Author Archives: Seth Massey

Admissions of Guilt to the SEC under Chair Jay Clayton

by Giovanni Patti and Peter Robau

The U.S. Securities and Exchange Commission settles the overwhelming majority of its enforcement actions, most with consent decrees where the defendant “neither admits nor denies” wrongdoing.[1] The SEC has publicly defended its use of “neither admit nor deny” settlements, arguing they: (1) reduce the time and resources required to litigate a case, (2) expedite recovery for defrauded investors, and (3) protect defrauded investors by reducing the risk that the SEC will lose at trial.[2] As John Coffee recently noted, “[e]very few years, the issue is certain to be raised: Why does the SEC persist in ‘neither admit nor deny’ settlements, which allow an issuer to avoid acknowledging any misconduct?”[3] Continue reading →

Supreme Court Vacates Second Circuit Ruling Expanding Insider Trading Liability

by Reed Brodsky, Barry Goldsmith, and M. Jonathan Seibald

On January 11, 2021, the Supreme Court in a summary disposition vacated the U.S. Court of Appeals for the Second Circuit’s major insider trading decision in United States v. Blaszczak, 947 F.3d 19 (2d Cir. 2019), remanding the case to the Second Circuit for further consideration in light of the Supreme Court’s recent decision in Kelly v. United States, 140 S.Ct. 1565 (2020).  See Blaszczak v. United States, 2021 WL 78043 (Jan. 11, 2021); Olan v. United States, 2021 WL 78042 (Jan. 11, 2021).  The Supreme Court’s decision raises important questions regarding whether, and to what extent, the Second Circuit will retreat from the significant expansion of insider trading liability it enunciated in Blaszczak barely more than one year ago. Continue reading →

COVID-19: A Review of the Second Wave of Securities Fraud Enforcement Actions

by Michael G. Bongiorno, Christopher Davies, Jessica Lewis, Sierra Shear, and Hyun-Soo Lim

As COVID-19 has continued to spread across the United States, the Securities and Exchange Commission (SEC) has remained keenly focused on monitoring the market “for frauds, illicit schemes and other misconduct affecting U.S. investors relating to COVID-19.”[1] Since the SEC made its first statements related to COVID-19, described in our earlier alert, the SEC has reiterated and expanded on its guidance for public companies, emphasizing that it will pay attention to “how companies are disclosing the effects and risks of COVID-19 on their businesses, financial condition, and results of operations.”[2] Continue reading →

United States Imposes Sanctions on Turkey under CAATSA Section 231 for Purchase of Russian Missile System

by H. Christopher Boehning, Jessica S. Carey,  Christopher D. Frey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Mark F. Mendelsohn, Richard S. Elliott, Rachel Fiorill, Karen R. King, and Maria E. Eliot

On December 14, 2020, the U.S. imposed sanctions on the Republic of Turkey’s Presidency of Defense Industries (“SSB”) pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), which mandates the imposition of sanctions against non-U.S. persons who conduct “significant” transactions with Russia’s defense or intelligence sectors.[1] The U.S. State Department determined that SSB’s acquisition of a Russian S-400 surface-to-air missile from Rosoboronexport (“ROE”) qualified as a significant transaction under Section 231. Continue reading →

CNIL Issues Fines Totaling €135 Million in Landmark ePrivacy Directive Cases

by Gail Crawford, Myria Saarinen, Tim Wybitul, and Wolf-Tassilo Böhm

Between December 2019 and May 2020, the French data protection authority (CNIL) conducted multiple online investigations by visiting google.fr and amazon.fr, before launching a full-scale investigation into Google LLC, Google Ireland, and Amazon Europe Core. On 7 December 2020, the CNIL handed down two decisions, one against Google LLC (€60 million fine) and Google Ireland (€40 million fine), and another against Amazon Europe Core (€35 million fine). Contrary to a previous sanction against Google LLC, which was triggered by specific complaints about its practices, the CNIL’s decisions indicate that the investigations were launched sua sponte with the specific aim of controlling the companies’ cookie practices. Continue reading →

U.S. Congress Passes the Criminal Antitrust Anti-Retaliation Act of 2019

by Daniel Swanson, Rachel Brass, Scott Hammond, Jeremy Robison, Chris Wilson, and Anna Aguillard

On December 8, 2020, the U.S. House of Representatives passed the Criminal Antitrust Anti-Retaliation Act of 2019.[1] Sponsored by Republican Senator Chuck Grassley and co-sponsored by Democratic Senator Patrick Leahy, the bill prohibits employers from retaliating against certain employees who report criminal antitrust violations internally or to the federal government. Similar legislation has previously been passed unanimously by the Senate in 2013, 2015, and 2017; each time, the legislation stalled in the House.[2] This time, however, the legislation has been adopted with overwhelming support in the Senate and the House.[3] The bipartisan bill now awaits the President’s signature. Continue reading →

The SEC (Sort of) Weighs In on How Personal Liability for Chief Compliance Officers May Undercut Effective Compliance Programs

by Matthew Levine

Although regulators often seek to empower compliance officers within their institutions, a troubling question lingers as to whether regulators are undercutting this important message by simultaneously sending mixed or unrefined signals about when a Chief Compliance Officer should be held personally liable for the compliance failings of his or her firm. The director of the U.S. Securities and Exchange Commission’s Office of Compliance Inspections and Examinations recently urged investment firms to empower Chief Compliance Officers (CCOs), saying, “The CCO is not there to fill out irrelevant paperwork or serve as a scapegoat for the firms’ failings.  A firm’s compliance department should be fully integrated into the business of the [regulated entity] for it to be effective.” Continue reading →

Congress to Include Significant Expansion of Beneficial Ownership Disclosure Requirements for U.S. Companies and Non-U.S. Companies Registered to Do Business in the United States as a Part of the 2021 NDAA

by H. Christopher Boehning, Jessica S. Carey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Mark F. Mendelsohn, Richard S. Elliott, Rachel M. Fiorill, Karen R. King,  Anand Sithian, and Joshua R. Thompson

As has been widely reported[1] and announced in statements by members of both the House and Senate,[2] Congress has included a significant expansion of beneficial ownership disclosure requirements for companies in the United States as a part of the fiscal year 2021 National Defense Authorization Act (the “2021 NDAA”), a spending bill that is expected to pass by the end of the year. The most recent version of the 2021 NDAA reported out of conference to the House last week includes new beneficial ownership (defined for purposes of the 2021 NDAA as those individuals who own 25 percent or more of the ownership interests of a company and/or who exercise “substantial control” over a company) reporting requirements for companies that closely track the Corporate Transparency Act of 2019,[3] which passed the House in October 2019, although certain changes were made to make the disclosure provisions somewhat more business-friendly. Nonetheless, if the 2021 NDAA is passed and signed into law in its current form,[4] the law would impose new beneficial ownership disclosure requirements on many U.S. companies—and non-U.S. companies that are registered to do business in the United States (collectively, “reporting companies”)—that previously had not been required to disclose their beneficial owners. Continue reading →

The Fall of Legal and Compliance in the Private Fund Space

by Terrance J. O’Malley

A decade ago, legal and compliance issues stood at the top of the priority list for most private fund firms looking at the operational side of their business.  Wide-ranging interviews with leading industry participants, surveys of Chief Operating Officers, and other anecdotal evidence, however, suggests that may not be the case today.  Meanwhile, recent actions by the SEC staff, including the release of “risk alerts” highlighting deficient industry practices, indicate that the SEC has taken notice.  This blog post suggests that senior management should revisit legal and compliance roles to ensure that these functions remain a top priority. Continue reading →

UK Market Conduct – Avoiding Governance and Oversight Pitfalls

by Matthew Nunan, Michelle M. Kirshner, Martin Coombes, and Chris Hickey

The UK Financial Conduct Authority (“FCA”) continues to show a desire to take action in sectors of the financial services industry where there has been traditionally less supervisory oversight and to push the importance of firm’s internal governance and oversight structures. Enforcement cases are often used as a way to convey key messages to such sectors, and an important Final Notice[1] was published on Monday 23 November 2020 when the FCA imposed a fine of nearly £3.5m on TFS-ICAP Limited for breaches of Principle 2 (due skill, care and diligence), Principle 3 (reasonable care in organising and controlling its affairs responsibly and effectively) and Principle 5 (proper standards of market conduct) of the Authority’s Principles for Businesses. Continue reading →