current issues in securities litigation monday, february 23, 2015 bar association of san francisco...
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CURRENT ISSUES IN SECURITIES LITIGATION
Monday, February 23, 2015
Bar Association of San Francisco
Presented By the ABA Section of Litigation
Securities Litigation Committee and
Alternative Dispute Resolution Committee
Whistleblowers, Self-Reporting
Parallel Proceedings, Retaliation
Increasing Whistleblower Claims: 2014 Annual Report to Congress
With the Dodd-Frank whistleblower bounty program maturing, the number of whistleblowers and whistleblower retaliation enforcement claims is increasing. SEC issued whistleblower awards to more individuals in Fiscal 2014 than in all
previous years combined (Nine our of the 14 total awards made under the program were paid in 2014).
SEC received 3,620 whistleblower tips in 2014, a 20% increase over two years ago
Record-breaking $ payments: $30M to one individual in Sept. 2014
SEC brought its first enforcement action under anti-retaliation provisions of Dodd-Frank in June 2014
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2014 Annual Report to Congress
Whistleblower tips by allegation type: 2014
Source: 2014 Report to Congress on the Frank-Dodd Whistleblower Program
Corporate Disclosures
and Financials
OfferingFraud
Manipulation InsiderTrading
Trading and Pricing
FCPA Unregistered Offerings
MarketEvent
Municipal Securities and Public Pension
Other Blank
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2014 Annual Report to Congress
Whistleblower tips by allegation type: 3 year comparison
Source: 2014 Report to Congress on the Frank-Dodd Whistleblower Program
Corporate Disclosures
and Financials
OfferingFraud
Manipulation InsiderTrading
Trading and Pricing
FCPA Unregistered Offerings
MarketEvent
Municipal Securities and Public Pension
Other Blank
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2014 Annual Report to Congress
In Fiscal 2014, the SEC received whistleblower submissions from individuals in all fifty states, thee District of Columbia and the U.S. territory of Puerto Rico.
Source: 2014 Report to Congress on the Frank-Dodd Whistleblower Program
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2014 Annual Report to Congress: Excerpts
Whistleblower tips received by state: Fiscal 2014
Source: 2014 Report to Congress on the Frank-Dodd Whistleblower Program
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2014 Annual Report to Congress: Excerpts
Whistleblower tips received by international location Fiscal 2014:
Source: 2014 Report to Congress on the Frank-Dodd Whistleblower Program
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Whistleblowers, Self-Reporting, Parallel Proceedings, Retaliation
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HypotheticalJoe Blow is employed as a Vice President of MyToot, a publicly-traded U.S. manufacturer of high tech whistles (used primarily in Celtic tin whistle pieces). MyToot has commenced the manufacture and sale of a new whistle that will surely revolutionize the whistle business. Blow has had performance problems and thinks he may get fired. He has just learned that MyToot has stolen the underlying unpatented technology from another California-based whistle manufacturer, and advises outside counsel, Fred Law, of the theft of technology, adding that he, Blow, loaded up on MyToot stock before the Company disclosed that it had begun manufacturing the new whistle, in anticipation of the stock’s soaring, and then quickly sold after that news was announced.
Blow fingers Bacall, the Company’s CEO (who toyed with him briefly and then ended the relationship abruptly) as the main culprit in the theft of the technology. Blow suggests to Law that he, Blow, could be a whistleblower concerning the underlying technology theft and said that he also intends now to short the stock and buy puts since the truth is bound to come out. Bacall knows nothing about the theft of the technology but she sees Blow go into Law’s office, suspects he is accusing her of sexual harassment and fires him on the spot.
Whistleblowers, Self-Reporting, Parallel Proceedings, Retaliation
1. Assume Law tells the Audit Committee (whose charter requires it to supervise investigations of possible misstatements in SEC filings and insider trading) of Blow’s allegations and insider trading. What are the Audit committee’s action items? When, if ever do they self-report?
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Whistleblowers, Self-Reporting, Parallel Proceedings, Retaliation
2. Assume Law himself wants to be a whistleblower and is either inside or outside counsel. He seeks your advice. Can he be a whistleblower? What restrictions/pitfalls?
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Whistleblowers, Self-Reporting, Parallel Proceedings, Retaliation
3. The Company issues an 8-K saying it’s received some government subpoenas focusing on its disclosures and financial statements concerning its innovative whistle. Stock drops; Class actions and derivative actions follow; DOJ and SEC are investigating; What does the company do about the parallel proceedings? How does Bacall react when invited to a get together by the DOJ/SEC?
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Whistleblowers, Self-Reporting, Parallel Proceedings, Retaliation
4. Blow wants to be a whistleblower and collect beaucoup $$$. You’re his lawyer. What do you advise? How do you deal with his insider trading problem.
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Whistleblowers, Self-Reporting, Parallel Proceedings, Retaliation
5. Blow wants to bring an employment action for retaliation. The SEC wants to bring a retaliation action too, to set another example. Should they? Can they under these facts?
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