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  • SEC Achieves Jury Verdict In Cryptocurrency Fraud Case
    04/16/2024

    On April 5, 2024, a jury in the Southern District of New York found cryptocurrency startup Terraform Labs PTE Ltd. (the “Company”) and its co-founder, Do Kwon, liable for securities fraud. The jury sided with the SEC in determining that the Company lied to investors about the stability of their digital assets to raise billions of dollars by selling digital securities, many of which were unregistered. The verdict was delivered following a two-week long trial, providing a significant win to the SEC in its campaign to regulate the cryptocurrency sector and continuing a split among judges related to how to evaluate whether a cryptocurrency is a security.

    Categories : CryptocurrencySEC
  • SEC v. Panuwat – Northern District Of California Jury Endorses SEC’s “Shadow Trading” Theory
    04/16/2024

    On April 5, 2024, a jury in the Northern District of California found that Matthew Panuwat had misappropriated his employer’s confidential information and committed insider trading. The closely followed case represented the SEC’s first action under the so-called “shadow trading” theory. The SEC alleged that Panuwat possessed material nonpublic information (“MNPI”) that his employer, Medivation, would soon be acquired by Pfizer. The SEC further alleged that this information influenced his decision to purchase call options in a Medivation competitor—Incyte Corporation—because Panuwat believed the announcement of the Medivation acquisition would increase the stock prices of competitors. Despite the almost certain appeal of this decision to the Ninth Circuit, this verdict could strengthen the SEC’s resolve to bring more claims under the shadow trading theory and leaves open questions concerning whether legal and compliance officers should revise their insider trading policies and procedures to account for this development.

    Categories : 10b-5Insider TradingSEC
  • DOJ Announces Plan To Pay Corporate Whistleblowers
    03/26/2024

    On March 7, 2024, the Department of Justice announced a whistleblower rewards program intended to compensate individuals who assist the Department in discovering unknown significant corporate or financial misconduct with a portion of any resulting forfeiture. 

    Categories : DOJWhistleblower
  • New York Attorney General Sues Beef Processing Company In “Greenwashing” Complaint Alleging The Company Publicized Unrealistic “Net Zero” Goals For Itself To Deceptively Promote Its Products And Company As Environmentally Friendly
    03/26/2024

    On February 28, 2024, the New York Attorney General filed suit against one of the world’s largest beef processing companies (the “Company”), alleging that the Company engaged in deceptive business practices and false advertising by misleading the public about its environmental impact. The People of the State of NY v. JBS USA Food Co., et al., (N.Y. Sup. Ct., N.Y. Cnty. Feb. 28, 2024). Of particular note, the complaint focuses not on statements by the Company about its current environmental impact, or presently measurable facts—instead, the complaint focuses on statements by the Company about its future plans and ambitions that the Attorney General claims were not realistic and not supportable. For instance, the complaint alleges that the Company claimed that it would reach “net zero” by 2040 when, in fact, it had not yet measured its emissions or made plans for how it would do so. While not the first “greenwashing” complaint to be brought, it could be one of the most significant, and could shape expectations for companies going forward.

  • Supreme Court Rules Whistleblowers Need Not Prove Retaliatory Intent Under SOX
     
    02/13/2024

    On February 8, 2024, the Supreme Court of the United States unanimously held that whistleblower-plaintiffs need not prove that adverse employment actions were motivated by their employer’s retaliatory intent to obtain protection under the anti-retaliation provisions of the Sarbanes-Oxley Act (“SOX”).  Murray v. UBS Securities, LLC, No. 22-660 (Feb. 8, 2024).  This decision resolved a Circuit split and clarified the whistleblower’s burden under SOX is to prove that the protected activity was merely a contributing factor to the retaliatory act.
  • Historic Penalties For Cryptocurrency Exchange’s AML-Related Violations
     
    12/13/2023

    On November 21, 2023, the Cayman Islands registered cryptocurrency exchange, Binance Holdings Limited (the “Company”), pled guilty to criminal violations related to allegedly failing to register as a money transmitting business (“MTB”), failing to maintain an effective anti-money laundering program, and violations of the International Emergency Economic Powers Act (“IEEPA”).  In connection with its plea agreement with the Department of Justice, the Company agreed to pay $4.3 billion in penalty, including $1.8 billion as a criminal fine and $2.5 billion in disgorgement.  The Company’s founder also pled guilty to similar AML violations and agreed to resign as the Company’s Chief Executive Officer.
  • SEC Announces $25 Million Enforcement Action Over Company’s Use Of Stock Buyback Plans That SEC Alleged Failed To Comply With Rule 10b5-1
    11/21/2023

    On November 14, 2023, the Securities and Exchange Commission announced a settled enforcement action against Charter Communications, Inc. (“Company”) imposing a $25 million civil penalty over allegations that the Company had used stock buyback plans that did not comport with Rule 10b5-1 of the Securities Exchange Act of 1934.  The SEC claimed that the Company’s stock buyback plans did not comport with Rule 10b5-1 because the plans contained provisions that allowed the Company to change the total dollar amounts available to buy back stock and the timing of buybacks after the plans took effect; and while Rule 10b5-1 is a safe harbor rather than a standard that must be met, the SEC alleged that the use of buyback plans that did not meet the Rule 10b5-1 standard evidenced insufficient accounting controls in violation of Section 13(b)(2)(B) of the Exchange Act.
  • SEC Brings Groundbreaking Claims Against Company For Fraud Relating To Data Breach
     
    11/07/2023

    On October 30, 2023, the Securities and Exchange Commission filed claims against a software company (the “Company”) and its Chief Information Security Officer for alleged fraud and internal control failures relating to known cybersecurity risks and vulnerabilities.  SEC v. SolarWinds Corp., et al., No. 23-cv-9518 (S.D.N.Y. Oct. 30, 2023).  The SEC’s complaint alleges that the Company made misleading omissions, in connection with its disclosure in December 2020, that it had suffered a cyberattack that compromised its customers’ information.
    Categories : Enforcement MattersSEC
  • CFTC Issues Advisory Guidelines On Civil Penalties, Monitors And Admissions
     
    11/01/2023

    On October 17, the Commodity Futures Trading Commission’s Division of Enforcement released an advisory instruction to CFTC staff for future enforcement actions.  The advisory provided guidance on the following:  (i) whether proposed civil monetary penalties are sufficient; (ii) circumstances when the imposition of a corporate compliance monitor is appropriate; (iii) what duties and responsibilities of monitors should be; and (iv) whether admissions should be recommended in a particular enforcement action.  While the guidance leaves ample room for interpretation and development over time, the unambiguous thrust is to send a message that the CFTC is seeking to increase the severity of sanctions, both in terms of the size of monetary penalties and associated undertakings, continuing a trend that the CFTC has been pushing for several years.
  • SEC Sues Company For Unregistered Offerings Of NFTs
     
    10/11/2023

    On September 13, 2023, the U.S. Securities and Exchange Commission brought a settled enforcement action against Stoner Cats 2 LLC for raising approximately $8 million through an unregistered offering of Non-Fungible Tokens (“NFTs”) that the SEC alleged were securities.  This action is another example of the SEC alleging that crypto assets were securities based on the specific manner in which they were offered.
  • Nine Investment Firms Fined By The SEC For Marketing Rule Violations
     
    10/11/2023

    On September 11, 2023, the U.S. Securities and Exchange Commission announced settled enforcement actions against nine separate investment advisory firms for alleged marketing rule violations, assessing a total of $850,000 in combined penalties.  In each case, the SEC alleged that the firms improperly provided hypothetical performance information on their firm websites without following the requirements of the marketing rule.
  • SEC Announces Results Of Recent Enforcement Sweep Focused On Insider Ownership Reporting Failures
     
    10/11/2023

    On September 27, 2023, the Securities and Exchange Commission announced settled enforcement actions against six officers, directors and major shareholders of various public companies for allegedly failing to timely report information about their holdings and transactions in company stock, and simultaneously announced settled actions against five public companies for allegedly contributing to these insiders’ filing failures or for failing to report their insiders’ filing delinquencies.  The actions are part of a recent SEC enforcement initiative aimed at ensuring compliance with ownership disclosure rules by company insiders.
    Category : SEC
  • DOJ Announces Safe Harbor For Companies That Self-Disclose Misconduct Discovered During M&A
     
    10/10/2023

    On October 4, 2023, Deputy Attorney General Lisa O. Monaco announced a Department of Justice-wide safe harbor policy for voluntary self-disclosures made in connection with mergers and acquisitions.  During her remarks at the Society of Corporate Compliance and Ethics’ 22nd Annual Compliance and Ethics Institute, the Deputy Attorney General said that the Safe Harbor provides companies with the presumption that the DOJ will decline criminal prosecution when they voluntarily self-disclose misconduct by companies they are acquiring or have recently acquired.
  • Justice Department Announces New Corporate Enforcement Appointments In National Security Division
     
    10/10/2023

    On September 11, 2023, the Justice Department’s National Security Division (the “Division”) announced that it had made key appointments to lead the Division’s Corporate Enforcement program.  The new appointees include Ian Richardson as the first Chief Counsel for Corporate Enforcement and Christian Nauvel as Deputy Chief Counsel for Corporate Enforcement.  Richardson and Nauvel will be tasked with overseeing the Division’s investigation and prosecution of corporate crime deemed to relate to U.S. national security.  The Division had previously announced the establishment of these positions in March 2023, when Deputy Attorney General Lisa Monaco also announced that the Division would add more than 25 prosecutors to investigate and prosecute sanctions evasion, export control violations and other such economic crimes.
    Categories : DOJNational Security
  • SEC Fines International Conglomerate $6.5 Million For FCPA Violations Related To Client Travel And Hospitality Expenses
     
    09/06/2023

    On August 25, 2023, the Securities and Exchange Commission (“SEC”) accepted an Offer of Settlement (the “settlement”) from 3M Company (“3M”), related to alleged violations of the Foreign Corrupt Practices Act’s (“FCPA”) books and records and internal accounting control provisions (§§ 13(b)(2)(A) – (B) of the Securities Exchange Act of 1934).  Without admitting or denying the findings, 3M agreed to pay $6,581,618 to resolve allegations that 3M’s China subsidiary (“3M-China”) improperly accounted for overseas trips it provided to 3M-China’s customers who were employed by Chinese state-owned entities (SOEs).  According to the SEC, 3M-China invited SOE customers, who are deemed foreign officials under the FCPA, “to attend overseas conferences, educational events, and health care facility visits … ostensibly as part of 3M-China’s marketing and outreach efforts, but that in fact were often a pretext to provide overseas travel, sightseeing and entertainment … to the Officials to obtain and retain business from the SOE Customers.”
  • Corficolombiana Pays $80M To Resolve Bribery Probes
     
    08/16/2023

    On August 10, 2023, the U.S. Securities Exchange Commission (“SEC”) and the Department of Justice (“DOJ”), in coordination with Columbian authorities, announced that Colombian conglomerate Grupo Aval Acciones y Valores S.A (“Grupo Aval”) and its banking subsidiary Corporacion Financiera Colombiana S.A. (“Corficolombiana”) agreed to pay approximately $80 million USD for their alleged involvement in a scheme to pay $23 million USD in bribes to high-ranking government officials in Colombia, in violation of the anti-bribery provisions of the Foreign Corrupt Practices Act (“FCPA”).  In resolving these allegations, Corficolombiana entered into a three-year Deferred Prosecution Agreement (“DPA”) with the DOJ, and agreed to pay a $40.6 million USD criminal penalty, up to half of which may be credited against payments to the Columbian government.
  • In Denying Motion To Dismiss In Terraform Cryptocurrency Case, New York Federal Judge Rejects Key Aspects Of Ripple  Ruling, Continuing Uncertainty On How Securities Law Applies To Cryptocurrencies
    08/08/2023

    On July 31, 2023, United States District Court Judge for the Southern District of New York Judge Rakoff, denied cryptocurrency company Terraform Labs, Pte Ltd. (“Company”) and its founder’s motion to dismiss a suit that had been brought against them by the Securities and Exchange Commission (the “SEC”).  The SEC sued the Company and its founder in February 2023 after the Company’s algorithmic stablecoin collapsed in May 2022, contributing to multiple bankruptcies.  The SEC alleged that the Company and its founder made false and materially misleading statements to entice U.S. investors to purchase and hold on to the Company’s products, which the SEC claimed were unregistered investment-contracts that qualified as securities under Section 5 of the Securities Act of 1933 (the “Securities Act”).  SEC v. Terraform Labs Pte. Ltd., 2023 WL 4858299, at *1 (S.D.N.Y. July 31, 2023).  The Court held that the SEC had alleged a plausible claim for relief, and enough facts to establish the cryptocurrencies at issue were investment contracts requiring registration under the securities laws.
  • New York District Court Decides Significant Cryptocurrency Case, Holding That Whether Cryptocurrency Is A Security Turns On When And How It Was Sold
     
    08/01/2023

    On July 13, 2023, Judge Analisa Torres of the United States District Court for the Southern District of New York issued a decision on the parties’ cross-motions for summary judgment in SEC v. Ripple Labs, Inc., No. 1:20-cv-10832-AT-SN, holding that Ripple Labs, Inc. (the “Company”) unlawfully sold unregistered securities in violation of the Securities Act of 1933 (the “Securities Act”) by selling its cryptocurrency token, XRP, to certain institutional buyers, while at the same time holding XRP was not a security within the meaning of the Securities Act when sold on digital asset exchanges, given the different circumstances and expectations of buyers in those transactions.  The Court also held that the Company’s distributions of XRP to employees and third parties for the development of its project did not constitute sales of unregistered securities.  This is a pivotal decision for the cryptocurrency market and is a significant win for cryptocurrency exchanges in particular.
  • DC Circuit Enjoins FINRA Disciplinary Proceeding, Questions Constitutionality Of Hearing Officers
     
    07/11/2023

    On July 5, the United States Court of Appeals for the D.C. Circuit granted an emergency injunction blocking the Financial Industry Regulatory Authority (“FINRA”) from halting the securities business of Alpine Securities Corporation (the “Company”) through an expedited hearing process pending the Company’s appeal challenging the constitutionality of FINRA’s enforcement proceedings.  Alpine Securities Corporation, et al v. Financial Industry Regulatory Authority, Inc., 1:23-cv-01506-BAH (July 5, 2023).  While noting that this was not a decision on the merits, the court found that the Company had shown a likelihood that it will succeed on the merits in its challenge to the structure of FINRA enforcement actions, having at this early stage “raised a serious argument that FINRA impermissibly exercises significant executive power.”
  • United States Supreme Court To Hear Appeal On SEC Power To Initiate Administrative Proceedings
     
    07/06/2023

    On June 30, 2023, the United States Supreme Court agreed to hear an appeal regarding the constitutionality of administrative proceedings in the case of George Jarkesy and Patriot28 LLC v. SEC, which could have important ramifications on how federal agencies bring actions against alleged wrongdoers.  This grant of certiorari stems from a May 18, 2022, Fifth Circuit decision, Jarkesy v. Sec. & Exch. Comm’n, 34 F.4th 446 (5th Cir. 2022), which held that the use of administrative proceedings by the Securities and Exchange Commission (“SEC”) was unconstitutional, but its reasoning could also impact proceedings before the Federal Trade Commission and other agencies.
    Categories : ConstitutionSupreme Court
  • FCPA Charges Dismissed Due To DOJ’s Unduly Delayed Prosecution
     
    06/13/2023

    On June 7, 2023, a United States District Judge in the Southern District of Texas dismissed conspiracy charges related to Foreign Corrupt Practices Act (“FCPA”) and money laundering violations brought against Paulo Jorge Da Costa Casquiero Murta (“Murta”) by the Department of Justice, finding that prosecutors had intentionally caused delays in Murta’s trial, in violation of both the Speedy Trial Act and Murta’s Sixth Amendment right to a speedy trial.  United States v. Murta, 4:17-CR-00514-8 (S.D. Tex. June 6, 2023).  Murta, who had been in U.S. custody since July 2021, argued that despite his repeated demands for a speedy trial, the government had intentionally delayed his trial.  The Court agreed and dismissed the charges against Murta with prejudice, finding that DOJ’s prosecutors had acted in bad faith.
     
    Categories : DOJFCPA
  • Investment Adviser Fined $1.4 Million For Failure To Disclose SPAC Conflicts
     
    06/13/2023

    On May 31, 2023, the United States Securities and Exchange Commission (SEC) fined a New York investment adviser (Investment Adviser) $1.4 million for allegedly failing to disclose conflicts of interest regarding special purpose acquisition companies (SPACs).  In the Matter of RTW Invs., L.P., SEC Administrative Proceeding 3-21473 (May 30, 2023).  According to the SEC, Investment Adviser personnel sponsored two separate SPACs while those same personnel simultaneously invested client funds in the SPACs, which the SEC alleged was a conflict of interest that required disclosure.  The Investment Adviser neither admitted nor denied the allegations in the SEC’s Order.
     
    Categories : SECSPACs
  • Supreme Court Clarifies Scienter Standard For False Claims Act Liability
     
    06/06/2023

    On June 1, 2023, the Supreme Court issued a unanimous decision in the consolidated cases United States v. SuperValu Inc. and United States v. Safeway, Inc. holding that the False Claims Act’s (“FCA”) scienter element refers to a defendant’s knowledge and subjective beliefs—not what an objectively reasonable person would have known or believed.  No. 21-1326 (June 1, 2023).
  • Supreme Court And First Circuit Issue Decisions Reversing White Collar Convictions, Cautioning Against Prosecutorial Overreach In Honest Services Fraud Cases
     
    06/01/2023

    Two facially unrelated decisions, issued last week by the First Circuit and the Supreme Court, continued a recent theme of courts pushing back against potential prosecutorial overreach in the application of fraud statutes—especially in the area of honest services fraud.  In the first case, the First Circuit reversed the convictions of two “Varsity Blues” parents who had been found guilty of honest services fraud, among other charges, after paying money to individuals to help get their children into college under false pretenses.  And in the second case, the United States Supreme Court unanimously reversed the conviction of Joseph Percoco, a former manager of former New Governor Andrew Cuomo’s re-election campaign who had likewise been found guilty of honest services fraud, unanimously holding that the jury instructions used to convict him were too vague and would sweep in too much innocent conduct.
  • Dutch Company Settles Alleged FCPA Violations With SEC For $62M
     
    06/01/2023

    On May 11, 2023, the Securities and Exchange Commission (“SEC”) announced that Netherlands-based Koninklijke Philips N.V. (“Philips”) will pay more than $62 million to resolve claims that it violated the Foreign Corrupt Practices Act (“FCPA”) with respect to alleged conduct related to its sales of medical diagnostic equipment in China.  Admin. Proc. File No. 3-21411.  According to the SEC, Philips’ subsidiaries in China used special price discounts with distributors that created a risk that excessive distributor margins could be used to fund improper payments to employees.  Philips neither admitted nor denied wrongdoing as part of the settlement.
    Categories : FCPASEC
  • Supreme Court To Review Second Circuit Decision On Whistleblower Retaliation
     
    05/09/2023

    On May 1, 2023, the United States Supreme Court granted a writ of certiorari filed by alleged whistleblower against his former employer, a financial institution, in a case that is expected to clarify when the termination of a whistleblower amounts to unlawful retaliation under the Sarbanes-Oxley Act.
    Categories : Sarbanes-OxleyWhistleblower
  • Supreme Court Holds That Structural Challenges To Agency Administrative Proceedings May Be Brought Directly In Federal Court
     
    04/18/2023

    On April 14, 2023, the United States Supreme Court issued a unanimous decision in the consolidated cases of Axon Enterprises Inc. v. FTC and SEC v. Cochran, finding that constitutional challenges to the ability of the Federal Trade Commission (“FTC”) and the U.S. Securities and Exchange Commission (“SEC”) to bring certain claims as administrative proceedings can bypass the administrative appeals process and be brought directly in federal court. The Court concluded that the authorizing statutes of the regulatory agencies do not implicitly restrict federal district courts of original jurisdiction to hear any challenges to an agency’s constitutionality. Thus, although the Court did not decide the substance of the petitioners’ constitutional challenges to the agencies’ administrative proceeding processes, it allowed petitioners’ challenges to move forward in federal court.
  • CFTC Charges Digital Asset Exchange And Its Founder With Violating The Commodity Exchange Act And Commission Regulations
     
    04/18/2023

    On March 27, 2023, the Commodity Futures Trading Commission (“CFTC”) filed a civil enforcement action against three entities that operate a digital asset exchange (the “Company”) and its Founder and Chief Executive Officer (collectively “Defendants”) for willful violation of the Commodity Exchange Act (“CEA”) and CFTC regulations. Further, the CFTC charged the Company’s Former Chief Compliance Officer with aiding and abetting these violations. See Complaint, Commodity Futures Trading Comm’n v. Zhao, et al., Civil Action No. 1:23-cv-01887 (N.D. Ill. Mar. 27, 2023).
  • Brazilian Mining Company To Pay $55.9 Million To Settle SEC Charges Of Misleading ESG Disclosures
     
    04/18/2023

    On March 28, 2023, the Securities and Exchange Commission (“SEC”) submitted a settlement agreement (“settlement”) to the United States District Court of the Eastern District of New York with Brazilian mining company Vale S.A. (“Vale” or “Company”). Under the settlement, without admitting or denying the findings, the Company will pay a total of $55.9 million to resolve charges brought against it by the SEC on April 28, 2022, regarding the Company’s allegedly false and misleading representations in its environmental, social, and governance (“ESG”) disclosures. The SEC averred in its complaint that the Company concealed the unsafe condition of its dams, which caused its ESG disclosures to be materially false and misleading for investors. See SEC v. Vale S.A., Case No. 22-cv-2405-LDH-SJB (Mar. 28, 2023).
  • Telecommunications Company Agrees To Plead Guilty Following Alleged Breach Of 2019 Deferred Prosecution Agreement
     
    03/24/2023

    On March 2, 2023, the Department of Justice (“DOJ”) announced that a multinational telecommunications company headquartered in Stockholm, Sweden (the “Company”) agreed to plead guilty and to pay a penalty of approximately $206 million after allegedly breaching the cooperation and disclosure provisions of a 2019 Deferred Prosecution Agreement (“DPA”) it had previously entered into to address claims that it participated in a scheme to pay bribes, falsify books and records, and failed to implement reasonable internal accounting controls in violation of the Foreign Corrupt Practices Act (“FCPA”).
  • DOJ And SEC Charge Individual For Insider Trading Through Use Of 10b5-1 Trading Plans
     
    03/24/2023

    On March 1, 2023, the Department of Justice (“DOJ”) unsealed an indictment against the founder, CEO, and Chairman of a publicly traded health care company (the “Company”), alleging that he had illegally executed trades pursuant to Rule 10b5-1 trading plans while in possession of material nonpublic information. The Securities and Exchange Commission (“SEC”) filed a concurrent civil suit against defendant for the same activity. In each case, the government alleged that defendant improperly used his 10b5-1 plans by entering into them while in possession of material nonpublic information and triggering sales shortly thereafter, without any form of cooling-off period.
    Categories : 10b-5DOJInsider TradingSEC
  • Sterling Bancorp Pleads Guilty To Criminal Securities Fraud
     
    03/24/2023

    On March 15, 2023, the Department of Justice (“DOJ”) announced that Michigan-based bank Sterling Bancorp, Inc. (“Sterling”) agreed to plead guilty to securities fraud for allegedly filing false statements relating to its 2017 initial public offering (“IPO”) and 2018 and 2019 annual financial reports. As part of its guilty plea, Sterling agreed to pay fines totaling $69 million, including $27.2 million in restitution to non-insider stockholders.
  • SEC Charged McDonald’s For Public Disclosure Violations Related To The Board’s Exercise Of Discretion Respecting The Former CEO’s Termination And Charged The Former CEO For Fraud
     
    02/28/2023

    On January 9, 2023, the Securities Exchange Commission issued a cease-and-desist order against McDonald’s Corporation and the Company’s former CEO Stephen Easterbrook related to Easterbrook’s departure. The SEC’s order alleged that the Company failed to disclose in a Form 8-K that it exercised discretion in terminating Easterbrook “without cause,” and allowed him to retain more than $40 million in equity-based compensation that would have been forfeited if the company had terminated him “for cause;” and further alleged that Easterbrook withheld information about his relationships with Company employees in an internal investigation. Without admitting or denying the findings, the Company and Easterbrook consented to the entry of the Order. See In re Easterbrook & McDonald’s Corp., No. 3-21269 (Jan. 9, 2023).
    Categories : 10b-5Enforcement ActionsSEC
  • United States Department Of Justice Issues Voluntary Self-Disclosure Policy Pursuant To Deputy Attorney General’s September 15, 2022, Memorandum
     
    02/28/2023

    On February 22, 2023, the United States Department of Justice issued the United States Attorney’s Offices’ Voluntary Self-Disclosure Policy for corporate criminal enforcement, which sets forth the criteria the 94 United States Attorney’s Offices will use to determine the appropriate resolution for a corporate entity that voluntarily self-discloses misconduct to a USAO. The VSD Policy is intended to provide incentives, including declinations or reduced fines, to corporations that timely disclose misconduct, cooperate with the DOJ’s investigation, and remediate misconduct. It applies to all USAOs and is effective immediately.
    Category : USAO
  • SEC Brings Enforcement Action Over Company’s Alleged Failure To Track Information About Workplace Misconduct Relevant To Risk Factor Disclosures About Employee Retention
     
    02/14/2023

    On February 3, 2023, the Securities and Exchange Commission (“SEC”) announced a settled enforcement action against video game maker Activision Blizzard Inc. (the “Company”) for an alleged failure to maintain procedures designed to collect employee complaints of workplace misconduct and analyze them for disclosure purposes. The SEC found that the lack of such procedures violated the Company’s obligation to maintain procedures designed to ensure that information required to be disclosed in the Company’s SEC reports was in fact timely reported. In addition, the SEC’s enforcement action alleged that the Company had improperly impeded former employees from communicating directly with the SEC staff about possible securities law violations by requiring those employees, through a clause in their separation agreements, to notify the Company of any requests from an administrative agency in connection with a report or complaint. Without admitting or denying the findings, the Company agreed to pay a $35 million civil penalty, but Commissioner Hester Peirce issued a spirited dissent arguing that the SEC’s allegations did not in fact amount to securities law violations.
    Categories : Exchange ActSECWhistleblower
  • DOJ Announces Revisions To The Criminal Division’s Corporate Enforcement Policy
     
    02/03/2023

    On January 17, 2023, Assistant Attorney General Kenneth A. Polite delivered remarks announcing revisions to the Department of Justice (“DOJ”) Criminal Division’s Corporate Enforcement Policy (“CEP”) at Georgetown Law Center.  The revisions aim to encourage additional companies to voluntarily self-disclose potential criminal conduct they may uncover by setting more granular incentives that will be provided to companies in such circumstances.  While there is still substantial subjectivity embedded in the revised policy regarding when and how such incentives will be made available to companies, the revisions will put added pressure on companies to make self-disclosures in certain circumstances.
  • DOJ And SEC Extend FCPA Monitorship For Telecom Company
     
    12/20/2022

    On December 14, a multinational telecommunications company headquartered in Stockholm, Sweden (the “Company”), announced it had reached agreement with the U.S. Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”) to extend the Company’s independent compliance monitorship by one year, to June 2024.  The agreement to extend the monitor, which had been required under a 2019 resolution with the DOJ, was the result of the DOJ determining that the Company had failed to adequately disclose compliance matters that it had investigated in Iraq.
  • SEC Announces Year-End Enforcement Results, Emphasizing Record-Setting Penalty Awards
     
    11/22/2022

    On November 15, 2022, the Securities and Exchange Commission (“SEC”) released its summary of enforcement actions for the 2022 fiscal year, which ended on June 30, 2022. The SEC announced that it filed 760 enforcement actions, a nine percent increase over 2021. The actions resulted in orders of a record-breaking $6.439 billion to be paid to the SEC, including roughly $4.2 billion in penalties. The SEC noted that the high numbers reflect its “sense of urgency to protect investors, hold wrongdoers accountable and deter future misconduct in our financial markets.”
    Categories : SECWhistleblower
  • CFTC Releases Its Annual Enforcement Results
     
    11/01/2022

    On October 20, 2022, the Commodity Futures Trading Commission (“CFTC”) released its enforcement results for Fiscal Year (“FY”) 2022, reporting that it had filed 82 enforcement actions. Eighteen of the actions brought in FY 2022 involved cryptocurrency or other digital assets, an area which has seen progressively increasing scrutiny from the CFTC and other enforcement agencies. The CFTC also reported that it obtained orders collectively imposing over $2.5 billion in fines in that period.
    Categories : CFTCEnforcement Actions
  • SEC And CFTC Orders Concerning Electronic Communications
     
    10/11/2022

    On September 27, 2022, the SEC announced charges against affiliates of 11 financial institutions (15 broker-dealers and one investment adviser) for allegedly failing to maintain and preserve electronic communications and allegedly failing to reasonably supervise from January 2018 through September 2021. See SEC Press Release 2022-174 (Sept. 27, 2022).  On the same day, the CFTC announced charges against affiliates of the same 11 financial institutions for allegedly failing to maintain, preserve, or produce required records, and allegedly failing to supervise matters related to their businesses as swap dealers and futures commission merchants.
    Categories : CFTCSEC
  • The DOJ Reinforces And Updates Corporate Criminal Enforcement Priorities With Speech By Deputy Attorney General Lisa O. Monaco
     
    09/30/2022

    On September 15, 2022, Deputy Attorney General Lisa O. Monaco delivered remarks on the Department of Justice’s corporate prosecution priorities at New York University, at the invitation of the University’s Project on Corporate Compliance and Enforcement.  While many of her comments were simply a reiteration of existing priorities, some were potentially meaningful changes.  Indeed, by clarifying certain points and strengthening others, Monaco emphasized the “carrot and stick” approach to signal loud and clear that the DOJ remains as focused as ever on pursuing corporate crime.  She unambiguously encouraged corporations both to self-report potential criminal activity and cooperate in the investigation of culpable individuals, indicating that failure to do so could lead to severe consequences.  At the same time, as has long been the case, the policies leave somewhat subjective the true nature of any “carrot” and any “stick” that would apply in any given case, making the decision of how corporations should deal with potential criminal conduct one of the most challenging decisions corporations can face.
  • SEC Brings Actions Against Underwriters In First-Ever Municipal Bond Disclosure Cases
     
    09/30/2022

    On September 13, 2022, the Securities and Exchange Commission (“SEC”) filed suit in the United States District Court for the Southern District of New York against an underwriter for allegedly failing to comply with the regulatory requirements of the Exchange Act’s Rule 15c2-12 (17 C.F.R. § 240.15c2-12), which provides a limited exception to certain disclosure requirements where underwriters have a reasonable belief that the municipal securities are being sold only to sophisticated investors that are each buying the securities for a single account.  See SEC v. Oppenheimer & Co., Inc., S.D.N.Y. No. 1:22-cv-7801 (Sept. 13, 2022).  The SEC also initiated settled enforcement actions with three other firms for similar alleged violations.  This is the first time that the SEC has initiated municipal-bond disclosure cases.
  • SEC Brings Enforcement Action Against Investment Advisor For Allegedly Failing To Disclose Conflicts Of Interest In SPACs Into Which It Invested Client Funds
     
    09/15/2022

    On September 6, 2022, the Securities and Exchange Commission announced that New York-based, registered investment advisor Perceptive Advisors LLC (“Investment Advisor”) had agreed to pay a $1.5 million civil penalty for allegedly failing to disclose conflicts of interest regarding ownership of its personnel in sponsors of special purpose acquisition companies (SPACs).  According to the SEC, the Investment Advisor used private client funds to facilitate transactions benefitting SPACs in which the Investment Advisor’s personnel and other clients had financial interests but failed to disclose the alleged conflicts resulting from those interests.
  • Second Circuit Overturns $1 Million Whistleblower Award For Improper Jury Instruction
     
    08/16/2022

    On August 5, 2022, the United States Court of Appeals for the Second Circuit overturned a judgment of approximately $1 million awarded to a purported whistleblower after a jury determined in 2017 that the financial institution unlawfully terminated the employee in retaliation for his refusal to change certain aspects of his research reports related to commercial mortgage-backed securities.  In narrowing the universe of alleged whistleblowers who may be entitled to relief for retaliation, the Second Circuit held that the trial judge failed to inform the jurors as to the critical burden whistleblowers bear under the Sarbanes-Oxley Act: namely, that a whistle-blower must prove that their employer intended the alleged employment action to be retaliatory.
    Categories : SECSecond CircuitWhistleblower
  • New York Fines Crypto Trading Platform $30M In First-Ever DFS Crypto Settlement
     
    08/16/2022

    On August 2, 2022, New York State’s Department of Financial Services (“DFS”) announced that Robinhood Crypto, LLC (“RHC”), a trading platform that allows customers to transact in cryptocurrencies, had agreed to pay a $30 million fine to resolve allegations of “significant” lapses in its compliance with New York State anti-money laundering and cybersecurity regulations.  In addition to the fine, the settlement will also require RHC to hire an independent consultant to evaluate the company’s remediation efforts and compliance with DFS regulations. RHC did not admit to the allegations contained in the Consent Order.
  • SEC And DOJ Bring First Ever Charges For Cryptocurrency Insider Trading Tipping Scheme
     
    07/28/2022

    On July 21, 2022, the Securities and Exchange Commission (“SEC”) filed a complaint and the Department of Justice (“DOJ”) unsealed an indictment against Ishan Wahi, a former Coinbase employee, his brother, Nikhil Wahi, and friend, Sameer Ramani, for alleged insider trading.  SEC v. Ihan Wahi, Nikhil Wahi, and Sameer Ramani, 2:22-cv01009 (W.D. Wa. July 21, 2022); United States v. Ishan Wahi, Nikhil Wahi, and Sameer Ramani, 22-cr-392 (S.D.N.Y. 2022).  Both the complaint and indictment concern the same underlying conduct by Wahi, who allegedly provided dozens of tips to his brother and friend over several months to purchase certain digital assets tied to cryptocurrencies (the “digital assets”) shortly before they were publicly listed on Coinbase’s exchange.
  • Second Circuit Rejects SEC Request To Revisit Holding That “Scheme Liability” Requires Conduct Beyond Misstatements And Omissions
     
    07/28/2022

    On July 15, 2022, a panel of the United States Court of Appeals for the Second Circuit ruled against the Securities and Exchange Commission (“SEC”) in an interlocutory appeal the SEC had brought seeking to expand the scope of “scheme liability” under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c) thereunder.  SEC v. Rio Tinto plc, No. 21-2042 (2d Cir. Jul. 15, 2022).  Specifically, the SEC had urged the Second Circuit, in a case it had brought against a mining company and certain of its former executives (the “Defendants”), to hold that the Supreme Court’s decision in Lorenzo v. SEC, 139 S. Ct. 1094 (2019), abrogated the Second Circuit’s prior decision in Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005), which had found that a defendant can only be liable for scheme liability under Rule 10b-5(a) and (c) where they engage in misleading conduct beyond misstatements and omissions.  The Second Circuit panel ruled that Lentell remains good law, and that any expansion of the scheme liability provisions of Rule 10b-5(a) and (c) would need to come either from the Second Circuit en banc or the Supreme Court.
    Categories : SECSecurities Act
  • FINRA Fines Broker-Dealer $9 Million For Allegedly Attempting To Influence The Market For Offered Securities
     
    07/06/2022

    On June 23, 2022, FINRA’s Department of Enforcement announced a settlement in which a broker-dealer agreed to pay $3.6 million in fines, $4.77 million in disgorgement, and partial restitution of over $625,000 to resolve the broker-dealer’s alleged misconduct under the Exchange Act and NASD and FINRA Rules in connection with three IPOs and seven follow-on offerings between June 2016 and December 2018 for which the broker-dealer acted as underwriter, as well as for other supervisory and operational violations.
    Categories : Enforcement MattersFINRA
  • SEC Brings Its First Regulation Best Interest Enforcement Action
     
    06/23/2022

    On June 15, 2022, the Securities and Exchange Commission (“SEC”) filed a complaint in the U.S. District Court for the Central District of California against registered broker-dealer Western International Securities, Inc. (“Western”) and five of its registered representatives (the “Registered Representatives”), alleging that they had violated the Best Interest Obligation under Rule 15l-1(a) of the Securities Exchange Act of 1934 (“Regulation Best Interest” or “Reg BI”) in connection with their recommendations to retail customers to purchase certain unrated debt securities.  This is the first action brought by the SEC to enforce Reg BI, and the litigation could lead to important legal rulings clarifying its scope.
  • SEC Brings Action Against Investment Advisers For Allegedly Misleading Robo-Adviser Clients About Hidden Fees
     
    06/23/2022

    On June 13, 2022, the Securities and Exchange Commission (“SEC”), announced that it had instituted a settled administrative proceeding accusing several investment advisers (the “Advisers”) that focused on robo-advising, and all of which were themselves subsidiaries of a prominent investment adviser, of violating Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 and Section 15(b) of the Securities Exchange Act of 1934.  Broadly, the SEC accused them of failing to invest client cash in ways that their own analyses showed would be optimal for the clients, and instead retaining cash in a way that benefitted the Advisers.  The Advisers did not admit or deny the SEC’s allegations as part of the resolution, but as part of the settlement agreed collectively to disgorge approximately $52 million and to pay a civil monetary penalty of $135 million and were also required to engage an independent consultant and engage in certain other undertakings.
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