Expert Analysis

• Sripetch May Prove To Be An Empty Victory For The SEC

  

  The U.S. Supreme Court's recent decision in Sripetch v. U.S. Securities and Exchange Commission held that the SEC need not prove pecuniary harm for disgorgement, but if the commission must still identify victims and distribute funds in a compensatory way, it faces the same economic problem as before the ruling, says Erin Smith at Compass Lexecon.

• SEC Disgorged Fund Distribution Is Next Query After Sripetch

  

  Following the Supreme Court's Sripetch v. U.S. Securities and Exchange Commission decision, investor harm isn't required for the SEC to obtain a disgorgement award, but future cases must resolve whether the commission will be freed from a requirement to distribute disgorged funds to the victims of alleged misconduct, says Daniel Walfish at Katsky Korins.

• Direct Fed Payment Access Finally In Sight For Fintechs

  

  A recent executive order and a Federal Reserve proposal could finally allow direct payment system access for fintechs and other nonbanks, potentially reducing reliance on sponsor banks and reshaping competition, as well as prompting organizations to reassess partnership strategies as litigation and rulemaking unfold, say attorneys at Freshfields.

• New State AI Laws Create Dual Misrepresentation Risk

  

  As artificial intelligence transparency laws are enacted across the country and the volume and specificity of compliance records increase, companies will be required to speak more often, more precisely and to more audiences about the same systems, compounding the risk of litigation, say attorneys at Cooley.

• Series

  Cow Horse Makes Me A Better Lawyer

  

  Moving an unwilling 800-pound cow while riding a horse at high speed is exhilarating, a little unhinged and, at least for me, a surprisingly effective training ground for litigation — both demand focus, preparation over rigid planning and the willingness to act despite fear, says Ashley Zitrin at Glenn Agre.

• O Brother, Where Art DAO? Jurisdiction Issues Abound

  

  While there is a dearth of decisions examining a decentralized autonomous organization's citizenship for diversity jurisdiction purposes, Second Circuit case law has defined citizenship for other unincorporated entities, which may guide how courts evaluate an increasing number of cases involving DAOs, says Michael Mix at Morrison Cohen.

• Opinion

  Agentic AI And Securities Law: Steps Congress Should Take

  

  Agentic artificial intelligence technology doesn't fit comfortably into the existing securities regulatory landscape, so Congress should avoid repeating the mistakes that led to the legal uncertainty crypto companies and investors have faced over the past decade-plus by providing a legislative framework before AI fully matures, says Joseph A. Hall at Davis Polk.

• 3 Disgorgement Questions Linger After Justices' SEC Ruling

  

  While the U.S. Supreme Court’s recent decision in Sripetch v. U.S. Securities and Exchange Commission avoided placing new limits on the SEC’s disgorgement powers, it passed over several questions, including whether the commission can seek disgorgement when returning the money to investors isn't possible, says David Slovick at Kopecky Schumacher.

• Checking For AI Errors Is Now A Two-Way Street

  

  A handful of recent federal and state cases demonstrate the importance of checking for errors generated by artificial intelligence not only in your own court submissions, but also your opponent's, as well as when catching opposing counsel's AI mistakes could result in an award for attorney fees, says Tamara Barago at Hollingsworth.

• Opinion

  SEC Enforcement Reforms Must Address Post-Wells Limbo

  

  The U.S. Securities and Exchange Commission's recent changes to how it notifies companies of a potential enforcement action fail to address what happens after the Wells process is over, highlighting the need for meaningful process reform that includes a formal closure determination, says Kimble Cannon at Mahdavi Bacon.

• Lessons For Banks From Recent FCA Enforcement Trends

  

  While government relief programs rely on financial institutions in times of economic uncertainty, recent enforcement shows that a government partnership may not protect banks from liability involving False Claims Act missteps, say attorneys at O'Melveny.

• Series

  The Biz Court Digest: Shoring Up Corporate Law In Maryland

  

  Launched more than 20 years ago to improve complex corporate adjudication, Maryland's Business and Technology Case Management Program has been a solid success in some areas, but there always is room for improvement, says Bill Krulak at Miles & Stockbridge.

• How End Of SEC 'Gag Rule' Affects Free Speech Certiorari Bid

  

  The Securities and Exchange Commission's recent rescission of the so-called gag rule, which forbade defendants in settlements from denying the SEC’s allegations, may sway the outcome of a petition to the Supreme Court in a case challenging the rule on First Amendment grounds, say attorneys at Troutman.

• Banks Should Reassess Warehouse Lines Amid Credit Stress

  

  Growing stress in private credit markets means banks with warehouse lines to nonbank lenders should inventory exposures, revisit covenants and prepare for tougher regulator scrutiny, as repayment strains and weakening fund liquidity could turn seemingly indirect risks into material compliance concerns, say attorneys at Barack Ferrazzano.

• Citron Founder Verdict Tests Reach Of 'Half-Truth' Fraud

  

  A California federal jury's conviction this week of Citron founder Andrew Left may be remembered less as a conventional manipulation prosecution than as a case about how far the "half-truth" doctrine can reach when applied to modern market speech, says Elisha Kobre at Sheppard.