Insider Trading in Commodities Markets: An Evolving Enforcement Priority (Part IV of IV)

by Douglas K. Yatter, Sohom Datta, and Cameron J. Sinsheimer

This is Part IV of a four-part post. For Part I, discussing the CFTC’s historical authority to bring insider trading actions, and the CFTC’s expanded authority after the Dodd-Frank Act, click here. For Part II, discussing recent enhancements in the CFTC’s ability to detect insider trading, and four of the CFTC’s foundational insider trading cases, click here. For Part III, discussing two of the CFTC’s recent settlements involving insider trading and misuse of confidential information, click here.

In another new area of collaboration between the agencies, the CFTC’s Division of Enforcement announced in March 2019 that it would work alongside the DOJ to investigate foreign bribery and corruption relating to commodities markets, issuing an enforcement advisory on self-reporting and cooperation for violations of the CEA involving foreign bribery.[1] The agency’s first enforcement action in this area arrived in late 2020 with an order that included a focus on misappropriation of confidential information.

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FinCEN Notice on Efforts Related to Trade in Antiquities and Art

by Sharon Cohen Levin, Elizabeth Davy, Jennifer Sutton and Samantha Rosenthal

On March 9, 2021, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued a notice (“Notice”) to inform financial institutions about new provisions in the Anti-Money Laundering Act of 2020 (“AMLA”) relating to the illicit trade in antiquities and art.  As the Notice highlights, the AMLA amended the Bank Secrecy Act (“BSA”) to apply to dealers in antiquities and directed the Secretary of the Treasury, acting through the Director of FinCEN, to issue proposed rules to carry out the amendments.  The AMLA also directed the Secretary of the Treasury to perform a study of the facilitation of money laundering and the financing of terrorism through the trade in works of art.  The Notice emphasizes the heightened risk of the antiquities and art markets being exploited to launder money and finance terrorism and warns financial institutions with existing BSA obligations that illicit activity associated with the trade in antiquities and art may involve their institutions.  Finally, the Notice provides specific instructions to financial institutions for filing a Suspicious Activity Report (“SAR”) related to trade in antiquities and art.[i]  

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Insider Trading in Commodities Markets: An Evolving Enforcement Priority (Part III of IV)

by Douglas K. Yatter, Sohom Datta, and Cameron J. Sinsheimer

This is Part III of a four-part post. For Part I, discussing the CFTC’s historical authority to bring insider trading actions, and the CFTC’s expanded authority after the Dodd-Frank Act, click here. For Part II, discussing recent enhancements in the CFTC’s ability to detect insider trading, and four of the CFTC’s foundational insider trading cases, click here.

Three additional settlements recently announced by the CFTC further reinforce the agency’s interest in identifying and deterring misappropriation of confidential information. The latest matters also herald the arrival of criminal enforcement by the DOJ in this area.

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Five Key Federal Grants Compliance Tips as COVID-19 Comes More Under Control

by David B. Robbins, David W. DeBruin, Rebecca Fate, Emily A. Merrifield, and Andrew J. Plague

Colleges and universities have grappled with many challenging issues throughout the COVID-19 crisis, but federally sponsored research has generally provided stable and (comparatively) uncomplicated revenue- and work-streams through this period. In some cases, federal grants were easier to obtain and comply with as additional funding came available through the CARES Act and federal guidance reduced certain compliance requirements. Ongoing compliance efforts may have suffered as a result. As the economy creeps back toward normal, compliance takes on added importance once again.

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SEC Staff Issues Risk Alert on Continued Focus on Digital Asset Securities in Examinations

by Justin L. Browder, J. Christopher Giancarlo, Conrad G. Bahlke, James R. Burns, Anne C. Choe, Elliot J. Gluck, Elizabeth P. Gray, and Artyom Rogov

The staff of the Securities and Exchange Commission’s Division of Examinations (the “Division”) published a risk alert on February 26, 2021,[1] offering guidance on the digital-asset related activities that the Division will focus on during examinations of investment advisers, broker-dealers, exchanges and transfer agents.  Notably, the guidance applicable to investment advisers and broker-dealers, in certain instances, applies to both digital assets that are securities (“Digital Asset Securities”) as well as other digital assets issued and/or transferred using distributed ledger or blockchain technology – including, but not limited to, virtual currencies, coins and tokens – that may or may not be securities under the federal securities laws (“digital assets”). 

The Division’s continued focus on this area is further demonstrated by the inclusion of digital assets and FinTech as priorities in the Division’s 2021 Examination Priorities, which were published on March 3, 2021.[2]  The Examination Priorities release notes that examinations of market participants engaged in digital asset activities will continue to assess: (i) whether investments are in the best interests of investors; (ii) portfolio management and trading practices; (iii) safety of client funds and assets; (iv) pricing and valuation; (v) effectiveness of compliance programs and controls; and (iv) supervision of representatives’ outside business activities.

In this post, we outline the key areas of focus highlighted by the Division in the February 26th risk alert.

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Risk, Risk and More Risk: Federal Reserve Finalizes Its Supervisory Guidance on Board of Directors’ Effectiveness

by Arthur S. Long and Elizabeth A. Ising

On February 26, 2021, the Board of Governors of the Federal Reserve System (Federal Reserve) issued a Supervision and Regulation letter[1] containing its final supervisory guidance (Effectiveness Guidance) on the effectiveness of a banking institution’s board of directors.  The Guidance applies to bank holding companies and savings-and-loan holding companies with total consolidated assets of $100 billion or more, with the exception of intermediate holding companies of foreign banking organizations (IHCs).  A separate Supervision and Regulation letter issued the same day revised twelve prior Supervision and Regulation letters touching on the subject and made nine additional prior Supervision and Regulation letters inactive.[2] Continue reading →

Compliance Implications of the Government’s Pursuit of Information

by Veronica Root Martinez

For the past several years, I have been working on a set of projects aimed at strengthening ethics, compliance, and governance programs and processes within corporations.  At the outset of my research, I sought to identify possible ex ante incentives to address corporate misconduct or compliance failures. I then turned to how best to engage in root-cause analysis after a compliance failure occurred, and I next focused on internal governance mechanisms that seemed to contribute to significant and widespread compliance failures. 

In this blog post, I will briefly outline the project to-date and then turn to the most-recent addition to this body of work, which again focuses on ex ante incentives for firms to engage in the creation and implementation of effective ethics and compliance programs. 

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Insider Trading in Commodities Markets: An Evolving Enforcement Priority (Part II of IV)

by Douglas K. Yatter, Sohom Datta, and Cameron J. Sinsheimer

This is Part II of a four-part post. For Part I, discussing the CFTC’s historical authority to bring insider trading actions, and the CFTC’s expanded authority after the Dodd-Frank Act, click here.

Expansion of CFTC Resources to Detect and Deter Insider Trading

In 2018, to enhance its efforts to identify and take action against insider trading, the CFTC announced the formation of an Insider Trading and Information Protection Task Force (Task Force). The CFTC described the Task Force as “a coordinated effort across the Division to identify and charge those who engage in insider trading or otherwise improperly use confidential information in connection with markets regulated by the CFTC.”[1] The Task Force has endeavored to “thoroughly investigate and, where appropriate, prosecute instances in which individuals have abused access to confidential information — for example, by misappropriating confidential information, improperly disclosing a client’s trading information, front running, or using confidential information to unlawfully prearrange trades.”[2] The Division of Enforcement has noted the ongoing importance of this effort, including in its FY2019 Annual Report, which emphasized that “[i]llegal use of confidential information can significantly undermine market integrity and harm customers in our markets.”[3]

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Developments in Antitrust Law: Keep an Eye on New York

by Perry A. Lange, Brian K. Mahanna, Nicole Callan, and Alvaro Mateo Alonso

Although much attention recently has been focused upon debates in Congress, potential legislative changes to U.S. antitrust law are not limited to proposals at the federal level. Many states are considering changes to their own antitrust laws, which usually can be enforced by state attorneys general and private plaintiffs. Importantly, New York legislators have introduced two bills that propose sweeping changes to the State’s antitrust law, the Donnelly Act, building on measures introduced in New York’s last legislative session. Continue reading →

SEC Signals Support for Single Global ESG Disclosure Framework

by Betty M. Huber

Last week, the SEC released a statement by Division of Corporation Finance Acting Director John Coates on ESG disclosure. In this post, we provide our observations on what his statement may indicate about the direction of globally coordinated efforts on ESG disclosure. Continue reading →