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Speaker 1: You're listening the Bloomberg Law with June Grosso and Michael

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Speaker 1: Best in New York and I am Greg's store in Washington.

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Speaker 1: When the Securities in Exchange Commission accuses someone of fraud,

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Speaker 1: agency lawyers don't have to go before a federal district judge.

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Speaker 1: The SEC instead gets to bring the case in house

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Speaker 1: through an administrative process under which the agency wins more

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Speaker 1: than its cases. Critics say the SEC has an unfair

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Speaker 1: advantage at those trials where the rules are very different

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Speaker 1: from those in federal court. Among them is Lynn Tilton,

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Speaker 1: the Patriarch Partners founder and so called diva of distress,

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Speaker 1: who is facing SEC allegations she misled investors about the

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Speaker 1: value of risky pools of corporate loans. Her case, which

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Speaker 1: could end her career and cost her two hundred million dollars,

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Speaker 1: is now awaiting a ruling by an SEC administrative law judge.

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Speaker 1: With us to talk about the SEC and its administrative

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Speaker 1: complaint process is Robert Hirskovitz, a lawyer at Hurts Hrskovitz,

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Speaker 1: PLC who represents securities industry participants in enforcement actions. Rob

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Speaker 1: thanks for joining us. Can you just give us a

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Speaker 1: quick example or two of how the rules in an

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Speaker 1: SEC administrative proceedings differ from what they might be in

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Speaker 1: federal court. Sure, and thank you for having me today. UH.

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Speaker 1: There's really two areas that I think UM of our

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Speaker 1: particular importance. One concernce timing and the second concerns discovery.

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Speaker 1: So as it relates to timing. UM. Although the rules

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Speaker 1: were loosened somewhat once the Commission decides to bring an

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Speaker 1: enforcement action UH. And in the case of Lindtelt, they

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Speaker 1: did a five year investigation and then brought an enforcement action.

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Speaker 1: Under the old rules, she had but four months to

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Speaker 1: defend herself. Under the amended rules, which she was not

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Speaker 1: able to avail herself of, it could be as long

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Speaker 1: as ten months UM, which to some may sound like

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Speaker 1: a reason bole amount of time. But to most people

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Speaker 1: and and folks that have to defend people like miss Tilton,

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Speaker 1: ten months to pass through what could be millions of documents, UM,

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Speaker 1: get your thoughts together on what would be appropriate emotions

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Speaker 1: is not a sufficient amount of time. And I think

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Speaker 1: most federal judges would likely agree with that UH and

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Speaker 1: provide for a more expanded schedule. So, just to be clear,

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Speaker 1: the rules have changed, They've gotten a little bit better,

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Speaker 1: but not not good enough in your view. I believe

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Speaker 1: that's the changes were cosmetic in nature and not substantive. Rob.

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Speaker 1: Why is it that the sec can have different rules

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Speaker 1: if it brings up proceeding internally with an administrative law

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Speaker 1: judge versus if it brings a case in federal court. Well,

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Speaker 1: the rules were properly promulgated, so one can't say that

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Speaker 1: the rules themselves are inherently illegal. Uh. And there are

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Speaker 1: certainly times when it is appropriate for a matter to

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Speaker 1: proceeded an administrative setting, But the fear is that these

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Speaker 1: rules are being abused. Uh. And the administrative actions are

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Speaker 1: being used for matters which are too complex and deserving

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Speaker 1: of the protections afforded in federal court. Rob. Are there

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Speaker 1: advantages to the administrative law system? Uh? You know people

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Speaker 1: often talk about how the a ljs as they're known,

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Speaker 1: have some special expertise. Do you see that as as

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Speaker 1: a useful thing? Uh? You know, marginal, Um, they do

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Speaker 1: have expertise, But the federal judges are, um, you know,

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Speaker 1: some of the brightest jurists in the country. Uh. And

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Speaker 1: securities claims are not foreign to UH, to federal courts

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Speaker 1: and particularly in in in the Manhattan Federal Court. The judges,

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Speaker 1: to my mind, are as expert insecurities pause, if not

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Speaker 1: more than any a l J. Rob. Miss Tilton has

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Speaker 1: been trying to litigate a bunch of issues relating to

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Speaker 1: the fairness of the sec S process for a while now,

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Speaker 1: and so far hasn't hasn't been able to stop the proceedings.

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Speaker 1: What happens if she loses before the a l J.

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Speaker 1: What's the procedure for her to challenge the ruling? Well,

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Speaker 1: she can, It's essentially, you know, a two step process.

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Speaker 1: She can she can file an appeal to the commission

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Speaker 1: itself UH, which statistically speaking, UM UH will not get

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Speaker 1: her the outcome she she hopes for, assuming she doesn't

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Speaker 1: win a trial, And at that point in time, she

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Speaker 1: can appeal to UH, to a federal court UM, a

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Speaker 1: circuit court and challenge UH. You know what what you'll

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Speaker 1: argue to be do process violations at the trial level. Rob.

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Speaker 1: We only have about thirty seconds left. But but tell

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Speaker 1: me one thing that lind Tilton argued earlier in the

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Speaker 1: case was that she should have the right to go

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Speaker 1: to federal court before the sec trial went forward. Would

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Speaker 1: that be a good move the challenges of that nature

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Speaker 1: are are typically rejected, were rejected in her case. The

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Speaker 1: bottom line is that there's something called exhaustion the administrative remedies,

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Speaker 1: which means put your best foot forward at the trial level,

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Speaker 1: and if you exhaust all your remedies there you can

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Speaker 1: you can appeal. Above. We want to thank our guest

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Speaker 1: Rob Herskovitz, a lawyer who represents securities industries participants in

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Speaker 1: enforcement actions by the sec. Thank you so much. That's

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Speaker 1: it for this edition of Bloomberg Law. We will be

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Speaker 1: back tomorrow thanks to our technical director Reginald Basil and

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Speaker 1: our producer David Sutraman. You can find more legal news

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Speaker 1: at Bloomberg Law dot com and Bloomberg being a dot com,

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Speaker 1: plus an invaluable website for the legal community at Big

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Speaker 1: Law Business dot com. Coming up on Bloomberg Radio bloom

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Speaker 1: Markets with Carol Masser and Corey Johnson. Carol, very quickly,

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Speaker 1: what are you talking about today? Very quickly, Internet of Things.

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Speaker 1: You've got an author of a new book. Back to you, Greg,

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