Sullivan
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We assist clients in high-stakes shareholder lawsuits, federal and state enforcement actions, internal investigations and arbitrations, including representations in class actions, multi-district litigation proceedings and cross-border commercial disputes.

Our litigators work closely with the attorneys in the firm’s other practice areas, including corporate, securities, corporate governance and white collar defense to develop winning strategies. We have extensive jury and non-jury trial experience and frequently appear before regulators including FINRA, SEC and state securities regulators.

Representative Client Work

  • Representation of independent trustees and mutual funds in various disputes with their advisors and/or third-party service providers. These matters are generally highly confidential, complex disputes requiring detailed factual analyses and involving complex issues arising under both the Investment Company Act of 1940, as amended, as well as common law duties
  • Obtained dismissal of stock manipulation lawsuit brought against Credit Suisse by hedge funds (S.D.N.Y., 2d Cir., Wash. State Court)
  • Represented broker-dealer and its officers in a FINRA arbitration alleging failure to supervise and other claims asserted by more than 20 claimants regarding their investments in a CBD company
  • Represented an LLC and its board of managers in AAA arbitration, defending against claims of fraud and breach of fiduciary duty in the context of a plan to reorganize the entity and its affiliates. We defeated the claims and the claimants’ effort to derail the reorganization, thereafter working with our tax and corporate attorneys to shepherd the transaction through to completion successfully
  • Represented a private investment firm on a defaulted convertible promissory note in federal court against the issuer
  • Represented a private company in an SEC investigation concerning an alleged initial coin offering and related cryptocurrency issues
  • Represented a private company and an officer in an SEC investigation concerning the alleged sale of unregistered securities
  • Representation of broker dealer in multiple FINRA and SEC investigations related to initial public offerings
  • Representation of broker dealers and registered representatives in multiple compliance, regulatory, and enforcement matters resulting from SEC and FINRA inquiries, examinations, and investigations
  • Defense, leading to dismissal in the Southern District of New York, and affirmance in the United States Court of Appeals for the Second Circuit, of securities class action claims in excess of $20 million against corporate officers of an internet technology company arising from the alleged sale of unregistered securities
  • Preclusion of a securities class action plaintiff from enjoining a merger of public companies
  • Representation of largest victim investor who uncovered fraud in WexTrust securities receivership arising from $255 million Ponzi scheme
  • Internal investigation of major financial institution in response to allegations of $60 million fraud on investors
  • Internal investigations in connection with alleged overvaluations of investment companies’ portfolio assets
  • Represented underwriters in securities class action brought in connection with IPO of a subprime lender
  • Successful defense of key office in MF Global securities fraud and breach of fiduciary duty actions brought by liquidating receiver and shareholders
  • Representation of institutional investment managers in defense of class actions involving "excessive fee" allegations
  • Defended an investment bank in a federal securities class action in Texas arising from the Bre-x gold scandal
  • Representation of extremely large broker-dealer in addressing alleged violations of best execution rules
  • Representation of independent trustees, investment companies, and third-party mutual fund service providers in various SEC and state securities enforcement actions and related private securities litigation involving alleged negligent failure to supervise adequately, merger objections, and loss of portfolio value claims
  • Defense of majority shareholders and partners, closely held corporations, and partnership entities against derivative waste and mismanagement claims and breach of fiduciary duty claims, including freeze out claims
  • Represented a national insurance and financial services company in numerous actions, workouts and negotiated resolutions of securities, fiduciary and other claims arising out of three mezzanine funds
  • Represented major public and private employee pension funds in disputes related to the purchases of stock, bonds and convertible securities by public and private issuers
  • Represented a consortium of Swiss private banks in the recovery of multi-million dollar investments in convertible bonds issued by a U.S. medical technology company
  • Represented an institutional investor in civil and criminal proceedings to recover losses from a rogue employee's off-market trading of more than $9 billion in securities
  • Obtained the dismissal of a complaint brought by a group of investors alleging securities fraud against DeHeng Law Offices of Beijing, one of China’s largest law firms, Pope Investments II, LLC v. DeHeng Law Firm, No. 13-3250-cv (2d Cir. Sept. 18, 2014)
  • Successful defense of numerous regulatory proceedings and state and federal shareholder class action non-disclosure claims against mutual funds and fund independent trustees
Viewpoints
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FINRA’s Small-Cap Sweep: Strategic Steps for Broker-Dealers
It has been approximately one (1) month since the Financial Industry Regulatory Authority (FINRA) has launched a targeted review of broker-dealer activity in small-capitalization offerings involving foreign issuers—particularly those with operations in foreign jurisdictions such as China. The scope of the review extends across both public and private offerings of small-cap exchange-listed issuers and applies to firms that have acted as underwriters, bookrunners, syndicate or selling-group members, placement agents, or engaged in follow-on trading or omnibus account activity. For broker-dealers active in this market segment between January 1, 2023, and September 30, 2025, this initiative warrants immediate attention. FINRA’s focus underscores the need for firms to proactively strengthen compliance, supervisory and due-diligence frameworks before scrutiny is initiated. Implications for Broker-Dealers For broker-dealers that have acted in offerings of foreign-issuer small-cap companies, or engaged in corresponding trading, the risk of regulatory inquiry is now heightened. Firms should assume that FINRA may request detailed documentation of supervisory procedures, training materials, due-diligence records, compensation arrangements, and transaction lists. Potential exposure encompasses both the underwriting/placement side and the secondary trading side, particularly where omnibus accounts or affiliate-linked trading have occurred. Moreover, compliance weaknesses in this area may expose firms to broader regulatory focus given FINRA’s emphasis on market integrity and manipulative trading risks in small-cap IPOs. As a result, firms should view this not simply as a matter of historical transactions but as an active compliance priority for present-day operations and future offerings. Strategic Compliance Priorities and Action Plan Broker-dealers should undertake an immediate, firm-wide review of their involvement in relevant small-cap foreign-issuer offerings. This review should begin with an inventory of all transactions, public or private, in which the firm acted as underwriter, bookrunner, syndicate or selling-group member, placement agent, or participated in secondary trading during the relevant period. Firms should review whether their written supervisory procedures (WSPs), compliance manuals, training materials and internal guidance adequately address the risks particular to small-cap foreign-issuer offerings. This includes controls around due diligence of issuers, audit-firm and management backgrounds, beneficial-owner structures, cross-border legal/regulatory risks, syndicate compensation, and trading after the offering. Surveillance systems and trading desk controls should similarly be assessed to ensure they capture unusual trading patterns consistent with manipulative or coordinated activity. Firms should evaluate whether their AML/KYC programs are appropriately scaled to the enhanced risk of foreign issuers and thinly-traded securities, and whether their vendor-risk frameworks adequately cover third-party trading platforms, omnibus accounts, and algorithmic or remote trading tools. From a governance standpoint, senior management, compliance heads and the board should elevate this matter within their risk-assessment frameworks. Firms should consider whether internal audit scopes and independent reviews cover this business line, whether incentives or compensation structures may have encouraged participation in higher-risk offerings, and whether escalation procedures are clearly defined and monitored. Finally, firms should prepare for regulatory engagement by gathering and organizing deal files, training logs, supervisory review documentation, compensation records and transaction lists now, rather than waiting until a request arrives. Key Takeaways The targeted review by FINRA of small-cap foreign-issuer offerings signals a clear regulatory priority and a call to broker-dealers to raise their vigilance. For firms with exposure in this area, now is the time to act. Waiting until after a request is received may leave a firm scrambling and vulnerable to findings of deficient controls or documentation. The themes underpinning the review—cross-border risk, thin-traded securities, manipulative activity, and weak controls—are broader than the specific focus and should prompt firms to proactively enhance controls across the board. Senior leadership should not view this as a niche compliance issue, but rather as a signal of elevated scrutiny across multiple lines of business. With proper preparation, firms can not only respond to potential regulatory requests but demonstrate a thoughtful, forward-looking compliance program aligned with the evolving risk landscape.
FINRA Launches Targeted Review of Small-Cap Foreign Offerings
The Financial Industry Regulatory Authority (FINRA) has announced a targeted review of broker-dealers involved in small-cap initial public offerings (IPOs) and related transactions for companies based in foreign jurisdictions, such as China. The review signals increased regulatory scrutiny of potential stock manipulation risks, cross-border due diligence practices and overall compliance controls within the small-cap market, which includes broker-dealers and ultimately issuers whose stock trades on U.S. exchanges. Overview FINRA’s latest initiative underscores the regulator’s focus on potential market-abuse risks tied to foreign small-cap listings. While FINRA has not specified the impetus for the sweep, the timing aligns with publicly announced emphases on cross-border enforcement efforts. The SEC, which oversees FINRA, announced in September the formation of a task force to combat cross-border fraud and securities-law violations in jurisdictions “where governmental control and other factors pose unique investor risks,” explicitly citing China. Earlier this year, Nasdaq proposed increasing the threshold size of IPOs for Chinese companies, including issuers based in Hong Kong and Macau, to $25 million, versus $15 million for other issuers. According to FINRA, the review targets member firms that participated in multiple small-cap offerings, defined as IPOs raising $25 million or less and priced between $4.00 and $8.00, between January 2023 and September 2025. The inquiry also extends to follow-on offerings and private placements linked to those transactions. Focus Areas FINRA has requested detailed information from firms that served as underwriters, bookrunners, syndicate members, selling group members, or placement agents in the identified offerings. The regulator is seeking documentation that addresses: Due diligence, insider trading and anti-money-laundering (AML) compliance policies, including internal training materials; Supervisory procedures related to cross-border offerings and compliance with SEC Regulation M and FINRA Rule 5210; and Comprehensive transaction records, including all professional participants (e.g., auditors, legal counsel and internal approvers). FINRA’s emphasis on documentation, deal structure and related-party identification indicates a broader assessment of firms’ governance and risk-management frameworks around small-cap and foreign issuer activity. Takeaways for Broker-Dealers Firms active in small-cap or foreign offerings should take immediate steps to assess their exposure and confirm the effectiveness of their compliance controls. Recommended actions include: Reviewing recent and pending small-cap transactions to determine whether they fall within FINRA’s stated parameters. Evaluating supervisory systems, due diligence processes and deal-approval workflows for coverage of cross-border risks and compliance with Regulation M and FINRA Rule 5210. Reviewing annual AML testing results to ensure trading surveillance programs, including alert thresholds, omnibus account oversight and escalation protocols, are effectively in place and reasonably designed to identify and address red flags. Preparing responsive documentation proactively to facilitate timely engagement with FINRA if contacted. Looking Ahead FINRA’s targeted review is part of a broader regulatory trend emphasizing cross-border transparency and control effectiveness. Firms with recurring involvement in small-cap or foreign offerings should anticipate heightened scrutiny from both FINRA and the SEC and ensure that their regulatory and compliance frameworks align with evolving expectations. Sullivan’s Small-Firm Task Force is advising clients on responding to FINRA requests and enhancing compliance programs to withstand heightened scrutiny in this area. The Task Force, comprised of lawyers from the firm’s transactional capital markets, regulatory compliance, and white collar/government investigations practice groups, will use its multidisciplinary approach to defend these inquiries and cost-effectively advance the agenda and priorities of the constituencies impacted by the evolving regulatory focus on targeted inquiries in the small-cap market.
Sullivan & Worcester Announces Creation of Small-Firm Task Force to Address Latest FINRA Small-Cap IPO Sweep
New York, NY – Sullivan & Worcester announced today the creation of its Small-Firm Task Force, a dedicated cross-disciplinary team designed to support small to mid-sized broker-dealers in navigating the review announced by the Financial Industry Regulatory Authority (FINRA) of firms’ practices relating to public and private offerings of small-capitalization, exchange-listed issuers with business operations in foreign jurisdictions, such as China. The FINRA announcement targeting small-cap offerings also seeks to review compliance with Reg M and FINRA Rule 5210, governing quotes of securities. Sullivan’s Task Force is intended to assist firms in responding to inquiries and effecting meaningful compliance during the review period and beyond. In light of FINRA’s renewed focus on small-cap issuers that have foreign business operations, the Task Force brings together members of Sullivan’s market-leading Capital Markets, Government Investigations, Regulatory Compliance and Securities Litigation practice groups. The integrated team offers clients comprehensive, practical counsel tailored to helping issuers, underwriters and other market participants assess, mitigate and manage potential risk exposures, compliance obligations and disclosure challenges. Managing Partner of Sullivan’s New York office David E. Danovitch explained the firm’s move: “No sooner than the industry is beginning to stabilize do we see another major sweep and inquiry into matters that have been covered by various agencies over the past several years. We are uniquely positioned to assist firms in responding to these inquiries. Our longstanding practice throughout Asia and our in-depth experience with Reg M issues and related compliance will now be used as a resource to assist firms in responding to these inquiries and review and, if necessary, proactively improve their procedures.” Danovitch, who also maintains his securities licenses at a small broker-dealer, added: “This is a crushing request that covers nearly three years. The market for small-cap offerings has been challenged since early 2022. The markets are just beginning to improve. This is an unfortunate development.” In addition to Danovitch, Sullivan Partners Michael Dyson and Meghan Rohan will round out the Task Force. The creation of the Small-Firm Task Force underscores Sullivan’s ongoing commitment to helping clients navigate complex legal environments with integrated, forward-thinking solutions. For more information about the Task Force, please contact: David E. Danovitch Partner | New York ddanovitch@sullivanlaw.com | 212 660 3060 Michael T. Dyson Partner | Washington, D.C. mdyson@sullivanlaw.com | 202 775 1217 Meghan Rohan Partner | New York mrohan@sullivanlaw.com | 212 660 3040 About Sullivan Sullivan & Worcester (Sullivan) is a global, mid-sized law firm with lawyers in Boston, London, New York, Tel Aviv and Washington, D.C. Sullivan’s clients, including Fortune 500 companies, leading financial services firms and asset managers, boards of directors, real estate companies, and emerging businesses, rely on Sullivan’s ability to navigate complex legal and operational landscapes, the impeccable judgment of its lawyers, and its commitment to best‑in‑class client service.
The Supreme Court of Israel Issues Groundbreaking Decision on Derivative Claims, Referencing Article Co-Authored by Sullivan Partner Amichay Tessler
Tel Aviv, Israel – Recently, in a precedential case, the Supreme Court of Israel (the "Supreme Court") cited and based its groundbreaking decision on an article co-authored by Amichay Tessler, a litigation partner in Sullivan & Worcester's Tel Aviv office. According to Israeli law, a shareholder or a director of a company (and a creditor, in certain circumstances) can file a motion to certify a claim as a derivative claim (“Derivative Claimant” and “Motion to Certify”, respectively). Furthermore, Derivative Claimant can, before they file a Motion to Certify, file a motion for discovery and production of documents against the company, relating the cause of the future Motion to Certify (“Motion for Discovery”). In order to obtain approval for a Motion for Discovery, certain legal requirements must be fulfilled, which include acting in good faith and demonstrating that the Motion for Discovery will serve the company's best interests. Recently, a shareholder in a known retail company in Israel named Max Stock Ltd. (“Max Stock”) filed a Motion for Discovery before a Motion to Certify to the economic department in Tel Aviv district court. In his motion, the Derivative Claimant argued that, allegedly, some of the officers and directors in Max Stock breached their fiduciary duties and exploited business opportunities that allegedly belonged to Max Stock. A few months after Max Stock submitted its response to the Motion for Discovery, the Derivative Claimant sought an extension for submitting a class action against Max Stock, arguing that the documents he asked for in the Motion for Discovery will assist him in the class action as well. The district court denied the Motion for Discovery, and the Derivative Claimant filed a motion to appeal to the Supreme Court (in Hebrew). The Supreme Court denied the motion to appeal on March 31, 2024, citing and basing its ruling in this precedential case on an article co-authored (in Hebrew) by Amichay Tessler, published in the prestigious Law Review of Reichman University. According to Tessler’s article, a Derivative Claimant cannot submit a Motion for Discovery, which is designed to assist him in a derivative action and is meant to benefit the company, to assist him in a class action in which he opposes the company; and by doing so – he, or she, is acting in bad faith, and therefore the conditions to allow Motion for Discovery are not met. This new ruling, which adopts Tessler’s research and conclusion as outlined in his article, deepens the gravity of good faith in derivative procedures, and will shape the future conduct and rulings in following Motions for Discovery. All companies, public and private alike, which face a derivative procedure will be best served to address our litigation practice and be advised on the best and most recent relevant legal theories and tactics. About Sullivan Sullivan & Worcester (Sullivan) is a global law firm with approximately 200 attorneys in Boston, London, New York, Tel Aviv and Washington, D.C. Sullivan’s clients, including Fortune 500 companies, leading financial services firms and asset managers, boards of directors, real estate companies, and emerging businesses, rely on Sullivan’s ability to navigate complex legal and operational landscapes, the impeccable judgment of its lawyers, and its commitment to best‑in‑class client service.