Supreme Court Rejects Challenge to SEC's "No Deny" Settlements

U.S. Supreme Court rejects Musk-backed challenge to SEC’s ‘gag’ rule

The U.S. Supreme Court on Tuesday rejected a challenge brought by a former Xerox Corp executive and backed by Elon Musk to a Securities and Exchange Commission (SEC) rule requiring people who agree to settlements with the agency not to deny its allegations against them.

The justices declined to hear former Xerox chief financial officer Barry Romeril’s appeal of a lower court’s decision that the rule does not violate his free speech rights under the U.S. Constitution’s First Amendment. Romeril agreed under the rule not to deny accounting fraud allegations he settled with the SEC in 2003.

SEC Charges Egan-Jones Ratings Co. and CEO with Conflict of Interest Violations

The SEC’s order finds that, in 2019, Egan, who at the time headed Egan-Jones’s ratings group, became involved in business and marketing activities concerning a client and was influenced by sales and marketing considerations while participating in determining a credit rating for that client, which created a prohibited conflict of interest. The order finds that by issuing and maintaining a rating for the client under those circumstances, Egan-Jones violated the SEC’s NRSRO conflict of interest rules and, further, that Egan caused the company’s violations.

The SEC’s order also finds that, in 2018, Egan-Jones violated another conflict of interest provision by continuing to issue and maintain ratings for another client even though that client had contributed ten percent or more of the company’s net revenues during the prior fiscal year. Finally, the order finds that Egan-Jones failed to establish, maintain, and enforce policies and procedures reasonably designed to manage such conflicts of interest.

SEC Obtains Final Judgment Against Former Pharmacy Chain Employee Charged with Insider Trading

On September 17, 2020, the Commission filed a complaint alleging that Sheinfeld sold nearly $1 million in Rite Aid securities in advance of news that caused the price of Rite Aid securities to drop when it became public. The complaint alleges that, after learning confidentially through his employment that the anticipated merger between Rite Aid and Walgreens would not close by an upcoming deadline, Sheinfeld liquidated all of his exercisable Rite Aid employee stock options. The complaint further alleges that Sheinfeld then accessed the accounts of his sister-in-law and adult daughter and sold all of their Rite Aid stock as well.

Money Funds Could Be Next Target In Greenwashing War

“We have seen more and more ESG-related bonds and commercial paper programs, but the supply is still too small to be able to build a proper, ESG-only portfolio,” he said.

Similar to other parts of the ESG industry, money funds are likely to be more susceptible to greenwashing as more and more funds proliferate the market. Expanded ESG disclosures and third-party oversight to examine funds in a standardized way would help reduce those risks, Fayvilevich said.

Chainalysis Launches 24/7 Hotline for Crypto Crime Victims

Blockchain research firm Chainalysis has launched a new hotline that will provide support for organizations that have been targeted by a crypto-related cyber attack or ransomware demand.

The Crypto Incident Response hotline will function 24/7, and victims will be paired with a team of investigators from Chainalysis who will trace and label the funds in Chainalysis’ program. If funds have already been transferred or stolen, the Chainalysis team will “help liaise with law enforcement and asset recovery counsel.”

SPAC Federal Securities Litigation Analysis

While SPAC offerings may have cooled, the litigation has yet to heat up

The following report provides an analysis of the exponential increase in SPAC IPOs, and the litigation that has followed, during the period of between January 2019 and April 2022 (Relevant Period). Highlights from our findings include:

--Newly proposed regulation may have paused SPAC IPOs, but the litigation continues.

--977 SPAC IPOs took place during the Relevant Period, with the bulk of those occurring in 2021 (613).

--61 federal securities actions were filed by investors during the Relevant Period, with the bulk of those occurring in 2021 (33).

--Over 85% of the actions remain active and are expected to take several more years to resolve.

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