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Yahoo
4 days ago
- Business
- Yahoo
NCLA Seeks Dismissal of Tainted SEC Enforcement Proceeding After Unauthorized Staff Actions
In the Matter of Rev. Fr. Emmanuel Lemelson and Secs. and Exchange Comm'n v. Rev. Fr. Emmanuel Lemelson Washington, DC, June 04, 2025 (GLOBE NEWSWIRE) -- The New Civil Liberties Alliance has filed a motion to dismiss a three-year-old administrative enforcement proceeding the Securities and Exchange Commission has been prosecuting against its client, the Reverend Father Emmanuel Lemelson, a Greek Orthodox priest and activist investor. The proceeding has been irreparably tainted twice over, first by the filing of an ultra vires federal lawsuit purportedly on behalf of SEC but that the Commissioners never authorized. Then a recently disclosed SEC internal control failure further tainted the proceeding. These irregularities, the latest twists in the Commission's longstanding and publicly adversarial relationship with Fr. Lemelson, negate any plausible appearance that the Commission can now fairly and impartially adjudicate its related administrative enforcement prosecution against him. The SEC enforcement division's pursuit of Fr. Lemelson began more than a decade ago and has continued ever since. On April 30, 2025, the Division of Enforcement filed the latest federal lawsuit, purportedly on SEC's behalf, seeking judicial enforcement of a belated administrative subpoena issued earlier this year by one of SEC's administrative law judges (ALJs). But the Division subsequently admitted that it filed the lawsuit without first consulting with or getting approval from the presidentially appointed and Senate-confirmed SEC Commissioners, erroneously asserting that it possessed 'delegated authority' to file the suit. NCLA challenged the legitimacy of that purported delegated authority. Only a week after the Court ordered the parties to brief the matter (and only a month after launching the lawsuit), SEC abruptly withdrew the lawsuit on May 30 instead of defending itself. While the lawsuit was pending, the Division of Enforcement also admitted that, purportedly due to yet another internal control failure at SEC, an unspecified number of internal Division emails were sent to an unnamed former Division of Enforcement staff member who had transferred to the Office of the SEC Chairman to serve as counsel to the Chairman in early April 2025, including emails related to the litigation against Fr. Lemelson. This SEC internal control failure is separate from the control failure that caused SEC to dismiss 42 pending administrative enforcement proceedings en masse—two years ago, almost to the day—because enforcement staff had improper access to ALJs' files, including those then pending against NCLA clients Michelle Cochran and Marian Young. In conjunction with its motion to dismiss the SEC administrative proceeding, NCLA has also asked the SEC ALJ to issue a subpoena to the Division of Enforcement to produce documents relevant to the recent breaches of SEC protocol and internal controls. Last week, the U.S. Court of Appeals for the First Circuit separately agreed with NCLA that a Massachusetts district court improperly denied Fr. Lemelson's claim for attorney's fees under the Equal Access to Justice Act in a related case SEC pursued against him from 2018 through 2022. And days later, NCLA filed a notice of appeal seeking review by the U.S. Court of Appeals for the D.C. Circuit of a recent district court decision dismissing Lemelson's amended complaint that sought declaratory and injunctive relief to stop SEC's ongoing administrative enforcement proceeding against him on constitutional and other legal grounds. NCLA released the following statements: 'In administrative adjudications, the agency is supposed to be the neutral and impartial final judge of the dispute in both fact and appearance, but that cannot happen if the agency is simultaneously locked in longstanding adversarial litigation against the same respondent in federal court. This case exemplifies what can go wrong when Congress assigns important responsibilities to unelected agency heads who then further diffuse political accountability by subdelegating those responsibilities to agency staff.'— Russ Ryan, Senior Litigation Counsel, NCLA 'It is utterly outrageous that SEC's enforcement division filed a lawsuit without permission from the appointed officials at the top of the Commission. Kudos to SEC for yanking the lawsuit late last month. Hopefully that means there is a new sheriff in town willing to ride herd on what has been an agency running amok since at least 2017.'— Mark Chenoweth, President, NCLA For more information visit the case pages here and here. ABOUT NCLA NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA's public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans' fundamental rights. ### CONTACT: Joe Martyak New Civil Liberties Alliance 703-403-1111 in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
22-04-2025
- Business
- Yahoo
5 Ways the SEC Can Embrace Innovation
The U.S. Securities and Exchange Commission has long been the world's most influential financial regulator, helping to ensure our capital markets are the deepest, fairest, and most accessible in the world. But its continued relevance will depend on whether it can do more than merely respond to innovation — it must proactively foster it. For nearly a century, the SEC has adapted to evolving markets, new technologies and greater retail participation. In its best moments, the agency has embraced innovation in service of transparency, investor protection, and capital formation. But in recent years, it has strayed from that legacy — nowhere more visibly than in its approach to crypto and good news is, with a change in leadership and a more open posture emerging, the SEC has a chance to course-correct. But the bigger question is: how do we make that change permanent? How do we build innovation into the SEC's DNA so that the next promising financial technology isn't strangled in its crib? I spent nearly six years at the SEC, first as a Senior Counsel in the Division of Enforcement and then as Chief Counsel in the Office of Legislative and Intergovernmental Affairs. I've since held senior legal and policy roles in crypto firms across the ecosystem. From both perspectives, one thing is clear: the SEC can fulfill its mission more effectively — and maintain its global leadership — only if it becomes a proactive partner in financial innovation. The SEC has a proud history of embracing change to the benefit of investors and markets alike. In the 1990s, it digitized corporate filings through EDGAR, replacing paper documents with searchable databases. It later approved Regulation ATS, enabling the rise of alternative trading systems that increased competition and liquidity. ETFs, which were once novel, are now mainstream products that offer low-cost, diversified exposure to a wide range of assets. More recently, fractional-share trading has empowered millions of retail investors to own a slice of companies they once could only admire from afar. One especially relevant example as the SEC thinks about how to regulate crypto is the agency's treatment of asset-backed securities. In the 1980s and 1990s, the SEC recognized that these complex financial products didn't fit neatly into existing disclosure regimes. After years of study and no-action letters, it developed a tailored disclosure framework in 2004 — refined further in 2014 — that balanced innovation with investor protection. And it didn't need to bring hundreds of enforcement actions to do it. There are also times the SEC failed to adapt, to the detriment of both investors and markets. It was slow to respond to the rise of high-frequency trading, contributing to the 2010 Flash Crash. It took years to implement the crowdfunding rules authorized by the JOBS Act. It lagged on digital reporting standards, delaying broader access to market data. And, for much of the last few years, its stance on crypto veered from caution to outright hostility. Instead of issuing clear rules for digital assets, the agency pursued a scattershot enforcement campaign — often against firms that were seeking to comply in good faith. Many of these actions didn't even involve fraud or investor loss. Meanwhile, American crypto companies fled overseas, and a global industry flourished without us. Even the SEC's grudging approval of spot bitcoin ETFs in 2024 came only after it was forced by a federal court. And while the agency at one point talked about creating a crypto disclosure framework akin to what it did for ABS, it never followed through. Crypto may be new, but the SEC has faced this challenge before. It knows how to modernize its rules to meet new realities. What's different now is the opportunity to leverage innovation — not just regulate it. Take blockchain technology. It could enable near-instant trade settlement, reducing risk and freeing up capital. It could improve market transparency through immutable records and real-time transaction data. It could lower operational costs by reducing intermediaries. And tokenization could expand access to private markets and hard-to-reach asset classes, benefiting both issuers and investors. Ironically, the SEC hasn't seriously explored how blockchain could improve its own market oversight. That's a missed opportunity. But it's not too late. So what would it look like to build innovation into the SEC's core mission? Revise the SEC's Mandate: Congress should amend the Securities Exchange Act of 1934 to explicitly include the promotion of innovation and modernization, alongside investor protection, market integrity, and capital formation. Rethink Metrics of Success: The SEC shouldn't measure success solely by the number of enforcement actions or penalties collected. It should also look to capital formation, investor confidence, and the safe adoption of new technologies. Create an Innovation Office: A dedicated, empowered team should engage with entrepreneurs, technologists, and academics to guide responsible innovation — just as similar offices in the U.K. and Singapore have done. Adopt Risk-Based Regulation: Not every new product or platform needs full regulatory treatment on day one. Pilot programs, safe harbors, and regulatory sandboxes can help innovators test ideas while maintaining appropriate guardrails. Invest in Education and Training: SEC staff need better fluency in emerging technologies. Cross-disciplinary expertise should be rewarded and cultivated. These are not radical ideas — they are proven tools drawn from the SEC's own playbook. In a global race to define the future of finance, the SEC has a choice: lead or fall behind. Its greatest strength has always been its credibility and ability to adapt. The next generation of investors and entrepreneurs won't wait around for 20th-century rules to catch up to 21st-century innovation. Nor should they have to. If the SEC wants to remain the gold standard, it must adapt once again — not just to the present, but to what comes in to access your portfolio
