Supreme Court Decides 2 Securities Fraud Cases

WASHINGTON — In a pair of securities fraud decisions issued Wednesday, the Supreme Court ruled for investors seeking to band together in a class-action lawsuit and imposed a strict time limit on some suits filed by the Securities and Exchange Commission. The class action case, Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, No. 11-1085, was a kind of sequel to the court’s 2011 decision in Wal-Mart Stores v. Dukes, which threw out an enormous employment discrimination class action on the ground that the plaintiffs did not have enough in common to pursue their claims in a single lawsuit. Read New York Times report [...]

For S.E.C., a Setback in Bid for More Time in Fraud Cases

The Supreme Court on Wednesday delivered a swift and decisive rejection of the Securities and Exchange Commission’s argument that it should operate under a more forgiving statute of limitations in pursuing penalties in fraud cases. As a result of the decision, the agency will have to find a long-term solution to give itself more time to investigate cases. In Gabelli v. Securities and Exchange Commission, Chief Justice John G. Roberts Jr. wrote in the unanimous decision rejecting the S.E.C.’s argument that a federal statute that limits the government’s authority to pursue civil penalties should commence when a fraud is discovered, not when it occurred. More in the New York Times [...]

J.P. Morgan Says Hedge Funds Using ‘Pocket Veto’ to Halt MF Global Suit

J.P. Morgan Chase & Co. (JPM) says a group of hedge funds is trying to use a “pocket veto” to derail the bank’s bid to recover $928 million it lent to MF Global Holdings Ltd. just before the firm’s 2011 collapse. In a Tuesday filing with U.S. Bankruptcy Court in Manhattan, J.P. Morgan said the hedge funds, which filed a payback plan that MF Global (MFGLQ) creditors are currently voting on, are attempting to deny creditors of the financing subsidiary information about what their claims should be worth. More on Fox Business News [...]

FINRA to appeal class-action ruling favoring Schwab

The Financial Industry Regulatory Authority will appeal a ruling that allows Charles Schwab Corp. to require customers to waive their right to participate in class-action suits, a spokeswoman said on Tuesday. “We are in the process of filing an appeal,” a FINRA spokeswoman told Reuters in an emailed statement. The decision comes after a hearing panel decision last Thursday that upheld Schwab’s late 2011 move to require clients to waive their class-action rights. Schwab’s action violates FINRA’s rules, but the rules themselves violate the National Arbitration Act, the panel found.
More in the Chicago Tribune [...]

SEC budget in line of fire as House panel seeks cuts

Republicans on a House financial panel on Tuesday said Wall Street and housing regulators need to learn to do more with less, as Washington tries to tame deficits by cutting back on spending. The House Financial Services Committee voted to release a 19-page policy document that does not call for specific levels of cuts but singles out agencies, including the Securities and Exchange Commission, for not using resources wisely. More on Reuters [...]

High court limits SEC authority to seek penalties

The Supreme Court on Wednesday limited the authority of the federal government’s top securities regulator to seek civil penalties over conduct that occurred more than five years before investigators took action. The nine-member court held on a unanimous vote that the five-year clock for the government to act on fraud begins to tick when the fraud occurs, not when it is discovered. More on Reuters [...]

Goldman ex-director Gupta must repay bank $6.22 million

A federal judge on Monday ordered former Goldman Sachs Group Inc (GS.N) director Rajat Gupta to reimburse $6.22 million to help the Wall Street bank cover its legal expenses related to his criminal insider trading case. Goldman had sought to recover $6.91 million, and U.S. District Judge Jed Rakoff in Manhattan said the bank had proved it was entitled to 90 percent of what it requested. Gupta, 64, is appealing his June 15, 2012 conviction and two-year prison term for feeding confidential information he had learned at Goldman board meetings to Raj Rajaratnam, the Galleon Group hedge fund manager and former billionaire. More on Reuters [...]

Bernard Madoff urges investigators to keep pursuing big banks

Imprisoned money manager Bernard Madoff is encouraging those investigating his massive Ponzi scheme to keep going after banks he alleges were complicit in the fraud. Madoff, who is serving a 150-year sentence for defrauding investors out of billions of dollars, wrote an email to Fox Business Network reiterating what he has said before: The big banks he dealt with had to be aware of the scheme. “The banks had to know what I was doing regarding the fraud,” he wrote. More in the Los Angeles Times [...]

Watchdogs would feel sequester’s bite

The federal government’s Wall Street watchdogs will feel the pinch of sequestration if Washington lawmakers cannot strike a deal by March 1 to avoid the across-the-board cuts. A trio of the nation’s top financial regulators would face millions of dollars in cuts under the sequester — a budget squeeze that could limit their ability to conduct examinations, purchase needed technology, and generally keep a close eye on Wall Street. More on The Hill [...]

Madoff Victims Suffer Major Setback In Federal Appeals Court

On January 6, 2012,the Southern District of New York affirmed a June 28, 2011, Order of the district’s bankruptcy court affirming Trustee Irving H. Picard’s denial of appellants’ claims against Bernard L. Madoff Investment Securities LLC (“BLMIS”) under the Securities Investor Protection Act (“SIPA”) because appellants do not qualify as BLMIS “customers” under SIPA. , see id. § 78lll(2). The matter than moved to the 2nd Circuit on appeal. None of the appellants invested directly with BLMIS; rather, they invested in two limited partnerships, Spectrum Select,L.P., and Spectrum Select II, L.P. (“Spectrum Funds”). Those Spectrum Funds then invested in two hedge funds, Rye Select Broad Market Fund, L.P., and Rye Select Broad Market Prime Fund, L.P. (“Feeder Funds”). Investors were advised in various documentation that by purchasing interests in the Feeder Funds, the investors had yielded exclusive control over investment decisions to those entities, which had invested the investors’ pooled capital with BLMIS through securities accounts maintained only in the funds’ names. More on Forbes [...]