• "FINRA Board Of Governors Fails To Confront Goldman Sachs $215 Million Gender Discrimination Settlement" (BrokeAndBroker.com Blog / May 10, 2023)
  https://www.brokeandbroker.com/7035/finra-goldman-sachs/
  
  
• “A Call for Boycott: FINRA Board of Governors’ Cowardly Silence Becomes Thunderous” (BrokeAndBroker.com Blog / May 1, 2023)
  https://www.brokeandbroker.com/7021/finra-board-ruemmler-epstein/

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As set forth in SCOTUS' "Syllabus":

This case arises from a public offering of securities governed by the Securities Act of 1933, and the issue presented is what a public buyer must allege to state a claim under §11 of the Act. The 1933 Act requires a company to register the securities it intends to offer to the public with the Securities and Exchange Commission. See, e.g., 15 U. S. C. §§77b(a)(8), 77e; see also §77d. As part of that process, a company must prepare a registration statement that includes detailed information about the firm’s business and financial health so prospective buyers may fairly assess whether to invest. See, e.g., §§77f, 77g, 77aa. The law imposes strict liability on issuing companies when their registration statements contain material misstatements or misleading omissions. In this case, Slack Technologies—a technology company that offers a platform for instant messaging—conducted a direct listing to sell its shares to the public on the New York Stock Exchange in 2019. As part of that process, Slack filed a registration statement for a specified number of registered shares it intended to offer in its direct listing. Under the direct listing process, holders of preexisting unregistered shares in Slack were free to sell them to the public right away. Slack’s direct listing offered for purchase 118 million registered shares and 165 million unregistered shares. Fiyyaz Pirani bought 30,000 Slack shares on the day Slack went public, and later bought 220,000 additional shares. When the stock price dropped, Mr. Pirani filed a class-action lawsuit against Slack alleging, as relevant here, that Slack had violated §11 of the 1933 Act by filing a materially misleading registration statement. Slack moved to dismiss, arguing that the complaint failed to state a claim under §11 because Mr. Pirani had not alleged that he purchased shares traceable to the allegedly misleading registration statement, leaving open the possibility that he purchased shares not registered by means of the registration statement. The district court denied the motion to dismiss but certified its ruling for interlocutory appeal. The Ninth Circuit accepted the appeal and a divided panel affirmed.

Held: Section 11 of the 1933 Act requires a plaintiff to plead and prove that he purchased securities registered under a materially misleading registration statement. The relevant language of §11(a) authorizes an individual to sue for a material misstatement or omission in a registration statement when the individual has acquired “such security.” Slack argues the term “such security” refers to a security issued pursuant to the allegedly misleading registration statement; Mr. Pirani says that the term may encompass a security not registered under an allegedly misleading registration statement. While the word “such” usually refers to something that has already been described, there is no clear referent in §11(a) defining what “such security” means. As a result, the Court must ascertain the statute’s critical referent “from the context or circumstances.”

Context provides several clues. First, the statute imposes liability for false statements or misleading omissions in “the registration statement.” §77k (emphasis added). The statute uses the definite article to reference the particular registration statement alleged to be misleading, and in this way seems to suggest the plaintiff must “acquir[e] such security” under that document’s terms. Ibid. In addition, the statute repeatedly uses the word “such” to narrow the law’s focus—for example, referring to “such part” of the registration statement that contains a misstatement or misleading omission—suggesting that when it comes to “such security,” the law speaks to a security registered under the particular registration statement alleged to contain a falsehood or misleading omission. Section 6 of the statute indicates that a registration statement is “effective” for “only . . . the securities specified therein,” which is also hard to square with Mr. Pirani’s reading. Damages caps in the statute also make less sense with Mr. Pirani’s account of the statute. Collectively, these contextual clues persuade the Court that Slack’s reading of the law is the better one. While direct listings like the one here are new, the Court’s conclusion is not. The majority of courts have for years held that §11(a) liability extends only to shares that are traceable to an allegedly defective registration. 

Resisting this conclusion, Mr. Pirani argues that the Court should read the phrase “such security” to include not only securities registered under a defective registration statement but also other securities that bear some sort of minimal relationship to a defective registration statement. Mr. Pirani contends that but for the existence of Slack’s registration statement for the registered shares, its unregistered shares Cite as: 598 U. S. ____ (2023) 3 Syllabus would not have been eligible for sale to the public. But Mr. Pirani does not explain what the limits of his rule would be, how the Court might derive them from §11, or how any of this can be squared with the various contextual clues identified which suggest that liability runs with registered shares alone. Mr. Pirani argues that if Congress wanted liability under §11(a) to attach only to securities issued pursuant to a particular registration statement, it could have borrowed language from §5 to achieve that result. On its own terms, that argument also shows that Congress could have written §11(a) to explain more clearly that liability attaches to “any security” or “any security” bearing some specified relationship to a registration statement. Finally, Mr. Pirani argues that adopting a broader reading of “such security” would expand liability for falsehoods and misleading omissions and thus better accomplish the purpose of the 1933 Act. The Court cannot endorse that sort of reasoning. Nor is Mr. Pirani’s account of the law’s purpose altogether obvious; an alternate inference in the opposite direction is at least equally plausible. In any event, the Court’s function is to discern and apply existing law. The Court concludes that the better reading of §11 requires a plaintiff to plead and prove that he purchased shares traceable to the allegedly defective registration statement, and remands for the Ninth Circuit to consider that question in the first instance. Pp. 5-10. 

13 F. 4th 940, vacated and remanded.

GORSUCH, J., delivered the opinion for a unanimous Court.

SEC Charges Massachusetts-Based Firm and Its Co-Owners with Acting as Unregistered Securities Dealers (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25741.htm
In the United States District Court for the District of Massachusetts, the SEC filed a Complaint
https://www.sec.gov/litigation/complaints/2023/comp25741.pdf charging Auctus Fund Management, LLC and its co-owners: Alfred Sollami and Louis Posner with violating Sections 15(a)(1) and 20(b) of the Securities Exchange Act In part the SEC Release alleges that:

[F]rom 2013 through 2021, Auctus Management, Sollami, and Posner engaged in the business of purchasing convertible notes and associated warrants from microcap issuers, converting the notes into shares of stock at a large discount from the market price, and selling those newly issued shares into the market at a significant profit. Auctus Management, Sollami, and Posner allegedly purchased through Auctus Fund notes from more than 150 separate issuers and sold more than 60 billion shares of newly issued stock into the market, generating profits of over $100 million. As alleged, Auctus Management, Sollami, and Posner failed to register as securities dealers with the SEC or associate themselves with a registered dealer, in violation of the mandatory registration provisions of the federal securities laws. By failing to register, Auctus Management, Sollami, and Posner avoided certain legal obligations for securities dealers that govern their conduct in the marketplace and protect the investing public, including regulatory inspections and oversight, financial responsibility requirements, and maintaining books and records.

[B]etween March 2016 and at least April 2021, Melton fraudulently offered and sold to seven investors a total of approximately $1.03 to $1.49 million of interests in what Melton described as a real estate development venture in Laurinburg, North Carolina. The complaint states that six of these investors ranged in age from almost 60 to just over 86, with an average age of 75 at the time of investment. According to the complaint, Melton told each investor that he would use the funds to purchase properties in disrepair in downtown Laurinburg, renovate those properties for rental income and resale, and pay the investors a return from rental income and/or sale proceeds. The SEC alleges that, while Melton used some investor funds to purchase seven properties in Laurinburg, he did little to renovate, develop, or commercially use them, and instead misappropriated for his own use nearly two-thirds of the investors' funds. The complaint further alleges that, in April 2021, Melton transferred ownership of five of the Laurinburg properties to two complaining investors in exchange for a release of claims against him, but to facilitate this transfer, he fraudulently induced two other investors to relinquish their interests in those properties-misleadingly telling one that he would get her something better, which he never did, and misrepresenting to the other that he had a buyer for the property and could only make the sale if the investor exchanged his interests for a promissory note that Melton would then repay. The complaint states that Melton later defaulted on this promissory note.

NLRB General Counsel Issues Memo on Non-competes Violating the National Labor Relations Act (NLRB Release)
https://www.nlrb.gov/news-outreach/news-story/nlrb-general-counsel-issues-memo-on-non-competes-violating-the-national 
NLRB General Counsel Jennifer Abruzzo sent a Memo to all Regional Directors, Officers-in-Charge, and Resident Officers, setting forth her view that the proffer, maintenance, and enforcement non-compete provisions in employment contracts and severance agreements violate the National Labor Relations Act except in limited circumstances.
https://apps.nlrb.gov/link/document.aspx/09031d4583a87168 As set forth in part in the NLRB Release:

The memo explains that overbroad non-compete agreements are unlawful because they chill employees from exercising their rights under Section 7 of the National Labor Relations Act, which protects employees’ rights to take collective action to improve their working conditions. Specifically, these agreements interfere with employees ability to: 1. concertedly threaten to resign to secure better working conditions; 2. carry out concerted threats to resign or otherwise concertedly resign to secure improved working conditions; 3. concertedly seek or accept employment with a local competitor to obtain better working conditions; 4. solicit their co-workers to go work for a local competitor as part of a broader course of protected concerted activity; 5. seek employment, at least in part, to specifically engage in protected activity, including union organizing, with other workers at an employer’s workplace. 

Former Wells Fargo Senior Executive Carrie Tolstedt Agrees to Settle SEC Fraud Charges for Misleading Investors About Abusive Sales Practices to Inflate a Key Performance Metric (SEC Release)
https://www.sec.gov/news/press-release/2023-99
Without admitting or denying the allegations in an SEC Complaint
https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-99.pdf, the former head of Wells Fargo & Co.’s Community Bank, Carrie L. Tolstedt agreed to a Final Judgment permanently enjoining her from violating, or aiding and abetting violations of, the antifraud and other provisions of the federal securities laws and imposing a permanent officer-and-director bar. In addition to a $3 million civil penalty, Tolstedt agreed to pay disgorgement of $1,459,076 plus prejudgment interest of $447,874. The SEC will combine this money with $500 million paid by Wells Fargo and the $2.5 million penalty paid by Stumpf in previous settlements and distribute the sum to harmed investors. Previously, the SEC settled related charges against Wells Fargo and its former CEO and Chairman, John Stumpf. As alleged in part in the SEC Release:

[F]rom mid-2014 through mid-2016, Tolstedt publicly described and endorsed Wells Fargo’s “cross-sell metric” as a means of measuring Wells Fargo’s financial success despite the fact that this metric was inflated by accounts and services that were unused, unneeded, or unauthorized. The complaint further alleges that Tolstedt knew the cross-sell metric did not accurately track accounts or products that customers needed or used, since she was aware of misconduct at the Community Bank that led to bankers pushing products on customers that they did not need or want, including the unauthorized opening of accounts. The complaint alleges that Tolstedt made misleading public statements to investors at Wells Fargo’s investor conferences in 2014 and 2016, and signed misleading sub-certifications as to the accuracy of Wells Fargo’s public disclosures when she knew or was reckless in not knowing that statements in those disclosures regarding Wells Fargo’s cross-sell metric were materially false and misleading.

SEC Settles IIIicit Trading Case Against Two Former Registered Representatives (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25738.htm
In the United States District Court for the Eastern District of New York Final Judgments were entered against Joshua W. Turney and Hector Perez (former registered representatives at New York broker-dealer Global Arena Capital Corp.). As alleged in part in the SEC Release:

[F]rom April through June 2015, defendants Jonah Engler, Barbara Desiderio, Turney, and Perez fraudulently schemed to conduct large-scale trading in certain Global Arena customer accounts without receiving authorization from those customers. The defendants' illicit trading allegedly took place in over 360 customer accounts, generated over $2.4 million in unlawful profits for Global Arena and ill-gotten gains for the defendants, and resulted in over $4 million in net losses for their customers. The SEC's complaint charged Turney and Perez with violating Section 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder.

Turney and Perez were charged criminally by the U.S. Attorney's Office for the Eastern District of New York, and each pleaded guilty to one count of conspiracy to commit securities fraud. Turney was sentenced to two years' imprisonment followed by two years' supervised release, ordered to pay $5,295,868.12 in restitution, jointly and severally with Perez, and to forfeit $281,914. Perez was sentenced to two years' probation, ordered to pay $5,295,868.12 in restitution, jointly and severally with Turney, and to forfeit $137,275.

Turney and Perez consented to the entry of separate final judgments in the SEC action. Turney was ordered to pay disgorgement of $347,019.13 and prejudgment interest of $81,297.47. Perez was ordered to pay disgorgement of $137,275.26 and prejudgment interest of $32,159.94. The payments were deemed satisfied by the restitution order for Turney and the restitution and forfeiture orders for Perez, in the respective parallel criminal proceedings.

The Court in the SEC action previously entered partial consent judgments against Turney and Perez, permanently enjoining each of them from violating the Securities Act and Exchange Act antifraud provisions. For further information, see Litigation Release No. 24874 (Aug. 25, 2020). The SEC also recently concluded its litigation against Engler and Desiderio.

SEC Charges RTW Investments for Failing to Disclose SPAC-Related Conflicts of Interest (SEC Release)
https://www.sec.gov/enforce/34-97622-s
Without admitting or denying the findingsan SEC Order
https://www.sec.gov/litigation/admin/2023/34-97622.pdf that the firm violated the antifraud and compliance provisions of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder, and violated and/or caused violations of the beneficial ownership reporting provisions of Section 13(d) of the Securities Exchange Act of 1934 and Rules 13d-1 and 13d-2 thereunder, RTW Investments, LP agreed to a Cease-and-Desist Order, a Censure, and a $1.4 million civil penalty. As alleged in part in the SEC Release [Ed: special purpose acquisition companies ("SPACs") :

[RTW] formed multiple SPACs whose sponsors were owned both by RTW personnel and by private funds that RTW advised. The RTW personnel were entitled to a portion of the compensation the SPAC sponsors received upon completion of the SPACs' business combinations. The order finds that RTW invested assets of private funds it advised in certain transactions that helped complete the SPACs' business combinations and did not timely disclose these conflicts. In addition, the order finds that RTW failed to timely file accurate reports on Schedule 13G concerning the beneficial ownership of the common stock of a public company formed as a result of a SPAC business combination.

Former Coinbase Manager and His Brother Agree to Settle Insider Trading Charges Relating to Crypto Asset Securities (SEC Release)
https://www.sec.gov/news/press-release/2023-98
In the United States District Court for the Western District of Washington, former Coinbase product manager Ishan Wahi and his brother, Nikhil Wahi entered into Final Consent Judgments that permanently enjoin them from violating Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. In the criminal action, Ishan and Nikhil Wahi pled guilty to conspiracy to commit wire fraud. Ishan Wahi was sentenced to 24 months in prison and ordered to forfeit 10.97 ether and 9,440 Tether, and Nikhil was sentenced to 10 months in prison and ordered to forfeit $892,500. As alleged in part in the SEC Release:

[W]hile employed at Coinbase, Ishan Wahi helped to coordinate the platform’s public listing announcements that included what crypto assets would be made available for trading. According to the complaint, Coinbase treated such information as confidential and warned its employees not to trade on the basis of, or tip others with, that information. However, from at least June 2021 to April 2022, in breach of his duties, Ishan repeatedly tipped the timing and content of upcoming listing announcements to his brother, Nikhil Wahi, and his friend, Sameer Ramani. Ahead of those announcements, which usually resulted in an increase in the assets’ prices, Nikhil Wahi and Ramani allegedly purchased at least 25 crypto assets, at least nine of which were securities, and then typically sold them shortly after the announcements for a profit. The Wahi brothers agreed, as part of the settlement, not to deny the SEC’s allegations.