Earlier this week, CFTC Chairman J. Christopher Giancarlo announced the signing of a Memorandum of Understanding (MOU) intended to enable greater enforcement coordination and information sharing between the CFTC and state securities agencies. The MOU formalizes a process for exchange of information and coordination between the CFTC, which has jurisdiction over the commodities and swaps markets, and state securities regulators and enforcers. It continues the trend of increasing prominence of the CFTC’s enforcement division, and further reinforces connections with state authorities to promote cross-jurisdictional cooperation and coordinated enforcement action. While the impact of the MOU remains to be seen, it is hoped that it will facilitate more coordinated and efficient enforcement proceedings in cases involving the CFTC. At the same time, the provisions for information sharing reinforce the prudence of assuming that enforcement authorities speak to each other. Therefore, companies facing possible investigations should ensure information provided to all relevant authorities is accurate and complete, and in appropriate cases may consider actively involving state securities agencies early on in order to potentially facilitate a later joint resolution. Continue Reading CFTC Chairman Announces Formal Cooperation Agreement With State Securities Agencies
In a February post, we discussed in detail recent changes to the U.S. tax rules governing the deductibility of settlement payments and court-ordered damages payments. The IRS has now released some limited guidance on this new law (IRS Notice 2018-23), and this post addresses what is in this guidance (the “Notice”).
To recap, under the new law: a settlement or court-ordered payment made to (or at the direction of) a government in relation to the violation of any law (or the investigation or inquiry by such government into the potential violation of any law) is not deductible for U.S. tax purposes unless the payment constitutes “restitution (or remediation of property) ” or “a payment for the purpose of coming into compliance with a law”.
On March 14, 2018, U.S. Commodity Futures Trading Commission (“CFTC”) Chairman J. Christopher Giancarlo gave a speech at the Futures Industry Association (“FIA”) annual meeting in Boca Raton, Florida, in which he reviewed the CFTC’s activities during the past year and provided a preview of CFTC priorities for the coming year. Among the issues addressed in Chairman Giancarlo’s speech were the CFTC’s successes and priorities in enforcement, including in particular initiatives in the area of anti-spoofing and virtual currencies. Continue Reading Recent CFTC Enforcement Actions: Spoofing and Virtual Currency Task Forces
Investigations into potential violations of U.S. and non-U.S. securities laws are often resolved by a settlement requiring the business to make one or more large settlement payments. We have seen settlements paid to the DOJ, the SEC, other U.S. and non-U.S. regulators, and private plaintiffs. An important question is whether the payment will be deductible for tax purposes. Since 1969, the U.S. tax law has denied a deduction for “any fine or similar penalty paid to a government for the violation of any law.”[i] This limitation was significantly changed by the U.S. tax reform law enacted in December of 2017 (known as the Tax Cuts & Jobs Act or “TCJA”). These changes, which had been proposed in Congress over 30 times since 2003 but not enacted until now, respond in part to disputes the IRS has had with taxpayers in the past. Continue Reading Settlement Payments Under the New Tax Reform Law
In a September 25, 2017 speech in New York, U.S. Commodity Futures Trading Commission (the “CFTC”) Division of Enforcement (the “Division”) Director James McDonald outlined the CFTC’s focus on creating greater incentives for self-reporting and cooperation in order to deter and detect misconduct in the commodities markets. Director McDonald’s speech accompanied the release of an Updated Advisory on Self Reporting and Full Cooperation, which supplements the guidance issued by the CFTC earlier this year.
The new guidance reflects an effort by the CFTC to rebalance the incentives facing firms who identify potential misconduct to favor voluntary reporting and pro-active cooperation, reinforced by the potential for concrete benefits in the form of fine reductions and, potentially, declination of prosecution in appropriate cases. Commodities market participants and financial institutions should take note of this guidance when considering how to respond to potential evidence of misconduct and in dealing with the Division.
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