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CALIFORNIA CORPORATE & SECURITIES LAW

Did The Co-Founder Of Alcoholics Anonymous Violate Rule 10b-5?

Recently, I enjoyed watching My Name is Bill W., a 1989 movie that starred James Woods, JoBeth Williams and James Garner.  The film tells the story of Alcoholics Anonymous co-founder William Griffith Wilson (aka Bill W.).  In telling his story, the film details Wilson’s  work on Wall Street during the 1920s.  According to the film, Wilson decides…

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Insider Trading Is Like A Dog Named “Stay”

Insider trading cases remind me of the following joke attributed to stand-up comic Steven Wright: I bought a dog the other day. I named him Stay. It’s fun to call him. “Come here, Stay! Come here, Stay!” He went insane. Regulation of insider trading is a lot like Wright’s unfortunate pet.  Securities regulators encourage investors…

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Did This Corporation’s Law Firm Unwittingly Join The Criminal Prosecution Team?

In Brady v. Maryland, 373 U.S. 83 (1963), the Supreme Court held that the prosecution has a duty under the Fourteenth Amendment’s due process clause to disclose evidence to a criminal defendant.   The former Chief Executive Officer of IAR Systems Software, Inc. invoked this right after the San Mateo District Attorney charged him with felony…

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Criminal Conviction Of De Facto Officer Does Not Preclude D&O Coverage

After a two week trial in 2013, a jury convicted Mitchell J. Stein, a lawyer, of mail, wire, and securities fraud based on evidence that he fabricated press releases and purchase orders to inflate the stock price of his client Signalife, Inc., a publicly-traded manufacturer of medical devices.  Mr. Stein received a sentence of 204 months’ imprisonment, over…

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Why Bassam Salman Should Not Have Been Convicted

A lot of ink has been spilt on the United States Supreme Court’s decision in Salman v. United States, 137 S. Ct. 420 (2016).  In that case, the Supreme Court upheld the criminal conviction of Mr. Bassam Salman who received lucrative trading tips from an in-law, who had received the information from his brother.  The legal issue in…

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Ninth Circuit Accords Chevron Deference To The SEC, What Would Judge Gorsuch Say?

Last week, I noted that Judge Gorsuch has expressed a certain skepticism of Chevron deference.  The next day, the Ninth Circuit Court of Appeals held that the Securities and Exchange Commission’s interpretation of Section 19(d)(2) of the Securities Exchange Act is entitled to Chevron deference. Sharemaster v. United States SEC, 2017 U.S. App. LEXIS 1827 (9th…

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SEC Continues To Pay Out Millions In Secrecy

Earlier this week, the Securities and Exchange Commission announced awards to three whistleblowers totaling more than $7 million.  That is about all anyone can say about the awards.  The SEC’s order is only 448 words long, including numerous occurrences of the word “redacted”.  It doesn’t name the company or describe the nature of the investment scheme. Even…

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10th Circuit Holds SEC ALJs Are Holding Office Unconstitutionally

In March 2015, I posed the following question: But if you were hailed before an unconstitutional tribunal with the ostensible authority to fine you and bar you from working, would you want a “real” court to step in and consider the constitutionality of the proceedings? Since raising that question, several respondents in administrative proceedings brought by…

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Has The SEC Paid Millions In Whistleblower Bounties To “Friends And Family”?

Earlier this month, the Securities and Exchange Commission announced yet another large whistleblower bounty.  See SEC Awards Nearly $1 Million to Whistleblower.  This brings to $136 million the total amount awarded to date by the SEC to whistleblowers.  That is a lot of money, especially since it went to only 37 individuals! Were any of those awards made to…

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SEC Takes Action Because Issuer Did Not Effect A Public Offering

Until the addition of paragraph (c) to Rule 506 three years ago, securities lawyers spent a lot of time advising their clients on how to avoid a public offering of their securities.  Thus, I found it somewhat ironic to read that the Securities and Exchange Commission had taken enforcement action against a California lawyer for not conducting…

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