SEC-Covington Subpoena Dispute Fizzles Out in D.C. Circuit

Unnamed Covington client ends fight to keep name secret from SEC

An unnamed client of law firm Covington & Burling has dropped its challenge to a subpoena from the U.S. Securities and Exchange Commission, ending a closely-watched fight over law firms’ obligations to release client information to financial regulators.

The client in a filing on Monday told the U.S. Court of Appeals for the D.C. Circuit that it would no longer pursue an appeal of a federal judge’s order last year that required Covington to disclose the company’s name to the SEC in response to a subpoena.

The filing did not say why the client was ending its case. The client was due to tell the court in a filing on Monday why it believed it had an interest in preventing disclosure of its identity.

Crypto Gets Blamed for a Real-Life Currency Crisis

Tigran Gambaryan, Binance’s head of financial-crime compliance, flew to Nigeria’s capital to solve a problem: The government had blamed the world’s largest crypto exchange for crashing the currency.

The American, a former Internal Revenue Service special agent, left his wife and children at home in Georgia in late February with a small suitcase for what he thought was a quick business trip.

He hasn’t come back.

Nigerian authorities detained Gambaryan and a colleague, Nadeem Anjarwalla, a U.K. and Kenyan national and Binance’s regional manager for Africa, according to the men’s families.

The Binance employees, who are being held in a guarded house, haven’t been charged with any crimes. The government, which invited them to Nigeria for meetings, hasn’t publicly discussed the detentions.

The accounting crisis everybody seems to ignore, and the regulator fighting to fix it

Erica Williams wants the accounting industry to know that there’s a new sheriff in town, and she’s rolling up her sleeves to deal with what her organization has called a “completely unacceptable” rate of accounting errors.

Williams is an outsider brought in to police an audit industry that collects about $5.4 billion in fees from S&P 500 companies each year, and has historically been accustomed to being overseen by friendly insiders. But Williams has brought with her a much greater willingness to lay down the law than her predecessors: the former Obama adviser spent 12 years in enforcement at the Securities and Exchange Commission, where she dismantled Ponzi schemes and worked closely with the Department of Justice to bring forth civil and criminal charges.

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But under Williams, the first Black woman to chair the organization, the new-look PCAOB has been ringing the alarm bell on what it calls a worrying trend of “unacceptable” accounting errors that continue to rise. Mistakes showed up in 40% of the roughly 800 audits it recently released inspection reports for.

Oil Companies Challenge SEC’s Climate Rules in Fifth Circuit

Oil and gas industry groups on Monday sued to stop the SEC’s climate reporting regulations in the Fifth Circuit, giving the conservative-leaning court another challenge to the rules.

The petition seeking a review of the regulations—filed by the Texas Alliance of Energy Producers and the Domestic Energy Producers Alliance—is one of at least three against the Securities and Exchange Commission pending in the US Court of Appeals for the Fifth Circuit over the climate rules. Republican attorneys general and fracking companies also have petitioned the Fifth Circuit to look over the SEC’s March 6 requirements for companies to report their greenhouse gas emissions and make other climate-related disclosures.

The SEC rules exceed the agency’s authority, said Luke Wake, an attorney for the Pacific Legal Foundation, a libertarian public interest law firm representing the energy organizations.

“Congress did not authorize the SEC to demand that companies report environmental or any other controversial issues completely unrelated to finance,” Wake said in a statement.

Bump-Up Exclusion Precludes Coverage for Merger-Related Claims Settlement

On March 6, 2024, in a decision that has attracted a lot of attention in the business press, the Eastern District of Virginia, applying Virginia law, held that the bump-up exclusion in Towers Watson’s D&O insurance policy precludes coverage for the $90 million paid in settlement of claims relating to the firm’s January 2016 merger with Willis Group Holdings. As discussed below, the court’s ruling highlights recurring issues concerning the wording of the bump-up exclusion. A copy of the March 6, 2024, opinion can be found here.

ANALYSIS: Lawsuits Will Ask Major Questions on SEC Climate Rule

The new SEC climate rule was approved March 6. The first related lawsuits have already been filed, and more legal challenges will be on the way. When the SEC first proposed the rule in 2022, it raised hackles, and thousands of comments raising objections were filed with the agency.

Comments can be thought of as a preview of future litigation arguments, and based on the comments, the major questions doctrine is set to lead the way in court challenges, and the non-delegation doctrine is sure to make an appearance.