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Jonathan S. Kolodner’s practice focuses on white-collar criminal enforcement and regulatory matters as well as complex commercial litigation.

On May 9, Deputy Attorney General Rod J. Rosenstein provided remarks at the American Conference Institute’s 20th Anniversary New York Conference on the Foreign Corrupt Practices Act and announced a new policy designed to promote coordination and limit the imposition of multiple penalties on a company for the same conduct, which he referred to as “piling on.”

This memorandum highlights some of the most salient points from Rosenstein’s remarks, and describes the key elements of the new policy, with an eye towards potential implications for enforcement actions going forward.

On April 25, 2018, a jury in the United States District Court in Connecticut acquitted former UBS AG (“UBS”) trader Andre Flotron of conspiring to manipulate the precious metals futures market through “spoofing.”  The verdict, the first acquittal in a criminal spoofing-related case since the practice was outlawed by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) in 2010, reflects the difficulties the government faces in cracking down on the practice. Continue Reading Acquittal of Former UBS Trader Signals Potential Challenges for Government’s Anti-Spoofing Initiative

On March 1, 2018, U.S. Department of Justice (“DOJ” or the “Department”) officials announced that the Criminal Division is expanding the applicability of a policy that encourages corporate self-reporting and cooperation for violations of the Foreign Corrupt Practices Act (“FCPA”) to reach other types of non-corruption criminal cases.  Speaking at the American Bar Association’s National Institute on White Collar Crime in San Diego, John Cronan, Acting Assistant Attorney General for the DOJ Criminal Division, and Benjamin Singer, Chief of the DOJ Securities and Financial Fraud Unit, told attendees that the Criminal Division will apply the FCPA Corporate Enforcement Policy (the “FCPA Enforcement Policy”) as nonbinding guidance in cases other than FCPA cases.

The FCPA Enforcement Policy, which was adopted in November 2017, provided additional guidelines regarding the credit the Department will provide to companies that self‑report FCPA violations and then cooperate with the resulting investigation – including a presumption that self-reporting companies will not be criminally charged.  Expanding use of the FCPA Enforcement Policy signals the Department’s perception of its success and a further effort by DOJ to encourage companies to self-report and cooperate.  It also provides important guidance for companies faced with a variety of different types of investigations regarding the treatment they can expect, and tools to advocate before the Department for more favorable resolutions. Continue Reading DOJ Announces Expansion of Approach Encouraging Self Reporting and Cooperation

In December 2017, the US Department of Justice, Criminal Division’s Computer Crime and Intellectual Property Section (“DOJ”) released guidance for law enforcement to follow when seeking data stored by an entity with a cloud service provider.[1]  In short, DOJ suggests that prosecutors should seek data directly from the company, rather than its cloud service provider, so long as doing so will not compromise the investigation. Continue Reading New DOJ Guidelines on Collecting Cloud–Based Data

This past year, which marked the 40th anniversary of the Foreign Corrupt Practices Act, saw significant anti-corruption developments in the United States and abroad, capped by the announcement of a new FCPA corporate enforcement policy by the U.S. Department of Justice.  As the year began with a new administration, however, there was initially some uncertainty as to how much the new administration would prioritize FCPA enforcement.   Perhaps wanting to put this concern to rest, President Trump’s appointees quickly emphasized that FCPA enforcement was “as alive as ever”  with Attorney General Jeff Sessions promising that the DOJ would “continue to strongly enforce the FCPA and other anti-corruption laws.”   While there were fewer total FCPA corporate resolutions in 2017 than in 2016, the DOJ concluded two of the largest global settlements in FCPA history this year.  The DOJ also demonstrated a continued and expanded focus on anti-corruption compliance, aided by its issuance in February of new guidance on how the DOJ would evaluate the effectiveness of compliance programs.

This memo examines some of these key FCPA developments in greater detail and provides our analysis of what their impact may be in 2018.

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In a significant development for companies relating to the Foreign Corrupt Practices Act (FCPA), in late November the U.S. Department of Justice (DOJ) announced a new FCPA Corporate Enforcement Policy (the Enforcement Policy).[1]

The Enforcement Policy is designed to encourage companies to voluntarily disclose misconduct by providing greater transparency concerning the amount of credit the DOJ will give to companies that self-report, fully cooperate and appropriately remediate misconduct.  Notably, in announcing the Enforcement Policy, the DOJ highlighted the continued critical role that anti-corruption compliance programs play in its evaluation of eligibility under the Enforcement Policy. Continue Reading The New DOJ FCPA Corporate Enforcement Policy Highlights the Continued Importance of Anti-Corruption Compliance

The SEC has recently signaled an increased concern with the offerings and marketing of Initial Coin Offerings (“ICOs”),[1] which should be of interest to companies and institutions involved with ICOs.  On November 1, 2017, the SEC Division of Enforcement and Office of Compliance Inspections and Examinations (“OCIE”) jointly issued a public statement warning celebrities and other influencers promoting Initial Coin Offerings (“ICOs”) about potential violations of a host of federal securities laws, including the anti-touting and anti-fraud provisions of the federal securities laws.  Specifically, the public statement noted that endorsements may be unlawful if they do not “disclose the nature, source, and amount of any compensation paid, directly or indirectly . . . in exchange for the endorsement.,” and that endorsers may also face liability for potential violations of the anti-fraud provisions, for participation in an unregistered securities offering, and for acting as unregistered brokers.  The public statement also noted that investment decisions should not be based solely on an endorsement and cautioned that “celebrity endorsement may appear unbiased, but instead be part of a paid promotion.”  The public statement follows an investigative report issued by the Division of Enforcement on July 25, 2017, which announced that blockchain technology-based coins or tokens sold in an ICO may be a form of security under the Securities Act of 1933 and the Securities Exchange Act of 1934.

The SEC’s announcement follows recent endorsements of such ICOs by celebrities such as Floyd Mayweather, DJ Khaled, Paris Hilton and Jamie Foxx, who each used their social media platforms to promote ICOs in the past months.  According to an article published byThe New York Times five days before the SEC’s public announcement, celebrity endorsements have helped raise $3.2 billion in ICOs this year, which is a 3,000 percent increase over the total amount raised in ICOs last year.

In its statement, the SEC said it “will continue to focus on these types of promotions to protect investors and to ensure compliance with the securities laws.”  Additionally, the SEC Office of Investor Education and Advocacy posted an Investor Alert on their website the same day cautioning against investment decisions based on endorsements from celebrities and encouraging investors to report any possible securities fraud to the SEC.  These recent pronouncements indicate a dovetailing of recent areas of focus for the SEC’s enforcement program—new technologies that expand the scope and ease of securities offerings with increased efforts to focus enforcement resources on areas having the potential to harm retail investors.

Following the SEC’s public statement and Investor Alert signaling increased attention on ICOs,  the SEC announced that it had filed charges against PlexCorps and two of its principals based on an alleged ICO fraud.  PlexCorps had raised up to $15 million in an ICO this year by promising a 13-fold profit in less than one month.  The company has been charged with violating anti-fraud provisions and the registration provision of the federal securities laws. These charges are the first filed by the SEC’s Cyber Unit, which was created in September 2017.  Robert Cohen, the Chief of the Cyber Unit, stated “[t]his first Cyber Unit case hits all the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing.” To read more about this case, please see our previous article.

[1] ICOs are fundraising mechanisms, similar to crowdfunding, in which companies create and sell new virtual currency, in the form of blockchain-based coins or tokens.

On November 29, 2017, the U.S. Department of Justice (“DOJ” or the “Department”) announced a new FCPA Corporate Enforcement Policy (the “Enforcement Policy”) applicable to investigations of companies under the Foreign Corrupt Practices Act (“FCPA”). The Enforcement Policy builds on the FCPA Pilot Program (the “Pilot Program”) that has been in effect since April 2016, and provides additional transparency regarding the credit the Department will provide to companies that self-report FCPA violations and then cooperate with the resulting investigation. By and large, the new policy, which is now part of the U.S. Attorney’s Manual (“USAM”), makes key provisions of the Pilot Program permanent, and significantly, it also promises additionalbenefits to companies that qualify. The Enforcement Policy signals a further effort by DOJ to encourage companies to self-report and cooperate, although the policy also leaves the Department with considerable leeway in assessing key threshold questions for eligibility even for companies that do self-report.

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On October 27, 2017, the Hong Kong Securities and Futures Commission (“SFC”) issued Guidelines for Reducing and Mitigating Hacking Risks Associated with Internet Trading (the “Guidelines”),1 a set of baseline cybersecurity requirements that all persons licensed or registered with the SFC and engaged in internet trading will be required to implement. The Hong Kong Monetary Authority (“HKMA”) simultaneously issued a circular to CEOs of Registered Institutions requiring them to apply the Guidelines.

The new guidelines should be viewed as requirements for securities and futures dealers and asset managers registered with the SFC and banks supervised by the HKMA (which include a number of foreign banks that operate branches in Hong Kong). For e-commerce firms and other companies that do business in or have connections to Hong Kong, the new guidelines should additionally be viewed as relevant guidance for best practices in cybersecurity.

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On August 18, 2017, in United States v. Krug, the Second Circuit revisited the boundaries of attorney-client privilege in the context of joint defense agreements, reversing a district court order to preclude testimony of a cooperating co-defendant.  The decision serves as a useful reminder of certain best practices when participating in joint defense (or “common interest”) agreements to ensure that the communications are protected by the privilege. Continue Reading Second Circuit Decision Reiterates The Limitations of Joint Defense Agreements