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Article
Publication date: 24 April 2019

Perrie Michael Weiner, Edward D. Totino and Aaron Goodman

To analyze the evolution of market manipulation and fraud by short-sellers and online bloggers and mechanisms available for addressing and remediating the damage caused by…

Abstract

Purpose

To analyze the evolution of market manipulation and fraud by short-sellers and online bloggers and mechanisms available for addressing and remediating the damage caused by such fraud, including recent activity by the US Securities and Exchange Commission (the “SEC” or “Commission”).

Design/methodology/approach

This article discusses the development of a modern market manipulation and fraud scheme – the “short and distort” – including a review of potential claims by the targeted companies and anticipated impediments to asserting such claims.It further examines the need for regulation and the possibility that the SEC has opened the door for civil claims for this type of fraud.

Findings

Companies wrongfully targeted by illegitimate short-sellers may pursue claims for securities violations, defamation, business interference, securities fraud and extortion, among other claims.However, each of these claims has had, and still has, both business and legal challenges, as the short-seller’s initial defense tends to be to attempt to prove the truth of their statements to the market or establish those statements as legitimate opinion.The SEC has made the pursuit easier but there is still a long way to go.

Originality/value

This article contains valuable information about recent SEC enforcement activity and practical guidance from experienced securities lawyers.

Details

Journal of Investment Compliance, vol. 20 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 1 July 2004

Perrie M. Weiner, Edward Totino and Robert D. Weber

Over the past few years, regulators, issuers, investors, and other market participants have expressed increasing concerns regarding the real or perceived effects of short…

Abstract

Over the past few years, regulators, issuers, investors, and other market participants have expressed increasing concerns regarding the real or perceived effects of short selling. For example, thinly‐capitalized issuers whose shares trade on the over‐the‐counter market often blame short sellers for declines in the prices of their stocks. Recently, these issuers’ ire has focused on so‐called “naked short sellers,” i.e. short sellers who do not locate or borrow shares before selling. Likewise, other market participants have expressed apprehension about conduct involving short sales that may be viewed as disruptive or manipulative. The Securities and Exchange Commission (SEC) and the self‐regulatory organizations (SROs) have addressed these concerns both by promulgating new regulations governing short sales and by pursing enforcement actions. This article summarizes the new short sales rules contained in Regulation SHO and the amendments to Regulation M, and discusses recent enforcement actions pertaining to short sales.

Details

Journal of Investment Compliance, vol. 5 no. 3
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 5 May 2015

Perrie Michael Weiner, Patrick Hunnius and Grant Alexander

To discuss the Securities and Exchange Commission’s (SEC’s) likely preparation of new rules to increase the monitoring and oversight of various asset funds, including…

185

Abstract

Purpose

To discuss the Securities and Exchange Commission’s (SEC’s) likely preparation of new rules to increase the monitoring and oversight of various asset funds, including hedge funds and alternative mutual funds, and recommends protective measure for fund managers to take.

Design/methodology/approach

Discusses the SEC’s increasing concerns about risks related to the asset management industry and how those concerns may lead to additional scrutiny and regulation. Recommends four steps for alternative mutual fund managers to take at this time to protect their interests.

Findings

The SEC’s potential regulatory action is in response to apparent increasing concern that the multitrillion-dollar asset management industry could create substantial instability to the financial system with the occurrence of a significant event, such as a sudden change in interest rates or widespread investor redemptions. It has been suggested that the proposed sweep of alternative mutual funds is part of a larger strategy by the SEC to bring the alternative mutual funds, and similarly situated entities such as asset managers and hedge funds, under the same regulatory umbrella imposed upon large banks and similarly situated financial institutions in response to the 2008 recession.

Practical implications

Preparation will go a long way in dealing with what appears to be a developing mine field of new regulations, and potential enforcement actions, from the federal government.

Originality/value

Knowing that increasing SEC scrutiny, such as inquiries and subpoenas, may be just around the corner, the precautionary measures outlined in this article will help alternative mutual fund managers protect their interests.

Details

Journal of Investment Compliance, vol. 16 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 6 July 2015

Perrie Michael Weiner, Patrick Hunnius and Sean R. Crain

To address “Conflicts, Conflicts Everywhere,” a speech at the recent IA Watch 17th Annual Compliance Conference by Julie M. Riewe, co-chief of the Securities and Exchange…

124

Abstract

Purpose

To address “Conflicts, Conflicts Everywhere,” a speech at the recent IA Watch 17th Annual Compliance Conference by Julie M. Riewe, co-chief of the Securities and Exchange Commission’s Enforcement Division’s Asset Management Unit (AMU).

Design/methodology/approach

Provide information on the AMU’s creation, the AMU’s 2015 priorities for each of the primary investment vehicles it polices –registered investment companies; private funds (both hedge funds and private equity funds); and other client accounts, such as separately managed accounts/retail accounts – and the AMU’s central concern across all of the investment vehicles it polices: conflicts of interest.

Findings

Conflicts of interest will be receiving much attention from the Commission in the coming months. In order to help avoid an SEC inquiry or, worse yet, an enforcement action, corporations and individuals should seek counsel.

Originality/value

Practical explanation and guidance from experienced securities and financial services lawyers.

Details

Journal of Investment Compliance, vol. 16 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 1 October 2006

Nicolas Morgan, Edward Totino and Perrie Weiner

This paper aims to draw conclusions about the likelihood that Securities and Exchange Commission (“SEC”) Chairman Christopher Cox will take significant action to reduce…

187

Abstract

Purpose

This paper aims to draw conclusions about the likelihood that Securities and Exchange Commission (“SEC”) Chairman Christopher Cox will take significant action to reduce regulation affecting hedge funds based on how the SEC has dealt with hedge fund regulation in both the rule making and enforcement arenas since Mr. Cox became Chairman.

Design/methodology/approach

Assesses actions taken by the SEC under Mr Cox's leadership with regard to PIPE (private investment in public equity) transactions by hedge funds, hedge fund registration rules, portfolio disclosure requirements, and alleged collusion among short‐selling hedge funds, research firms, and journalists.

Findings

The SEC's enforcement activities with respect to hedge funds that make short sales before the announcement of a PIPE transaction indicate that the SEC has no plans to lighten the regulatory or enforcement burden on hedge funds. The SEC's response to the DC Circuit Court's decision striking down the hedge fund registration rule likewise indicates that additional hedge fund regulation remains an SEC priority. While it remains to be seen how the SEC investigations and civil actions regarding the alleged collusion between short‐selling hedge funds, research firms and journalists will turn out, it appears unlikely that Chairman Cox will take any bold action to protect freedom of expression and the marketplace of ideas from attacks by disgruntled companies.

Originality/value

Provides a timely and insightful view of the near‐term outlook for SEC regulatory and enforcement policy toward hedge funds.

Details

Journal of Investment Compliance, vol. 7 no. 4
Type: Research Article
ISSN: 1528-5812

Keywords

Content available
Article
Publication date: 1 October 2006

Henry A. Davis

191

Abstract

Details

Journal of Investment Compliance, vol. 7 no. 4
Type: Research Article
ISSN: 1528-5812

Content available
Article
Publication date: 5 May 2015

Henry A Davis

130

Abstract

Details

Journal of Investment Compliance, vol. 16 no. 1
Type: Research Article
ISSN: 1528-5812

Content available
Article
Publication date: 6 July 2015

Henry A Davis

96

Abstract

Details

Journal of Investment Compliance, vol. 16 no. 2
Type: Research Article
ISSN: 1528-5812

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