Hello, Newman. A Second Circuit Panel Revives U.S. v. Newman’s Personal Benefit Test, Maybe.

On June 25, 2018, the Second Circuit Court of Appeals issued a revised opinion in United States v. Martoma, No. 14-3599, Dkt No. 226. (2d Cir. Jun. 25, 2018) (“Martoma”). While the outcome for Matthew Martoma does not change—his conviction for insider trading still stands—other defendants facing insider trading charges may once again, at least for the present, avail themselves of the Second Circuit’s more stringent personal benefit test under United States v. Newman, 773 F.3d 438 (2d Cir. 2014) (“Newman”). Continue Reading

New York Court of Appeals Rules that Civil Securities Fraud Claims Brought Under Martin Act Are Subject to Three-Year Statute of Limitations

In People v. Credit Suisse Securities (USA) LLC, No. 40, 2018 WL 2899299 (June 12, 2018) (DiFiore, Ch. J), the Court of Appeals for the State of New York ruled that the three-year statute of limitations of Section 214(2) of the New York Civil Practice Law & Rules (“CPLR”) applies to civil enforcement actions brought under the Martin Act (General Business Law article 23-A) on the basis of a “fraudulent practice” as defined in General Business Law § 352(1). In doing so, the Court overruled both the New York Supreme Court and the Appellate Division and rejected the New York Attorney General’s (“NYAG”) attempt to apply a six-year statute of limitations under CPLR 213(8), which governs the limitations period for common law fraud. The Court’s decision narrows the window of opportunity to assert civil securities fraud claims under the Martin Act’s more forgiving standard. Prosecutors wishing to avail themselves of CPLR 213’s generous six-year statute of limitations will now be required to demonstrate their civil securities fraud claims meet all of the elements of common law fraud. Continue Reading

OSD Issues Policy Guidance Rejecting “Sweeps” Data

By memorandum dated June 7, 2018, Shay Assad, DoD’s Director, Defense Pricing/Defense Procurement and Acquisition Policy, has reversed decades of procurement practice that has been embraced by industry and the government alike in attempting to manage the often unmanageable process of providing the government with cost or pricing data that is current, accurate and complete as of the date of agreement on price. Recognizing that inherent “lag time” often makes it impossible for contractors to provide “up to the minute” data in real time at the point when the parties “shake hands,” contractors have customarily performed immediate post-handshake “sweeps” of their databases to provide the government with any data that may have escaped the pre-handshake dragnet. The government, in turn, has customarily accepted the data, evaluated its impact on the price, and negotiated, if and as appropriate, adjustments to the price. The net result was that the government had all the data, its impact on price was addressed, and the contractor avoided liability under the Truth in Negotiations Act and, possibly, under the False Claims Act. Everyone was happy.

Not anymore. Continue Reading

Proposed Rule Would Create a Separate, More Restrictive Standard for “Adequate Price Competition” for the DoD, NASA, and the Coast Guard

On June 12, 2018, the Department of Defense (“DoD”), the General Services Administration, and NASA proposed a new rule that would limit the “adequate price competition” exception to certified cost or pricing data requirements on all DoD, NASA, and Coast Guard procurements. Currently, FAR 15.403-1 prohibits contracting officers from requiring contractors to submit certified cost or pricing data to support a contract action when the contracting officer determines that the prices agreed upon are based on “adequate price competition,” which the regulation defines in one of three ways: Continue Reading

The Future of COTS Procurement: Section 846 Industry Day Highlights

On June 21, 2018, the General Services Administration (“GSA”) and the Office of Management and Budget (“OMB”) held their second Industry Day concerning the implementation of Section 846 of the National Defense Authorization Act (“NDAA”) of 2018 (“Procurement Through E-Commerce Portals,” known hereafter as the “Portals Program”).[1] The Industry Day, GSA’s first since issuing its Phase I implementation plan, provided a unique opportunity for GSA to update the public on its current thinking for the Portals Program. A few highlights from the Industry Day are set out below. Continue Reading

You Might Be an Inside Trader If…You Trade on Your Unconfirmed Suspicions of a Cybersecurity Event Prior to Its Public Revelation or Disclosure

Earlier this year, the SEC released cybersecurity guidance addressing, among other things, the risk of insider trading in the event of a data breach. This risk comes in multiple forms, including the intruders trading on stolen information and insiders trading on the knowledge of the breach itself. The SEC demonstrated its willingness to address the latter situation in the recent insider trading case against Jun Ying, the former chief information officer of Equifax’s United States Information Systems business unit. Continue Reading

Regulation Best Interest: The SEC’s Responds to the DOL’s Fiduciary Rule

On April 18, 2018, the Securities and Exchange Commission published its proposed Regulation Best Interest. Regulation Best Interest would require broker-dealers and affiliated persons to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities. Continue Reading

Supreme Court Strikes Down Federal Sports Gambling Law

On Monday, the Supreme Court opened the door for states across the country to authorize sports gambling within their borders—a decision that could have a dramatic effect in the world of sports and potentially weaken the federal government’s authority over states on a number of fronts.

In Murphy v. National Collegiate Athletic Association, No. 16-476, the Court struck down the Professional and Amateur Sports Protection Act (PASPA), a 26-year-old federal law that banned most states from legalizing sports betting. The Court held that PASPA unconstitutionally “commandeered” the states to enforce federal laws or policies in violation of the 10th Amendment. Continue Reading

“Portal of Portals” – GSA’s (Unwritten) Vision for COTS E-Commerce Marketplaces

Last month, the General Services Administration (“GSA”) and the Office of Management and Budget released their Phase 1 Implementation Plan (the “Plan”) for Section 846 of the National Defense Authorization Act (“NDAA”) of 2018 (“Procurement Through E-Commerce Portals,” known hereafter as “Portals Program”).[1] Section 846 directs GSA to establish one (or several) “e-commerce portals,” and in its recently-released Plan, GSA made four legislative requests to Congress GSA believes are necessary not only to bring its vision for the Portals Program online, but to make it the preferred method for COTS procurement government-wide. On April 3, 2018, GSA officials discussed these legislative requests at a panel discussion hosted by the Coalition for Government Procurement (“CGP”). During the CGP panel, GSA officials were candid about their current vision for the Portals Program and the rationale behind these legislative requests. Their comments relating to two of the four legislative requests (bolded below) were particularly informative, as they shed some light on their unwritten vision for the Portals Program, as well as the deal GSA is hoping to strike with Congress. Continue Reading

New Rules for Filing Protests at GAO and New DFARS Debriefing Requirements

GAO’s New Electronic Protest Docketing System

GAO finally has unveiled its long-awaited Electronic Protest Docketing System (“EPDS”). Effective May 1, 2018, all new protests (excluding those containing classified material) must be filed using GAO’s EPDS. EPDS is designed to provide a more seamless and efficient process for all participants. The system provides real-time notice to federal agencies of a new protest filing, which serves as the Agency’s notification to stay performance of the newly-awarded contract as required under the Competition in Contracting Act (“CICA”). Since most government contractors hire outside counsel to file protests, this change will not have a large impact on contractors. Contractors should be aware, however, that GAO also has implemented a new $350 filing fee for all new protests. All subsequent filings and supplemental protests do not require a filing fee. Funds from this filing fee will be used to pay for the operation and maintenance of the EPDS.         Continue Reading

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