Summer 2024
ICAN’s Strategy for Change Yields Returns
As relentless advocates for small businesses, entrepreneurs, and investors, ICAN must maintain a marathon mindset, always prepared to confront the harmful, excessive government regulations that threaten their rights and livelihoods.
While we’re eager to celebrate recent wins in this issue of the Ticker Tape, we are keeping our sights firmly set on our long-term strategy and goals of ICAN: vigorously defending everyday Americans who find themselves caught in the crosshairs of the Securities and Exchange Commission (SEC), developing a precedent-based legal bulwark against SEC overreach, and actively promoting the crucial role robust capital markets play in creating a healthy, vibrant economy where upward mobility is available to all.
The wins and progress we share in this newsletter are testament to the power of ICAN’s efforts.
None of it would be possible without ICAN’s growing network of generous donors. I hope you will consider supporting our efforts and sharing this newsletter with others you think might be interested in ICAN’s work.
With thanks for your continued support,
Nick Morgan
Founder and President of ICAN
Amicus Wins: Jarkesy and Binance
Jarkesy Amicus Win, Wall Street Journal Mention
I hope you’ve had the opportunity to read our press release celebrating the win in SEC v. Jarkesy. ICAN helped to elevate the national profile of the case and the important issues at stake when we filed an amicus brief co-signed by Mark Cuban and Elon Musk. There was a marked increase in media attention about SEC v Jarkesy after our brief. The degree to which we helped drive the public narrative of the case was highlighted when I was one of only two experts unconnected to the parties quoted in the Wall Street Journal’s article about the Court’s ruling.
The article highlighted how we hope the win is just the first step in pushing back against administrative court injustices.
Nick Morgan, a former SEC enforcement attorney, said the court’s opinion opens the door to challenges of other punishments that administrative courts can order, including suspensions and bars from working in a regulated industry.
“There will be some litigation saying professional bars can in some cases be more impactful than a monetary penalty and should be afforded the same right to a jury,” said Morgan, who now helps clients fight SEC litigation. He filed a friend-of-the court brief supporting Jarkesy on behalf of a group that included Mark Cuban and Elon Musk, who each have locked horns with the commission.
Read Article Here: Supreme Court Curbs SEC’s Enforcement Powers by Jan Wolfe, WSJ
ICAN currently represents multiple pro bono clients facing ruinous monetary judgments and professional bars over administrative infractions. These small business owners and investors have spent years entangled in the SEC’s regulatory labyrinth before finally getting their day in court. You can learn more about them here. We’re hopeful that the Jarkesy case is indeed an opening to continue fighting for due process for all.
As we mentioned at the outset of the newsletter, our work truly requires a marathon mindset. The Jarkesy ruling has been a decade in the making. In 2013 and 2014, the SEC brought cases in federal court against (and subsequently lost to) Mark Cuban, Nelson Obus, and Manouch Moshayedi. ICAN co-founder Tom Zaccaro represented Manouch Moshayedi in his case. In 2014, after this string of federal court jury trial losses, Reuters interviewed the then-SEC director of enforcement. They asked why the agency was not using its new power under Dodd-Frank to utilize its in-house administrative proceedings. The former director indicated the agency would be expanding the use of its in-house system because merely threatening to do so often caused people to settle.
While many of us are looking to the future to see how the agency adapts in the wake of Jarksey, we think the latest episode of our SEC Roundup Series revisiting the 2013-2014 era is worth a listen. It underscores the critical importance of due process in all SEC proceedings, discussing how the agency is well aware that the threat of its administrative process all but guarantees settlements. Nick and Tom revisit those cases, joined by special guests Mr. Moshayedi and Mr. Obus, and discuss the need for juries to protect those falsely accused of wrongdoing.
SEC Roundup 66: Jarkesy and the Critical Importance of Juries in SEC Proceedings
Binance Amicus Win
ICAN had another Amicus win in SEC v Binance, and it was a considerable one. If you have followed the Howey crypto developments or know how infrequently defendants prevail on any part of a motion to dismiss an SEC complaint, you’ll understand the significance of portions of the recent ruling dismissing parts of the SEC's complaint against Binance.
Parts of the ruling line up with our amicus brief, which benefited from the strategic thinking of ICAN’s counsel: David E. Kirk, Michael Ingram, and Chris Davis. From the order dismissing parts of the SEC’s complaint:
"Insisting that an asset that was the subject of an alleged investment contract is itself a 'security' as it moves forward in commerce and is bought and sold by private individuals on any number of exchanges, and is used in any number of ways over an indefinite period of time, marks a departure from the Howey framework that leaves the Court, the industry, and future buyers and sellers with no clear differentiating principle between tokens in the marketplace that are securities and tokens that aren’t. It is not a principle the Court feels comfortable endorsing or applying based on the allegations in the complaint, particularly since the only term among the approximately twenty options included in the statutory definition of 'security' that is being relied upon in this case is 'investment contract.'"
You can keep up with all of our amicus briefs on our website.
ICAN’s Founder Nick Morgan Interviewed About Loper Decision Impacts on SEC
The end of the “Chevron Deference” concept in the Loper decision impacts all administrative agency rulemaking and litigation, including the SEC. While some have expressed concern about the impact of Loper on the ability of government agencies to carry out their regulatory responsibilities effectively, this concern is likely overblown. The ruling may instead help the SEC and others more effectively pursue rulemaking in a way that fosters healthier relationships between the agencies and their respective regulated industries.
Knowing that challenges to rules may become more common, regulators will now have more incentive to seek feedback on the front end. I was honored to be the guest on the Alternative Investment Management Association's podcast, “The Long-Short,” discussing this new potential era of cooperation and how overturning Chevron deference will change (but not end) SEC rulemaking and litigation.
I had an opportunity to further discuss the potential impact of the ruling, and how agency leaders may influence implementation, in a piece on ThinkAdvisor.com by Melanie Waddell, Senior Editor and Washington Bureau Chief.
“It remains to be seen how big of an impact this opinion will have once judges start applying it. At a minimum, judges will no longer need to defer to the SEC’s own opinion about its jurisdiction and the application of the federal securities laws,” Morgan said.
The impact of the Supreme Court’s ruling “will only be seen in litigation where the SEC and DOL tell a judge to defer to the agencies’ interpretation,” Morgan continued.
For instance, ”in the pending litigation challenging the SEC’s short sale rules, the court may continue to take the SEC’s view of the statutory authority for the rules, but the court will give those views less deference under this new Supreme Court opinion.”
Added Morgan: “The great irony about the Chevron doctrine is that the original case involved environmental activists not wanting courts to defer to the Reagan administrations’ EPA’s interpretation of environmental laws. How strongly one thinks courts should defer to executive branch agencies may turn in part on which executive is presiding over the agencies.”
You can read the entire article here. It features an excellent group of experts who discuss climate disclosure rules, their impacts on investors, and much more.
Change Makers
While ICAN focuses on a legal strategy to combat the overreach of the SEC, we’re constantly encouraged by people driving change through industry associations or their businesses. Recently, we’ve featured some of these impressive folks on our SEC Roundup and Capital Ideas series.
Here are a few we’d like to suggest you check out:
Chris Iacovella, President and CEO of the American Securities Association (ASA)
Chris joined us to discuss the ASA’s recent lawsuit against the SEC, seeking information under the Freedom of Information Act for the SEC’s rationale for eye-watering (some might say, arbitrary) penalties some broker-dealers face for failing to retain “off-channel communications.” The SEC has refused to produce any documents for how it has calculated these penalties, prompting the ASA to sue, saying that these calculations should not be hidden from public examination and scrutiny, something we agree with. Watch our discussion with Chris here.
Jonathan Dunsmoor, recovering securities attorney and the Chief Development Officer of The Blue Rock Organization
Jonathan explains his early skepticism of blockchain and the Initial Coin Offering era and how he is now leveraging that same technology to democratize economic opportunities. We listened as Jonathan explained Blue Rock’s initiative to help individuals become accredited investors by leveraging FINRA’s Series 65 exam. You can hear about his innovative ideas here.
Etan Butler, Chairman of Dalmore Group
Etan’s organization has captured nearly 50% of the Regulation A offering market, so we were eager to hear his take on the challenges of accessing capital, the paths that came about from JOBS Act exemptions, and the innovative solutions the Dalmore Group is providing. Tune in to our conversation with Etan here.
Wrapping Up
I am proud to be able to share so much positive news about the impact our young organization is having.
We have just taken on a sixth pro bono client, whom we will highlight in our August newsletter. We continue to file a steady stream of strategic amicus briefs. And we are actively participating in the SEC rulemaking process and serving as a watchdog on the agency’s administrative powers, submitting rule petitions, rule comment letters, and FOIA requests.
Of course, this important activity requires considerable resources and would not be possible without ICAN’s growing network of supporters. As a nonprofit litigation firm that provides pro bono services to all of our clients, we depend upon donations from individuals like you to help us continue to push back against the SEC and its overreach.
If you’d like to support our work, please consider:
Sharing all or a part of this newsletter on social media, or
Forwarding this newsletter to someone who might be interested in any of these topics, or
If you’re a member of the press and are covering a story where ICAN could contribute a comment or information, please reply to this email.
And last but certainly not least, consider donating to help us bolster our legal advocacy fund for small businesses and investors. Please reply to this email to discuss a donation, or click here.
With thanks,
Nick Morgan
Founder and President of ICAN
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