Category Archives: Sanctions

Will This One Stick?

by Veronica Root

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

Repeat Corporate Misconduct

by Veronica Root

But for other more salacious political concerns, the biggest story of the last couple weeks likely would have been Mark Zuckerberg’s testimony before Congress.  Zuckerberg spent two days answering hundreds of questions from lawmakers.[1]  Much of the questioning was concerned with Facebook’s protection, or alleged lack thereof, of its users’ privacy.  The testimony, however, once again raises questions about how companies that engage in repeated instances of misconduct should be sanctioned. Continue reading

Global Magnitsky Sanctions Target Human Rights Abusers and Government Corruption Around the World

by David S. Cohen, Kimberly A. Parker, Jay Holtmeier, Ronald I. Meltzer, David M. Horn, Lillian Howard Potter, and Michael Romais

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.[1] 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

Ditching Deterrence: Preventing Crime by Reforming Corporations Rather than Fining Them

by Mihailis E. Diamantis

“Corporate criminal law . . . operates firmly in a deterrence mode.”[1]  The ultimate goal of that deterrence is prevention.  But recent evidence suggests that deterrence—and in particular, the corporate fine (the favorite tool of deterrence theorists)[2]—is not particularly good at the job.[3]  For a host of structural and practical reasons, corporate fines do not influence corporate behavior as we might have hoped.  In a forthcoming article, Clockwork Corporations: A Character Theory of Corporate Punishment, I propose abolishing the corporate fine and offer an alternative framework for structuring corporate punishment.[4]  The proposal expands on a strategy prosecutors already employ, albeit imperfectly, as part of corporate deferred prosecution agreements: mandating corporate reform.[5]  On this new approach, such government-directed reform would be the exclusive means of corporate punishment, and judges and judge-appointed monitors, rather than prosecutors, would be in the driver’s seat.  This “character” theory of punishing corporations could beat deterrence theory at its own game by preventing more corporate crime. Continue reading

The Enforcement Outcomes of the Australian Securities and Investments Commission

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

Behind the Annual SEC Enforcement Report: 2017 and Beyond, Part III

by Urska Velikonja

The following is the third 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.

Litigation Venue

The Dodd-Frank Act authorized the SEC to bring almost any enforcement action in an administrative proceeding. Before Dodd-Frank, the SEC could secure civil fines against registered broker-dealers and investment advisers in administrative proceedings, but had to sue in court non-registered firms and individuals, including public companies and executives charged with accounting fraud, as well as traders charged with insider trading violations. After the Dodd-Frank amendment, save for a few remedies that can only be obtained in court, the SEC can choose the forum in which it prosecutes enforcement actions. Continue reading

Behind the Annual SEC Enforcement Report: 2017 and Beyond, Part II

by Urska Velikonja

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

Behind the Annual SEC Enforcement Report: 2017 and Beyond, Part I

by Urska Velikonja

The following is the first 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.

Last week, the SEC released its enforcement report for fiscal year 2017. In it, the SEC reported moderate declines in the number of filed enforcement actions, 754 compared with 868 in fiscal year 2016, and in the total monetary penalties ordered, $3.8 billion compared with $4.1 billion in fiscal 2016. The narrative accompanying the release suggests that despite the change in SEC leadership, enforcement remains consistent. Continue reading

Admitting Wrongdoing to the SEC: An Empirical Study of Admissions in SEC Settlements

by Verity Winship and Jennifer K. Robbennolt

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

Corporate Executives and Criminal Justice Reform

by Amy J. Sepinwall

On September 19, Senator Chuck Grassley (R-IA) issued a press release stating that the bipartisan authors of a 2015 landmark criminal justice reform bill were preparing to reintroduce that legislation. The Sentencing Reform and Corrections Act of 2015 (PDF: 1,020 KB), to which Sen. Grassley will grant new life, was part of a widespread effort at criminal justice reform that appeared to have died with the 2016 election. A centerpiece of the effort would have clarified and enhanced the mens rea (or mental state) necessary for conviction: in the House version, a defendant could be convicted only if she knew she was engaged in criminal activity; the Senate version was even more defendant-friendly, requiring willful participation.

Criminal justice reform has a laudable overarching ambition—to reduce sentences and incarceration rates, especially for minor drug and firearms offenses. As Yale Law Professor Gideon Yaffe writes, this would benefit “those who are especially ill-treated by the criminal justice system: the poor and racial minorities.” But these efforts are being championed by some unusual suspects: Republican members of Congress, who don’t ordinarily vie for more leniency when it comes to street crime, and the Koch brothers, who also are not usually poster boys for the plight of the underclass, who are over-represented (PDF: 153 KB) in criminal prosecutions, convictions and America’s prisons. Continue reading