Today in the U.S. Supreme Court: Key Oral Argument in SEC v. Jarkesy 👀

The SEC Might Lose Its Courts

But if Jarkesy wins a total victory on the nondelegation argument, that’s different. That could mean that all of the SEC’s rulemaking (and every other regulatory agency’s rulemaking) is suspect, that every policy decision that the SEC makes is unconstitutional. Much of US securities law would need to be thrown out, or perhaps rewritten by Congress if they ever got around to it. Stuff like the SEC’s climate rules would be dead forever.

I don’t think that’s necessarily a likely outcome here. The Supreme Court could rule against Jarkesy, or it could rule for him on the jury-trial stuff without bothering with the nondelegation argument, or it could rule for him on the nondelegation argument in a narrow way, saying that this particular delegation is not allowed without undercutting all of the SEC’s rules. Or it could rule against him on the nondelegation argument (saying that this is not a legislative decision, for instance) while ruling for him on the jury-trial stuff. In some ways that is the easiest outcome: The Supreme Court has several justices who would love to revive the nondelegation doctrine, but this is a somewhat silly case to do it in.

But the Supreme Court does have several justices who would love to revive the nondelegation doctrine in a way that really would undermine most of securities regulation, and while this is a silly case to do it in, it is a case to do it in. You never know! Tomorrow could be a big day for the SEC.

The Supreme Court Considers the Right to Trial by Jury

The Supreme Court on Wednesday will hear the first of two landmark cases this term challenging the runaway administrative state. At stake in SEC v. Jarkesy is a bedrock constitutional principle that colonists fought to defend in the American revolution: the right to a trial by jury.

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Progressives say a ruling for Mr. Jarkesy would gut the administrative state, which is what they always say. But the SEC and other federal agencies could continue to litigate cases in-house that involve truly public rights such as veterans benefits and asylum claims. But they would have to go to federal court to impose civil penalties for common-law offenses.

Restoring the originalist interpretation of the Seventh Amendment would strengthen safeguards against tyrannical government.

What’s Really Driving the Business of White-Collar Defense?

Large law firms are earning millions of dollars in their white-collar defense and government investigation practices—but it’s not only because of federal agencies pursuing more enforcement actions.

Increasingly, law firms are seeing demand from proactive clients before litigation or enforcement begins.

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While the number of SEC enforcement actions in recent years hasn’t been record-breaking, law firms are gaining business through clients that are choosing litigation with the SEC instead of settlements. That means more fees if clients choose to head to trial.

“We’re seeing now on the SEC front a willingness from public companies and regulated entities to fight back against the SEC and litigate,” said Brad Bondi, global co-chair of Paul Hastings’ investigations and white-collar defense practice.

Charles T. Munger, Much More Than Warren Buffett’s No. 2, Dies at 99

Charles T. Munger, who quit a well-established law career to be Warren E. Buffett’s partner and maxim-spouting alter-ego as they transformed a struggling New England textile company into the spectacularly successful investment firm Berkshire Hathaway, died on Tuesday in Santa Barbara, Calif. He was 99.

His death, at a hospital, was announced by Berkshire Hathaway. He had a home in Los Angeles.

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Mr. Buffett has described him as the originator of Berkshire Hathaway’s investing approach. “The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices,” Mr. Buffett once wrote in an annual report.

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Mr. Munger counseled Mr. Buffett that if he wanted to build a large, sustainable company that would outperform other investors, he should buy solid brand-name companies. “He was the architect and I was the general contractor,” Mr. Buffett said of their relationship.

Ex-Nuveen Trader Pleads Guilty to $47 Million Insider Scheme

A former Nuveen LLC trader admitted to tipping off an Oregon retiree about the asset management firm’s plans as part of an insider-trading scheme that netted them more than $47 million in illegal profits.

Lawrence Billimek entered a plea to one count of securities fraud Tuesday before US District Judge Paul G. Gardephe in Manhattan as part of an agreement with prosecutors. His sentencing was set for April 4. Billimek faces a maximum of 20 years in prison, though he’s likely to receive far less under his deal with the government. He agreed not to contest any sentence of 87 months or less.

SEC, US Audit Board to Collaborate on More Audit Investigations

The SEC and US audit board plan to combine their enforcement resources to target serious audit violations and auditors with a history of repeated missteps, officials with the two regulators said Tuesday.

“There are firms that just continually come up in our space,” Ryan Wolfe, chief accountant for the Division of Enforcement at the Securities and Exchange Commission, told a Baruch College audit event in New York Tuesday. “We need to have an all-hands-on-deck approach for this class of firms. Because it’s not doing the profession any good, it’s not doing investors any good…..

SEC Obtains Judgments Against Three Defendants for Insider Trading Prior to Pharmaceutical Merger

On November 27, 2023, the Honorable Vincent Marrero of the United States District Court for the Southern District of New York entered judgments by consent against defendants Joseph M. Dupont and Stanley Kaplan, who were each charged with insider trading in the securities of Portola Pharmaceuticals Inc. Previously, on August 9, 2023, Judge Marrero entered a consent judgment against defendant Jarett G. Mendoza, who was also charged with insider trading Portola securities.

The SEC’s complaint, filed on June 29, 2023, alleges that Dupont was a vice president at Alexion Pharmaceuticals Inc. when he knowingly or recklessly tipped confidential information to a close friend about an anticipated May 2020 announcement of a tender offer by Alexion to acquire Portola. According to the SEC’s complaint, the close friend traded on that information and then passed the information to Kaplan and Mendoza, who also profitably traded. On the day of the acquisition announcement, Portola’s stock price increased more than 130 percent.

EV Company Hit with SPAC-Related Securities Suit

One of the most important securities class action litigation trends in recent years has been the wave of securities lawsuits involving SPACs. And while as time has passed since the peak of the SPAC IPO frenzy in late 2020 and early 2021, SPAC-related securities class action suits continue to be filed. The latest example is the securities suit filed earlier this week against the electric vehicle company Fisker, which merged with a SPAC in 2020. A copy of the November 27, 2023, complaint can be found here.