November 2007 Archives
What Turns Legal Conduct into Market Manipulation? A District Court Answers That Bad Intent Is Enough, But Only Where It Is the Sole Intent
PDF version A decision by the Southern District of New York in SEC v. Masri, 04 Civ. 1584 (S.D.N.Y. Nov. 21, 2007) (RJH), granting summary judgment and dismissing claims against a broker, seeks to clarify the intent necessary to prove a violation of Section 10(b) of the Securities Exchange Act for market manipulation when the alleged manipulative conduct is otherwise legal. An investor and a broker, who allegedly sought to raise prices in a thinly traded stock by placing a large buy order near market close (“marking the close”), argued that a market transaction unaccompanied by other deceptive or fraudulent conduct cannot, as a matter of law, support a finding of market manipulation. Although the court disagreed, holding that the SEC need not prove other deceptive or fraudulent conduct, it required the SEC to prove that but for the manipulative intent, a defendant would not have conducted the transaction. At the same time, the court held that there was no set of circumstances in which a jury could conclude that the broker had manipulative intent or knowledge of the investor’s manipulative intent. Thus, it granted the broker’s motion for summary judgment. In so doing, the court sought to strike a balance where brokers would not be “at risk of liability for market manipulation every time they executed a sizeable order in thinly traded stock at the end of the day.”
SEC Votes to Adopt Rule Amendments Relating to Electronic Shareholder Forums and Shareholder Proposals on the Election of Directors
At an open meeting on November 28, 2007, the Securities and Exchange Commission (SEC) voted to adopt rule amendments relating to (1) electronic shareholder forums and (2) shareholder proposals on the election of directors. The amendments were first proposed in July 2007 in two companion releases. Notably, the SEC declined to act on another rule amendment that would enable shareholders to include in company proxy materials their proposals regarding the procedures for nominating candidates for the board of directors. The SEC indicated that it may act on that proposal in the future.
Speaking Engagement - ICI’s Investment Company Directors Conference - West
Morgan Lewis partner John Ford will speak on "Small Fund Issues."
SEC Proposes Improved Approach to Mutual Fund Disclosure
At an open meeting yesterday, the Securities and Exchange Commission (SEC) voted unanimously to seek public comments on proposed amendments to Form N-1A, the mutual fund registration form, and Rule 498 under the Securities Act of 1933. These amendments are designed to ensure that investors receive a user-friendly summary of the key information needed to make an informed investment decision. The changes encourage funds to use a layered format to allow investors the option of accessing additional information on a particular topic. The proposed amendments continue the SEC’s effort, as in the Internet proxy rules, to use the Internet to simplify delivery of required communications and reduce costs.
Speaking Engagement - Terrapinn’s Hedge Funds World Bahamas 2007
Morgan Lewis Partner Ivan Harris is one of the panelists discussing "The Impact of Hedge Funds on the Global Capital Markets" at the Terrapinn’s Hedge Funds World Bahamas 2007.
Webcast - Electronic Recordkeeping/Required Books and Records to be Maintained by Advisers
Morgan Lewis partner W. John McGuire will speak on "Electronic Recordkeeping/Required Books and Records to be Maintained by Advisers" as part of ACA University’s compliance webcast series.
MSRB Issues Guidance Regarding Revisions to Its Supervisory Rules
PDF version On November 8, 2007, the Municipal Securities Rulemaking Board (MSRB) issued Notice 2007-32 with guidance pertaining to amendments to its supervision rule, Rule G-27. The Notice stated that the amendments, which become effective on February 29, 2008, are intended to ensure a coordinated regulatory approach with, and facilitate inspection and enforcement in the area by, the Financial Industry Regulatory Authority (FINRA). The amendments to Rule G-27 incorporate most of the requirements of NASD Rules 3010 and 3012, which are now rules of FINRA.
Speaking Engagement - SIFMA-CL New York Fall Compliance Seminar: The New SRO “FINRA”
Morgan Lewis partner Robert Mendelson will speak on "Fixed Income" and partner Ben Indek will speak on "The Examination Process from the Regulators’ Perspective."
Speaking Engagement - FINRA Institute at Wharton Certificate Program
Morgan Lewis partner Georgia Bullitt will be speaking at the FINRA Institute at Wharton Certificate Program.