On October 25, 2016, New York Attorney General (“NYAG”) Eric Schneiderman announced settlements with daily fantasy sports providers DraftKings, Inc. (“DraftKings”) and FanDuel Inc. (“FanDuel”) that resolved claims that the companies had violated New York’s deceptive advertising laws by, among other things, failing to disclose the significant technological advantages enjoyed by more sophisticated players and overstating the likelihood of winning large cash prizes.  Settlement Agreement, In the Matter of DraftKings, Inc. (Oct. 25, 2016); Settlement Agreement, In the Matter of FanDuel Inc. (Oct. 25, 2016).  Under the terms of the settlements, DraftKings and FanDuel each agreed to pay $6 million in penalties and costs and reform their marketing efforts to align with a series of highly specific demands for disclosure by the NYAG.  

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On Monday, October 17, 2016, Judge Richard M. Berman of the United States District Court for the Southern District of New York denied a motion to dismiss criminal charges against a Turkish businessman, who allegedly violated U.S. sanctions against Iran by directing foreign companies to conduct U.S. dollar transactions on behalf of, and for the benefit of, Iranian entities and individuals.  United States v. Zarrab, Case No. 1:15-cr-00867 (S.D.N.Y. October 17, 2016).  Judicial decisions interpreting the scope of criminal violations of U.S. sanctions laws are rare, as corporate defendants have recently opted to settle allegations.  This decision offers valuable insight into the application of U.S. sanctions laws to foreign actors, operating on foreign soil.

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On October 11, 2016, the Securities and Exchange Commission (“SEC” or “Commission”) announced its enforcement results for its 2016 fiscal year.  The SEC brought an all-time record 868 enforcement actions in FY 2016, the third consecutive year in which the SEC has set a new record for enforcement activity.  The 868 enforcement actions were an approximately 7.5 percent increase over 2015 and nearly 15 percent over 2014, and resulted in the Commission collecting over $4 billion in disgorgement and penalties in FY 2016.

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On October 11, 2016, Judge Brett Kavanaugh, writing for the United States Court of Appeals for the D.C. Circuit, vacated an administrative enforcement order brought by the Consumer Financial Protection Bureau (“CFPB”) against PHH Corp. (“PHH”) for violations of Section 8 of the Real Estate Settlement Procedures Act (“RESPA”).  PHH Corp. v. CFPB, No. 15-1177 (D.C. Cir. Oct. 11, 2016).  The Court held, in relevant part, that the structure of the CFPB—an independent agency with power concentrated in a single director who is unaccountable to the President of the United States—represented an unconstitutional delegation of unchecked executive authority.  As a remedy, the Court held that the President must have the power to remove, direct, and supervise CFPB’s director, but otherwise permitted the CFPB to continue its work.  Accordingly, the immediate practical impact of the decision will be limited, but over the long term the CFPB may begin to answer more directly to the political leanings of the Executive Branch, rather than Congress.

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On September 30, 2016, Florida accountants Joseph D’Arelli and Mitchell Pruzansky, together with the firm D’Arelli Pruzansky P.A., agreed to pay a $50,000 civil penalty to settle the SEC’s investigation into alleged violations of auditor independence rules, which occurred when D’Arelli and Pruzansky each failed to rotate off certain audit engagements after five consecutive years.  The respondents neither admitted nor denied the SEC’s allegations, which were included in a settled cease and desist order that cited violations of Section 10A(j) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10A-2 thereunder.  In the Matter of D’Arelli Pruzansky, P.A., et al., File No. 3-17605 (Sept. 30, 2016).

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​On September 27, 2016, Weatherford International Ltd. (“Weatherford”), the world’s seventh-largest oilfield services company, agreed to pay $140 million to settle accounting and reporting fraud claims brought by the Securities Exchange Commission (“SEC”).  In the Matter of Weatherford International PLC, Admin. Proc. File No. 3-17582 (Sept. 27, 2016).  In a settled order instituting administrative proceedings, the SEC alleged that Weatherford used deceptive accounting practices to inflate its earnings by over $900 million between 2007 and 2012, and accused Weatherford’s former vice president of tax, James Hudgins, and former tax manager, Darryl Kitay, as bearing personal responsibility.  Neither Weatherford nor the two individuals acknowledged wrongdoing as part of the settlement.

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On Monday, September 19, the United States Securities and Exchange Commission (“SEC”) announced that public accounting firm Ernst & Young (“EY”) agreed to pay a total of $9.3 million to settle separate charges that two of the firm’s audit partners, Gregory Bednar and Pamela Hartford, violated auditor independence rules after overseeing allegedly independent audits while allegedly engaging in personal relationships with senior executives of the EY issuer clients that were being audited.
 
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On September 13, 2016, Pharol SGPS, S.A., formerly known as Portugal Telecom SGPS, S.A. (“Portugal Telecom”), agreed to pay a $1.25 million civil penalty to resolve the SEC’s investigation into its alleged accounting and controls failures.  In the Matter of Portugal Telecom, SGPS, S.A., File No. 3-17534 (Sept. 13, 2016).  The alleged accounting and control failures related to Portugal Telecom’s 2013 disclosure of its short-term investments in debt securities.  Portugal Telecom neither admitted nor denied the SEC’s allegations, which were made as a part of a settled cease and desist order alleging violations of Section 13 of the Exchange Act.  

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On August 31, 2016, the United States Court of Appeals for the Ninth Circuit vacated a judgment in favor of Peter Jensen and Thomas Tekulve, Jr., former officers of Basin Water, Inc., and remanded for a jury trial.  SEC v. Jensen, No. 14-55221 (9th Cir. Aug. 31, 2016).  The Court held, in relevant part, that the officers could be subject to the disgorgement provisions of Section 304 of the Sarbanes-Oxley Act (“SOX 304”) following the company’s accounting restatements as long as the restatements were issued due to misconduct, even if that misconduct was not on the part of the defendants.  

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On August 30, 2016, the United States Department of the Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation, the National Credit Union Association, and the Office of the Comptroller of the Currency (together “Federal Banking Agencies” or “FBAs”), released a four-page fact sheet outlining their expectations for domestic banks evaluating the regulatory risks posed by foreign financial institutions.  U.S. Department of the Treasury and Federal Banking Agencies Joint Fact Sheet on Foreign Correspondent Banking: Approach to BSA/AML and OFAC Sanctions Supervision and Enforcement (the “Fact Sheet”).  The Fact Sheet addresses the obligations of domestic banks to comply with the Bank Secrecy Act (BSA)—including the BSA’s anti-money laundering (AML) and combating the financing of terrorism (CFT) requirements—as well as with U.S. sanctions programs administered by the Office of Foreign Asset Control (OFAC).  

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On August 23, 2016, the United States Court of Appeals for the Tenth Circuit rejected an appeal by Charles Kokesh that contested, among other things, an order that he pay $34.9 million in disgorgement on statute of limitations grounds.  S.E.C. v. Kokesh, No. 15-2087, slip op. at 2 (10th Cir. Aug. 23, 2016).  Kokesh had claimed that the disgorgement order should have been barred by the five-year limitations period in 28 U.S.C. § 2462, citing the recent Eleventh Circuit decision S.E.C. v. Graham, 823 F.3d 1357 (11th Cir. 2016), which held that § 2462 applied to disgorgement.  The Tenth Circuit, however, rejected the Eleventh Circuit’s analysis and held that the disgorgement order was not subject to § 2462 because it was neither a penalty nor forfeiture.

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On August 23, 2016, four Apollo Global Management advisers, each organized as a Delaware limited partnership, agreed to pay a total of roughly $52.7 million (including $37.527 million in disgorgement and a $12.5 million civil penalty) to settle the SEC’s investigation of alleged breaches of fiduciary duty stemming from, among other things, a failure to disclose accelerated fees paid by Apollo funds’ portfolio companies and alleged misrepresentations about which entity would ultimately be allocated the interest that accrued on a loan.  SEC Press Release, Apollo Charged With Disclosure and Supervisory Failures, Rel. No. 2016-165 (Aug. 23, 2016).  The advisers neither admitted nor denied the SEC’s allegations, which were made as a part of a settled cease and desist order alleging violations of the Investment Advisers Act of 1940.  

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On August 15, 2016, the United States Court of Appeals for the Second Circuit reversed the district court’s judgment of acquittal for Kristofor Lange on venue grounds.  See U.S. v. Lange, No. 14-2442-cr, slip op. at 2 (2d Cir. Aug. 15, 2016).  Lange had been convicted of securities fraud and conspiracy to commit wire fraud after a jury trial.  The Court held that venue was in fact proper in the Eastern District of New York because individuals targeted by Lange’s scheme had received phone calls in the district and because it was foreseeable to Lange that calls would be made to individuals located there.  

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On August 10, 2016, the Securities and Exchange Commission (“SEC”) instituted a settled administrative proceeding against a building products distributor.  The allegations focused on the distributor’s use of severance agreements that required outgoing employees to forego their ability to recover monetary rewards under various whistleblower statutes.  In the Matter of BlueLinx Holdings, Inc., Admin. Proc. File no. 3-17371 (Aug. 10, 2016).  Six days later, the SEC instituted another settled administrative proceeding that raised similar allegations regarding the use of such severance agreements; this time, involving a health insurance provider.  In the Matter of Health Net, Inc., Admin. Proc. File No. 3-17396 (Aug. 16, 2016).  The details of both settlements are set forth below:

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On Friday, August 5, 2016, the Securities and Exchange Commission (the “SEC” or “Commission”) issued an opinion barring John J. Aesoph and Darren M. Bennett (“Respondents”), both former CPAs for KPMG, from practicing or appearing before the SEC, with a right to apply for reinstatement in three and two years, respectively, on the grounds that they had negligently engaged in improper professional conduct within the meaning of SEC Rule 102(e).  In re John J Aesoph and Darren M. Bennett, Admin Proc. File No. 3-15168 (August 5, 2016),  In so doing, a divided Commission levied harsher sanctions than had been imposed by the Administrative Law Judge who presided over the matter or requested by the Division of Enforcement.

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On August 9, 2016, a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit found the use of administrative law judges (“ALJs”) by the Securities and Exchange Commission (“SEC” or “Commission”) to be constitutionally sound, holding that the SEC’s use of ALJs does not violate the Appointments Clause of the U.S. Constitution because, rather than acting as officers of the United States, these ALJs, who lack the authority to issue final decisions, act as employees.  Raymond J. Lucia Cos. Inc. v. Securities and Exchange Commission, No. 15-1345 (D.C. Cir. Aug. 9, 2016).  With at least one similar case pending before the Tenth Circuit, and a number of contested actions still pending in front of the Commission itself, the Lucia decision has the potential to be an important precedent-setting decision.

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On July 25, 2016, the Securities and Exchange Commission (“SEC”) announced that on July 20, 2016, the Honorable Charles Pannell of the Northern District of Georgia entered a final judgment against Michael Sean Cain.  Pursuant to the judgment, Cain consented to a permanent injunction and to pay a civil penalty of $36,991.20, a sum that exceeds his own alleged insider trading profits by less than $350, despite allegations that persons to whom he provided the insider information earned profits that exceeded $380,000.  

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On Thursday, July 14, 2016, the Second Circuit effectively quashed a judicially authorized search warrant by which the U.S. Government had sought to obtain customer data that Microsoft stored overseas.  Microsoft Corp. v. United States, No. 14-2985, slip op. (2d Cir. July 14, 2016).  In doing so, the Second Circuit held that the Government cannot obtain a search warrant under the Stored Communications Act (SCA) to obtain electronic customer data located exclusively on foreign servers, even where a U.S. corporation has custody and control of that data.   

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On July 14, 2016, the Second Circuit released its decision in Microsoft Corp. v. United States, No. 14‐2985, slip op. (2d Cir. July 14, 2016). The Second Circuit rejected the Government’s efforts to require Microsoft to turn over emails held overseas in its data center in Dublin, Ireland pursuant to a judicially-authorized search warrant.

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On July 13, 2016, the SEC adopted amendments to the Rules of Practice that govern administrative proceedings to, among other things, expand discovery and extend the timelines for conducting administrative proceedings.  Press Release, SEC Adopts Amendments to Rules of Practice for Administrative Proceedings (July 13, 2016), www.sec.gov/news/pressrelease/2016-142.html.  The adopted amendments are little changed from those that were initially proposed in September 2015.  At the time, SEC Chair Mary Jo White defended the amendments as “provid[ing] parties with additional opportunities to conduct depositions and add[ing] flexibility to the timelines . . . while continuing to promote the fair and timely resolution of the proceedings.”

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On July 11, 2016, the Securities and Exchange Commission (“SEC”) announced that Johnson Controls, Inc. (“Johnson Controls”), a Wisconsin-headquartered global provider of automatic temperature control systems, had agreed to pay $14.3 million to settle alleged violations of the Foreign Corrupt Practices Act (“FCPA”).  In the Matter of Johnson Controls, Inc., Admin. Proc. No. 3-17337 (July 11, 2016) (order instituting proceedings).  Although Johnson Controls reportedly self-disclosed the violations, cooperated extensively with the SEC and Department of Justice (DOJ), identified individuals associated with the misconduct, and engaged in robust remediation, the company nevertheless was required to pay a civil money penalty in addition to disgorging the profits it reaped as a result of the scheme.  The DOJ agreed to issue a declination, but the SEC took a harder line.

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On July 1, 2016, Germany’s Federal Financial Supervisory Authority (“BaFin”) announced the creation of a centralized office for whistleblowers to report regulatory violations. BaFin also noted in its announcement that it believed that protecting whistleblowers was a top priority.  Numerous regulators throughout the world have now created dedicated whistleblower offices, and BaFin’s efforts seem fully in line with this growing and impactful trend.

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The Securities and Exchange Commission (SEC or Commission) brought over 400 enforcement actions in the first half of fiscal year (FY) 2016, and is on pace to surpass its record of 807 enforcement actions in a single fiscal year, set in FY 2015.

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On June 27, 2016, the United States Court of Appeals for the Second Circuit granted a motion to allow former ratings agency and private equity executives to jointly file a petition for rehearing of their appeals challenging the constitutional validity of SEC proceedings before administrative law judges.  Barbara Duka v. U.S. Securities and Exchange Commission, No. 15-2732, slip op. at *1 (2nd Cir. June 27, 2016); Tilton v. Securities and Exchange Commission, No. 15-2103.  In a two-sentence ruling, the Second Circuit granted the motion to permit the petitioners, Barbara Duka and Lynn Tilton, to proceed jointly in their attempts to overturn the Second Circuit’s holding that underlying SEC proceedings must conclude before the constitutionality of those proceedings may be challenged in federal court.  Duka and Tilton had filed separate lawsuits seeking to halt administrative proceedings brought against them by the SEC, claiming that SEC administrative law judges’ appointments and insulation from removal are unconstitutional.

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On June 27, 2016, the Supreme Court unanimously overturned the 2014 conviction of former Virginia Governor Robert McDonnell.  McDonnell v. United States, No. 15-474, 2016 WL 3461561 (June 27, 2016).  A jury had convicted McDonnell on charges related to accepting things of value in exchange for performing “official acts,” but the Court defined “official act” narrowly and required that such an act “involve a formal exercise of governmental power.”  Since the district court’s jury instruction appeared to define an official act more broadly, the Court held that the jury may have convicted McDonnell without finding that he had committed an official act, and vacated McDonnell’s conviction. 

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We are now halfway into 2016. After a few relatively slow years, it appears that 2016 may reflect a return to more active FCPA enforcement as, in the last six months, the two U.S. enforcement agencies, the DOJ and the SEC, have collectively brought as many cases as they did in the entire year of 2015 and more than in the two preceding years. What is interesting, however, is that, although some of the cases involved household corporate names, the penalties were relatively low—with the exception of the VimpelCom case— and the patterns of corruption, albeit with some exceptions, fairly mundane. More controversial have been some of the policy changes announced by the DOJ, placing a premium on voluntary disclosure and cooperation, including overtly and mandatorily “throwing employees under the bus” in exchange for allegedly deeper discounts on penalties and other forms of leniency. 

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The Securities and Exchange Commission (SEC or Commission) brought over 400 enforcement actions in the first half of fiscal year (FY) 2016, and is on pace to surpass its record of 807 enforcement actions in a single fiscal year, set in FY 2015.

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On June 20, 2016, the Supreme Court held that, to maintain a civil claim under the Racketeer Influenced and Corrupt Organizations (“RICO”) Act, a private plaintiff “must allege and prove a domestic injury to its business or property.”  RJR Nabisco, Inc. v. European Cmty., No. 15-138, 2016 WL 3369423 (June 20, 2016).  And while the Court also separately held that a plaintiff may base a civil RICO claim on predicate acts that were committed abroad, those acts must violate underlying statutes that Congress unmistakably intended to apply extraterritorially.  

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On June 16, 2016, the SEC settled civil claims with fund administrator Apex Fund Services (US) Inc. (“Apex”), relating to allegations that Apex failed to heed red flags and correct faulty accounting for two of its clients.  SEC Press Release, Private Fund Administrator Charged with Gatekeeper Failures, Rel. No. 2016-120 (June 16, 2016).  

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On June 14, 2016, the United States Court of Appeals for the D.C. Circuit denied consolidated petitions brought by the chief securities regulators for Massachusetts and Montana seeking to vacate a recently-enacted Securities and Exchange Commission (the “Commission”) registration exemption known as Regulation A-Plus. —F.3d—, 2016 WL 3254610 (D.C. Cir. 2016). The Court held that Regulation A-Plus withstood scrutiny under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984), and that the Commission had provided a satisfactory basis for the regulation.

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On June 13, 2016, United States District Judge Susan D. Wigenton denied the defense’s motions to dismiss charges arising out of the so-called “Bridgegate” scandal.  United States v. Baroni, No. 15-cr-193, slip op. at 1 (D.N.J. June 13, 2016).  

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On June 6, 2016, and June 7, 2016, the SEC filed settled administrative proceedings against accounting and audit firms for allegedly deficient auditing procedures. These enforcement actions, along with recent press statements and general trends in SEC enforcement, reflect the SEC’s renewed focus on addressing accounting fraud.

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On May 26, 2016, a three-judge panel of the United States Court of Appeals for the Eleventh Circuit issued SEC v. Graham, 1 a significant decision that, at least in the Eleventh Circuit, limits the ability of the Securities and Exchange Commission (“SEC” or “Commission”) to obtain disgorgement of ill-gotten gains in civil injunctive actions filed more than five years after the allegedly violative conduct. In so doing, the Eleventh Circuit ruled that 28 U.S.C. § 2462—the federal catch-all five-year statute of limitations—applies to the equitable remedy of disgorgement, because disgorgement is nothing other than “forfeiture,” which is expressly covered by Section 2462. Graham comes after the Supreme Court’s 2013 decision in Gabelli v. SEC where the Court declined to consider whether claims for disgorgement were subject to Section 2462 but signaled that it was generally in favor of limiting the government’s ability to obtain relief for conduct long in the past, noting that “even wrongdoers are entitled to assume that their sins may be forgotten.”

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On May 26, 2016, in SEC v. Graham, the Eleventh Circuit became the first circuit to hold that claims brought by a government agency for disgorgement and declaratory relief are subject to the five-year statute of limitations set forth in 28 U.S.C. § 2462.  The panel held that the disgorgement and declaratory relief the SEC sought were functionally identical to “forfeiture” and “penalties,” respectively, as defined by Section 2462, but that the injunctive relief sought by the SEC was not time-barred.  Graham appears to create a circuit split that would prompt Supreme Court review, as prior courts have found that disgorgement was not subject to the limitations period in Section 2462.

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On June 1, 2016, in Tilton v. SEC,  a divided Second Circuit panel affirmed the dismissal of a constitutional challenge to the SEC’s use of administrative proceedings on the grounds that the claim could only be brought in an appeal following the issuance of a final order by the SEC after the proceedings have concluded.  The panel’s decision to dismiss on jurisdictional grounds, and not reach the merits, may nevertheless result in a circuit split that could trigger Supreme Court review with implications for future SEC enforcement actions, depending on how the D.C. Circuit rules in the pending case of In the matter of Timbervest. 

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On June 7, 2016, for only the second time in SEC history, the Commission announced non-prosecution agreements in a settlement of FCPA enforcement actions. As a result of the settlements, Akamai Technologies (Akamai) and Nortek Inc. (Nortek) will forfeit ill-gotten gains connected to bribes paid to Chinese officials by foreign subsidiaries. As a part of the settlements, Akamai will pay $652,452 in disgorgement plus $19,433 in interest and Nortek will pay $291,403 in disgorgement plus $30,655 in interest. Neither company, however, will pay monetary penalties because of the cooperation extended to the Commission in connection with the settlements.

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On June 1, 2016, in Tilton v. SEC, a divided Second Circuit panel affirmed the dismissal of a constitutional challenge to the SEC’s use of administrative proceedings on the grounds that the claim could only be brought in an appeal following the issuance of a final order by the SEC after the proceedings have concluded.  No. 15-2103, ---F.3d---, 2016 WL ______ (2d Cir. June 1, 2016).  The panel’s decision to dismiss on jurisdictional grounds, and not reach the merits, may nevertheless result in a circuit split that could trigger Supreme Court review with implications for future SEC enforcement actions, depending on how the D.C. Circuit rules in the pending case of In the matter of Timbervest. 

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On May 26, 2016, in SEC v. Graham, the Eleventh Circuit became the first circuit to hold that claims brought by a government agency for disgorgement and declaratory relief are subject to the five-year statute of limitations set forth in 28 U.S.C. § 2462.  The panel held that disgorgement and declaratory relief the SEC sought were functionally identical to “forfeiture” and “penalties,” respectively, as defined by Section 2462, but that the injunctive relief sought by the SEC was not time-barred.  Graham appears to create a circuit split that would prompt Supreme Court review, as prior courts have found that disgorgement was not subject to the limitations period in Section 2462. 

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When a Second Circuit panel in December 2014 reversed the convictions of two portfolio managers in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), many believed that the decision, which held that to be liable for insider trading a tippee must know that a tipper made a gift of inside information or disclosed it in exchange for a personal benefit, would make it more difficult to convict “remote tippees,” or tippees multiple steps removed from the source of the tip, of insider trading.  Criminal and civil actions brought last week against former Dean Foods CEO Thomas Davis and gambler William Walters, which included a civil claim against golfer Phil Mickelson as a “relief defendant,” suggest that the DOJ and SEC are reluctant to charge a remote tippee absent concrete evidence that the tippee knew the circumstances of the tip, but that the SEC may be pursuing a new enforcement strategy that nevertheless aims to force remote tippees to disgorge their profits. 

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Beginning with the creation of its Financial Reporting and Audit Task Force in July 2013, accounting fraud has been a renewed priority for the SEC.  SEC Announces Enforcement Initiatives to Combat Fin. Reporting and Microcap Fraud and Enhance Risk Analysis, Lit. Rel. No. 2013-121, July 2, 2013. The SEC has brought numerous accounting cases of late regarding earnings management and other alleged fraud; recent activity suggests that its next focus may be the use of non-GAAP measures.  

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On May 24, 2016, Bradley Bennett, the executive vice president of enforcement of the Financial Industry Regulatory Authority (“FINRA”), reportedly commented on FINRA’s future focus on individuals in anti-money laundering (“AML”) enforcement at a panel during FINRA’s 2016 Annual Conference.  Bennett’s speech came just days after FINRA announced a $17 million settlement of AML claims against Raymond James Financial Services Inc. and Raymond James & Associates Inc., which included a three month suspension and $25,000 fine for Raymond James compliance officer Linda L. Busby for her alleged failure to supervise and screen suspicious activity.  In his remarks, Bennett stressed that the decision to suspend the compliance officer will be a rare one, for example, in instances where compliance officers (1) knew they lacked sufficient resources to properly supervise their firms, but (2) failed to elevate the issue to management.  

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The SEC’s pursuit of enforcement actions against compliance professionals was one of the most divisive issues of 2015.  Last week, high-ranking officials at the Securities and Exchange Commission (“SEC”) and Department of Justice (“DOJ”) made public comments providing further insight on how they evaluate corporate compliance programs and individuals responsible for those programs, which gave something of a roadmap for how compliance professionals should prepare for investigations. 

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​The Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) includes a so-called Extender Statute prescribing the limitations period for actions brought by the Federal Deposit Insurance Corporation (“FDIC”) as conservator or receiver for a failed bank. The Housing and Economic Recovery Act of 2008 (“HERA”) includes a materially identical provision governing the limitations period for actions brought by the Federal Housing Finance Agency (“FHFA”) as conservator or receiver for government-sponsored entities within its regulatory purview, such as Fannie Mae and Freddie Mac. These Extender Statutes have been utilized by the FDIC and FHFA to pursue residential mortgage-backed securities (“RMBS”) claims that otherwise would have been barred by various statutes of repose, and in 2013, in FHFA v. UBS, the Second Circuit held that the FHFA Extender Statute displaced the 1 Securities Act’s three-year statute of repose.

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After experiencing criticism and receiving unfavorable judicial rulings in 2015, recent data suggests that the SEC may be bringing fewer contested actions as administrative proceedings. 

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On May 18, 2016, the Financial Industry Regulatory Authority (“FINRA”) announced that two Raymond James affiliates agreed to pay $17 million in fines for alleged failures of the firms’ anti-money laundering (“AML”) programs, in violation of FINRA Rule 3310, which requires FINRA members to maintain effective AML programs.  This case is especially noteworthy because affiliate Raymond James & Associates Inc.’s (“RJA”) AML Compliance Officer also agreed to a fine of $25,000 and a three-month suspension due to her alleged personal violations of FINRA Rule 3310.  These violations were based on her failure to establish written procedures, investigate red flag activity, or ensure that periodic reviews were conducted. Aruna Viswanatha, Raymond James to Pay $17 Million Fine for Anti-Money-Laundering Lapses, Wall St. J., May 18, 2016;  News Release, Fin. Indus. Regulatory Auth., FINRA Fines Raymond James $17 Million for Systemic Anti-Money Laundering Compliance Failures (May 18, 2016).

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On May 13, the Securities and Exchange Commission (“SEC”) announced a $3.5 million whistleblower award.   This award is significant because it represents the first time that the SEC rewarded a whistleblower for providing a tip that “bolstered”—rather than initiated—an investigation.  In its order approving the award, the Commission explained that the tip caused the SEC to focus on specific conduct of which it was already generally aware.  The order further noted that the tip “significantly contributed” to the success of the action by increasing the Enforcement staff’s leverage during settlement negotiations. 

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On April 27, the Supreme Court held oral argument on former Virginia Governor Robert McDonnell’s appeal of his bribery conviction under the federal bribery statute, Hobbs Act, and honest-services fraud statute, 18 U.S.C. §§ 201, 1346, 1951.  McDonnell contends that the statutes are unconstitutionally vague to the extent they criminalize agreeing to take an “official act” in exchange for a thing of value, without further defining what an “official act” is.  The questioning from certain justices suggested they were sympathetic to McDonnell’s arguments.  While it is always difficult to predict an outcome based on an oral argument, the judges’ expressed concerns about the danger of unclear laws could result in a significant opinion clarifying the definition of honest services fraud.  Indeed, depending on how any such opinion is written, it is conceivable that it could also impact how courts interpret a far broader range of statutes, including the FCPA and other statutes that defendants have long argued require clear limiting principles.

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On May 12, 2016, Securities and Exchange Commission (“SEC”) Enforcement Director Andrew Ceresney gave the keynote address at the Securities Enforcement Forum West 2016 in San Francisco. Remarks at the Securities Enforcement Forum West 2016 (May 12, 2016).  In his remarks, Ceresney defended the need for enforcement activity in private equity, reviewed recent prominent actions, addressed common arguments made by subjects of investigations, and argued that recent enforcement activity in the private equity industry had led developments that protected investors. 

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On May 6, 2016, Appellant Bassam Salman filed his opening brief with the Supreme Court in Salman v. United States, a closely-watched appeal of an insider trading conviction that has the potential to resolve ongoing ambiguity in insider trading law, especially prevalent since the Second Circuit’s December 2014 decision in United States v. Newman, 773 F.3d 438, over when a remote tippee can be convicted of insider trading. 

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On May 10, Deputy Attorney General Sally Yates spoke out in defense of the so-called “Yates Memo,” a policy statement she issued in September 2015 that announced new policies intended to enhance the Department of Justice’s (“DOJ”) ability to identify and prosecute culpable individuals at all levels in corporate cases. In remarks at the New York City Bar Association White Collar Crime Conference, Yates defended these policies, which largely direct civil and criminal government attorneys to focus on collecting evidence in corporate cases that will lead to the prosecution of individuals, against what she described as predictions of many legal commentators that the policies will cause a “cascading cavalcade of terribles.”

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