I.  Introduction: Themes and Notable Developments

A.  Continued Focus on Protection of Main Street Investors

The first half of 2019 has seen a continuation of the Commission's emphasis on protecting the interests of Main Street investors. Chairman Clayton reiterated these themes in his testimony in May before the Financial Services and General Government Subcommittee of the U.S. Senate Committee on Appropriations. 1 In addition to the no less than 43 references to Main Street investors, the Chairman's testimony highlighted: (1) the Retail Strategy Task Force, formed in 2017, to use data-driven strategies to generate leads for investigation of industry practices that could harm retail investors, as well as (2) the mutual fund share class initiative as an example of returning funds to retail investors through a program to incentivize self-reporting and cooperation. To be sure, the Commission brought a number of enforcement actions focusing on various offering frauds, often with themes related to some form of cryptocurrency or digital asset. 2 The Chairman also noted in his Congressional testimony that the Commission's FY 2020 budget request contemplates adding add six positions to the Commission's investigations of conduct affecting Main Street investors.

On June 5, 2019, the SEC adopted a set of rules intended to enhance the quality and transparency of retail investors' relationships with investment advisers and broker-dealers. 3 The new "Regulation Best Interest" requires broker-dealers to act in the best interest of a customer when making recommendations for securities transactions or investment strategies to a retail consumer. This means broker-dealers may not place the financial or other interests of the broker-dealer ahead of the customer. In order to satisfy the fiduciary obligations required by Regulation Best Interest, broker-dealers must: (1) make certain disclosures regarding any conflicts of interest; (2) exercise reasonable diligence, care, and skill in making recommendations; (3) maintain policies and procedures designed to address conflicts of interest; and (4) maintain policies designed to achieve compliance with the regulation. 4 Regulation Best Interest takes effect on September 10, 2019. Firms will have until June 30, 2020 to comply with the regulation.

B.  Full Commission and other Senior Staffing Updates

During the first six months of this year, there were a number of leadership changes, several of which reflect the advancement of lawyers with many years of experience in the Division of Enforcement to positions of senior leadership.

On June 20, the U.S. Senate confirmed Allison Lee to serve as the fifth Commissioner with a term ending in 2022. Commissioner Lee was sworn in on July 8, bringing the Commission back to its full complement of Commissioners. Commissioner Lee replaces prior Democratic Commissioner Kara Stein. Commissioner Lee previously served at the Commission for over a decade, including as counsel to Commissioner Stein, as well as a Senior Counsel in the Complex Financial Instruments Unit of the Division of Enforcement. How long the full Commission will last is uncertain as there have been reports that Commissioner Robert Jackson, the only other Democratic Commissioner, may be stepping down in the near future to return to teaching and NYU Law School. Commissioner Jackson has not commented on his plans.

Other changes in the senior staffing of the Commission include:

  • In June, David Peavler was appointed Director of the Fort Worth Regional Office. Mr. Peavler rejoined the SEC after serving two years as the General Counsel of HD Vest Inc. He previously worked for 15 years in the Division of Enforcement in the SEC's Fort Worth Regional Office.
  • In May, Erin Schneider was appointed Director of the San Francisco Regional Office. Ms. Schneider joined the Commission in 2005 as a Staff Attorney in the Division of Enforcement in the San Francisco Office, became an Assistant Director in the Asset Management Unit in 2012 and an Associate Director in the San Francisco Office in 2015.
  • Also in May, Adam Aderton was appointed Co-Chief of the Asset Management Unit of the Division of Enforcement. Mr. Aderton joined the Commission as a staff attorney in the Division of Enforcement in 2008, joined the Asset Management Unit in 2010, and became an assistant Director of the Unit in 2013.

More broadly, until recently, the Commission had been subject to a hiring freeze which led to an approximately 10% decline in staffing both in the Enforcement Division and the Commission overall. Under its FY 2019 budget, the Commission has been able to resume some hiring, but not sufficient to restore staffing levels to their prior levels. Accordingly, the Enforcement Division will continue to endeavor to accomplish more with less for the foreseeable future.

C.  Change to Commission Practice on Consideration of Settlement Offers with Waiver Requests

On July 3, Chairman Jay Clayton announced a change in the process by which the Commission will consider settlement offers from prospective defendants who are also seeking a waiver from a regulatory disqualification that would be triggered by the settlement. 5  In effect, the new policy actually restores Commission practice to what it had been historically, prior to a change under the last administration, and represents a much-needed, common sense improvement to the Commission's settlement process.

The issue arises when negotiating a settlement that triggers a regulatory disqualification.  The client can request a waiver from the disqualification.  However, the last administration had revoked the authority previously delegated to the regulatory divisions to decide waivers and required a party to make an unconditional offer of settlement without assurance as to whether the Commission would grant the waiver.  This meant that a party could be bound to a settlement that triggered a disqualification without assurance of receiving a waiver.  In some cases, the risk was significant.

Under the new policy, the Commission will still be the decision-maker on waivers, but will consider the settlement offer and waiver request simultaneously and as a single recommendation.  Most important, if the Commission approves the settlement offer, but not the waiver, the party could withdraw the settlement offer and will not be bound by the offer.

As the Chairman's statement explains:

... an offer of settlement that includes a simultaneous waiver request negotiated with all relevant divisions . . . will be presented to, and considered by, the Commission as a single recommendation from the staff. . . . [I]n a matter where a simultaneous settlement offer and waiver request are made and the settlement offer is accepted but the waiver request is not approved in whole or in part, the prospective defendant would need to promptly notify the staff (typically within a matter of five business days) of its agreement to move forward with that portion of the settlement offer that the Commission accepted. In the event a prospective defendant does not promptly notify the staff that it agrees to move forward with that portion of the settlement offer that was accepted (or the defendant otherwise withdraws its offer of settlement), the negotiated settlement terms that would have resolved the underlying enforcement action may no longer be available and a litigated proceeding may follow.

In sum, under the new procedure, parties will simply receive the same benefit as any settling party – certainty, finality and the clarity of knowing the full consequences of their offer to settle.

D.  Whistleblower Awards Continue

The Commission continued to issue significant awards to whistleblowers for providing information that led to financial recoveries in enforcement actions. As of June 2019, the SEC has awarded over $384 million to 64 whistleblowers since the program began in 2012. 6

In March, the Commission announced a pair of awards totaling $50 million to two whistleblowers (one for $37 million and another for $13 million). 7 The $37 million award was the Commission's third highest award. One of the awards was notable because the Commission finding in its order that the claimant had "unreasonably delayed in reporting the information to the commission," and had "passively financially benefitted from the underlying misconduct during a portion of the period of delay." 8

In May, for the first time, the SEC issued an award under a provision of the whistleblower rules which permits claims by whistleblowers who first report a tip to a company if the whistleblower also reports the same tip to the SEC within 120 days. 9 In this case, the whistleblower sent an anonymous tip to the company, as well as to the SEC. The whistleblower's report triggered an internal investigation by the company, which resulted in the company reporting its findings to the SEC, resulting in an SEC investigation and action. In calculating the award, the SEC credited the whistleblower "for the company's internal investigation, because the allegations were reported to the Commission within 120 days of the report to the company." The whistleblower was awarded more than $4.5 million.

In June, the SEC announced an award of $3 million to whistleblowers for a tip that led to the successful enforcement action related to "an alleged securities law violation that impacted retail investors." 10

The key takeaway from these awards is that they provide powerful financial incentives to would be whistleblowers to report suspicions of misconduct – real or perceived – to the Commission staff. The financial incentives and anti-retaliation protections for whistleblowers put a premium on companies implementing a rigorous, proactive and documented response to internal complaints to protect against second-guessing by regulators and prosecutors.

Last year, in Digital Realty Trust v. Somers, the Supreme Court held that Dodd-Frank's anti-retaliation measures protect only whistleblowers who report their concerns to the SEC and not those who only report internally. 11 In response to the Supreme Court's decision, on May 8, 2019, the House Committee on Financial Services passed the Whistleblower Protection Reform Act of 2019, H.R. 2515, which would extend the anti-retaliation protections in Dodd-Frank to whistleblowers who report alleged misconduct to a superior. 12

E.  Notable Litigation Developments

There were a number of litigation developments of note during the first half of this year.

In Lorenzo v. SEC, the Supreme Court held that an individual who is not a "maker" of a misstatement may nonetheless be held primarily liable under Rule 10b-5(a) and (c) for knowingly "disseminating" a misstatement made by another person. 13  The decision refines the Court's 2011 decision in Janus v. First Derivative Traders, in which the Court held that liability under Rule 10b-5(b) for a misstatement only extent to the "maker" of a statement which is the "person or entity with ultimate authority over the statement."

The impact of the Lorenzo decision for Commission enforcement actions may be more academic than practical because the Commission has the ability to bring actions for secondary liability for aiding and abetting or causing a violation by another party.  Nevertheless, Commissioner Hester Peirce has cautioned against the Commission's use of Lorenzo to expand so-called "scheme" liability beyond the bounds of secondary liability. 14  The practical import of the decision for private civil litigation may be more significant, since, in the absence of secondary liability, private plaintiffs may be able to craft broader allegations of primary liability against defendants based on their participation in a "device, scheme, or artifice to defraud" under Rule 10b-5(a) or an "act, practice or course of business" that "operates ... as a fraud or deceit" under Rule 10b-5(c).

In Robare Group, Ltd. v. SEC, the U.S. Court of Appeals for the D.C. held that a "willful" violation of Section 207 of the Investment Advisers Act of 1940 requires more than proof of mere negligence, even though negligence may be sufficient to establish a violation under Section 206(2) of the Advisers Act.  The decision represents a change from the holding in a 2000 decision by the same court in Wonsover v. SEC, which held that "willfully" means "intentionally committed the act with constitutes the violation" but does not require that "the actor...be aware that he is violating" the law.  In Robare, the court clarified that the willfulness standard could not be met by proof of merely negligent conduct.

Historically, in cases in which parties settle to Commission orders finding willful violations, the settled order often contained a footnote articulating the Wonsover standard of willfulness.  Notably, despite the decision in Robare, the Commission has continued to use the Wonsover formulation. 15  In the long term, the Commission will likely seek to reconcile the Robare and Wonsover decisions.  In the near term, the Robare decision potentially provides prospective defendants with additional arguments to oppose alleged violations of statutory provisions that require proof of willfulness, and as a consequence, to avoid forms of relief that turn on findings of willful violations.

Finally, over the years, the Commission been continually challenged to conduct investigations and either resolve or commence actions in a timely manner.  In addition, all investigative and prosecutorial agencies have been subject to criticism at various times for "piling on" with seemingly duplicative investigations and enforcement actions in high profile matters.  This year, the Commission's late arrival to an already crowded regulatory party has become the subject of an unusually pointed judicial inquiry in the Commission's litigation against Volkswagen.  The Commission filed the action in March 2019, years after the company had already resolved actions by other federal and state governments as well as private civil actions.  In a quote that will likely resonate for some time to come, the court questioned the Commission's delay in bringing the action and reminded counsel that "the symbol of the SEC is the symbol ... of the eagle, not a carrion hawk that simply descends when everything is all over and sees what it can get from the defendant."  In an unusual step, the court order the Commission to file a declaration stating when the Commission learned of the facts alleged in each paragraph of the 69-page complaint.  On July 8, the Commission filed its submission which seeks to explain the various challenges the Commission faced in its investigation, including delays in obtaining evidence from abroad, that led to the timing of the agency's action.  Regardless of the outcome of this particular case, perhaps the court's commentary will lead investigative agencies to undertake a more thoughtful approach to the need to add to multi-agency investigations.

F.  Legislative Response to Supreme Court's Kokesh Decision

In 2018, in Kokesh v. SEC, the Supreme Court held that a 5-year statute of limitations applies to the Commission's ability to recover disgorgement of ill-gotten gains from defendants.  In a footnote to the unanimous decision, the Court somewhat cryptically suggested that the Commission's authority to obtain disgorgement may not be entirely without question.  In particular the Court stated that the decision was limited to the applicability of the statute of limitations, and not reaching the issue of "whether courts possess authority to order disgorgement in SEC enforcement proceedings...."  In its 2018 annual report, the Enforcement Division estimated the Kokesh decision may cause the Commission may forego up to $900 million in disgorgement claims.

The issue of the SEC's ability to obtain disgorgement is a question that continues to play out in lower courts.  Thus far, the Second Circuit and district courts within the Second Circuit have upheld disgorgement awards post-Kokesh, finding disgorgement to be a proper equitable remedy. 16  The meaning of Kokesh is also being hashed out in cases involving regulators other than the SEC, such as the CFTC.  For example, in a case from May of this year, a district court found that, contrary to the defendants' reading of Kokesh, the amount of disgorgement to be paid to the CFTC did not need to be reduced based on costs incurred by the defendants in the commission of their violations. 17

In March of this year, Senators Mark Warner (D-Va) and John Kennedy (R-La) introduced a bipartisan bill designed to address the concerns sounded by the Commission in the wake of Kokesh.  Titled the Securities Fraud and Investor Compensation Act, the bill would provide explicit statutory authority for the Commission to obtain disgorgement for gains actually received or obtained by a defendant, subject to a 5-year statute of limitations.  Of potentially greater consequence, however, the bill would also authorize the Commission to obtain restitution of losses sustained by investors caused by defendants in the securities industry, such as broker-dealers and investment advisers, and create a 10-year statute of limitations for equitable relief, including restitution, injunctions, bars and suspensions.

Historically, the Commission has not sought to advance an argument for restitution in court.  It is not uncommon for the financial benefit to a defendant to be far less that the alleged harm incurred by an arguable class of victims.  Consequently, for many defendants, the risk of restitution could represent a substantial increase in the potential exposure created by an enforcement action.  As of this writing, the bill has not advanced.

G.  Litigation Challenge to the "Neither-Admit-Nor-Deny" Settlement

The "neither admit nor deny" settlement has long been a staple of the Commission's enforcement program.  Specifically, prospective defendants typically settle enforcement actions by consenting to either issuance of a Commission order containing findings, or the entry of a civil judgment based on a complaint containing allegations, to which the proposed defendant neither admits nor denies.  Under the prior administration, the Commission had adopted a policy of requiring admissions in certain exceptional cases.  Nevertheless, the neither admit nor deny formulation remained the predominant settlement formulation.

Importantly, as a corollary to not being required to admit to any findings or allegations, parties are also prohibited from denying the findings or allegations.  The requirement is spelled out in a regulation adopted in 1972:

The Commission has adopted the policy that in any civil lawsuit brought by it or in any administrative proceeding of an accusatory nature pending before it, it is important to avoid creating, or permitting to be created, an impression that a decree is being entered or a sanction imposed, when the conduct alleged did not, in fact, occur. Accordingly, it hereby announces its policy not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings. In this regard, the Commission believes that a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations.

17 C.F.R. § 202.5(e).

The requirement is also contained in the form of settlement offer executed by a settling party:

Defendant understands and agrees to comply with the Commission's policy "not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegation in the complaint or order for proceedings." 17 C.F.R. § 202.5. In compliance with this policy, Defendant agrees not to take any action or to make or cause to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis. . . . .  If Defendant breaches this agreement, the Commission may petition the Court to vacate the Final Judgment and restore this action to its active docket.

In a lawsuit filed in January of this year, the Cato Institute is challenging the constitutionality of the so-called "gag rule" as a violation of a defendant's right to free speech under the First Amendment. 18  The Cato Institute's interest in the issue is grounded on its desire to publish a manuscript by a party who settled a Commission enforcement action.  According to the Cato Institute's complaint, the manuscript describes what the author believes to be the Commission's overreach in coercing the author into a settlement despite the author's belief that the charges were without merit in order to avoid crippling litigation expenses.  The complaint alleges that the regulation and policy constitutes an unconstitutional content-based restriction on speech.

Not surprisingly, the Commission filed a motion to dismiss the complaint in May, arguing, among other things, that the plaintiff's action was flawed in three key ways: (1) the Cato Institute lacked standing under Article III because it was challenging a contract reviewed, approved and entered by a district court—a contract to which the plaintiff was neither a party nor an intended beneficiary; (2) the court lacked jurisdiction on ripeness grounds because the plaintiff's claims were premised upon speculation about future events that would implicate other courts' authority, in effect asking the court to invalidate no-deny provisions in every single past consent judgment, regardless of whether all past settling defendants wanted this outcome;  and (3) the Cato Institute did not state a First Amendment claim because the no-deny provisions were negotiated provisions and were not imposed against a defendant's free will.  The Commission further asserted that there were compelling interests that would justify these no-deny provisions, such as avoiding investor and market confusion and deterring future defendants.

The Cato Institute opposed the Commission's motion to dismiss, arguing that the Commission's no-deny provisions amounted to a lifetime ban on speech, and former SEC defendants who want to complain about the SEC's conduct in their cases are unable to do so because of these provisions.  The Cato Institute asserted three main arguments in response to the Commission's motion to dismiss: (1) the Cato Institute has standing as a would-be publisher because it is currently required to abstain from constitutionally protected speech; (2)  the court could adjudicate the instant claims without invading the jurisdiction of any other court; and (3) the unconstitutional-conditions doctrine applies to this matter and therefore the Cato Institute has properly pleaded a justiciable claim under the First Amendment.

Needless to say, the lawsuit has had no impact whatsoever on the Commission's continued practice of settling actions on a neither-admit-nor-deny basis.

II.  Public Company Disclosure, Accounting and Audit Cases

A.  Internal Controls

In late January, the SEC announced a settlement with four public companies based on the companies' alleged failure to maintain adequate internal controls over financial reporting ("ICFR"). 19  The SEC alleged that, although the companies disclosed material weaknesses in their ICFR, the took months or years to remedy the issues, including after SEC staff notified the companies of the issues.  Without admitting or denying the allegations, all four companies agreed to a cease and desist order and to pay civil penalties Ranging from $35,000 to $200,000.  One company, a Mexican steel manufacturer and processor, continues to remediate material weaknesses and, as part of the settlement, has undertaken to have an independent consultant to review the remediation.

B.  Company Disclosures Concerning the Business

In March, the SEC instituted a settled action against a U.S. home improvement company based on allegations that the company made misstatements regarding its products' compliance with regulatory standards. 20 Following a media report on certain of the company's products in 2015, the company stated that third-party test results demonstrated its products were in compliance with regulatory standards.  The company also stated that individuals featured in the media reporting were not employees of the company's suppliers.  The SEC alleges that the company knew that one of its Chinese suppliers had failed third-party testing and had evidence that the individuals featured in the media reporting were employees of the company's suppliers.  Without admitting or denying the findings in the SEC's order, the company agreed to pay a $6 million penalty.  On the same day the SEC instituted its settled action, the Department of Justice announced that the company entered into a deferred prosecution agreement and agreed to pay $33 million in forfeiture and criminal fines.

As discussed above in our introductory section, in March of this year, the SEC filed an unsettled complaint against a car manufacturer, two of its subsidiaries, and its former CEO for alleged misstatements concerning the compliance of the company's vehicles with emissions standards at a times when the company issues bonds and asset backed securities. 21  The complaint alleges that the misstatements enabled the company to issue bonds as a lower interest rate than otherwise.  As discussed above, the litigation remains pending.

C.  Financial Reporting Cases

In early April, the SEC brought a settled action against the founder and former CEO of a Silicon Valley mobile payment startup based on allegations that he overstated the company's revenues and then sold shares he owned to investors in the secondary market. 22  The former CEO agreed to settle the charges without admitting wrongdoing, agreeing to pay more than $17 million in disgorgement and penalties and to be barred from serving as an officer or director of a publicly traded U.S. company.  The SEC instituted a separate settled administrative action against the company's former CFO for based on allegations that he failed to exercise reasonable care in the company's financial statements and signed stock transfer agreements that inaccurately implied that the company's board of directors had approved the CEO's stock sales.  The CFO, who had also sold some of his shares in the company, entered into a cooperation agreement with the SEC and, in connection with his settlement, agreed to pay approximately $420,000 in disgorgement and prejudgment interest.

Also in April, the SEC filed an unsettled action against the former CFO and two former employees of a publicly traded transportation company. 23  The SEC's complaint alleges that the former CFO hid expenses and manipulated the company's finances, while the other two employees failed to write-off overvalued assets and overstated receivables at one of the company's operating companies.  The complaint also alleges that the defendants misled the company's outside auditor, causing the company to misstate financial results in periodic reports filed with the SECs.  The U.S. Department of Justice's Fraud Section also filed parallel criminal charges against the three individuals.

Later in April, the SEC instituted a settled proceeding against a Silicon Valley market place lender that, through its website, sold securities linked to performance of its consumer credit loans. 24  According to the SEC's administrative order, the company excluded certain non-performing charged off loans from its performance calculations reported to investors, and as a result, overstated its net returns.  Pursuant to the settlement, the company agreed to pay $3 million.

Also in April, the SEC filed a settled action against a U.S. truckload carrier with accounting fraud, books and records, and internal control violations. 25  The SEC's complaint alleges that the company avoided recognizing impairment charges and losses by selling and buying used trucks at inflated prices from third-parties, which enabled the company to overstate its pre-tax and net income and earnings per share in one annual and two quarterly reports.  In the settlement, the company agreed to pay $7 million in disgorgement, which is deemed satisfied by the company's payment of restitution in settlement of a parallel action brought by the Department of Justice.  This is also one of the few settled SEC actions under this administration in which the defendant admitted to the violations alleged in the SEC's complaint.

In May, the SEC instituted settled administrative proceedings against a New Hampshire-based manufacturer and its former CEO based on allegations that the company misled investors regarding the company's ability to supply "sapphire glass" for Apple's iPhones. 26  According to the SEC's orders, the company entered into an agreement with Apple to provide sapphire glass that met certain standards, but that the company failed to meet the standards required by the Apple contract, which triggered Apple's right to withhold payment and accelerate a large repayment from the New Hampshire company.  Despite Apple's exercise of this withholding and repayment, the company reported that it expected to meet performance targets and receive payment from Apple.  In settlement, the former CEO agreed to pay approximately $140,000 in disgorgement and penalties.  The company, which had since filed for, and exited from, bankruptcy as a private company, was not assessed a penalty.

D.  Cases Against Audit Firms

In February, the SEC instituted a settled administrative proceeding against a large Japanese accounting firm and two of the firm's former executives (the former CEO and the former Reputation and Risk Leader and Director of Independence) based on allegations that the firm violated certain provisions of the SEC's audit independence rules. 27  The SEC's order alleges that the firm issued audit reports for a client notwithstanding that certain personnel within the accounting firm were aware that the client's subsidiary maintained dozens of bank accounts for employees of the accounting firm with balances that exceeded depositary insurance limits.  The SEC's order alleges that the firm's quality control system did not provide reasonable measures to help ensure the firm was independent from its audit clients.  Without admitting or denying the allegations, the firm agreed to pay a $2 million penalty.  The former executives agreed to be suspended from appearing or practicing before the SEC as accountants with a right to apply for reinstatement after two years in the case of the former CEO and one year in the case of the former Reputation Risk Leader and director of Independence,

In June, the SEC instituted a settled administrative proceeding against an international accounting firm based on allegations that certain former firm personnel obtained confidential lists of inspection targets from a now former employee of the Public Company Accounting Oversight Board (PCAOB) and used the information to alter past audit work papers to reduce the likelihood of deficiencies being found during the PCAOB inspections. 28  Last year, the SEC had previously instituted enforcement actions against the former personnel of the audit firm and the PCAOB.  The SEC's settled order against the firm also alleges that a number of the firm's audit professionals engaged in misconduct in connection with internal training exams.  Pursuant to the settlement, the firm agreed to pay a $50 million penalty, to retain an independent consultant to review and evaluate the firm's quality controls relating to ethics and integrity, and other remedial measures.  The firm also admitted the facts in the SEC's order and acknowledged that its actions violated a PCAOB rule requiring integrity.

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Footnotes

1  Testimony of Chairman Jay Clayton before the Financial Services and General Government Subcommittee of the U.S. Senate Committee on Appropriations, (May 8, 2019), available at https://www.sec.gov/news/testimony/testimony-financial-services-and-general-government-subcommittee-us-senate-committee.

2  See, e.g., SEC Charges Issuer With Conducting $100 Million Unregistered ICO, Press Rel. No. 2019-87 (June 4, 2019), available at https://www.sec.gov/news/press-release/2019-87; SEC Sues alleged Perpetrator of Fraudulent Pyramid Scheme Promising investors Cryptocurrency Riches, Press Rel. No. 2019-74 (May 23, 2019), available at https://www.sec.gov/news/press-release/2019-74; SEC Obtains Emergency Order Halting Alleged Diamond Related ICO Scheme Targeting Hundreds of Investors, Press Rel. No. 2019-72 (May 21, 2019), available at https://www.sec.gov/news/press-release/2019-72.

3  SEC Press Release, SEC Adopts Rules and Interpretations to Enhance Protections and Preserve Choice for Retail Investors in Their Relationships with Financial Professionals (June 5, 2019), available at https://www.sec.gov/news/press-release/2019-89.

4  SECURITIES AND EXCHANGE COMMISSION, Regulation Best Interest: The Broker-Dealer Standard of Conduct, Rel. No. 34-86031 (June 5, 2019) (to be codified at 17 CFR §§ 240.15l-1, 240.17a-3, and 240.17a-4), available at https://www.sec.gov/rules/final/2019/34-86031.pdf ("Final Rule").

See Statement by Chairman Jay Clayton Regarding Offers of Settlement (July 3, 2019), available at https://www.sec.gov/news/public-statement/clayton-statement-regarding-offers-settlement.

6  SEC Press Release, SEC Awards $3 Million to Joint Whistleblowers (June 3, 2019), available at https://www.sec.gov/news/press-release/2019-81.

7  SEC Awards $50 Million to Two Whistleblowers, Press Rel. 2019-42 (Mar. 26, 2019), available at https://www.sec.gov/news/press-release/2019-42.

8  In the Matter of the Claims for Award in connection with [redacted] Notice of Covered Action [redacted], Order Determining Whistleblower Award Claims, Rel. No. 85412 (Mar. 26, 2019), available at https://www.sec.gov/rules/other/2019/34-85412.pdf.

9  SEC Press Release, SEC Awards $4.5 Million to Whistleblower Whose Internal Reporting Led to Successful SEC Case and Related Action (May 24, 2019), available at https://www.sec.gov/news/press-release/2019-76.

10  SEC Press Release, SEC Awards $3 Million to Joint Whistleblowers (June 3, 2019), available at https://www.sec.gov/news/press-release/2019-81.

11  See Gibson, Dunn & Crutcher LLP 2018 Mid-Year Securities Enforcement Update (July 30, 2018), available at https://www.gibsondunn.com/2018-mid-year-securities-enforcement-update/.

12  House Financial Services Committee Passes Bill to Expand Dodd-Frank Whistleblower Protection to Internal Whistleblowers (May 30, 2019), available at https://www.jdsupra.com/legalnews/house-financial-services-committee-88658/.

13  Lorenzo v. SEC, 587 U.S. ___, No. 17-1077 (U.S. Mar. 27, 2019).

14  See Speech by Commissioner Hester M. Peirce, "Reasonableness Pants," (May 8, 2019), available at https://www.sec.gov/news/speech/speech-peirce-050819 ("Congress defined aiding and abetting liability to be the provision of 'substantial assistance' to a securities law violator. It is important for us and the courts not to ascribe primary liability to every violation and thus write aiding and abetting out of the statute.") (footnote omitted).

15  See, e.g., Matter of Deer Park Road Management Company, LP, Rel. No. 5245 (June 4, 2019), n. 7 ("A willful violation of the securities laws means merely 'that the person charged with the duty knows what he is doing.... There is no requirement that the actor 'also be aware that he is violating one of the Rules or Acts.'") (citations omitted).

16  See, e.g., SEC v. Rio Tinto plc and Rio Tinto Limited, Thomas Albanese, and Guy Robert Elliott, No. 17 Civ. 7994 (AT), 2019 WL 1244933, at *22 (S.D.N.Y. Mar. 18, 2019) (collecting cases).

17  CFTC v. Southern Trust Metals, Inc., 2019 WL 2295488, at *4-5 (S.D. Fla. May, 30, 2019).

18  Cato Institute v. SEC, et al., Case 1:19-cv-00047 (D.D.C. Jan. 9, 2019).

19  SEC Press Release, SEC Charges Four Public Companies with Longstanding ICFR Failures (Jan. 29, 2019), available at https://www.sec.gov/news/press-release/2019-6.

20  SEC Press Release, SEC Charges Lumber Liquidators with Fraud (Mar. 12, 2019), available at https://www.sec.gov/news/press-release/2019-29.

21  SEC Press Release, SEC Charges Volkswagen, Former CEO with Defrauding Bond Investors During "Clean Diesel" Emissions Fraud (Mar. 14, 2019), available at https://www.sec.gov/news/press-release/2019-34.

22  SEC Press Release, SEC Charges Former CEO of Silicon Valley Startup with Defrauding Investors (Apr. 2, 2019), available at https://www.sec.gov/news/press-release/2019-50.

23  SEC Press Release, SEC Charges Transportation Company Executives with Accounting Fraud (Apr. 3, 2019), available at https://www.sec.gov/news/press-release/2019-51.

24   SEC Press Release, Silicon Valley Company Settles Fraud Charge for Misstating Returns to Investors (Apr. 19, 2019), available at https://www.sec.gov/news/press-release/2019-58.

25  SEC Press Release, SEC Charges Truckload Freight Company with Accounting Fraud (Apr. 25, 2019), available at https://www.sec.gov/news/press-release/2019-60.

26  SEC Press Release, SEC Charges Sapphire Glass Manufacturer and Former CEO with Fraud (May 2, 2019), available at https://www.sec.gov/news/press-release/2019-66.

27  SEC Press Release, Deloitte Japan Charged with Violating Auditor Independence Rules (Feb. 13, 2019), available at https://www.sec.gov/news/press-release/2019-9.

28  SEC Press Release, KPMG Paying $50 Million Penalty for Illicit Use of PCAOB Data and Cheating on Training Exams (June 17, 2019), available at https://www.sec.gov/news/press-release/2019-95.

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