Justia Securities Law Opinion Summaries

In 2003, the SEC filed a civil suit against Custable, charging fraud involving “penny stocks” that yielded him at least $4 million. Criminal proceedings resulted in a long prison sentence for Custable. In 2010 he consented to entry of a judgment that ordered him to pay a $120,000 penalty plus $6.4 million in disgorgement of profits, 15 U.S.C. 78u(d). The SEC may either to remit the penalty money to the Treasury or to place it in the same fund as the disgorged profits, 15 U.S.C. 7246. Deciding that locating the defrauded victims would not be feasible, the Commission asked the court to allow it to pay to the Treasury all the disgorged profits that it had recovered. Hare, a purported victim of another Custable fraud and not a party, claimed to have an interest in the fund and asked the court to allow him to respond to any motion to disburse. The judge rejected Hare’s argument and granted the SEC’s motion to disburse the entire fund to the Treasury. The Seventh Circuit dismissed an appeal. Hare failed to establish that he is within an exception to the rule that forbids a nonparty to appeal; the grounds that he advanced for relief were frivolous View "Sec. & Exch. Comm'n v. Custable" on Justia Law

This appeal arose out of the settlement of a securities class action brought on behalf of the purchasers of certain common stock of a corporation. Those who objected to the settlement and appealed the rejection of their objection argued that they were given too little time to register objections with the district court and that the district court should not have approved the amount of attorneys’ fees awarded to class counsel. The First Circuit (1) affirmed the district court’s rejection of the objections at issue, as the objectors had notice in fact and a sufficient opportunity to have any of their objections heard by the court before it approved the settlement; and (2) dismissed the objectors’ appeal from the court orders approving the settlement and award of counsel fees, as the objectors had no standing to complain about the fee award. View "Hill v. State Street Bank Corp." on Justia Law

The Bank and a group of States challenged the constitutionality of various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376. The district court concluded that plaintiffs lacked standing and that their claims were not ripe. The court concluded that the Bank has standing to challenge the constitutionality of the Consumer Financial Protection Bureau, and that claim is ripe. Therefore, the court reversed as to that claim and remanded for reconsideration in the first instance the Bank’s constitutional challenge to the Bureau. The court also concluded that the Bank has standing to challenge Director Cordray’s recess appointment, and that claim is ripe. Therefore, the court reversed as to that claim and remanded for reconsideration in the first instance the Bank’s constitutional challenge to the recess appointment. The court further concluded that the Bank lacks standing to challenge the constitutionality of the Financial Stability Oversight Council and affirmed the judgment as to that claim. Finally, the court concluded that the State plaintiffs lack standing to challenge the Government’s orderly liquidation authority, and that claim is not ripe. Therefore, the court affirmed as to that claim. View "State Nat'l Bank of Big Spring v. Lew" on Justia Law

Plaintiffs, purchasers of Green Mountain common stock, filed a putative securities class action, alleging that Green Mountain and some of its executives made fraudulent misrepresentations about Green Mountainʹs inventory, business performance, and growth prospects in a manner designed to mislead investors about the strength of Green Mountainʹs business, in violation of federal securities law. The court held that the complaint alleges misleading statements of material fact and a compelling inference of scienter. Accordingly, the court vacated the district court's grant of defendants' motion to dismiss and remanded for further proceedings. View "Employees' Retirement System v. Green Mountain Coffee Roasters" on Justia Law

Plaintiffs, special-purpose investment entities, filed suit in New York state court against defendants, several parties responsible for structuring, offering, and managing collateralized debt obligations (CDOs). Plaintiffs allege, among other things, fraud in connection with disclosures about the construction of three CDOs. After removal to federal court, the district court dismissed the complaint under Rule 12(b)96) and denied plaintiffs' request to replead. The court concluded that the district court erred in aspects of its dismissal of plaintiffs’ fraud claim and also exceeded the bounds of its discretion in denying plaintiffs leave to amend the complaint as to the remaining claims. Accordingly, the court reversed in part, vacated in part, and remanded for further proceedings. View "Loreley Financing (Jersey) No. 3 v. Wells Fargo Securities, LLC" on Justia Law

In 1996, Bocchino, a stockbroker, learned from a superior that Traderz “might go public” and that the endeavor was supported by “some commitment” from a popular fashion model. Based solely on that, and without any independent investigation into the quality of the entity, Bocchino immediately sought investment from clients. Bocchino received over $40,000 in commissions from Traderz sales. The second involved Fargo. The source of Bocchino’s information regarding Fargo is unclear. Bocchino only obtained cursory documentation about the entity before soliciting sales. He did not conduct any independent investigation, despite awareness that Fargo’s principal’s “full-time ‘job’ was law student.” Bocchino received $14,000 in commissions for his clients’ stock purchases in Fargo. Traderz and Fargo turned out to be fraudulent ventures. The principals of each entity were criminally convicted, and the anticipated value of the investments vanished. The Securities and Exchange Commission brought civil law enforcement actions against those who sold investments in the entities. The bankruptcy court held that those civil judgments against Bocchino were nondischargeable, 11 U.S.C. 523(a)(2)(A). The district court and Third Circuit affirmed, finding that collapse of the private placements was neither abnormal nor extraordinary given Bocchino’s lack of due diligence. View "In Re: Bocchino" on Justia Law

The SEC found that petitioner and his company repeatedly marked the close - buying or selling stock as the trading day ends to artificially inflate the stock's value - and sanctioned them accordingly. The court concluded that the Commission applied the correct legal standard and properly concluded that there is ample evidence petitioner manipulated the market by marking the close; petitioner was properly charged as a primary violator under both the Securities and Exchange Act, 15 U.S.C. 78j(b), and the Investment Advisers Act, 15 U.S.C. 80b-6(1), (4); but the Commission cannot apply the Dodd-Frank Act, Pub. L. No. 111-203, 124 Stat. 1376, to bar petitioner from associating with municipal advisors and rating organizations because such an application is impermissibly retroactive. Accordingly, the court granted in part and denied in part the petition for review. The court vacated the portion of the SEC order that is impermissibly retroactive. View "Koch v. SEC" on Justia Law

Petitioners seek review of the SEC's final order finding that petitioners violated Sections 204, 206, and 207 of the Investment Advisors Act of 1940, 15 U.S.C. 80b-4, 80b-6(1)–(2), 80b-7, and Advisors Act Rule 204-1(a)(2), 17 C.F.R. 275.204-1(a)(2). Determining that, by failing to disclose $210,000 in fees received from an investment manager, petitioners misrepresented that they were providing independent and conflict-free advice, the Commission imposed industry bars and cease-and-desist orders, ordered disgorgement, and levied a total of $650,000 in civil penalties. The court denied the petition for review, holding that the Commission reasonably interpreted Section 4E as not imposing a jurisdictional bar to late-filed actions, and that the Commission acted reasonably in imposing its sanctions. View "Montford and Co. v. SEC" on Justia Law

Trinity, a New York Episcopal parish, owns Wal-Mart stock and requested that Wal-Mart include its shareholder proposal in Wal-Mart’s proxy materials. Trinity’s proposal, linked to Wal-Mart’s sale of high-capacity firearms at about one-third of its 3,000 stores, asked Board of Directors to develop and implement standards for use in deciding whether to sell a product that “especially endangers public safety,” “has the substantial potential to impair the reputation of Wal-Mart,” and/or “would reasonably be considered by many offensive to the family and community values integral to the Company’s promotion of its brand.” The Securities and Exchange Commission’s “ordinary business” exclusion lets a company omit a shareholder proposal from proxy materials if the proposal relates to ordinary business operations. Wal-Mart obtained a “no-action letter” from the SEC, indicating that there would be no recommendation of an enforcement action against Wal-Mart if it omitted the proposal from its proxy materials. Trinity filed suit. The district court held that, because the proposal concerned the company’s Board (rather than management) and focused principally on governance (rather than how Wal-Mart decides what to sell), it was outside ordinary business operations. The Third Circuit reversed. “Stripped to its essence, Trinity’s proposal goes to the heart of Wal-Mart’s business: what it sells on its shelves.” View "Trinity Wall Street v. Wal-Mart Stores, Inc" on Justia Law

Plaintiffs acquired shares of K-V Pharmaceutical stock during the period in which the company launched and marketed Makena, its new prescription drug, designed to reduce the risk of pre-term labor for at-risk pregnant women. It had acquired rights to the drug from the FDA, under the Orphan Drug Act, 21 U.S.C. 360. In a putative class action, the plaintiffs alleged that K-V and three of its officers made materially false or misleading statements or omissions related to the product launch. The district court dismissed, holding the challenged statements were protected by the safe-harbor provision of the Private Securities Litigation Reform Act of 1995 (PSLRA), 15 U.S.C. 78u-4(b), and that the plaintiffs failed to adequately plead scienter under the PSLRA. The district court also denied the plaintiffs the opportunity to amend the complaint as it related to allegations from confidential witnesses. The Eighth Circuit affirmed. K-V’s statements fell within the PSLRA’s safe-harbor provision as forward-looking statements accompanied by meaningful cautionary language and are not actionable as a basis for a securities fraud action. View "Anderson v. K-V Pharma. Co." on Justia Law