The SEC granted two petitions for review last week that tee-up significant issues for full Commission consideration late next Spring. The Commission will consider the application of the Second Circuit’s Newman decision restricting the “gifting theory” of insider trading and also will take up the constitutionality of the agency’s administrative enforcement forum.

Insider-Trading After Newman.

ALJ Patil dismissed insider-trading charges against trader Joseph Ruggieri last fall, finding that his tipper hadn’t provided the inside information in return for any personal benefit. Patil held that Newman was consistent with long-standing insider-trading precedent (Dirks) and required proof of personal-benefit to the tipper. I discussed the Initial Decision here.

The Commission denied Ruggieri’s motion for summary affirmance and granted Enforcement’s petition for review, grabbing the opportunity to address Newmanfrom its home-court forum: “This appeal raises issues as to which we have an interest in articulating our views and important matters of public interest, including insider trading law and the personal benefit requirement.”

Briefing will conclude March 25, 2016.

In the Matter of Joseph Ruggieri, AP File No. 3-16178, ’34 Act Rel. No. 76614 (SEC Dec. 10, 2015)

Admin Forum Constitutionality.

The Commission granted review of the Initial Decision against Laurie Bebo, which found accounting-fraud Rule 10b-5 violations and imposed a cease-and-desist order, $4.2M fine and O&D bar. Laurie Bebo and John Buono, CPA, Initial Decision Rel. No. 893 (Oct. 2, 2015), 112 SEC Docket 10, 2015 WL 5769700 (). I discussed the Initial Decision here.

Bebo raised and lost one of the earlier Court challenges to the Commission’s administrative forum. Whether federal courts have jurisdiction to intervene has provoked a judicial divide.   The Seventh (in Bebo’s case) and D.C. Circuits say no, while an Atlanta federal district court’s decisions to stay several administrative prosecutions is pending appeal at the Eleventh Circuit. I addressed those here.

The Commission unsurprisingly held its administrative forum was constitutional in its Timbervest decision this Fall. I discussed the opinion here. But that’s on appeal.

The Commission also sanctioned auditors in connection with Bebo’s case. In the Matter of Grant Thornton, LLP, AP File No. 3-16976, ’33 Act Rel. No. 76536 (Dec. 2, 2015)(C&D, censure, $1.3M fine and remedial measures); In the Matter of Melissa K. Koeppel, et al., AP File No. 3-16977, ’33 Act Rel. No. 76357 (Dec. 2, 2015)(C&D, 5-year bar).

Briefing on Bebo’s appeal will conclude in late February, 2016.

In the Matter of Laurie Bebo, AP File No. 3-16293, ’34 Act Rel. No. 76592 (SEC Dec. 8, 2015)