​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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On May 4, in United States v. Tagliaferri, No. 15-536, ---F.3d---, 2016 WL 2342677 (2d Cir. May 4, 2016), a Second Circuit panel affirmed the conviction of an investment advisor for violating Section 206 of the Investment Advisers Act of 1940, holding that Section 206 requires proof only that an adviser intended to deceive a client, and not necessarily that the adviser intended to harm the client.  Much like the Second Circuit did earlier this year in United States v. Litvak, 808 F.3d 160 (2d Cir. 2015), the Court focused on the nature of the defendant’s deception and not its outcome.  In so holding, the panel clarified that prosecutors have a relatively low bar for obtaining convictions under Section 206.

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Perhaps in response to growing skepticism of the purported benefits of self-disclosure, multiple high-level United States government officials have recently reiterated what they contend are the benefits for corporate defendants of self-reporting legal and regulatory violations.  The officials emphasized that voluntary self-disclosure can result in reduced criminal penalties and, among other things, less onerous monitoring requirements.  The officials also took pains to note that failing to self-report could result in higher fines and penalties, though they did not point to specific empirical evidence to back up their assertions. 

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On April 19, the SEC announced significant enforcement actions against two separate companies – Logitech and Ener 1 – and certain of their officers.  The cases are unrelated, but both include allegations of accounting fraud.  The Logitech matter primarily involves section 10(b) claims that Logitech inflated its earnings by failing to write down excess inventory in a timely fashion.  The SEC settled its case against Logitech in an administrative proceeding, and filed a complaint in federal court against two company officers – the former CFO and Controller – who are contesting the allegations.  Shearman & Sterling is representing the former CFO in this matter.  The Ener1 matter primarily involves section 10(b) claims that Ener1 failed to impair investments and receivables timely.   The SEC filed two separate settled administrative proceedings relating to these allegations – one against the company and certain executives, and one against the former audit partner from PwC.  While each case involves different claims, and none of the defendants admitted the allegations, the SEC’s decision to announce the actions jointly highlights its continued aggressive focus on possible accounting fraud and earnings management.

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