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SEC Enforcement Trends: Five Key Takeaways

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Jina Choi, Haima Marlier, Michael Birnbaum, and Anissa Chitour authored an article for the Harvard Law School Forum on Corporate Governance covering the U.S. Securities and Exchange Commission’s (SEC) recent announcement of its enforcement results for FY21 and how the data from FY21 suggest that this new SEC will pursue an aggressive enforcement agenda for FY22. 

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<p>We are Morrison Foerster — a global firm of exceptional credentials. Our clients include some of the largest financial institutions, investment banks, and Fortune 100, technology, and life sciences companies. Our lawyers are committed to achieving innovative and business-minded results for our clients, while preserving the differences that make us stronger.</p><p>Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Prior results do not guarantee a similar outcome.</p>

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<p>Jina Choi, Haima Marlier, Michael Birnbaum, and Anissa Chitour authored an article for the Harvard Law School Forum on Corporate Governance covering the U.S. Securities and Exchange Commission’s (SEC) recent announcement of its enforcement results for FY21 and how the data from FY21 suggest that this new SEC will pursue an aggressive enforcement agenda for FY22. </p><p>“Between an increasing appetite for aggressive enforcement and the offer of huge rewards for whistleblowers, the Commission’s drop in overall cases in FY21 will not likely continue in the coming year. With the SEC thinking strategically and creatively about how to enforce the securities laws and protect investors, public companies and registrants should carefully assess their compliance and whistleblower response programs.”</p><p>Read the <a href="https://media2.mofo.com/v3/assets/blt5775cc69c999c255/blt5fe1ca712d40dc7b/6273efe00cffdf1eb136b56a/211230-sec-enforcement-trends.pdf" target="_blank">full article</a>.</p>

<p>SEC Enforcement Trends: Five Key Takeaways</p>

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<p>Haima Marlier is a partner in Morrison Foerster’s Investigations + White Collar Defense Group and co-chairs both its Fintech and Securities Enforcement practices. Drawing on her experience as a former Securities and Exchange Commission (SEC) senior trial counsel, Haima represents public and private companies, financial services providers, and executives, directors, and other individuals in SEC, Commodity Futures Trading Commission (CFTC), Financial Industry Regulatory Authority (FINRA), state securities regulator, and internal investigations, as well as in related litigation. She has more than 20 years of experience litigating in federal, state, and administrative courts, leading complex negotiations, and representing her clients in mediation. She also counsels clients regarding securities enforcement developments, trends, and risk mitigation.</p><p>Before joining the firm, Haima spent nearly a decade in the SEC’s Division of Enforcement. While at the SEC, Haima served as lead counsel on a number of prominent enforcement litigations and investigations involving public companies, registered investment advisers, broker-dealers, banks, and individuals in matters arising under the federal securities laws. She has also worked closely with foreign securities regulators, numerous U.S. attorneys’ offices, and FINRA.</p><p>Haima is a member of <em>Law360</em>’s Securities Editorial Board, serves on the advisory board of Securities Docket, and is on the Board of Trustees of the SEC Historical Society. She mentors Penn State students of color who aspire to become lawyers and is a member of the board of directors of, and a volunteer running coach for, Girls on the Run New Jersey, a nonprofit dedicated to inspiring girls to recognize their inner physical and emotional strengths. She maintains an active pro bono practice.</p><p>Haima has been recognized by <em>Chambers USA </em>for Securities Regulation: Enforcement and Crypto-Asset Disputes;<em> Crain’s New York Business</em>’s Notable Women in Law and Notable Diverse Leaders in Law; <em>The Legal 500 US</em> as a recommended lawyer in Securities Litigation: Defense, Investigations and White Collar Criminal Defense, and Fintech; <em>Securities Docket’s </em>Enforcement Elite; and the <em>New York Law Journal</em> for her efforts in the diversity and inclusion space.</p><p>Haima received her J.D. from Boston College Law School and her B.A. from The Pennsylvania State University.</p><h4>Representative Experience</h4><h5>Cybersecurity</h5><ul><li>Successfully resolved an SEC investigation into a global technology solutions company’s cybersecurity risk disclosures and disclosure controls, policies, and procedures, with an acknowledgment by the SEC of the client’s significant remediation and cooperation.</li><li>Representing a global tech service management company in an SEC inquiry into its cybersecurity incidents and disclosures.</li><li>Represented numerous public companies and other clients in the SEC’s SolarWinds cybersecurity enforcement sweep.</li><li>Advising numerous public companies and SEC-registered firms on the efficacy of their cybersecurity disclosure controls and procedures and the materiality of cybersecurity incidents.</li><li>Represented a major technology company in an internal investigation into its cybersecurity statements and controls, policies, and procedures.</li></ul><h5>Fintech & Crypto</h5><ul><li>Represented a nonprofit foundation supporting a major blockchain, as well as two of its senior individuals, in an SEC investigation, with a complete termination letter issued by the SEC.</li><li>Successfully resolved an SEC crypto investigation into anti-money laundering and other compliance and monitoring programs on behalf a former senior bank executive.</li><li>Representing a leading cryptocurrency exchange platform in responding to SEC, CFTC, and state attorney general subpoenas and other requests for information.</li><li>Obtained a successful federal court settlement for a venture capital fund in a securities class action concerning an unregistered digital token offering.</li><li>Advising numerous Fintech companies, from startups to mature organizations, on securities enforcement compliance best practices and enforcement risk mitigation.</li><li>Represented a private investor in an SEC investigation related to a reverse merger involving a cryptocurrency company with no action taken by the SEC.</li></ul><h5>Artificial Intelligence</h5><ul><li>Representing a major tech company in an SEC investigation focused on AI-related disclosures and policies.</li></ul><h5>Accounting & Financial Reporting</h5><ul><li>Represented the former Chief Operations Officer of a major NASDAQ-listed food distributor in SEC and special committee investigations, with a complete termination letter issued by the SEC, as well as in related Delaware Court of Chancery litigation, which was favorably resolved.</li><li>Successfully resolved SEC and special committee investigations into related-party transaction disclosures and accounting issues, as well as related shareholder litigation, on behalf of a former CEO of a NASDAQ-listed company.</li><li>Represented an audit committee of a public company in an internal investigation resulting from a whistleblower complaint alleging accounting and disclosure issues.</li><li>Represented a leading public company in an internal investigation resulting from a whistleblower complaint alleging accounting and disclosure issues.</li></ul><h5>Other Securities Enforcement Matters</h5><ul><li>Represented the former CEO of a major company listed on the New York Stock Exchange in an SEC insider trading investigation with no action taken by the SEC.</li><li>Represented an individual in an SEC investigation concerning the “pay-to-play” rule.</li><li>Represented a private investment fund in a COVID-19 related SEC insider trading investigation with no action taken by the SEC.</li><li>Represented a broker-dealer in a for-cause FINRA examination into anti-money laundering and other issues.</li><li>Represented a leading international company in government investigation into pharmaceutical drug pricing.</li><li>Represented a biotech company in a Massachusetts Securities Division investigation concerning securities registration exemptions and representations to investors regarding securities registration with no action taken by the state regulator.</li><li>Obtained a successful resolution for a pre-IPO biotech company in a wrongful termination lawsuit brought by a co-founder and former CEO terminated by the board of directors.</li><li>Represented the SEC in all stages of federal and administrative proceedings, including at trial and on appeal, in matters involving violations of the federal securities laws.</li></ul>

Haimavathi Marlier

Partner

<p>Michael Birnbaum is a go-to litigator for high-stakes cases and investigations who serves as managing partner of Morrison Foerster’s New York office and served previously as the head of MoFo’s New York Litigation Department.</p><p>As a member of the firm’s Investigations + White Collar, Securities Enforcement, and Securities Litigation Groups, Michael represents financial institutions, professional services firms, investment advisers, broker-dealers, and public companies in internal investigations and government enforcement matters. He advises clients facing inquiries from the SEC, FINRA, and other regulators, drawing on his prior experience as a senior trial counsel at the SEC to help clients navigate complex regulatory and enforcement issues. He has achieved significant results, including at trial, in matters involving investment funds and other financial institutions, addressing allegations of fraudulent securities offerings, registration violations, and supervisory failures related to the sale of securities.</p><p>Michael’s practice also focuses on representing clients in complex commercial litigation in state and federal courts and before arbitration panels in trade secret, defamation, and “business divorce cases, and in restructuring-related disputes involving high-stakes chapter 11 proceedings and related litigation. He advises creditors’ committees in investigations and claims alleging fraudulent transfers, breaches of fiduciary duty, equitable subordination, and other contested issues that arise in bankruptcy proceedings. Michael is frequently engaged at critical inflection points in a case, where litigation risk, governance issues, and potential regulatory exposure intersect, and he brings a trial-ready, strategic approach to resolving complex disputes in bankruptcy courts and other forums.</p><p>Michael is frequently invited to speak on topics related to securities litigation and enforcement, including by the Practising Law Institute (PLI) and <em>Securities Docket</em>. He also publishes articles relating to trending topics in these areas and serves on the editorial board of <em>Wall Street Lawyer</em>.</p><p>Before joining private practice, Michael served at the SEC for 11 years, where he worked closely with SEC investigative units including the Asset Management Unit, the Market Abuse Unit, and the Complex Financial Instruments Unit. He also worked with attorneys at various U.S. Attorney’s Offices, the Manhattan District Attorney’s Office, and foreign securities regulators on securities-related investigations and prosecutions.</p><h4>Selective Significant Representations</h4><h5>Complex Litigation</h5><ul><li><strong>Farmland Partners, Inc.</strong> Named “Litigator of the Week” by <em>AmLaw</em> Litigation Daily for achieving a landmark settlement for Farmland Partners Inc. (FPI), a publicly traded farmland REIT, in a “short-and-distort” case that was prompted by a defamatory article that drove down FPI’s stock price by 39% in one day. The previously anonymous author, who wrote under the alias “Rota Fortunae,” and his clients utilized the scheme to profit from their short positions. As part of the settlement, the author acknowledged publicly that his article was full of false statements and made a payment that was multiples of the profits he made off the scheme. Meanwhile, FPI prevailed on its defense of a class action accusing the company and principals of securities fraud.</li><li><strong>Leading Audit Firm.</strong> Won full victory for leading audit firm in confidential arbitration concerning work performed in connection with government contracts, including an award of fees.</li><li><strong>Traackr, Inc. </strong>Achieved favorable settlement in trade secrets litigation after successfully narrowing claims and theories of relief through motion practice and discovery.</li></ul><h5>Bankruptcy Proceedings</h5><ul><li><strong>Unsecured Creditors of Incora Ltd.</strong> Represented in connection with a chapter 11 bankruptcy trial in U.S. Bankruptcy Court for the Southern District of Texas. We reached a conditional settlement for the Committee after investigating potential wrongdoing by various stakeholders—including securities law violations—and seeking standing to pursue claims to subordinate other stakeholders’ interests.</li><li><strong>Unsecured Creditors of Nikola Corporation.</strong> Represented in connection with a chapter 11 bankruptcy proceeding in D. Del. bankruptcy court. As part of our representation, we are evaluating certain potential claims, including for potential securities law violations by various individuals, and investigating facts relating to several existing securities law cases against individuals connected to Nikola.</li><li><strong>Unsecured Creditors’ Committees in Bankruptcy Proceedings.</strong> Led investigations and drove favorable settlements in matters including <em>Clovis Oncology, Inc.</em> (D. Del.) and <em>Wesco Aircraft Holdings, Inc</em>. (S.D. Tex.) (pending approval).</li></ul><h5>Government Enforcement</h5><ul><li><strong>A Multinational Electronics Company.</strong> Representation in an SEC FCPA investigation involving conduct in Latin America related to a business relationship with a company that was subsequently involved in a government corruption scandal.</li><li><strong>Investors in Cryptocurrency. </strong>Advise clients regarding litigation and regulatory investigations in connection with initial coin offerings and related transactions.</li><li><strong>Special Purpose Acquisition Companies (SPACs).</strong> Represent SPACs, sponsors, and other investors in SEC investigations regarding various SPACs’ initial public offerings and de-SPAC transactions, and counsel clients engaging in such transactions regarding regulatory and litigation risks.</li><li><strong>A Major Pharmaceutical Company.</strong> Successfully convinced SEC not to pursue an action against pharmaceutical company following investigation into the company’s FDA-related disclosures.</li><li><strong>Leading Crowdfunding Entity.</strong> Representation in providing compliance advice and counsel in connection with FINRA inquiries arising from alleged unregistered securities offerings and disclosure issues.</li><li><strong>An International Broker-Dealer.</strong> Representation in responding to FINRA and SEC inquiries related to the treatment of domestic and international client accounts.</li></ul>

Michael Birnbaum

<p>Anissa Chitour is an associate in the Litigation Department of Morrison Foerster’s San Francisco office.</p><p>Anissa earned her M.A. in Change Management from the Russian Presidential Academy of National Economy and Public Administration and her B.A. in public policy from Stanford University. Before joining MoFo, she was a summer associate at the firm. While in law school, Anissa was the associate editor of the <em>University of Pennsylvania Journal of Constitution Law </em>and the production editor of the <em>University of Pennsylvania Journal of Law and Public Affairs.</em> She served as treasurer for the Muslim Law Student Association, operations and management coordinator of “If/When/How: Lawyering for Reproductive Justice” project, and founded the Penn Law Trans Advocacy and Empowerment Project. She also served as a law intern to the Honorable Jerome Simandle in the District of New Jersey.</p><p>Anissa is fluent in French.</p>

Anissa Chitour

Associate

Securities Enforcement

<em>Harvard Law School Forum on Corporate Governance</em>