SEC 'Obey-the-Law' Injunctions Held Invalid

23 July 2012
The Harvard Law School Forum on Corporate Governance and Financial Regulation
The Eleventh Circuit Court of Appeals 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. In SEC v. Goble, No. 11-12059, 2012 WL 1918819 (11th Cir. May 29, 2012), the Eleventh Circuit vacated the “obey-the-law” injunctions entered against defendant Richard Goble, the founder of North American Clearing, Inc. (“North American”), because the injunctions did not satisfy Federal Rule of Civil Procedure 65(d)(1), which requires that injunctions describe, “in reasonable detail. . . the act or acts [sought to be] restrained or required.” Although the decision appears to widen an existing gap between the Eleventh and Second Circuits on the propriety of “obey-the-law” injunctions in SEC settlements, the full impact of the Goble decision remains unclear. The Eleventh Circuit’s strongly worded opinion and careful analysis could prompt other courts to question the benefit and efficacy of the SEC’s frequent practice of seeking such broad “obey-the-law” injunctions.