SEC “Obey-The-Law” Injunctions Held Invalid

8 June 2012
Download PDF

Key takeaways:

  • The Eleventh Circuit Court of Appeals last week dealt a blow to the Securities and Exchange Commission (“SEC”) and its long-standing practice of seeking broad federal court injunction orders directing defendants to refrain from any future violations of securities laws, often referred to as “obey-the-law” injunctions.
  • The Court held that “obey-the-law” injunctions fail to satisfy the specificity requirements for injunctions as set forth under Federal Rule of Civil Procedure 65(d)(1) because they deprive defendants of procedural safeguards alerting them to what could be a future charge of a violation of the securities laws.
  • In light of the Eleventh Circuit’s opinion, individuals and companies may want to consider challenging any attempt by the SEC to impose broad “obey-the-law” injunctions.