filed its complaint. Meanwhile PPP's proposal for a reduced class was rejected. PPP accepted an offer of judgment under Fed. R. Civ. P. 68. The court rejected PPP's proposal to continue the suit. The investor suit plaintiff sought to intervene as class representative. The district court denied that motion. The Seventh Circuit affirmed. With respect to the limitations period, the court noted when the investors were aware of their harm. There cannot be a class action without a viable representative and there was no such representative involved in the appeal. View "Premium Plus Partners v. Goldman Sachs & Co., Inc." on Justia Law

Plaintiffs James Adams, Stanley Dye and Ed Holcombe were all shareholders in Altrust Financial Services, Inc. They sued Altrust, the Peoples Bank of Alabama (collectively, Altrust) and Dixon Hughes, LLC, Altrust's public-accounting firm, for violating the Alabama Securities Act. Altrust is a holding company that fully owns, controls and directs the operations of the Bank. Altrust and the Bank share common officers and directors and issue consolidated financial statements. Shareholders voted to reorganize the company in 2008 from a publicly held company to a privately held company. The move would have freed the company of certain reporting obligations imposed by the federal Securities Exchange Act and allowed the company to elect Subchapter S status for tax purposes. Relying on information in a proxy statement, Plaintiffs elected not to sell their shares of Altrust stock and instead voted for reorganization. Plaintiffs alleged that the proxy statement and financial reports contained material misrepresentations and omissions that induced them to ultimately sign shareholder agreements that made them shareholders in the newly reorganized Altrust. Plaintiffs contended that if (in their view) instances of mismanagement, self-dealing, interested-party transactions and "skewing" of company liabilities had been fully disclosed, they would have elected to sell their shares rather than remain as shareholders. Upon review, the Supreme Court found that Plaintiffs' allegations were not specific to them but to all shareholders, and as such, they did not have standing to assert a direct action against the company. Because Plaintiffs did not have standing to assert claims against Altrust, they also lacked standing to assert professional negligence claims against the accounting firm. The Court remanded the case for further proceedings.

Plaintiff, the SEC, appealed from a judgment dismissing its complaint against Marc J. Gabelli, the portfolio manager of the mutual fund Gabelli Global Growth Fund (GGGF or the Fund), and Bruce Alpert, the chief operating officer for the Fund's adviser, Gabelli Funds, LLC (Adviser). The SEC's complaint charged defendants with failing to disclose favorable treatment accorded one GGGF investor in preference to other investors. As a preliminary matter, the court limited its jurisdiction to the SEC's appeal. The court held that the complaint adequately stated claims against Alpert for violations of Section 17(a) of the Securities Act of 1933, 15 U.S.C. 77q(a), and Section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b). The court also held that the SEC's prayer for civil penalties survived defendants' motions to dismiss and must be reinstated where the court found that at this stage in the litigation, defendants have not met their burden of demonstrating that a reasonably diligent plaintiff would have discovered this fraud prior to September 2003. The court further held that the complaint sufficiently plead a reasonable likelihood of future violations and thus reversed the district court's dismissal of the SEC's prayer for injunctive relief. Accordingly, the court granted the SEC's appeal in all respects, dismissed the cross-appeals for want of appellate jurisdiction, and remanded for further proceedings. View "Securities and Exchange Commission v. Gabelli, et al." on Justia Law

This criminal appeal arose from a "finite reinsurance" transaction between American International Group, Inc. (AIG) and General Reinsurance Corporation (Gen Re). Defendants, four executives of Gen Re and one of AIG, appealed from judgments convicting them of conspiracy, mail fraud, securities fraud, and making false statements to the Securities and Exchange Commission. Defendants appealed on a variety of grounds, some in common and others specific to each defendant, ranging from evidentiary challenges to serious allegations of widespread prosecutorial misconduct. Most of the arguments were without merit, but defendants' convictions must be vacated because the district court abused its discretion by admitting the stock-price data and issued a jury instruction that directed the verdict on causation. View "United States v. Ferguson, et al." on Justia Law

Appellants appealed from the dismissal of their first amended complaint, which asserted claims against Morgan Stanley under Section 10(b) of the Securities and Exchange Act of 1934 (Act), 15 U.S.C. 78a et seq., and New York common law. Appellants contended that Morgan Stanley, in oral and email communications with appellants' treasurer, materially misrepresented the liquidity of certain auction rate securities (ARS) and thereby fraudulently induced appellants to purchase and hold these securities at a time when Morgan Stanley knew that the market for ARS was collapsing. The court affirmed the district court's dismissal on the ground that sophisticated investors like appellants could not plead reasonable reliance on Morgan Stanley's alleged misrepresentations in light of Morgan Stanley's publicly-filed statement explicitly disclosing the very liquidity risks about which appellants claimed to have been misled. View "Ashland Inc. et al. v. Morgan Stanley & Co., Inc." on Justia Law

Plaintiff purchased auction-rate securities from defendant, a securities broker-dealer. ARS are long-term bonds whose interest rates periodically reset through auctions and typically offer higher returns than treasuries or other money market instruments. Investors can liquidate at each auction, if demand exceeds supply. If sellers outnumber buyers, the auction fails. ARS underwriters may place proprietary bids, to prevent auctions from failing. If an auction fails, there is a penalty interest rate to compensate for temporary illiquidity and entice new buyers. When plaintiff wanted to sell in 2008, neither defendant nor underwriters would place proprietary bids, leaving plaintiff with $194 million in illiquid securities. Plaintiff discounted the price by millions of dollars. The district court dismissed a suit claiming: violation of the Securities and Exchange Act of 1934 (15 U.S.C. 78j(b)), violation of Kentucky Blue Sky Laws, common-law fraud, promissory estoppel, and negligent misrepresentation. The Sixth Circuit affirmed. Many of defendant's purported misstatements and omissions are not actionable, either because they lacked materiality or because defendant had no duty to disclose them. Facts alleged in the complaint fall short of establishing scienter, as required to establish securities fraud. View "Ashland, Inc.v. Oppenheimer & Co., Inc." on Justia Law

Sheet Metal Workers Local 33 et al. appealed from a judgment of the district court dismissing their putative securities class action complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. At issue was whether the securities issuer made false statements and omissions of material facts in the registration documents accompanying its initial public offering, in violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. 77a et seq. The court held that the alleged misstatements were not material because the value of the transactions composed an immaterial portion of the issuer's total assets. Accordingly, the court affirmed the district court's motion to dismiss on the ground of immateriality. View "Hutchison, et al. v. CBRE Realty Finance, Inc." on Justia Law

This case arose when the SEC brought suit against Stanford Group Company (SGC), along with various other Stanford entities, including Stanford International Bank (SIB), for allegedly perpetrating a massive Ponzi scheme. In this interlocutory appeal, defendants appealed the preliminary injunction that the receiver subsequently obtained against numerous former financial advisors and employees of SGC, freezing the accounts of those individuals pending the outcome of trial. The court held that the district court had the power to decide the motion for preliminary injunction before deciding the motion to compel arbitration; the district court did not abuse its discretion in granting a preliminary injunction; the preliminary injunction was not overbroad; and the district court acted within its power to grant a Texas Uniform Fraudulent Transfer Act (TUFTA), Tex. Bus. & Com. Code Ann. 24.005(a)(1), injunction rather than an attachment; and that the court did not have jurisdiction to rule on the motion to compel arbitration. Accordingly, the court affirmed and remanded the motion to compel arbitration for a ruling in the first instance. View "Janvey v. Alguire, et al." on Justia Law

Petitioners, each of which had corporate members that issued publicly traded securities, petitioned for review of Exchange Act Rule 14a-11. At issue was whether the Securities and Exchange Commission promulgated the rule in violation of the Administrative Procedure Act, 5 U.S.C. 551 et seq., because, among other things, the Commission failed adequately to consider the rule's effect upon efficiency, competition, and capital formation, as required by Section 3(f) of the Exchange Act and Section 2(c) of the Investment Company Act and Section 2(c) of the Investment Company Act of 1940, 15 U.S.C. 78c(f) and 80a-2(c). The court held that the Commission acted arbitrarily and capriciously for having failed once again to adequately assess the economic effects of a new rule. The court also held that the Commission inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial problems raised by commenters. Therefore, the Commission's decision to apply the rule to investment companies was also arbitrary. Because the court concluded that the Commission failed to justify Rule 14a-11, the court need not address petitioners' additional argument that the Commission arbitrarily rejected proposed alternatives that would have allowed shareholders of each company to decide for that company whether to adopt a mechanism for shareholders' nominees to get access to proxy materials. Accordingly, the petition was granted and the rule was vacated. View "Business Roundtable, et al. v. SEC" on Justia Law

This case stemmed from continuing disputes between Argentina and its various private creditors. Argentina and its Brady bondholders entered into a Continuation of Collateral Pledge Agreement that extended the security interest in the tendered bonds' collateral during its transfer and liquidation. Capital Ventures International (CVI) held certain non-Brady bonds on which Argentina also defaulted and chose to sue Argentina to collect on the defaulted bonds it held, seeking to attach Argentina's reversionary interest in the Brady collateral. At issue was whether the attachments blocked the proposed exchange and whether the district court properly modified the attachments to allow the exchange. The court held that CVI was entitled to maintain its attachments even though a quirk of the bonds' Collateral Pledge Agreement meant that the attachments would effectively block the proposed exchange between Argentina and the Brady bondholders. Therefore, the court reversed the district court's orders that modified the attachments to permit the exchange. View "Capital Ventures Int'l v. Republic of Argentina" on Justia Law