Securities and Exchange Commission v. Lek Securities Corporation
1:17-cv-01789
| S.D.N.Y. | Mar 21, 2019Background
- SEC sued Lek Securities, Samuel Lek, and Avalon defendants alleging layering and a cross-market manipulation scheme in U.S. securities, claiming violations of Sections 10(b), 9(a), and 17(a).
- Avalon is an unregistered foreign day-trading firm that routed U.S. market trades through registered broker-dealers (e.g., Lek Securities).
- After expert reports from SEC experts Terrence Hendershott and Neil Pearson, Avalon submitted a rebuttal expert report from Ronald Filler.
- Filler’s report: largely legal analysis and commentary, no econometric or independent trading-data analysis, and he admitted limited quantitative and market experience.
- SEC moved to exclude Filler as an improper rebuttal expert, arguing Filler was unqualified and that his report offered legal conclusions and argument rather than admissible expert critique.
- Court granted the SEC’s motion: Filler unqualified to rebut Hendershott/Pearson; his report largely legal brief, speculative on technical points, and would usurp judge/jury functions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Qualification as rebuttal expert | Filler lacks trading/statistics expertise to rebut Hendershott/Pearson | Filler is a qualified expert to rebut legal and market-design aspects | Court: Filler not qualified—no trading experience, minimal stats, limited market expertise; cannot reliably rebut technical experts |
| Expert testimony vs. legal conclusions | Expert may not provide legal conclusions or instruct jury; Filler’s report crosses that line | Filler’s legal analysis is proper expert context to rebut SEC experts | Court: Filler’s report impermissibly offers legal conclusions and would usurp judge/jury roles; inadmissible |
| Engagement with opposing experts’ methodologies | SEC: Filler fails to meaningfully engage with Hendershott/Pearson technical analyses | Avalon: Filler sufficiently criticizes legal import and conclusions of opposing reports | Court: Filler’s critiques are conclusory and overlook key analyses (e.g., NBBO Movement Analysis); thus unreliable rebuttal |
| Factfinding and speculative opinions | SEC: Filler’s factual inferences (e.g., traders’ intent, testing liquidity) are speculative and inappropriate for expert | Avalon: Filler may draw inferences about intent and market behavior to rebut fraud claims | Court: Such factual/intent inferences improperly do juror factfinding and are excluded |
Key Cases Cited
- United States v. Lumpkin, 192 F.3d 280 (2d Cir. 1999) (expert may not usurp judge’s or jury’s role by instructing on law or deciding facts)
- Marx & Co. v. Diners’ Club Inc., 550 F.2d 505 (2d Cir. 1977) (witnesses may not instruct jury on applicable legal principles)
- SEC v. Lek Sec. Corp., 276 F. Supp. 3d 49 (S.D.N.Y. 2017) (prior ruling describing manipulative schemes at issue and legal framework)