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Securities and Exchange Commission

Charles R. Kokesh v. Securities and Exchange Commission

Issues

Does the five-year statute of limitations in 28 U.S.C. § 2462 apply when the Securities and Exchange Commission compels offenders to disgorge the proceeds of their illegal activity?

In this case, the Supreme Court will decide whether the five-year statute of limitations on forfeitures and penalties in 28 U.S.C. § 2462 applies when the Securities and Exchange Commission (“SEC”) directs a wrongdoer to surrender proceeds stemming from his illegal activity (“disgorgement claims”). Petitioner Charles R. Kokesh argues that § 2462 applies to SEC disgorgement claims because these claims fell within the ordinary meaning of “forfeiture” at the time Congress enacted the statute. In addition, Kokesh contends that § 2462 applies because disgorgement claims are in part to punish the wrongdoer and are therefore penalties. Respondent SEC counters that disgorgement claims are not forfeitures under § 2462 because the term “forfeiture” was only intended to include procedures to take tangible property when Congress enacted the statute. The SEC also argues that disgorgement claims are not penalties because they do not make wrongdoers worse off financially than they would have been if they did not violate the law. This case will resolve a circuit split regarding whether § 2462’s statute of limitations applies to SEC disgorgement claims. In doing so, this case will also determine whether the SEC can enforce U.S. securities laws through disgorgement orders without regard to when the alleged violation occurred.

Questions as Framed for the Court by the Parties

Under 28 U.S.C. § 2462, any “action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued.”

The question presented is:

Does the five-year statute of limitations in 28 U.S.C. § 2462 apply to claims for “disgorgement”?

In 2009, the Securities and Exchange Commission (“SEC”) brought an enforcement action against Charles R. Kokesh, alleging that two investment advisory firms (“Advisers”) that he owned had mishandled the money of four clients (“Funds”). See Brief for Petitioner, Charles R.

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Credit Suisse Securities (USA) v. Billing

Issues

The Securities and Exchange Commission (SEC) heavily regulates public offerings of securities. Does the SEC’s jurisdiction automatically displace the application of antitrust law to these offerings, or does antitrust immunity for an offering of securities only occur when Congress has specifically expressed the intent to exempt a particular practice from antitrust liability?

 

Glen Billing and other investors filed a class action lawsuit against Credit Suisse First Boston Ltd. and other Wall Street investment firms, alleging that the firms violated the Sherman Antitrust Act, by artificially inflating the prices of securities in initial public offerings. The Court of Appeals for the Second Circuit, splitting with other courts, held that since Congress had not specifically immunized this conduct from antitrust liability, the Sherman Act should apply despite the Securities and Exchange Commission’s regulation of this area. The Supreme Court’s decision in this case will help resolve whether conduct already heavily regulated by the SEC should be automatically immune from antitrust liability, or whether antitrust immunity should only be granted where Congress has expressed a specific intent to immunize the conduct at issue.

Questions as Framed for the Court by the Parties

Whether, in a private damages action under the antitrust laws challenging conduct that occurs in a highly regulated securities offering, the standard for implying antitrust immunity is the potential for conflict with the securities laws or, as the Second Circuit held, a specific expression of Congressional intent to immunize such conduct and a showing that the SEC has power to compel the specific practices at issue..

Glen Billing and other investors filed a class action lawsuit against Credit Suisse First Boston Ltd. (“Credit Suisse”) and other Wall Street investment firms. In re Initial Public Offering Antitrust Litigation, 287 F.Supp.2d 497 (S.D.N.Y. 2003) (“In re IPO”). Billing alleged that the firms had violated the Sherman Antitrust Act15 U.S.C.

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Salman v. United States

Issues

Does making a gift of confidential information to a close family member or friend for non-corporate purposes satisfy the “personal-benefit” test to establish insider trading or must the government show that the insider received a “personal benefit” that was monetary in nature? 

The Supreme Court will determine whether a close family relationship between the insider and tippee shows “personal benefit” necessary to establish insider trading. Petitioner Bassam Salman argues that a casual or social friendship does not prove personal benefit but, rather, proof of personal benefit requires a showing of monetary gain by the tipper. The United States contends that a tipper personally benefits by giving a gift of information to a family member or friend, rendering proof of monetary gain by the tipper unnecessary. The United States maintains that a tipper breaches his fiduciary duty to shareholders whenever he discloses non-public corporate information for non-corporate purposes. The Court’s decision in this case may have a substantial impact on the scope of SEC’s authority to enforce securities-fraud laws in case of tipping and consequently influence investors’ interests and their confidence in securities markets. 

Questions as Framed for the Court by the Parties

Does the personal benefit to the insider that is necessary to establish insider trading under Dirks v. SEC require proof of “an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature,” as the Second Circuit held in United States v. Newman, or is it enough that the insider and the tippee shared a close family relationship, as the Ninth Circuit held in this case? 

On September 1, 2011, Bassam Yacoub Salman was indicted for his involvement in an insider trading scheme involving members of his extended family. United States v. Salman, 792 F.3d 1, 3–7 (9th Cir. 2015). Specifically, the government charged Salman with conspiracy to commit securities fraud. Id. at 3.

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Stoneridge Investment Partners v. Scientific-Atlanta

Issues

Can a party be held liable for fraud where it made no misleading public statements (or omissions), and had no duty to disclose, but engaged in transactions with a public corporation designed to artificially inflate the public corporation's financial statements?

 

Stoneridge Investment Partners, LLC, brought a securities fraud class action against Charter Communications' vendors Scientific Atlanta and Motorola, alleging a scheme in which Charter contracted with the vendors to purchase set-top cable boxes at higher-than-normal prices and sell advertising at higher-than-normal rates. These transactions served to artificially inflate Charter's stock price. The United States District Court for the Eastern District of Missouri held that Stoneridge's claim was foreclosed by the Supreme Court's decision in Central Bank, N.A. v. First Interstate Bank, N.A., 511 U.S. 164 (1994), in which the Court determined that mere "aiders and abettors" of fraud cannot be held liable.  The Eighth Circuit affirmed. Thus, the issue before the Supreme Court is whether a party may be held liable for fraud where it made no misleading public statements (or omissions), and had no duty to do make disclosures, but engaged in transactions with a public corporation designed to artificially enhance the public corporation's financial statements.  How the Supreme Court decides this case may set a new standard for determining whether third-parties can be held liable for investor-related fraud.

Questions as Framed for the Court by the Parties

Does the Supreme Court's decision in Central Bank, N.A. v. First Interstate Bank, N.A., 511 U.S. 164 (1994), foreclose claims for deceptive conduct under section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, where Respondents engaged in transactions with a public corporation with no legitimate business or economic purpose except to inflate artificially the public corporation's financial statements, but where Respondents themselves made no public statements concerning those transactions?

Charter Communications is a publicly traded cable company that provides digital services to millions of personal and business customers throughout the country. Brief for Petitioner at 4. In order to provide these services, Charter contracts with vendors, such as Respondents Scientific-Atlanta and Motorola, who provide set-top boxes and other equip

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