It is almost axiomatic that the SEC “enjoys” bringing enforcement actions against lawyers.  The SEC believes that lawyers have a special duty to protect and police the securities markets, and, when a lawyer fails, the SEC is right there to pounce.

In fact, the SEC fined and barred an attorney from practicing before the Commission because the attorney failed to conduct proper due diligence when acting as underwriter’s counsel in misleading municipal bond offerings.  See https://www.sec.gov/litigation/admin/2017/33-10335.pdf.  The SEC claimed that the lawyer prepared erroneous documents regarding on-going disclosure obligations. The SEC stated the lawyer never went beyond relying upon the issuer’s claims, and ignoring red flags concerning the inaccuracy of the disclosure.

If you are lawyer, you cannot outrun the long-arm of the SEC, please take precautions!

We strongly encourage you to read the article profiling our firm and partners, Mark Silow (also our firm Chairman) and Joshua Horn, on Fox’s  Cannabis Practice Group.  See https://bol.bna.com/why-fox-rothschild-is-still-banking-on-its-cannabis-practice/.  No, sorry, Fox does not offer free samples, but, if you are interested in this emerging area, Josh is available to discuss.

Although the Broker Protocol has alleviated some concerns, many firms still find themselves wrestling with the vagaries of restrictive covenants when dealing with their employees.  Fox Rothschild has produced this revised and updated 50-state survey as a quick reference for in-house counsel and human resource professionals to access details on the variations by state in the laws of restrictive covenants in the employment context.

As always, we are available to discuss individual circumstances.

Given the start of the NFL season and the post-Labor Day last leg of the presidential campaign season, it reminded me of a blog entry that I posted in August 2012, regarding picking a winner for the then presidential race based upon the conference of the team that won the Super Bowl in the year of the election.  I have re-published the blog below for your amusement.

I blogged on this topic because it involved 3 things everyone in the securities industry seems to argue about:  politics, football, and statistics.  In any event, my blog proved to be prophetic.  The New York Giants defeated the New England Patriots because of a lucky catch with some assistance from the referees who happened to leave their seeing eye dogs at home during the 4th quarter– yes, I am still slightly bitter at the result.  Based upon my statistical analysis, such a result foretold President Obama’s re-election, and he did win pretty handily.

Now, this year’s Super Bowl was won by the Denver Broncos, yet again with the assistance of Roger Goodell’s band of incompetent zebra looking and optically challenged referees, who permitted Aqib Talib to put on Rob Gronkowski’s jersey while he was still wearing it in the end zone during the final drive of the AFC Championship Game thereby depriving the better team from prevailing.  Poor “I am not a Lawyer” Roger promised a thorough investigation, but, since it would not benefit any team other than the Patriots, he quickly backtracked and forgot about it.

However, I digress so let’s get back to my model.  If the statistics are to be believed, the NFL’s machinations– ensuring Peyton Manning winning his final Super Bowl– dictate that the Republican nominee, Donald Trump, will win the presidential election.  Of course, if you do not like this prediction, you should take comfort with another NFL axiom, “anything can happen on any given Sunday,” and get out and vote to prove it wrong (or, if you do like the model, get out and vote to prove it right) since that is the only true measure of any election, not some fancy statistical metric.

Yes, this blog is quite different than what you are used to reading, but it is a Friday in August so please take it in that vein.  Here goes.

Undoubtedly, many know the securities industry loves to use statistics.  Statistics are used for everything, including, among other things, to make predictions.  However, the securities industry is not alone in using statistics to predict the world to come.  For example, given this time of year with both NFL training camps and the presidential campaign in full swing, statistics and the resulting predictions are being dispensed like Pez candy.  Really, how many more NFL pre-season or swing state predictions can they come out with???!!!

Although statistics may be the norm in the political field, some political wonks are using an odd, novel method, most notably, cockroaches to predict the outcome of the presidential race.  Although I have heard a number of politicians in my life called cockroaches, until today, I have not heard of them being used for polling purposes.  However, I digress.

In any event, I started to think if there was some statistical correlation between the NFL and presidential politics.  Eerily (of course, when you use statistics in this manner, it is always eerie), there is!!  Apparently, the connection is with the winner of the Super Bowl in the year of the presidential election.

Now, since 1980, there have been 8 presidential elections.  Over that time, the Democrat has won 3 times while the Republican has won 5 times—more on that below when we discuss 2000—yes, you always have to discuss 2000!!  Of the 8 Super Bowl winners, 3 were from the AFC (Steelers, Raiders and the Patriots), and 5 were from the NFC (Redskins-2x, Dallas, Rams, and the Giants).  You are probably thinking, okay, whenever the AFC wins the Democrat wins, and, when the NFC wins, the Republican is the victor.  Not so fast, as your mother probably told you, do not jump to quick conclusions!!

In fact, it is the exact opposite.  In 1992, 1996, and 2008, an NFC team won the Super Bowl along with the Democrat candidate, while, in 1980, 1984, and 2004, the AFC team won along with the Republican.  Two elections remain: 1988 and 2000.

You are probably thinking, okay, the NFC team won both years along with the Republican so any predictive benefit falls apart.  However, the eeriness continues.  Let’s go back to 1988, that year the Redskins defeated the Broncos in Super Bowl XXII.  Some may recall that the Redskins’ quarterback was Doug Williams.  Williams would lead the Redskins over the Broncos, and win the Super Bowl MVP.  As many may also recall, Williams was the first African-American quarterback to play in the Super Bowl.  Is this an omen for President Obama, who happens to be the nation’s first African-American president?  Who knows?  One other point on the 1988 Election, George H.W. Bush, the Republican, defeated Democrat Michael Dukakis—a Massachusetts governor!!!!  Hmm, should former Massachusetts Governor Romney be worried???

Similarly, in 2000, the spooky coincidences continue.  The 2000 Super Bowl was won by the Rams, a NFC team, okay, based upon what we are talking about a Democrat should win.  Well, did he?  This is not the place to go through the tortured history of that excruciating presidential election, but Democrat Al Gore did win the popular vote while Republican George W. Bush, won the Electoral College and the presidency.  Of course, this game was famous for coining the phrase “One Yard Short,” http://en.wikipedia.org/wiki/Final_play_of_Super_Bowl_XXXIV, the final play of the game where the Titans were driving, but Titans receiver Kevin Dyson was tackled one yard short of making a game tying touchdown.  Some people are still suggesting George W. Bush really came up one yard short as well, but, unlike him, the Titans could not appeal to the United States Supreme Court.

Okay, what does this all mean for the 2012 election?  The New York Giants won the Super Bowl.  That means, if re-elected, President Obama will have none other than Tom Brady of the New England Patriots to thank for missing his favorite receiver, Wes Welker, thereby, ensuring the NFC’s victory and the President’s victory in November.  However, a word of advice for the President (like he really needs my advice!!), if he wants to send Tom a present, I do not think he likes cockroaches!!!

 

Not too long ago, I tried a case that had, among other issues, the improper use of the advisor’s personal email account. That improper use serves as a valuable lesson of what can go wrong when you deviate from using the firm approved email.

The client emailed complaints about the handling of the account to the advisor’s personal email address. In hindsight, the client appears to have done so to manipulate the situation. He was successful.

The advisor responded from his personal email without forwarding the complaint to the compliance department. Compounding that issue, the email he sent was construed to contain admissions of wrongdoing. We lost the trial.spying.jpg

The reasons are obvious why personal email should never be used for business purposes. For one, there is no oversight. Second, it can and will put you in an awkward position vis-à-vis the client and the firm.

What makes this situation even more pronounced is the reason why the advisor gave the client his personal email address in the first place. The client would not stop sending hardcore porn and racist humor to the company email address.

From my perspective, this was a client (regardless of account size) who had trouble written all over him. Rather than report the client and take some more drastic action (such as firing the client or barring the use of email), the advisor took an easy way out and paid dearly for that mistake.

Don’t give your clients your personal email address. If you do, report anything in the nature of a complaint to the firm before trying to respond. It is better to take the heat over using personal email than possibly admit to liability.  Don’t get caught with your pants down!*

* photo from freedigitalphotos.net

The U.S. District Court for the Southern District of New York dismissed a New York law malpractice and fraud claims by convicted inside trader Winifred Jiau against her former attorney.  See Jiau v. Hendon, http://www.bloomberglaw.com/public/document/Jiau_v_Hendon_Docket_No_112cv07335_SDNY_Sept_28_2012_Court_Docket.

Prosecutors contended that in her role as an employee of an expert network company, Jiau obtained inside information about public companies through professional and personal contacts and sold the information to portfolio managers at hedge funds, who traded on the inside data.  A jury convicted Jiau on conspiracy and securities fraud and the defendant then sued her lawyer for malpractice.  The court found no claim.

Although this turned out well for the lawyers, it should remind everyone of the potential dangers in these representations.

The number of cases brought by the SEC against attorneys under its Rule of Practice 102(e) will continue to climb.

In the wake of the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the number of SEC cases against attorneys, pursuant to Rule 102(e) or through cease-and-desist actions, has risen. The SEC’s Office of the General Counsel now is receiving referrals about potential attorney misconduct from the Enforcement Division on a regular basis.  Under Rule 102(e), the SEC may censure or bar persons from appearing or practicing before it for various reasons, including, but not limited to, “negligent conduct” or “unethical or improper professional conduct.”  OGC handles  Rule 102(e) complaints while the Enforcement Division may file other types of actions against attorneys for securities law violations.

In sum, attorneys are being targeted by the SEC’s in full measure.

A firm faced with a regulatory investigation should hire outside counsel to bring objective analysis to the situation. Although it may seem simple, the question that must first be addressed is who the lawyer represents.

If the firm itself is the subject of the inquiry, then the firm needs representation. However, that same lawyer should not represent any individual employees who are subject to the review as well because there could be conflicts of interest between the firm and the employee.

In this situation, the company’s lawyer should advise the individual that they should retain their own counsel. Depending upon the situation, the firm should consider whether to pay for that separate counsel.

Similarly, the communications between the company lawyer and the firm should be limited to those in the firm who are part of what has been termed the “legal control” group. In other words, the group should comprise of individuals who are specifically designated to address the regulatory issue before the firm. By keeping the communications between the firm and its counsel limited, there is less likelihood of any attorney-client privilege being inadvertently waived.money.jpg

Although this may all seem to be promoting the legal profession, there is much more to the story. How a firm handles an investigation of a regulatory issue may say more about the firm than the issue itself. Will the firm portray the image that it is simply trying to sweep everything under the carpet by keeping the review in-house? Or, will the firm be able to meet the regulatory review and be able to say and demonstrate that it took an objective approach to address the situation.

How you decide this matter may have a large bearing on what happens as a result of the regulatory review. Think twice before you decide.

* photo from freedigitalphotos.net.

We routinely report enforcement actions directed against lawyers because it simply never goes away. Attorneys are a major target for federal and state securities regulators.  Regulators salivate over “getting” attorneys, because they receive notoriety and money from the attorney’s malpractice carrier for investors. 

Additionally, the SEC’s new cooperation initiative may result in even more enforcement actions against attorneys.  Attorneys need to understand that some of their clients will be looking to accuse them to obtain credit for cooperation.  Clients do not owe attorneys any fiduciary duty although attorneys do not have the same protection.

In short, attorneys need to protect themselves.