On April 29, 2021, the Securities and Exchange Commission (the “SEC”) announced settled charges against eight public companies that filed notifications of late filings on Form 12b-25 (more commonly known as “Form NT”) without disclosing in those filings a pending restatement or correction of financial statements.

These settlements are a reminder that filing a Form NT is not only a necessary procedural step when an issuer will be delayed in filing a 10-K, 10-Q, 20-F or other specified report; it is also a decision point for making potentially sensitive disclosure to the market, and should reflect input from both a company’s IR and legal departments.

Please click here to read the full alert memorandum.

Last week, the Second Circuit affirmed the dismissal for lack of Article III standing a proposed class action against a health services provider that mistakenly disclosed personally identifiable information (“PII”).  In its opinion, the Second Circuit held that plaintiffs may establish Article III standing based on an increased risk of identity theft or fraud following an unauthorized disclosure of their data, but that the standard was not met based on the facts presented.  The decision, which is the first time the Second Circuit has explicitly adopted this standard, has potentially important implications going forward for data breach cases.

Continue Reading Second Circuit Articulates Injury Standard in Data Breach Suits

The Biden CFPB has begun a significant expansion in the use of consumer finance enforcement tools to act on behalf of marginalized communities.  On the back of Acting Director David Uejio’s announcement earlier this year of his intention to prioritize cases involving racial equity, and subsequent filing of the Biden CFPB’s first enforcement action against Libre Services for alleged abuse and “unfair practices” involving Spanish-speaking immigrant communities, the CFPB has also signaled a focus on potential violations of fair lending protections for LGBTQ individuals. Continue Reading The CFPB Broadens Enforcement Reach to Include Protection of LGBTQ Individuals

Conventional wisdom is that under the Biden Administration, the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) will pivot to a more muscular approach to enforcement of consumer financial protection laws.  The current leadership has already begun to signal the CFPB’s move towards a more aggressive approach while President Biden’s nomination to lead the agency, FTC Commissioner Rohit Chopra, is considered by the Senate Committee on Banking, Housing, and Urban Affairs.  CFPB Acting Director Dave Uejio has issued a number of statements identifying the agency’s priorities, particularly for the Bureau’s Division of Supervision, Enforcement & Fair Lending (“SEFL”), which are expected to continue—and potentially broaden—under a Chopra CFPB.[1]  The CFPB has already begun to rescind Trump administration policies restricting its enforcement more generally, and has indicated its intent to prioritize the enforcement of potential violations related to the COVID-19 pandemic and racial inequity. Continue Reading The CFPB’s Much-Anticipated Enforcement Shift Has Begun

As discussed in our prior blog post, earlier this year the Supreme Court vacated and remanded the Second Circuit’s decision in a high-profile insider trading case, United States v. Blaszczak,[1] for reconsideration in light of the Supreme Court’s “Bridgegate” decision in Kelly v. United States.[2]  In Blaszczak, the Second Circuit had previously found that a government agency’s confidential pre-decisional information constituted “property” under Title 18, and that therefore the Blaszczak defendants had committed fraud under the applicable statutes when they obtained the information and traded on it.[3]  However, following that decision, the Supreme Court held in Kelly that a government regulatory interest did not constitute “property” for the purpose of Title 18 fraud statutes.[4]  The Blaszczak defendants filed a petition for certiorari, contending that the Second Circuit’s reading of Title 18 could not be reconciled with the Supreme Court’s holding.[5]  After the Blaszczak defendants filed their petition, the government consented to a remand to the Second Circuit. Continue Reading DOJ Concedes Error In Title 18 Insider Trading Convictions After Supreme Court’s “Bridgegate” Decision

Last week, John Coates, the Acting Director of the SEC’s Division of Corporation Finance (“Corp Fin”), released a statement discussing liability risks in de-SPAC transactions.

The statement focused in particular on the concern that companies may be providing overly optimistic projections in their de-SPAC disclosures, in part based on the assumption that such disclosures are protected by a statutory safe harbor for forward-looking statements (which is not available for traditional IPOs).  Director Coates’s statement questions whether that assumption is correct, arguing that de-SPAC transactions may be considered IPOs for the purposes of the statute (and thus fall outside the protection offered by the statutory safe harbor).  He therefore encourages SPACs to exercise caution in disclosing projections, including by not withholding unfavorable projections while disclosing more favorable projections. Continue Reading Acting Director of SEC’s Corp Fin Issues Statement on Disclosure Risks Arising from De-SPAC Transactions

On March 5, 2021, the Securities and Exchange Commission (“SEC”) filed a lawsuit in federal court against AT&T, Inc. (“AT&T”) for violating Regulation FD, and also charged three of AT&T’s Investor Relations executives with aiding and abetting this violation.[1]  Reg FD (which stands for “Fair Disclosure”) prohibits companies from selectively disclosing material nonpublic information to certain categories of individuals, including analysts and investors, and is intended to promote full and fair disclosure of such information in order to ensure that all investors have equal access to potential market-moving information.[2]

Continue Reading SEC Brings Rare Litigated Enforcement Action for Violation of Regulation FD

Overview

  • The Colombian Corporations Commission (La Superintendencia de Sociedades) (“Superintendencia”) has issued Resolution 100-006261, which requires the overwhelming majority of companies that are supervised by the Superintendencia and engage in international transactions to adopt and implement a compliance program – called a Business Transparency and Ethics program – by April 30, 2021.  The program must be designed to prevent and detect violations of anti-bribery laws, in accordance with 2016 guidance.
  • This is another example of how compliance standards across Latin America and the United States have been converging in recent years on a set of standards, even if some differences remain.
  • For example, both Colombian and U.S. guidance emphasize the importance of tailoring compliance programs to the most salient risks for the company; continually improving compliance programs; performing adequate due diligence on third parties; and ensuring a commitment by management to compliance, both in terms of company culture and resources allocated to the program.
  • The new Resolution provides a further reason for multinational companies with business activities in the Americas and Colombian companies expanding in the region to establish a strong compliance program.

Continue Reading Colombian Corporate Regulatory Authority Expands Application of Compliance and Transparency Program Guidelines

On February 18, 2021, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) announced a $507,375 settlement with BitPay, Inc. (BitPay), a payment processor for merchants accepting digital currency as payment for goods and services, for 2,102 apparent violations of multiple sanctions programs between 2013 and 2018.[1] The settlement highlights that financial service providers facilitating digital currency transactions must not only establish sanctions compliance programs to screen their own customers but also must monitor third-party non-customer transaction information. Continue Reading OFAC Settles with Digital Currency Payment Processor for Sanctions Violations

On March 3, 2021, the U.S. Securities and Exchange Commission (“SEC”) Division of Examinations (the “Division”)—formerly the Office of Compliance Inspections and Examinations—released its 2021 Examination Priorities (“2021 Priorities”).  The 2021 Priorities generally retain perennial risk areas as the Division’s core focus, but do include several new and emerging risk areas reflecting broader policy shifts under new SEC leadership.

The 2021 Priorities include:  retail investors; information security and operational resilience; financial technology (“Fintech”), including digital assets; anti-money laundering; transition from the London Inter‑Bank Offered Rate (“LIBOR”); several areas covering registered investment advisers and investment companies; market infrastructure; and oversight of the Financial Industry Regulatory Authority and Municipal Securities Rulemaking Board programs and policies.  Although not formal priorities, the Division will also focus on climate-related risks and environmental, social and governance (“ESG”) matters in light of recent market developments and broader attention in these areas. Continue Reading Turning the Page: Highlights of the SEC’s Division of Examination’s 2021 Priorities