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On April 20, OFAC issued COVID-related guidance indicating that it encourages those subject to its jurisdiction to contact the OFAC staff if they believe they will have difficulty meeting OFAC deadlines (whether reporting deadlines, responses to administrative subpoenas, or other matters).  OFAC also encouraged electronic submission of any communications.  In our experience, OFAC is still functioning at a relatively high level, remote operations notwithstanding, but the staff has also been flexible in responding to the challenges all institutions face.  As OFAC’s guidance and our own experience underline, open communication with the staff is very important.
Continue Reading OFAC Issues Guidance on COVID’s Impact on Compliance and Enforcement

On March 24, the Commodity Futures Trading Commission (“CFTC”) released its Final Interpretive Guidance on Actual Delivery for Digital Assets (“Final Interpretation”), addressing longstanding questions regarding which digital asset transactions could be deemed “retail commodity transactions” under the Commodity Exchange Act (“CEA”).  The Final Interpretation comes two years after the CFTC issued proposed interpretive guidance (“Proposed Interpretation”).
Continue Reading CFTC Issues Final Interpretive Guidance on Actual Delivery for Digital Assets

On March 9, 2020, the Financial Industry Regulatory Authority (FINRA) updated its guidance for broker-dealers’ pandemic-related business continuity plans (BCPs) and issued regulatory guidance and relief from some of their obligations in response to the novel coronavirus (COVID-19) global pandemic.  FINRA made clear that Regulatory Notice 20-08 imposes no new rules or obligations on members and applies only to members’ obligations under FINRA’s rules and regulations and not those of other securities regulators.  Acknowledging the evolving nature of the crisis, FINRA also invited members to consult with the organization to address additional compliance challenges as they arise, noting that additional regulatory guidance and relief may be provided at a later date.  Finally, FINRA indicated that Regulatory Notice 20-08 will remain effective until a subsequent notice of cessation is published.
Continue Reading FINRA Issues Regulatory Notice 20-08 Providing Guidance and Regulatory Relief to Members Addressing COVID-19 Pandemic

The World Health Organization has now declared COVID-19 a pandemic, and as more businesses begin to face the impacts of quarantines and travel restrictions, they may find themselves managing unexpected legal risks.  Among those are risks related to communications with customers by sales and marketing functions.

Those businesses hardest hit in the initial stages of the crisis — e.g., cruise lines, airlines and hotels —  quickly face pressures that raise the risks of private litigation and government enforcement in connection with sales and marketing efforts.  For example, what assurances should sales representatives give in response to inquiries about the chances of contracting the virus in connection with the use of a product or service?  What information should be provided about safety measures being taken?  Do sales commission and incentive programs exacerbate the risks of non-compliant responses, and should they be suspended?
Continue Reading COVID-19 and the Compliance Risks Related to Sales and Marketing Practices

On January 27, 2020, the U.S. Securities and Exchange Commission (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) issued examination observations related to cybersecurity and operational resiliency practices (“Examination Observations”). The observations highlight a set of best practices by market participants in the following areas:  (1) governance and risk management, (2) access rights and controls, (3) data loss prevention, (4) mobile security, (5) incident response and resiliency, (6) vendor management and (7) training and awareness.  Cybersecurity has been a key priority for OCIE since 2012.  Since then, it has published eight cybersecurity-related risk alerts, including an April 2019 alert addressing mobile security. OCIE has perennially included cybersecurity practices as part of its examination priorities (“Examination Priorities”) and listed all but mobile security as “particular focus areas” in the “information security” priority for 2020. 
Continue Reading OCIE Cybersecurity and Resiliency Observations and Best Practices

Insider trading law has remained a subject of significant debate and attention, including with a recent Second Circuit decision addressing the use of 18 U.S.C. §§ 1343 (wire fraud) and 1348 (securities fraud) in insider trading cases[1] and a new insider trading bill that passed the U.S. House of Representatives in December by an overwhelming majority.  Yesterday, a blue ribbon task force headed by Preet Bharara, the former U.S. Attorney for the Southern District of New York, published a report studying the history and current state of insider trading law and proposing reforms that would bring greater clarity and certainty to the law.
Continue Reading Task Force Led By Preet Bharara and Cleary Gottlieb’s Joon H. Kim Issues Report Recommending Reforms to Insider Trading Law

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2020”.

Enforcement of anti-bribery, sanctions and money laundering laws remains a top priority for US authorities. In 2019, the US Department of Justice and civil regulators issued new or updated policies aimed at…

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.”
Continue Reading FINRA Publishes AML Red Flags to Help Broker-Dealers Satisfy Suspicious Activity Monitoring and Reporting Requirements

Legal and regulatory scrutiny regarding the use of non-disclosure agreements by companies to resolve allegations of sexual harassment and misconduct continues to increase in the wake of the #MeToo movement.  Such scrutiny featured prominently this month in two high-profile sexual harassment matters: the Wynn Resorts investigation and the various legal proceedings following the allegations against Harvey Weinstein.  Both in-house and outside counsel for companies with senior executives facing such allegations should take note of these developments, as they call into question whether the use of NDAs could in certain circumstances amount to investigatory obstruction or a violation of ethical obligations.
Continue Reading New Scrutiny for NDAs in Sexual Harassment Matters

On December 20, 2018, the U.S. Securities and Exchange Commission (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) released its 2019 Examination Priorities.  The six themes for this year’s priorities are:  retail investors (including seniors and those saving for retirement), compliance and risk in registrants responsible for critical market infrastructure (clearing agencies, transfer agents, national securities exchanges and Regulation SCI entities), oversight of the Financial Industry Regulatory Authority and Municipal Securities Rulemaking Board, digital assets, cybersecurity and anti-money laundering.  The only new theme for 2019 compared to 2018 is digital assets, which we take to imply a plan to more closely—and substantively—regulate investment advisers and broker-dealers involved with this asset class.  The 2019 priorities also more explicitly than the 2018 priorities describe specific practices that OCIE found concerning in examinations of those entities, many of which involved failure to adequately safeguard client assets and the adequacy of disclosures of conflicts of interest.  We expect to see a corresponding focus in Enforcement Division investigations and cases on these issues as a result.
Continue Reading Lessons from the SEC Office of Compliance Inspections and Examinations’ 2019 Priorities