Whether the macroprudential regulation enacted to protect the stability of the financial system is sufficient to prevent another crisis is uncertain. Although much of that regulation represents good faith and, in many cases, highly thoughtful efforts to control systemic risk, its primary focus is on banks and other systemically important financial institutions (“SIFI”s). This entity-based approach may be too narrow because it largely ignores other critical elements of the system, such as financial markets.
Furthermore, influenced by political and media pressure to assign blame for the financial crisis, some of the entity-based regulation is itself imperfect. A major focus of that regulation, for example, is on controlling morally hazardous risk-taking by SIFIs that deem themselves “too big to fail” (“TBTF”). Capital requirements epitomize this approach, protecting SIFIs against losses by requiring them to hold minimum levels of capital. However, the ability of capital requirements to control systemic risk is unclear. The cost of capital requirements is also uncertain; some argue they impose no public costs, others argue to the contrary. Continue reading →
Thank you very much for that introduction, Jennifer, and thanks to the entire PCCE staff for organizing this great event. It is always wonderful to be at NYU and especially to appear before such a distinguished audience.
Let me first share with you some general principles we follow with respect to monitors, and then discuss some specific issues, including:
How we determine whether to seek appointment of a monitor;
The factors we consider in selecting a monitor;
How an entity might avoid the appointment of a monitor; and
What, in our experience, makes a monitorship successful?
Over the past several years, there have been many attempts to garner greater transparency of the government’s use of nonprosecution agreements and monitorships. On three occasions the party attempting to obtain a ruling that would reign in the government’s authority over these matters has won at the district court level. In each of these instances, however, the court of appeals reversed. Continue reading →
In a significant development for companies relating to the Foreign Corrupt Practices Act (FCPA), in late November the U.S. Department of Justice (DOJ) announced a new FCPA Corporate Enforcement Policy (the Enforcement Policy).
The Enforcement Policy is designed to encourage companies to voluntarily disclose misconduct by providing greater transparency concerning the amount of credit the DOJ will give to companies that self-report, fully cooperate and appropriately remediate misconduct. Notably, in announcing the Enforcement Policy, the DOJ highlighted the continued critical role that anti-corruption compliance programs play in its evaluation of eligibility under the Enforcement Policy. Continue reading →
This past year marked the 40th anniversary of the U.S. Foreign Corrupt Practices Act (“FCPA”). Since its enactment in 1977, the U.S. Department of Justice (the “DOJ”) has brought approximately 300 FCPA enforcement actions, while the U.S. Securities and Exchange Commission (the “SEC”) has brought approximately 200 cases. This anniversary year, the first year of the Trump administration, demonstrated that the FCPA continues to be a powerful tool in combating corruption abroad and encouraging compliance at global companies.
Like many other complex corporate criminal matters, FCPA matters largely get resolved without meaningful judicial oversight. Although imperfect, such negotiated settlements do provide corporations with a greater degree of predictability and finality. In addition to a monetary penalty, these resolutions often involve the appointment of a compliance monitor, which occurred in more than half of the DOJ’s FCPA resolutions in 2016. The appointment of monitors has attracted controversy over the years, including that monitors are often seen as burdensome and expensive, have the practical effect of extending an investigation, and effectively outsource oversight to a third party. As with negotiated resolutions themselves, typically there has been little judicial involvement in the appointment or oversight of corporate monitors. Continue reading →
In a post on this site last fall, Prof. Veronica Root asked “What Does It Mean to be a Monitor?” The point of her piece was to explain how the term “monitor” describes a number of activities and assignments that can be quite different from one another. Prof. Root’s post faithfully described different monitorship models, from court-ordered monitorships to corporate compliance monitorships. But the otherwise excellent post did not touch on a key piece of the monitorship puzzle—proactive monitorships, created in the absence of an action or settlement as a prophylactic against wrongdoing—without which any discussion of monitorships is incomplete.
Proactive monitors, sometimes called “integrity monitors” or in some contexts “independent private sector inspectors general,” play an important and growing role in the world of monitorships. A recent high-profile example is New York Times reporter Andrew Ross Sorkin’s open letter to President-elect Donald Trump, in which he suggested that if Mr. Trump did not place his assets in a blind trust, one way for him to ease concerns about potential conflicts of interest posed by his business empire would be to engage a corporate monitor to examine and report on such conflicts. Such a monitor would, of course, have to be “truly independent.”
Monitorships are utilized when misconduct is found within an organization, but what does it mean to be a monitor? In the past, I have spoken to monitors who insist that I don’t understand what it is they do, but what the conversations revealed over time is that the word monitor is used to encompass a great deal of similar, yet distinct, activity. Continue reading →
For several years, scholars, regulators, corporations, practitioners, reporters, and the public have debated whether monitor reports should be publicly available. Those in favor of greater transparency argue, in part, that allowing access to monitor reports would serve as an additional check on efforts to improve compliance within corporations. Those in favor of robust confidentiality argue, in part, that confidentiality serves to encourage more frank conversations and effective participation in the monitorship process by employees at the monitored organization. The debate, however, was largely an academic one, because courts appeared to defer to the government’s contention that monitor reports should be kept confidential. Yet in January 2016, a district court ordered that HSBC’s monitor’s report be made publicly available, subject to certain redactions. The district court’s ruling triggered yet another round of commentary and discussion regarding the appropriate norms governing the disclosure of monitor reports. Continue reading →