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Conservative U.S. Supreme Court justices on Wednesday signaled skepticism toward the legality of certain proceedings conducted in-house by the Securities and Exchange Commission to enforce investor-protection laws - a case that gives them an opportunity to further undercut the power of federal agencies, Reuters reported. The court, which has a 6-3 conservative majority, heard arguments in an appeal by President Joe Biden's administration of a lower court's ruling that deemed unconstitutional the SEC's tribunal proceedings before administrative judges installed by the agency that can lead to financial penalties for infractions. The conservative justices focused on a part of the 2022 ruling by the New Orleans-based U.S. Court of Appeals for the Fifth Circuit that found that in-house proceedings violated the U.S. Constitution's Seventh Amendment right to a jury trial. Texas-based hedge fund manager George Jarkesy, whom the SEC fined and barred from the industry after determining he had committed securities fraud, challenged the legality of the agency's system. His lawsuit was supported by numerous conservative and business groups, which long have complained about the regulatory reach of the federal "administrative state" in areas such as energy, the environment, climate policy, workplace safety and financial regulation. The conservative justices expressed concern that SEC administrative proceedings are conducted for certain charges, such as fraud, without a jury, when similar cases alleging fraud in federal court would have one. "It does seem to me to be curious that - and unlike most constitutional rights - you have that right until the government decides that they don't want you to have it. That doesn't seem to me the way the Constitution normally works," Chief Justice John Roberts said.

The Securities and Exchange Commission on Wednesday charged Jonathan Larmore, a Phoenix-based real-estate investor, with stock manipulation tied to a false tender offer for now-bankrupt WeWork, the Wall Street Journal reported. The SEC charges also allege that ArciTerra Companies, a real estate investment company, and Larmore, who is the company’s chief executive, misappropriated more than $35 million in managed funds over a number of years. The SEC alleges that Larmore had, since at least January 2017, used a “substantial portion” of misappropriated funds from ArciTerra for family members’ expenses and to fund a lifestyle that included private jets, yachts and expensive residences. Earlier this month, according to the SEC, Larmore and Cole Capital Funds, an entity created and controlled by Larmore, issued a press release saying the firm would purchase 51% of all minority ownership shares in WeWork for $9 a share. The offer, priced at more than nine times WeWork’s stock price at the time, prompted shares to more than double after-hours. Larmore allegedly purchased 72,000 call options in WeWork in the days before and planned to execute on the trades once the stock rose.

The U.S. Securities and Exchange Commission on Monday adopted a financial crisis-inspired rule barring traders in asset-backed securities from betting against the same assets they sell to investors, Reuters reported. The SEC move is mandated by the Dodd Frank law, aimed at eradicating behavior seen in the 2008 global financial crisis. The rule is among the last to be adopted under 2010's Dodd Frank Wall Street reform legislation and faced a winding road to completion. An earlier version on traders' "conflicts of interest" was first proposed in 2011 but never finalized. The rule blocks "securitization participants" from entering deals that involve shorting or buying credit-default swaps against those same securities. Parties covered by the rule include underwriters, placement agents and sponsors for asset-backed securities.

A challenge to the U.S. Securities and Exchange Commission's powers to protect investors from fraud comes before the Supreme Court on Wednesday in another in a series of legal attacks against federal agencies that regulate financial markets, Reuters reported. The justices are due to hear arguments in an appeal by President Joe Biden's administration of a lower court's ruling restricting the SEC's power to enforce securities laws through the agency's longstanding in-house tribunal system. The case involves hedge fund manager George Jarkesy, who the SEC fined and barred from the industry after determining he had committed securities fraud. Critics of the agency have argued that its in-house system gives it the unfair advantage of prosecuting cases before its own judges rather than before a jury in federal court. The New Orleans-based U.S. Court of Appeals for the Fifth Circuit in 2022 ruled in favor of a legal challenge brought by Jarkesy. The 5th Circuit decided that the SEC's power to seek penalties through in-house enforcement proceedings violates the U.S. Constitution's Seventh Amendment right to a jury trial and infringes on presidential and congressional powers.

Kraken, one of the world's largest cryptocurrency exchanges, was sued on Monday by the U.S. Securities and Exchange Commission, which accused it of illegally operating as a securities exchange without first registering with the regulator, Reuters reported. The lawsuit in San Francisco federal court is the latest step in SEC Chair Gary Gensler's push to bring cryptocurrency under his agency's purview, by contending that digital assets are investment contracts subject to federal securities laws. Kraken intends to defend itself, saying Congress should decide how to regulate cryptocurrency exchanges and calling the SEC view of digital assets "incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy." The San Francisco-based exchange also said the lawsuit will not affect its more than 10 million clients. In June, the SEC filed similar lawsuits against Binance, the world's largest cryptocurrency exchange, and Coinbase, the largest in the United States. Both are defending against the regulator's claims.

The U.S. Securities and Exchange Commission (SEC) on Thursday said it had adopted new rules aimed improving governance at clearing agencies registered with the agency, Reuters reported. The new rules, which are aimed to reducing conflicts of interest and promoting board independence, create new requirements for board composition, independent directors, and certain committees, the SEC said in a statement. They require that a majority of the board be independent directors, require firms to create risk management committees and demand policies and procedures to identify or eliminate conflicts of interest, among other changes. Clearing agencies will have two years to comply with new independence requirements for boards and board committees. They will need to meet all the other new requirements of the rules a year after it is published in the federal register.

As Celsius Network LLC nears the end of its bankruptcy, it may find the US Securities and Exchange Commission eyeing a key business element of its restructuring plan similar to those the regulator has targeted at other companies, Bloomberg Law reported. Celsius recently secured court approval to emerge from Chapter 11 as Fahrenheit LLC, a public crypto mining company that would include a crypto “staking” division. But before it can implement the plan, it needs a green light from the SEC as well. Without the regulator’s blessing, Celsius says it may be forced to liquidate, which would hurt creditors’ recoveries. In crypto staking, holders of cryptocurrency give their assets to a company to hold, which in turn pays them some reward on the holding. The SEC has previously raised issues with staking-as-a-service businesses at Coinbase and Kraken. Celsius says the Fahrenheit entity intends to operate a self-staking business. Though the staking issue could prove problematic for the SEC down the road, multiple lawyers said they expected the agency to allow Celsius to emerge from bankruptcy. The full nature of Fahrenheit’s staking operation may emerge over time, Yuliya Guseva, a professor at Rutgers Law School, said. Celsius’ successful restructuring would be a major development in the crypto landscape, which cascaded into chaos late last year with a series of bankruptcies and criminal proceedings. BlockFi Inc. and Voyager Digital Holdings both liquidated, while FTX remains in Chapter 11 as its co-founder Sam Bankman-Fried faces life in prison for fraud. The SEC’s pending decision on Celsius comes as it seeks to get a hold on a young and complicated industry. The agency has said some staking operations function as unregistered securities exchanges. It also has a contentious past with Celsius itself, having accused its founder of fraud and settling related allegations against the company.

The Securities and Exchange Commission said that its enforcement actions during fiscal year 2023 led to almost $5 billion in fines and money ordered to be reimbursed to investors, as the agency sued Wall Street brokerages and many of the largest players in the crypto industry, Bloomberg News reported. The SEC said Tuesday that the total penalties it won between October 2022 and Sept. 30 was the second highest amount on record. In a statement, the regulator highlighted its actions involving digital assets, cybersecurity and Wall Street brokerage employees using unapproved communications platforms to conduct business. “The investing public benefits from the division of enforcement’s work as a cop on the beat,” said SEC Chair Gary Gensler said in a statement. The agency said that it filed 784 enforcement actions, which represented a 3% increase from 2022. The agency’s focus on crypto has led some in the industry to consider Gensler its top enemy in Washington. During fiscal 2023, the SEC brought a civil case against FTX co-founder Sam Bankman-Fried. The regulator’s action against the former FTX front man has taken a back seat to the Department of Justice’s criminal charges.