Earlier this month, the SEC (the “Agency”) announced that it initiated a record-breaking 868 enforcement actions in fiscal year 2016. This figure – along with other milestones – reflect the Agency’s commitment to expanding the scope and reach of its enforcement programs to pursue an array of federal securities law violations.
Charles's practice focuses on a variety of commercial litigation matters and government investigations including securities fraud, shareholder derivative actions, corporate governance, health care fraud, and general commercial disputes.
Prior to joining Orrick, Charles was an associate at Heller Ehrman and at Cravath, Swaine & Moore. He is also a former law clerk to the Honorable Maxine M. Chesney of the United States District Court for the Northern District of California.
- Cell Therapeutics. Charles defended Cell Therapeutics, Inc., and its directors in multiple securities and shareholder derivative lawsuits, all of which were dismissed with prejudice.
- Loudeye Corporation. Charles defended Loudeye Corporation and its directors in shareholder suit challenging merger, which was dismissed by trial court and affirmed by court of appeals, Rodriguez v. Loudeye, et al., 144 Wn. App. 709 (2008).
- Deloitte & Touche LLP. Charles defended Deloitte & Touche LLP against professional malpractice claims in five-week jury trial resulting in complete defense verdict. Ahtna v. Deloitte & Touche LLP, et al., 3AN-04-5669 (Sup. Ct. Alaska).
- Government Enforcement Proceedings and Investigations. Charles has represented numerous public companies and accounting firms in connection with SEC, DOJ and State Attorney General investigations and enforcement proceedings.
- Internal Investigations. Charles has assisted in numerous internal investigations conducted by both public and private companies into allegations of accounting malfeasance.
Posts by: Charles Ha
On July 7, 2016, Judge Paul A. Magnuson of the United States District Court for the District of Minnesota granted Defendants’ Motions to Dismiss a shareholder class action that had been initiated following a 2013 holiday season data breach involving customers of Target Corporation (“Target,” or “the Company”). The data breach, which resulted in the release of information of approximately 70 million consumer credit and debit cards, made headlines as one of the biggest privacy hacks at the time. Initially disclosed to the public in December 2013, with an estimated 40 million credit and debit cards affected, Target subsequently revealed a little less than a month later that additional consumer data, including customers’ names, mailing addresses, phone numbers and email addresses, were also stolen, and increased its initial estimate to 110 million.
On March 4, 2016, the Second Circuit affirmed the dismissal of two related securities actions against Sanofi Pharmaceuticals, its predecessor Genzyme Corporation, and three company executives (collectively, “Sanofi”). In doing so, the Second Circuit offered its first substantial interpretation of the Supreme Court’s March 2015 decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135 S. Ct. 1318 (2015), which addresses how plaintiffs can allege securities claims based on statements of opinion.
On Monday, November 9, 2015, the Office of Compliance Inspections and Examinations (“OCIE”) of the U.S. Securities and Exchange Commission (“SEC”) released results from its evaluation of investment adviser firms’ use of third parties for compliance functions, including outsourced chief compliance officers (“CCO”). Outside CCOs often perform important compliance responsibilities, including updating firm policies and procedures, preparing regulatory filings, and conducting annual compliance reviews. Despite the importance of these functions, the Risk Alert (“Risk Alert” or “Alert”) indicated that several of the outsourced CCOs examined had not implemented effective compliance programs. The Alert, available here, sends a cautionary signal to investment adviser firms considering outsourcing compliance functions. This warning is particularly timely since government agencies, including the SEC, have increased their focus on financial firms’ compliance programs, and on CCOs in particular.
In United States v. Salman, the Ninth Circuit recently held that a remote tippee could be liable for insider trading in the absence of any “personal benefit” to the insider/tipper where the insider had a close personal relationship with the tippee. This opinion is significant in that it appears at first glance to conflict with the Second Circuit’s decision last year in United States v. Newman, in which the court overturned the conviction of two remote tippees on the grounds that the government failed to establish first, that the insider who disclosed confidential information in that case did so in exchange for a personal benefit, and second, that the remote tippees were aware that the information had come from insiders. READ MORE
In a speech last Thursday, SEC Chair Mary Jo White publicly addressed the issue of whether the SEC has been too lax in granting waivers to large corporations that are subject to certain restrictions under the Well-Known Seasoned Issuer (“WKSI”) regulations or the so-called “Bad Actor Rule.”
The SEC classifies certain large widely followed issuers as WKSIs under Rule 405 of the Securities Act of 1933. Issuers with WKSI status benefit from greater flexibility in registration and investor communications. Most notably, registration statements filed by WKSIs become effective immediately and automatically upon filing. Certain categories of “ineligible issuers”—including those convicted of certain crimes and those determined to have violated the anti-fraud provisions of the securities laws—are precluded from qualifying for WKSI status. The SEC, however, can (and does) grant waivers to ineligible issuers upon a showing of good cause.
In a long-awaited opinion issued on August 15 in Parkcentral v. Porsche, the Second Circuit limited the extraterritorial reach of the U.S. securities laws, affirming the dismissal of securities claims brought by parties to swap agreements that were entered into in the United States but were based on the price of foreign securities. Although the Parkcentral opinion offers an important interpretation of the Supreme Court’s 2010 opinion in Morrison v. National Australia Bank, the Second Circuit declined to set forth a bright-line rule for determining when a securities fraud claim based on domestic transactions in foreign securities is sufficiently “domestic” to be subject to U.S. securities laws, thereby leaving the door open to future litigants to confront this issue in securities cases involving foreign elements.
In Morrison, the Supreme Court found that Section 10(b) of the Exchange Act does not apply extraterritorially based on a lack of congressional intent to overcome the strong presumption against the extraterritorial application of domestic laws. In so holding, the Court rejected a long line of Second Circuit cases that allowed the application of Section 10(b) to claims involving foreign securities so long as the claims involved either significant conduct in the U.S. or some effect on U.S. markets or investors. The Supreme Court reasoned that the Second Circuit’s so-called “conduct test” and “effects test” improperly extended the geographic reach of the U.S. securities laws beyond Congress’s intent, and would interfere with foreign countries’ own securities regulations. Instead, the Court adopted a new “clear test,” holding that Section 10(b) applies only to claims based on: (1) “transactions in securities listed on domestic exchanges” or (2) “domestic transactions in other securities.”
“Dark pools of liquidity” have recently become the focus of increased regulatory scrutiny, including a number of high-profile enforcement actions related to these alternative trading systems. This increased scrutiny follows on the heels of Michael Lewis’s popular book, “Flash Boys,” which introduced the public at large to dark pools through its allegations that high frequency trading firms use dark pools to game the system to the detriment of common investors. But what exactly are dark pools and do they have any redeeming qualities? This post provides a primer on the benefits and disadvantages of dark pools and why they matter.
In general, “dark pools of liquidity” are private alternative forums for trading securities that are typically used by large institutional investors and operate outside of traditional “lit” exchanges like NASDAQ and the NYSE. The key characteristic of dark pools is that, unlike “lit” exchanges, the identity and amount of individual trades are not revealed. The pools typically do not publicly display quotes or provide prices at which orders will be executed. Dark pools, and trading in dark pools, have proliferated in recent years due in part to the fragmentation of financial trading venues coupled with advancements in technology, including online trading. There are currently over 40 dark pools operating in the United States. Around half of these are owned by large broker-dealers and are operated for the benefit of their clients and for their own proprietary traders. According to the SEC, the percentage of total trading volume executed in dark venues has increased from approximately 25% in 2009 to approximately 35% today.
As discussed in a previous December 3, 2013 post, the U.S. Supreme Court has agreed to hear Halliburton’s pitch to overrule or modify the decades old fraud-on-the-market presumption established in Basic Inc. v. Levinson, 485 U.S. 224, 243-50 (1988). This theory effectively allows shareholders to bring class action suits under Section 10 of the 1934 Act by presuming that plaintiffs, in purchasing stock in an efficient market, relied on alleged material misstatements made by defendants because such public statements were reflected in the company’s stock prices.
Urging the reversal of Basic, Halliburton filed its opening brief on December 30, 2013, in Halliburton Co. v. Erica P. John Fund, No. 13-317. Halliburton makes several arguments in its brief in support of overturning Basic, including many familiar legal arguments relating to statutory interpretation, congressional intent and public policy objectives. Perhaps most interesting, however, is the brief’s focus on the academic literature regarding the economic assumptions underlying Basic that may not be as familiar to practitioners. Specifically, Halliburton argues that academics have discredited and rejected Basic’s key premise that the market price of shares traded on well-developed markets reflects all publicly available information. In particular, Halliburton argues that: READ MORE
“Life settlements” are financial transactions in which the original owner of a life insurance policy sells it to a third party for an up front, lump sum payment. The amount paid for the policy is less than the death benefit on the policy, yet greater than the amount the policyholder would otherwise receive from an insurance company if the policyholder were to surrender the policy for its cash value. For the life settlement investor that buys the policy, the anticipated return is the difference between the death benefit and the purchase price plus the amount paid in premiums to keep the policy in force until the death benefit is payable.
Some commentators have deemed life settlements as essentially a “bet” on the life of the insured. The longer the insured lives, the lower the rate of return on the investment. Critics of life settlements are quick to point out that investors have a financial interest in the early demise of the insured person. The life settlement industry has been subject to extensive litigation for several years.
An important and as yet unsettled question is whether life settlements are “securities” as defined under federal and state securities law. This basic question has important ramifications for how life settlement contracts will be treated by courts and regulators. READ MORE