Word came down earlier this week that the SEC has issued charges against individuals involved in what the SEC described as "widespread and brazen schemes of serial insider trading that yielded at least $6.7 million of illicit gains." Two former Goldman Sachs employees allegedly orchestrated the schemes.
Continue Reading...Effective May 25, 2006, trade shredding is a thing of the past as a result of new Rule 3380, Order Entry and Execution Practices. No, this new Rule doesn't regulate the use of shredding machines. What it does do is prohibit the splitting of any customer order for securities into multiple smaller orders for execution where the primary purpose is to maximize in-kind or monetary payments.
Continue Reading...A waiver of the attorney-client privilege is not a requirement for cooperation to be considered "extraordinary." This was the message from Susan Merrill of the NYSE, during the final general session of the 2006 SIA Compliance and Legal Division Annual Seminar last month. But Merrill acknowledged that nobody believes her when she says it. Just weeks after Merrill's comments, the U.S. Sentencing Commission struck language from a 2004 sentencing-guideline amendment, that endorsed the practice of compelling corporations to waive the attorney-client and work-product privileges, in order to receive credit for "cooperating" with the government.
The American Bar Association's Task Force on Attorney Client Privilege is currently working with organizations such as the National Association of Criminal Defense Layers and the Association of Corporate Counsel to address an even bigger concern - the internal policy of the U.S. Department of Justice that allows prosecutors to demand a waiver in exchange for reduced or dropped charges. http://www.abanews.org/statementsletters/sttwaiver.html But it's an uphill battle. The Department of Justice has defended the waiver policy and opposed the change to the sentencing guidelines, arguing that a zero-tolerance policy on corporate fraud (and the need to uncover it), often outweigh the need to protect the attorney-client privilege.
Time-barred securities fraud claims once thought retroactively revived under the Sarbanes-Oxley Act ("SOXA") may very well have died again. A recent onslaught of court decisions suggests the federal judiciary is unwilling to apply longer statute of limitation periods to resurrect fraud claims originating before SOXA's enactment.
Not surprisingly, Plaintiff's bar was enamored with the passage of Section 804 of SOXA, which extended applicable statute of limitations periods for federal securities fraud claims from one year of discovering the facts constituting or giving rise to notice of the alleged violation, or three years after the violation, whichever came first, to two years from discovery or five years from the date of the violation. But celebration may have been premature.
Having now been litigated in federal district and appellate courts, multi-jurisdictional judicial opinion confirms federal securities fraud claims based upon violations that occurred prior to SOXA's effective date, July 30, 2002, are likely governed by pre-SOXA one and three limitations periods. Thus, a Section 10(b) fraud claim brought by a plaintiff in October 2003, but which is premised upon fraudulent acts that allegedly occurred between January through July 2000 (i.e. post-SOXA enactment but more than three years past the date of the alleged violations), will likely be dismissed as time-barred.
For businesses and corporate insiders looking over their shoulders, this perhaps means a little less strain on the neck. Indeed, practically speaking, whether in court or arbitration, parties defending against Section 10(b) fraud claims can now cite to such decisions as Aetna Life Ins. Co. v. Enterprise Mortgage Acceptance Co., LLC, 391 F.3d 404-406 (2d Cir. 2004) and Foss v. Bear Stearns & Co., Inc., 394 F.3d 540, 542 (7th Cir. 2005) to defend against and possibly defeat stale claims for securities fraud.
Criminal felons accused of sexual abuse know that if the prosecuting authorities delay too long, the charges could be time barred by applicable statutes of limitations. Similarly, civil defendants accused of egregious commercial fraud involving Ponzi schemes with numerous victims can rely on a statue of limitations defense if the victims wait too long to commence a lawsuit. Notions of fair play, concerns over faded memories, the reasonable expectation that legitimate claims will be pursued in a timely manner and the public policy discouraging the pursuit of stale claims, all support the enforceability of bright line statutes of limitations for criminal and civil charges.
According to the NASD, however, NASD members have no such protection when the Department of Enforcement brings disciplinary action. Instead of the safeguard of bright line limitations, periods enjoyed by accused criminals and civil litigants, the NASD contends that when looking at the delay in bringing enforcement action, it is appropriate to consider the entire fairness of the proceeding based on the entire record.
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