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The U.S. Securities and Exchange Commission has charged Arista Power Inc., its general counsel, Michael Hughes, its CEO and a third party with securities fraud involving a scheme to disguise the public company’s financing and its money difficulties, Corporate Counsel reported today. Arista, which previously operated under two other names, purported to develop and sell energy-producing wind turbines. A penny stock company, it filed for bankruptcy in December 2015 during the SEC’s investigation and is undergoing liquidation, according to the commission. Attorney Michael Hughes began doing legal work for the company in 2008, and in 2013 became general counsel, the SEC stated. He also continued as a partner in the New York office of Schwell Wimpfheimer & Associates, which also has offices in Jerusalem and Tel Aviv. Neither Hughes nor the law firm immediately returned phone calls seeking comment. Hughes and the other two defendants were charged with two counts of fraud, while the company was also charged with violating SEC reporting rules for filing false and misleading documents.

A recent decision by the U.S. Supreme Court that curbed the government’s enforcement powers over Wall Street could hurt efforts to penalize private-equity managers over fees that the government considers poorly disclosed to investors, the Wall Street Journal reported today. The opinion, handed down last week, said that the SEC has just five years to order firms to give back profits that it says were wrongfully taken. That means the regulator can no longer object to fees received long ago, significantly reducing the amount it could force a buyout firm to give up. Before the decision there was no limit to how far back the SEC could go in seeking “disgorgement” of fees. The SEC is investigating private-equity managers Carlyle Group and Silver Lake over large one-time fees from companies they sold or took public. It settled milestone cases over disclosure of similar fees against Blackstone Group LP and Apollo Global Management LLC in 2015 and 2016, respectively. The decision in Kokesh v. SEC affects the private-equity industry in particular because private-equity funds usually last 10 to 12 years — meaning the five-year statute of limitations imposed by the Supreme Court’s ruling prevents the regulator from objecting to fees taken or expenses charged during the earlier years of a fund’s life.

A recent Supreme Court decision will now require that a case seeking disgorgement be filed within five years of the violation, pushing the Securities and Exchange Commission to complete its investigation more quickly or risk losing that remedy, the New York Times reported today. More ominously, although disgorgement is so well established that is it rarely challenged, the court raised a question about whether it was even available for a violation of the securities laws, which may lead to reconsideration of one of the Securities and Exchange Commission’s most potent weapons. In Kokesh v. SEC, the justices decided that disgorgement comes under a statute of limitations provision that requires filing a case to collect “any civil fine, penalty or forfeiture” within five years “from when the claim first accrued.” The court pointed out that the limitations period was “vital to the welfare of society” because it embodied the principle that “even wrongdoers are entitled to assume that their sins may be forgotten” — if not necessarily forgiven.

U.S. Securities and Exchange Commission Chairman Jay Clayton on Thursday named Steven Peikin and Stephanie Avakian co-directors of the agency’s enforcement division, filling the most prominent staff opening at the Wall Street regulator, Bloomberg News reported yesterday. Peikin, a former federal prosecutor, worked with Clayton at Sullivan & Cromwell LLP, where he represented clients including Goldman Sachs Group Inc. and Barclays Plc as managing director of the law firm’s criminal defense and investigations group. Elevating Avakian, who has been the enforcement unit’s acting director, may ease some Democrats’ concerns that SEC will be less aggressive in fighting abuses by financial firms under President Donald Trump. Clayton, who was nominated to lead the agency in January, has pledged to be tough on corporate wrongdoing in response to assertions from Democratic lawmakers that his career representing banks and hedge funds made him a poor choice for the job. Former SEC Chair Mary Jo White took a similar approach on the enforcement post in 2013 when she named acting chief George Canellos and law firm colleague Andrew Ceresney to share the role.

The Supreme Court ruled unanimously yesterday that U.S. Securities and Exchange Commission enforcement actions requiring companies to return illegally obtained profits must conform to a five-year federal statute of limitations, MorningConsult.com reported. The decision in the case, Kokesh v. SEC, further restricts the securities regulator’s ability to require the forfeiture of funds, known as disgorgement. As part of the decision, which Justice Sonia Sotomayor authored, the court rejected a government argument that the disgorgement requirements shouldn’t be ordered because they are a remedial, and not punitive, measure. “This limitations period applies here if SEC disgorgement qualifies as either a fine, penalty, or forfeiture,” Sotomayor wrote. “We hold that SEC disgorgement constitutes a penalty.” Despite being limited in scope to the statute of limitations issue, SEC experts said that the decision could have long-term consequences for SEC disgorgement actions because of the court’s ruling that disgorgement is a penalty instead of a remedy.

Jay Clayton, who left Sullivan & Cromwell, the prominent New York law firm, to become the chairman of the Securities and Exchange Commission, is expected to tap his former colleague Steven R. Peikin to serve as the commission’s co-director of enforcement, the New York Times reported. Peikin, a Sullivan & Cromwell partner and former federal prosecutor, is said to be friends with Clayton, and many New York lawyers speculated for weeks that he would get the job. Clayton is expected to also name Stephanie Avakian, the agency’s acting enforcement director and a former white-collar defense lawyer, as co-director with Peikin.

The finance industry may get a fresh opportunity to chip away at an Obama-era rule that cracked down on Wall Street conflicts of interest, as the Securities and Exchange Commission is considering reviewing the responsibilities that brokers have to their clients, Bloomberg News reported Friday. The SEC’s first step could be seeking feedback on what’s known as a fiduciary duty — the requirement that financial professionals offering investment advice put their customers’ interests ahead of their own. The SEC’s efforts would be significant in deciding the fate of a rule passed last year by the Labor Department that imposed a fiduciary obligation on brokers who handle retirement accounts. Despite Trump administration efforts to slow it down, Labor Secretary Alexander Acosta disappointed financial firms this week by saying the bulk of the rule would take effect as scheduled on June 9.

A federal appeals court on Wednesday sharply questioned the powers of the U.S. Securities and Exchange Commission’s in-house courts in a case that could transform how the Wall Street regulator carries out its enforcement authority, the Wall Street Journal reported today. The SEC tribunals are run by officers who have career appointments, such as U.S. district judges, but are classified as employees of the agency. The SEC’s administrative judges conduct trials and are expected to independently oversee hearings, although any punishments they impose must be confirmed by the agency’s commissioners to take effect. Judges on the U.S. Court of Appeals for the District of Columbia Circuit probed whether the SEC’s judges exercise enough power that, under the Constitution’s appointments clause, they should have been hired by the SEC’s commissioners. The challengers to the SEC’s system say that it is a fatal flaw that the judges were hired by a human resources office, violating the Constitution’s call to limit the power of government officials who don’t answer to elected officeholders. The SEC argues its system for hiring judges is legitimate because the judges’ decisions aren’t final without the commission’s involvement. But several judges on the appeals court on Wednesday said the standard is whether the SEC’s judges wield significant authority, such as assessing the credibility of witnesses and deciding what evidence to allow.

A federal appeals court today will consider whether Wall Street’s top cop has vested too much power in its in-house courts, a system that regulators expanded several years ago as they sought to speed enforcement actions against firms and individuals accused of fraud and wrongdoing, the Wall Street Journal reported today. The U.S. Court of Appeals for the District of Columbia Circuit will provide the latest forum for lawyers arguing over the legitimacy of the Securities and Exchange Commission’s administrative courts. The forums are run by officers who have career appointments, such as U.S. district judges, but are employees of the agency. The SEC’s judges are expected to independently oversee enforcement hearings even though the agency’s commissioners can reverse their decisions. The SEC’s in-house courts generated little controversy for decades, but a decision in 2014 to lean more heavily on the tribunals sparked a backlash. Lawyers defending clients challenged how the judges are hired, arguing their sweeping powers mean that presidentially-appointed commissioners should appoint them, instead of human-resources officials.