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.

To read the full post, please click here.

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”.

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.

To read the full post, please click here.

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.

As part of the National Defense Authorization Act for 2021 (the “NDAA”), Congress has passed the most significant U.S. anti-money laundering (“AML”) legislation since the USA PATRIOT Act of 2001, the “Anti-Money Laundering Act of 2020” (“AMLA 2020”).

Although President Trump has threatened to veto the NDAA, the majorities supporting the legislation would be sufficient to override the veto if members do not change their votes.

The legislation requires U.S. corporations and LLCs and non‑U.S. corporations and LLCs registered to do business in the United States to disclose information on their underlying beneficial owners to the Financial Crimes Enforcement Network (“FinCEN”) of the Department of the Treasury, if there is no applicable exemption. After implementation, we expect financial institutions no longer to bear the primary burden of establishing the underlying beneficial ownership of many customers as they will have access to the disclosures (with customer consent).

AMLA 2020 also makes sweeping changes to other areas of the U.S. AML regime, including by: (i) providing more guidance and feedback to financial institutions on AML compliance programs required under the Bank Secrecy Act, (ii) increasing resources and enhancing enforcement tools to police AML compliance, and (iii) implementing initiatives to strengthen and modernize FinCEN and AML supervision writ large.

Please click here to read the full alert memorandum.

On Monday, November 9, 2020, the U.S. Federal Trade Commission announced a proposed settlement with Zoom Video Communications, Inc. (“Zoom”), a video conferencing provider, regarding allegations that Zoom misrepresented its data security practices to users and designed its product to circumvent certain embedded security features of third-party software.  The proposed settlement requires Zoom to undertake a range of specific remedial measures related to its data security practices.  It also imposes multiple layers of reporting and certification requirements. Continue Reading FTC Announces Settlement with Zoom Regarding Data Security Practices

On September 30, 2020, amidst a blizzard of cases filed at the end of the Securities and Exchange Commission’s fiscal year, the SEC announced a settlement with BGC Partners, Inc. (“BGC”) involving allegedly misleading disclosures concerning how it calculated a key non-GAAP financial measure (“NGFM”).[1]   This settlement is the latest in a string of enforcement actions relating to what the SEC views as improper uses of NGFMs.  In advance of year-end reporting, this action is a useful reminder to companies to carefully consider the SEC guidance and recent enforcement actions related to NGFMs.  At least 95% of all Fortune 500 companies publish NGFMs, and the SEC has indicated that it will be reviewing NGFMs with particular scrutiny this year-end in light of the challenges of reporting on performance during the COVID-19 pandemic. Continue Reading SEC Brings Enforcement Action Against Global Brokerage Company, Finding False and Misleading Statements In Connection With Non-GAAP Financial Measures

Over the weekend, former Vice President Joseph R. Biden, Jr. was declared the winner of the U.S. presidential election. Although President Trump has yet to concede and press reports suggest he will continue to make his case in court, thoughts have turned to what the Biden administration will mean for federal regulation of business and finance.

In many ways, the future will depend on whether the centrist, coalition-building Biden of yesteryear will show up, or if he will embrace the more progressive wing of the Democratic party that has since grown in influence. Below we lay out our initial reactions on how the Biden presidency is likely to reshape the corporate landscape.

If you have any questions, please feel free to contact the authors listed below or your regular contacts at the firm. Continue Reading What to Expect From the Biden Administration

On the eve of the U.S. presidential election last week, the SEC Enforcement Division released its annual report for fiscal year 2020 (the “Report”), providing an overview of the Division’s enforcement figures, developments, and areas of focus in what Director Stephanie Avakian described as “the most challenging year in recent memory.”[1]  This past year has marked, together with the longest shutdown in government history the year prior, a challenging but reasonably productive time for the SEC’s enforcement program.  Just as last year’s report highlighted the Division’s struggles during the fiscal shutdown, the final annual report of the Clayton-led SEC focuses on the significant disruption the COVID-19 pandemic has caused to the Division’s operations, investigations, and priorities, including the suspension of testimony for several months, establishment of a Coronavirus Steering Committee, and redirection of resources toward COVID-related fraud.  This time around, however, the Division could not avoid a drop-off in the number of enforcement cases, which seems attributable at least in part to the pandemic and its profound impact on the SEC’s operations. Continue Reading From Government Shutdown to COVID-19: SEC Enforcement Division Releases Final Chapter of Jay Clayton-led SEC