As the Securities and Exchange Commission Division of Enforcement signaled in its recent annual report, policing the asset management industry will be a key priority in its continuing focus on protecting retail investors.[1]  This renewed emphasis reaffirms the view that if a significant error or misconduct is detected, firms generally should not wait for SEC scrutiny to take corrective steps and mitigate investor harm.  Voluntary remediation must be considered as part of any strategy for managing regulatory exposure as well as reputational and litigation risk.  Where a firm does decide to remediate, it must proceed carefully to avoid pitfalls that could lead to fresh scrutiny from regulators or even private civil litigation.

This post provides guidance to regulated firms on managing risks once they determine to voluntarily remediate – as distinct from the fact-specific issue of whether to “self-report” errors or misconduct – in the SEC context.  It begins with an overview of the benefits and risks of voluntary remediation and common types of remedial measures.  It then identifies potential issues that can arise when undertaking remediation.  Finally, it advises on structuring and implementing remedial measures to minimize risks of regulatory or litigation exposure. Continue Reading Voluntary Remediation in the SEC Context: Avoiding Common Pitfalls

On January 15, 2018, Singapore’s Law Minister, Kasiviswanathan Shanmugam SC, announced during an event held by the Law Society of Singapore a proposal for up to 50 different amendments to the city’s Criminal Procedure Code and Evidence Act, to include a procedure for Deferred Prosecution Agreements (“DPA”).  The proposed legislation, if introduced, would make a significant change in the enforcement tools available to Singaporean prosecutors, and comes against a backdrop of an increasingly high-profile focus on corruption and anti-money laundering prosecutions. Continue Reading What To Look For In Proposed Singapore Deferred Prosecution Agreement (“DPA”) Legislation

In February 2018, the Supreme Court will hear argument in United States v. Microsoft Corporation on the issue of whether a U.S. email provider must comply with a warrant issued pursuant to Section 2703 of the Stored Communications Act (“SCA”) by making disclosure in the United States of electronic communications stored exclusively on servers at datacenters abroad.[1]  Recently the parties submitted briefing on the merits to the Court, and a number of amici weighed in to support Microsoft Corp. (“Microsoft”). [2]   Through more than twenty amicus briefs, major tech giants like Google, Apple, and Amazon, along with members of Congress, European lawmakers, European legal groups, and foreign sovereigns, expressed concern about the Government’s interpretation of the SCA. [3] As this interest demonstrates, the Court’s decision is expected to have far reaching implications for the treatment of foreign data protection laws in U.S. courts. Continue Reading Accessing Servers Abroad: The Global Comity and Data Privacy Implications of United States v. Microsoft

FINRA released its 2018 Regulatory and Examination Priorities Letter (“2018 Letter”) on January 8, 2018.  The 2018 Letter highlights areas of emphasis for FINRA in the coming year.  While many of the areas of focus are similar to those included in the 2017 Regulatory and Examination Priorities Letter—including continued focus on high-risk brokers, fraud, firms’ surveillance systems, cybersecurity protocols, and protecting vulnerable investors—there are additional topics included in the 2018 Letter based on market developments throughout 2017 and the results of FINRA’s 2017 exam program, summarized in the 2017 Report on FINRA Examination Findings.

Continue Reading FINRA Declares Regulatory and Examination Priorities for 2018

In December 2017, the US Department of Justice, Criminal Division’s Computer Crime and Intellectual Property Section (“DOJ”) released guidance for law enforcement to follow when seeking data stored by an entity with a cloud service provider.[1]  In short, DOJ suggests that prosecutors should seek data directly from the company, rather than its cloud service provider, so long as doing so will not compromise the investigation. Continue Reading New DOJ Guidelines on Collecting Cloud–Based Data

On January 12, 2018, the Supreme Court granted a writ of certiorari in Raymond J. Lucia Cos., Inc. v. SEC, No. 17 130,[1] a case raising a key constitutional issue relating to the manner in which the U.S. Securities and Exchange Commission’s (SEC or Commission) appoints its administrative law judges (ALJs).  The Court will decide “[w]hether administrative law judges of the [SEC] are Officers of the United States within the meaning of the Appointments Clause.”  The answer to this question matters because if SEC ALJs are “officers,” then they should have been appointed by the Commission itself instead of hired through traditional government channels—and the Commission only exercised its ALJ appointment authority in late-2017.  Although the question is limited to SEC ALJs, any decision could also impact ALJs at other agencies government-wide. Continue Reading Supreme Court Grants Certiorari on the Constitutionality of SEC ALJ Appointments– What This Means for the Securities Industry

The recent uptick in the mergers and acquisitions market in Brazil comes at a time of great upheaval in Brazil. Brazil’s sweeping anticorruption investigation, which is more than three years old, has resulted in more than 844 search and seizure warrants, 201 arrest warrants, 158 whistleblower agreements, and 10 corporate settlements (known in Brazil as “leniency agreements”) with some of the largest companies in Brazil. Some companies implicated in the scandal have been forced to restructure or file for bankruptcy as a result of their involvement.

Fortunately there is a well-worn path, informed by past settlements as well as guidance from U.S. regulators, that helps investors either avoid buying tainted companies or lessen the risk of exposure to corruption-related liability when making investments in tainted companies. To avoid or reduce these risks, investors need to be aware of and plan for circumstances unique to the Brazilian context. Appropriate diligence and early planning can help to minimize the risks and capitalize on the opportunities presented by the Brazil M&A market.

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More than six months have passed since the Supreme Court held, in Kokesh v. SEC, 137 S. Ct. 1635 (2017), that the Securities and Exchange Commission’s (SEC or Commission) disgorgement power constitutes a penalty subject to a five-year statute of limitations.  As expected, the Supreme Court’s holding on the penal nature of SEC disgorgement has spurred  defendants to seek to broaden its application to other contexts.  Most fundamentally, this includes whether the SEC has the statutory authority to seek disgorgement at all.  To date, courts have mostly turned aside these challenges.  At the same time, however, litigants have grown more creative in their attacks, evidenced by a class action suit seeking reimbursement of nearly $15 billion from the SEC of certain historical disgorgement payments.[1]

Below, we look back at how the lower courts have handled post-Kokesh challenges to the SEC’s disgorgement power and other so-called equitable remedies to date.  Continue Reading Kokesh v. SEC: Half a Year On

This past year, which marked the 40th anniversary of the Foreign Corrupt Practices Act, saw significant anti-corruption developments in the United States and abroad, capped by the announcement of a new FCPA corporate enforcement policy by the U.S. Department of Justice.  As the year began with a new administration, however, there was initially some uncertainty as to how much the new administration would prioritize FCPA enforcement.   Perhaps wanting to put this concern to rest, President Trump’s appointees quickly emphasized that FCPA enforcement was “as alive as ever”  with Attorney General Jeff Sessions promising that the DOJ would “continue to strongly enforce the FCPA and other anti-corruption laws.”   While there were fewer total FCPA corporate resolutions in 2017 than in 2016, the DOJ concluded two of the largest global settlements in FCPA history this year.  The DOJ also demonstrated a continued and expanded focus on anti-corruption compliance, aided by its issuance in February of new guidance on how the DOJ would evaluate the effectiveness of compliance programs.

This memo examines some of these key FCPA developments in greater detail and provides our analysis of what their impact may be in 2018.

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In a significant development for companies relating to the Foreign Corrupt Practices Act (FCPA), in late November the U.S. Department of Justice (DOJ) announced a new FCPA Corporate Enforcement Policy (the Enforcement Policy).[1]

The Enforcement Policy is designed to encourage companies to voluntarily disclose misconduct by providing greater transparency concerning the amount of credit the DOJ will give to companies that self-report, fully cooperate and appropriately remediate misconduct.  Notably, in announcing the Enforcement Policy, the DOJ highlighted the continued critical role that anti-corruption compliance programs play in its evaluation of eligibility under the Enforcement Policy. Continue Reading The New DOJ FCPA Corporate Enforcement Policy Highlights the Continued Importance of Anti-Corruption Compliance