On March 3, 2021, the U.S. Securities and Exchange Commission (“SEC”) Division of Examinations (the “Division”)—formerly the Office of Compliance Inspections and Examinations—released its 2021 Examination Priorities (“2021 Priorities”).  The 2021 Priorities generally retain perennial risk areas as the Division’s core focus, but do include several new and emerging risk areas reflecting broader policy shifts under new SEC leadership.

The 2021 Priorities include:  retail investors; information security and operational resilience; financial technology (“Fintech”), including digital assets; anti-money laundering; transition from the London Inter‑Bank Offered Rate (“LIBOR”); several areas covering registered investment advisers and investment companies; market infrastructure; and oversight of the Financial Industry Regulatory Authority and Municipal Securities Rulemaking Board programs and policies.  Although not formal priorities, the Division will also focus on climate-related risks and environmental, social and governance (“ESG”) matters in light of recent market developments and broader attention in these areas. Continue Reading Turning the Page: Highlights of the SEC’s Division of Examination’s 2021 Priorities

After what appears to be a period of relative leniency in 2018/19, enforcement actions for violations of the EU General Data Protection Regulation (“GDPR”) have since intensified. In 2020, according to publically available information, supervisory authorities across the EU and the UK Information Commissioner’s Office (“ICO”) have issued over EUR 170 million worth of fines combined[1], with six of the top ten individual fines imposed being issued in 2020[2]. Continue Reading Ready to Pounce: Regulators Are Intensifying GDPR Enforcement

In a decision with potentially far-reaching implications, Alasaad v. Mayorkas, Nos. 20-1077, 20-1081, 2021 WL 521570 (1st Cir. Feb. 9, 2021), the First Circuit recently rejected First and Fourth Amendment challenges to the U.S. government agency policies governing border searches of electronic devices. These policies permit so-called “basic” manual searches of electronic devices without any articulable suspicion, requiring reasonable suspicion only when officers perform “advanced” searches that use external equipment to review, copy, or analyze a device.  The First Circuit held that even these “advanced” searches require neither probable cause nor a warrant, and it split with the Ninth Circuit in holding that searches need not be limited to searches for contraband, but may also be used to search for evidence of contraband or evidence of other illegal activity. This decision implicates several takeaways for company executives entering and leaving the United States, particularly if they or their employers are under active investigation.  In-house counsel in particular should consider the implications of the decision given obligations of lawyers to protect the confidentiality of attorney-client privileged information.

Continue Reading First Circuit Upholds Border Searches of Electronic Devices Without Probable Cause

Last month, in Guo Wengui v. Clark Hill, PLC, the United States District Court for the District of Columbia granted Plaintiff’s motion to compel production of Defendant’s third-party forensic investigation report following a cybersecurity incident.[1]  The court held that the forensic report was not covered by the attorney-client privilege or the work product doctrine, providing a cautionary tale for companies conducting post-breach investigations. Continue Reading D.C. District Court Rejects Privilege Claim for Post-Data Breach Forensic Report

Corporate investigations under the Biden Administration’s Department of Justice (“DOJ”) are expected to increase in the coming months.  Navigating such investigations can be complex, distracting, and costly, and comes with the risk of prosecution and significant collateral consequences for the company.  Recently, Cleary Gottlieb partners and former DOJ prosecutors, Lev Dassin, Jonathan Kolodner, and Rahul Mukhi, published a chapter on “Representing Corporations in United States Attorney’s Office and DOJ Investigations,” which can serve as a useful guide for in-house counsel to prepare for an investigation or manage an ongoing matter.  The chapter, available here, covers topics including DOJ’s organizational structure, the typical path of a corporate criminal investigation, recent policy initiatives at DOJ that reflect an effort to provide greater transparency with respect to corporate investigations, the process by which federal prosecutors make critical decisions about filing charges and resolving investigations, and the opportunities for counsel to advocate for their clients along the way.

Earlier this month, the Supreme Court vacated and remanded a high-profile insider trading case, United States v. Blaszczak, to the Second Circuit “for further consideration in light of Kelly v. United States.”[1]  Kelly is more commonly known as the “Bridgegate” decision, in which the Supreme Court restricted the application of federal fraud statutes to schemes seeking to obtain property, to the exclusion of schemes primarily targeting regulatory actions by government officials.  In light of the remand, the Second Circuit will now reconsider its endorsement in Blaszczak of liability under Title 18 for a scheme targeting “political intelligence.” Continue Reading Second Circuit to Reconsider the Scope of Insider Trading Prosecutions Under Federal Fraud Statutes After Supreme Court’s Bridgegate Decision

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2021”.

Antitrust was front-page news in 2020: regulators sued Google and Facebook in some of the biggest antitrust enforcement actions in recent decades. Robust antitrust enforcement can be expected to continue under a Biden administration.

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The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2021”.

In recent years, the international tax system has experienced significant change as tax authorities across the globe have adopted and implemented new rules and procedures to respond to the new economy and perceptions of taxpayers arbitraging differences among jurisdictions.

While this process has been partially delayed by special temporary tax measures enacted by governments in response to COVID-19, once these measures expire, tax authorities and policymakers can be expected to rapidly resume forceful enforcement initiatives and the introduction of further substantive law changes. We expect to see, in particular, an increased focus on how to tax companies engaging in digital transactions. While many of the rules enacted so far are intended to prevent deductions from being claimed in more than one jurisdiction and income from escaping taxation entirely, they may inadvertently result in taxpayers being subject to double taxation or whipsaw, particularly as the new rules are being adopted and implemented simultaneously and without coordination. Taxpayers will need to be vigilant, thorough and proactive to minimize their risks.

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For a PDF of the full memorandum, please click here.

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2021”.

The tumultuous events of 2020, including the ongoing pandemic and the election of a new U.S. President, will have direct and lasting impacts on white-collar and regulatory enforcement in the years to come. As we enter 2021, we anticipate that white-collar and regulatory enforcement will be more active under the Biden administration, as policy priorities shift toward financial and corporate fraud, as well as ESG issues, environmental and social justice, more generally. At the same time, we expect the already-visible pandemic and recession-related enforcement trends to continue, with a sustained focus on financial statement and accounting fraud. Finally, we expect that the increased reliance on whistleblowers will continue (and potentially grow) in 2021.

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For a PDF of the full memorandum, please click here.

On December 22, the SEC finalized significant revisions to its rules under the Investment Advisers Act governing advertising and solicitation by investment advisers. The new Marketing Rule represents the first substantive changes to the Advertising Rule and Solicitation Rule since their adoption more than 40 years ago.

The Final Rule made several significant changes to the November 2019 Proposal. Perhaps the most notable is removing the proposed codification of disparate standards for retail and non-retail advertisements, which has been replaced by a general expectation to tailor communications based on audience sophistication and the adoption of several distinctions between advertisements to private fund investors and advertisements for other types of clients. A new flat prohibition on presenting gross performance data without net performance, regardless of audience sophistication, is another significant shift from both current practice and the Proposal. While the proposed pre-review requirement for advertisements has not been adopted, we expect modifications will still be needed to advisers’ existing communication protocols.

The Marketing Rule will become effective 60 days after publication in the Federal Register, with compliance required 18 months after the effective date.

This alert memorandum discusses our key takeaways and summarizes the notable points from the Final Rule, along with specific interpretive issues that could yield unintended consequences, create additional compliance obligations or require changes to policies and procedures.