Author Archives: Seth Massey

Cybersecurity Oversight and Defense – A Board and Management Imperative

by John F. Savarese, Sarah K. Eddy, Sabastian V. Niles, and Jeohn Salone Favors

This past weekend, criminal ransomware cyberattacks drove the shutdown of one of America’s largest pipelines for refined gasoline, diesel fuel, and jet fuel as a precautionary means of containing the impact of the breach, highlighting the vulnerability of the nation’s energy infrastructure. Recent reports indicate that more than two dozen other company victims across a range of industries were targeted by these ransomware attacks, with worse damage blocked thanks to close and rapid coordination between federal authorities and private sector partners to identify and swiftly shut down servers being used in the attack. Earlier this month, a California- based regional hospital operator had to take healthcare IT systems offline following a cyberattack, significantly disrupting care, forcing medical personnel to use back-up paper records and raising concerns about vulnerabilities in the healthcare system as the nation continues to battle the Covid-19 pandemic.

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Health Care Fraud Means Never Having to Say You’re Sorry

by Jacob T. Elberg

The Securities and Exchange Commission’s use of “neither admit nor deny” settlements[1] continues to garner significant attention a decade after Judge Rakoff took aim at the policy. Most recently, authors on this blog used data from the Securities Enforcement Empirical Database (SEED) to examine the prevalence of “neither admit nor deny” settlements, as well as admissions of guilt, concluding that the SEC has, “albeit slowly, shifted away from the more aggressive prosecutorial stance instituted under Chair [Mary Jo] White” – a more aggressive stance taken in the wake of criticism from Judge Rakoff,[2] Senator Elizabeth Warren,[3] and countless commentators and scholars.

Strangely, while the SEC’s use of “neither admit nor deny” settlements continues to be the focus of criticism suggesting it is too lenient, there has been no similar criticism of the Department of Justice’s use of the False Claims Act, which plays a parallel role in health care enforcement to that of the SEC’s enforcement of the securities laws. Continue reading →

SEC Division of Examinations Risk Alert Provides a Useful Roadmap on Compliance Issues for Fund Managers

by Mark K. Schonfeld, Tina Samanta, and Lauren Myers

On Friday, April 9, 2021, the Securities and Exchange Commission (“SEC”) Division of Examinations (the “Division”) issued a Risk Alert detailing its observations of deficiencies and internal control weaknesses from examinations of investment advisers and funds regarding investing that incorporates environmental, social, and governance factors (“ESG investing”).[1] This alert follows another recent announcement of the creation of a Climate and ESG Task Force within the Division of Enforcement to focus on ESG-related disclosures by public companies and ESG investment practices by investment funds.[2] Continue reading →

To Fix Corporate Crime, Write a Statute

by Miriam Baer

For scholars, jurists and other observers, the body of doctrines collectively known as “corporate criminal law” continues to generate questions about its provenance and mission. Is it just another form of criminal punishment, whose weaknesses mirror the weaknesses we encounter throughout the criminal justice system generally? Or is it so different in design and execution that it functions as something wholly different from criminal law, prompting its own set of first principles and challenges? Should we think of corporate criminal law as a form of regulation, as just another manifestation of criminal law, or as something more transformative that can be used to spur systemic changes in how our society relates to the private sector and to government generally?

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Compliance, Culture and Evolving Regulatory Expectations

by Mark Steward

Keynote address delivered at the March 31, 2021 conference of New York University School of Law’s Program on Corporate Compliance and Enforcement, titled, Compliance, Culture, and ESG: How Companies Achieve Meaningful Cultural Change and Meet Evolving Regulatory and Stakeholder Expectations.

Highlights

The Senior Managers Regime (SMR) has changed the way firms allocate responsibilities, align those responsibilities to relevant controls and ensure oversight as to how these controls operate down the line.
The 5 Conduct Questions (5CQ), which start with ‘tone from the top’, are increasingly focussing on ‘tone from within,’ which requires every person in an organisation to be personally accountable and engaged.
Every employee of a regulated firm is subject to individual conduct rules, which impose broad obligations.
The SMR and 5CQ questions require firms to think about how a system or function might fail because of non-compliance, and they inject a sharper focus on conduct risk into the fabric of an organisation.
As demonstrated by enforcement cases, failures are not necessarily failures of compliance, but the consequence of choices made by individuals.

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Document Retention in EU Competition Cases

by Alejandro Guerrero and David Wood

On 25 March 2021, the Court of Justice of the EU (“CJEU”) confirmed the fines imposed in Europe on a number of pharmaceutical companies, including Xellia and Alpharma, for entering into anticompetitive ‘pay for delay’ settlement agreements.

One of the grounds of appeal rejected by the CJEU concerned the impact of the lengthy administrative procedure on Xellia’s and Alpharma’s rights of defence. The CJEU found that Xellia and Alpharma had not proven that the Commission’s investigatory steps had taken so long as to impact their rights of defence. In particular, Xellia and Alpharma could not blame the Commission for their own failure to preserve documents that could have assisted their defence. Continue reading →

Five Key Federal Grants Compliance Tips as COVID-19 Comes More Under Control

by David B. Robbins, David W. DeBruin, Rebecca Fate, Emily A. Merrifield, and Andrew J. Plague

Colleges and universities have grappled with many challenging issues throughout the COVID-19 crisis, but federally sponsored research has generally provided stable and (comparatively) uncomplicated revenue- and work-streams through this period. In some cases, federal grants were easier to obtain and comply with as additional funding came available through the CARES Act and federal guidance reduced certain compliance requirements. Ongoing compliance efforts may have suffered as a result. As the economy creeps back toward normal, compliance takes on added importance once again.

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Risk, Risk and More Risk: Federal Reserve Finalizes Its Supervisory Guidance on Board of Directors’ Effectiveness

by Arthur S. Long and Elizabeth A. Ising

On February 26, 2021, the Board of Governors of the Federal Reserve System (Federal Reserve) issued a Supervision and Regulation letter[1] containing its final supervisory guidance (Effectiveness Guidance) on the effectiveness of a banking institution’s board of directors. The Guidance applies to bank holding companies and savings-and-loan holding companies with total consolidated assets of $100 billion or more, with the exception of intermediate holding companies of foreign banking organizations (IHCs). A separate Supervision and Regulation letter issued the same day revised twelve prior Supervision and Regulation letters touching on the subject and made nine additional prior Supervision and Regulation letters inactive.[2] Continue reading →

Developments in Antitrust Law: Keep an Eye on New York

by Perry A. Lange, Brian K. Mahanna, Nicole Callan, and Alvaro Mateo Alonso

Although much attention recently has been focused upon debates in Congress, potential legislative changes to U.S. antitrust law are not limited to proposals at the federal level. Many states are considering changes to their own antitrust laws, which usually can be enforced by state attorneys general and private plaintiffs. Importantly, New York legislators have introduced two bills that propose sweeping changes to the State’s antitrust law, the Donnelly Act, building on measures introduced in New York’s last legislative session. Continue reading →

SEC Signals Support for Single Global ESG Disclosure Framework

by Betty M. Huber

Last week, the SEC released a statement by Division of Corporation Finance Acting Director John Coates on ESG disclosure. In this post, we provide our observations on what his statement may indicate about the direction of globally coordinated efforts on ESG disclosure. Continue reading →