Justia Securities Law Opinion Summaries

Internal Revenue Code section 1256 provides that an investor who holds certain derivatives at the close of the taxable year must “mark to market” by treating those derivatives as having been sold for fair market value on the last business day of the taxable year. A “foreign currency contract” is a “section 1256 contract” that an investor must mark to market. Contending that a foreign currency option is within the definition of “foreign currency contract," the Wrights claimed a large tax loss by marking to market a euro put option upon their assignment of the option to a charity. The Wrights’ assignment of the option was part of a series of transfers of mutually offsetting foreign currency options that they executed over three days. These transactions apparently allowed the Wrights to generate a large tax loss at minimal economic risk or out-of-pocket expense. The Tax Court held that the Wrights could not recognize a loss upon assignment of the euro put option because the option was not a “foreign currency contract” under section 1256. The Sixth Circuit reversed. While disallowance of the claimed tax loss makes sense as tax policy, the statute's plain language clearly provides that a foreign currency option can be a “foreign currency contract.” View "Wright v. Comm'r of Internal Revenue" on Justia Law

The SEC brought a civil enforcement proceeding against defendants and a jury subsequently found defendants liable for multiple claims of securities fraud. At issue is the district court's asset freeze order. The court held that the entry of the asset freeze order did not violate the Bankruptcy Code’s automatic stay; the order fell within the “governmental unit” exception to the automatic stay provision, did not constitute impermissible “enforcement of a money judgment,” and did not run afoul of SEC v. Brennan; and it was properly supported by a showing of ill‐gotten gains. Because the court is unable to determine whether sufficient evidence supports imposition of the order against the remaining seven Relief Defendants, the cause is remanded to the district court with instructions. View "SEC v. Miller" on Justia Law

Plaintiff, a bank, filed suit against multiple defendants for fraud, constructive fraud, civil conspiracy, negligent misrepresentation, unjust enrichment, and violation of the Tennessee Securities Act. Three non-resident defendants (the “Ratings Agencies”) moved to dismiss based on lack of personal jurisdiction and failure to state a claim. The trial court granted the motion and dismissed Plaintiff’s claims. The Supreme Court (1) affirmed the judgment of the trial court finding that Plaintiff failed to establish a prima facie case of personal jurisdiction under a theory of general jurisdiction or specific jurisdiction; but (2) vacated the dismissal of Plaintiff’s action against the Ratings Agencies on the theory of conspiracy jurisdiction, holding that although Plaintiff has failed to establish a prima facie case of conspiracy jurisdiction at this point, the case must be remanded for the trial court to determine if Plaintiff should be allowed to conduct jurisdictional discovery on the conspiracy theory of personal jurisdiction in a manner consistent with the guidelines set forth in this opinion. View "First Cmty. Bank, N.A. v. First Tennessee Bank, N.A." on Justia Law

This appeal concerns the proper application of Section 510(b) of the Bankruptcy Code in the Lehman bankruptcies. LBI, the debtor, was lead underwriter of unsecured notes issued by Lehman Holdings, its affiliates. After the bankruptcy of both the Lehman entity that issued the notes, Lehman Holdings, and the Lehman entity that was lead underwriter on the issuances, LBI, the Junior Underwriters were held to account for the noteholders' losses, and incurred loss for defense and settlements. The Junior Underwriters filed suit asserting claims for contribution or reimbursement against the liquidation estate of Debtor LBI. The bankruptcy court construed the statute to require subordination of the Junior Underwriters’ contribution claims. The court, however, adopted the district court's construction of section 510(b), holding that in the affiliate securities context, “the claim or interest represented by such security” means a claim or interest of the same type as the affiliate security. Claims arising from securities of a debtor’s affiliate should be subordinated in the debtor’s bankruptcy proceeding to all claims or interests senior or equal to claims in the bankruptcy proceeding that are of the same type as the underlying securities. Accordingly, the court affirmed the judgment of the district court. View "ANZ Securities v. Giddens" on Justia Law

Defendants are national securities exchanges registered with the U.S. Securities and Exchange Commission (SEC) and operate as self‐regulatory organizations that regulate markets in conformance with securities laws under the Securities Exchange Act of 1934, 15 U.S.C. 78a. Plaintiffs are securities firms and members of the defendant exchanges. They compete for customer order flow by displaying buy and sell quotations for particular stocks. Between at least January 2004 and June 2011, each defendant charged “payment for order flow” (PFOF) fees. Each defendant exchange imposes PFOF fees when a trade is made for a customer; however, these fees are not imposed for proprietary “house trades,” where a firm trades on its own behalf. The Seventh Circuit affirmed dismissal of plaintiffs’ suit, in which they sought to recover PFOF fees they claim were improperly charged. The district court lacked subject matter jurisdiction based on plaintiffs’ failure to exhaust administrative remedies before the SEC. View "Citadel Sec., LLC v. Chicago Bd. Options Exch., Inc." on Justia Law

TriQuint Semiconductor, Inc., and its directors were defendants in two consolidated shareholder derivative suits filed in Washington State. TriQuint moved to dismiss those suits on the ground that its corporate bylaws establish Delaware as the exclusive forum for shareholder derivative suits. The trial court denied TriQuint’s motion to dismiss, and the Supreme Court allowed TriQuint’s petition for an alternative writ of mandamus. After review, the Supreme Court concluded that, as a matter of Delaware law, TriQuint’s bylaw was a valid forum-selection clause and bound its shareholders. The Court also concluded that, as a matter of Oregon law, the bylaw was enforceable. The Court issued a peremptory writ of mandamus directing the trial court to grant TriQuint’s motion to dismiss. View "Roberts v. TriQuint Semiconductor, Inc." on Justia Law

James Hopkins and John Flannery, two former employees of State Street Bank and Trust Company, were charged with violations of 15 U.S.C. 77q(a), 15 U.S.C. 78j(b), and 17 C.F.R. 240.10b-5 for engaging making material misrepresentations and omissions that misled investors about two State Street-managed funds. The United States Securities and Exchange Commission’s (SEC) Chief Administrative Law Judge (ALJ) dismissed the proceeding, finding that neither defendant was responsible for or had ultimate authority over the documents at issue and that these documents did not contain materially false or misleading statements or omissions. The SEC reversed the ALJ with regard to a slide that Hopkins used at a presentation to a group of investors and two letters that Flannery wrote or had seen before they were sent to a investors. The Commission imposed cease-and-desist orders on both defendants, suspended them from association with any investment adviser or company for one year, and imposed civil monetary penalties. The First Circuit vacated the Commission’s order, holding that the Commission’s findings were not supported by substantial evidence. View "Flannery v. Securities & Exchange Comm’n" on Justia Law

This appeal was the most recent appeal in a series of lawsuits that have arisen over the sale of bonds by a corporation wholly owned by the Lac du Flambeau Band of Lake Superior Chippewa Indians (collectively, “the Tribal Entities”). In a prior action, the Seventh Circuit held that a bond indenture constituted an unapproved management contract under the Indian Gaming Regulatory Act (“IGRA”) and was therefore void. Following more than three years of litigating the validity of other bond-related documents in federal and state court, the Tribal Entities instituted a tribal court action seeking a declaration that the bonds are invalid under the IGRA as well as tribal law. Certain “Financial Entities” and Godfrey & Kahn S.C. sought an injunction in the Western District of Wisconsin to preclude the Tribal Entities from pursuing their tribal court action. The district court preliminarily enjoined the Tribal Entities from proceeding against the Financial Entities but allowed the tribal action to proceed against Godfrey. The Seventh Circuit affirmed in part and reversed in part, holding that the district court (1) did not abuse its discretion in enjoining the tribal court action against the Financial Entities; but (2) made several errors of law in assessing whether Godfrey had established a likelihood of success on the merits. Remanded. View "Stifel, Nicolaus & Co., Inc. v. Lac Du Flambeau Band of Lake Superior Chippewa Indians" on Justia Law

The FHFA filed a summons with notice in state court asserting breach of contractual obligations to repurchase mortgage loans that violated representations and warranties and then Quicken removed the action to federal court. Plaintiff, as trustee of the subject residential mortgage‐backed securities trust, took control of the litigation and filed the complaint. Quicken moved to dismiss the suit. The court affirmed the district court's conclusion that (1) the statute of limitations ran from the date the representations and warranties were made; (2) the extender provision of the Housing and Economic Recovery Act,12 U.S.C. 4617(b)(12), did not apply to the Trustee’s claim; and (3) the Trustee’s claim for breach of the implied covenant of good faith and fair dealing was duplicative. View "Deutsche Bank Nat'l v. Quicken Loans" on Justia Law

ChinaCast founder and CEO Ron Chan embezzled millions from his corporation and misled investors through omissions and false statements. At issue was whether Chan’s fraud can be imputed to ChinaCast, his corporate employer, even though Chan’s actions was adverse to ChinaCast’s interests. The court agreed with the Third Circuit and concluded that Chan's fraudulent misrepresentations - and, more specifically, his scienter or intent to defraud - can be imputed to ChinaCast. The court concluded that imputation is proper because Chan acted with apparent authority on behalf of the corporation, which placed him in a position of trust and confidence and controlled the level of oversight of his handling of the business. Accordingly, the court dismissed the complaint alleging securities fraud under Rule 12(b)(6). View "Costa Brava P'ship v. ChinaCast Educ. Corp." on Justia Law