CD: Reflecting on the last 12-18 months, could you provide an insight into some of the primary trends in US securities litigation and enforcement action?

Tuttle: With the eventual winding down of the cases arising out of the financial and mortgage crisis, securities litigation and enforcement is beginning to return to more traditional types of cases. On the shareholder class action and derivative litigation front, that means generally a return to the typical corporate issuer-focused matters that arise from restatements or other negative company developments. Because of the general decline in actual restatements, however, these cases can now arise from revisions of financial statements, announcements of regulatory investigations, or other pre-restatement indicators of financial issues. On the enforcement front, the Securities & Exchange Commission (SEC) has also directed more focus onto corporate accounting and financial reporting, having formed a Financial Reporting and Audit Task Force and pledged greater enforcement attention on the area. Consistent with those announced intentions, the SEC has brought a number of recent cases, including matters featuring non-fraud reporting and books and records charges arising from more technical accounting and financial reporting violations.

Berry: The Citigroup decision in 2011, wherein a federal District Court Judge rejected a proposed settlement with the government as unfair, inadequate and lacking sufficient foundation to support the compromise – particularly because the target did not admit culpability – incentivised the SEC to be more aggressive and demanding in its settlements to avoid additional criticism by the courts. In late 2014, the Court of Appeals for the Second Circuit reversed the District Court in Citigroup, suggesting the trial court should afford the SEC more deference. The momentum created by the original Citigroup decision has not abated, however. Moreover, this more aggressive stance by the SEC has led more cases to go to trial and the SEC is getting mixed results. The SEC’s mediocre performance in courts of law has, in turn, led it to pursue more matters administratively as enforcement actions. It is uncertain when this will settle down and what the landscape will look like when it does. Predictability is a victim of this trend.

Apr-Jun 2015 issue

Debevoise & Plimpton

Lieff Cabraser Heimann & Bernstein LLP

Skadden, Arps, Slate, Meagher & Flom LLP

White and Williams LLP