Last week, several securities industry groups filed critical responses to the SEC’s plan for an audit trail. While most groups that commented on the SEC’s proposed regulation supported implementing the proposal, several had concerns regarding the cost for investors and firms, and the protection of private data.
Blake L. Osborn
Blake's practice in complex litigation matters focuses on defending companies, officers and directors in class actions, business disputes and regulatory proceedings and investigations in state, federal, and appellate courts throughout the country. He has represented these companies, directors and officers in various arenas, including matters involving emerging tech companies, software, securities fraud, public entities, accounting fraud, insider trading, and alter ego.
Blake has also dedicated significant time to pro bono representations in civil rights, unlawful detainer and domestic violence cases. His pro bono work has included first chairing a Section 1983 trial and oral argument before the California Court of Appeals.
Before joining Orrick, Blake worked as a Deputy Public Defender in Orange County. In that capacity, Blake individually tried 12 misdemeanor cases, argued more than 20 motions, and managed an extensive case load by representing clients at pretrial conferences.
Notable representations include:
- Representation of leading self-driving tech startup in business dispute and related merger and acquisition.
- Representation of leading media and digital video recording company in business dispute.
- Representation of owner and chairman of a leading entertainment and media company in corporate governance litigation.
- Representation of major software and hardware company in issues related to a patent-infringement trial.
- Representation of emerging electronic commerce company in business dispute.
- Representation of major software company in shareholder derivative action in Delaware.
- Conducted internal investigation on behalf of public entity concerning potential violations of whistleblower protection act and allegations of misconduct.
- Representation of international trust entities and Singapore-based public company in action alleging alter ego and RICO liability.
- Representation of former President and COO of Countrywide Financial Corp. in connection with various federal and state securities lawsuits.
- Representation of founder and CEO of United Kingdom-based automobile service and repair business in shareholder litigation.
- Representation of Big Four accounting firm in state court litigation stemming from the Madoff fraud.
- Representation of city employee in connection with SEC action over alleged misstatements in connection with the issuance of municipal bonds.
- Representation of mobile device company in connection with securities shareholder class action and derivative action.
- Representation of medical device company in connection with shareholder class action alleging violations of securities fraud.
- Representation of global venture investor in various business litigation disputes.
Posts by: Blake Osborn
Last week, the SEC’s Office of Inspector General (“OIG”) released its semiannual report to Congress, which details the OIG’s independent and objective audits, evaluations, investigations and other reviews of the SEC’s programs and operations in order to prevent and detect fraud, waste and abuse in SEC programs and operations, and other vulnerabilities the SEC faces. In the most recent report, the OIG was critical of various programs, but most notably: (1) recommended a new framework to increase the Office of Compliance Inspections and Examinations coverage of registered investment advisors, and (2) informed Congress it was conducting a further evaluation on the SEC’s enforcement investigations to ensure that investigations are coordinated internally and across SEC divisions and offices.
Speaking last week at the SEC’s and Rock Center’s Silicon Valley Initiative at Stanford Law School, SEC Chair Mary Jo White cautioned Silicon Valley’s start-up companies regarding their potential lack of internal controls. In particular, she warned that unicorns—nonpublic start-up companies valued north of one billion dollars—may warrant special scrutiny into whether their corporate governance and investor disclosures are keeping pace with their growing valuations. Ms. White repeatedly warned that the prestige of obtaining “unicorn” status may drive companies to inflate their valuations.
After the repeated challenges to the SEC’s in-house courts as previously reported, Mark Cuban joined the debate by filing an amicus curiae brief in support of petitioners Raymond J. Lucia Companies, Inc. and Raymond J. Lucia (collectively “Lucia”) in Lucia v. SEC. Cuban, describing himself as a “first-hand witness to and victim of SEC overreach” in a 2013 insider trading case brought against him in an SEC court, argued that the D.C. Circuit should grant the petitioners’ appeal because SEC in-house judges are unconstitutionally appointed.
On the eve of the much anticipated release of Star Wars: The Force Awakens, the SEC approved Overstock Inc.’s plan to issue digital shares. The online retailer plans to issue company stock via bitcoin blockchain–an enormous database running across a global network of independent computers that tracks the exchange of money. Just as the original Star Wars movies released in the late 1970s and early 1980s signaled a monumental shift in special effects in film, Overstock’s plan to issue digital shares may herald a significant shift in the way securities are distributed and traded in the future.
On October 30, 2015, the United States Securities and Exchange Commission (“SEC”) moved forward in implementing Title III of the JOBS Act and adopted new rules permitting companies to offer and sell securities to all potential investors through crowdfunding. Crowdfunding is the use of small amounts of capital from a large number of investors to finance new business ventures. This method of investment, typically conducted over the internet, is aimed at assisting smaller companies with capital formation by accessing a greater pool of potential investors. The SEC had previously opened crowdfunding investment to “accredited investors” (investors meeting certain net worth and/or investment experience criteria) but these rules permit non-accredited investors, i.e., everyone else, to participate while providing them with additional protection under the federal securities laws. Title III and these rules come in response to the enormous growth of equity crowdfunding through financing platforms such as GoFundMe, Kickstarter or Indiegogo.
United States District Court Judge Richard M. Berman of the Southern District of New York has been making headlines in recent weeks as he presides over the highly publicized case between the National Football League (“NFL”) and National Football League Players Association (“NFLPA”) regarding the suspension of New England Patriots star quarterback Tom Brady over his alleged role in “Deflategate.” Taking a page from the Patriot’s playbook, Judge Berman recently deflated the United States Securities and Exchange Commission (“SEC”) and its controversial administrative court forum.
Even with the SEC’s home-court advantage in bringing enforcement actions in its administrative court rather than in federal court, the SEC will still criticize its own administrative law judges (“ALJ”) when an ALJ’s decision falls short of established legal standards. On April 23, 2015, the SEC found that an ALJ’s decision to bar Gary L. McDuff from associating with a broker, dealer, investment adviser, municipal securities dealer, municipal adviser, transfer agent or nationally recognized statistical rating organization was insufficient because it lacked enough evidence to establish a statutory requirement to support a sanctions analysis. The SEC then remanded the matter to the same ALJ – no doubt in an effort to encourage him to revise his initial opinion.
We first heard about the SEC’s increased focus on high-frequency trading in June 2014 when the SEC announced its desire to promulgate new rules on high frequency trading to address the lack of transparency in dark pools and alternative exchanges and to curtail the use of aggressive, destabilizing trading strategies in vulnerable market conditions. However, the SEC and other regulators may not need to rely on new rules to regulate high frequency trading. The United States Commodity Futures Trading Commission special counsel Greg Scopino recently published an article in the Connecticut Law Review arguing that certain high frequency trading tactics violate federal laws against spoofing and wash trading.
In recent years, the DOJ and SEC have significantly increased their Foreign Corrupt Practices Act (FCPA) enforcement efforts, and in the process, have successfully advocated the theory that state-owned or state-controlled entities should qualify as instrumentalities of a foreign government under the FCPA. The FCPA defines a foreign official as “any officer or employee of a foreign government or any department, agency or instrumentality thereof.” In August 2014, the government’s broad definition of who constitutes a “foreign official” came into question for the first time when two individuals (Joel Esquenazi and Carlos Rodriguez) filed a petition for writ of certiorari with the Supreme Court to challenge their convictions under the FCPA and argued for the high court to limit the FCPA’s definition of the term. However, on October 6, 2014, the Supreme Court declined to consider the potential landmark case effectively upholding the government’s broad view of the term “foreign official.” READ MORE