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The Washington, D.C. Circuit Court of Appeals ruled that the Securities and Exchange Commission’s (SEC) new proxy access rule 14a-11 is “arbitrary and capricious” and thus invalidated the rule. The DC Circuit Courts decided in Business Roundtable v. SEC that the SEC’s rule had unsupported assertions and arguments.

The SEC proxy access rule states that public companies need to provide shareholders with information regarding shareholder-backed candidates when board of directors are going to be voted on. The Business Roundtable and U.S. Chamber of Commerce said this rule violates the Administrative Procedure Act…

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SEC Finalizes New Whistleblower Rules

The United States Securities and Exchange Commission recently updated its whistleblower program to provide monetary incentives to employees who report misconduct within their companies directly to the government. The Dodd–Frank Wall Street Reform and Consumer Protection Act, passed last July, required the SEC to pay 10 to 30 percent of any monetary sanctions over $1 million levied after company misconduct to the whistleblower who reported it.  Congress hopes the law will encourage employees to alert the government to fraud and mismanagement.

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Rogue Brokers – Your Past is Showing

On May 16, 2011, the Financial Industry Regulatory Authority (“FINRA”) launched the  FINRA Disciplinary Actions Online database, a new free database system that makes its disciplinary actions available to the public via its website.  The database allows users to search for FINRA actions by several criteria, including case number, document text, document type, action date, and individual/firm name and Central Registration Depository number, 24/7.  Disciplinary action documents such as Office of …

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A tax incentive associated with qualified small business stock (QSBS) was extended for 12 more months as stipulated in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 signed by President Barack Obama into law on Dec. 17.

The act contains a temporary exclusion for 100 percent of the gain accepted by non-corporate investors from the sale of qualified small business stock that was acquired after Sept. 27, 2010 and before Jan. 1, 2011 for QSBS held for beyond five years.

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In two separate incidents, FINRA recently punished two firms for reneging compensation from their employees. Arbitration found that both Barclays and Merrill Lynch had unfairly decided not to pay employees in the midst of recent mergers and collapses.

Barclays was forced to pay one investment banker $715,000, plus a 4 percent interest change and trial fees, after Lehman Brothers collapsed. The banker had a compensation agreement when he worked for Lehman Brothers, which Barclays attempted to renege upon their acquisition of the firm.

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Experts believe that disputes over U-5 termination forms will increase due to a new set of FINRA directives. FINRA’s Regulatory Notice 10-39 warns member firms to be more detailed when completing U-5 forms after firing employees. The notice focuses on a section of the form that asks why an employee is being fired and says that the common response of “broker violated firm policy” is too vague. FINRA now wants …

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Congress Revamps Whistleblower Incentive Program

The U.S. Congress has greatly expanded incentives for whistle-blowers in the financial industry by creating a $451 million fund for reward payments. Prior to the new plan, regulators decided how much to pay insiders for evidence of wrongdoing, which led to only $160,000 in payouts over the last two decades. Despite this, over 90 percent of U.S. Securities and Exchange Commission enforcements have started with a tip from a whistle-blower. …

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On Tuesday, January 25, 2011, the Securities and Exchange Commission (the “SEC”) issued a release announcing the proposed new language of the net worth standard for “accredited investors” under the Securities Act of 1933 (the “1933 Act”).  The proposed amendments will align the standards for determining whether an investor is an “accredited investor” under the 1933 Act Rules 215 and 501 with the changes made by Section 413(a) of the …

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Goldman/Facebook – New Media Invokes Old Laws

Media reports on January 18 indicate that Goldman Sachs has halted its private placement of Facebook stock due to ‘regulatory concerns’ with respect to the enormous publicity the transaction has received in both traditional press and new media. It is a cornerstone of the private placement exemption that no ‘publicity’ is utilized in the transaction in order to demonstrate that no general solicitation has occurred, the foundation of a private …

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