These are some of the compliance-related stories that recently caught my attention.
Proskauer Launches Private Equity SEC Enforcement Tracker
The tracker contains key information from the actions, including summaries of key issues, settlement terms, and relevant statutory provisions. The tracker will be an important resource for us and our clients, providing us with quick access to comparable cases and allowing us to identify important enforcement trends impacting private equity advisers as they develop. We are also making available summary information from the database for all SEC enforcement actions against private equity advisers over the last 6 years.
Click here to view the tracker.
Upcoming Deadline for Form SHL – Foreign Ownership of US Securities
Ropes & Gray
Very generally, Form SHL is required to be completed by, among others, U.S. resident issuers (including pooled investment vehicles such as private investment funds, hedge funds, mutual funds and other similar commingled vehicles), the securities of which are held by foreign residents, to the extent the total fair value of such securities equals or exceeds $100 million.1Investment advisers and managers typically file Form SHL on behalf of the U.S. resident issuers they advise.2 As a result, if a U.S. fund has foreign investors with a value of $100 million or more, the fund’s investment adviser will need to complete a Form SHL.
https://www.ropesgray.com/en/newsroom/alerts/2019/07/Upcoming-Deadline-for-Form-SHL-Foreign-Ownership-of-US-Securities
Tipper X: The Wall Street Informant
by Andrew Thomas
The Epoch Times
Hardin told them that insider trading was rampant in the industry. The agents gave him their card, and told him that he had an opportunity to build bigger cases. He called them the next day, and told them he would help.
https://www.theepochtimes.com/tipper-x-the-wall-street-informant_3007726.html
The agents told him that he was going to have to wear a wire to record conversations with anyone who was involved in the insider trading game whenever he had the opportunity. Hardin went home, and made a list of who he felt were the worst of the worst.
Assessing Risks and Potential Liability in Responding to a Crisis
Cleary Gottlieb Steen & Hamilton LLP
A company faced with a crisis needs to act quickly to assess and determine the scope of any potential liability in order to guide its first response and frame the forthcoming investigation. Issues overlooked in the early phases of an investigation could prove very costly down the road, limiting options or potentially subjecting a company to greater penalties. Understanding the full scope of potential liability early in an investigation allows a company to develop a plan of action through consideration of how such penalties can potentially be mitigated and whether it is sensible to set aside reserves for potential fines and other expenses associated with an investigation. The severity of such penalties may also shed light on who needs to be informed, including for example, whether any public disclosures will be necessary.
https://wp.nyu.edu/compliance_enforcement/2019/07/22/assessing-risks-and-potential-liability-in-responding-to-a-crisis/
Cryptocurrency Investor Gets Second Chance to Show AT&T Liability in $24M Hack
by Nathan Solis
Courthouse News Service
Hackers attacked blockchain and cryptocurrency investor Michael Terpin’s cellphone on two separate occasions, according to his initial complaint filed in the Central District Court of California in August 2018. Following the hacks, Terpin says he told AT&T he was also the victim of a SIM card swap.
https://www.courthousenews.com/cryptocurrency-investor-gets-second-chance-to-show-att-liability-in-24m-hack/
The relatively low-tech hacking technique involves a hacker posing as a customer and asking the mobile carrier to transfer the phone number to a separate phone SIM card, which then gives the hacker access to the victim’s online accounts – including bank accounts and cryptocurrency wallets used to store digital currency.
Kansas Supreme Court limits the extraterritorial application of state’s Blue Sky law
by Brad Rosen
Jim Hamilton’s World of Securities Regulation
The Kansas Supreme Court reversed the criminal convictions of the principals of a Kansas limited liability corporation for selling or offering to sell unregistered securities and committing fraud in selling or offering to sell securities. The prosecution had alleged that jurisdiction applied even though the defendants used intermediaries residing in California who made sales presentations in California and sold the securities from California to individuals who did not reside in Kansas (State v. Lundberg, July 19, 2019, per curiam).
https://jimhamiltonblog.blogspot.com/2019/07/kansas-supreme-court-limits.html
Gibson Dunn Offers 2019 Mid-Year Securities Enforcement Update
by Mark K. Schonfeld and Amy Mayer
The CLS Blue Sky Blog
The first half of 2019 has seen a continuation of the Securities and Exchange Commission’s emphasis on protecting the interests of Main Street investors. Chairman Clayton reiterated these themes in his testimony in May before the Financial Services and General Government Subcommittee of the U.S. Senate Committee on Appropriations.[1] In addition to the no less than 43 references to Main Street investors, the Chairman’s testimony highlighted: (1) the Retail Strategy Task Force, formed in 2017, to use data-driven strategies to generate leads for investigation of industry practices that could harm retail investors, as well as (2) the mutual fund share class initiative as an example of returning funds to retail investors through a program to incentivize self-reporting and cooperation. To be sure, the Commission brought a number of enforcement actions focusing on various offering frauds, often with themes related to some form of cryptocurrency or digital asset.[2] The Chairman also noted in his Congressional testimony that the Commission’s FY 2020 budget request contemplates adding add six positions to the Commission’s investigations of conduct affecting Main Street investors.
http://clsbluesky.law.columbia.edu/2019/07/24/gibson-dunn-offers-2019-mid-year-securities-enforcement-update/
Taking Insider Trading Too Far: What’s Left of the ‘Personal Benefit’ Requirement After ‘U.S. v. Martoma’?
by Benjamin Gruenstein and Miriam Rosenbaum
New York Law Journal
Courts in the Southern District of New York are now instructing juries that intent to benefit the tippee is sufficient to establish the personal benefit requirement. In United States v. Chow, 17-cr-667 (S.D.N.Y. 2018), a case in which a partner of a private equity firm provided a material, nonpublic tip to his friend and business associate, the court instructed the jury on the personal benefit test as follows: …
https://www.law.com/newyorklawjournal/2019/07/23/taking-insider-trading-too-far-whats-left-of-the-personal-benefit-requirement-after-u-s-v-martoma/?slreturn=20190625132356
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