Bill Wang

Application of the Federal Mail and Wire Fraud Statutes to Criminal Liability for Stock Market Insider Trading and Tipping

After the Supreme Court’s unanimous decision in Carpenter v. United States,[1] the federal mail and wire fraud statutes became potent prosecutorial weapons against insider trading when the information-owner is the victim. This post examines how criminal liability under the federal mail and wire fraud statutes supplements traditional SEC authority to pursue insider trading. SEC Rules 14e-3 and 10b-5 cover a great deal of stock market insider trading and tipping, but certainly not all. For instance, Rule 14e-3 is confined to the tender offer context.

As illustrated by the recent case of United States v. Newman,[2] the Rule 10b-5 … Read more

Morrison Foerster discusses FINRA’s Revised Sanction Guidelines: Higher, Tougher, Fairer?

FINRA’s newly revised Sanction Guidelines, effective immediately, signal that the upward trend in sanctions against broker-dealers is likely to continue.

The Sanction Guidelines, which establish the range of sanctions that FINRA may impose in formal disciplinary proceedings, affect several specific types of violations, as well as the principles behind levying sanctions and the overall levels of monetary sanctions. The Guidelines are also meant to catch up to the sanctions that FINRA actually is levying; as FINRA stated, in revising the guidelines, it is seeking to “harmonize the Sanction Guidelines with the current state of the cases in this area.”… Read more

Roe Vatiero

Corporate Governance and its Political Economy

To fully understand the modern corporation’s ownership, shape, and distribution of authority, one must attend to politics. Because basic dimensions of corporate organization can affect the interests of voters, because powerful concentrated interest groups seek particular outcomes that deeply affect large corporations, because those deploying corporate and financial resources from within the corporation to buttress their own interests can affect policy outcomes, and because the structure of some democratic governments fits better with some corporate ownership structures than with others, politics can and does determine core structures of the large corporation. Interest groups often seek to obtain via politics both … Read more

Simpson Thacher discusses SEC and FINRA Report on Cybersecurity Sweep Examinations and SEC’s Cybersecurity Guidance Update

The SEC issued a National Exam Program risk alert summarizing OCIE’s cybersecurity examination sweep of advisers and broker-dealers on February 3, 2015 (SEC Risk Alert). On the same day, FINRA issued its report on cybersecurity practices of broker-dealers, based on its own sweep examination (FINRA Report). Neither the SEC Risk Alert nor the FINRA Report creates any new rules or legal obligations, but each provides insight into current industry practice.

Many commentators have interpreted the reported results as a sign that the industry is on top of cybersecurity issues, but OCIE specifically included cybersecurity controls among its examination priorities for … Read more


Commissioner Aguilar discusses U.S. Equity Market Structure: Making Our Markets Work Better for Investors

The following public comments were released by Commissioner Luis A. Aguilar, U.S. Securities and Exchange Commission (SEC)[1] on May 11, 2015.  A copy of them appears on the SEC website, here.

I. Introduction

It is well known that the Commission needs to undertake a holistic review of our current equity market structure. In fact, the Commission has formed an advisory committee to assist that review.[2] In furtherance of that process, the following is intended to focus on certain issues that any serious review should consider—such as the various issues that have arisen from our markets’ increasingly fragmented … Read more

Akin Gump discusses SDNY Decision Allowing SEC Insider Trading Case to Proceed, Distinguishing Newman

A recent decision from the United States District Court for the Southern District of New York allowing a U.S. Securities and Exchange Commission (SEC) civil enforcement action to proceed against two former stockbrokers for alleged insider trading violations sheds additional light on application of the 2nd Circuit’s decision in United States v. Newman, No. 13-1837-cr(L) (2d Cir. Dec. 10, 2014). In the new decision, SEC v. Payton, No. 14 Civ. 4644 (S.D.N.Y. Apr. 6, 2015), Judge Jed S. Rakoff upheld the SEC’s allegations that traders Daryl Payton and Benjamin Durant III of Euro Pacific Capital improperly traded software … Read more

Joanna C. Schwartz

The Cost of Suing Business

To listen to the Chamber of Commerce, one would think that class actions are the most significant scourge on business ever conjured up by man. In brief after brief to the Supreme Court, the Chamber of Commerce and other business amici tell the same story: Meritless class actions, filed by rapacious plaintiffs’ attorneys, are so devastatingly expensive to defend against, and threaten such financial ruin if plaintiffs prevail, that corporate defendants cannot help but accept “blackmail settlements” that harm both businesses’ bottom lines and society at large.

The Supreme Court appears to have premised several recent civil procedure decisions—including Twombly, Read more

PwC discusses Cyber-security: Think Risk Not IT

Despite millions of dollars spent on enhancements, cybersecurity remains the area of risk management with the largest gap between threat and preparedness. As the frequency and sophistication of cyber attacks have increased significantly in recent years, counter measures have failed to keep pace.

This gap is especially important for financial institutions, which by our estimate are over 30% more likely to be targeted by cyber crime. While the biggest banks have been dealing with cyber threats for years, they and their smaller peers are largely responding to threats reactively. More specifically, banks continue to address past issues rather than responding … Read more

Key Speakers At Seminars At The IMF & World Bank Annual Meetings

Chair Yellen discusses Finance and Society

Let me begin by thanking the organizers for inviting me to participate in this important dialogue on the role of finance in society. The financial sector is vital to the economy.  A well-functioning financial sector promotes job creation, innovation, and inclusive economic growth. But when the incentives facing financial firms are distorted, these firms may act in ways that can harm society. Appropriate regulation, coupled with vigilant supervision, is essential to address these issues.

Unfortunately, in the years preceding the financial crisis, all too many firms took on risks they could neither measure nor manage. Leverage, interconnectedness, and maturity and … Read more


The New Stock Market: Sense and Nonsense

Over the last few decades, how stocks are traded in the United States has been totally transformed. Gone are the dealers on NASDAQ and the specialists at the NYSE. Instead, a company’s stock can now be traded electronically on up to sixty competing venues where a computer matches incoming orders. A majority of quotes are now posted by high-frequency traders (HFTs), making them the market makers that are the preponderant source of liquidity in the new market.

This new stock market has spawned a bewildering number of controversies. From the quoting practices of HFTs, to the rise of so-called dark … Read more

Paul Hastings describes how CFPB’s Public Complaint Database Is Likely to Amplify Consumer Voice But Muffle Effective Provider Responses

The Consumer Financial Protection Bureau (the “CFPB” or “Bureau”) recently issued its final policy statement (the “Policy Statement”) enabling consumers to post on the CFPB’s web-based public consumer complaint database (the “Database”) complaints about consumer financial services in narrative format. [1] While the CFPB has maintained the Database since 2012, under the Policy Statement, consumers would be able to submit detailed descriptions of their experiences in dealing with providers of consumer financial products and services. Once a complaining consumer consents to publication, the CFPB would remove personally identifying information and then feature the consumer’s full complaint in narrative … Read more

mary jo white

Chair White discusses the SEC as the Whistleblower’s Advocate

Thank you, David, for that kind introduction. I am very honored to address the Garrett Institute, one of the most important programs in the country for corporate and securities lawyers, and to be in David’s home territory of Northwestern Law School where he served as Dean before going on to serve as a very distinguished Chairman of the SEC in the late 1980s.

Although the Garrett Institute was established 35 years ago to honor former SEC Chairman Ray Garrett, Jr., I really first came to learn about him when I did a bit of research for a speech I gave … Read more

WilmerHale discusses Central Register of Beneficial Ownership to be Introduced in the UK

On 26 March 2015, the United Kingdom Parliament passed into law the Small Business, Enterprise and Employment Act 2015 (the “Act”).

The Act will bring about a number of fundamental changes to UK company law including, amongst others, the abolition of bearer shares and corporations acting as directors and, perhaps most controversially, the establishment of a central public registry of those individuals who hold significant control of UK companies. The stated aims of the reforms are to “increase transparency around who ultimately owns and controls UK companies,” and should be framed in the wider context of … Read more

Yoon-Ho Alex Lee

SEC Rules, Stakeholder Interests, and Cost-Benefit Analysis

The D.C. Circuit’s 2011 decision in Business Roundtable v. SEC , 647 F.3d 1144 (D.C. Cir. 2011) spawned a lot of debate regarding the value of cost-benefit analysis in financial regulation. On one side of the debate were those who felt more should be required of the SEC. as well as other financial regulators. At least some members on the Hill must have thought so. No fewer than three independent legislative efforts[1] sought to impose a more stringent cost-benefit analysis requirement on the SEC, including one that proposed to have the SEC and other independent regulatory commissions submit their … Read more

Wachtell Lipton explains Some Lessons from DuPont-Trian

The ISS Report on the DuPont-Trian proxy contest calls attention to a number of important insights into ISS policies and practices and those of many of its institutional investor clients.  Concomitantly, these policies illustrate the realities of the sharp increase in activist activity and the steps corporations can, and should, take to deal with the activist phenomena.

ISS and major institutional investors will be responsive to and support well-presented attacks on business strategy and operations by activist hedge funds on generally well managed major corporations, even those with an outstanding CEO and board of directors.

Trian Fund Management and its … Read more

Michael Krimminger

Bail-in, Not Bail-out: Developing SIFI Resolution Strategies Around the Globe

The 2007-2009 financial crisis was a watershed event that shook the confidence of people around the globe in the stability of the international financial system. The crisis demonstrated a failure of market discipline and the government responses only exacerbated this problem by confirming the long-standing expectation that some firms – particularly globally active financial companies – were too big or interconnected to fail.

In response, international standard setters and national authorities have sought to create a more resilient financial system while fashioning statutory frameworks and strategies to make the resolution of so-called systemically important financial institutions (“SIFIs”) possible.

The U.S. Read more

Orrick discusses In re Polycom and the SEC’s Continued Focus on Internal Controls

Over the past year, the SEC and other regulatory agencies have initiated an increasing number of investigations into companies based on allegations of inadequate internal controls and/or a system for reporting those controls. (For more on internal controls and a discussion of recent regulatory activity in this area, see Jason M. Halper & Jonathan E. Lopez, et al., Assessing the Increased Regulatory Focus on Public Company Internal Control and Reporting, Bloomberg BNA: Securities Regulation & Law Report, Oct. 6, 2014, available at:

“Internal controls” are the procedures and practices instituted by a company to manage risk, … Read more

Max Helveston

How Big Data Will Revolutionize the Insurance Industry and Challenge Regulatory Bodies

The Big Data revolution has begun to have a transformative impact on commercial markets. Businesses are continually developing new ways to capitalize on the increased availability of analytic services and drastic reductions in the costs of data collection and storage. Industry groups, regulatory bodies, the media, and academics have attempted to stay abreast of this seemingly endless torrent of data-centered activity. It is clear that the Big Data movement has the potential to significantly improve markets. By providing businesses with actionable information about consumers and the world, it will enable companies to increase the efficiency of their operations and kick … Read more


Institutional Investors’ Appetite for Alternatives

The emergence of alternative business entities[1] like benefit corporations, which facilitate pursuit of profit and purpose in the same endeavor, challenges the strict dichotomy between for-profit and non-profit corporations. Most alternative entities, including well-known brands like Warby Parker and Etsy—both certified B corps—have been privately-owned and thus untested in financial markets,[2] until now. Last month, the online consortium of unique and hand-made goods known as Etsy, made headlines announcing its SEC filing initiating an IPO to raise up to $300 million.

If Etsy retains its B corp certification or elects to reincorporate as a Delaware benefit Read more


Is the Price Right? An Empirical Study of Fee-Setting in Securities Class Actions

By motivating lawyers to handle class actions, fee awards enable millions of people to obtain access to justice every year and strengthen the effect of regulatory laws. But the process by which judges decide how much to pay lawyers has long been a black box. Settlements go in one side; fee awards come out the other. Researchers have studied the inputs and the outputs, but not the process that connects the two. Consequently, it is difficult to know why judges award the amounts they do.

Our new study, to be published this fall in the Columbia Law Review, seeks … Read more