In October 2013, the U.S. Supreme Court will hear oral arguments on three consolidated cases, Chadbourne Chadbourne & Parke LLP v. Troice, Willis of Colorado Inc. v. Troice and Proskauer Rose LLP v. Troice. Even though these cases have largely fallen below the general public’s radar, they are extremely important, as an incorrect decision by the Supreme Court could severely limit the ability of victims of financial fraud to seek justice.
These cases relate to two statutes passed in the 1990′s, the Private Securities Litigation Reform Act (PSLRA) and the Securities Litigation Uniform Standards Act (SLUSA). The financial lobby was able to convince Congress that the nation’s courts were flooded with frivolous securities fraud cases. To address that perceived problem, Congress passed the PSLRA, which placed several hurdles on securities fraud filings in federal court. Later, when it seemed that fraud victims had found a way to get around PSLRA, by filing securities fraud cases under state law (instead of federal securities law), Congress passed SLUSA. The SLUSA statute completely forbids class actions brought under state law if the case alleges fraud that is “in connection with” a federal securities transaction.
Since the passage of SLUSA, every circuit court and the Supreme Court have wrestled with what “in connection with” actually means. The Court is again addressing the issue in the Troice cases.
The financial lobby has filed briefs arguing the Court should define “in connection with” broadly. Occupy the SEC (“OSEC”) has filed an amicus brief opposing the lobby. OSEC’s brief explains that an overly broad definition of “in connection with” would significantly hamper the ability of victims of financial fraud to file civil claims. Many transactions that have little to do with securities fraud (e.g., loan fraud or mortgage fraud) would no longer be eligible for review under state law. Federal court filings are generally more burdensome and expensive. The bottom line is that a broad definition of “in connection with” would mean fewer lawsuits against financial fraudsters. That outcome would embolden other fraudsters, and would leave fraud victims with fewer civil court options.
OSEC’s amicus brief is available at: http://occupythesec.org/files/OSEC-Troice-Amicus.pdf
Senate hearing earlier this week on bank holding companies (the designation that GS and MS were granted, and one which JPM already had) and their involvement in physical commodity markets, as a follow up to the bombshell NYTimes article last weekend. Warren and Brown asked very hard-hitting questions, and an academic named Saule Omarova gave some fantastic testimony. Her paper is essential reading. Some background by Michael R. Crittenden and Christian Berthelsen at The Wall Street Journal July 23, 2013.
Federal grand jury delivers a 41-page indictment to hedge fund SAC Capital for insider trading. Heidi Moore at the Guardian July 25, 2013.
Elizabeth Warren and other democratic senators defy party and hold firm on student loan rates. Tracy Jan at The Boston Globe July 24, 2013.
Recent bombshell New York Times article details how Goldman shuffles aluminum around warehouses, shaving a penny here a penny there, and as a result racks up billions in costs to the public. Not to mention the London Metal Exchange, the regulator here, is filled with bankers from all the major Wall St banks. Next up: Copper. David Kocieniewski at The New York Times July 20, 2013.
Lawrence Summers, sexist proponent of complete deregulation, is the potential frontrunner to head up the FED. What worse candidate is there to pick? A most revealing pick for the supposed lesser of two evils Obama. What gymnastics will establishment liberals do to defend this one? David Dayen at Salon July 24, 2013.
One side effect of the Snowden leaks and the revelations of the U.S. spying on it’s supposed “allies” might be the collapse or at least the weakening of two “Free-Trade” Agreements (which really just give aways to multinational corporations), the Trans Pacific Partnership and the US-European “Free Trade” Agreement. Yves Smith at Naked Capitalism July 1, 2013.
The FED is “clear as mud” as to when the too-big-to-fail banks will have to comply with capital standards setting a hazy “phase in” stage starting January 2014 which may not ever even happen. Pam Martens at Wall Street on Parade July 3, 2013.
The FED gives Goldman a huge concession as it gives them two more years (July 12, 2015) to comply with a requirement to divest part of its derivatives business to a separately capitalized unit. Ronald D. Oral at Marketwatch (Wall Street Journal) July 3, 2013.
Gary Gensler is holding firm on cross-border derivative reform, much to the surprise of all the big shots who thought they would get the exemptive waiver extended no problem. Here’s to Gensler going out in style. George Bailey at Naked Capitalism June 25, 2013.
Jon Corzine to be sued by federal regulators for his role in the collapse of MF Global. A rare move against an ex-Goldmanite. But in a case like MF Global, civil charges really aren’t enough. Ben Protess at The New York Times June 25, 2013.
Obama administration and bank-friendly congressmen try and give Gary Gensler the Brooksley Born treatment as the anxiety rises before the July 12th deadline. However, Gensler unlike Born holds all the cards. Here’s to Gensler not making an 11th hour compromise in the face of adversity. Yves Smith at Naked Capitalism June 27, 2013.
Mortgage rates soar from 3.93% to 4.46% for 30-year fixed mortgage in one week, the highest rate since July 2011. Prashant Gopal at Bloomberg June 27, 2013.
A USA Today article details how two-thirds of recipients taking part in the “independent” foreclosure review received a paltry $300 – the smallest possible amount. With many lingering questions about how compensation was determined, who would get it, and the role of the big banks in the process, it’s clear that the people ravaged by the foreclosure crisis still haven’t been given anything resembling justice. Julie Schmit at USA Today June 25, 2013.