Tag Archives: Robert A. Cohen

FTC Announces New Enforcement Initiative Targeting Deceptive AI Practices

by Robert A. Cohen, James W. Haldin, Daniel S. Kahn, Maude Paquin, and Michael Scheinkman

Photos of the authors

Left to right: Robert A. Cohen, James W. Haldin, Daniel S. Kahn, Maude Paquin, and Michael Scheinkman (Photos courtesy of Davis Polk & Wardwell LLP)

The Federal Trade Commission launched Operation AI Comply, announcing enforcement actions against five companies for alleged deception regarding artificial intelligence.  The FTC’s actions mark the latest U.S. scrutiny of AI-related misconduct. 

Background

On September 25, 2024, as part of a new enforcement “sweep” called Operation AI Comply, the FTC announced enforcement actions against five companies that allegedly used artificial intelligence (AI) to “supercharge deceptive or unfair conduct that harms consumers.”  According to the FTC, these cases showcase how “hype surrounding AI” is used to “lure consumers into bogus schemes” and to provide AI-based tools that themselves can be used to deceive consumers.  In announcing the actions, FTC Chair Lina Khan stated that “[t]he FTC’s enforcement actions make clear that there is no AI exemption from the laws on the books.”

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DOJ Leadership Discusses FCPA Enforcement Trends and Guidance

by Greg D. Andres, Uzo Asonye, Sidney Bashago, Martine M. Beamon, Robert A. Cohen, Daniel S. Kahn, Tatiana R. Martins, Fiona R. Moran, Paul J. Nathanson, and Patrick S. Sinclair

Photos of the authors

Top left to right: Greg D. Andres, Uzo Asonye, Sidney Bashago, Martine M. Beamon, and Robert A. Cohen
Bottom left to right: Daniel S. Kahn, Tatiana R. Martins, Fiona R. Moran, Paul J. Nathanson, and Patrick S. Sinclair
(Photos courtesy of Davis Polk & Wardwell LLP)

In a recent speech, Acting Assistant Attorney General Nicole M. Argentieri laid out how the DOJ is increasing its use of data analytics to proactively identify FCPA cases, deepening its cooperation with international counterparties, actioning its 2023 revisions to the Corporate Enforcement Policy concerning cooperation credit, and beginning to require forfeiture or disgorgement as part of all corporate resolutions.

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FinCEN Proposes Rule Targeting International Convertible Virtual Currency Mixers

by Robert A. Cohen, Kendall Howell, Paul D. Marquardt, Will Schisa, Daniel P. Stipano, Charles Marshall Wilson, and Zachary Zweihorn 

Top left to right: Robert A. Cohen, Kendall Howell, Paul D. Marquardt, and Will Schisa.
Bottom left to right: Daniel P. Stipano, Charles Marshall Wilson, and Zachary Zweihorn.
(Photos courtesy of Davis Polk & Wardwell LLP).

FinCEN released a proposed rule that would identify international convertible virtual currency mixing as a class of transactions of “primary money laundering concern” – a designation that would result in additional reporting and recordkeeping requirements for financial institutions for transactions involving CVC mixers.

On October 19, 2023, the Financial Crimes Enforcement Network (FinCEN) released a notice of proposed rulemaking (NPRM) that would designate transactions involving international convertible virtual currency[1] mixing (CVC mixing) as a class of transactions of primary money laundering concern.[2] Once implemented, the proposed rule would require covered financial institutions to collect and report certain details on transactions in CVC (including bitcoin and other digital assets) that the institutions know, suspect, or have reason to suspect involve CVC mixing activities outside of the United States. The NPRM is one of a series of measures that the United States Treasury Department (Treasury) has taken in recent years to target CVC mixers, which are third-party services used to anonymize cryptocurrency transactions.[3] According to Treasury, North Korea, terrorist groups, and other illicit actors have exploited CVC mixers to launder criminal proceeds and evade sanctions. FinCEN believes that the NPRM will curb the misuse of CVC mixers and facilitate law enforcement investigations into CVC transactions.

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DOJ Leadership Highlights National Security Focus and Previews New Corporate Enforcement Guidance

by Greg D. Andres, Uzo Asonye, Martine M. Beamon, Robert A. Cohen, Daniel S. Kahn, Tatiana R. Martins, Fiona R. Moran, Paul J. Nathanson, and Patrick S. Sinclair

Photos of the authors

Top left to right: Greg D. Andres, Uzo Asonye, Martine M. Beamon, Robert A. Cohen, and Daniel S. Kahn.
Bottom left to right: Tatiana R. Martins, Fiona R. Moran, Paul J. Nathanson, and Patrick S. Sinclair.
(Photos courtesy of Davis Polk & Wardwell LLP)

In recent speeches, Deputy Attorney General Lisa Monaco and Principal Associate Deputy Attorney General Marshall Miller laid out how the DOJ uses active corporate criminal enforcement and interdepartmental cooperation to preserve national security and the rule of law, and previewed forthcoming compliance guidance on M&A deals.

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Fifth Circuit holds the SEC’s administrative adjudications to be unconstitutional

by Greg D. Andres, Uzo Asonye, Martine M. Beamon, Robert A. Cohen, Daniel S. Kahn, Tatiana R. Martins, Paul S. Mishkin, Fiona R. Moran, Paul J. Nathanson, and David B. Toscano

On May 18, the U.S. Court of Appeals for the Fifth Circuit ruled that the SEC’s administrative proceedings are unconstitutional on three independent grounds.  The decision could potentially have a significant impact on the constitutionality of administrative adjudications by other federal agencies as well.

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DOJ Announces Compliance Certifications to Be Considered as Part of Corporate Criminal Resolutions

by Greg D. Andres, Uzo Asonye, Martine M. Beamon, Angela T. Burgess, Robert A. Cohen, Daniel S. Kahn, Tatiana R. Martins, Fiona R. Moran, Paul J. Nathanson, and Patrick S. Sinclair

In a pair of speeches, the Assistant Attorney General of DOJ’s Criminal Division emphasized its focus on compliance and announced that he has instructed his prosecutors to consider requiring chief executive officers and chief compliance officers to certify to (1) the accuracy of annual reports submitted pursuant to corporate resolutions, and (2) the effectiveness of their company’s compliance program prior to releasing the company from its obligations under a resolution agreement.

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House Passes Insider Trading Bill

by Greg D. Andres, Martine M. Beamon, Angela T. Burgess, Tatiana R. Martins, Uzo Asonye, Robert A. Cohen, Neil H. MacBride, Fiona R. Moran, Stefani Johnson Myrick, and Paul J. Nathanson

The House of Representatives has passed a bill on a bipartisan basis that would be the first statute directly banning insider trading in the securities markets.  The bill largely would preserve current case law, but would expand the scope of insider trading by prohibiting trades based on information obtained by theft or computer hacking.  The House passed an identical bill in late 2019 that did not receive a Senate vote, but Senate action may be more likely under current Democratic control. 

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SEC Changes Enforcement Practice for Settlement Offers in Cases Involving Waivers

by Greg D. Andres, Martine M. Beamon, Angela T. Burgess, Tatiana R. Martins, Uzo Asonye, Robert A. Cohen, Neil H. MacBride, Fiona R. Moran, Paul J. Nathanson, and Kenneth L. Wainstein

Parties considering whether to settle an SEC enforcement investigation or criminal proceeding have a reasonable expectation that they will know the likely consequences of a settlement.  This includes whether they can expect to receive a waiver from certain statutory disqualifications.  Last week, however, the Acting Chair of the SEC announced that the Enforcement Division will not recommend any settlement offer that is conditioned on the settling party receiving a waiver.  If this statement reduces transparency between SEC staff and parties negotiating a possible settlement, the result likely will be a more difficult and protracted process for both sides as it becomes difficult for settling parties to make informed decisions about the full implications of a resolution. Continue reading →

SEC Disgorgement Authority Would Expand in National Defense Authorization Act

by Greg D. Andres, Martine M. Beamon, Angela T. Burgess, Tatiana R. Martins, Uzo Asonye, Robert A. Cohen, Neil H. MacBride, Fiona R. Moran, Paul J. Nathanson, and Patrick Sinclair

The National Defense Authorization Act approved by Congress earlier this month would extend to 10 years the time for the SEC to file disgorgement claims for scienter-based violations. It also would toll the limitations period while a party is outside of the United States. As of this writing, the bill has been vetoed by the President, and the House has voted to override the veto. The Senate is currently debating on the override. Continue reading →

How the SEC Enforcement Division Responds to a Crisis

by Martine M. Beamon, Robert A. Cohen, Joseph A. Hall, Gary Lynch, Neil H. MacBride, Stefani Johnson Myrick, Paul J. Nathanson, Annette L. Nazareth, Linda Chatman Thomsen, and Kenneth L. Wainstein

As markets react to the spread of the coronavirus (COVID-19), the SEC has expressed its intent to respond proactively to the impact the crisis has had on capital formation, secondary trading, and investors.  Risks can become heightened during a market downturn, and we expect that the Enforcement Division will concentrate resources on certain types of investigations, including potential:  (1) material misrepresentations and omissions about the impact of the coronavirus on public companies and investment products; (2) trading based on material nonpublic information about changes in the financial performance of public companies; (3) errors in the operation of trading platforms being stressed by high trading volume and volatility; (4) misuse of investor assets, and (5) frauds seeking to take advantage of investor anxiety.  In the coming weeks and months, public companies should be vigilant regarding their disclosure practices and management of material, nonpublic information, and industry professionals similarly should be cautious when describing the impact of the pandemic on their investment services and products. Continue reading →