These are some of the compliance-related stories that recently caught my attention.
The Impact of Compliance –Another Reversal For a Jefferies Trader by T. Gorman in SECActions
The key role of compliance threads through the continuing saga of Jefferies & Co. trader Jesse Litvak as well as a series of similar cases. Mr. Litvak is one of a number of traders who were indicted by the U.S. Attorney’s Office for allegedly making misstatements to counterparties while trading residential mortgage backed securities or RMBS. Although those markets are largely opaque, the traders and counterparties are highly sophisticated, employing complex pricing models to guide their transactions. Mr. Litvak, who was initially indicted in 2013, was just freed from prison following the second reversal of his conviction by the Second Circuit Court of Appeals. U.S. v. Litvak, No. 17-1464 (2nd Cir. May 3, 2017). [More…]
Volcker Rule Rewrite Is Said to Drop Key Trading Burden on Banks by Jesse Hamilton and Benjamin Bain
In a much anticipated overhaul of Volcker, the Federal Reserve and other regulators are planning to drop an assumption written into the original rule that positions held by banks for less than 60 days are speculative — and therefore banned, the people said. Instead, banks would have leeway to conclude that their trades comply with the rule, putting the onus on regulators to challenge such judgments, the people said. [More…]
Can Sophisticated Investors Be Defrauded? Two Cases Raise Hurdles by Peter J. Henning in the NYTimes.com’s Dealbook
So do parties in a negotiation get a free pass on what they say, even if it is not the truth? An April 2016 decision by the federal appeals court in Chicago in United States v. Weimert answered that question in the affirmative. The court overturned the conviction of David Weimert for wire fraud for misleading both sides in a real estate transaction. The judges pointed out that in a negotiation the two sides “will often try to mislead the other party about the prices and terms they are willing to accept. Such deceptions are not criminal.” [More…]
Disgorgement After Kokesh – Evidence from SEC Insider Trading Actions (FY2005-FY2015) by Verity Winship in NYU Law’s Compliance & Enforcement blog
For about 50 years – at least since Texas Gulf Sulphur – the SEC has ordered defendants to disgorge their profits from transactions that violated the securities laws. Despite disgorgement’s long history, in its 2017 opinion in Kokesh v. SEC, the US Supreme Court put two aspects of the remedy on the table. It applied a five-year statute of limitations to disgorgement. It also reopened old debates over agencies’ power to seek remedies not specified in statute. My article, Disgorgement in Insider Trading Cases: FY2005-FY2015, provides data to inform these debates over the agency’s use of disgorgement and the effects of Kokesh. It reports the results of an empirical study of ten years of the remedies ordered by the SEC in insider trading actions, with particular emphasis on the agency’s reliance on disgorgement. [More…]
How do we reconcile UBO due diligence and GDRP obligations? by Lindsay Columbo in The FCPA Blog
What all this means is that financial institutions face new challenges to reconcile their compliance obligations. On one hand, their obligations are increasing to conduct customer due diligence to verify UBO information, among other things. On the other hand, the data processors at the same institutions are obligated to limit circumstances in which personal data can be collected, and when it is collected, to ensure it’s adequately protected according to EU standards. [More…]
Buyer Beware: Hundreds of Bitcoin Wannabes Show Hallmarks of Fraud By Shane Shifflett and Coulter Jones in the Wall Street Journal
In a review of documents produced for 1,450 digital coin offerings, The Wall Street Journal has found 271 with red flags that include plagiarized investor documents, promises of guaranteed returns and missing or fake executive teams. [More…]
