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March 2015 Archives

SEC Proposes Rule to Regulate High-Frequency Trading Outlets

The Securities and Exchange Commission ("SEC") has proposed a new rule that will attempt to bring firms that engage in high-frequency trading ("HFT") under regulatory supervision. "The proposed amendments to Rule 15b9-1 would eliminate the current proprietary trading exemption and replace it with a narrower rule to exempt only off-exchange transactions by floor-based dealers that are solely meant to hedge the risks of its floor-based activities."1 Specifically, the SEC is proposing that brokers and brokerage firms that are not trading on exchanges to join a national securities association, bringing them under the oversight of the Financial Industry Regulatory Authority ("FINRA").2

Consumer Financial Protection Bureau Study Critical of Arbitration Clauses

The Consumer Financial Protection Bureau ("CFPB"), in a study mandated by a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act, investigated the effects of arbitration clauses on consumers and financial companies. Arbitration clauses have been a point of contention for consumer advocate groups because they reduce consumers' legal rights and ability to seek redress.1

Philadelphia Woman Files Class-Action Lawsuit Against Angie's List

Consumers know that one of the great things about the Internet is being able to research products and services before you buy them. Often an important part of that process is looking at what other consumers have said after making the purchase. Ratings and opinions can vary widely, but it is still possible to get a reasonably clear idea of a product based on how consumers' descriptions of it fit or don't fit with your specific needs.

Consumer Financial Protection Bureau to Review Credit Card Industry

As mandated by the Credit Card Accountability, Responsibility, and Disclosure Act ("CARD"), the Consumer Financial Protection Bureau ("CFPB" or the "Bureau") will be performing a review of the credit card industry this year. The CARD Act of 2009, passed after the Great Recession to improve consumers' experiences with the credit card industry, requires the CFPB to do such a review of the industry once every two years. To begin the process of assembling the 2015 report, the CFPB has reached out to credit card customers of various companies to accumulate data for its report. The Bureau is focusing its research on the terms of credit card agreements, fees, costs to the companies, and the efficacy of the disclosure of said fees and costs.1

Hidden 'resort fees' the target of class-action lawsuit

In 2012 the Federal Trade Commission (FTC) notified 22 hotel companies that their websites "may violate the law by providing a deceptively low estimate of what consumers can expect to pay for their hotel rooms." The notification relates to undisclosed "resort fees," which were not being disclosed to consumers when their rooms were booked online.

JP Morgan Still Fighting ERISA Lawsuit Brought by Employees

JPMorgan Chase and Co. ("JPMorgan" or the "Company") is still feeling the ramifications of the improper derivative trades undertaken by [former employee] Bruno Iksil, the so-called "London Whale," and several others. The trades caused the company to lose over $6 billion and incur more than $1 billion in fines. In Scrydoff v. JPMorgan Chase and Co. (2014 U.S. Dist. LEXIS 46366), the financial services company is facing a class action lawsuit brought by a class of its own employees that invested money into retirement accounts containing JPMorgan common stock funds. The plaintiffs allege that JPMorgan violated its fiduciary duties to employees under the Employee Retirement Income Security Act ("ERISA") during the period of December 20, 2011 to July 12, 2012 (the "Class Period").1

Supreme Court Sides with DOL Regarding Agency Rulemaking

In the case Perez v. Mortgage Bankers' Association (2015 U.S. LEXIS 1740), the Supreme Court ruled in favor of the Department of Labor ("DOL") and upheld changes the DOL made to an interpretive rule. In 1999 and 2001, the DOL issued interpretive rulings holding that mortgage-loan officers do not qualify as administrative officers and, hence, are not subject to the Fair Labor Standards Act ("FLSA") overtime exemption. In 2004, the DOL changed its ruling and said that mortgage-loan officers do, in fact, fall into the FLSA's overtime exemption category. Finally, in 2010, the DOL went back on its 2004 decision, and ruled without "notice or comment" that the loan officers do not fall under the exemption. In siding with the DOL, the Supreme Court also overturned the "Paralyzed Veterans Doctrine" laid out by the Second Circuit Court of Appeals in Paralyzed Veterans of America v. D.C. Arena L.P (117 F. 3d 579).1

Federal Judge Denies Intercept Pharmaceutical's Motion to Dismiss in Investor Suit

In the case captioned Atwood v. Intercept Pharmaceuticals, Inc. (2014 U.S. Dist. LEXIS 69717), two classes of investors brought suit against Intercept Pharmaceuticals, Inc. ("Intercept") for withholding information in order to prop up its stock price in preparation for an April 2014 stock offering. Judge Naomi Reice-Buchwald of the United States District Court for the Southern District of New York denied Intercept's motion to dismiss, holding that there was evidence showing that company executives may have purposefully withheld the information to deceive investors.1

Supreme Court to Review Commercial Exception Under FSIA

In 2013, the Ninth Circuit agreed to rehear Sachs v. Republic of Austria (737 F.3d 584) and, after the rehearing, reversed its previous decision, issued in September 2012. Upon rehearing, the Ninth Circuit held that a foreign company conducting substantial commercial activity in the United States is not immune from suit under the Foreign Sovereign Immunities Act ("FSIA").1 On January 23, 2015, the Supreme Court granted certiorari to hear the appeal from OBB Personenverkehr AG ("OBB"), an Austrian train company.2

What If I Report Securities Fraud Internally and Nothing Is Done?

Under the Securities and Exchange Commission's whistleblower program, employees who provide valuable information about securities fraud can receive sizable award payouts. Generally, though, if a compliance staff member or a high-level employee -- an executive, for instance -- reports a securities violation after hearing about it through another employee or through the company's compliance processes, then the staffer or executive is ineligible to receive an award from the SEC.