One of the most frequently discussed white collar issues of late has been the benefits of voluntarily self-disclosing to the U.S. Department of Justice (“DOJ”) allegations of misconduct involving a corporation. This is the beginning of periodic analyses of white collar issues unique to financial institutions, and in this issue we examine whether and to what extent a financial institution can expect a benefit from DOJ for a voluntary self-disclosure (“VSD”), especially with regard to money laundering or Bank Secrecy Act violations. Although the public discourse regarding VSDs tends to suggest that there are benefits to be gained, a close examination of the issue specifically with respect to financial institutions shows that the benefits that will confer in this area, if any, are neither easy to anticipate nor to quantify. A full consideration of whether to make a VSD to DOJ should include a host of factors beyond the quantifiable benefit, ranging from the likelihood of independent enforcer discovery; to the severity, duration, and evidentiary support for a potential violation; and to the expectations of prudential regulators and any associated licensing or regulatory consequences, as well as other factors. Continue reading
Corporate misconduct allegations often result in investigations by multiple agencies, including foreign, federal, state, and local authorities. Without proper coordination, companies risk being hit with duplicative penalties for the same misconduct. Duplicative corporate penalties can be avoided, but coordinating a corporate resolution with multiple authorities is hard to navigate.
Within the United States, federal prosecutors often have overlapping jurisdiction with other federal criminal and civil prosecutors, federal and state regulators, and local prosecutors. In international investigations, federal prosecutors also have to cooperate with foreign authorities with overlapping jurisdiction. All of these players can have a legitimate interest in protecting the public from economic crimes. Regulatory competition, however, often leads government authorities to want to take the lead over other authorities. Other times, government authorities jump from the sidelines onto the field of play when a corporate resolution is near and refuse to leave the field without a share of the penalties. A coordinated resolution is difficult to achieve in either case. In the end, the overlapping jurisdiction and regulatory competition can either lead to (1) each authority “piling on” their share of penalties or (2) a coordinated resolution that identifies the collective harm caused by the company’s misconduct, the appropriate penalties for that harm, and the fair allocation of the penalties among the interested government players. Continue reading
In 2010, in the wake of the financial crisis, Congress passed comprehensive financial regulation reform legislation known as the Dodd-Frank Act (Pub.L. 111-203). Section 922 of the Dodd-Frank Act established both a bounty award program as well as anti-retaliation protection for whistleblowers who report securities law violations.
Pursuant to the mandate of Section 922, the US Securities and Exchange Commission (“SEC”) established an Office of the Whistleblower, and implemented its final rules on the Dodd-Frank Program through a comprehensive rulemaking process that involved significant public input in May 2011. Continue reading
In today’s world, data breaches are a regular occurrence. The size and scale varies, and they have different causes, but those matters are irrelevant if you are a data subject affected – you just want the situation resolved and compensation for any losses you suffer. Who should be responsible for those breaches? Where a company has not taken sufficient steps to safeguard personal data, the answer is obvious. But what about where a rogue employee leaks personal data with the deliberate intention of harming his employer? The English High Court has recently decided that even in that instance, the employer is liable to data subjects. Although there is no specific case on this point, we believe that a similar outcome would be reached in an action under US law. Continue reading
On January 12, 2018, the Supreme Court granted a writ of certiorari in Raymond J. Lucia Cos., Inc. v. SEC, No. 17 130, a case raising a key constitutional issue relating to the manner in which the U.S. Securities and Exchange Commission’s (SEC or Commission) appoints its administrative law judges (ALJs). The Court will decide “[w]hether administrative law judges of the [SEC] are Officers of the United States within the meaning of the Appointments Clause.” The answer to this question matters because if SEC ALJs are “officers,” then they should have been appointed by the Commission itself instead of hired through traditional government channels—and the Commission only exercised its ALJ appointment authority in late-2017. Although the question is limited to SEC ALJs, any decision could also impact ALJs at other agencies government-wide.
At this point, both the petitioner and the Solicitor General (SG) actually agree that ALJs are officers. In its response to the cert petition raising this issue in Lucia, the SG, in an about-face, had abandoned the SEC’s long-held defense of the manner in which it appoints its ALJs. Up until now, in an attempt to fend off an asserted constitutional defect in their AJL’s method of appointment, the SEC has argued (with SG approval) that ALJs are “mere employees” of the SEC, and not “officers.” The day after the SG dropped this position—and with no warning in its briefing—the Commission took the step to appoint the current ALJs. Continue reading
On December 20, 2017, President Trump issued a new Executive Order (PDF: 235 KB) (EO) targeting corruption and human rights abuses around the world.
The EO implements last year’s Global Magnitsky Human Rights Accountability Act (the Global Magnitsky Act), which authorized the president to impose sanctions against human rights abusers and those who facilitate government corruption. The US Department of the Treasury’s Office of Foreign Assets Control (OFAC), which will administer the EO, also added 15 individuals and 37 entities to its Specially Designated Nationals and Blocked Persons List (SDN List). Continue reading
Large-scale data breaches can give rise to a host of legal problems for the breached entity, ranging from consumer class action litigation to congressional inquiries and state attorneys general investigations. Increasingly, issuers are also facing the specter of federal securities fraud litigation.
The existence of securities fraud litigation following a cyber breach is, to some extent, not surprising. Lawyer-driven securities litigation often follows stock price declines, even declines that are ostensibly unrelated to any prior public disclosure by an issuer. Until recently, significant declines in stock price following disclosures of cyber breaches were rare. But that is changing. The recent securities fraud class actions brought against Yahoo! and Equifax demonstrate this point; in both of those cases, significant stock price declines followed the disclosure of the breach. Similar cases can be expected whenever stock price declines follow cyber breach disclosures. Continue reading
By Ian Ramsay and Miranda Webster
The following post provides an overview of the key findings from our research on the enforcement outcomes of the Australian Securities and Investments Commission (ASIC) for the five-year period from 1 July 2011 to 30 June 2016. The full journal article can be accessed here.
ASIC is Australia’s corporate, markets, financial services and consumer credit regulator. This government organization regulates Australian companies, financial markets, financial services organisations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit. ASIC dedicates a significant amount of resources (around 70%) to surveillance and enforcement activity, reflecting its view that enforcement is an important part of its regulatory role. Continue reading
The following is the second post in a series of three on recent SEC enforcement. The full report can be accessed here. A note of caution to the readers: the SEC does not share enforcement data. All three posts are based on a database of SEC enforcement actions I have put together along with several research assistants, covering the period between 2007 and 2017. The data was collected by hand, and reviewed at least once. Entries were compared with SEC releases and reports, but the chance of error remains.
I. Enforcement Against Entities
The first post observed that enforcement against individual defendants remained largely unchanged in the second half of the 2017 fiscal year. Enforcement against entities, on the other hand, has changed quite substantially. Fewer entities were targeted in actions brought in the second half of FY 2017: 34% of defendants (165 of 488) in standalone actions in the second half were entities, compared with 47% (201 of 427) in the first half of the year. Continue reading
What is the connection between what the SEC actually does and what it says it will do? In 2013, the SEC unveiled a new policy requiring some enforcement targets to admit wrongdoing when they settled with the agency. In An Empirical Study of Admissions in SEC Settlements, we analyze settlements from before and after the introduction of this policy to determine how the SEC’s practice lines up with its new approach to admissions. We find an uptick of admissions following the policy announcement, with the highest number in FY2016. Using an inclusive definition of admissions, we identify fewer than one hundred settlements containing admissions that were announced during the seven years of our study (FY2011-FY2017). Continue reading