http://nysbar.com/blogs/SecuritiesLitigation/ Sponsored by the Commercial and Federal Litigation Section of the New York State Bar Association All data and information provided on this site is for informational purposes only. Nothing contained herein is intended as legal or financial advice and no representation is made about the accuracy of the information. en Copyright 2010 Wed, 17 Mar 2010 21:15:44 +0000 http://www.sixapart.com/movabletype/ http://blogs.law.harvard.edu/tech/rss Written by Christine Lazaro, Esq. On March 10, 2010, the Securities and Exchange Commission issued a press release alerting investors about a web site that falsely claims to have recovered $1.3 billion in funds hidden by convicted Ponzi schemer Bernard Madoff in Malaysia. The website purports to be that of the "International Security Investor Protection Corporation", which is a ficticious entity.]]> http://nysbar.com/blogs/SecuritiesLitigation/2010/03/sec_warns_of_investor_scam_rel.html http://nysbar.com/blogs/SecuritiesLitigation/2010/03/sec_warns_of_investor_scam_rel.html Securities News Wed, 17 Mar 2010 21:15:44 +0000 Written by Christine Lazaro, Esq. On February 17, 2010, FINRA announced that it will submit a proposal to further expand BrokerCheck to the SEC shortly. FINRA describes BrokerCheck as a free tool offered by FINRA which allows investors to check the professional background of current and former FINRA-registered securities firms and brokers. In the press release, FINRA explains that the proposal would increase the number of customer complaints reported publicly; extend the public disclosure period for the full record of a broker who leaves the industry from two years to 10 years; and, make certain information about former brokers available permanently, such as criminal convictions and certain civil and arbitration judgments. ]]> http://nysbar.com/blogs/SecuritiesLitigation/2010/02/finra_proposes_to_further_expa.html http://nysbar.com/blogs/SecuritiesLitigation/2010/02/finra_proposes_to_further_expa.html Securities Arbitration Mon, 22 Feb 2010 17:00:14 +0000 Written by David Welch, Esq. ...Continued from Control Person Liability Post on September 21, 2009: The success or failure of a pre-hearing Motion to Dismiss a control person liability claim may at times depend on which standard the arbitrators or judge choose to adopt: the “culpable participation” standard or the “potential control standard.” Although some courts are bound by precedential case law to apply a certain standard, many jurisdictions have not definitely selected an appropriate standard and arbitrators, after all, are free to apply whichever standard they deem appropriate. Thus, parties involved in control person liability disputes often commit significant efforts to advocating the standard that best suits their needs. Although defective control person liability claims can be dismissed under the “potential control” standard, as discussed below, it generally behooves control persons to advocate in favor of the application of the “culpable participation” standard. The “Culpable Participation” Standard]]> http://nysbar.com/blogs/SecuritiesLitigation/2010/01/control_person_liability_conti.html http://nysbar.com/blogs/SecuritiesLitigation/2010/01/control_person_liability_conti.html Securities Litigation Thu, 14 Jan 2010 22:44:54 +0000 Regulatory Notice 09-74. The changes, in pertinent part are as follows: ]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/12/sec_approves_amendments_to_arb.html http://nysbar.com/blogs/SecuritiesLitigation/2009/12/sec_approves_amendments_to_arb.html Mon, 21 Dec 2009 19:51:36 +0000 here. ]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/11/proposed_restoring_american_fi.html http://nysbar.com/blogs/SecuritiesLitigation/2009/11/proposed_restoring_american_fi.html Securities Law Fri, 20 Nov 2009 16:40:08 +0000 here (New York Securities) and here (Perceptive Advisors). For more on what constitutes a violation of Rule 105 read here. ]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/10/two_recently_settled_sec_actio.html http://nysbar.com/blogs/SecuritiesLitigation/2009/10/two_recently_settled_sec_actio.html Securities Law Wed, 21 Oct 2009 15:36:29 +0000 Written by Arpan Parmar* In April 2009, FINRA’s Board of Governors established a Special Review Committee to conduct an internal review of FINRA’s examination program as it relates to FINRA member firms associated with R. Allen Stanford and Bernard L. Madoff. The Committee consisted of four FINRA public governors: Ellyn L. Brown, Brown & Associates; Harvey J. Goldschmid, Dwight Professor of Law at Columbia University; Joel Seligman, President of the University of Rochester; and, Committee Chair, Charles A. Bowsher. The Board asked the Committee to recommend changes in the examination program to improve member oversight, fraud detection capability and FINRA’s monitoring of compliance with examination program policies. In September 2009, the Committee provided a report of their findings.]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/10/changes_at_finra_in_the_wake_o.html http://nysbar.com/blogs/SecuritiesLitigation/2009/10/changes_at_finra_in_the_wake_o.html Securities Law Tue, 20 Oct 2009 15:18:51 +0000 here. ]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/10/repost_of_leonard_e_sienkos_po.html http://nysbar.com/blogs/SecuritiesLitigation/2009/10/repost_of_leonard_e_sienkos_po.html Fri, 02 Oct 2009 15:01:30 +0000 Christine Lazaro, Esq. Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, Paul E. Kanjorski (D-PA), released discussion drafts of three pieces of legislation on October 1st. The drafts include the Investor Protection Act, the Private Fund Investment Advisers Registration Act, and the Federal Insurance Office Act. In a press release, Chairman Kanjorski stated “With these three bills we will address many of the shortcomings and loopholes laid bare by the current financial crisis. The Investor Protection Act will better protect investors and increase the funding and enforcement powers of the U.S. Securities and Exchange Commission. We must ensure that investor confidence continues to increase for the betterment of our financial system.” ]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/10/congressman_kanjorski_releases.html http://nysbar.com/blogs/SecuritiesLitigation/2009/10/congressman_kanjorski_releases.html Thu, 01 Oct 2009 22:41:01 +0000 Written by Arpan Parmar* The Second Circuit Court of Appeals issued an opinion vacating and remanding a district court opinion that denied the Securities and Exchange Commission’s (“SEC”) motion for a preliminary injunction against an alleged computer hacker and insider trader on July 22, 2009, SEC v. Dorozhko, Docket No. 08-0201-cv. This case represents an important win for the SEC in an age where technology often outpaces securities law. In early October 2007, the defendant, Oleksandr Dorozhko opened an online trading account with Interactive Brokers LLC (“Interactive Brokers”) and deposited $42,500 into that account. That same month, IMS Health, Inc. (“IMS”), was scheduled to announce its third-quarter earnings during an analyst conference call scheduled for October 17, 2007 at 5 p.m. IMS had hired Thomson Financial, Inc. (“Thomson”) to provide investor relations and web-hosting services, which included managing the online release of IMS’s earning reports. Prior to the open of the securities markets on October 17th, an anonymous computer hacker attempted to gain access to IMS’s earnings report from Thomson’s secure server. At 2:15 p.m., minutes after Thomson actually received the IMS data, that hacker successfully located and downloaded the IMS data from Thomson’s secure server. Beginning at 2:52 p.m., Dorozhko, who had not previously used his Interactive Brokers account to trade, purchased $41,670.90 worth of IMS put options that would expire on October 25th and 30th, 2007. ]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/09/in_dorozho_the_second_circuit.html http://nysbar.com/blogs/SecuritiesLitigation/2009/09/in_dorozho_the_second_circuit.html Securities Law Tue, 29 Sep 2009 22:00:08 +0000 Written by David Welch, Esq. As a general rule, when there is a significant and sustained drop in the stock market, there is a significant increase in law suits and arbitration claims against stock brokers. In addition to stock brokers, plaintiffs’ lawyers will often try to name “control persons” individually to increase the settlement pool or insulate the viability of their claim against a possibly insolvent broker. Control person liability claims in the realm of broker-dealers are typically brought under §20(a) of the Securities Exchange Act. Interestingly, in a recently settled case brought by the SEC against Nature's Sunshine Products, Inc. (not a broker-dealer), the SEC named individual executives of the company under §20(a) and did not alleged that the executives had personal knowledge of the underlying Foreign Corrupt Practices Act (“FCPA”) violations. This is noteworthy because there is somewhat of a split among the courts about what needs to be alleged under §20(a) to bring a control person into a case or arbitration. Generally, the courts are divided between one standard that requires some level of participation on the part of the control person, and another that maintains that participation is not required. Thus, it will be interesting to see if plaintiffs’ attorneys, who advocate for the broadest of standards, will try to use the SEC’s decision not to allege knowledge as support for their control liability claims. Although it is plausible that they will try to do so, that fact remains that such an argument would be without merit because, among other reasons, the FCPA is an entirely different animal than the typical violations brought against brokers. Control person liability is defined under §20(a) as:]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/09/brokerdealer_control_person_li.html http://nysbar.com/blogs/SecuritiesLitigation/2009/09/brokerdealer_control_person_li.html Securities Arbitration Mon, 21 Sep 2009 21:40:05 +0000 Written by Arpan Parmar* On September 17, 2009, the SEC unanimously proposed a rule amendment that would prohibit the practice of flashing marketable orders. Rule 602 of Regulation NMS requires every national securities exchange to make the best bids and offers available in the consolidated quotation data that is widely disseminated to the public. However, the rule excludes bids and offers communicated on an exchange that are executed immediately after communication or cancelled if not executed immediately after communication. Orders that are immediately executed or cancelled have come to be known as flash orders.]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/09/sec_proposes_to_eliminate_flas.html http://nysbar.com/blogs/SecuritiesLitigation/2009/09/sec_proposes_to_eliminate_flas.html Mon, 21 Sep 2009 16:59:07 +0000 Written by Christine Lazaro, Esq. Bloomberg.com reports that, as Congress discusses regulatory reforms, judges are issuing rulings with national impact. For example, last week, U.S. District Judge Shira Scheindlin threw out a key free-speech defense that credit raters had used for years to thwart investors’ fraud suits. Click here for the full story.]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/09/as_regulatory_reform_discussed.html http://nysbar.com/blogs/SecuritiesLitigation/2009/09/as_regulatory_reform_discussed.html Securities Litigation Tue, 08 Sep 2009 16:17:36 +0000 Written by Christine Lazaro, Esq. The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) are holding joint meetings to seek input from the public on harmonization of market regulation. The first meeting is being held at the CFTC on September 2nd, and the second meeting will be held at the SEC on September 3rd. ]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/09/cftc_and_sec_to_hold_joint_mee.html http://nysbar.com/blogs/SecuritiesLitigation/2009/09/cftc_and_sec_to_hold_joint_mee.html Securities Law Wed, 02 Sep 2009 15:48:46 +0000 here.]]> http://nysbar.com/blogs/SecuritiesLitigation/2009/08/new_finra_rule_on_panel_compos.html http://nysbar.com/blogs/SecuritiesLitigation/2009/08/new_finra_rule_on_panel_compos.html Securities Arbitration Tue, 04 Aug 2009 14:32:54 +0000