Author Archives: Serina M. Vash

Administrative Enforcement Proceedings on the Rise, SEED Report Finds

Over the past five years, the SEC has increasingly turned to its own administrative court to pursue enforcement actions against public companies. The NYU Pollack Center for Law & Business, in collaboration with Cornerstone Research, investigated recent trends in enforcement via the Securities Enforcement Empirical Database (SEED), and confirmed the trend that many practitioners may have noticed. The results of this study were published in the SEC Enforcement Activity Against Public Company Defendants: Fiscal Years 2010-2015 Research Report (“SEED Report”) (PDF: 6.51 MB).

Even so, the numbers may shock. Continue reading →

Compliance and Mortgage Fraud

by Frank Partnoy

Compliance and enforcement professionals will want to check out David Dayen’s new book, Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud. The book is a gripping, perhaps film-worthy account of the proliferation of foreclosure fraud in the aftermath of the financial crisis. Although Dayen is highly critical of the behavior of various banks, his account contains important data and details for anyone who wants to understand the problems associated with foreclosures in the aftermath of the financial crisis – even if one does not share his political views. Chain of Title is the most complete account I have read of the various defenses that have arisen in foreclosures actions brought by banks that could not establish that they held the underlying mortgage loans. Continue reading →

Why America is the New Switzerland – and How Panama is About to Change This

by Susan Emmenegger

When in 1848 the Swiss cantons agreed to form a federal state modeled after the U.S. Constitution of 1787, they called Switzerland the New America. More recently, the roles have been reversed: America is called the New Switzerland. The claim is not that America is making better chocolate than the Swiss. It is that America has become the world’s leading bank secrecy jurisdiction. Yet America’s “Swissness” is about to be scaled down. Following the Panama Papers scandal, the Treasury has activated long-standing proposals to improve U.S. financial transparency. Among other things, new rules on Customer Due Diligence were published on May 11, 2016. In Europe, the general view is that the changes – even if approved by Congress – are not sufficient. Nevertheless, they are an important step forward. Continue reading →

SEC Enforces Morals Not Laws

by Gregory Morvillo

Should the Securities and Exchange Commission regulate based on the law or its view of what is ethical? Before May 20, 2016, the answer was the law, but to paraphrase Bob Dylan “the times [may be] a changing.”

Last week, the SEC charged William Walters and Thomas Davis with insider trading related to Dean Foods. Standing alone this may or may not be newsworthy. But throw professional golfer Phil Mickelson into the mix and the internet and news outlets were all abuzz.

In my opinion, commentators have focused on the wrong aspect of the SEC’s complaint. It is not the fact that the SEC named Mickelson in the complaint that should catch our collective attention. Nor the fact that the professional golfer was named only as a relief defendant. It is paragraphs 95 and 96 of the complaint (PDF: 425 KB) that are truly newsworthy. In these paragraphs the SEC alleged that Mickelson should have to disgorge the profit from his stock purchase even though the complaint does not allege that he committed insider trading. Yes, you read that right. Continue reading →

Fokker Misses Opportunity to Provide Clear Guidance on Court’s Role in DPA Cases

by Serina M. Vash

Over the last decade, deferred prosecution agreements (“DPAs”) have been increasingly employed to resolve allegations of corporate criminal misconduct. When a DPA is reached between the government and a corporate defendant, the general practice has been for the government to file the DPA with the court, together with a charging document and a tolling agreement. But once the power of the judiciary has been invoked by these simultaneous filings, what then becomes the role of the court?

While the narrow holding in United States v. Fokker Services B.V. (PDF: 114 KB) correctly pointed out what the court’s role is not, the Federal Circuit missed an opportunity to provide clear guidance on the scope of judicial authority to the district courts that increasingly find deferred prosecutions pending on their dockets. Continue reading →

What the Fokker?

by Brandon L. Garrett

The standards for judicial review of corporate settlements have entered a period of ferment. As Alan Morrison and I have just described in the National Law Journal, the U.S. Court of Appeals for the D.C. Circuit erred in its much-anticipated ruling in Fokker Services, holding that judicial approval of a corporate deferred prosecution agreement should be de rigueur, absent indicia of illegality. The result may have been correct, given the terms of the deal at issue, but the reasoning was quite overblown and unsupported. Continue reading →

Corporate and Individual Liability in SEC Enforcement Actions

by Michael Klausner and Jason Hegland

Commentators have criticized the SEC for targeting and penalizing corporations for securities fraud while allowing the individuals that committed the violations to go unpunished.[1] As explained in this blog, however, the SEC frequently targets and penalizes individual officers. Using the Stanford Securities Litigation Analytics database[2], we document the SEC’s enforcement practices with respect to imposing penalties on corporations and on the individuals who commit the violations with which corporations are charged. The data used in this blog include all SEC enforcement actions for disclosure violations from 2000 through 2014. Continue reading →

Measuring Compliance

by Sean J. Griffith

Regulatory and enforcement authorities are increasingly pressing firms to demonstrate the quality of their compliance program by reference to metrics. For example, in a recent interview, Hui Chen, the DOJ’s Compliance Expert stated that “strong compliance must be data driven” and emphasized that “the kind of data [firms] do and do not monitor tells me a lot about how sophisticated their program is.”[1] This is a fairly clear signal from the DOJ that firms must develop metrics to measure compliance or risk losing mitigation for having an “effective” compliance program. Continue reading →

Compliance and Enforcement