SEC Roundup: Number of Securities Cases Brought Against Attorneys Rises, Permission Granted to Announce Material Information Via Social Media, & Clearing Agency Rulemaking Process Gets Streamlined

Under Rule of Practice 102(e), SEC to File More Securities Cases Against Lawyers
According to the Commission, it intends to bring even more cases against lawyers under its Rule of Practice 102(e). The amount cases had already gone up in the wake of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act and the 2002 Sarbanes-Oxley Act. Now, the regulator’s Office of the General Counsel is getting referrals from its Enforcement Division about possible lawyer misconduct.

The cases being brought generally involve alleged securities violations, such as active involvement in financial fraud and the obstruction of probes, with judgment errors and close calls not included. Per rule 102(e), the SEC can bar or censure individuals from practicing or appearing before it for different reasons. Some attorneys, however, are worried about the way the regulator interprets the rule, such as what ‘active participation’ in fraud actually entails. There are also concerns that the rule could be used as a “tactical tool” against attorneys.

Social Media Now An Avenue for Announcing Material Information
The Securities and Exchange Commission says that companies can now use social media to make material information announcements, as long as investors are notified which sites to go to for this data. This is the first time that the subject of Regulation Fair Disclosure to corporate information published on social media sites was directly addressed. The announcement was issued in a rare report pursuant to the 1934 Securities Exchange Act’s Section 21(a).

The report was spurred by Netflix Inc. (NFLX) CEO Reed Hastings’s Facebook post June 2012 announcing that subscribers had experienced more than 1 billion hours of content. The SEC later sent a Wells notice to the company saying that the information should have been disclosed through other avenues. However, following an investigation, the regulator discovered that there has been uncertainty over the way Regulation FD and the Commission’s 2008 Guidance applies to disclosures that take place through social media.

Clearing Agency Rulemaking Process Gets Streamlined
The SEC has finalized a rule that streamlines the rulemaking process for clearing agencies that are registered with both the regulator and the Commodity Futures Trading Commission. The 1934 Securities Exchange Act’s rule 19b-4 amends an interim rule that lets SRO rule changes go into effect upon filing, as long as the proposed modifications are not related mainly to securities futures and they don’t impact the securities clearing operations of the agencies.

The latest amendments bring non-securities products, including security-based swaps and swaps that aren’t mixed, under the umbrella of the interim rule. The final rule is supposed to make sure that the clearing agencies involved don’t have to deal with unnecessary delays in implementing changes to rules that primarily involve non-security products and that modifications are filed with the SEC.

If you suspect that your financial losses are a result of institutional investor fraud, please contact Shepherd Smith Edwards and Kantas, LTD, LLP right away.

Read the Amendment to Dual Filing Clearing Agencies’ Rule Filing Requirements, SEC (PDF)

The SEC Rules of Practice (PDF)

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AIG Wants to Stop Former CEO Greenberg From Naming It as a Defendant in Derivatives Lawsuit Against the US, Stockbroker Fraud Blog, April 13, 2013

Texas Securities Fraud: IMS Securities Settles FINRA Case Alleging Inadequate Supervision of Wholesale Representatives, Stockbroker Fraud Blog, March 27, 2013