2019

On May 2, 2019, FINRA proposed new rules to designate “high-risk” firms and strengthen its ability to impose additional obligations on those firms.[1]

  • Proposed Rule 4111 would authorize FINRA to designate “Restricted Firms” based on the number of event disclosures made by the firm and its registered persons. Restricted Firms would be subject to limitations on their operations and could be required to maintain restricted deposits that could only be withdrawn with FINRA’s consent.
  • Proposed Rule 9559 would create an expedited appeals process, including a process for challenging a designation as a Restricted Firm and any obligations imposed.

FINRA expects that only a small number of large firms (500 or more registered representatives) would be affected by the proposed rules, and that only zero to two would have been impacted in any given year had the rules been effective from 2013-2018.[2]

Early signals from FINRA about this rulemaking generated concern that the standards would be overly subjective, leading to uncertainty in application.  We believe, however, that the proposed rules on balance reflect a reasonable, and largely objective, approach given FINRA’s stated goal to “impose tailored obligations” on those firms that “present heightened risk of harm to investors.”[3]
Continue Reading FINRA Proposes Rules Targeting Firms With History of Misconduct

On May 2, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control released “A Framework for OFAC Compliance Commitments”, providing general guidance on the elements OFAC considers to compose an effective sanctions compliance program.

Broadly, the framework endorses a risk-based approach to compliance (recognizing that no two compliance programs will…

On May 7, 2019, the Department of Justice issued formal guidance to DOJ’s False Claims Act litigators on the circumstances in which DOJ will grant credit for cooperation during FCA investigations.

The guidance explains the factors that DOJ considers in determining whether to award cooperation credit in FCA investigations and the types of credit available.…

On May 2, 2019, the United States District Court for the Southern District of New York issued an important decision delineating the boundaries between conducting a proper internal investigation and acting as an arm of the government.

For the government, the consequences of “outsourcing” an investigation to a company and its counsel could be exclusion…

As discussed in our most recent blog post, on April 30, 2019, the Criminal Division of the U.S. Department of Justice (“DOJ” or “the Department”) announced updated guidance for the Criminal Division’s Evaluation of Corporate Compliance Programs (“the Guidance”).  The Guidance is relevant to the exercise of prosecutorial discretion in conducting an investigation of a corporation, determining whether to bring charges, negotiating plea or other agreements, applying sentencing guidelines and appointing monitors.[1]  The Guidance focuses on familiar factors: the adoption of a well-designed compliance program that addresses the greatest compliance risks to the company, the effective implementation of the company’s compliance policies and procedures, and the adequacy of the compliance program at the time of any misconduct and the response to that misconduct.  The Guidance makes clear that there is no one-size-fits-all compliance program and that primary responsibility for the compliance program will lie with senior and middle management and those in control functions.
Continue Reading DOJ Guidance on Corporate Compliance Programs: A Checklist for Directors

On April 30, 2019, the Criminal Division of the U.S. Department of Justice announced updated guidance for the Criminal Division’s Evaluation of Corporate Compliance Programs (“the Guidance”) in charging and resolving criminal cases.  This memorandum highlights key updates and discusses the themes present across versions of the Guidance.  Overall, this newest version places greater emphasis…

In recent weeks two enforcement actions by the UK Financial Conduct Authority (“FCA”) against regulated firms have highlighted the regulator’s continued scrutiny of transaction reporting.  In the decisions, the FCA has reiterated the importance of complete, accurate and timely transaction reporting to assist in its objective of protecting and enhancing the integrity of the UK’s financial system.  The significant penalties imposed in each case, £27.6 million and £34.3 million respectively, demonstrate the serious consequences for firms that fail to meet their transaction reporting requirements.
Continue Reading FCA Continues Focus on Transaction Reporting Breaches

Legal and regulatory scrutiny regarding the use of non-disclosure agreements by companies to resolve allegations of sexual harassment and misconduct continues to increase in the wake of the #MeToo movement.  Such scrutiny featured prominently this month in two high-profile sexual harassment matters: the Wynn Resorts investigation and the various legal proceedings following the allegations against Harvey Weinstein.  Both in-house and outside counsel for companies with senior executives facing such allegations should take note of these developments, as they call into question whether the use of NDAs could in certain circumstances amount to investigatory obstruction or a violation of ethical obligations.
Continue Reading New Scrutiny for NDAs in Sexual Harassment Matters

On April 3, 2019, Senator (and Democratic Presidential contender) Elizabeth Warren announced proposed legislation—dubbed the “Corporate Executive Accountability Act”—that would effect a dramatic change in white collar criminal law by permitting prosecution of corporate executives for negligent conduct.  Under traditional criminal law principles, defendants must typically have at least knowledge with respect to the conduct that constitutes the crime.  However, under Senator Warren’s proposed law, executives of large companies could be criminally prosecuted (and fined and/or jailed if convicted) if they are found to have acted negligently in failing to prevent criminal acts committed by the companies they supervise.  The bill is unlikely to be enacted, but it nonetheless represents a significant policy indication from a Presidential candidate.
Continue Reading Senator Warren Proposes Bill to Hold Corporate Executives Criminally Accountable for Negligent Conduct

In the much-awaited Judgment No. 63, filed on March 21, 2019 and published on March 27, 2019 on Issue No. 13 of the Italian Official Gazette, the Italian Constitutional Court found that the principle of retroactive application of the most favorable law applies to the administrative penalties set forth under Legislative Decree No. 58 of…