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Government Enforcement Exposed - "The GEE"
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27 Apr 2017 The Yates Memo – DOJ Issues Questions and Answers: Question 6

  *This is the seventh in a series of blog posts that examines seven FAQs issued by the DOJ in response to questions raised by the Yates Memo. The sixth of these questions addresses whether companies should enter into joint defense agreements.   Question: Can a cooperating company enter into a joint defense agreement with individuals’ counsel?   As mentioned in a previous post about the Yates Memo, the Department of Justice (DOJ) has certainly cast a pall on joint defense agreements (JDA) in potential criminal investigations. The DOJ’s guidance seems to indicate that any corporation interested in obtaining cooperation credit in the form of a reduced penalty or a deferred prosecution agreement must carefully consider whether entering into a JDA could stymie the corporation’s ability to…

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10 Mar 2016 Watch What You Write, Watch What You Say

  While market manipulation cases typically involve circumstantial evidence, prosecutors are finding more sophisticated ways to get defendants’ direct statements into evidence. In market fraud cases, government prosecutors are required to prove a defendant’s state of mind (the criminal intent component of a case). Historically, they have done so based on what the defendant did under specific circumstances—something referred to as “circumstantial evidence.” For example, an insider trading case may turn on the circumstance that a corporate insider had earnings information on the date she sold large quantities of corporate stock. Or, a market manipulation case may turn on the trades a defendant entered into after receiving a specific phone call.   Another significant component of such cases is the defendant’s own notes and comments….

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27 Oct 2015 Update from the Coscia Trial

Yesterday, the United States began its prosecution of Michael Coscia of Panther Energy Trading LLC for allegedly engaging in “the crime of spoofing,” as prosecutors framed it. We have blogged about this case before (here and here) and discussed it in the media in the following outlets: Bloomberg News, Wall Street Journal Law Blog, Crain’s Chicago Business and the Chicago Tribune.   In his opening statement, Assistant United States Attorney Renato Mariotti tried to make high frequency trading rudimentary, understandable, and impactful for the jurors. He used very basic analogies and explanations, in order to build a simple case. According to Mariotti, Coscia manipulated markets by using two trading programs—“Flash Trader” and “Quote Trader”—to make it appear there was more supply or demand in the…

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08 Oct 2015 Regulation S-P Violation: Are You Prepared For A Cyber-Security Breach?

On Sept. 22, 2015, the Securities and Exchange Commission (SEC) announced the first violation by a registered investment advisor of the so-called Safeguards Rule (Regulation S-P) pertaining to the protection of personally identifiable information from cyber-attack.  This is the first instance of the SEC enforcing Regulation S-P against an investment advisor.   The Regulation, broadly speaking, requires broker-dealers, investment advisers and other financial firms to protect confidential customer information from unauthorized release to unaffiliated third parties. Included in Regulation S-P is the “Safeguard Rule” (Rule 30(a)), which requires financial institutions to, among other things, adopt written policies and procedures reasonably designed to protect customer information against cyber-attacks.  This raises the question:  Are you prepared for a cyber-attack (and the attendant liability)?   In its findings,…

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05 Jun 2015 CFTC and CME Collaborate to Chase Alleged Spoofers

The Commodity Futures Trading Commission’s (CFTC) ongoing use of its new anti-spoofing authority (Section 4c(a)(5)(C) of the Commodity Exchange Act) demonstrates a heightened awareness by exchanges of efforts by market participants to rapidly enter and cancel trades in order to manipulate market prices. In May 2015, the CFTC filed a complaint (Complaint) in the Southern District of New York against two traders who allegedly engaged in spoofing by layering trades in the Gold and Silver futures on the Commodity Exchange, Inc. (COMEX). The case is noteworthy for several reasons.   The Complaint alleges that defendants Heet Khara and Nasim Salim “entered orders or layered multiple orders to encourage market participants to trade opposite … smaller orders on the opposite side of the book.”  Once the…

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17 Apr 2015 What you need to know about United States of America v. Michael Coscia

This week, we have posted about two commodity enforcement trends (here and here). Yesterday, Judge Harry D. Leinenweber of the United States District Court for the Northern District of Illinois issued his opinion on the defendant’s motion to dismiss in the matter of the United States of America v. Michael Coscia, Case No. 14 CR 551. The decision is not remarkable, insofar as it is a motion to dismiss that takes the allegations of the criminal indictment as true, but it is instructive. Following are a few of the pertinent highlights.   The Commodity Exchange Act’s Anti-Spoofing Provision is not void for vagueness.  Coscia had argued that 7 U.S.C. §§ 6(c)(a)(5)(C) and 13(a)(2) were void, under the Due Process Clause of the United States Constitution,…

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17 Apr 2015 Recent Enforcement Trends In The Commodity Markets (Part 2)

Last fall, Aitan Goelman – the Director of Enforcement for the Commodity Futures Trading Commission – made two interesting points that appear to be indicative of a couple of enforcement trends. Specifically, he stated that: (i) real deterrent of market manipulation requires putting people in jail; and (ii) the CFTC is going to start trying cases before Administrative Law Judges. Jean Eaglesham, “CFTC Turns Towards Administrative Judges,” The Wall Street Journal (Nov. 9, 2014). At a minimum, these two points demonstrate the beat cop’s resolve to triage all available resources in order to ensure the sanctity of the swaps and futures markets. At the outside, they define a troubling scenario in which administrative law judges with no trading experience will determine whether complex trading was…

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13 Apr 2015 Recent Enforcement Trends in the Commodity Markets (Part 1)

Last fall, Aitan Goelman – the Director of Enforcement for the Commodity Futures Trading Commission (Commission) – made two interesting points that appear to be indicative of enforcement trends. Specifically, he stated that: (i) real deterrent of market manipulation requires putting people in jail and (ii) the CFTC is going to start trying cases before administrative law judges. Jean Eaglesham, “CFTC Turns Toward Administrative Judges,” The Wall Street Journal (Nov. 9, 2014).   At a minimum, these two points demonstrate the beat cop’s resolve to triage all available resources in order to ensure the sanctity of the swaps and futures markets. At the outside, they define a troubling scenario in which administrative law judges with no trading experience will determine whether complex trading was or…

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08 Jan 2015 No Spoofing. No Kidding?

Both the Securities and Exchange Commission and the Commodity Futures Trading Commission have, for years, banned the use of manipulative trading devices. Indeed, if you asked most average market participants, they would have told you that trading practices like layering and spoofing—putting on buy and sell orders in different order types that allow a trader to move the market price without actually trading, in order to sell high and buy low—were manipulative devices. And, yet, it has taken until now for the two largest commodity exchanges (the CME Group and the ICE Futures U.S. Exchange) to come out and ban such blatantly manipulative trading.   In September 2014, the CME announced that it was specifically banning “disruptive market practices,” including spoofing and quote stuffing. Then,…

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05 Sep 2014 Foreign Corrupt Practices Act – Keeping the Wolf at Bay

  Anti-bribery laws, including the United States’ own Foreign Corrupt Practices Act, seem to be becoming the stuff of Aesop’s Fables, with many asking whether the resounding alarm over bribery-exposure is akin to the cries of “wolf” by the shepherd boy. The alarm is real enough, however. The Securities and Exchange Commission and the Department of Justice have brought an average of 30 cases per year since 2005. These laws impact small and medium-sized companies and their executives, as well. In July 2014, Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit explained that “small and medium-size businesses that want to enter into high-risk markets and expand their international sales” must be compliant with the FCPA.   So, if the wolf is really amongst…

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