These are some of the compliance-related stories that recently caught my attention.
SEC Enforcement Against Private Equity Firms in 2018: Year in Review
James E. Anderson, Elizabeth P. Gray, Justin L. Browder, and Jonathan Tincher
In 2018, the Securities and Exchange Commission (the “SEC”) continued to pursue a series of enforcement actions against private equity fund sponsors. The issues raised by the cases reflect the SEC’s ongoing scrutiny of expense allocation practices, application of management fee offset provisions, acceleration of consulting and advisory fees, unauthorized principal, agency and affiliate transactions, and compliance with regulatory and investor reporting requirements. Many of these issues were first brought to the fore in two notable SEC staff speeches in 2014 and 2015,1 and the 2018 cases demonstrate that they continue to be of central importance. Private equity sponsors should continue to remain focused on enhancing their compliance programs in these areas as they move forward in 2019.
https://www.willkie.com/~/media/Files/Publications/2019/03/SEC_Enforcement_Against_Private_Equity_Firms_in_2018_Year_in_Review.pdf
How to Design an Ethical Organization
Nicholas Epley and Amit Kumar
Harvard Business Review
Creating an ethical culture thus requires thinking about ethics not simply as a belief problem but also as a design problem. We have identified four critical features that need to be addressed when designing an ethical culture: explicit values, thoughts during judgment, incentives, and cultural norms.
https://hbr.org/2019/05/how-to-design-an-ethical-organization
A Fraudster Loses to the SEC But Beats the Clock on Penalties
Matt Robinson
Bloomberg
Over the course of 12 years, Charles Kokesh quietly misappropriated more than $30 million from investors, a jury found in 2014. Kokesh, now 71, cultivated some expensive and unusual hobbies, such as importing Argentine polo ponies and participating in cowboy-style shooting competitions, according to trial testimony. But the really unusual part of the story is how the U.S. Supreme Court decided he wouldn’t have to pay back most of the cash.
https://www.bloomberg.com/news/articles/2019-06-25/a-fraudster-loses-to-the-sec-but-beats-the-clock-on-penalties
Real Meaning of the Walmart Case
Matt Kelly
Radical Compliance
So what lessons can we learn from the Walmart case? The same lessons we’ve been learning for the last 10 years. They’re good lessons, and important lessons. Dropping the phrase “Walmart, largest company in the world” will always help when you talk about FCPA risks to your board, employees, or third parties. I’m delighted we have Walmart to dissect and discuss for years to come.
But the Walmart settlement broke no new ground for the enforcement of ethics and compliance; so no, it’s not a landmark.
It’s a bookend.
http://www.radicalcompliance.com/2019/06/24/real-meaning-walmart-fcpa-case/
Statement of Concerned Securities Law Professors Regarding Investment Advisers and Fiduciary Obligations
The CLS Blue Sky Blog
We circulate this statement as law professors specializing in the field of securities regulation who are concerned that the Securities and Exchange Commission (the “Commission”) has moved in a new direction that is both contrary to its past practice and harmful to the interests of investors. In Release No. IA-5248 (“Commission Interpretation Regarding Standard of Conduct for Investment Advisers”) (June 5, 2019) (“Release 5248”), the Commission has turned its back on its history and reinterpreted the case law in a surprising manner that reverses what it said only a year ago.
http://clsbluesky.law.columbia.edu/2019/06/25/statement-of-concerned-securities-law-professors-regarding-investment-advisers-and-fiduciary-obligations/
