VW Asks Judge to Reject SEC's "Draconian" Proposed Sanction

VW fights ‘draconian’ SEC sanction bid in emissions case

Volkswagen AG has asked a U.S. judge to reject what the German automaker called a “draconian” bid from the U.S. Securities and Exchange Commission to punish the company for an employee who allegedly refuses to be questioned as part of the agency’s VW emissions cheating scandal case.

VW said in a filing on Friday in San Francisco federal court that the company had “repeatedly” asked employee Thorsten Duesterdiek to sit for a deposition in the litigation or sign a sworn declaration. VW said German law bars the company from taking any adverse action over his alleged refusal to testify.

SEC Charges Merrill Lynch for Failing to Disclose Foreign Exchange Fees to Clients

The Securities and Exchange Commission today charged Merrill Lynch, Pierce, Fenner & Smith Incorporated for charging advisory clients more than $4 million in undisclosed foreign exchange fees for transfers to or from their accounts. To settle the charges, Merrill Lynch has agreed to pay disgorgement, prejudgment interest, and a civil penalty totaling more than $9.5 million and has agreed to distribute funds to harmed clients.

The SEC’s order finds that, between May 2016 and July 2020, Merrill Lynch offered programs to advisory clients in which the clients paid Merrill a fee in exchange for a range of investment advisory services, including foreign currency exchanges. In the program’s client agreements and brochures, Merrill Lynch disclosed that it charged a markup or markdown on foreign currency exchanges, but it did not disclose an additional fee it referred to as a production credit, which, in more than 80 percent of the transactions, was equal to or greater than the disclosed markup or markdown. Merrill Lynch paid a percentage of these production credits to its financial advisors and referred to this charge as a commission in internal documents. The SEC’s order also finds that Merrill Lynch failed to adopt and implement policies and procedures reasonably designed to prevent its disclosures from being misleading about the fees it charged on foreign currency exchanges.

Signature Bank Insiders Sold $100 Million in Stock During Crypto Surge

The extent of the executives’ sales was hard to determine in part because Signature filed the documents with the Federal Deposit Insurance Corporation, rather than the Securities and Exchange Commission, which is typical for companies of its size.

Most banks of this size have their securities regulated by the SEC and file their forms there.

Signature was one of only two companies in the S&P 500 that didn’t file insider-trading transactions to the SEC. The other was First Republic Bank, which was rescued by a $30 billion deposit by a group of large banks.

Regulation by EnforcementAn increasingly common response by regulators to what they view as undesirable market trends or challenges has been a sharp turn towards litigation to introduce novel legal theories and frameworks that could have been the product or subject of legislative or administrative rulemaking. The decision to do so has been met by calls claiming such administrative action to be unfair, and in some instances, illegal.

This Article revisits the New Deal origins of regulation by enforcement, and its more recent incarnations, and explains that as a legal matter, regulators generally enjoy discretion as to whether to make policy through rulemaking, adjudication, or by filing a lawsuit in federal court. However, there are some exceptions to this principle, as well as some reasons to believe that new doctrinal developments hostile to agency adjudications could reduce the discretion of agencies to choose their policymaking tool, especially where their actions are understood to be naked attempts to grab turf or circumvent democratic norms embedded in the Administrative Procedure Act. In this Article, we analyze the incentives facing agencies when choosing to regulate by enforcement, consider some of the new risks, and lay out a framework for thinking about when agencies should regulate by rule, and when they should regulate by enforcement.

The Crypto Industry Also Needs to Fix Itself

I look around to take some perspective, I see three reasons why the industry is in the doldrums.

The first one is the SEC’s onslaught on the industry. The second is Congress’ inability to pass any laws that might set the industry in a significantly new direction, or even slow down the SEC rampage. These are well-known reasons, but they are a prelude to the third one.

***This brings us to the third factor, and it is related to us, the industry.So, let’s look at ourselves in the mirror because we are also part of the problem.Let’s stop giving pundits, regulators or politicians free ammunition to mount attack after attack on crypto. Those critics have been feasting on crypto’s mishaps of the past year, to the point where they want to define us by our failures and not by our successes, potentials or benefits.

SPAC Board and Sponsor Hit with Delaware State Court Breach of Fiduciary Duty Direct Action

Though SPAC-related lawsuits were among the most important factors contributing to securities class action litigation filing volume in 2022, SPAC-related litigation has not yet been as significant of a factor so far in 2023. But while there have been relatively few SPAC related securities suits filed this year, there has been SPAC-related Delaware state court breach of fiduciary duty litigation. In the latest example of this Delaware state court litigation activity, plaintiff shareholders recently filed a Delaware Chancery Court lawsuit against the directors of a SPAC; the post-merger de-SPAC company, as successor in interest in the SPAC; and the SPAC’s sponsor, alleging that the defendants breached their fiduciary duties in connection with the merger. A copy of the plaintiff’s March 31, 2023, complaint can be found here.

Sen. Warren’s ‘Anti-Crypto Army’ Is Just the Beginning of Crypto’s Politicization

The moment a Democrat talks about a CBDC or some sort of U.S. government digital currency the Republicans will call Democrats anti-American because they want to surveille regular Americans.

The moment a Republican says something positive about bitcoin the Democrats will say that it is un-American since it threatens U.S. dollar hegemony and dominance and existence.

It probably won’t be as black and white as that, but it’s election season. Take your side, America!

Judge Jed Rakoff on Fraud and Fraudsters

Judge Rakoff also offered–relevant to some of the work that I have done and am doing on friends-and-family insider trading cases–that based on his personal experience, fraud and other white collar criminal misconduct may be motivated by greed, a desire for power or status, psychological issues, etc. But he noted overall that those who commit business fraud have a well-founded belief that they can get away with their misconduct–and they actually do. These fraudsters get off the hook, he says, in part because of a prosecutorial double standard that jails some and not others and also because of an enforcement shift from a large number of individual white collar prosecutions in the early part of the new millennium to legal actions taken against the business entities that employ the actors committing the fraudulent activity.