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The Second Circuit recently took an unexpected plunge into the torrid waters of insider trading law. Following several years of decisions limiting the government’s broad interpretation of what constitutes a
Continue Reading United States v. Blaszczak: Second Circuit Ruling Creates Opening for Significant Increase in Insider Trading Prosecutions

To gain insight into where the Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) have been focusing their oversight and what their priorities will be in 2020, look no further than their recent words and deeds. A common thread running through the recent public statements and enforcement activity of both agencies is a commitment to maximizing the resources at their disposal to expedite resolutions, whether by leveraging technology, deploying multi-pronged approaches, engaging in industry outreach, or coordinating with fellow regulators.
Continue Reading Regulatory Moves Show Financial Watchdogs Working Smarter, if Not Harder

U.S. regulators, in particular the Commodity Futures Trading Commission (“CFTC”), are intently pursuing market manipulation enforcement. The September 30 end of the 2019 fiscal year brought with it a flurry of press releases from four different agencies announcing settlements of spoofing-related enforcement actions against trading firms, banks, interdealer brokers, and traders.
Continue Reading Spoofing Enforcement Intensifies

Under its new leader, the New York Department of Financial Services (“DFS”) has staked out high ground for itself by self-identifying as the “regulator of the future” DFS’s pronouncement came in a July press release issued about a month after Linda Lacewell was confirmed as the agency’s third superintendent. The press release, issued to announce the creation of a new Research and Innovation Division, signals that DFS is attempting to harness the increasing technological tools available to regulators, while making New York an attractive place for financial firms to do business. “The financial services regulatory landscape needs to evolve and adapt as innovation in banking, insurance and regulatory technology continues to grow,” Lacewell said in the press release. “This new division and these appointments position DFS as the regulator of the future, allowing the Department to better protect consumers, develop best practices, and analyze market data to strengthen New York’s standing as the center of financial innovation.”
Continue Reading New York’s Department of Financial Services: the Self-Styled “Regulator of the Future”

On May 7, 2019, Representative James Himes (D-Conn) introduced the “Insider Trading Prohibition Act” (H.R. 2534). The proposed legislation would amend the Securities and Exchange Act of 1934, §§15 U.S. Code § 78a et seq. (the “Act”) by inserting a new section that defines the elements of criminal insider trading.

The bill’s objective is to eliminate the ambiguity of the offense as it is conceived under current law. It would also significantly expand the potential scope of criminal liability for insider trading in several ways: first, by eliminating the existing “personal benefit” requirement; second, by expanding the scienter requirement from willful to reckless use of “wrongfully obtained” material non-public information; and third, by expanding the definition of “wrongfully obtained” information to include stolen, hacked, and fraudulently obtained information.
Continue Reading New Bill Seeks to Bring Clarity to Insider Trading Law

Earlier this month, the U.S. Department of Justice (“DOJ”) and the U.S. Department of the Treasury’s Office of Foreign Asset Controls (“OFAC”) both issued guidance regarding their expectations for corporate compliance programs. Both documents are geared towards establishing more rigid frameworks for assessing compliance programs. A common theme among both pieces of guidance appears to be the identification and allocation of responsibility to individuals, especially management. Additionally, the fact that the agencies released their guidance within days of each other could be read as a clear signal from federal authorities that they are serious about increasing their focus on individual accountability for corporate wrongdoing.
Continue Reading Feds Focus on Individuals in Evaluating Corporate Compliance Programs

On April 29, 2019, just months into her new job at the New York State Department of Financial Services (“DFS”), acting DFS Superintendent Linda Lacewell announced a significant reorganization within the financial and insurance regulator. The new Consumer Protection and Financial Enforcement Division (the “CPFED”) combines seven previously separate divisions and units – Enforcement, Investigations and Intelligence, the Civil Investigations Unit, the Producers Unit, the Consumer Examinations Unit, the Student Protection Unit, and the Holocaust Claims Processing Office – under a single executive deputy superintendent. Lacewell appointed Katherine Lemire, a former state and federal prosecutor, to head the newly-minted division.
Continue Reading New York DFS Consumer Protection and Financial Enforcement Division: New Name, New Look, Old Mandate

Once again, the Department of Justice’s (DOJ) efforts to hold a trader accountable for misrepresentations made during negotiations met with stiff resistance from the courts. On March 4, 2019, Judge Charles Breyer of the Northern District of California granted Robert Bogucki’s motion to dismiss the indictment in the middle of his criminal trial, ruling that the Government failed to prove that Bogucki’s statements could not possibly amount to fraud because there is no expectation of truth in the discussions between Bogucki and his customer. Judge Breyer’s ruling parallels the Second Circuit’s highly publicized 2018 repudiation of the DOJ’s attempts to prosecute Jessie Litvak, a former bond trader, for similar misrepresentations made in connection with trading residential mortgage-backed securities.
Continue Reading “Nanny” Government Rebuffed in Prosecution of Former Barclays Trader

Three prominent trading exchanges did not exactly show their government overseer the love this Valentine’s week.  On February 14, 2019, the New York Stock Exchange (“NYSE”) filed a petition for review to the U.S. Court of Appeals for the District of Columbia Circuit against the Securities Exchange Commission (“SEC”), seeking review of a controversial transaction fee pilot program, slated to take effect in April.  The Cboe and Nasdaq literally followed suit a day later, with nearly identical petitions.  The petitions seek a ruling that the pilot program is unlawful under the Securities Exchange Act of 1934 and the Administrative Procedure Act and a permanent injunction barring the SEC from implementing the pilot program. 
Continue Reading Where is the Love? Exchanges Sue SEC Over Market Access Fee Pilot Program