WEBVTT - SCOTUS Gun Cases & New Focus at SEC 0:00:02.759 --> 0:00:07.480 This is Bloomberg Law with June Grossel from Bloomberg Radio. 0:00:08.720 --> 0:00:13.800 Securities and Exchange Commissioned Chairman Paul Atkins promised changes at 0:00:13.840 --> 0:00:16.760 the agency when he took over in April. 0:00:16.640 --> 0:00:19.840 So at the helm of the SEC, I can confidently 0:00:19.880 --> 0:00:22.880 say it is a new days signed for the SEC 0:00:23.079 --> 0:00:26.599 to end its waywardness and return to its core mission 0:00:26.680 --> 0:00:30.720 that Congress set for it, investor protection, fair, orderly and 0:00:30.760 --> 0:00:34.479 efficient markets, and capital formation. I will work to protect 0:00:34.479 --> 0:00:38.440 investors from fraud, keep politics out of how our securities 0:00:38.560 --> 0:00:42.640 laws and regulations are applied, and advance clear rules of 0:00:42.680 --> 0:00:45.879 the road that encourage investment in our economy to the 0:00:45.920 --> 0:00:47.159 benefit of Americans. 0:00:48.000 --> 0:00:52.720 And the SEC has paired back enforcement. Indeed, new enforcement 0:00:52.800 --> 0:00:56.760 actions have dropped by about twenty eight percent through September, 0:00:57.080 --> 0:01:00.560 and the focus has changed to more traditionals to securities 0:01:00.640 --> 0:01:06.240 law violations and intentional misconduct. The agency has retreated from 0:01:06.440 --> 0:01:11.040 crypto related litigation and is focusing more on individual offenders 0:01:11.080 --> 0:01:16.039 than household name companies. Nearly thirty percent of enforcement actions 0:01:16.080 --> 0:01:20.640 brought under this administration so far focus on offering fraud 0:01:20.840 --> 0:01:25.520 or insider trading. My guest is securities law expert James Park, 0:01:25.840 --> 0:01:29.559 a professor at UCLA Law School, Can you start by 0:01:29.800 --> 0:01:35.440 sort of broadly describing what Gary Gensler's era at the 0:01:36.000 --> 0:01:41.080 SEC looked like as far as enforcement actions, It was. 0:01:41.160 --> 0:01:44.839 Very vigorous, I think in terms of enforcement, I think 0:01:44.920 --> 0:01:49.560 they brought significant cases that made an impact. I think 0:01:49.600 --> 0:01:54.480 there was a willingness to be entrepreneurial, to bring innovative 0:01:54.560 --> 0:01:58.160 theories in a number of areas, particularly with respec to 0:01:58.960 --> 0:02:03.320 ESG to issues, environmental, social and governance issues. We had 0:02:03.360 --> 0:02:08.120 some very significant cases against companies like Volkswagen, for example, 0:02:08.120 --> 0:02:12.440 which had that emission scandal, and you know Boeing, you 0:02:12.440 --> 0:02:16.480 know cases arising out of misrepresentations relating to the accidents 0:02:16.520 --> 0:02:20.520 that they had before. You had some theories like shadow trading, 0:02:20.760 --> 0:02:23.680 where you're using inside information not to trade in your 0:02:23.720 --> 0:02:26.840 own company, but in another company that you don't owe 0:02:26.919 --> 0:02:29.600 for douciary duties to but you may have a duty 0:02:29.600 --> 0:02:33.160 of confidentiality with respect to that information. And we saw 0:02:33.280 --> 0:02:38.400 record penalties and that's something that the prior enforcement director 0:02:38.840 --> 0:02:43.000 said is he believed that higher penalties are important to deterrence. 0:02:43.200 --> 0:02:47.320 Was a major theme during the Genstler enforcement era. I 0:02:47.360 --> 0:02:49.320 think that's the best way to describe it and. 0:02:49.360 --> 0:02:54.600 How as Chairman Paul Atkins distinguished or tried to distinguish 0:02:54.680 --> 0:02:58.400 his tenure from gancellers, what are his focuses. 0:02:58.919 --> 0:03:03.240 I think he's more focused on the straightforward cases, cases 0:03:03.280 --> 0:03:08.360 where you have clear evidence of intentional wrongdoing, whether that 0:03:08.520 --> 0:03:15.920 be theft by a broker, insider trading, really intentional misconduct. 0:03:15.960 --> 0:03:20.160 I think that's one area of emphasis. Another is that 0:03:20.240 --> 0:03:23.079 I think the SEC may be looking more at individuals 0:03:23.080 --> 0:03:27.120 as opposed to bringing cases against corporations. In that I 0:03:27.160 --> 0:03:31.800 think is a development that we've seen before. Actually, during 0:03:31.800 --> 0:03:35.560 the nineteen seventies, we had a very aggressive enforcement division 0:03:35.760 --> 0:03:40.040 under Stanley Sporken that was bringing innovative cases against corporations 0:03:40.080 --> 0:03:44.520 for accounting fraud, paying bribes to foreign companies. I mean, 0:03:44.520 --> 0:03:47.520 there are questions about whether the SEC was exceeding its authority. 0:03:47.920 --> 0:03:50.760 With Chairman Shad coming in, one of these things he 0:03:50.840 --> 0:03:54.120 emphasized is that we're going to focus more on individuals 0:03:54.200 --> 0:03:57.720 and insider trading. And that's kind of an interesting similarity 0:03:57.760 --> 0:04:02.800 with this era where we're moving from focusing on corporations 0:04:02.800 --> 0:04:06.560 as wrongdoers to individuals. And I think that, you know, 0:04:06.640 --> 0:04:09.600 may be based on sort of the idea that you know, 0:04:09.800 --> 0:04:14.640 most wrongdoing is done by rogue actors, people who are 0:04:14.680 --> 0:04:17.880 just acting on their own. I think that's the approach 0:04:17.960 --> 0:04:21.080 I think that we see Atkins taking versus maybe the 0:04:21.120 --> 0:04:25.360 Gensler position that goes after corporations is more concerned about 0:04:25.600 --> 0:04:29.440 sort of bad corporate cultures, that it's not individuals who 0:04:30.320 --> 0:04:32.160 just decide to do bad things, but because they're in 0:04:32.200 --> 0:04:34.400 bad corporate cultures that they commit fraud. 0:04:34.720 --> 0:04:38.000 According to a Bloomberg Law review, the SEC has brought 0:04:38.120 --> 0:04:42.440 about ninety one new enforcement suits since inauguration Day through 0:04:42.440 --> 0:04:45.120 the end of September. That's down from one hundred and 0:04:45.120 --> 0:04:48.560 twenty six actions filed during the same period in twenty 0:04:48.600 --> 0:04:52.039 twenty four. Is it because it's a new administration. Is 0:04:52.040 --> 0:04:55.599 it because they're focusing on different things? I mean, why 0:04:55.600 --> 0:04:57.039 do you think there's that drop. 0:04:57.640 --> 0:05:00.120 I think it could be a combination of different things. 0:05:00.000 --> 0:05:04.320 It's very hard to pinpoint the cause, and I think 0:05:04.360 --> 0:05:07.839 certainly the fact that you're in a transition period may 0:05:07.880 --> 0:05:11.520 mean that there are fewer cases that are actually filed. 0:05:11.760 --> 0:05:15.440 You know, we only got a new enforcement director last month, 0:05:15.720 --> 0:05:19.760 Judge Ryan in September, and enforcement moves more slowly without 0:05:19.800 --> 0:05:24.040 clear guidance from the top, and you know, just having 0:05:24.040 --> 0:05:26.760 a leadership transition maybe a reason that you have a 0:05:26.800 --> 0:05:29.560 decline in the number of cases. And you know, I 0:05:29.600 --> 0:05:31.200 took a look at a few numbers, and you know, 0:05:31.240 --> 0:05:33.840 even before this year, if you look at twenty twenty four, 0:05:33.920 --> 0:05:37.480 which was during the Gensler era, that'sa our decline compared 0:05:37.480 --> 0:05:40.040 to twenty twenty three. Five hundred and eighty three actions 0:05:40.040 --> 0:05:42.920 are filed in twenty twenty four. Seven hundred eighty four 0:05:42.920 --> 0:05:45.400 were in twenty twenty three. That's a twenty six percent 0:05:45.520 --> 0:05:49.279 decline within the same administration. Now, the penalties did increase 0:05:49.320 --> 0:05:53.520 in twenty twenty four relative to twenty twenty three, and 0:05:53.600 --> 0:05:55.880 so I think in a few weeks or a few 0:05:55.880 --> 0:05:59.200 months will learn, you know, what the penalties collected are 0:05:59.240 --> 0:06:03.000 and that may tell something additional. And it is finally 0:06:03.160 --> 0:06:06.680 possible that you know, the new administration's less aggressive. You know, 0:06:06.720 --> 0:06:09.680 we have some cases that were dropped that might have settled, 0:06:09.720 --> 0:06:13.160 and probably investigations that were started that could have resulted 0:06:13.200 --> 0:06:16.760 in actions may either be you know, just sort of 0:06:16.800 --> 0:06:20.279 delayed or languishing or maybe even formally closed. So I 0:06:20.279 --> 0:06:22.160 think I think it's a combination of a lot of 0:06:22.440 --> 0:06:23.360 different things. 0:06:23.320 --> 0:06:27.120 And did they drop all the crypto related actions, even 0:06:27.480 --> 0:06:30.080 the ones that were ongoing. Basically they dropped. 0:06:29.839 --> 0:06:34.159 Them, the major ones against exchanges in particular. I have 0:06:34.240 --> 0:06:39.120 seen a few crypto related cases involving outright thefts, and 0:06:39.200 --> 0:06:41.960 so they have not dropped all crypto cases, but the 0:06:42.040 --> 0:06:46.920 cases against you know, exchanges for example, or major developers 0:06:46.960 --> 0:06:49.960 where the argument is that you should have registered, you 0:06:50.000 --> 0:06:53.240 should have registered this as a security. I believe all 0:06:53.320 --> 0:06:55.440 or almost all of those have been withdrawn. 0:06:55.920 --> 0:06:58.760 So there's not a big discussion anymore. I mean, the 0:06:58.800 --> 0:07:01.040 last couple of years, you and I we're discussing what 0:07:01.160 --> 0:07:04.480 is a security? Is this a security? And the judges 0:07:04.560 --> 0:07:08.080 in New York we are having conflicting decisions. So that's 0:07:08.080 --> 0:07:11.400 not happening anymore. They don't have to worry about that, well. 0:07:11.200 --> 0:07:14.480 Not through the sec But there are cases that are 0:07:14.760 --> 0:07:18.480 private litigation that are percolating up, and I expect that 0:07:18.520 --> 0:07:21.320 the issue of whether or not certain digital assets our 0:07:21.360 --> 0:07:24.840 securities will be decided by courts in that context. And 0:07:24.960 --> 0:07:27.720 I've seen a few cases here and there that have 0:07:27.760 --> 0:07:30.280 gone both ways, so I think there still will be 0:07:30.320 --> 0:07:33.600 some litigation about that. For the time being, but it'll 0:07:33.600 --> 0:07:37.360 happen in the context of private litigation rather than SEC 0:07:37.400 --> 0:07:38.360 government enforcement. 0:07:39.160 --> 0:07:43.520 The SEC is making it easier for companies going public 0:07:44.320 --> 0:07:49.800 to force securities fraud claims into arbitration. Why and what 0:07:49.840 --> 0:07:51.040 would be the result of that? 0:07:52.360 --> 0:07:57.080 Well, I think the idea behind this is that shareholders 0:07:57.120 --> 0:08:01.040 should have a choice. Shareholders should be able to decide 0:08:01.440 --> 0:08:05.280 how the company is governed. And there's an argument that 0:08:05.560 --> 0:08:10.760 the way you resolve certain types of shareholder litigation should 0:08:10.800 --> 0:08:13.880 be up to the shareholders and if they accept it. 0:08:14.040 --> 0:08:16.320 You know, while they may not actually have a say 0:08:16.360 --> 0:08:19.040 in deciding whether or not such provisions are put into 0:08:19.080 --> 0:08:22.040 the charter of a company going public, they do have 0:08:22.360 --> 0:08:25.200 a say in that if they're unhappy with the provision, 0:08:25.200 --> 0:08:27.360 they can choose not to buy the stock. They can 0:08:27.440 --> 0:08:30.000 choose to pay less for the stock. This is a 0:08:30.040 --> 0:08:34.600 well established academic idea now, is that that shareholders have 0:08:34.679 --> 0:08:37.640 a choice with respect to corporate governance, and this policy 0:08:37.679 --> 0:08:41.960 decision effectively is signaling a willingness to allow companies to 0:08:41.960 --> 0:08:44.480 try this out if they would like to. I think 0:08:44.520 --> 0:08:47.160 there are some questions about the legality of some of 0:08:47.200 --> 0:08:50.599 these mandatory arbitration provisions. If they are adopted. So I 0:08:50.600 --> 0:08:53.280 think there is some risk that if somebody adopts them, 0:08:53.520 --> 0:08:56.360 this will be litigated. And for now, at least in Delaware, 0:08:56.800 --> 0:09:00.400 Delaware companies would not be able to put these visions 0:09:00.440 --> 0:09:03.800 in their charter because of a Delaware state law. But 0:09:04.000 --> 0:09:07.240 it's you know, it's something that academics have talked about 0:09:07.360 --> 0:09:10.440 for some time, and you know it's consistent with a 0:09:10.480 --> 0:09:14.520 Republican SEC chair to try this out. Now, whether or 0:09:14.600 --> 0:09:17.920 not companies will will do this, how this will work, 0:09:18.160 --> 0:09:20.160 you know, that's still very much up in the air, 0:09:20.240 --> 0:09:22.360 and so I think it'll take a few years before 0:09:22.400 --> 0:09:23.800 it starts having an impact. 0:09:23.880 --> 0:09:27.080 If it does, I'm going to go through just a 0:09:27.120 --> 0:09:30.960 couple of changes. The Division Director no longer has authority 0:09:30.960 --> 0:09:35.480 to issue formal orders of investigation, which allowed Division staff 0:09:35.480 --> 0:09:37.640 to issue to poenas, and so they're going back to 0:09:37.679 --> 0:09:39.920 something that they did prior to two thousand and nine, 0:09:39.960 --> 0:09:43.280 I think, where the commissioners have to approve the orders 0:09:43.320 --> 0:09:44.680 by majority vote. 0:09:45.400 --> 0:09:48.600 It's a significant change. It's a significant change, a procedural 0:09:48.679 --> 0:09:52.120 change that very well will likely affect the pace of 0:09:52.280 --> 0:09:55.480 SEC enforcement. I think it'll be slower, and you know, 0:09:55.520 --> 0:09:58.000 to give a little little background. For a long time, 0:09:58.240 --> 0:10:02.480 this was the policy of the SEC where the five commissioners, 0:10:02.600 --> 0:10:08.520 these five pointees had to sign off on every enforcement subpoena, 0:10:08.640 --> 0:10:13.000 any decision to issue orders that open investigations, those five 0:10:13.000 --> 0:10:15.800 commissioners had to decide this. And you know, I think 0:10:15.800 --> 0:10:18.280 the issue is that these five commissioners are very busy 0:10:18.440 --> 0:10:22.080 right there deciding all sorts of things, looking at new rules, 0:10:22.200 --> 0:10:24.520 and you know, all sorts of other matters, and so 0:10:25.080 --> 0:10:27.240 it will take a while for the subpoena to get 0:10:27.240 --> 0:10:30.040 on the agenda. And you know, I think that's what 0:10:30.440 --> 0:10:34.040 resulted in delays with the SEC and enforcement and even 0:10:34.120 --> 0:10:36.960 opening up an investigation. I mean, so after the Madeoff 0:10:37.000 --> 0:10:39.040 scandal two thousand and nine, one of the reforms is 0:10:39.040 --> 0:10:41.080 we're going to delegate some of this to the staff 0:10:41.120 --> 0:10:44.760 and so investigations could open more quickly, move more quickly, 0:10:45.040 --> 0:10:46.959 and in my view, it's a good change. But I 0:10:47.000 --> 0:10:50.920 think the argument on the other side is that, you know, 0:10:51.200 --> 0:10:54.520 if you want to control enforcement, you want the commissioners 0:10:54.520 --> 0:10:57.240 to get involved from the very beginning, because they're ultimately 0:10:57.280 --> 0:11:00.240 the ones you have to approve and enforcement action being 0:11:00.240 --> 0:11:03.480 brought being settled. And if they're involved at the very beginning, 0:11:03.520 --> 0:11:06.800 they can maybe cut off some investigations that may be 0:11:07.480 --> 0:11:09.200 inappropriate in their mind. 0:11:09.880 --> 0:11:14.000 Jim, you mentioned the dollar amounts of fines. Does it 0:11:14.080 --> 0:11:19.079 matter how much money the SEC brings in through enforcement actions? 0:11:19.440 --> 0:11:21.920 I mean, is that considered a gauge of how well 0:11:21.960 --> 0:11:23.160 the commissioner is doing? 0:11:23.679 --> 0:11:26.959 It's cited and it's something that I think the SEC 0:11:27.120 --> 0:11:31.199 chair in the past, both Republican and Democrat, have highlighted 0:11:31.240 --> 0:11:33.600 when they have a record amount of penalties. It's a 0:11:33.600 --> 0:11:36.160 way to show Congress, Hey, we're doing our job. We're 0:11:36.200 --> 0:11:37.479 vigorous on enforcement. 0:11:37.920 --> 0:11:38.079 Now. 0:11:38.160 --> 0:11:41.320 Is it a great measure? I think that there's some 0:11:42.240 --> 0:11:44.720 questions as to whether or not this might lead to 0:11:45.520 --> 0:11:49.680 artificial inflation of penalties, or even an incentive to settle 0:11:49.720 --> 0:11:51.960 cases more quickly for too little, just to get the 0:11:51.960 --> 0:11:55.439 penalty in your numbers. There's a Wall Street Journal article 0:11:55.760 --> 0:11:58.480 about a year ago that reported that a lot of 0:11:58.480 --> 0:12:01.840 these penalties are actually not collect that they're from bankrupt companies, 0:12:01.880 --> 0:12:04.680 and so that the SEC doesn't actually end up cofflecting 0:12:04.720 --> 0:12:07.240 all the penalties that it imposes. They only announce the 0:12:07.280 --> 0:12:11.160 ones that they've imposed, not necessarily ones that they've collected, 0:12:11.360 --> 0:12:14.040 and so and so. It's an imperfect measure, but it's 0:12:14.040 --> 0:12:17.560 a significant one. And I suspect that if we see 0:12:17.559 --> 0:12:22.320 a consistent decline, then that may be used against this SEC. 0:12:22.520 --> 0:12:24.480 You know, if there's a big crash, that that would 0:12:24.520 --> 0:12:27.199 be oh, you know, look at the penalties they declined 0:12:27.240 --> 0:12:30.920 by you know, fifty percent under Atkins. That's why we 0:12:31.000 --> 0:12:33.120 have a lots of confidence. So the SEC needs to 0:12:33.160 --> 0:12:36.520 be careful because if it's not vigorous and there's a 0:12:36.559 --> 0:12:39.920 market correction and a lot of scandals, everyone asks, you know, 0:12:39.920 --> 0:12:41.920 why was the SEC asleep at the switch? 0:12:42.960 --> 0:12:47.559 Chairman Atkins has also expressed a commitment to notifying businesses 0:12:47.600 --> 0:12:52.320 of technical violations before jumping to enforcement. 0:12:53.040 --> 0:12:55.400 I think that's fine in some cases. If it truly 0:12:55.480 --> 0:12:59.320 is a minor technical infraction that is a mistake, then 0:13:00.080 --> 0:13:03.720 may be faster. It may be faster to simply inform 0:13:03.760 --> 0:13:06.120 the company you know, you need to fix this now. 0:13:06.520 --> 0:13:11.319 The problem is if this becomes an excuse to you know, 0:13:11.440 --> 0:13:15.880 avoid enforcement of more serious matters, more serious matters where 0:13:15.920 --> 0:13:21.320 there is repeated violations, where there's harmed investors and customers, 0:13:21.400 --> 0:13:24.920 whether you know, sometimes technical rule violations signal a more 0:13:25.000 --> 0:13:28.920 corrupt corporate culture, and that's something that I'd be worried if, 0:13:29.000 --> 0:13:30.720 you know, if the SEC is not looking into this 0:13:30.760 --> 0:13:33.199 and following up on some of these minor rule violations. 0:13:33.240 --> 0:13:35.480 Now on the other side is maybe it's a better 0:13:35.559 --> 0:13:38.440 use of SEC enforcements which have become more limited. You know, 0:13:38.440 --> 0:13:41.240 there's a lot of staff decline. You know, SEC's always 0:13:41.240 --> 0:13:43.720 have limited enforcement resources. This may be a way of 0:13:44.240 --> 0:13:48.480 quickly resolving matters without fully investigating. But I would be 0:13:48.520 --> 0:13:52.440 concerned about over using this particular method. But I do 0:13:52.480 --> 0:13:54.719 think used properly, it could be a good thing. 0:13:55.679 --> 0:13:59.839 You mentioned to focus sort of more on individuals. The 0:14:00.080 --> 0:14:04.079 powerhouse public companies then breathe a sigh of relief and 0:14:04.240 --> 0:14:07.319 maybe relax their compliance programs or not. 0:14:07.520 --> 0:14:09.760 I hope not. I hope they don't see that as 0:14:09.800 --> 0:14:13.280 the message. A lot of the large companies have already 0:14:13.320 --> 0:14:17.120 invested in substantial amounts of compliance and so they have 0:14:17.200 --> 0:14:20.000 the infrastructure in place. I would be surprised if they 0:14:20.240 --> 0:14:23.480 abandoned that, because we could have a different SEC in 0:14:23.520 --> 0:14:26.080 the next you know, if there's a transition in a 0:14:26.120 --> 0:14:29.760 few years. And also it's good business to have strong compliance. 0:14:29.800 --> 0:14:32.800 In my view that it's a way of controlling misconduct 0:14:32.800 --> 0:14:35.400 within your organization that you know, you would not want, 0:14:35.400 --> 0:14:40.000 the shareholders would not want as well, but it would 0:14:40.080 --> 0:14:42.680 you know, probably send a signal that on some issues 0:14:42.720 --> 0:14:46.040 we can maybe be a little bit less worried. And 0:14:46.120 --> 0:14:49.760 so the danger there is that you know, corporate manager 0:14:49.760 --> 0:14:52.600 has become a little bit too complacent, and so they 0:14:52.640 --> 0:14:55.520 may get the signal where we can take more risk 0:14:55.600 --> 0:14:58.040 with respect to misconduct, and they may not listen to 0:14:58.040 --> 0:14:59.960 the lawyers who are telling them. If you do this, 0:15:00.040 --> 0:15:02.360 the sec could come knocking and they may see that 0:15:02.400 --> 0:15:05.560 as less credible if you have less vigorous enforcement on 0:15:05.640 --> 0:15:09.880 the on the corporate side, and you know, cases against individuals, 0:15:09.960 --> 0:15:13.400 I think the reality is they're very expensive, they're very 0:15:13.440 --> 0:15:16.720 hard to develop. You have to be very very thorough 0:15:16.760 --> 0:15:21.560 and sometimes the evidence to really establish liability against individuals 0:15:21.840 --> 0:15:25.120 may take years and years to develop, and so it 0:15:25.160 --> 0:15:28.360 will provide some deterrence, I think. But I think that 0:15:28.800 --> 0:15:32.320 you know, sometimes if you have a substantial wrongdoing by 0:15:32.320 --> 0:15:35.360 a big corporation that gets a lot of publicity, that 0:15:35.400 --> 0:15:37.840 generates a lot of deterrence in the corporate world. 0:15:38.280 --> 0:15:41.960 Finally, a noticeable decrease in the use of press releases 0:15:42.320 --> 0:15:45.800 in September, only one press release this is a Gorina routers. 0:15:46.080 --> 0:15:49.560 Only one press release announce an enforcement action compared to 0:15:49.680 --> 0:15:52.480 forty three in September of twenty twenty four. 0:15:53.160 --> 0:15:56.400 What's a big decline actually, And you know, I watch 0:15:56.440 --> 0:15:59.800 those press releases very carefully. The blogs do as well. 0:15:59.800 --> 0:16:03.160 That's how we learn about the big cases. And I 0:16:03.160 --> 0:16:06.800 hope they will issue more press releases with notable cases 0:16:06.840 --> 0:16:10.200 because that's how we law professors and attorneys get a 0:16:10.240 --> 0:16:13.320 sense of what the SEC thinks is important. It keeps 0:16:13.320 --> 0:16:17.480 the SEC visible. But I think it's understandable. With the transition, 0:16:17.760 --> 0:16:21.000 I expect they will ramp up their press releases over the. 0:16:20.960 --> 0:16:23.520 Next year, so I'm sure they'll put out at least 0:16:23.520 --> 0:16:25.720 more than one a month. Do you have any concerns 0:16:25.720 --> 0:16:27.960 about enforcement that we haven't addressed? 0:16:28.400 --> 0:16:28.600 You know. 0:16:28.720 --> 0:16:30.920 The other point I would make is that, you know, 0:16:30.960 --> 0:16:34.960 with AI technology becoming so important, I hope the SEC 0:16:35.320 --> 0:16:40.160 really keeps a close eye on fundraising by AI companies 0:16:40.200 --> 0:16:43.280 because it's a very opaque technology. I think there are 0:16:43.280 --> 0:16:45.760 a lot of opportunities for fraud in this space. It's 0:16:45.760 --> 0:16:49.280 an important part of our economic boom, and I think 0:16:49.320 --> 0:16:52.800 that if we lose some confidence in those valuations, investors 0:16:52.840 --> 0:16:54.960 will lose a lot of money. So I hope the 0:16:55.000 --> 0:16:59.920 SEC is continuing those initial efforts to look at AI companies. 0:17:00.040 --> 0:17:03.320 That will certainly keep them busy. Thanks Jim. That's Professor 0:17:03.400 --> 0:17:07.280 James Park of UCLA Law School. The Supreme Court has 0:17:07.320 --> 0:17:11.560 agreed to rule on the constitutionality of the federal law 0:17:11.640 --> 0:17:16.159 that bans firearm possession by drug users and addicts. It 0:17:16.200 --> 0:17:18.840 will be the second test this term of the Second 0:17:18.840 --> 0:17:23.160 Amendment's gun rights protections. Earlier this month, the Supreme Court 0:17:23.160 --> 0:17:26.440 agreed to hear a gun case testing the right to carry. 0:17:26.920 --> 0:17:30.560 My guest is Andrew Willinger, executive director of the Duke 0:17:30.680 --> 0:17:34.200 Center for Firearms Law. Andrew tell us about the federal 0:17:34.280 --> 0:17:37.480 law at issue here in the Hamani case. 0:17:38.080 --> 0:17:42.280 This section of federal law might sort of sound familiar 0:17:42.359 --> 0:17:45.560 to people who have been following the Court's Second Amendment 0:17:45.600 --> 0:17:49.879 jureisprudence over the past couple of years. This is eighteen 0:17:50.000 --> 0:17:54.159 US Code nine twenty two, and specifically nine twenty two G, 0:17:55.080 --> 0:18:00.600 which lists a number of prohibited statuses groups of people who, 0:18:00.640 --> 0:18:04.280 because of their status, are prohibited under federal law from 0:18:04.320 --> 0:18:08.439 possessing firearms or ammunition and one of those groups. One 0:18:08.440 --> 0:18:11.560 of those subsections under nine twenty two G was an 0:18:11.600 --> 0:18:14.440 issue in the Rahimi case. That's individuals who are subject 0:18:14.520 --> 0:18:17.600 to a domestic violence restraining order that meets certain criteria. 0:18:17.760 --> 0:18:20.840 But there are other groups as well, felons for example, 0:18:21.000 --> 0:18:24.400 and then, as relevant to the Harmani case, individuals who 0:18:24.440 --> 0:18:28.960 are considered unlawful users of or addicted to a controlled substance. 0:18:29.440 --> 0:18:34.119 So that's the specific revision of criminal law that's at 0:18:34.200 --> 0:18:37.880 issue in this case is a ban on unlawful drug 0:18:37.960 --> 0:18:39.800 users possessing firearms. 0:18:40.119 --> 0:18:44.120 The Fifth Circuit said that the blanket ban is unconstitutional, 0:18:44.640 --> 0:18:48.000 but the ban could be used against people accused of 0:18:48.040 --> 0:18:51.439 being high and armed at the same time. Explain the 0:18:51.480 --> 0:18:53.119 logic of that. 0:18:53.119 --> 0:18:56.600 That's basically right. It is a little bit confusing because 0:18:56.880 --> 0:18:59.800 there are a number of different cases in the Fifth Circuit, 0:19:00.200 --> 0:19:01.960 and so if you look back at the Harmoni case, 0:19:02.000 --> 0:19:06.080 there really isn't a lengthy decision because the Circuit had 0:19:06.119 --> 0:19:08.879 decided in an earlier case called Connolly, and all the 0:19:08.960 --> 0:19:11.480 judges said in this specific case is that you know, 0:19:11.520 --> 0:19:14.760 we're applying our ruling in Connolly and therefore find that 0:19:15.000 --> 0:19:19.480 as applied to this individual HARMIONI the provision is also unconstitutional. 0:19:19.760 --> 0:19:22.679 But basically the approach that the Fifth Circuit has taken 0:19:22.880 --> 0:19:26.600 in these drug cases is to say that, as a 0:19:26.800 --> 0:19:31.880 historical matter, that judges believe that their support for applying 0:19:31.960 --> 0:19:35.440 this provision when somebody is under the influence of drugs 0:19:36.119 --> 0:19:39.800 and at the same time in possession of guns or ammunition, 0:19:40.560 --> 0:19:43.920 but when there's no proof that those two things were contemporaneous, 0:19:43.960 --> 0:19:47.080 that they occurred at the same time, then the judges 0:19:47.119 --> 0:19:49.920 have said that the provision cannot be applied. And that's 0:19:49.960 --> 0:19:52.080 what they decided in the Harmonic case. 0:19:52.400 --> 0:19:55.520 And this is the same provision that a jury convicted 0:19:55.800 --> 0:19:57.040 Hunter Biden on. 0:19:57.560 --> 0:19:59.560 That's correct, that is correct. 0:19:59.359 --> 0:20:03.840 That's where its fame. So the Justice Department is arguing 0:20:04.119 --> 0:20:07.520 that the law is valid. So they're arguing then, for 0:20:07.640 --> 0:20:11.480 a law that restricts Second Amendment rights, that's right. 0:20:11.560 --> 0:20:14.720 Yeah, it's a little bit of an interesting posture, as 0:20:14.760 --> 0:20:17.280 you know. But again, I think what this comes back 0:20:17.320 --> 0:20:20.080 to is the distinction between a facial challenge and it 0:20:20.119 --> 0:20:24.520 has applied challenge. So the Hamani case deals with an 0:20:24.560 --> 0:20:28.119 has applied challenge, and the government is saying, you know, 0:20:28.160 --> 0:20:30.280 we think the Fifth Circuit got it wrong, but on 0:20:30.400 --> 0:20:33.200 these specific facts. So I think it's going to be 0:20:33.280 --> 0:20:35.840 a little bit of a delicate dance throughout this case 0:20:35.880 --> 0:20:37.879 as it works its way through the briefing and the 0:20:38.000 --> 0:20:41.639 oral argument before the Supreme Court, where I actually don't 0:20:41.760 --> 0:20:46.720 think that the current administration believes that nine twenty two 0:20:46.840 --> 0:20:50.920 G Three has the language has been interpreted, is constitutional 0:20:50.960 --> 0:20:52.879 in all of its applications, right. I don't know that 0:20:52.920 --> 0:20:55.480 they would say that this is constitutional as applied to 0:20:55.520 --> 0:20:59.240 somebody who's just, you know, using marijuana on a regular basis. 0:20:59.640 --> 0:21:02.480 But they want to say in this case because there 0:21:02.480 --> 0:21:06.720 are maybe exacerbating factors not just marijuana. There's potentially other 0:21:07.160 --> 0:21:11.119 legal drugs at issue, and there's a connection to allegedly 0:21:11.160 --> 0:21:15.080 to foreign terrorism that's not really relevant to the Second Amendment. 0:21:15.320 --> 0:21:18.359 But they're going to, I think, focus a lot on 0:21:18.440 --> 0:21:21.960 the as applied nature and on the specific facts of 0:21:22.000 --> 0:21:22.520 this case. 0:21:23.080 --> 0:21:26.919 The Supreme Court in twenty twenty two, in the Bruin case, 0:21:27.440 --> 0:21:31.200 rule that any restrictions on firearms have to be consistent 0:21:31.480 --> 0:21:37.399 with the nation's historical tradition of firearms regulation. What is 0:21:37.440 --> 0:21:40.800 the history and tradition that the government is saying supports 0:21:40.840 --> 0:21:41.920 their position here? 0:21:42.480 --> 0:21:45.520 The government at least below in these cases in the 0:21:45.560 --> 0:21:51.080 Fifth Circuit has basically rested on three categories of historical 0:21:51.720 --> 0:21:55.639 statutes or restrictions. So the first is the historical treatment 0:21:55.680 --> 0:21:58.600 of the mentally ill, and that's sort of an argument 0:21:58.640 --> 0:22:02.199 that maybe drug users are analogous in some way to 0:22:02.200 --> 0:22:04.280 those who are mentally ill, that this is this is 0:22:04.280 --> 0:22:08.760 some form of a temporary incapacitation. The second is more 0:22:08.880 --> 0:22:13.000 generally just laws that we're based on a legislative determination 0:22:13.040 --> 0:22:15.560 that some group of people is dangerous. So that could 0:22:15.640 --> 0:22:18.359 be you know, political dissonance for example, it could be 0:22:18.400 --> 0:22:20.760 any group where the determination is that you know, this 0:22:20.760 --> 0:22:23.760 group is dangerous and we're not going to allow them 0:22:23.800 --> 0:22:26.960 to have guns. And then the third is and this 0:22:27.200 --> 0:22:29.679 kind of you know, goes in sequential order. You know, 0:22:29.720 --> 0:22:32.919 the mental illness and the dangerousness laws are earlier, and 0:22:32.960 --> 0:22:35.520 then eventually you start you start to see laws that 0:22:35.640 --> 0:22:39.200 talk about alcohol and being intoxicated with alcohol, and those 0:22:39.200 --> 0:22:42.159 are also a category that the government has come forward 0:22:42.200 --> 0:22:44.720 with in these cases. And again, I think for each one, 0:22:44.840 --> 0:22:47.800 you know, it's going to depend on this level of 0:22:47.840 --> 0:22:51.639 generality issue that that courts have really been wrestling with 0:22:51.920 --> 0:22:55.960 under Bruin, which is how close do the historical statutes 0:22:56.000 --> 0:22:58.840 really need to be in order to uphold the modern law? 0:22:59.359 --> 0:23:02.600 And the historic statutes go back to the seventeenth and 0:23:02.800 --> 0:23:06.639 eighteenth century, do they go back to the nineteenth century? 0:23:06.960 --> 0:23:09.640 What does the court consider acceptable history? 0:23:10.000 --> 0:23:11.840 Yeah, Well, that's one of the really interesting aspects of 0:23:12.080 --> 0:23:14.600