On November 6, 2019, the SEC’s Division of Enforcement released its annual report (the “Report”) describing its enforcement actions from fiscal year 2019. Like prior reports, the Report quantifies the Division’s activities in a number of ways and discusses priority areas going forward. The Report also brings front-and-center certain challenges the Division has faced – including difficulties navigating recent Supreme Court decisions that call into question the constitutionality of the SEC’s administrative proceedings and the agency’s ability to obtain disgorgement, as well as the impact of the government shut-down and general resource constraints. Continue Reading Headwinds and Shifting Priorities: Beyond the Numbers In The SEC Enforcement Division’s 2019 Annual Report
On November 1, 2019, the Supreme Court granted certiorari in Liu v. SEC to decide whether the Securities and Exchange Commission can obtain disgorgement as an equitable remedy in federal court enforcement actions.
The certiorari grant in this case is unusual, because the circuit courts that have considered the issue have all agreed that the SEC can obtain disgorgement from a district court exercising its equitable authority.
Depending on how the Court rules, this case could have major consequences for the SEC’s enforcement program and even for the inherent equitable powers of Article III courts.
The final version of the California Consumer Privacy Act of 2018 is coming into view.
On October 10, California’s Attorney General released the long-anticipated draft regulations to implement the CCPA, and on October 12, the Governor signed into law five amendments to the CCPA passed during the 2019 legislative session. (We previously discussed the CCPA here and the amendments here.) While the Regulations are currently subject to public comment and may be further modified by the Attorney General in response to such comments, the shape of the law that will come into effect on January 1 seems largely in place.
Given the scope of the Regulations and some unanticipated new requirements they contain, this alert memorandum provides a guide for understanding the Regulations by (i) highlighting some welcome clarifications included in the Regulations; (ii) identifying unexpected new obligations they impose; (iii) describing inconsistencies between the Regulations and the CCPA; and (iv) discussing other provisions in the Regulations that implement the CCPA.
Please click here to read the full memorandum.
On October 3, 2019, the governments of the United Kingdom and United States signed the first-ever executive agreement governing cross-border data requests (the “Agreement”) pursuant to the US Clarifying Lawful Overseas Use of Data Act (“CLOUD Act”). As contemplated by the CLOUD Act, the Agreement provides a mechanism for the governments to access and share data stored abroad by electronic communications services providers (“CSP”) in their respective countries in a timely manner. The Agreement will enter into effect following a 180 day Congressional review period required by the CLOUD Act and a similar review by the UK Parliament. Continue Reading United Kingdom and United States Governments Sign First-Ever CLOUD Act Agreement
Global Crisis Management Series: This post is part 15 in a series concerning topics further elaborated on in Cleary Gottlieb’s Global Crisis Management Handbook—a desk reference for spotting issues and avoiding common mistakes when faced with a crisis. The current version is available here.
Have the right policies in place
- Ensure clear, readily accessible, and (where necessary) country-specific policies are in place indicating the permitted uses of company devices and other IT equipment, including messaging services. If you allow employees to use their own devices to perform work, make sure your policies adequately address issues of access in the context of investigations.
- Draft and make accessible to employees a policy concerning the purposes for which, when, and by whom, suspicious log data can be accessed, and implement and enforce acceptable and unacceptable use of IT work facilities policies.
- Evaluate policies regularly. Policies that allow monitoring of communications should be reviewed at least annually to assess whether they are the least intrusive means to achieve the stated purposes.
- Stay informed on updates in the law surrounding monitoring, and note that these rules also apply to the monitoring of electronic communications in the workplace.
On September 18, 2019, the Securities and Exchange Commission (“SEC”) filed its first civil suit alleging violations of broker-dealer registration requirements in U.S. digital asset markets. In a case filed in the U.S. District Court for the Central District of California, the SEC alleged that Defendants ICOBox and its founder, Nikolay Evdokimov, illegally conducted an unregistered public securities offering for their 2017 initial coin offering (“ICO”), and have operated an unregistered brokerage service facilitating the launch of ICOs in digital asset securities since 2017. Continue Reading SEC Files First Suit Against Alleged Unregistered Broker-Dealer Operating in Digital Asset Markets
Global Crisis Management Series: This post is part 14 in a series concerning topics further elaborated on in Cleary Gottlieb’s Global Crisis Management Handbook—a desk reference for spotting issues and avoiding common mistakes when faced with a crisis. The current version is available here.
Many investigations, particularly those that are cross-border in nature, are likely to present data privacy issues, and managing these issues is frequently a key consideration in an investigation. By keeping data privacy laws in mind as soon as an investigation starts, an organization will avoid the risk that it has failed to satisfy certain requirements, thereby exposing itself to the possibility of a fine or sanction from a regulator. Below we walk through chronologically how an organization might incorporate data privacy considerations at each stage of an investigation: Continue Reading Incorporating Data Privacy Considerations Into Investigations
Companies that face non-public government investigations frequently confront challenging questions regarding whether and when to disclose the existence of the investigation, how much to disclose, and any duty to update the disclosure as the investigation proceeds. The SEC recently filed a settled complaint alleging that Mylan committed accounting and disclosure violations for failing to timely disclose an otherwise confidential DOJ investigation into whether Mylan overcharged Medicaid for its largest revenue and profit generating product, the EpiPen. The investigation resulted in Mylan agreeing to pay $465 million to settle the investigation. The settlement papers are important reading for all public companies considering disclosure of government investigations.
Please click here to read the full alert memorandum.
On September 4, 2019, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert addressing the most common compliance issues it identified in examinations of investment advisers (“Advisers”) related to principal and agency cross transactions. Continue Reading SEC’s OCIE Affiliate Transaction Risk Alert Highlights Pitfalls in Obtaining Effective Consent
Global Crisis Management Series: This post is part 13 in a series concerning topics further elaborated on in Cleary Gottlieb’s Global Crisis Management Handbook—a desk reference for spotting issues and avoiding common mistakes when faced with a crisis. The current version is available here.
When a company receives a request for information from an investigating authority, one initial issue is whether to cooperate with the request or to assume an adversarial (or at least non-cooperative) position. Even if the company ultimately decides to contest the authority’s characterization of the conduct, it is often in the company’s best interest to agree to cooperate with the investigation and the authority’s requests (to the extent they are reasonable and lawful). In this vein, there are three important ways to establish and maintain a cooperative posture with an investigating authority, while also protecting the company’s interests in the process. Continue Reading Best Practices for Negotiating the Scope of an Investigative Request