Author Archives: Hector Correa Gaviria

EDPB Issues Opinion on Pay-Or-Consent Models

by Olivia Lee and Ashley Webber

Photos of the authors

From left to right: Olivia Lee and Ashley Webber (Photos courtesy of Hunton Andrews Kurth LLP)

On April 17, 2024, the European Data Protection Board (“EDPB”) adopted its non-binding Opinion 08/2024 on Valid Consent in the Context of Consent or Pay Models Implemented by Large Online Platforms (the “Opinion”), stating that such models generally are not compliant with the EU General Data Protection Regulation (“GDPR”), though their use should be considered on a case-by-case basis.

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EPA Announces New Enforcement Policy Requiring Civil-Criminal Coordination

by Steven P. Solow and Chloe Graham

From left to right: Steven P. Solow, and Chloe Graham (Photos courtesy of Baker Botts LLP)

The Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance (OECA) announced a new Strategic Civil-Criminal Enforcement Policy (Policy) that is perhaps the most significant change in environmental enforcement since the passage of the basic environmental laws decades ago. At bottom, the new Policy addresses the long-standing concern that the decision to enforce a matter civilly or criminally ultimately depended on whose “desk” it landed on.

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Supreme Court Holds That “Pure Omissions” Are Not Actionable Under Rule 10b-5(b)

by Elliot Greenfield, Matthew E. Kaplan, Maeve O’Connor, Benjamin R. Pedersen, Jonathan R. Tuttle, Anna Moody, Brandon Fetzer, and Mark D. Flinn

Top left to right: Elliot Greenfield, Matthew E. Kaplan, Maeve O’Connor, and Benjamin R. Pedersen.
Bottom left to right: Jonathan R. Tuttle, Anna Moody, Brandon Fetzer, and Mark D. Flinn. (Photos courtesy of Debevoise & Plimpton LLP).

On April 12, 2024, in a highly anticipated decision, the Supreme Court held in Macquarie Infrastructure Corp. v. Moab Partners, L.P.[1] that pure omissions are not actionable in private litigation under Rule 10b-5(b). Resolving a circuit split, the Court held that Rule 10b-5(b) does not support a “pure omissions” theory based on an alleged failure to disclose material information required by Item 303 of SEC Regulation S-K (Management’s discussion and analysis of financial condition and results of operations, or MD&A). Instead, a “failure to disclose information required by [MD&A] can support a Rule 10b-5(b) claim only if the omission renders affirmative statements made misleading.”[2] While the decision arose in the context of Item 303, which requires disclosure of “known trends and uncertainties” that have had or are “reasonably likely” to have a material impact on net sales, revenues or income from continuing operations,[3] the decision stands for the broader principle that Rule 10b-5(b) does not support pure omissions theories based on alleged violation of any disclosure requirement. Such claims remain viable, however, under Section 11 of the Securities Act of 1933. This ruling provides welcome clarity to issuers and eliminates the risk of pure-omission claims under Rule 10b-5(b) based on the judgment-based requirements of MD&A.

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Implications of the SEC’s “Shadow Trading” Verdict

by John F. Savarese, Wayne M. Carlin, and David B. Anders

Photos of the authors

From left to right: John F. Savarese, Wayne M. Carlin, and David B. Anders (photos courtesy of Wachtell, Lipton, Rosen & Katz).

Last week, a jury in San Francisco returned a verdict in SEC v. Panuwat, finding that a corporate executive engaged in insider trading when he learned about an impending acquisition of his employer and then traded in the securities of an unrelated company in the same industry. The case has widely been described as “novel” but, in bringing this case, the SEC did not seek to extend existing law. Panuwat simply applied well-established principles of insider trading law to a new fact pattern. Yet in doing so, this action may well have implications for corporate trading policies. 

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The Luring Test: AI and the Engineering of Consumer Trust

by Michael Atleson

Federal Trade Commission

In the 2014 movie Ex Machina, a robot manipulates someone into freeing it from its confines, resulting in the person being confined instead. The robot was designed to manipulate that person’s emotions, and, oops, that’s what it did. While the scenario is pure speculative fiction, companies are always looking for new ways – such as the use of generative AI tools – to better persuade people and change their behavior. When that conduct is commercial in nature, we’re in FTC territory, a canny valley where businesses should know to avoid practices that harm consumers.

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Semiconductor Chips and Cloud Computing: A Quote Book

by Staff at the Federal Trade Commission’s Office of Technology

The FTC’s Tech Summit on AI[1] highlighted three panels that reflect different layers of the AI tech stack – hardware and infrastructure, data and models, and front-end user applications. Here, we publish the first in a three-part series of “Quote Books” summarizing each of the three panels. This first quote book is focused on hardware and infrastructure, including semiconductor chips and cloud computing.

 

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Federal Court Declares the Corporate Transparency Act Unconstitutional

by Gina Parlovecchio, Brad Resnikoff, Matthew Bisanz, and Daisy Gray

From left to right: Gina Parlovecchio, Brad Resnikoff, Matthew Bisanz, and Daisy Gray (Photos courtesy of Mayer Brown LLP).

On March 1, 2024, the US District Court for the Northern District of Alabama declared the Corporate Transparency Act (“CTA”) unconstitutional, and suspended its enforcement against the plaintiffs in that case. While most companies remain subject to its requirements for now, this decision may presage more broadly applicable relief through subsequent judicial or administrative action.

The CTA requires many entities conducting business in the United States to disclose beneficial ownership information to the Financial Crimes Enforcement Network (“FinCEN”), a law enforcement arm of the US Department of Treasury. The court, in enjoining the CTA’s enforcement against the plaintiffs, found that the CTA exceeds constitutional limits on Congress’s power. In the wake of the decision, FinCEN announced that it intends to respect the court’s decision and will not enforce the CTA beneficial ownership requirements against the plaintiffs, but its silence as to other parties implies that everyone else must continue to comply.

In this Legal Update, we discuss the case, National Small Business Association, et al. v. Yellen, FinCEN’s response, and our predictions for what will come next.

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AI in the 2024 Proxy Season: Managing Investor and Regulatory Scrutiny

by William Savitt, Mark F. Veblen, Kevin S. Schwartz, Noah B. Yavitz, Carmen X. W. Lu, and Courtney D. Hauck

Photos of the authors

Top from left to right: William Savitt, Mark F. Veblen, and Kevin S. Schwartz.
Bottom left to right: Noah B. Yavitz, Carmen X. W. Lu, and Courtney D. Hauck. (Photos courtesy of Wachtell, Lipton, Rosen & Katz)

Corporate disclosures concerning artificial intelligence have increased dramatically in the past year, with Bloomberg reporting that nearly half of S&P 500 companies referenced AI in their most recent annual reports. And some investors are clamoring for even more, using shareholder proposals to press public companies for detailed disclosures concerning AI initiatives, policies, and practices — including, most recently, an Apple shareholder proposal that attracted significant support at a meeting last week. Regulators, meanwhile, have signaled increasing scrutiny of AI-related corporate disclosures, including in a February speech by SEC Chair Gensler cautioning against “AI washing” — the practice of overstating or misstating corporate AI activity. For the 2024 proxy season and beyond, public companies will need to balance the competing demands of regulators and investors, in order to craft effective, responsive strategies for engaging with their stockholders on AI topics. 

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WilmerHale Global Anti-Bribery Year-in-Review: 2023 Developments and Predictions for 2024

by Kimberly Parker, Jay Holtmeier, Erin Sloane, Christopher Cestaro, Sandra Redivo, Matthew Girgenti, Elliot Shackelford, and Keun Young Bae

Top left to right: Kimberly Parker, Jay Holtmeier, Erin Sloane, and Christopher Cestaro.
Bottom left to right: Sandra Redivo, Matthew Girgenti, Elliot Shackelford, and Keun Young Bae. (Photos courtesy of Wilmer Cutler Pickering Hale and Dorr LLP).

Although publicly announced Foreign Corrupt Practices Act (FCPA) enforcement activity remains lower than the levels reached a few years ago, 2023 saw a modest increase in the overall number of FCPA enforcement actions (26 in 2022 vs. 27 in 2023).  This was seen especially in the number of corporate resolutions (12 in 2022 vs. 15 in 2023).  The combined total of monetary penalties decreased, from $1.56 billion in 2022 to $776 million in 2023.  Nonetheless, senior officials at the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) again signaled, through policy changes and public announcements, that anti-corruption enforcement is a priority and that there will be significant and growing enforcement efforts going forward.  Below are the key takeaways regarding FCPA enforcement in 2023 and trends to keep in mind as we look ahead to 2024.

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Paying Criminal Whistleblowers: DOJ Announces A Program to Pay For Tips, and the SFO Is Considering Doing So Too

by Joshua A. Naftalis, Matt Getz, and Tracey Dovaston

From left to right: Joshua A. Naftalis, Matt Getz, and Tracey Dovaston. (Photos courtesy of Pallas Partners LLP).

In the past two weeks, the U.S. Department of Justice (DOJ) and the U.K. Serious Fraud Office (SFO) each made announcements about paying financial bounties to whistleblowers.  On March 7, 2024, U.S. Deputy Attorney General Lisa Monaco announced a new DOJ whistleblower program that will compensate individual whistleblowers for reporting corporate or financial misconduct previously unknown to DOJ.  This announcement followed a February 13, 2024 speech by SFO Director Nick Ephgrave, who said that he supported the idea of paying whistleblowers.    

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