On February 15, 2024, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) released a notice of proposed rulemaking (the “Proposed Rule”)[1] that would impose anti-money laundering/countering the financing of terrorism (“AML/CFT”) compliance obligations on SEC-registered investment advisers (“RIAs”) and exempt reporting advisers (“ERAs”) pursuant to the Bank Secrecy Act (the “BSA”), taking steps to close a perceived gap in the AML/CFT defenses of the U.S. financial system. FinCEN estimates more than 15,000 RIAs and almost 6,000 ERAs may be covered by the Proposed Rule, including many advisers that are located outside the United States but have registered (or file reports) with the SEC because they have U.S. clients. Continue Reading FinCEN Tries Again . . . to Impose AML Requirements on Investment Advisers

On November 14, the Securities and Exchange Commission announced its enforcement results for the 2023 fiscal year,[1] 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

On October 8, 2023, California’s Governor Gavin Newsom signed into law Senate Bill 54 (the “VC Diversity Law”) requiring “venture capital companies” with business ties to California to file annual reports detailing (1) specified demographic data for the founding teams of all portfolio companies invested in during the prior year and (2) the aggregate amounts of investments made by the venture capital company during the prior year and investments in specified categories of portfolio companies.  Demographic data must be obtained through voluntary surveys sent to each founding team member of a portfolio company that receives funding from the venture capital company.  The data, in anonymized form, will be publicly available – and searchable and downloadable – on the California Civil Rights Department’s website.  The VC Diversity Law is stunning both in its scope and its plain objective to impose State-level requirements that go beyond Federal requirements.  And this at a time when the Securities and Exchange Commission has exponentially increased those Federal requirements.Continue Reading California Adds To Private Fund Adviser Woes; Adopts New Diversity Reporting for Venture Capital Funds

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.”[1] 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.”[2]  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 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.[1]  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

Faced with the new challenges of a changing market, developing digital platforms and the consequential rise of new online commerce practice, the European Union (“EU”) has strengthened its current legislation on consumer protection.Continue Reading Italian Transposition of the Omnibus Directive: the Reform in Pills