This Week In Securities Litigation (Week of February 26, 2024)
Last week the Commission filed two new actions. One centered on insider trading and was partially resolved. The second focused on violations of Rule 105 by an investment adviser. The proceeding was resolved.
Be careful, be safe this week.
SEC
Remarks: SEC Chairman Gary Gensler delivered remarks tilted “AI, Finance, Movies and the Law,” at Yale Law School on February, 13, 2024 (here). The Chairman’s remarks used well known lines from various films to illustrate points regarding SEC enforcement actions that might stem from or involve IA.
SEC Enforcement – Filed and Settled Actions
Statistics: This week the Commission filed 1 new civil injunctive action and 1 new administrative proceedings, excluding tag-along actions and those that present a conflict for the author.
Insider trading: SEC v. Loudon, Civil Action No. 24-cv-622 (S.D. Tx. Filed February 22, 2024) is an action which names as defendant Tyler Loudon who resides in Huston Tx. His wife is an M&A manager for BP p.l.c. On February 16, 2023, TravelCenters of America, Inc., a full service truck stop and travel center based in Ohio announced it had signed an agreement to be acquired by BP. Prior to the announcement Defendant misappropriated material, confidential information about the transaction from his wife. He then purchased 46,450 shares of TravelCenters stock. Following the deal announcement the share price increased about 70.8%. Mr. Loudon sold his shares for over $1.76 million in profits. The complaint alleges violations of Exchange Act Section 10(b). Defendant partially resolved the action, consenting to the entry of a permanent injunction based on the Section cited in the complaint. The U.S. Attorney’s Office for the Southern District of Texas announced parallel criminal charges.
Rule 105: In the Matter of Contrarian Capital Management, LLC, Adm. Proc. File No. 99578 (February 21, 2024) is a proceeding which names the registered investment advisor as a Respondent. In two instances between April 2020 and July 2020 Respondent purchased offering shares for clients from an underwriter or broker-dealer participating in a follow-on or secondary public offering of stock. Yet Respondent caused at least one advisory client to sell short the same security during the Rule 105 restricted period. In each instance the short sale booked as a result of the assignment of previously sold call options during the five business day period that preceded the pricing of the offering, thereby violating Rule 105. To resolve the proceedings Respondent consented to the entry of a cease-and-desist order based on Rule 105. In addition, the firm will pay disgorgement of $351,726.86, prejudgment interest of $29,600.50 and a penalty of $140,000.
FinCEN
Meeting: The Financial Crimes Enforcement Network or FinCEN held its first exchange with Puerto Rican Financial Institutions and Law Enforcement, according to a released dated February 222, 2024. The purpose of the meeting was to facilitate cooperation between the agency and officials in Puerto Rico (here).
Hong Kong
Remarks: Julia Leung, Hong Kong Securities & Futures Commission, delivered remarks at the Launch Ceremony of Greenhouse Gas Emissions Calculation and Estimation Tools event, February 21, 2024 (here). Her remarks focused on the institution of the new calculation tools.
Singapore
Publication: The Monetary Authority of Singapore or MAS published a consultation paper titled “Good Practices for Auditors of Fund Management Companies,” dated February 2024 (here).
This Week In Securities Litigation (Week of February 26, 2024)
Last week the Commission filed two new actions. One centered on insider trading and was partially resolved. The second focused on violations of Rule 105 by an investment adviser. The proceeding was resolved.
Be careful, be safe this week.
SEC
Remarks: SEC Chairman Gary Gensler delivered remarks tilted “AI, Finance, Movies and the Law,” at Yale Law School on February, 13, 2024 (here). The Chairman’s remarks used well known lines from various films to illustrate points regarding SEC enforcement actions that might stem from or involve IA.
SEC Enforcement – Filed and Settled Actions
Statistics: This week the Commission filed 1 new civil injunctive action and 1 new administrative proceedings, excluding tag-along actions and those that present a conflict for the author.
Insider trading: SEC v. Loudon, Civil Action No. 24-cv-622 (S.D. Tx. Filed February 22, 2024) is an action which names as defendant Tyler Loudon who resides in Huston Tx. His wife is an M&A manager for BP p.l.c. On February 16, 2023, TravelCenters of America, Inc., a full service truck stop and travel center based in Ohio announced it had signed an agreement to be acquired by BP. Prior to the announcement Defendant misappropriated material, confidential information about the transaction from his wife. He then purchased 46,450 shares of TravelCenters stock. Following the deal announcement the share price increased about 70.8%. Mr. Loudon sold his shares for over $1.76 million in profits. The complaint alleges violations of Exchange Act Section 10(b). Defendant partially resolved the action, consenting to the entry of a permanent injunction based on the Section cited in the complaint. The U.S. Attorney’s Office for the Southern District of Texas announced parallel criminal charges.
Rule 105: In the Matter of Contrarian Capital Management, LLC, Adm. Proc. File No. 99578 (February 21, 2024) is a proceeding which names the registered investment advisor as a Respondent. In two instances between April 2020 and July 2020 Respondent purchased offering shares for clients from an underwriter or broker-dealer participating in a follow-on or secondary public offering of stock. Yet Respondent caused at least one advisory client to sell short the same security during the Rule 105 restricted period. In each instance the short sale booked as a result of the assignment of previously sold call options during the five business day period that preceded the pricing of the offering, thereby violating Rule 105. To resolve the proceedings Respondent consented to the entry of a cease-and-desist order based on Rule 105. In addition, the firm will pay disgorgement of $351,726.86, prejudgment interest of $29,600.50 and a penalty of $140,000.
FinCEN
Meeting: The Financial Crimes Enforcement Network or FinCEN held its first exchange with Puerto Rican Financial Institutions and Law Enforcement, according to a released dated February 222, 2024. The purpose of the meeting was to facilitate cooperation between the agency and officials in Puerto Rico (here).
Hong Kong
Remarks: Julia Leung, Hong Kong Securities & Futures Commission, delivered remarks at the Launch Ceremony of Greenhouse Gas Emissions Calculation and Estimation Tools event, February 21, 2024 (here). Her remarks focused on the institution of the new calculation tools.
Singapore
Publication: The Monetary Authority of Singapore or MAS published a consultation paper titled “Good Practices for Auditors of Fund Management Companies,” dated February 2024 (here).