On November 14, the Securities and Exchange Commission announced its enforcement results for the 2023 fiscal year, with case numbers up from fiscal year 2022 and monetary sanctions at the second highest level in the agency’s history, though down significantly from last year’s record highs. In a press release announcing the results, Enforcement Director Gurbir Grewal noted that the past year’s cases demonstrate how the agency “work[s] with a sense of urgency, using all the tools in our toolkit.” This post evaluates how the SEC used its enforcement tools in the past year and surveys the enforcement highlights in key substantive areas.Continue Reading SEC Announces FY 2023 Enforcement Results with Second-Highest Penalties on Record
On October 13, the Securities and Exchange Commission (the “SEC”) adopted new rule 10c-1a (the “Rule”), which establishes broad reporting requirements of the terms of securities loans to the Financial Industry Regulatory Authority (“FINRA”) for public dissemination. Aimed at increasing transparency in the securities lending market, the Rule will significantly increase compliance obligations in the securities lending industry, and many market participants will likely require extensive operational upgrades to prepare for compliance. Certain details of reporting obligations will be the subject of FINRA rulemaking, and participants should be prepared to review and provide comment on what is proposed.Continue Reading SEC Finalizes Rule Requiring Securities Loan Reporting
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 6th, the SEC Division of Examinations (the “Division”) published a risk alert with more detail on how it selects investment advisers for examinations and its process for determining the specific risk areas and issues to address in examination. It noted that it leverages technology to conduct bulk data collection and analysis at both an industry and adviser level, as well as utilizing disclosure documents such as Form ADV and Form PF. The risk alert is the second this year to address examination practices; a March 2023 risk alert provided an examination road map for new advisers and detailed a number of observations from recent exams. Releases for the recently proposed and adopted amendments to Form ADV and Form PF, as well as the much anticipated final Private Fund Rules, have also noted the anticipated use of such disclosures and rules in examination and enforcement. While some industry watchers have observed that the staff’s focus on rulemaking has slowed examination and enforcement activity, the staff have achieved a spate of recent settlements in connection with their sweeps on Marketing Rule compliance and Custody Rule violations. This latest risk alert signals that advisers should expect continued scrutiny in these areas and additional sweep exams shortly after the compliance dates for new Private Fund Rules. Advisers should take into account the recent enforcement cases and Division publications as they review their policies and procedures, disclosures, compliance controls and practices relating to the Marketing Rule and these other high priority areas for the SEC.Continue Reading SEC Risk Alert on Examinations: Who Gets Examined and Scope of Exams
On March 27th, the SEC Division of Examinations (the “Division”) published a risk alert affirming its long-standing interest in conducting reasonably prompt examinations of newly registered advisers. The risk alert provides an examination ‘how to’ guide for new advisers, describing the materials those advisers should expect to provide to staff in an examination. Advisers should expect exam staff to focus on (i) proper identification and mitigation of conflicts of interest; (2) adequacy of client disclosures; and (3) effectiveness of compliance programs.Continue Reading SEC Risk Alert Identifies Key Compliance Issues for New (and Not New) Registered Advisers
On December 1, 2022, at the American Conference Institute’s 39th International Conference on the Foreign Corrupt Practices Act (“FCPA”) in Washington D.C., Acting Principal Deputy Assistant Attorney General Nicole M. Argentieri (“DAAG Argentieri”) gave a special keynote speech highlighting developments in FCPA enforcement by the Department of Justice (“DOJ” or the “Department”), including with regard to the application of the DOJ’s announcement of corporate criminal enforcement policy priorities in September of this year. DAAG Argentieri focused on several policy changes and enforcement trends and initiatives using examples from this year’s FCPA resolutions and declination, as well as from the Money Laundering and Asset Recovery Section’s Kleptocracy Asset Recovery Initiative.
Continue Reading DOJ Provides Updates on FCPA and Corporate Criminal Enforcement Trends at International Conference on the FCPA
On September 15, 2022, Deputy Attorney General Lisa O. Monaco (“DAG Monaco”) announced further changes to the enforcement policies and practices of the Department of Justice (“DOJ” or the “Department”) at an event at New York University Law School, in particular building on previously announced revisions relating to individual misconduct and corporate recidivism.
Continue Reading U.S. Department of Justice Announces Changes to Corporate Criminal Enforcement Policies
On August 12, 2022, in United States v. Hoskins, No. 20-842 —F.4th—, 2022 WL 330357 (2d. Cir. Aug. 12, 2022) (“Hoskins II”), a three-judge panel from the Second Circuit upheld a lower court decision to overturn the foreign bribery conviction of a former Alstom SA executive, Lawrence Hoskins. The Court concluded that the trial evidence did not support a finding that Defendant Hoskins was an “agent” of a U.S. subsidiary of the French multinational railway manufacturer Alstom (“Alstom U.S.”). While highly fact-intensive and likely subject to narrow interpretation in the future, the decision is the Second Circuit’s most recent limitation on the extraterritorial reach of the Foreign Corrupt Practices Act (“FCPA”). This follows a prior Second Circuit decision in this same case limiting the scope of the FCPA’s extraterritorial reach of conspiracy liability for certain foreign individuals acting abroad.
Continue Reading Second Circuit Upholds District Court’s Rejection of DOJ Attempt to Expand Extraterritorial Reach of FCPA Through Agency Liability
On July 12, 2022, the Brazilian Government published Federal Decree No. 11,129/2022, which amends the regulation of the Brazilian Clean Companies Act (“BCCA”), Brazil’s 2013 Anticorruption Law. The new regulation came into effect earlier this week, on July 18, 2022, and replaces Decree No. 8,420/2015, which previously regulated the application of the BCCA.
Overall, the new decree resembles past regulation in form and substance, however, it provides additional guidance on the expectations of the Controladoria Geral da União (“CGU”), which oversees compliance with the BCCA, in assessing integrity programs and the range and application of administrative fines for violations of the law. The new decree also clarifies and details procedural mechanisms for the conduct of investigations and negotiation of leniency agreements by the CGU and Brazilian public prosecutors (Advocacia Geral da União – “AGU”).Continue Reading New Anticorruption Decree Modifies Regulation of Brazilian Clean Companies Act
On March 30, 2022, the U.S. Securities and Exchange Commission (“SEC”) Division of Examinations (the “Division”)—formerly the Office of Compliance Inspections and Examinations—released its 2022 Examination Priorities (“2022 Priorities”). The Division is undergoing extensive leadership changes, with the recent departures of several top officials. Consistent with the aggressive agenda set by Chair Gensler for the SEC generally, the Division has returned to its pre-pandemic caseload, conducting over 3,000 exams in fiscal year 2021, issuing over 2,000 deficiency letters, and making 190 referrals to the Enforcement Division. Despite the management changes, the 2022 Priorities generally retain perennial risk areas as the core focus, but include several new and emerging risk areas reflecting the policy goals espoused by Gensler in recent proposed rule releases and public statements.
Continue Reading SEC Division of Examinations Reinforces Gensler Initiatives in its 2022 Exam Priorities