Tag Archives: Michael Osnato Jr.

DOJ Reverses Course on Definition of “Property” for Fraud on Blaszczak Remand, Leaving Statutory Action the Only Likely Hope for Insider Trading Reform—For Now

by Brooke Cucinella, Stephen M. Cutler, Sarah L. Eichenberger, Nicholas S. Goldin, Joshua A. Levine, Michael J. Osnato, Jr., and Jonathan S. Kaplan

On January 11, 2021, based on the consent—and indeed, at the request of the Department of Justice (“DOJ”)—the Supreme Court vacated and remanded the Second Circuit’s decision in United States v. Blaszczak. Blaszczak was the controversial 2-1 decision that arguably heightened (some say unfairly) the risk of criminal insider trading prosecution by upholding the multi-count convictions of the defendants for, at bottom, illegally trading while in possession of information stolen from the government. The Supreme Court agreed, remanding to the Second Circuit to reconsider its decision in light of the Court’s intervening decision in Kelly v. United States. Kelly overturned the convictions that had stemmed from New Jersey’s infamous BridgeGate scandal by finding that, in that case, the government information at issue was not “property” as would have been required to sustain a conviction under the wire fraud theory, and that while “allocating lanes” on the bridge required “the time and labor of Port Authority employees,” those expenditures were “incidental” to “run-of-the-mine exercise of regulatory power,” rather than a misappropriation of government property.[1]

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SEC Risk Alert Highlights Registered Investment Adviser Compliance Deficiencies

by Michael Osnato, Jr., David Blass, Allison Scher Bernbach, Meaghan A. Kelly, Meredith J. Abrams, and Manny M. Halberstam

Last month, the Office of Compliance Inspections and Examinations (“OCIE”) of the U.S. Securities and Exchange Commission (“SEC”) published a Risk Alert (the “Risk Alert”)[1] providing an overview of registered investment adviser compliance issues identified by OCIE related to Rule 206(4)-7 (the “Compliance Rule”) under the Investment Advisers Act of 1940 (the “Advisers Act”).[2]

The Risk Alert identified a number of Compliance Rule deficiencies that OCIE staff observed in its recent adviser exams. One type of deficiency it discusses is failures by advisers to devote adequate resources, such as information technology, staff and training, to their compliance programs. OCIE staff also observed chief compliance officers (“CCOs”) who lacked sufficient authority within the adviser to develop and enforce appropriate policies and procedures. In addition, OCIE staff observed certain deficiencies pertaining to advisers’ annual compliance program reviews.

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