Reports

In-depth legal analysis of fraud issues by some of the country’s best practitioners. Subscribers to Financial Fraud Law have unlimited access to these comprehensive reports on the latest in fraud law litigation and best practices.

Seeing Red: The Road to (Maximum) Recovery for Today’s Ponzi Scheme Victim

A legacy of “extraordinary evil”1…

 

Following the unraveling of the greatest Ponzi scheme in history, its victims expressed a spectrum of emotions to the sentencing court.  In a fit of outrage, one wrote “You, Bernard Madoff…are a murderer…a rapist…a larcenist…[and you have] committed ‘generational theft.’”2  With palpable sorrow, another penned, “at the age of 89, I find myself and my wife (86) devoid of future hope.  I find it hard to believe what he did to us and in addition [to] [sic] all the charities affected by this Bastard.”3  On the day of sentencing, a man who lost all of the funds earmarked for the care of his mentally disabled brother told the court, “I hope his sentence is long enough so his jail cell will become his coffin.”4  Read more


SEC Proposes Consolidated Audit Trail System and New Requirements for Municipal Securities Underwriters

The U.S. Securities and Exchange Commission (“SEC”) recently voted unanimously to propose a new rule (the “Proposal”) that would require self-regulatory organizations (“SROs”) to establish a centralized repository for the collection of real-time order and execution data for all secondary market transactions in National Market System (“NMS”) equity securities and listed options.  The SEC also voted unanimously to adopt amendments to Rule 15c2-12 under the Securities Exchange Act of 1934 (the “Exchange Act”) concerning the obligations of Participating Underwriters of municipal bonds. Read more


Merck v. Reynolds: The Supreme Court Clarifies the Standard for Determining When a Plaintiff “Discovers” Fraud for Limitations Purposes in Section 10(b) Actions

The Supreme Court decision in Merck & Co. v. Reynolds1 will make it easier for plaintiffs to avoid dismissal of complaints on grounds that they are time-barred. In that opinion, the Court construed the statute of limitations applicable to private actions brought under Section 10(b) of the Securities Exchange Act of 1934.  The relevant provision, 28 USC Section 1658(b), provides that a complaint is timely if filed by the earlier of "2 years after the discovery of the facts constituting the violation” or “5 years after such violation.”  The Court held that the two year statute of limitations accrues when the plaintiff actually discovers the facts constituting the violation, including scienter, or when a reasonably diligent plaintiff would have discovered such facts — whichever occurs first.  Read more


New York Court Throws Out Two Investor Lawsuits Involving Subprime Securities

Despite the current climate of anti-Wall Street fervor from the public, two recent decisions illustrate that, at least in New York, the courts will not allow public sentiment to trump the law as it should be applied to financial institutions that dealt in subprime mortgage-related securities.  In Ambac1 and Oddo,2 Judge Barbara R. Kapnick dismissed with prejudice two separate lawsuits that investors brought against their portfolio managers, a rating agency, and the sponsor of a structured vehicle, on the grounds that these plaintiffs could not state a basis in law to sue for the alleged misconduct.  Read more


By Denying Certiorari in Duxbury and Hopper, Supreme Court Maintains the Circuit Split Status Quo on Important Original Source and Rule 9(b) Questions

Even as it acknowledged a circuit split on two major issues affecting the False Claims Act (“FCA”), the Solicitor General informed the Supreme Court, via an amicus brief in Ortho Biotech Products, L.P. v. United States ex rel. Duxbury,1 that the United States’s preference was that these disparities remain unresolved — at least for now.  Because  the Court denied certiorari in Duxbury, however, the Court  will likely never resolve the important “original source” circuit split exemplified by that case.  The Court also denied certiorari on  the question of how Rule 9(b) applies to certain FCA claims — a question on which the circuits continue to differ.  Read more


SEC Proposes Consolidated Audit Trail System and New Requirements for Municipal Securities Underwriters

The U.S. Securities and Exchange Commission (“SEC”) recently voted unanimously to propose a new rule (the “Proposal”) that would require self-regulatory organizations (“SROs”) to establish a centralized repository for the collection of real-time order and execution data for all secondary market transactions in National Market System (“NMS”) equity securities and listed options.  The SEC also voted unanimously to adopt amendments to Rule 15c2-12 under the Securities Exchange Act of 1934 (the “Exchange Act”) concerning the obligations of Participating Underwriters of municipal bonds. Read more


Proposed Amendments to U.S. Sentencing Guidelines: Revisions Dovetail With Timing of U.K. Bribery Act and Impact the Effectiveness of Compliance Programs

The importance of corporate ethics and compliance programs has been emphasized by U.S. law enforcement authorities since the early 1990s, when the U.S. Sentencing Commission first issued Guidelines offering credit in the form of reduced penalties to companies that work diligently to prevent misconduct.  These Guidelines have served as the principal framework for assessing corporate misconduct for multiple U.S. enforcement agencies, including the Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”).  Read more


The New U.K. Bribery Act: An In-Depth Analysis

The United Kingdom’s Bribery Act 20101 (“Act”) received Royal Assent on 8 April 2010. It has not yet come into force and will need to be enacted by secondary legislation, now that the U.K. general election is over. When it comes into force, the Act will replace and consolidate the previous patchwork of common law offences and offences under the Public Bodies Corrupt Practices Act and the Prevention of Corruption Acts 1906 and 1916. Read more


Merck v. Reynolds: The Supreme Court Clarifies the Standard for Determining When a Plaintiff “Discovers” Fraud for Limitations Purposes in Section 10(b) Actions

The Supreme Court decision in Merck & Co. v. Reynolds1 will make it easier for plaintiffs to avoid dismissal of complaints on grounds that they are time-barred. In that opinion, the Court construed the statute of limitations applicable to private actions brought under Section 10(b) of the Securities Exchange Act of 1934.  The relevant provision, 28 U.S.C. §1658(b), provides that a complaint is timely if filed by the earlier of “2 years after the discovery of the facts constituting the violation” or “5 years after such violation.” Read more


FCPA Update

2010 is shaping up to be another significant year for enforcement of the U.S. Foreign Corrupt Practices Act (“FCPA”).  The U.S. Department of Justice (“DOJ”) and the U.S. Securities and Exchange Commission (“SEC”) appear to be pursuing a course of aggressive investigation and prosecution both within the United States and through cooperation with foreign authorities.  Companies that voluntarily disclose their FCPA violations continue to reap significant benefits when dealing with U.S. authorities.  As the increased enforcement stance of U.S. law enforcement continues, effective FCPA compliance programs should be a priority for any entity doing business outside of the United States. Read more