alerts & publications

DC Circuit Upends SEC’s Low ‘Willful’ Standard for Securities Violation

In this bylined article, O’Melveny counsel Bill Martin considers the impact on future charging decisions by the SEC following the DC Circuit’s recent determination in Robare Group Ltd. v. SEC that a “willful” securities law violation cannot simply be negligent conduct. Rather, “there must be evidence of an individual’s or entity’s knowledge or ‘extreme recklessness’ in order to find a ‘willful’ violation,” argues Martin.

The SEC has previously relied on its decision in Wonsover v. SEC to set a relatively low bar to demonstrate a respondent’s “willfulness,” writes Martin. However, the holding in Robare Group is in direct tension with Wonsover’s instruction, leaving the future standard unclear. “Based on Robare Group, the DC Circuit appears to have adopted the view that willful securities violations require intentional or extremely reckless conduct. To charge a willful violation after Robare Group, the SEC now has the difficult, if not sometimes impossible, task of obtaining evidence that an individual or entity acted or failed to act intentionally or extremely recklessly,” Martin concludes.

To read the full article, click here.