On December 29, 2022, in a closely-watched insider trading case, the Second Circuit decided United States v. Blaszczak (Blaszczak II”).[1]  The Supreme Court in January 2021 had vacated and remanded the Second Circuit’s prior decision in light of Kelly v. United States (also known as the “Bridgegate” decision).  On remand, a divided panel of the Second Circuit found that trading on the basis of certain confidential government information related to pending regulation does not give rise to violations of the criminal wire fraud and securities fraud statutes.

Continue Reading Second Circuit Decision Limits the Ability to Prosecute Instances of Trading on Confidential Government Information

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2023”.

The Securities and Exchange Commission (SEC) and Department of Justice (DOJ) ramped up their enforcement efforts in 2022, often in highly coordinated actions, including with other regulatory agencies such as the Commodity Futures Trading Commission (CFTC), Department of the Treasury’s Office of Foreign Assets Control (OFAC) and Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).  The DOJ also announced major policy changes regarding corporate criminal enforcement and took steps to convey its seriousness in pursuing actions against individual wrongdoers, recidivists and companies that fail to maintain effective compliance programs.  The SEC was particularly active, setting its record for civil penalties and continuing its enforcement focus on insider trading, digital assets and Environment, Social and Governance (ESG) disclosures.

To read the full post, please click here.

For a PDF of the full memorandum, please click here

Following a speech by Assistant Attorney General Kenneth A. Polite on January 17, 2023, the DOJ issued additional guidance on changes to the Corporate Criminal Enforcement Policy, focused on voluntary self-reporting.

The policy increases, and makes more explicit and concrete, the potential benefits for companies to self-disclose misconduct, cooperate, and remediate, as well as the potential costs for those that fail to do so.

The memorandum provides insights into how DOJ will address voluntary self-reporting by corporations going forward, including the availability of declinations, discounts from the U.S. Sentencing Guidelines, and mechanisms to reward cooperation, especially “extraordinary cooperation” as covered by the updated Corporate Enforcement Policy.

Please click here to read the full alert memorandum.

On December 21, 2022, the Federal Deposit Insurance Corporation published a notice of proposed rulemaking elaborating on what constitutes false advertising of deposit insurance for purposes of the Federal Deposit Insurance Act.

Continue Reading FDIC Continues Rulemakings Related to Misrepresentation in Advertising: Digital Asset Businesses Still in the Crosshairs

The U.S. Securities and Exchange Commission recently announced the Division of Enforcement’s results for fiscal year 2022, the first full year for the Division under the leadership of both Chair Gary Gensler and Director of Enforcement Gurbir Grewal.

Results were up from the year before, with a record $4.2 billion in civil penalties reflecting the agency’s goal to see penalties “recalibrated” upward across the board. With several blockbuster corporate settlements, the SEC continued to focus on traditional areas such as investment advisers, broker-dealers, and issuer accounting and disclosure, while also prioritizing individual accountability and suits against “gatekeepers” such as auditors and lawyers. The past year has also been notable for the SEC’s willingness to impose third-party compliance consultants, often with broad mandates, to oversee entity-level improvements. Our analysis of the SEC’s enforcement results provides indications of where the agency may focus in the year to come.

Please click here to read the full alert memorandum.

On December 1, 2022, at the American Conference Institute’s 39th International Conference on the Foreign Corrupt Practices Act (“FCPA”) in Washington D.C., Acting Principal Deputy Assistant Attorney General Nicole M. Argentieri (“DAAG Argentieri”) gave a special keynote speech highlighting developments in FCPA enforcement by the Department of Justice (“DOJ” or the “Department”), including with regard to the application of the DOJ’s announcement of corporate criminal enforcement policy priorities in September of this year.[1]  DAAG Argentieri focused on several policy changes and enforcement trends and initiatives using examples from this year’s FCPA resolutions and declination,[2] as well as from the Money Laundering and Asset Recovery Section’s Kleptocracy Asset Recovery Initiative. Continue Reading DOJ Provides Updates on FCPA and Corporate Criminal Enforcement Trends at International Conference on the FCPA

On October 26, 2022, the U.S. Securities and Exchange Commission (“SEC”) proposed a new rule under the Investment Advisers Act of 1940 (“Advisers Act”) imposing due diligence, recordkeeping and reporting obligations on registered investment advisers (“RIAs”) who outsource certain key “covered functions” of the adviser’s business to third parties, including affiliates.  The Proposal represents another step toward more substantive regulation of RIAs by the SEC under Chairman Gensler, and will impose real costs and operational risk on RIAs. Continue Reading New Requirements for Outsourcing by Advisers: Proposed SEC Rule Brings More Obligations and Scrutiny

On October 11, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and Financial Crimes Enforcement Network (“FinCEN”) announced related enforcement settlements with Bittrex, Inc., a U.S.-based digital asset exchange and hosted wallet services company (the “Company”), to settle violations of U.S. sanctions and the Bank Secrecy Act (“BSA”) and related regulations, respectively.[1]  The OFAC Settlement, the largest of OFAC’s digital asset-related enforcement actions to date, and the FinCEN Consent Order collectively result in the Company paying a civil penalty of approximately $30 million.  Following OFAC’s release of its “Sanctions Compliance Guidance for the Virtual Currency Industry” (which we wrote about here)[2] and recent revelations regarding prosecution by the U.S. Department of Justice of digital asset-related U.S. sanctions violations (which we wrote about here),[3] this joint OFAC-FinCEN enforcement action illustrates the U.S. government’s continued focus on the digital asset industry’s compliance with U.S. sanctions and the potentially significant penalties parties can face for U.S. sanctions and BSA violations. Continue Reading OFAC and FinCEN Announce Joint Enforcement Action Against U.S.-Based Digital Asset Exchange

On September 30, 2022, the Financial Crimes Enforcement Network (“FinCEN”) of the Department of the Treasury adopted a final rule (the “Final Rule”) to implement the beneficial ownership reporting requirements of the Corporate Transparency Act (“CTA”), as part of the Anti-Money Laundering Act of 2020.  The CTA and Final Rule require a range of U.S. entities, and non-U.S. entities registered to do business in the United States, to report information on their underlying beneficial owners who are individuals to FinCEN.  Notably, certain investments advisers exempt from registration and subsidiaries of private fund clients of investment advisers will be subject to these reporting requirements. Continue Reading FINCEN’s Corporate Beneficial Ownership Reporting Rule: Significance for Investment Advisers

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