Judge John Koeltl of the Southern District of New York has acted swiftly and granted the joint request of the SEC and Rengan Rajaratnam to extend the stay of the SEC’s enforcement action against Rajaratnam in light of the jury’s recent acquittal of Rajaratnam on criminal insider trading charges. The parties requested an extension of the stay, which was to expire yesterday, to see if they could resolve the parallel SEC matter. The court continued the stay for another sixty days, until September 15, 2014.
SEC Turns to Section 20(b) of the Exchange Act to Pursue Defendant Who Drafted Press Release for Third Party
Last month, we reported on SEC Chair Mary Jo White’s remarks suggesting the agency may turn increasingly to Section 20(b) of the Securities Exchange Act of 1934 when pursuing individuals for alleged securities fraud. Although the section has rarely been invoked or interpreted, it allows the government to pursue defendants who use an innocent intermediary to engage in conduct that runs afoul of the Act. As we explained, Section 20(b) may hold particular appeal for regulators who must now pass higher hurdles to establish primary liability under Section 10(b) following the Supreme Court’s decision in Janus Capital Group v. First Derivative Traders, 121 S. Ct. 2295 (2011).
In what appears to be evidence of Ms. White’s plan being put into action, the SEC recently filed a complaint against Christopher Plummer, the purported operator of a retail electricity provider named Franklin Power & Light LLC. The complaint alleges that Plummer orchestrated a multi-part scam in which one of his corporate partners issued a series of press releases containing fraudulent misstatements, including that it was “developing solar energy farms through a joint venture with Plummer’s companies.” The SEC contends at the time the unnamed company “was in dire financial straights and lacked the financial or logistical capability . . . to develop the solar energy farms. . . . In fact, Company A had no operating business, no customers, and no revenue at all.”