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Alexander Janghorbani’s practice focuses on complex securities issues, litigation and enforcement, informed by nearly nine years of service with the U.S. Securities and Exchange Commission.

On July 3, SEC Chairman Jay Clayton issued a statement signaling a policy change in SEC settlements and the consideration of applications for waiver of collateral consequences flowing from those settlements, such as the loss of certain significant procedural advantages in (or even outright exemption from) the securities registration process.[1]  In practice, this change could both streamline the process of settling enforcement actions with the SEC and provide additional certainty to settling entities, which, under the current regime, must decide whether to settle a matter before completing and knowing the outcome of negotiations over waivers.
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Last month, Representative Maxine Waters, Chair of the House Financial Services Committee, introduced a discussion draft of the “Bad Actor Disqualification Act of 2019” (the “Proposed Act”).  Similar to proposed legislation Rep. Waters introduced in 2015 and 2017, the effect of the Proposed Act, if passed, would be to dramatically increase the burdens on institutions

On May 15, 2019, the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Commodity Futures Trading Commission (“CFTC”) announced that they entered into an Enhanced Multilateral Memorandum of Understanding Concerning Consultation and the Exchange of Information (“Enhanced MMoU”) under the auspices of the International Organization of Securities Commissions (“IOSCO”), along with nine other international financial regulators.[1]  Both the SEC and CFTC are already signatories to IOSCO’s predecessor memorandum of understanding with 121 other signatories.  However, the Enhanced MMoU provides for significant enhancements in cross-border enforcement cooperation—including the ability to compel testimony outside of the United States—that, if widely adopted, could increase the signatory regulators’ abilities to undertake (and coordinate) multilateral cross-border investigations.
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On May 6, 2019, the Financial Industry Regulatory Authority (“FINRA”) issued Regulatory Notice 19-18, addressing members’[1] anti-money laundering (“AML”) compliance programs.  This notice focused extensively on members’ monitoring for suspicious activities and subsequent suspicious activity report (“SAR”) filing obligations, providing 97 examples of “money laundering red flags” to securities industry market participants.  Where applicable to a members’ business operations, FINRA encouraged broker-dealers to take a “risk-based approach” to AML compliance and incorporate these red flags into their AML programs, even though the organization noted that merely doing so will not satisfy all obligations.  Where any red flags are detected, FINRA encouraged firms to consider whether “additional investigation, customer due diligence measures or a SAR filing may be warranted.”

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On March 27, 2019, the Supreme Court issued a 6-to-2 decision in Lorenzo v. SEC focusing on the distinction between “making” a false statement under Exchange Act Rule 10b-5(b) and engaging in deceptive conduct—so-called “scheme liability”—under Rules 10b-5(a) and (c).

The Court upheld a D.C. Circuit majority decision concluding that the SEC could hold an

On March 6, 2019, the U.S. Commodity Futures Trading Commission (“CFTC”) Enforcement Division released an advisory (the “Advisory”) on self-reporting and cooperation for violations of the Commodity Exchange Act (“CEA”) that involve foreign corrupt practices.[1]  The Advisory lays out guidelines for companies or individuals “not registered (or required to be registered) with the CFTC” to receive significant cooperation credit for voluntarily and timely disclosing CEA violations involving foreign corrupt practices.[2]  Indeed, where such disclosure is followed by “full cooperation and appropriate remediation” and other measures, the Division of Enforcement will extend a presumption that no civil monetary penalties be imposed.[3]  Moreover, while registrants—which are subject to “independent reporting obligations”—will not benefit from such a presumption, cooperation may still garner “substantial reduction in the civil monetary penalty.”[4]

The Advisory is the latest signal of the CFTC’s efforts over the last two years to more clearly define the benefits of voluntary cooperation with the Agency.[5]  This may indicate that the CFTC is taking an increased interest in corruption cases related to the commodities or swaps markets.
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On March 4, a federal judge of the Northern District of California granted a directed verdict motion in favor of Robert Bogucki, the former head of Barclays’ foreign exchange (“FX”) trading desk.  Bogucki went to trial on charges that he had engaged in a “front-running” scheme to manipulate the FX options market in advance of a client’s corporate transaction.  Following the government’s presentation of its case at trial, Judge Charles Breyer acquitted Bogucki, finding that the government had failed to present sufficient evidence such that a reasonable jury could find Bogucki guilty of any fraud charges beyond a reasonable doubt.
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On March 4, 2019, the Commodity Futures Trading Commission (“CFTC”) announced a whistleblower award of over $2 million to an individual—unaffiliated with the company the CFTC charged—for providing expert analysis in conjunction with a related action instituted by another federal regulator.  While the Securities and Exchange Commission, which possesses a similar whistleblower award regime,[1] has previously issued awards to multiple claimants for both related actions[2] and to company outsiders,[3] this is the first such award to be granted by the CFTC in either respect.

The award demonstrates the CFTC’s continued commitment to the Whistleblower Program, and to using all available means in conducting enforcement actions.  This award also reflects both the CFTC’s willingness to collaborate with other federal regulators and to rely on external sources of expert data analysis and likely reflects the CFTC’s continued expansion of its Whistleblower Program, both in terms of sources of information and awards granted. 
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On February 20, the Securities and Exchange Commission (the “SEC” or “Commission”) issued a cease-and-desist order against Gladius Network LLC (“Gladius”) concerning its 2017 initial coin offering (“ICO”).  The SEC found that the Gladius ICO violated the Securities Act of 1933’s (“Securities Act”) prohibition against the public offer or sale of any securities not made pursuant to either an effective registration statement on file with the SEC or under an exemption from registration.[1]  While this is far from the first time that the SEC has found that a particular ICO token meets the definition of a “security” under the Securities Act,[2] this is notably the first action involving an ICO token issuer that self-reported its potential violation.  Due to this, and Gladius’s cooperation throughout the investigation, the SEC stopped short of imposing any civil monetary penalties among its ordered remedial measures.
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On February 15, 2019, the Securities and Exchange Commission (the “SEC”) announced that it had settled—on a no-admit, no-deny basis—with Cognizant Technology Solutions Corporation (“Cognizant”) for alleged violations of the Foreign Corrupt Practices Act (the “FCPA”) involving Cognizant’s former president and chief legal officer.[1] The same day, the Department of Justice (the “DOJ”) indicted the two former executives and the SEC filed a civil complaint seeking permanent injunctions, monetary penalties, and officer-and-director bars against them. The DOJ declined to prosecute Cognizant.[2] The DOJ’s declination was in part based on the fact that Cognizant quickly and voluntarily self-reported the conduct, and, as a result of that self-report, the DOJ was able to identify culpable individuals. This settlement reflects the DOJ demonstrating its continued commitment to its FCPA Corporate Enforcement Policy, under which the DOJ has committed to extending significant cooperation credit, up to and including declinations, to companies that provide meaningful assistance to further DOJ investigations. The resolution also reflects the DOJ’s “anti-piling on” policy in action, as the DOJ declination recognized the “adequacy of remedies such as civil or regulatory enforcement actions,” namely Cognizant’s resolution with the SEC, as a factor in declining to prosecute.[3]
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