Justia Securities Law Opinion Summaries

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After a jury trial, Defendant was convicted of theft by misapplication of property and securities fraud. Defendant appealed, contending that the court's jury instructions impermissibly shifted the burden of proof onto him to prove his innocence. The Supreme Court affirmed, holding that the burden of proof was not improperly shifted onto Defendant to prove his innocence where (1) there was no obvious error in the instructions the trial court gave because, as a whole, the instructions correctly stated the law; and (2) the court correctly stated the State's burden of proof and Defendant's presumption of innocence several times during the jury selection, at the beginning of the trial, in its final instructions, and in its written instructions sent to the jury room. View "State v. Philbrook" on Justia Law

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A pension fund and other America Online (AOL) shareholders brought a class action against Credit Suisse First Boston (CSFB), former CSFB analysts, and other related defendants (collectively, Defendants), alleging violations of sections 10(b) and 20(a) of the Securities Exchange Act and of SEC Rule 10b-5. Specifically, Plaintiffs claimed (1) CSFB made material misstatements and fraudulently withheld relevant information from the market in its reporting on the AOL-Time Warner merger; and (2) the shareholders purchased stock in the new company at artificially inflated prices as a result of the alleged misstatements and omissions. The district court awarded summary judgment to Defendants. The First Circuit Court of Appeals affirmed, holding (1) the district court did not err in excluding the shareholders’ expert testimony for lack of reliability; and (2) without the expert’s testimony, Plaintiffs were unable to establish loss causation. View "Bricklayers & Trowel Trades Int’l Pension Fund v. Credit Suisse Secs. (USA) LLC" on Justia Law

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Plaintiffs, employees of Antioch, participated in an employee stock ownership, plan (ESOP). In 2003, Antioch borrowed money to buy back all stock except the stock owned by the ESOP. The buy-out left Antioch bankrupt and ESOP worthless. Plaintiffs filed suit under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001, claiming breach of fiduciary duties. The district court granted the defendants summary judgments. The presumptive limitation period for violations is six years from the date of the last action constituting part of the breach or violation, but the time is shortened to three years from the time the plaintiff gained “actual knowledge of the breach or violation.” Applying the three-year limitations period, section 1113(2), the court reasoned that proxy documents given to plaintiffs at the time of the buy-out and their knowledge of Antioch’s financial affairs after the transaction gave them actual knowledge of the alleged ERISA violations. The Seventh Circuit reversed. The claims for breach of fiduciary duty do not depend only on the disclosed substantive terms of the 2003 transaction, but also depend on the processes used to evaluate, negotiate, and approve the transaction. Plaintiffs’ knowledge of the substantive terms of the buyout, therefore did not give them “actual knowledge of the breach or violation” alleged in this case. View "Fish v. Greatbanc Trust Co." on Justia Law

Posted in: ERISA, Securities Law
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Petitioner and Ajmal Khan, principal of Verus Investment Holdings, purchased securities in a company to arbitrage a merger between that company and another company (the trade). Petitioner and Khal used Verus' account at Jefferies & Co. and Winton Capital Holding to complete the purchase. After the merger, Jefferies wired to Verus the original investment and profits attributable to the Winton funds. Verus wired the investment money to Winton and the profits to Doris Lindbergh, a friend of Petitioner. Tax authorities later informed Jefferies it owed withholding tax on the trade. Pursuant to an arbitration clause in an agreement between Jefferies and Verus, Jefferies commenced an arbitration against Verus for the unpaid taxes. Verus, in turn, asserted thirty-party arbitration claims against Petitioner, Lindbergh, and others for their share of the taxes. After a hearing, Supreme Court determined that nonsignatories Petitioner and Lindbergh could not be compelled to arbitrate. The Appellate Division reversed, concluding that Petitioner should be estopped from avoiding arbitration because he knowingly exploited and received direct benefits from the agreement between Jefferies and Verus. The Court of Appeals reversed, holding that Petitioner did not receive a direct benefit from the arbitration agreement and could not be compelled to arbitrate.View "Belzberg v. Verus Invs. Holdings Inc." on Justia Law

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Plaintiffs, a group of foreign and domestic institutional investors, filed a putative class action against UBS and others, alleging violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), 78t(a), and Rule 10b-5, 17 C.F.R. 240.10b-5. The district court dismissed all claims with prejudice. The court concluded that the Supreme Court's decision in Morrison v. National Australia Bank Ltd. precluded claims brought under the Exchange Act by purchasers of shares of a foreign issuer on a foreign exchange, even if those shares were cross-listed on a United States exchange; claims brought under the Securities Act of 1933, 15 U.S.C. 77a et seq., based on disclosures made in connection with a UBS June 13, 2008 registered rights offering were properly dismissed because they were immaterial and/or inactionable "puffery;" and Exchange Act claims arising out of defendants' statements regarding positions in, and valuation of, mortgage-related assets were properly dismissed for failure to adequately plead a material misrepresentation or scienter. Accordingly, the court affirmed the judgment of the district court. View "City of Pontiac v. UBS AG et al." on Justia Law

Posted in: Securities Law
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In 1983, Birkelbach founded Birkelbach Investment Securities (BIS) and served as its president. Birkelbach was registered as a general securities representative and principal, a municipal securities representative and principal, an options principal, and a financial and operations principal. Birckelbach supervised Murphy’s control of one account held by an unsophisticated investor with assets of $1.7 million, while Murphy generated more than a million dollars in commissions, incurred substantial losses, and engaged in transactions that were not part of the investor-authorized strategy. The investor was unable to understand her statements, many of which included errors that overvalued the account. Lowry similarly mishandled, and Birkelbach supervised, the management of the smaller account of a college student/member of the U.S. military. Birkelbach knew that Murphy had been previously censured, suspended, and fined by the Chicago Board Options Exchange, for trading without authorization and had a history of customer complaints. Birkelbach also had a previous disciplinary history. He had been sanctioned by the Illinois Securities Department and, in 2005, additional supervision of Murphy had been requested by the Financial Industry Regulatory Authority (FINRA), a self-regulatory organization formed under the Securities Exchange Act, 15 U.S.C. 78o-3. Birkelbach did not do so. After FINRA investigated BIS and recommended sanctions, the Securities and Exchange Commission barred Birkelbach from participation in the securities industry for life. The Seventh Circuit denied a petition for review, rejecting arguments that the original disciplinary complaint was untimely and the lifetime bar was an excessive punishment.View "Birkelbach v. Sec. & Exch. Comm'n" on Justia Law

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The issue before the Tenth Circuit in this case stemmed from a civil-enforcement action brought by the Securities and Exchange Commission ("SEC") against Defendant-Appellant Ralph Thompson, Jr., in connection with an alleged Ponzi scheme Thompson ran through his company, Novus Technologies, L.L.C. ("Novus"). The district court granted summary judgment in favor of the SEC on several issues, including the issue of whether the instruments Novus sold investors were "securities." Thompson's single issue on appeal was that the district court ignored genuine disputes of material fact on the issue of whether the Novus instruments were securities, and that he was entitled to have a jury make that determination. After careful consideration, the Tenth Circuit concluded that under the test articulated by the U.S. Supreme Court in "Reves v. Ernst & Young" (494 U.S. 56 (1990)), the district court correctly found that the instruments Thompson sold were securities as a matter of law. View "SEC v. Thompson" on Justia Law

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Plaintiffs filed suit against defendants, alleging, inter alia, that Barclays knowingly misrepresented its cost of borrowing funds by submitting false information for the purpose of calculating the London Interbank Offered Rate (LIBOR), in violation of section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The court held that the district court erred in concluding, prior to any discovery, that plaintiffs failed to plead loss causation where plaintiffs' allegations that the June 28, 2012 decline in Barclay's stock price resulted from the revelation of Barclay's misrepresentations of its 2007-2008 LIBOR rates and defendant Diamond's conference call misrepresentation of Barclays's borrowing costs presented a plausible claim. The court also held that the district court correctly concluded that Barclays's statements in its SEC filings relating to the company's internal control requirements were not materially false. Accordingly, the court vacated in part, affirmed in part, and remanded. View "Carpenters Pension Trust v. Barclays PLC, et al." on Justia Law

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Amendments to the Commodity Exchange Act, Pub. L. No. 111-203, 124 Stat. 1376, made by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 purported to expand the enforcement authority of the Commodity Futures Trading Commission. The Dodd-Frank amendments authorize the Commission to regulate retail commodity transactions offered "on a leveraged or margined basis, or financed by the offeror, the counterparty, or a person acting in concert with the officer or counterparty on a similar basis." In light of the district court's factual findings and legal conclusions with which the court agreed, the court held that the Commission has enforcement authority over these transactions, and no exception applied. The court affirmed the district court's grant of the preliminary injunction because the Commission had pleaded a prima facie case of a violation of the Act. View "U.S. Commodity Futures v. Martin, Jr., et al." on Justia Law

Posted in: Securities Law
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In response to the Congo war, Congress created Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. 78m(p), which requires the SEC to issue regulations requiring firms using "conflict minerals" to investigate and disclose the origin of those minerals. The Association challenged the SEC's final rule implementing the Act, raising claims under the Administrative Procedure Act (APA), 5 U.S.C. 500 et seq.; the Securities Exchange Act, 15 U.S.C. 78a et seq.; and the First Amendment. The district court rejected all of the Association's claims and granted summary judgment for the Commission and intervenor Amnesty International. The court concluded that the Commission did not act arbitrarily and capriciously by choosing not to include a de minimus exception for use of conflict materials; the Commission could use its delegated authority to fill in gaps where the statute was silent with respect to both a threshold for conducting due diligence and the obligations of uncertain issuers; the court rejected the Association's argument that the Commission's due diligence threshold was arbitrary and capricious; the Commission did not act arbitrarily and capriciously and its interpretation of sections 78m(p)(2) and 78m(p)(1)(A)(i) was reasonable because it reconciled these provisions in an expansive fashion, applying the final rule not only to issuers that manufacture their own products, but also to those that only contract to manufacture; and the court rejected the Association's challenge to the final rule's temporary phase-in period, which allowed issuers to describe certain products as "DRC conflict undeterminable." The court also concluded that it did not see any problems with the Commission's cost-side analysis. The Commission determined that Congress intended the rule to achieve "compelling social benefits," but it was "unable to readily quantify" those benefits because it lacked data about the rule's effects. The court determined that this benefit-side analysis was reasonable. The court held that section 15 U.S.C. § 78m(p)(1)(A)(ii) & (E), and the Commission’s final rule violated the First Amendment to the extent the statute and rule required regulated entities to report to the Commission and to state on their website that any of their products have “not been found to be 'DRC conflict free.'" The label "conflict free" is a metaphor that conveys moral responsibility for the Congo war. By compelling an issuer to confess blood on its hands, the statute interferes with the exercise of the freedom of speech under the First Amendment. Accordingly, the court affirmed in part, reversed in part, and remanded for further proceedings. View "Nat'l Assoc. of Manufacturers, et al. v. SEC, et al." on Justia Law