Alison Frankel

Unlike SEC, FTC makes quick fix to ward off ALJ constitutional challenges

By Alison Frankel
September 16, 2015

(Reuters) – For the second time this month, a federal agency has declared its in-house judges are mere employees whose hiring is not addressed by the Appointments Clause of the U.S. Constitution. On Monday, four Federal Trade Commissioners denied LabMD’s motion to dismiss the FTC’s data security administrative proceeding against the cancer testing center, ruling that under the District of Columbia U.S. Circuit Court of Appeals’ 2000 decision in Landry v. Federal Deposit Insurance Corporation, its in-house judges are not “inferior officers’ because their initial decisions are reviewed by the commission before becoming final.

SEC not entitled to deference in State Street fraud appeal – law prof

By Alison Frankel
September 14, 2015

(Reuters) – When it comes to Securities and Exchange Commission enforcement litigation, the constitutionality of in-house proceedings is dominating journalists’ coverage (including mine). Former SEC officials, though, are dedicating a lot of attention of late to a less sexy – but perhaps more lastingly significant – question: Can the SEC redefine the parameters of securities fraud through a final determination in an enforcement action?

SCOTUS history backs 2nd Circuit insider trading opinion in Newman: law prof

By Alison Frankel
July 17, 2015

The first day of August is the Justice Department’s deadline for asking the U.S. Supreme Court to review the most consequential ruling on insider trading in recent memory, the 2nd U.S. Circuit Court of Appeal’s decision in U.S. v. Newman. You might think that seeking certiorari would be an easy decision for the government, since both federal prosecutors and the Securities and Exchange Commission have said the 2nd Circuit’s Newman ruling will cost them cases because it restricts the definition of what constitutes a “personal benefit” for corporate insiders who pass along confidential information.

Why the SEC can’t easily solve Appointments Clause problem with ALJs

By Alison Frankel
June 17, 2015

(Reuters) – It seems as though there ought to be an easy way for the Securities and Exchange Commission to stomp out claims that its in-house judges are unconstitutionally appointed through a bureaucratic process, a defense theory that has spread as fast among SEC defendants as viral cute-animal memes on the Internet. But the SEC has so far avoided even addressing the potential consequences of that quick fix – perhaps because the solution isn’t so simple after all. If the SEC changed the way it appoints in-house judges, the fix could call into question the outcome of scores of past and present SEC enforcement actions as well as cases at other regulatory agencies.

SEC commissioners order affidavits on hiring of in-house judges

By Alison Frankel
May 28, 2015

(Reuters) – The commissioners of the Securities and Exchange Commission seem to think there may just be something to the latest defense arguments that its in-house administrative law judges are unconstitutional.

N.Y. judge to Wylys: You can’t keep SEC away by declaring bankruptcy

By Alison Frankel
November 5, 2014

Onetime Texas billionaire Sam Wyly and the estate of his late brother Charles just can’t seem to outsmart the Securities and Exchange Commission. Their latest attempt to evade the consequences of their allegedly fraudulent offshore trust scheme failed Monday, when U.S. District Judge Shira Scheindlin of Manhattan, in a ruling of first impression in the 2nd U.S. Circuit Court of Appeals, said that the SEC is entitled to freeze the Wylys’ assets, even though both Sam and Charles’ estate declared Chapter 11 bankruptcy in late October, after the SEC began to take steps to collect the nearly $200 million (plus interest) Scheindlin awarded the agency in September.

Hedge fund’s novel claim: SEC in-house judges are unconstitutional

By Alison Frankel
October 2, 2014

(Reuters) – On Wednesday, the $200 million activist hedge fund Stilwell Value and its founder, Joseph Stilwell, filed a complaint against the Securities and Exchange Commission in federal court in Manhattan. Stilwell’s lawyers at Skadden, Arps, Slate, Meagher & Flom and Post & Schell are asking for a declaratory judgment to block the SEC from bringing an administrative proceeding against Stilwell, who has been under investigation since 2012 for interfund lending. According to Stilwell’s complaint, if the SEC follows through with its threats to sue him in an administrative proceeding – rather than prosecuting its case against him in federal district court – it will be breaching the U.S. Constitution.

In new amicus brief, SEC wants to protect whistleblowers – and itself

By Alison Frankel
February 21, 2014

In 2012 and 2013, when the 5th Circuit Court of Appeals was considering the question of whether Dodd-Frank’s anti-retaliation provisions protect whistleblowers who report their concerns internally, rather than to the Securities and Exchange Commission, the SEC stayed out of the fray. The case, Khaled Asadi v. G.E. Energy, centered on the tension between two sections of Dodd-Frank, one of which seemed to define whistleblowers only as those who tip the SEC about potential misconduct by their employers. In its Dodd-Frank implementation process, the SEC attempted to resolve the tension, issuing rules to clarify that whistleblowers are protected from retaliation regardless of whether they report concerns to the agency or up the chain of command through internal compliance programs, as the older Sarbanes-Oxley Act had encouraged. The SEC’s rules have convinced most of the federal trial judges who have considered the scope of Dodd-Frank whistleblower protections; courts have typically cited the deference due to the agency’s interpretation of a law it is responsible for enforcing.

Here’s what the government and judiciary think of serial whistleblowers

By Alison Frankel
October 4, 2013

In a post earlier this week, I wrote about whistleblower lawyers’ concerns that unsuspecting tipsters will be misled into signing up with one of the many non-lawyer groups advertising on the Internet for Dodd-Frank whistleblowers. Unlike lawyers’ websites, ads by non-lawyers aren’t subject to state bar regulations. Nor are fee agreements between whistleblowers and non-lawyer agents. Lawyers who regularly represent tipsters told me that a proliferation of supposedly deceptive ads after the Securities and Exchange Commission implemented its whistleblower bounty program is one of the biggest problems in their business.

Don’t get too excited about JPMorgan’s admissions to the SEC

By Alison Frankel
September 19, 2013

The Securities and Exchange Commission was pretty darn pumped about its $200 million settlement Thursday with JPMorgan Chase, part of the bank’s $920 million resolution of regulatory claims stemming from losses in the notorious “London Whale” proprietary trading. And why not? As George Cannellos, the co-director of enforcement, said in a statement, JPMorgan’s $200 million civil penalty is one of the largest in SEC history. The agency also showed that it’s serious about its new policy of demanding admissions of liability from some defendants. For those of us accustomed to the SEC’s “neither admit nor deny” boilerplate, it’s startling to see the words “publicly acknowledging that it violated the federal securities laws” in an SEC settlement announcement. So let’s permit Cannellos some chest-thumping: “The SEC required JPMorgan to admit the facts in the SEC’s order – and acknowledge that it broke the law – because JPMorgan’s egregious breakdowns in controls and governance put its millions of shareholders at risk and resulted in inaccurate public filings.”