Meet Eric

Did you know that following the conclusion of federal court litigation, the SEC may prosecute you a second time for the same conduct in a follow-on administrative proceeding seeking to bar you from your chosen profession? 

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Worse, the SEC may do this even if you were never accused of fraud or harming investors. Or if you were simply an employee of a company where the SEC alleged technical violations. 

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You may be familiar with our clients in SEC v Barry et al. Eric Cannon, an employee of PacWest, is one of the defendants in that case. In 2016, the SEC sued PacWest, its founder, and other personnel, including our clients, alleging the offer of life settlement arrangements they sold should have been registered as a securities offering and that Brenda, Eric, and Caleb should have been registered as securities brokers. All this, despite the fact that no statutes or regulations exist to classify whether the life settlement arrangements are securities, and some courts have previously ruled that life settlement arrangements were not securities. (including the prominent federal appellate court for the District of Columbia, SEC v Life Partners in 1996)

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The SEC Piles On

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Eric and his co-defendants continue to battle the SEC in federal court, with ICAN’s support. An appeal is now pending in the Ninth Circuit Court of Appeals. But now, on top of that, Eric is dealing with a follow-on proceeding in which the SEC is attempting to destroy his livelihood directly. 

Follow-on administrative proceedings, like Eric’s, initiated by the SEC at the conclusion of their federal court cases, are beginning to draw well-deserved scrutiny. There are procedural and systemic biases in the process that may put the respondents at an extreme disadvantage, emphasizing the need to reevaluate this procedural framework.

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The proceedings, meant to decide on professional bans within the securities industry, occur before administrative law judges (ALJs) directly employed by the SEC and take place on what could be seen as the SEC’s “home court.” 

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The Supreme Court has even reviewed whether these administrative venues are appropriate for imposing penalties — a typically judicial function that some argue should necessitate a jury trial under the Seventh Amendment.

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While the recent Jarkesy decision has now established that cases alleging fraud and seeking monetary penalties must go to federal courts, ICAN and others believe that these administrative venues aren’t appropriate for imposing penalties of any kind, and that is a function that should necessitate federal court involvement and a jury trial to impose professional bars under the Seventh Amendment.

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Cases like Eric's highlight the personal toll on affected individuals. Despite no conclusive bar orders against him thus far (and with his federal court proceeding on appeal), the repercussions on his professional life have been severe. Despite his diligent efforts – for example, studying for and passing the Series 65 investment adviser license exam, twice – the pendency of the litigation has prevented him from obtaining employment in the financial services industry. As a practical matter, the proceedings create a stigma around Eric for potential employers, essentially preventing him from participating in the industry to earn a living.

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The prolonged nature of these legal battles, coupled with the contentious legal interpretations and the potential for bias, underscores the critical need for more transparent and equitable processes within the SEC's administrative framework.

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In this video featured below, Eric describes his harrowing experience. ICAN Advisory Board member Keri Axel, a former SEC enforcement attorney and Assistant United States attorney, also joins us. Keri describes the problematic nature of these follow-on administrative proceedings at a time when the constitutionality of SEC administrative proceedings more generally continues to be scrutinized in the wake of the Jarkesy decision. 

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Eric’s ordeal fighting the SEC on two fronts to preserve his ability to work in the financial services industry, as he has done for over 20 years, has severely impacted his life and ability to make a living. The extreme duration of these legal battles and the associated costs underscore the lack of transparent and equitable processes within the SEC’s Kafka-esque administrative framework. But, thanks to ICAN and our supporters, he has the ability to continue to fight to maintain his livelihood.