Haynes and Boone Breaks SEC Winning Streak in Litigated Administrative Proceedings


A team of Haynes and Boone, LLP lawyers have achieved a rare victory against the Securities and Exchange Commission (SEC) Division of Enforcement in a venue in which the government has lost only once over the last three years.

Until the decision Wednesday, the SEC had won 22 of the last 23 litigated hearings before its administrative law judges, including every single case brought in FY 2014.

The extraordinary victory came in the firm’s representation of Bill Yancey, the former CEO of Penson Financial and an accomplished, highly regarded brokerage executive with more than 30 years in the securities industry. When the action was first brought, the SEC’s enforcement staff publicly accused Mr. Yancey of failing to supervise two employees regarding securities trade closeout and delivery obligations.

Kit Addleman, the Dallas-based litigation partner who heads the firm’s SEC Enforcement Defense Practice, said the decision from Administrative Law Judge Jason S. Patil was a complete defense victory. As the judge stated in his opinion, the evidence and testimony presented by the Haynes and Boone team “was frankly overwhelming.”

The trial team consisted of Dallas Partners Addleman and Ron Breaux and Dallas Associates Scott Ewing and Sarah Mallett. They were aided by Houston Associate Robert Carlton and Dallas Associate Jamee Cotton

“We are thrilled that Mr. Yancey has finally been vindicated,” said Addleman. “The administrative law judge’s decision demonstrates that the accusations were categorically false. Indeed, the judge specifically noted that Mr. Yancey was an ‘honest, ethical person of integrity in the securities profession, including during this tenure as Penson’s CEO’ according to all of the people he worked with.”

The 2010 Dodd-Frank financial regulatory overhaul gave the SEC broad authority to seek penalties through administrative proceedings. But the proceedings have been heavily criticized as an inherently biased process that hamstrings respondents. In fact, at a hearing Thursday before a House Financial Services panel only hours after the Yancey decision, Republican lawmakers grilled SEC enforcement chief Andrew Ceresney on the agency’s use of the administrative courts.

“The SEC’s 100 percent success rate from the year 2014 illustrates a very troubling pattern of the SEC’s attempting to stack the rules of process in a way the outcome of the case is, well, predetermined,” Rep. Scott Garrett (R., NJ) said, according to the Wall Street Journal.

Addleman said Yancey’s case embodies the problems with the SEC’s administrative trial alternative.

“We faced a trial in which the accused individuals had little opportunity to develop any defensive evidence though discovery, were not allowed to take a single deposition, and had to rely almost entirely on the record that the enforcement staff had nearly three years to develop,” she said.  “Because the administrative process does not provide a genuine opportunity for dispositive motions prior to trial, we could not seek to dismiss the action based on the objective facts adduced even before trial.

“The enforcement staff’s choice of venue meant Mr. Yancey, as well as the SEC and taxpayers, incurred enormous and unnecessary trial costs.”

Addleman said Judge Patil, one of the SEC’s newest judges, demonstrated a command of the facts and viewed the evidence impartially and objectively.

“The division staff members in this matter ignored key facts and overstepped boundaries in recommending that this action be brought,” said Addleman, who is a former director of the Atlanta Regional SEC Office and led the enforcement, examination and bankruptcy programs for five Southeastern states. “They were blinded by their aggressiveness and personal feelings. A comparison of the staff’s contentions in its order instituting the action and Judge Patil’s recitation of the facts in his decision demonstrates the ‘overwhelming evidence’ of how the facts were skewed when the action was initiated.

“This is an action that never should have been instituted and we told the staff and senior management in enforcement that many times.”

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