Securities Enforcement & Litigation

Securities matters often involve parallel litigation and enforcement proceedings, and our securities enforcement and litigation team has the experience and depth to advise and defend clients in these overlapping areas. We regularly represent public and private companies, financial institutions, officers, directors, and board committees in securities enforcement inquiries and investigations, lawsuits asserting violations of US federal and state securities laws, and shareholder derivative actions. We also counsel clients on the creation and regulation of financial products, guide them through internal and regulatory investigations, and defend them in litigation.

Our team includes former high-ranking government prosecutors and veteran US Securities and Exchange Commission (SEC) lawyers. We also have practitioners who previously worked at the US Department of Justice (DOJ) and the Financial Industry Regulatory Authority (FINRA), as well as several former government prosecutors from districts across the United States.

The securities group regularly draws on the capabilities of Morgan Lewis lawyers across other practices. These include lawyers focused on broker-dealer regulation; the Employee Retirement Income Security Act (ERISA); the Internal Revenue Code; food, drug, and medical device regulation; federal and state banking and insurance laws; and federal criminal laws. Collectively this team provides efficient, customized, and precise representation on any matter.

Securities Enforcement

For decades our securities enforcement team has represented financial institutions, public companies, and senior executives in regulatory investigations and enforcement proceedings conducted by the SEC, the DOJ, and other governmental agencies, as well as all major self-regulatory organizations, including FINRA. The group also conducts internal investigations and acts as an independent consultant to firms in matters arising out of regulatory settlements.

Securities Litigation

Morgan Lewis securities litigation lawyers defend public and private companies, financial institutions (including underwriters), officers, and directors in federal and state lawsuits throughout the United States. The team handles class actions, lawsuits asserting violations of federal and state securities laws, and shareholder derivative actions; advises on matters related to subprime mortgages; and handles claims challenging mergers and acquisitions (M&A). We also advise board committees. Our team frequently obtains dismissals in the early stages of litigation, and we’re always conscious of the important role settlements play in securities class actions, derivative cases, and litigation arising from M&A.

Securities Regulation

With experience advising financial institutions on the complex issues they face, our securities regulation team counsels clients on issues surrounding the creation and regulation of financial products. The group also provides guidance during examinations and investigations that all of the financial services regulatory agencies conduct, and represents clients during complex litigation when it arises.

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Current Developments in SEC Enforcement for Public Companies 2024

Securities Enforcement

Securities Industry

Morgan Lewis maintains one of the leading securities enforcement practices in the securities industry. Our clients include nearly all of the major international and US regional and local financial institutions, including banks, broker-dealers, and investment management firms, as well as their senior executives, in investigations that span all aspects of the securities markets and related regulatory issues. Our lawyers regularly appear before the SEC, the DOJ, the US Commodity Futures Trading Commission (CFTC), FINRA, and state securities regulators and attorneys general.

We work side by side with the securities industry in matters to help restore investor confidence in the markets. Our lawyers have represented clients at the national and state levels in most of the recent high-profile matters in the securities and investment management industries. In the recent past, matters for which our lawyers have taken leadership roles on behalf of clients have related to structured products, research analyst conflict rules, auction rate securities, municipal bonds, insider trading, subprime mortgage matters, and market timing and late trading.

Complex Financial Products

Our securities enforcement team advises clients on matters related to complex financial products, and regularly defends investigations conducted by the SEC Enforcement Division’s Complex Financial Instruments Unit, FINRA, and state securities regulators. These matters include investigations related to asset-backed securities, volatility instruments, derivatives, structured debt, and other complex products. We also frequently provide product guidance and specialized training to our clients with respect to these types of securities.

Foreign Corrupt Practices Act

Our Foreign Corrupt Practices Act (FCPA) team conducts investigations and regularly represents clients before the SEC and DOJ in connection with FCPA inquiries. The group has experience conducting cross-border investigations, making voluntary disclosure decisions, and evaluating remediation options. We also perform due diligence in connection with mergers, acquisitions, and other investment opportunities.

Our group assists clients with every aspect of FCPA compliance. This includes building global compliance programs, conducting risk assessments, and evaluating and enhancing existing anticorruption compliance programs. We also make improvements to internal controls and processes, and we train employees.

Accounting & Financial Fraud

We frequently represent public companies and their senior officers in internal or government investigations involving accounting and disclosure issues, as well as allegations of financial fraud. Our many alumni from the SEC and DOJ are well versed in crisis management and how to achieve the best results for our clients.

False Claims Act (FCA)

Our lawyers investigate and defend False Claims Act (FCA) actions throughout the United States, often in industrywide investigations. Members of our team are nationally recognized FCA practitioners and thought leaders, and collectively our team handles federal and state investigations in more than 36 jurisdictions. The firm’s practice also includes the defense of qui tam proceedings, which allow private individuals who claim that the US government has been defrauded to file suit on the government’s behalf. Many of our matters are parallel proceedings involving multiple government prosecuting agencies and multiple defendants at the federal and state levels.

Hedge Funds & Private Equity Funds

Our lawyers routinely represent hedge fund and private equity fund advisers in SEC investigations involving complex trading strategies, insider trading, short-selling rules, and disclosure and valuation issues. The group has experience with the SEC Enforcement Division’s Asset Management Unit.

We conduct internal investigations on behalf of hedge fund managers and help them resolve potential issues arising from these investigations. Additionally, we regularly advise fund managers on SEC examinations and compliance issues relating to information barriers and technical trading rules.

Internal Investigations

Corporate boards, audit committees, and special committees frequently hire Morgan Lewis to conduct internal investigations. We quickly and efficiently conduct these investigations—preserving relevant privileges, evaluating the risks and rewards of cooperation with government regulators, and navigating the complex accounting and financial disclosure issues that regularly arise. Our team knows firsthand how prosecutors, investigators, and regulators think and what they expect. This enables us to maximize the benefits of a credible internal investigation and positively influence the government’s approach to our clients.

Corporate Governance

In our role as counsel to many public and private companies, our lawyers—including the former chief counsel to the SEC’s chief accountant—advise boards of directors, board committees, and executive officers as they perform their extraordinary and routine duties. These lawyers are well versed in traditional corporate fiduciary standards as well as the extensive and ever-changing bodies of legislation, regulation, and listing standards that define and shape the responsibilities of public company directors and officers.

Insider Trading

Our lawyers routinely represent companies and individuals in insider-trading investigations, including matters involving alleged insider trading by hedge funds and expert networks. Using our network of international offices, we also represent foreign individuals and corporations in complex insider-trading matters.

We design corporate compliance programs, and help our clients implement and strengthen existing compliance programs. We also work with clients to formulate insider-trading policies and other policies relating to securities transactions.

Securities Litigation

We defend public and private companies, financial institutions (including underwriters), and officers and directors in US federal and state lawsuits, including class actions.

Biotechnology, defense, energy, financial services, healthcare, manufacturing, medical device, pharmaceutical, retail, technology, and transportation companies are among our clients. Recent significant, high-profile victories on behalf of our clients include:

Obtaining an affirmance by a court of appeals of the dismissal of a securities fraud class action against a major medical device manufacturer with regard to an alleged failure to disclose issues arising from a US Food and Drug Administration (FDA) inspection and alleged product defects.
On behalf of a Fortune 50 company, winning the dismissal of three derivative actions relating to executive severance, alleged FCA and FCPA violations, and a variety of corporate decisions, as well as prevailing on a motion to dismiss a securities fraud class action based on statements in the company’s code of ethics.
Prevailing on a motion to dismiss a derivative suit attacking business decisions in the Marshall Islands in a case of first impression.
Successfully fending off state and federal court challenges to acquisitions of several clients.

Class Actions

Our litigators defend claims under the Securities Exchange Act of 1934 and the Securities Act of 1933. This includes actions arising from adverse business events, restatements, unfavorable FDA decisions, alleged channel stuffing, purported accounting improprieties, failure to achieve forecasted estimates, initial public offerings, mutual fund trading, options backdating, and short selling.

We have a strong track record on motions to dismiss these claims. In cases that move past the motion to dismiss, we vigorously defend our clients in discovery and motion practice, and negotiate settlements where appropriate. We work closely with directors’ and officers’ insurance carriers to keep them apprised of developments, and we are on AIG’s panel of providers for securities litigation.

Shareholder Derivative Litigation

We defend public companies and their boards of directors in derivative cases in federal and state courts nationwide, including Delaware. We have won dismissals on demand futility grounds for claims attacking a variety of decisions by boards of directors. These include matters of executive compensation, purported FCA or FCPA violations, contract negotiations, and financing decisions.

M&A Securities Litigation

In recent years, there has been a substantial increase in shareholder lawsuits challenging mergers and acquisitions. This type of litigation is typically filed as a class action or derivative suit, with shareholders most often alleging the board of directors breached its fiduciary duty. Our lawyers routinely defend public companies in this type of litigation. We handle cases on both sides of the transaction—representing either the company being acquired or the acquiring company—to prevent litigation from affecting whether a transaction closes.

Special Committee Investigations

Companies and their boards of directors routinely retain us to advise audit committees and special litigation committees during investigations, including investigations resulting from shareholder demands or books-and-records demands. We conduct investigations thoroughly, efficiently, and in a manner designed to preserve the attorney-client privilege to the greatest extent possible.