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"It is impossible for ideas to
compete in the marketplace if no forum for The Business Forum Journal The Business Implications of Dealing in Securities
By Evan Peterson
Abstract
In tough economic times, ensuring access to
capital can be difficult. Since capital may be raised through the sale of
securities, companies must remain cognizant of whether the instruments they
deal in are classified as securities. If such instruments are classifiable
as securities, then companies must be careful to ensure compliance with both
state and federal securities laws. Violation of these laws may result not
only in both criminal and civil liability, but also in economically
crippling repercussions to a company’s business and image. Introduction In these tough economic times companies of all kinds, from small businesses to transnational mega corporations, are all desperately trying to stay afloat. Adequate capitalization is one of the many factors weighing in on whether a company can maintain a thriving business. Businesses that are unable to manage their cash flow quickly find themselves overwhelmed by increasing expenses and a diminishing revenue stream. Debt and equity financing are two financing techniques companies can utilize to combat their increasing fiscal needs. Debt financing refers to the practice of borrowing money with the borrower promising to repay the debt at a later date. Equity financing focuses on obtaining funds by allowing investors the opportunity to become partial owners of the company. The decision making that goes into selecting the most appropriate alternative requires companies to carefully examine their goals and objectives. The company must then determine which financial strategy best meets both its short-term and long-term needs. In the context of such decision making, it is vital that businesses also look to see whether their contemplated designs involve securities in any way. If such plans do involve securities, both state and federal securities laws apply. Such examination is critical because such entities may not, at first glance, realize their proposed transactions actually involve securities. In addition, mistaken characterization of an instrument as a security triggers application of all the protections and obligations of the securities laws, even if the instrument is not a security. Part I of this paper will discuss the requirements necessary for an instrument to be considered securities, the guiding principles behind the rules defining such securities, and the difficulties with properly characterizing various instruments as securities. Part II will briefly outline the various federal securities laws, then chiefly focus on Rule 10b-5. Part III will discuss the criminal, civil, and business implications of violating certain federal securities laws. PART I – THE CHARACTERISTICS OF SECURITIES
What is a Security? The Securities Act gives a broad definition to the term ‘security.’ By the language of the act, the term ‘security’ means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement ~ investment contract ~ or, in general, any interest or instrument commonly known as a ‘security’. (1) The key foundational principle behind the Securities Act is to "to eliminate serious abuses in a largely unregulated securities market. [2] It was the aim of Congress to ensure that the concept of a “security” not be confined to a restrictive interpretation. [3] As a result of Congress’ desire to create an effective means of protecting investors, the term ‘security’ was defined in general terms, so as to include the many instruments that in the commercial world fall within the ordinary concept of a security. [4] However, Congress in no way intended to create an overarching, all encompassing federal protection against fraud. [5] After an examination of the economic realities of the transaction, [6] it is the task of the Securities and Exchange Commission (SEC) to determine which financial transactions come within the ambit of the federal securities statues and which do not. [7] However, as some instruments are clearly investments by their very nature, a case-by-case analysis of economic realities is not always necessary. [8]Over the years, the Supreme Court has attempted to clear the murky waters surrounding the some of the terms contained within the statutory definition. While some of these terms seem relatively clear, others seem impossibly vague. As a result of this ambiguity, courts have long grappled with complex and esoteric issues. One of the most notoriously debated terms within the statutory definition is an “investment contract.” Because this term is one of the most unclear ones in the statutory definition, it is the one that will be focused on in the following section. Investment Contracts In SEC v. Howey [9] the United States Supreme Court fashioned the landmark test for determining whether an instrument is an investment contract. Under Howey, an instrument is an investment contract if it is a “contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party. [10] By identifying the span of the market it intended to regulate in such sprawling terms, Congress truly, “painted with a broad brush.” It recognized a need for a plan-of-attack capable of modifying itself to meet the challenges posed by increasingly complex money-making schemes. [11]The requirement of monetary investment has been liberally interpreted. Howey's "investment of money" prong requires that the investor "commit his assets to the enterprise in such a manner as to subject himself to financial loss." [12]> Thus, goods, services, and promissory notes are sufficient to satisfy the fiscal element of the standard proposed in Howey. [13] The common enterprise requirement, which looks to the extent an investor’s success is tied to the success of the overall enterprise, can be satisfied in two ways. One approach examines the relationship between the investors and the promoter, [14] while the other requires either that returns fluctuate together or that investor funds be pooled for a common enterprise to be found. [15] In order to satisfy the third requirement, an investor simply needs to supply legal consideration to the enterprise with the expectations of obtaining a return on the investment. For instance, participation in earnings on invested funds is enough. [16] The fourth and final requirement calls for the exertions of the transaction to come chiefly from the promoter, not the investor. [17] This element is not overly rigid, such that an investment contract is not precluded simply by the fact that the investor affords some assistance. [18]If each of these criteria is satisfied, the investment arrangement or agreement will be an "investment contract" within the meaning of the Securities Act. [19] “Investment contract” is a catch-all term that includes a range of novel and unusual instruments whose economic realities invite application of the securities laws. [20] Thus, they can include the purchase of condominium units marketed as investments,[21] certificates of interest in profit-sharing agreements, [22] and fractional undivided interests in oil, gas, and other mineral rights. [23]The Reasoning behind the Rules To properly be characterized as securities, economic instruments must be suitable for inclusion in public markets. [24] These instruments must be reasonably regarded as securities by participants in the market who acquire them. [25] In order for the protections provided by the federal securities laws to apply to an instrument, the investors holding that instrument must have a rational belief that the instrument is actually a security. [26]The reasonable expectations of the investing public are also considered in making a determination of whether an instrument can be properly deemed a security. In Reves, the United States Supreme Court noted that it would consider instruments to be securities based on “public expectations, even where an economic analysis of the circumstances of the particular transaction might suggest that the instruments are not ‘securities' as used in that transaction. [27] The court noted that the fundamental essence of a “security” is its nature as an “investment. [28] As instrument categorization is influenced by social factors that fluctuate and diverge from past practices over time, instruments not deemed to be securities on one occasion may be judged securities at another point in time.[29] The courts also look to see whether some factor, such as the existence of another regulatory scheme, significantly reduces the risk of the instrument, thereby rendering application of the Securities Acts unnecessary. [30] The instrument’s distribution scheme is also highly scrutinized to establish the existence of "common trading for speculation or investment. [31]
PART II – FEDERAL SECURITIES LAWS Overview of the Regulatory Environment Once a company makes the decision to sell securities in order to obtain financing, application of state and federal securities laws is triggered. State securities laws are referred to as “blue sky laws.” Before a security can be legally offered for sale, the securities offering must comply with both these “blue sky laws” and federal securities laws. [32] In a dated but relevant and insightful speech, Chairman Levitt of the SEC opined that the success of the investment markets is largely tied to the level of world confidence accorded to them, noting that, “Investors put their capital to work – and put their fortunes at risk – because they trust that the marketplace is honest. They know that our securities laws require free, fair, and open transactions.” The Chairman also stated that this level of enforcement, "resonate[s] especially profoundly" among American investors. [33]There are numerous federal laws that focus on securities transactions. For example, the Investment Advisers Act of 1940 regulates the actions of those in the business of advising the public on securities investments, [34] while the Investment Company Act of 1940 focuses on the activities of publicly owned companies that invest and trade in securities. [35] The Securities Investor Protection Act of 1970 created a nonprofit membership corporation to cover losses when a firm dealing in securities is unable to pay client accounts. [36] The Trust Indenture Act of 1939 regulates the public offerings of debt securities so that capital markets, investors and the general investing public are protected. [37]The primary sources of federal authority rest with the Securities Act of 1933 and the Securities Exchange Act of 1934. The purpose of each is to ensure dynamic and spirited market competition by requiring full and fair disclosure of all information important to securities transactions. [38] The Securities Act of 1933 facilitates investor access to material information on securities being sold to the public for the first time, and forbids dishonesty in the context of such sales. [39] The Securities Exchange Act of 1934 works to defend those who trade in securities already within securities market. [40] Enforcement of securities regulations lies with the SEC. [41] If federal securities laws apply, the issuer must file a registration statement with the Commission and distribute prospectuses. By law, a prospectus is required to communicate all material information to investors before a sale of securities can take place. However, registration is not required if the security or the transaction itself is exempt from registration requirements. [42]Rule 10b-5 A primary means employed in prosecuting violations of federal securities laws is Rule 10b-5 of the Securities Exchange Act. [43] Anyone utilizing a deceptive device or making a false statement or omitting a material fact in connection with buying or selling securities violates Rule 10b-5. [44]In essence, Rule 10b-5 provides a solid foundational basis for identifying and investigating claims of securities fraud. [45]Violators of Rule 10b-5 can be subject to criminal liability, civil liability, or both. [46] In order for a plaintiff to bring a successful civil claim for securities fraud under Rule 10b-5, the defendant must have: (1) made a misstatement or omission of material fact [47] (2) with scienter [48] (3) in connection with the purchase or sale of securities [49] (4) upon which the plaintiff’s reasonable reliance proximately caused the injury.[50]Under the first element, a misstatement or omission is an act that either expresses an artificial impression of the circumstances or is misleading. [51] Virtually any published dishonesty is enough. However, the misstatement or omission must be material. [52] A misstatement or omission is determined based on whether, in light of the surrounding circumstances, the information would be considered an important factor in coming to a decision. [53] However, statements that are generally optimistic “puffery,” are considered immaterial by the courts and do not present an actionable claims. [54]As the second element, scienter denotes the degree of intent required for violation of Rule 10b-5. This intent differs depending on whether the case is civil or criminal. To establish intent in a civil case, the plaintiff must prove scienter, i.e. “intent to deceive, manipulate, or defraud. [55] In a criminal case, criminal penalties result from willful violation of its provisions. [56] In order for a defendant to act willfully, his or her actions must be intentional and deliberate, rather than the result of a mistake or carelessness.[57] Importantly, conviction does not require awareness of the applicable law in order to be imposed. [58]The third element requires that the purchase or sale of securities be involved in order for securities fraud to take place. This requirement is interpreted broadly. Buying or purchasing is defined as including any “contract to buy, purchase, or otherwise acquire.” In addition, the law’s coverage also includes “any contract, agreement, or transaction for future delivery.” Terms relating to selling or sale have been similarly defined. [59]To prove the reliance element, the government must demonstrate the impact that the fraudulent scheme had on the investor. [60] However, an exception to this general rule exists. In Basic Inc. v. Levinson, the Supreme Court discussed the “fraud on the market” theory. Under this theory, a rebuttable presumption of reliance to any alleged violations of Rule 10b-5 may be applied in certain circumstances. [61] The Court determined that since “most publicly available information is reflected in market price, an investor's reliance on any public material misrepresentations, therefore, may be presumed for purposes of a Rule 10b-5 action.”[62]In order for this presumption to be triggered, four elements must be established. First, the defendant must make a material public misrepresentation. Second, the shares at issue must be traded on an efficient market. Third, the misrepresentation must cause the average, reasonable investor to misinterpret the value of those shares. Fourth and finally, the plaintiff must have traded the shares before the misrepresentation was disclosed. [63] To determine whether the security was traded on an “efficient market,” the courts examine factors such as: (1) large weekly trading volume (2) significant number security analyst reports (3) market makers in the security (4) company eligibility to file S-3 Registration Statement, and (5) history of immediate stock price movement caused by unexpected corporate events or financial releases. [64] Once all of the above elements are established, the defendant is guilty of Rule 10b-5 under the Securities Exchange Act.Insider Trading Rule 10b-5 of the Securities Exchange Act is also the primary authority employed in prosecuting criminal violations of federal securities laws. [65] As it provides the basis for a claim of securities fraud, [66] it is currently the Government’s primary measures of policing insider trading activities. [67] One of the purposes of Rule 10b-5 is preserve the maintenance of fair and honest markets, [68] an essential goal, as trading on misappropriated confidential information works to undermine investor confidence and market integrity. [69] In addition, insider trading can also lead to potential decreases in market liquidity. [70] These aims are achieved by prohibiting individuals from breaching fiduciary duties and using material, non-public information obtained via that fiduciary relationship to purchase or sell any security for personal profit. [71]There are two different theories that can serve as the foundation for a Rule 10b-5 violation of insider trading. [72] The first theory, the classical theory of insider trading, deals with the fiduciary relationship among corporate “insiders” and corporate shareholders. The second theory, popularly referred to as the misappropriation theory, focuses on the relationship between corporate “outsiders” and the internal source of the information. [73]Classical Theory of Insider Trading A violation of Rule 10b-5 occurs under the classical theory when corporate insiders buy or sell securities based on material information that is not available to the general public. Information is material if the average person would consider it important when making a decision whether to buy or sell a security. [74] As the language implies, the rule can be violated only by corporate insiders with fiduciary duties to corporate shareholders [75] However, the term “insider” has been given an expansive interpretation by the courts. For example, directors, officers, and principal shareholders have been held to qualify as corporate insiders. [76]In addition to conventional insiders; the rule also applies to temporary insiders and tippees. [77] Duties are imposed on temporary insiders where: (1) a confidential relationship exists, and (2) the individual is allowed access to corporate information as a result of that relationship. It is expected the outsider will not disclose the non-public information. [78] Such temporary insiders have included attorneys, accountants, consultants, and underwriters among others.A tippee is an individual that trades by utilizing non-public information he or she has received from a corporate insider. [79] In order for a tippee to incur liability, the following requirements must be met. First, the tipper must have possessed material, non-public information concerning the corporation. Second, the tipper must have disclosed such information to the tippee, who traded in the securities of the corporation based on that information. Third, the tippee must have known or should have known that the tipper violated a fiduciary relationship by giving the information to the tippee. Finally, the tipper must benefit in some way from disclosing the information to the tippee. [80]To avoid violating Rule 10b-5, a corporate insider must either make the non-public information public, or refrain from trading on the information. [81] Fraud occurs when one remains silent with respect to the advantages presented by the confidential information that is unavailable to other investors. Thus, disclosure of an intention to trade using non-public information to corporate shareholders would not constitute a violation of Rule 10b-5. [82]Misappropriation Theory of Insider Trading Under the misappropriation theory, Rule 10b-5 requires: (1) use of a deceptive device (2) breach of fiduciary duty (3) use of material, non-public information in connection with buying or selling a security, and (4) willfulness on the part of the defendant. [83] Illegality results from trading on the basis of confidential information for personal gain in breach of a fiduciary or other confidential relationship to the proprietor of the information. [84] The relationship can be defined broadly, and can occur in the context of the relationships between employers and employees, business partners, doctors and patients, and attorneys and clients. [85]While a fiduciary relationship can even exist in the context of a personal relationship, it has been historically more difficult to determine exactly which personal relationships established duties implicating the misappropriation theory. [86] Thus, the SEC enacted Rule 10b-5-2 to clear up this ambiguity. [87] Here, the Commission laid out a list of three scenarios where a personal duty could satisfy the misappropriation theory’s fiduciary duty requirement: (1) where individuals unequivocally agree to keep the information confidential (2) where past dealings or relationships reveal an implied understanding amongst those involved that the information will remain confidential, or (3) where the information comes from a spouse, parent, child, or sibling, unless the circumstances of the relationship clearly show no duty exists. [88]While fraudulent use of information protected by 10b-5 only invites criminal liability in the event such information is used in connection with the purchase or sale of a security, [89] the SEC has taken a broad approach in this regard. In SEC v. Zandford, the United States Supreme Court held that criminal liability applies when, “the scheme to defraud and the sale of securities coincide. [90] The Court held that the misappropriation theory can be properly applied in making a determination whether Rule 10b-5 has been violated. Like the classical theory, the misappropriation theory assists in ensuring the integrity of securities markets and the promotion of investor confidence through policing the use of misappropriated information. [91]
PART III – IMPLICATIONS OF NON-COMPLIANCE
WITH FEDERAL SECURITIES LAWS Non-compliance with federal securities laws can prompt an assortment of civil and criminal penalties. The important thing to remember is that there is no “I didn’t know” defense. Thus, companies must be especially careful as they may implicate federal securities laws by dealing in securities even without knowing it. According to John C. Coffee, Jr., the director of the Center on Corporate Governance at Columbia Law School, “The U.S. pursues securities law violations with a regulatory intensity unmatched elsewhere in the world." [92]The SEC has broad powers in dealing with violators of federal securities laws. As a result of its authority, the Commission can literally shut down a company.” It has been known to enact orders “enjoining the defendant company from conducting business under its compensation plan, freezing the company's assets, placing the company into a receivership, suspending the trading of the company's stock (if it is publicly traded), and ordering that the company disgorge itself of all ill-gotten profits.” [93] The commission can also fine an individual $100,000 or a company $500,000, prohibit an individual from serving as a company’s officer or director, bar an attorney or accountant from appearing before it, and refer cases for criminal prosecution.Failure to comply with federal securities laws may result in fines up to $10,000 and five years in prison under the Securities Act. Fines of $1,000,000 for a single individual, or $2,500,000 for the company and imprisonment of ten years are possible under the Securities Exchange Act. [94] Because federal contracts may be suspended simply by the presence of unassuming evidence of fraud, criminal prosecution for securities fraud can include loss of government contracts. Corporations may be subject to shareholder derivative suits and risk revocation of their corporate charter. [95]In 2005, the SEC ordered $1.8 billion in penalties be paid by securities law violators. Compared to the SEC’s equivalent in Great Britain, the Financial Services Authority (FSA), this was a 60-to-1 ratio. According to research conducted by Howell Jackson at Harvard Law School, the SEC alone imposes sanctions 384 times the sanctions compelled in Canada. Costs for private actions, like securities class action cases, have involved exorbitant financial sums. For example, in 2005 enforcements in the private sector reached $9.7 billion. [96]In a 2008 study conducted by the Deloitte Forensic Center, analysts examined SEC enforcement actions filed against 352 companies from 2000 through 2007. The study scrutinized reissued financial statements, chapter 11 restructuring filings, securities class action cases, and stock price reaction for the companies involved. The study found that seventy percent of the companies examined realized a decline in stock price, with around fifty-three percent of those companies experiencing a decline of fifty percent or greater. In addition, it was determined that thirty-three percent of the companies that had six to ten allegations of fraudulent schemes were also involved in a securities class action case. Thus, it was determined that as the number of overall fraudulent schemes increases, so does the likelihood that securities litigation will befall a corporation. The average settlement for a securities class action case involving such companies was $312 million, while the average settlement amount across all industries examined in the study was only $286 million. [97]In addition to civil and criminal punishment, violations of federal securities laws can also create difficulties in the area of debt and equity itself. First, the exchange the corporation trades upon could suspend trading or delist the company’s shares. Delisting refers to the removal of the company’s stock from the stock exchange so that investors are unable to trade shares of the stock on that exchange. [98]Second, if the corporate bylaws provide for indemnification, the corporation could be required to pay the defense costs for lawsuits involving directors and corporate officers. Bylaw indemnification provisions provide security for directors and officers for claims asserted against them for actions performed in the course of their respective duties. Such provisions allow for effective service to the corporation and protect against personal liability for actions done on behalf of the corporation. If such rights are put into a contract signed by both parties, no one party can unilaterally rescind the agreement. [99]Third, funds may be required to pay for work performed by attorneys and accountants in conducting reaudits of financial statements. A complete overhaul and reaudit of financial statements from previous years can be extremely costly, as evidenced by the wake of expenses after the Arthur Andersen scandal and others. CMS Energy paid Ernst & Young $10,852,320 to reaudit its statements from 2000 and 2001, compared to only $2,452,800 for its 2002 audit. Likewise, Georgia-Pacific Corporation paid Ernst & Young $11.3 million for Arthur Andersen’s work for the years between 1999 and 2001. [100]Fourth, if the corporation has any loans where the loan agreement provides that making a false representation results in a default, a lender may call in its loans. As lenders can be weary of lending money, especially in troubling economic times, the moment they smell blood in the water or believe they may encounter difficulties in obtaining their money, they will go into protection mode. The consequence of this is that the lender will try to recover loaned funds as soon as possible. A borrower must be careful not to commit an act, or fail to perform an act, constituting a default under the terms of the loan agreement. Default may occur in a variety of circumstances depending on the nature of the borrowed funds. Among the more common forms of default are misrepresentation, non-payment, breach of obligation, insolvency, and change of activity. [101]Finally, in the wake of all the fines and legal judgments, companies may be forced to expend immense sums of money. In the face of decreases in product sales and corporate earnings due to waning consumer confidence and poor public opinion, additional funds can be difficult to acquire. Thus, in order to survive a company may be forced to enact a host of cost cutting measures. Price increases and wage reductions might be two such measures. However, such a plan of attack may lead to a loss in customers or suppliers due to higher prices, or to loss of valuable employees due to reduced wage compensation. [102] In the alternative, downsizing and corporate restructuring are two other options. However, the feasibility of such alternatives is questionable, as they can be time consuming, intricate, and risky. The last thing a company wants is to conduct massive layoffs in order to save money, only to expose itself to wrongful termination and other employment related lawsuits.Conclusion Numerous methodologies exist for raising capital, each with their own innate benefits and drawbacks. Before attempting to raise capital by selling an instrument or proposing an investment opportunity in a business enterprise, companies must carefully scrutinize the situation to determine whether securities are involved. If securities are involved, the terms of both state and federal securities laws apply. As these laws define securities broadly, a vast array of transactions may potentially fall within their ambit, despite having very little resemblance to more obvious and traditional forms of securities. Failure to recognize the existence of a security and abide by federal securities laws, even when unintentional, can subject a company to civil and criminal penalties. In addition, such violations can have catastrophic consequences on the company’s business. In order to ensure neither federal nor state securities laws are violated, companies must seek the skilled advice and consultation of legal professionals. Since this is such a highly technical and convoluted area of the law, only attorneys skilled in dealing with securities should be utilized. While legal representation in these matters may seem like an additional and burdensome expense, the potential consequences of non-compliance with securities laws can prove to be far more expensive.
Notes [1] 15 U.S.C. § 77(b)(a)(1). [7] Forman supra at 848. [8] Reves supra at 62. [9] SEC v. Howey, 328 U.S. 293 (1946). [10] Howey supra at 299. [11] Howey supra at 299. [24] FitzGibbon, S. (1989). “What Is a Security? - A Redefinition Based on Eligibility to Participate in the Financial Markets.” Minnesota Law Review, 64, 893. [25] In re Nat'l Mort. Equity Corp. Mort. Pool Certificates Sec. Litig., 723 F. Supp. 497, 503 (C.D. Cal. 1989). [29] Seligman, J. (1995). “The Obsolescence of Wall Street: A Contextual Approach to the Evolving Structure of Federal Securities Regulation.” Michigan Law Review, 93, 649. [32] Alvarez, R. and Astarita, M. Introduction to the Blue Sky Laws, available at http://www.seclaw.com/bluesky.htm (last visited Aug 7 2009).
[33]
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Securities and Exchange Commission (Aug. 19, 2009) at [34] 15 U.S.C. §§ 80b-1 et. seq. [35] 15 U.S.C. §§ 80a-1 et. seq. [36] 15 U.S.C. §§ 78aaa et. seq. [37] 15 U.S.C. §§ 77aaa et. seq. [41] “U.S. Securities and Exchange Commission,” (Aug. 19, 2009) at http://www.sec.gov [42] 15 U.S.C. §77(f)-(g). [43] 17 C.F.R. § 240.10b-5. [51] SEC v. Texas Gulf Sulphur Co 401 F.2d 833, 862 (2d Cir. 1968). [53] TSC Indus., Inc. v. Northway, Inc., TSC Indus., 426 U.S. at 449. [56] 15 U.S.C. § 78ff(a) (2006). [59] 15 U.S.C. §78c(a)(13); 15 U.S.C. §78c(a)(14). [62] Id. at 246-47. [67] Acoba, M. (1999). “Insider Trading Jurisprudence After United States v. O'Hagan: A Restatement (Second) of Torts § 551(2) Perspective.” Cornell Law Review, 84, 1356. [69] 45 Fed. Reg. 60410 (1980). [70] Dolgopolov, S. (2004). “Insider Trading and the Bid-Ask Spread: A Critical Evaluation of Adverse Selection in Market Making,” Capital University Law Review 33, 83, pgs. 87-91. [76] In re Enron Corp. Sec., Derivatives & ERISA Litig., 258 F. Supp. 2d 576, 591 (S.D. Tex. 2003); No. 84 Employer-Teamsters Joint Council Pension Trust Fund v. America West Holding Corp., 320 F.3d 920, 925, (9th Cir. 2003). [77] Dirks v. SEC, 463 U.S. 646 (1983). [78] Dirks supra at 655 n.14). [83] O'Hagan supra at 666. [84] Aldave, B. (1984). “Misappropriation: A General Theory of Liability for Trading on Non-public Information.” Hofstra Law Review, 13, 101. [85] 17 C.F.R. § 240.10b5-2 (2008), ); SEC v. Peters, 735 F. Supp. 1505, 1521 (D. Kan 1990), United States v. Willis, 737 F. Supp. 269, 273-74, O'Hagan supra at 660-66.
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UNITAR (Aug. 19, 2009) at Pawgan v. Silverstein, 265 F. Supp. 898 (S.D. N.Y. 1967). Revak v. SEC Realty Corp., 18 F.3d 81 (2d Cir. 1994). Reves v. Ernst & Young, 494 U.S. 56 (1990). Robinson v. Glynn, 349 F.3d 166 (4th Cir. 2003). SEC v. C.M. Joiner Leasing Corp., 320 U.S. 344 (1943). SEC v. Howey, 328 U.S. 293 (1946). SEC v. Int'l Loan Network, Inc., 968 F.2d 1304 (D.C. Cir. 1992). SEC v. Peters, 735 F. Supp. 1505 (D. Kan 1990). S.E.C. v. SG Ltd., 265 F.3d 42 (1st Cir. 2001). SEC v. Texas Gulf Sulphur Co. 401 F.2d 833 (2d Cir. 1968). SEC v. Warde, 151 F.3d 42 (2d Cir. 1998). SEC v. Yun, 327 F.3d 1263 (11th Cir. 2003). SEC v. Zandford, 535 U.S. 813 (2002).
“Securities Law and MLM -
What's the Deal?” Grimes & Reese PLLC (Aug. 19, 2009) at
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