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Compliance Bits and Pieces for April 6

Posted on April 6, 2012April 6, 2012 by Doug Cornelius
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Earl Scruggs: Banjo, Bluegrass and the Fight against Corruption and Bribery by Tom Fox

So what is the lesson of Earl Scruggs for the compliance practitioner? It is this, even if you develop a completely new style that makes you one of the foremost experts in an area, you can still evolve. Further, the style you use may have significant effects on other styles, even in the fight against bribery and corruption.

General Solicitations, Rule 506, and the Missed Opportunity by J Robert Brown Jr. in the Race to the Bottom

Second, the risk of liability associated with the use of the exemption is significantly greater than many other exemptions. The ability to use a general solicitation is determined not at the time of the solicitation but at the time the purchases are made. To the extent a company engages in a general solicitation but sells to unaccredited investors, the exemption under 506 will be unavailable. Because the fallback, Section 4(2) does not permit a general solicitation, the inapplicability of the exemption will result in a violation of Section 5.

SEC Enforcement to Focus on Private Equity Insider Trading and Conflicts of Interest by Howard Sobel in The Harvard Law School Forum on Corporate Governance and Financial Regulation

The Enforcement Division’s increasing attention to private equity corresponds with the implementation of new rules under the Dodd-Frank Act that will significantly increase the number of private equity firms subject to SEC regulation as “investment advisers.” The Asset Management Unit, one of a number of specialized enforcement units formed by the Division of Enforcement in 2010 to focus on “priority areas,” is staffed with 65 professionals, including private equity experts.

The Impact of the JOBS Act on D&O Liability by Kevin LaCroix in the D&O Diary

These and many other changes introduced in the Act could require the D&O insurance industry to make changes in its underwriting and perhaps in policy forms to accommodate these changes. As was the case with the Sarbanes-Oxley Act and the Dodd-Frank Act, the D&O insurance industry may face a long period where it must try to assess the impact of changes introduced by this broad, new legislation. Though many of the Act’s provisions seem likely to reduce the potential scope of liability for many companies (particularly the EGCs), the Act could also introduce other changes that might result in increased potential  liability for other companies (particularly those resorting to crowdfunding financing).

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