Author Archives: Hector Correa Gaviria

30 Days to Form ADV: Have You Reviewed Your AI Disclosures?

by Charu Chandrasekhar, Avi Gesser, Kristin Snyder, Julie M. Riewe, Marc Ponchione, Matt Kelly, Sheena Paul, Mengyi Xu, and Ned Terrace

Photos authors

Top left to right: Charu Chandrasekhar, Avi Gesser, Kristin Snyder, Julie M. Riewe, and Marc Ponchione.
Bottom left to right: Matt Kelly, Sheena Paul, Mengyi Xu, and Ned Terrace. (Photos courtesy of Debevoise & Plimpton LLP)

Registered investment advisers (“RIAs”) have swiftly embraced AI for investment strategy, market research, portfolio management, trading, risk management, and operations. In response to the exploding use of AI across the securities markets, Chair Gensler of the Securities and Exchange Commission (“SEC”) has declared that he plans to prioritize securities fraud in connection with AI disclosures and warned market participants against “AI washing.” Chair Gensler’s statements reflect the SEC’s sharpening scrutiny of AI usage by registrants. The SEC’s Division of Examinations included AI as one of its 2024 examination priorities, and also launched a widespread AI sweep of RIAs focused on AI in connection with advertising, disclosures, investment decisions, and marketing. The SEC previously charged an RIA in connection with misleading Form ADV Part 2A disclosures regarding the risks associated with its use of an AI-based trading tool.

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An Update on the SEC’s Cybersecurity Reporting Rules

by Scott H. Kimpel

Scott H. Kimpel (Photo courtesy of Hunton Andrews Kurth LLP).

As we pass the two-month anniversary of the effectiveness of the U.S. Securities and Exchange Commission’s (“SEC’s”) Form 8-K cybersecurity reporting rules under new Item 1.05, this blog post provides a high-level summary of the filings made to date.

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The Future of ESG: Thoughts for Boards and Management in 2024

by Martin Lipton, Steven A. Rosenblum, Adam. O. Emmerich, Karessa L. Cain, Kevin S. Schwartz, and Carmen X. W. Lu

Top left to right: Martin Lipton, Steven A. Rosenblum, and Adam. O. Emmerich.
Bottom left to right: Karessa L. Cain, Kevin S. Schwartz, and Carmen X. W. Lu. (Photos courtesy of Wachtell, Lipton, Rosen & Katz).

The term “ESG” has steadily faded from the investor and corporate lexicon over the past year in the wake of cultural and political clashes over its meaning and purpose. “Anti-ESG” legislation adopted by several states has created legal and financial hurdles around the term. Institutional investors have gone quiet on ESG amid public criticism and congressional subpoenas. BlackRock has publicly disavowed the term for having become too politicized. The use of “ESG” in earnings calls has dropped precipitously. 

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Risk of AI Abuse by Corporate Insiders Presents Challenges for Compliance Departments

by Avi Gesser, Douglas Zolkind, Matt Kelly, Sarah Wolf, Scott J. Woods, and Karen Joo

Photos of authors

Top left to right: Avi Gesser, Douglas Zolkind, and Matt Kelly.
Bottom left to right: Sarah Wolf, Scott J. Woods, and Karen Joo. (Photos courtesy of Debevoise & Plimpton LLP).

We recently highlighted the need for companies to manage risks associated with the adoption of AI technology, including the malicious use of real-time deepfakes (i.e., AI-generated audio or video that impersonates a real person). In this article, we address three AI-related insider risks that warrant special attention by corporate compliance departments (i.e., insider deepfakes, barrier evasion, and model manipulation) and present possible ways to mitigate them.

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SDNY Whistleblower Pilot Program Incentivizes Self-Disclosure and Cooperation

by Helen V. Cantwell, Andrew J. Ceresney, Andrew M. Levine, David A. O’Neil, Winston M. Paes, Jane Shvets, Bruce E. Yannett, Douglas S. Zolkind, Erich O. Grosz, and Rebecca Maria Urquiola

Photos of the authors

Top left to right: Helen V. Cantwell, Andrew J. Ceresney, Andrew M. Levine, David A. O’Neil, and Winston M. Paes.
Bottom left to right: Jane Shvets, Bruce E. Yannett, Douglas S. Zolkind, Erich O. Grosz, and Rebecca Maria Urquiola. (Photos courtesy of Debevoise & Plimpton LLP)

On Wednesday, January 10, 2024, the U.S. Attorney’s Office for the Southern District of New York (“SDNY”) launched the SDNY Whistleblower Pilot Program (the “Program”).[1] The Program seeks to incentivize individuals to report criminal wrongdoing—including corporate control failures, state and local bribery, and fraudulent dealings involving public funds—before SDNY learns of the conduct and to fully cooperate with any resulting investigations and prosecutions. U.S. Attorney Damian Williams encouraged individuals “to come clean, cooperate, and get on the right side of the law,” cautioning “[c]all us before we call you.”[2]

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U.S. M&A Antitrust Enforcement: 2023 and the Year Ahead

by Ilene Knable Gotts, Nelson O. Fitts, Damian G. Didden, Christina C. Ma, and Monica L. Smith.

Photos of Authors

From left to right: Ilene Knable Gotts, Nelson O. Fitts, Damian G. Didden, Christina C. Ma, and Monica L. Smith (Photos courtesy of Wachtell, Lipton, Rosen & Katz)

In 2023, leadership of the Federal Trade Commission and the Antitrust Division of the Department of Justice maintained an aggressive approach to merger enforcement, investigating and challenging transactions on the basis of a broad range of theories of harm articulated in the agencies’ newly issued 2023 Merger Guidelines. Although some transaction parties abandoned their deals at the prospect of a lengthy investigation or litigation, others defended their transactions in court, where the agencies met with mixed success. The FTC and DOJ also continued to disfavor merger settlements, entering into only three such consent decrees in 2023. 

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Top 5 State Privacy Issues We’re Monitoring This Year

by Alysa Z. Hutnik and Alexander I. Schneider

Photos of authors

Alysa Z. Hutnik and Alexander I. Schneider (Photos courtesy of Kelley Drye & Warren LLP)

The year ahead promises to be busy on the state privacy front. States are continuing to fill the gap at the federal level by implementing comprehensive state laws that guarantee consumer privacy rights and regulate data sales, targeted advertising, and sensitive data.

Now, more states than ever are jumping on the bandwagon with comprehensive privacy laws on the books in more than 25 percent of U.S. states and new legislative efforts underway in many other states. In 2024, new laws in Florida, Tennessee, Texas, and Oregon will take effect, joining laws already in effect in California, Colorado, Connecticut, Utah, and Virginia. Laws focused on consumer health data take effect in Washington and Nevada in March as well.

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Cryptoasset Developments: Observations on the Thawing Crypto Winter

by Kevin S. Schwartz, Rosemary Spaziani, David M. Adlerstein, Samantha M. Altschuler, and Sabina M. Beleuz Neagu

Photos of the authors

Left to right: Kevin S. Schwartz, Rosemary Spaziani, David M. Adlerstein, Samantha M. Altschuler and Sabina M. Beleuz Neagu (Photos courtesy of Wachtell, Lipton, Rosen & Katz)

The U.S. cryptoasset industry just rang in the new year with the watershed SEC approval of the first spot ETFs for a digital asset.  With the approval of the first bitcoin Spot ETFs, making possible a path for millions of Americans to have direct bitcoin exposure in retirement and other traditional investment accounts, it is an appropriate time to reflect on significant recent developments that may shape the crypto industry in the year to come.

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Thoughts for Boards: Key Issues in Corporate Governance for 2024

by Martin Lipton, Steven A. Rosenblum, Karessa L. Cain, and Carmen X. W. Lu

From left to right: Martin Lipton, Steven A. Rosenblum, Karessa L. Cain, and Carmen X. W. Lu (Photos courtesy of Wachtell, Lipton, Rosen & Katz)

Over the past year, expectations for directors have continued to evolve, bringing new challenges and responsibilities to the boardroom.  The remarkable speed, volume and proliferation of channels through which information travels today continue to place more scrutiny on boards and heighten expectations regarding transparency and accountability.  Director reputations that have been carefully built over decades are not immune from such pressures, particularly as activist investors hunt for underperformers and revisit former targets.  The business environment has also become more complex:  macroeconomic uncertainty, geopolitical tensions, regulatory unpredictability, political polarization, culture wars, cybersecurity threats, the growth of generative AI, and energy transition are among the issues that boards are now expected to navigate.  

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The EU AI Act – Navigating the EU’s Legislative Labyrinth

by Avi Gesser, Matt Kelly, Martha Hirst, Samuel J. Allaman, Melissa Muse, and Samuel Thomson

From left to right: Avi Gesser, Matt Kelly, Martha Hirst, Samuel J. Allaman, and Melissa Muse. Not pictured: Samuel Thomson. (Photos courtesy of Debevoise & Plimpton LLP).

As legislators and regulators around the world are trying to determine how to approach the novel risks and opportunities that AI technologies present, the draft European Union Artificial Intelligence Act (the “EU AI Act” or the “Act”) is a highly anticipated step towards the future of AI regulation. Despite recent challenges in the EU “trilogue negotiations”, proponents still hope to reach a compromise on the key terms by 6th December, with a view to passing the Act in 2024 and most of the provisions becoming effective sometime in 2026.

As one of the few well-progressed AI-specific laws currently in existence, the EU AI Act has generated substantial global attention. Analogous to the influential role played by the EU’s GDPR in shaping the contours of global data privacy laws, the EU AI Act similarly has the potential to influence the worldwide evolution of AI regulation.

This blog post summarizes the complexities of the EU legislative process to explain the current status of, and next steps for, the draft EU AI Act. It also includes steps which businesses may want to start taking now in preparation of incoming AI regulation.

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