Wells Notices in SEC Enforcement

Students interested in the SEC enforcement process could benefit from reviewing the Brooklyn Law School Library’s copy of The Securities Enforcement Manual: Tactics and Strategies (2d ed.) published by the ABA (Call #KF1439 .S417 2007). The manual provides comprehensive coverage of techniques for dealing with an enforcement threat from the SEC, self regulatory organizations, or state securities regulators. It describes the enforcement investigations and proceedings and provides strategies to influence the outcome of an investigation and prevent or minimize the adverse effects of enforcement actions. Chapter 3 (SEC Investigations: The Heart of SEC Enforcement Practices) explains the use of Wells Notices by the SEC with material on Wells Submissions: The Critical Step at an Investigation's Conclusion, the Historical Background of Wells Submissions, Pre-Wells Submissions and Meetings, the Wells Submission Process, the Determination Whether to File a Wells Submission, the Wells Submission's Role in the Settlement Process, the Preparation of a Wells Submission, Filing a Wells Submission and the Staff's Reply, the Post-Wells Process, and the Use of Wells Submissions in Subsequent Actions.

A Wells Notice is a notification from the SEC or another regulator like FINRA or NASD sent to a respondent when the regulator intends to recommend that enforcement proceedings be commenced against it. The Wells Notice provides the respondent with the opportunity to present a case against the commencement of these proceedings. Providing a Wells Notice is not legally required but it usually the practice for regulators to do so. See Section 2.4 of the SEC Enforcement Manual for more on the Wells Process.

The use of Wells Notices dates to 1972, when SEC Chairman William J. Casey appointed a committee chaired by John Wells, commonly known as the Wells Committee, to examine and evaluate the SEC's enforcement policies. Among the recommendations made by the Wells Committee in its Report of the Advisory Committee on Enforcement Policies and Practices was the following:

Except where the nature of the case precludes, a prospective defendant or respondent should be notified of the substance of the staff’s charges and probable recommendations in advance of the submission of the staff memorandum to the Commission recommending the commencement of an enforcement action and be accorded an opportunity to submit a written statement to the staff to be forwarded to the Commission together with the staff memorandum.

Recent newsworthy instances of the use of Wells Notices include Standard & Poors, the largest U.S. credit-rating firm, which acknowledged last September that it had received a Wells Notice from the SEC warning the firm it could face civil enforcement action for its ratings actions in a 2007 collateralized-debt obligation, a pool of subprime mortgages and other assets sold in slices to investors. S&P said it was cooperating with the SEC on the probe and that the Wells notice was "neither a formal allegation nor a finding of wrongdoing." More recently, Puda Coal, a Chinese company facing regulatory scrutiny over its financial reporting, received a Wells Notice from the SEC that it intends to recommend administrative proceedings to suspend or revoke the registration of its securities for failure to comply with certain rules under the Securities Exchange Act of 1934. The SEC offered Puda an opportunity to make a Wells Submission no later than January 16, 2012 setting forth any reasons of law, policy or fact why it believes the administrative proceedings should not be brought.

For Sale: Taxpayer Funded Research

On December 16, 2011, Rep. Darrel Issa (R-CA) Carolyn B. Maloney (D-NY) introduced H.R. 3699, the Research Works Act, similar to the Fair Copyright in Research Works Act from 2008. The legislation would end the current requirement that research paid for by taxpayers be publicly available for free. The main section of the RWA states: "No Federal agency may adopt, implement, maintain, continue, or otherwise engage in any policy, program, or other activity that (1) causes, permits, or authorizes network dissemination of any private-sector research work without the prior consent of the publisher of such work; or (2) requires that any actual or prospective author, or the employer of such an actual or prospective author, assent to network dissemination of a private-sector research work."

The impact of the RWA would be greatest on the National Institute of Health because of its Public Access Policy. Other agencies that share the results of research gained through public funds would also be inhibited from doing so in the future. The bill’s primary supporter is the Association of American Publishers which argues that charging for search results is justified as publishers add value and credibility to the research and that allowing free public access to the research results would deny publishers just compensation. Proponents of the bill claim that the peer review process assesses the research for validity and significance and adds value to justify charging for articles outlining the results.

If the bill becomes law, researchers can expect to pay $25 to $30 for access to a research paper. It will cut off a valuable source of information for schools, scientists, medical professionals and anyone interested in learning more about research. Opponents of the bill (which include the Alliance for Taxpayer Access, the American Library Association, and the American Association of Law Librarians) argue that these research results are already public property as taxpayer funds paid for the research. Those who would purchase the articles essentially pay for the research twice. These organizations stress the importance of access to publicly funded research and would like to continue its availability to those individuals whose funds made the research available in the first place. See their letter in opposition to H.R. 3699 to the House Committee on Oversight and Government Reform. Read more on at the Chronicle of Higher Educations article, Library Groups and Open-Access Advocates Speak Out Against Bill (Brooklyn Law School Library users can ask a reference libraran for the username and passwork). Open access articles on the subject incldue the NY Times op-ed Research Bought, Then Paid For and the WIRED article Congress Considers Paywalling Science You Already Paid For.

Milestones: Professional and Personal

Jean Davis is currently serving as Interim Library Director of Brooklyn Law School Library. She and the staff look forward to working with incoming Law Library Director and Associate Professor of Law Janet Sinder in summer 2012.

Sara Gras, Reference Librarian and Adjunct Assistant Professor of Law, joined the staff at Brooklyn Law School after obtaining her M.L.S. from the Queens College Graduate School of Library and Information Studies. A graduate of Saint Louis University School of Law (Class of 2005), Sara Gras served as a Westlaw Account Representative working with attorneys and staff in some of the New York’s largest law firms to provide expert training and assistance in using Westlaw and other Westlaw products from 2005-2011. This semester, Sara is co-teaching both Advanced Legal Research and Intensive Online Legal Research for Foreign-Trained Lawyers.

H.C. Singh retired as the Acquisitions and Serials Librarian in January 2012. Mr. Singh joined Brooklyn Law School in 1989 where he assisted former Library Directors Sara Robbins and Victoria Szymczak in building Brooklyn Law School’s extensive collection.

Kathleen Darvil, Reference/Access Services Librarian and Adjunct Assistant Professor of Law, and her husband Ben Darvil welcomed a second son to their family on December 13, 2011. Sean Robert Darvil weighed in at 5 lb. 15 oz. Mother, Father, older brother D.J. and baby Sean are all doing well. Kathy is on maternity leave until March 2012.

Copyright Restoration of Public Domain Works

The same day the online blackout of SOPA and PIPA protested the broadening of copyright law as censorship, the US Supreme Court issued its 6-2 opinion in Golan v. Holder, a copyright case that may possibly have greater impact on scholars, librarians, and archivists. Plaintiffs, a group of conductors, educators, and others challenged the constitutionality of the Uruguay Round Agreements Act (URAA) of 1994 which removed millions of books, films, songs, and other creative works, mostly foreign, from the public domain to "restore" their copyrights in order to bring the US into compliance with international agreements on intellectual property Section 514 of the URAA restored copyrights in certain foreign works that were previously in the public domain in the US. Included among the works were Prokofiev's "Peter and the Wolf," the symphonies of Shostakovich, Picasso's "Guernica," the English films of Alfred Hitchcock, Fritz Lang’s Metropolis and the musical compositions of Stravinsky.

Plaintiffs, who relied on the availability of these artistic works in the public domain for their livelihoods, sued the federal government challenging the constitutionality of the URAA. The 10th Circuit Court of Appeals ruled that § 514 of the URAA was within Congress’s power under the Copyright Clause and that it did not violate the free speech and expression rights of the plaintiffs who had enjoyed freely using the foreign works that had been in the US public domain before restoration.

Justice Ginsburg writing for the majority (Justices Breyer and Alito dissenting) found that "neither the Copyright and Patent Clause nor the First Amendment ... makes the public domain, in any and all cases, a territory that works may never exit." The plaintiffs argued that removing works from the public domain and putting them back under private ownership violated the "limited Times" restriction of the Copyright Clause of the US Constitution (Art I, §8, Clause 8) which states: “The Congress shall have Power ... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” While prohibiting perpetual copyright, it does not specify how long that term can be, nor does it impose any restriction on the number of times the term may be extended. Since 1790, Congress, has extended copyright term four times. The Court in Eldred v. Ashcroft, 537 US 186 (2003), rejected the argument that the Sonny Bono Copyright Term Extension Act passed in 1998 created a de facto "perpetual copyright on the installment plan".

The court rejected the argument that restoration of copyright for works in the public domain is inconsistent with the purposes of the "limited Times" requirement, holding instead that "limited Times" simply means "not forever." The term of restored copyright, the court noted, is not perpetual, and therefore Congress acted within its power. As for the possibility that Congress would enact more restorations to achieve perpetual copyright on the installment plan, the court held that the possibility of this "hypothetical legislative misbehavior" was not worth considering. The Court also rejected the plaintiff’s First Amendment argument, but Justice Ginsburg said “some restriction on expression is the inherent and intended effect of every grant of copyright.” But the Court said Congress’ move to re-copyright the works to comport with an international treaty was more important.

For more on the topic, see the Brooklyn Law School Library’s online edition of Copyright and the Public Domain by Stephen Fishman (2011) which brings clarity to the question of what is protected by copyright and what is not. In plain language, it explains how and why works of authorship enter the public domain. It provides detailed coverage of copyright requirements, the duration of copyright, copyright forfeiture and abandonment, the publication requirement, restoration of copyrights to foreign works under GATT, conducting copyright renewal searches, non-copyright restrictions that may protect works in the public domain, and many other important issues.

ProQuest Congressional Guides and Tutorials

The Brooklyn Law School Library offers to the BLS community ProQuest Congressional, a comprehensive online resource for historic and current Congressional hearings, public issues, legislation, history and legal research collection of congressional information available anywhere online. Access to ProQuest Congressional is via IP Authentication and is available On-Campus only. Consult the proxy instructions for off-campus access. ProQuest Congressional offers two ways to find legislative histories. (1) Select Legislative Histories, Bills & Laws from the left-hand navigation bar; (2) Search using Basic Search Form (Congressional Publications), Advanced Search Form (Congressional Publications), or Search By Number Form (Congressional Publications).

If you select Legislative Histories, Bills & Laws from the left-hand navigation bar, use the default Keyword Search form if you know the subject matter of the law. This search can be restricted by words in the public law title or by Congress. Make sure that the default Legislative Histories option is selected. To improve your search results, use the Subject Terms link to access the controlled vocabulary subject term list. If you know the public law number, the Statutes at Large citation, or the enacted bill number associated with the legislative history for which you are searching, select the Get a Document tab and enter the number you know in the appropriate boxes. If you search using the public law number or the enacted bill number, make sure you select the appropriate Congress from the drop-down list.

If you search on the Basic or Advanced Search forms, legislative histories will be included in your search results. The Advanced Search form allows you to limit your search to return results from legislative histories only. To use the Search by Number form to search for legislative histories, select Find a Legislative History by Number from the drop-down list. You can search by Public Law Number, Statutes at Large, or Enacted Bill Number.

On the left side of ProQuest Congressional is a link to its Congressional Wiki which leads to a series of Training Videos with live demonstrations of ProQuest Congressional. There is also a set of bibliographies or LibGuides on a variety of topics from basic legal research skills to legal research guides on bankruptcy, environmental law and labor and employment.

The guides are kept current (3-6 months) and provide links to ProQuest resources that may not be easy to find otherwise. ProQuest has eight different categories: 1. Congressional Guides; 2. Current Bibliographies; 3. Database Guides; 4. Getting Started; 5. In the News; 6. Legal Research Guides; 7. Quick Start; and 8. Statistical Guides. The Congressional Guides and Quick Start guides provide users with information on how to negotiate the different databases and the Legal Research and Current Bibliographies guides provide users with relevant subject specific information.

Protest over SOPA/PIPA

On Wednesday, January 18, 2012, the English language version of Wikipedia will go dark in protest of proposed US anti-piracy laws, the Stop Online Piracy Act (SOPA - H.R. 3261) and the Protect IP Act (PIPA – S.968), joining other sites, such as MoveOn, Reddit, BoingBoing, Mozilla, and WordPress. Other big name sites like Craigslist, Google, Facebook, Twitter and Tumblr all have expressed their stance against the bills but will not be joining the day of protest. Wikipedia explains the reasons for its blackout here:

My hope is that when Wikipedia shuts down on January 18, people will understand that we’re doing it for our readers. We support everyone’s right to freedom of thought and freedom of expression. We think everyone should have access to educational material on a wide range of subjects, even if they can’t pay for it. We believe in a free and open Internet where information can be shared without impediment. We believe that new proposed laws like SOPA and PIPA, and other similar laws under discussion inside and outside the United States don’t advance the interests of the general public.

A list of organizations and individuals opposing PIPA and SOPA is available at the Center for Democracy and Technology website along with a large number of professors including Brooklyn Law School Prof. Derek E. Bambauer, who signed a letter in opposition to the proposed bill materials. In a November 2011 blog post at Info/Law, Prof. Bambauer wrote that PIPA “relies on DNS blocking. The legislation says ISPs must take ‘technically feasible and reasonable measures designed to prevent access by its subscribers located within the United States’ to Web sites targeted under the bill, ‘including measures designed to prevent the domain name of the foreign infringing site (or portion thereof) from resolving to that domain name’s Internet protocol address.’ The definitional section of the bill says that ‘including’ does not mean limited to.’ In other words, if an ISP can engage in technically feasible, reasonable IP address blocking or URL blocking – which is increasingly possible with providers who employ deep packet inspection – it must do so. The bill, in other words, targets more than the DNS.” He concludes “I predict that a bill like PROTECT IP will become law. Then, we’ll fight out again what the First Amendment means on the Internet, and then the myth of America’s free speech exceptionalism on-line will likely be dead.”

This video from the Guardian puts the issue in easy to understand terms:

BLS Professor Jason Mazzone, author of the new book, Copyfraud and Other Abuses of Intellectual Property Law stated in The Privatization of Copyright Lawmaking: “Much of what will happen under SOPA will occur out of the public eye and without the possibility of holding anyone accountable. For when copyright law is made and enforced privately, it is hard for the public to know the shape that the law takes and harder still to complain about its operation.”

Episode 073 – Conversation with Prof. Nelson Tebbe

Episode 073 – Conversation with Prof. Nelson Tebbe.mp3

In this podcast, Brooklyn Law School Professor Nelson Tebbe discusses his recent article, Nonbelievers, 97 Va. L. Rev. 1111 (2011). The article addresses how courts should handle nonbelievers who bring religious freedom claims. The answer is not an easy one as the religion clauses of the Constitution protect only religion. Today, this problem is gaining prominence because of nonbelievers’ rising visibility. Prof. Tebbe argues that no wholesale response will do. Nonbelievers and believers should receive comparable protection in some situations but not in others. He suggests that adjudication of religious freedom claims generally is neither impossible nor senseless. He also discusses this week's Supreme Court ruling in Hosanna-Tabor Evangelical Lutheran Church and School v. E.E.O.C. where the Court adopted the “ministerial exception” rule.

Prof. Tebbe teaches courses on constitutional law, religious freedom, legal theory, and professional responsibility. His scholarship focuses on the relationship between religious traditions and constitutional law, both in the United States and abroad. He has written extensively on these topics. A list of his publications is available here.

NYC Rent Control to SCOTUS

Rent control and rent stabilization in New York City has been a contentious issue since its inception in the 1920s and after when President Franklin D. Roosevelt signed into law 60 years the Emergency Price Control Act (EPCA) providing for a universal, nationwide price regulatory system. For a history of rent control in NY, see this link. Now a pro se petition for a writ of certiorari may give the Supreme Court an opportunity to reconsider its ruling in Yee v. City of Escondido (1992) that "government regulation of the rental relationship does not constitute a physical taking". The case asks the Court to review the ruling in Harmon v. Markus where Second Circuit upheld the district court’s dismissal of the landlord’s complaint against the NYC Rent Guidelines Board claiming that the RSL is an unconstitutional taking of their property under the Takings Clause of the Fifth Amendment. The NY Times story A Landlord’s Uphill Fight to Ease Rent Restrictions provides the facts of the case.

An op-ed (subscription required – see a Brooklyn Law School reference librarian) in the Wall Street Journal by NYU Law Prof. Richard A. Epstein argues “Rent control and rent stabilization are inimical to the long-term health of New York City. Ordinary tenants paying market rents contribute their fair share to the public treasury. By contrast, rent-controlled tenants on lifetime leases who have a specially privileged legal status are a constant drain on the community, discouraging investment in residential rental real estate by posing a persistent if inchoate threat of subjecting future properties to rent control. Mr. Harmon is asking the Supreme Court to uphold the Constitution and make right a long-standing wrong. It should take up his invitation and do so.”

The US Supreme Court docket shows that a number of interested parties have file amicus briefs including the Rent Stabilization Association of New York, Inc., the Pacific Legal Foundation, and the Atlantic Legal Foundation and Center for Constitutional Jurisprudence. The City of New York has until February 3, 2012 to respond.

The BLS Library has in its New York collection Rent Control: Statutes, Documents, Decisions and Annotated Bibliography by Robert Allan Carter (Call #KFN5837.5.R3 C37) and Rent Control: Regulation and the Rental Housing Market edited by W. Dennis Keating (Call #KF6068.R3 K43 1998) which provides a thorough assessment of the evolution of rent regulation in North American cities. Contributors sketch rent control’s origins, legal status, economic impacts, political dynamics, and social meaning. Case studies of rent regulation in specific North American cities from New York and Washington, DC, to Berkeley and Toronto are also presented. This is an important primer for students, advocates, and practitioners of housing policy and provides essential insights on the intersection of government and markets.

No Child Left Behind 10 Years Later

This week marks the 10th anniversary of the No Child Left Behind Act of 2001 (Pub. L. No. 107–110) which President George W. Bush signed into law on January 8, 2012 changing how school districts educate America's students. In remarks on signing the bill made at a public school in Ohio, President Bush said:

The fundamental principle of this bill is that every child can learn, we expect every child to learn, and you must show us whether or not every child is learning. I read a quote one time from a young lady in New York. She said, ‘‘I don’t ever remember taking an exam. They just kept passing me along. I ended up dropping out in the seventh grade. I basically felt nobody cared.’’

The story of children being just shuffled through the system is one of the saddest stories of America. ‘‘Let’s just move them through.’’ It’s so much easier to move a child through than trying to figure out how to solve a child’s problems.

Recent reports question whether No Child Left Behind (NCLB) has lived up to that promise. For example, the January 2010 report Test, Punish, and Push Out: How Zero Tolerance and High-Stakes Testing Funnel Youth into the School to Prison Pipeline provides an overview of zero-tolerance school discipline and high-stakes testing, how they relate to each other, and how NCLB have made school discipline even more punitive. The report explores:

• The common origins and ideological roots of zero tolerance and high-stakes testing


• The current state of zero-tolerance school discipline across the country, including local, state, and national data


• How high-stakes testing affects students, educators, and schools


• How zero tolerance and high-stakes testing have become mutually reinforcing, combining to push huge numbers of students out of school; and


• Successful grassroots efforts to eliminate harmful discipline and testing practices.

A November 2011 Justice Policy Institute report Education Under Arrest: The Case Against Police in Schools note that at the same time that No Child Left Behind has become part of school systems, zero tolerance policies and the use of SROs have only grown in popularity. According to the U.S. Department of Justice, the number of school resource officers increased 38 percent between 1997 and 2007. Some cities, like New York City, employ more officers in schools than many small cities' entire police force.

The Brooklyn Law School Library has in its collection several books dealing with NCLB including No Child Left Behind: A Guide for Professionals by Mitchell L. Yell and Erik Drasgow (Call #LB2806.22 .Y45 2005). See also Many Children Left Behind: How the No Child Left Behind Act Is Damaging Our Children and Our Schools edited by Deborah Meier and George Wood (Call #LB2806.22 .M36 2004) which says that far from improving public schools and increasing the ability of the system to serve poor and minority children, the law is doing exactly the opposite.

New Laws NY State 2012

The BLS Library Blog wishes readers a Happy New Year. The first of the year is when many new laws take effect. New York passed the Job Creation and Taxpayer Protection Act of 2011 enacting personal income tax cuts for about 4.4 million people and tax relief for manufacturers (Chapter 55, L.2011). A 2% cap on property tax increases levied by school districts and local governments also starts this year (Chapter 97, L.2011).

New regulations amend Section 7807 of the Education Law to require massage therapists to take at least 36 hours of mandatory continuing education every three years. Section 70.10 of the Regulations of the Commissioner on Public Accountancy now requires all accounting firms to participate in a mandatory quality review program. A new law (Ch. 65, L.2011) requires dental offices to keep a defibrillator on hand in case any patient has a cardiac emergency.

New legislation (Ch.205, L.2010) goes into effect banning household dishwashing soap containing phosphorus, which has been deemed hazardous to lakes, rivers and other water sources. New laws give the New York State Department Environmental Conservation new powers: one, (Ch. 220, L2011) bans products that contain mercury; another (Ch. 383, L.2011) limits the number of commercial fishing licenses and permits issued by DEC to protect the viability of the commercial and consumer fishing industry.

Another new law (Ch. 131, L.2011) amends the Public Health law to prohibit minors from buying hookahs and water pipes — and the tobacco that goes inside them.

There is a new law (Ch. 459, L.2011) that requires drivers to move over to adjacent lanes when approaching or passing hazard vehicles. It also provides extra safety measures for drivers and workers helping a broken-down vehicle, removing snow or performing other road maintenance.

Governor Andrew Cuomo signed into law a measure that goes into effect in early February requiring state and local agencies to make available all resolutions and related documents to be discussed at public meetings to be made available before or at the meeting – on the agency’s website, if it has one that it regularly updates. Currently, documents in many instances are made available following the meeting or not at all. Agencies are exempted from the requirement if compliance is too expensive or exceedingly onerous. Under the state open meetings law, anyone can sue an agency that fails to provide the required documents; a court could then order the agency to provide staff training, as well as cover the plaintiff’s legal costs.

The Brooklyn Law School Library has related material on the issue. See Open Meeting Laws 2d by Ann Taylor Schwing and Constance Taylor (Call # KF5753.Z95 S38 2000) a reference tool that covers meeting requirements, litigation procedures and has a list of defenses that typically fail. The book provides an invaluable table of statutes, cases, attorney general opinions and a comprehensive listing of secondary authorities to aid in research.