On September 21, 2022, the Securities and Exchange Commission announced settled insider trading charges against the CEO and the former President and Chief Technology Officer of Cheetah Mobile Inc. (the “Company”), a China-based mobile internet company.  The executives allegedly possessed material nonpublic information (“MNPI”) when they set up a trading plan under Rule 10b5-1 of the Securities Exchange Act. Continue Reading SEC Charges Company Executives with Insider Trading for Allegedly Setting Up 10b5-1 Trading Plan While in Possession of MNPI

On September 9, 2022, the Securities and Exchange Commission (“SEC”) announced charges against several investment advisers for failure to comply with requirements of Section 206(4) of the Advisers Act and the rules promulgated thereunder (commonly known as the “Custody Rule”) and deficiencies related to Form ADV filings.  The advisers included BiscayneAmericas Advisers L.L.C., Garrison Investment Group, LP, Janus Henderson Investors US LLC, Lend Academy Investments, LLC, Polaris Equity Management, Inc., QVR, LLC, Ridgeview Asset Management Partners, LLC, Steward Capital Management, Inc., and Titan Fund Management, LLC.  The advisers all agreed to settle the charges and will pay combined penalties of over $1 million.

Continue Reading SEC Releases Slate of Enforcement Actions Against Advisers Related to Custody Rule Violations and Form ADV Deficiencies

On September 15, 2022, Deputy Attorney General Lisa O. Monaco (“DAG Monaco”) announced further changes to the enforcement policies and practices of the Department of Justice (“DOJ” or the “Department”) at an event at New York University Law School[1], in particular building on previously announced revisions relating to individual misconduct and corporate recidivism.

Continue Reading U.S. Department of Justice Announces Changes to Corporate Criminal Enforcement Policies

On July 21, 2022, the Securities and Exchange Commission and the U.S. Attorney’s Office for the Southern District of New York charged Ishan Wahi, a former employee of the digital asset trading platform Coinbase (the “Company”), as well as his brother and friend, with engaging in insider trading ahead of certain of the Company’s digital asset listing announcements (i.e., announcements in which the Company publicly discloses the specific digital assets that it plans to make available for trading on its platform), which allegedly generally increase the value of the relevant digital assets. Continue Reading SEC and DOJ Charge Employee of Digital Asset Trading Platform and His Associates With Alleged Insider Trading in Digital Assets

On August 12, 2022, in United States v. Hoskins, No. 20-842 —F.4th—, 2022 WL 330357 (2d. Cir. Aug. 12, 2022) (“Hoskins II”), a three-judge panel from the Second Circuit upheld a lower court decision to overturn the foreign bribery conviction of a former Alstom SA executive, Lawrence Hoskins.  The Court concluded that the trial evidence did not support a finding that Defendant Hoskins was an “agent” of a U.S. subsidiary of the French multinational railway manufacturer Alstom (“Alstom U.S.”).  While highly fact-intensive and likely subject to narrow interpretation in the future, the decision is the Second Circuit’s most recent limitation on the extraterritorial reach of the Foreign Corrupt Practices Act (“FCPA”).  This follows a prior Second Circuit decision in this same case limiting the scope of the FCPA’s extraterritorial reach of conspiracy liability for certain foreign individuals acting abroad. Continue Reading Second Circuit Upholds District Court’s Rejection of DOJ Attempt to Expand Extraterritorial Reach of FCPA Through Agency Liability

The last few weeks have seen a significant ramp-up of federal bank regulators’ focus on cryptocurrency companies and their disclosures regarding FDIC deposit insurance, signaling a potential spike in enforcement actions targeted at the crypto sector. Continue Reading FDIC Issues Cease and Desist Letters to Companies for Crypto-Related Representations About Deposit Insurance

On August 10, 2022, the U.S. Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) jointly adopted proposed amendments to Form PF that would significantly expand reporting by private equity advisers and hedge fund advisers of both their investments and structures (the “Proposal,” available here).  The Proposal is part of an ongoing effort to bolster the SEC’s regulatory oversight of private fund advisers and investor protection efforts, while also purportedly enhancing the Financial Stability Oversight Counsel’s (“FSOC”) ability to monitor systematic risk. Continue Reading Form PF, Take Two: The SEC and CFTC Propose Further Amendments To Reporting Obligations For Private Equity and Hedge Funds

On August 1, 2022, Robinhood Crypto LLC (“RHC”) entered into a Consent Order with the New York Department of Financial Services (“DFS”) based on “serious deficiencies” related to anti-money laundering (“AML”), cybersecurity, and virtual currency that were identified in DFS’s examination of RHC covering the period from January to September 2019. Continue Reading DFS Enters Consent Order with Robinhood Crypto for Deficiencies in AML, Cybersecurity, and Virtual Currency Compliance

On July 12, 2022, the Brazilian Government published Federal Decree No. 11,129/2022,[1] which amends the regulation of the Brazilian Clean Companies Act (“BCCA”), Brazil’s 2013 Anticorruption Law.  The new regulation came into effect earlier this week, on July 18, 2022, and replaces Decree No. 8,420/2015, which previously regulated the application of the BCCA.

Overall, the new decree resembles past regulation in form and substance, however, it provides additional guidance on the expectations of the Controladoria Geral da União (“CGU”), which oversees compliance with the BCCA, in assessing integrity programs and the range and application of administrative fines for violations of the law.  The new decree also clarifies and details procedural mechanisms for the conduct of investigations and negotiation of leniency agreements by the CGU and Brazilian public prosecutors (Advocacia Geral da União – “AGU”).[2]

Continue Reading New Anticorruption Decree Modifies Regulation of Brazilian Clean Companies Act

On June 13, 2022, the Securities and Exchange Commission charged three Charles Schwab investment adviser subsidiaries—Charles Schwab & Co., Inc.; Charles Schwab Investment Advisory, Inc. (“CSIA”); and Schwab Wealth Investment Advisory, Inc. (“SWIA,” and together with Charles Schwab & Co., Inc. and CSIA, “Charles Schwab”)—with violations of the Investment Advisers Act of 1940 for alleged misconduct associated with its robo-advisor, Schwab Intelligent Portfolios (“SIP”).  Unlike most other robo-advisers, Charles Schwab did not charge an advisory fee for the SIP service.  However, Charles Schwab required its SIP clients to hold pre-set amounts of cash—rather than investing in equities under market conditions where equities were outperforming cash—that was then loaned out by Charles Schwab Bank at higher interest rates than it paid to the SIP clients, resulting in a profitable spread for Charles Schwab and the equivalent of a hidden fee for its clients, since holding cash lowered their returns.  Charles Schwab was ordered to pay almost $46 million in disgorgement, more than $5 million in prejudgment interest, and $135 million as a civil penalty.  The $187 million in total sanctions will be returned to investors.  Charles Schwab also agreed to an independent consultant to conduct a “comprehensive review” of its compliance policies, and agreed to provide ongoing cooperation to the SEC in an unusual provision—a sign that there may be additional charges yet to come.

Continue Reading SEC Brings Robo-Adviser Case Against Charles Schwab for Misleading Clients About Hidden Costs