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 April 3, 2019, Senator (and Democratic Presidential contender) Elizabeth Warren announced proposed legislation—dubbed the “Corporate Executive Accountability Act”—that would effect a dramatic change in white collar criminal law by permitting prosecution of corporate executives for negligent conduct. Under traditional criminal law principles, defendants must typically have at least knowledge with respect to the conduct that constitutes the crime. However, under Senator Warren’s proposed law, executives of large companies could be criminally prosecuted (and fined and/or jailed if convicted) if they are found to have acted negligently in failing to prevent criminal acts committed by the companies they supervise. The bill is unlikely to be enacted, but it nonetheless represents a significant policy indication from a Presidential candidate. Continue Reading Senator Warren Proposes Bill to Hold Corporate Executives Criminally Accountable for Negligent Conduct
In the much-awaited Judgment No. 63, filed on March 21, 2019 and published on March 27, 2019 on Issue No. 13 of the Italian Official Gazette, the Italian Constitutional Court found that the principle of retroactive application of the most favorable law applies to the administrative penalties set forth under Legislative Decree No. 58 of February 24, 1998 against market abuse, thereby upholding the views expressed by the Milan Court of Appeals in its Order No. 87 of March 19, 2017.
In sum, the Court found that:
- Administrative penalties against market abuse set forth under the Italian Securities Act have a “punitive nature;”
- As such, these penalties must comply with the safeguards “that the Constitution and international human rights law,” including the European Convention for the Protection of Human Rights and Fundamental Freedoms (“ECHR”), “provide for criminal matters,” including the principle of retroactive application of the most favorable law;
- More in general, the entire “body” of safeguards and principles applicable to “criminal matters” pursuant to the ECHR applies to administrative penalties having “a ‘punitive’ nature and purpose” according to the criteria set out by the European Court of Human Rights (“ECtHR”);
- As a result, Art. 6(2) of Legislative Decree No. 72 of May 25, 2015 (“Decree”) violates the Constitution insofar as it bars the retroactive application of the amendments introduced by Art. 6(3) of the Decree (i.e., the inapplicability of the fivefold increase of penalties under Art. 39(3) of Law No. 262 of December 28, 2005) to administrative sanctions against market abuses under Articles 187-bis and 187-ter of the Italian Securities Act.
In addition to the critical topic specifically addressed by the Court, the Judgment is remarkable for the abovementioned, broadly-worded principles included in its reasoning, which suggest that the Italian Constitutional Court’s stance to the relationships between Supervisory Authorities and supervised subjects may become more libertarian in the future.
Please click here to read the full alert memorandum.
On March 25, 2019, partners Lev Dassin and Arthur Kohn participated in a webcast hosted by The Conference Board, entitled “Corporate Prosecutions: What Companies, Boards and Executives Need to Know.” Daniel Gitner, a partner at Lankler Siffert & Wohl, also participated on the panel.
The panelists and moderator Doug Chia, executive director of The Conference Board, began by discussing corporate prosecutions generally, including the history of corporate prosecutions and how DOJ attitudes regarding corporate prosecutions have changed over time. Dassin explained that the DOJ has more recently refocused its attention on prosecuting individuals engaged in corporate misconduct. Continue Reading Cleary Partners Participate in Panel Discussion on Corporate Prosecutions
On April 3, 2019, staff of the Securities and Exchange Commission released (1) a framework providing principles for analyzing whether a digital asset constitutes an investment contract, and thus a security, as defined in SEC v. W.J. Howey Co. and (2) a no-action letter permitting TurnKey Jet, Inc., without satisfying registration requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934, to offer and sell “tokenized” cards that are recorded on a permissioned blockchain and can be used for the limited purpose of purchasing air charter services.
The framework and no-action letter are a logical expansion of prior SEC statements and actions applying Howey to digital assets, but raises important interpretative issues for newly issued digital assets.
Please click here to read the full alert memorandum.
In a recent speech at the annual ABA White Collar Crime Conference in New Orleans, Assistant Attorney General Brian Benczkowski of the Criminal Division of the Department of Justice (“DOJ”) announced certain changes to the FCPA Corporate Enforcement Policy (“the Enforcement Policy” or “Policy”) to address issues that the DOJ had identified since its implementation. These and other recent updates have since been codified in a revised Enforcement Policy in the Justice Manual.
The Enforcement Policy, first announced by the DOJ in November 2017, was initially applicable only to violations of the FCPA, but was subsequently extended to all white collar matters handled by the Criminal Division. The Policy was designed to encourage companies to voluntary self-disclose misconduct by providing more transparency as to the credit a company could receive for self-reporting and fully cooperating with the DOJ. Among other things, the Enforcement Policy provides a presumption that the DOJ will decline to prosecute companies that meet the DOJ’s requirement of “voluntary self-disclosure,” “full cooperation,” and “timely and appropriate remediation,” absent “aggravating circumstances” – i.e. relating to the seriousness or frequency of the violation. For more information on the Enforcement Policy, read our blog post explaining it here. Continue Reading DOJ Updates FCPA Corporate Enforcement Policy
On March 27, 2019, the Supreme Court issued a 6-to-2 decision in Lorenzo v. SEC focusing on the distinction between “making” a false statement under Exchange Act Rule 10b-5(b) and engaging in deceptive conduct—so-called “scheme liability”—under Rules 10b-5(a) and (c).
The Court upheld a D.C. Circuit majority decision concluding that the SEC could hold an investment banker primarily liable for circulating false emails to investors even where he did not personally author the content of those messages. The decision is notable because it clarifies that the “scheme liability” provisions of Exchange Act Rule 10b-5(a) and (c) can impose liability even upon those defendants who could not otherwise be held primarily liable under the Supreme Court’s 2011 decision in Janus Capital Group, Inc. v. First Derivative Traders, because they were not a “maker” of those statements under Exchange Act Rule 10b-5(b), but instead were involved in the preparation or dissemination of purportedly false statements “made” by others.
Please click here to read the full alert memorandum.
On March 6, 2019, the U.S. Commodity Futures Trading Commission (“CFTC”) Enforcement Division released an advisory (the “Advisory”) on self-reporting and cooperation for violations of the Commodity Exchange Act (“CEA”) that involve foreign corrupt practices. The Advisory lays out guidelines for companies or individuals “not registered (or required to be registered) with the CFTC” to receive significant cooperation credit for voluntarily and timely disclosing CEA violations involving foreign corrupt practices. Indeed, where such disclosure is followed by “full cooperation and appropriate remediation” and other measures, the Division of Enforcement will extend a presumption that no civil monetary penalties be imposed. Moreover, while registrants—which are subject to “independent reporting obligations”—will not benefit from such a presumption, cooperation may still garner “substantial reduction in the civil monetary penalty.”
The Advisory is the latest signal of the CFTC’s efforts over the last two years to more clearly define the benefits of voluntary cooperation with the Agency. This may indicate that the CFTC is taking an increased interest in corruption cases related to the commodities or swaps markets. Continue Reading CFTC Enforcement Division Issues New Advisory on Self-Reporting and Cooperation
On 12 February 2019, the European Data Protection Board (“EDPB”) adopted its first opinion on an “administrative arrangement,” which provides a new mechanism for the transfer of personal data between European Union (“EU”) financial supervisory authorities and securities agencies and their non-EU counterparts.
Under the EU’s General Data Protection Regulation 2016/679 (“GDPR”), personal data cannot be transferred from the European Economic Area (“EEA”) to a third country unless the European Commission has decided that such third country is “adequate” from a data protection laws perspective, or “appropriate safeguards” are in place to ensure that the treatment of personal data in the hands of the recipient reflects the GDPR’s high standards. Article 46 of the GDPR provides for various safeguarding options, including the possibility of “provisions to be inserted into administrative arrangements between public authorities or bodies which include enforceable and effective data subject rights.” No such “administrative arrangements” have been approved by the EDPB until now. Continue Reading EDPB Issues First Opinion on Administrative Arrangements Under the GDPR for Cross-Border Data Flows Between EU and Non-EU Securities Agencies
On March 4, a federal judge of the Northern District of California granted a directed verdict motion in favor of Robert Bogucki, the former head of Barclays’ foreign exchange (“FX”) trading desk. Bogucki went to trial on charges that he had engaged in a “front-running” scheme to manipulate the FX options market in advance of a client’s corporate transaction. Following the government’s presentation of its case at trial, Judge Charles Breyer acquitted Bogucki, finding that the government had failed to present sufficient evidence such that a reasonable jury could find Bogucki guilty of any fraud charges beyond a reasonable doubt. Continue Reading District Court Acquits Barclays FX Trader of Fraud Charges