March 1

Should You Crowdfund Your Business?

Bunch of different sized piggy banks

For new or would-be entrepreneurs, the central priority is often raising cash. Even when the start-up costs associated with the invention or development of the business idea are low, there is a need for outside capital to market the business to the public. Where can a new business find this funding? In recent years, there has been a push to allow companies to obtain this funding more directly from the public, taking down some of the usual barriers to the public stock markets for early-stage businesses. This concept has coined “crowdfunding” – a process by which the general public (or crowd) funds a new business idea, primarily via an online portal.

What about the stock market?

October 18

Will the Spitzer Wall Ever Come Down?

Since the global settlement of various enforcement actions in the investment banking industry in 2003 and 2004 timeframe (known as the “Spitzer Settlement” or “Global Settlement”), the industry has maintained a Chinese wall between equity research and investment banking functions. The purpose of the firewall is to prevent firms from putting out misleading research in favor of firm clients.

July 19

Will this be the summer of SEC settlements relating to the mortgage-backed securities crisis?

On July 18, 2012, the SEC announced that it had reached a settlement with Mizuho Securities USA for $127.5 million in connection with charges that Mizuho had mislead investors in a CDO by using  “dummy assets” to inflate the deal’s credit ratings. The CDO, known as Delphinus, was backed by subprime bonds.

The firm that served as collateral manager on the deal and the portfolio manager involved in the transaction, Alexander Rekeda, also reached a settlement with the SEC. As part of the settlement, Rekeda has agreed to a suspension from the industry for 1 year and to pay a civil money penalty of $125,000.

In February 2012, the WSJ reported that Rekeda had received a Wells notice in October 2011.

Back in September 2011, Standard & Poor’s reported that it had received a Wells notice in connection with the same Delphinus CDO.  Is there a SEC settlement with S&P in the wings or has the SEC decided not to move forward with prosecuting S&P for this transaction?

Should we expect to see more settlements related to the mortgage-backed securities crisis soon?

We know that JP Morgan received a Wells notice in January 2012 in connection with two separate investigations being conducted by the SEC, including one  “relating to settlements of claims against originators involving loans included in a number of Bear Stearns securitizations.” We also know that the government has been investigating  Wells Fargo, Bank of America, Citigroup, and Ally Financial for misconduct relating to the mortgage crisis. The billion dollar question is whether deals are in the works, whether the banks have convinced the SEC/DOJ to back down, or if these cases will be litigated (unlikely).

There is also a five year statute of limitations that limits the SEC’s ability to bring claims against the banks, but this statute may be tolled by the banks as part of the process of cooperating with the SEC’s investigations. Given that the relevant information is getting stale, it is reasonable to believe that if the SEC and/or DOJ plan to take any action relating to the mortgage-backed securities crisis, it will be soon.


The RMBS Working Group filed its first case on October 2, 2012.



May 17

The JOBS Act from a Securities Litigation Perspective

Though it is primarily addressed at jumpstarting the initial public offering (IPO) market for startups and emerging growth companies (EGCs), the recently enacted Jumpstart Our Business Startups (JOBS) Act may be a boon for securities litigators.

The Act includes a number of provisions that disrupt the status quo and increase the litigation risk associated with the IPO process. My recent article in the Securities Litigation Report provides a summary of some of the JOBS Act’s provisions that may lead to an increase in filed securities litigation actions.