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Lose One, Settle One: SEC Needs to Choose Its Fights Carefully
Author: Dan Brecher
Date: November 1, 2013
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The Securities and Exchange Commission (SEC) is publicly trying to rebuild its reputation as a tough enforcer. However, as the results of two recent cases demonstrate, you can’t win them all.
As we have previously discussed on this Business Law Blog, the SEC is moving away from its former policy of settling many cases on a neither-admit-nor-deny basis. Instead, the agency plans to take more cases to trial.
However, flamboyant businessman Mark Cuban recently took his chances at trial and won. The SEC accused the owner of the Dallas Mavericks of insider trading in connection with his sale of stock in search engine Momma.com, a claim Cuban vehemently denied. In the end, the jury cleared him of violating federal securities laws. They concluded that Cuban had not received material, non-public information or agreed not to trade on it.
The high-profile loss could be a setback for the SEC’s new enforcement regime and weaken its leverage at the negotiating table. However, the agency still has a good trial record, winning approximately 80 percent of its cases in recent years.
The SEC also still tends to resolve the majority of its cases outside the courtroom. Most recently, the agency reached a $200 million settlement with JPMorgan Chase & Co. The agency alleged that the firm misstated financial results and lacked effective internal controls to detect and prevent the now infamous “London Whale” trading losses.
In a significant victory for the SEC, the settlement also required JPMorgan to admit the facts underlying the SEC’s charges and publicly acknowledge that it violated the federal securities laws. The admission bolsters the agency’s new settlement policy and may encourage future wrongdoers to follow suit.
If you have any questions these cases or would like to discuss the legal issues involved, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work.
- Practices: Corporate Transactions & Business, Financial Services & Regulatory Practice
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