On January 10, 2024, the U.S. Attorney’s Office for the Southern District of New York (“SDNY”) announced the creation of the SDNY Whistleblower Pilot Program (the “Pilot Program”). Under the Pilot Program, individuals who self-disclose certain criminal misconduct that involves business organizations to SDNY and cooperate fully may be eligible for a Non-Prosecution Agreement (“NPA”). Continue Reading SDNY Announces Whistleblower Pilot Program For Individuals Who Self-Disclose Wrongdoing Involving Business Organizations
Rahul Mukhi’s practice focuses on criminal, securities, and other enforcement and regulatory matters as well as on complex commercial litigation.
At the September 21, 2023 Conference of the Global Investigations Review, Principal Associate Deputy Attorney General Marshall Miller announced actions by the Department of Justice (“DOJ”) to further incentivize companies engaged in M&A to prioritize compliance. Miller affirmed that “acquiring companies should be rewarded—rather than penalized—when they engage in careful pre-acquisition diligence and post-acquisition integration to detect and remediate misconduct at the acquired company’s business.” He noted that in practice, “… [Main Justice’s] Criminal Division has declined to take enforcement action against companies that have promptly and voluntarily self-disclosed misconduct uncovered in the mergers and acquisitions context and then remediated and cooperated with the Justice Department in prosecuting culpable individuals,” and that the DOJ “will be looking to apply that same approach Department-wide.” Continue Reading DOJ Announces Additional Guidance on Voluntary Self-Disclosure in M&A Context
On September 1, 2023, U.S. District Judge Pamela K. Chen of the Eastern District of New York granted a judgment of acquittal in the latest FIFA bribery prosecution, holding that the federal honest services statute, 18 U.S.C. § 1346, does not cover foreign commercial bribery in light of recent Supreme Court precedent.Continue Reading U.S. District Court Tosses FIFA Bribery Convictions, Finding Honest Services Statute Does Not Reach Foreign Commercial Bribery
On July 26, 2023, the U.S. Securities and Exchange Commission (the “SEC” or “Commission”) adopted rules to enhance and standardize disclosure requirements related to cybersecurity incident reporting and cybersecurity risk management, strategy, and governance.Continue Reading New SEC Disclosure Rules for Cybersecurity Incidents and Governance and Key Takeaways
On July 26, 2023, the Securities and Exchange Commission (“SEC”) proposed new rules targeting the use of predictive data analytics and artificial intelligence (“AI”) by registered investment advisers (“RIAs”) and broker-dealers. The new proposed rules focus on the potential for conflicts of interest and the possibility that newer, more complex analytics models (including those using AI) might optimize decision making for RIAs and broker-dealers by placing those firms’ interests above the interests of their clients. The proposed rules would require RIAs and broker-dealers to: (i) evaluate whether their use of technologies “that optimize for, predict, forecast or direct investment-related behaviors or outcomes” create such a conflict of interest, and (ii) either stop using or address the effects of tools that place a firm’s interests before the interests of clients. RIAs and broker-dealers will also will be required to adopt policies to ensure compliance with the new proposed rules. Continue Reading SEC Proposes Rules Limiting the Use of Artificial Intelligence by Registered Investment Advisers and Broker-Dealers
On January 24, 2022, Securities and Exchange Commission Chair Gary Gensler gave a speech at the Northwestern Pritzker School of Law’s Annual Securities Regulation Institute signaling the SEC’s intention to step up its cyber-related regulatory and enforcement efforts. Gensler described the continued rise in cybersecurity incidents targeting the financial sector as a serious threat to the nation’s economy and critical infrastructure, with costs potentially in the trillions of dollars.
Continue Reading SEC Chair Previews Ramp Up in Regulation and Enforcement in the Cybersecurity Context
On July 29, 2021, the U.S. Attorney’s Office for the Southern District of New York unsealed a securities and wire fraud indictment against Trevor Milton, the founder and one-time chairman of Nikola Corporation (“Nikola”), a pre-revenue electric- and hydrogen-powered vehicle company which went public through a merger with a special-purpose acquisition company (“SPAC”). The Indictment alleges that Milton made deceptive, false, and misleading claims regarding Nikola’s products and technology, which were directed at retail investors through social media and television, print, and podcast interviews. The SEC also filed a parallel civil action against Milton, alleging violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and which contends that Milton engaged in a “relentless public relations blitz” on social media and the popular press directed at “Robinhood investors” in order to inflate Nikola’s stock price.
These actions further confirm the heightened law enforcement and regulatory scrutiny of SPACs, as well as continuing interest by government authorities in protecting retail investors in so-called meme stocks.
Continue Reading DOJ Indicts Founder of Nikola for Allegedly Defrauding Retail SPAC Investors
On July 13, 2021, the Securities and Exchange Commission (“SEC”) announced a major enforcement action related to a proposed merger between a special purpose acquisition company (“SPAC”) and a privately held target company (“Target”). This followed numerous warnings by the SEC staff over several months of enhanced scrutiny of such transactions under the federal securities laws. The respondents, except for the Target’s CEO, settled the action by collectively agreeing to civil penalties of approximately $8 million and to certain equitable relief described below. 
Continue Reading SEC Brings SPAC Enforcement Action and Signals More to Come
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
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, for reconsideration in light of the Supreme Court’s “Bridgegate” decision in Kelly v. United States. 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. 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. 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. 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