“Gary Gensler has the perfect mix of market expertise, regulatory experience and commitment to the public interest to be an outstanding SEC Chairman,” said Barbara Roper, chief investor advocate at Washington-based Consumer Federation of America.
This approach significantly reduces the impact of the compliance program – senior management and the wider business can then view the compliance function as one of form over substance and a purely administrative cost center – something they are required to have rather than something they actually need. Or worse still, something that actually impedes business performance rather than enhancing it. It can be demotivating to compliance teams, generating endless content that nobody ends up reading, with any valuable insights getting lost in the trees.
Zachary Horwitz never made it big on the Sunset Strip — there was the uncredited part in Brad Pitt’s “Fury” and a host of roles in low-budget thrillers and horror flicks. But federal charges suggest he had acting talent, duping several financial firms out of hundreds of millions of dollars and enabling him to live the Hollywood dream after all.
The SEC’s Division of Examinations has issued a risk alert highlighting its recent observations from exams of firms offering ESG products and services. The alert gives the Division’s observations of deficiencies and internal control weaknesses derived from examinations of ESG investing by advisers and funds.
I hope you and your family are staying healthy during this pandemic. We are in a time of great distress. Our health and our economy are at risk. Our country is dividing itself over the correct response.
It’s been weeks since I’ve published a blog post. I’m trying to adapt to constantly working at home. The house is full of distractions. But it’s also full of family. My regular work routine is gone and I don’t know when it will come back.
Many firms are talking about how to get back in the office safely and what that might look like. Landlords are figuring out how to get buildings back to effective work spaces, how to deal with elevators and how to deal with commutes.
All of my bike rides have been cancelled or “re-imagined” into a different form. Disappointing, but clearly the right call for the health of riders and volunteers. I’ve only pedaled one short bike ride outside in the last month. Nonetheless, I’m 1100 miles ahead of my yearly biking distance goal. I’ve converted to indoor riding on my smart trainer and Zwift.
In all of this chaos and change in routines, my Compliance Building writing has fallen to the side. I’m hoping to get back to writing and back into a new routine. Let’s see if it works and how long it lasts.
The arbitrators were also “effectively advocating” for Dominick throughout the case, Wunderlich said, and when they were not “interrupting testimony, they would appear to be inattentive and failed to follow the proceedings.” This culminated with the final hearing, held virtually, in which one arbitrator continually looked at other screens, another blocked her screen for a period of time and, during closing arguments, the third simply walked away from the screen, the petition alleges.
Welcome to the newest addition to the Compliance Podcast Network, Compliance and Coronavirus. As the Voice of Compliance, I wanted to start a podcast which will help to bring both clarity and sanity to the compliance practitioner and compliance profession during this worldwide health and healthcare crisis. In this episode, I am joined by Jim Belin, as self-styled ‘contrarian investor’ and John Petrovski, a long time commercial real estate specialist in the lending arena. We take a deep dive into the reopening of the economies of the states in which we reside and where the economy may be going into 2012 and beyond.
Federal agents seized a cellphone belonging to a prominent Republican senator on Wednesday night as part of the Justice Department’s investigation into controversial stock trades he made as the novel coronavirus first struck the U.S., a law enforcement official said. Sen. Richard Burr of North Carolina, the chairman of the Senate Intelligence Committee, turned over his phone to agents after they served a search warrant on the lawmaker at his residence in the Washington area, the official said, speaking on condition of anonymity to discuss a law enforcement action.
The agency has received over 4,000 such tips since mid-March, representing a 35% increase over the same period a year ago, Steven Peikin, co-director of the SEC’s Enforcement Division, told attendees of a virtual conference.
We are all too familiar with the many ways in which the COVID-19 pandemic has transformed our personal and professional lives over these last several months.[1] We are confronting new and serious personal challenges, all the while endeavoring to continue our respective professional responsibilities. Like most of you, the SEC Staff have been teleworking since March. The disruption and changed work environment has had – and will continue to have – a substantial impact on the activities of the Division of Enforcement. But I am gratified to report that we have continued to execute on our important mission to protect investors, promote capital formation, and maintain fair and orderly markets. So this afternoon, I’d like to share with you how the Division of Enforcement is responding during this ongoing crisis. I’ll describe some of the work we are doing to detect and address COVID-19-related misconduct. Then I will turn to our regular docket of investigations and litigations. All of our regular enforcement responsibilities remain in place, and we are endeavoring to execute on them, though in many respects we have had to find new ways to do so. I’ll close with a brief discussion of where I see the Division going from here.
For 11 years our Thomson Reuters Regulatory Intelligence Cost of Compliance Report has given an unparalleled insight into the challenges facing risk and compliance officers in financial services firms around the world. This year a tightening of risk and compliance budgets, regulatory and cultural change and the possibility of increasing personal liability all provided evidence of a cyclical turn from the post-financial crisis years. It is too early to tell how COVID-19 will influence that inflexion over the long term, but already regulators are issuing a flurry of revisions to rules, and firms are asking for the postponement of various regulatory initiatives so they can focus on managing events. The report findings seek to help firms with planning and resourcing, while allowing them to benchmark their own approach. This year’s edition closed before the widespread impact of the COVID-19 pandemic had become apparent; thus, the report analyzes both the survey responses and, in an additional dedicated section, looks in more detail what better risk and compliance practice will look like in the face of continuing uncertainty.
I’m going to assume that most of the readers of Compliance Building are working remotely. I hope your firms’ business continuity processes are holding up and you’re keeping things together.
I have to admit that I’m getting a little crazy being stuck in the house and working from home so many days in a row. I’ve cut back on riding outside and am spending more time on Zwift in my basement. If you’re a Zwift rider, let me know and we can ride a virtual meetup.
If your looking for compliance-related stories to read, here are a few that caught my attention.
Banks cannot be blamed for starting the current crisis, nor can financial regulators be expected to contain it. It is, at bottom, a public health crisis, and the top priority must be to contain the spread of Covid-19. Yet the pandemic will inevitably trigger widespread economic problems, and while congressionally authorized fiscal support will be the most important tool for minimizing them, the health of the financial system will also come into play. If the reforms of the last decade work, the financial system should be able to absorb this shock and continue to provide the support that the real economy will so desperately need to recover. But if runs, losses, and uncertainty take over – and sadly, this seems more likely at this stage – the financial system could magnify, rather than soften, the economic impact of Covid-19.
Following the announcements of the federal indictments on March 9, Kentucky Derby-winning trainer Graham Motion stated that, “If this doesn’t wake up as an industry, I don’t know what will… it’s our own fault. We let it happen. This shows we are incapable of policing our own sport and that’s a sad situation.” Motion went on to express hope that “the indictments will bring the sport to rock bottom where opposition to the Horseracing Integrity Act will evaporate and the sport will finally embrace national standards for medications and safety.”
Two workers at the SEC’s Washington headquarters may have the new coronavirus, an agency official said in a court filing. The Securities and Exchange Commission’s Enforcement Division has implemented an emergency policy of “either requiring or strongly encouraging telework for its personnel, depending on their individual circumstances and each employee’s physical proximity to the workstations of two suspected COVID-19 cases,” David Mendel, an SEC assistant chief litigation counsel, said in a letter to U.S. District Judge Alvin Hellerstein in New York March 13.
Those businesses hardest hit in the initial stages of the crisis — e.g., cruise lines, airlines and hotels — quickly face pressures that raise the risks of private litigation and government enforcement in connection with sales and marketing efforts. For example, what assurances should sales representatives in response to inquiries about the chances of contracting the virus in connection with the use of a product or service? What information should be provided about safety measures being taken? Do sales commission and incentive programs exacerbate the risks of non-compliant responses, and should they be suspended?
In light of the novel coronavirus, COVID-19, companies are considering the advisability of holding in-person annual meetings. Given the timing of the COVID-19 emergence, companies with December 31 fiscal year ends may be weighing a change to their meeting format after filing their proxy statements and with little time until their annual meeting date.
With many newly-arriving Zwifters worldwide there are a few tips that I think all of us experienced Zwifters need to follow. Let’s cut these newbies a little slack and lend a teaching hand as these new riders find out how many meters the Tron bike actually requires, how to see the real race results on Zwift Power, and most importantly how to connect with the Zwift community more intimately. Whether that’s through group rides, races or just a social club environment, let’s make these folks feel welcome.
On March 4, 2020, the Securities and Exchange Commission issued an Order granting conditional relief from certain filing obligations under the federal securities laws for reporting companies whose compliance may be delayed by the coronavirus disease (COVID-19). In the press release accompanying this unprecedented Order, SEC Chairman Jay Clayton noted, “The health and safety of all participants in our markets is of paramount importance. While timely public filing of Exchange Act reports is a cornerstone of well-functioning markets, we recognize that this situation may prevent certain issuers from compiling these reports within the required timeframe.”
In our recent experience, fund boards of directors, in consultation with fund advisers, have begun to consider alternative options to in-person board meetings in light of COVID-19 concerns. Some have decided to hold their meetings telephonically, while others have opted to permit those directors who would need to travel to the meeting to instead attend the meeting telephonically, with those who live in close proximity to the meeting location attending in person. Fund complexes likewise have been reviewing meeting agendas to determine whether any in-person approvals are required under the 1940 Act. To the extent they are, funds that determine to rely on the IDC Letter and/or IM Statement should have the board make a determination (presumably before or at the beginning of the meeting) regarding the unforeseen or emergency circumstances that make reliance on the no-action position appropriate.
Business email compromise is a type of Internet-based fraud that typically targets employees with access to company finances—using methods such as social engineering and computer intrusions. The objective of the fraud is to trick the employee into making a wire transfer to a bank account thought to belong to a trusted partner, but that in fact is actually controlled by the fraudster. According to the FBI, between May 2018 and July 2019, there was a 100% increase in identified global exposed losses due to BEC.
In U.S. v. Coburn and Schwartz, Judge McNulty held that when it comes to charging defendants with violating the FCPA, the relevant question isn’t the number of bribes paid, but the number of calls made or emails sent.
To reach this decision – one of first impression under the FCPA – Judge McNulty simply relied on the statute’s plain language. Chatty defendants beware: you can face a separate criminal count for each individual missive you send about the same overall bribery scheme.
Typically, an 11% vote is the end of the story, at least until the next annual meeting when the shareholder may try again. Yet, in this case something unusual happened. Later that same day, a Sanderson press release informed the public that it was going beyond the request of the resolution to issue a report fully compliant with all applicable environmental and social standards set by SASB. Notably, the press release explained that, after “recent extensive engagement with many of its largest stockholders, and in recognition of evolving investor expectations in regard to sustainability reporting,” Sanderson had reversed course.
Although the California Consumer Privacy Act (“CCPA”) went into effect on Jan. 1, 2020, the California Attorney General’s regulations are not yet final, and likely will not go into effect until July 2020. Nonetheless, the most recent version of the proposed regulations, which were issued in February (“Proposed Regulations”), addresses some of the questions fund managers raised during initial compliance with the law.
On March 4, 2020, the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued a consent order assessing a $450,000 civil money penalty against Michael LaFontaine, a former Chief Operational Risk Officer at U.S. Bank NA (“U.S. Bank”), for his alleged failure to prevent Bank Secrecy Act/anti-money laundering (“BSA/AML”) violations that took place during his tenure.[1] This action—which follows U.S. Bank’s 2018 BSA/AML-related resolution with FinCEN, the U.S. Department of Justice (“DOJ”), the Office of the Comptroller of the Currency (“OCC”) and the Federal Reserve for a combined $613 million in financial penalties—marks the first time FinCEN has imposed a penalty on a bank compliance officer for his role in failing to prevent BSA/AML compliance program failures.
Securities and Exchange Commission announced that it is providing conditional regulatory relief for certain publicly traded company filing obligations under the federal securities laws. The impacts of the coronavirus may present challenges for certain companies that are required to provide information to trading markets, shareholders, and the SEC. These companies may include U.S. companies located in the affected areas, as well as companies with operations in those regions.
To address potential compliance issues, the Commission has issued an order that, subject to certain conditions, provides publicly traded companies with an additional 45 days to file certain disclosure reports that would otherwise have been due between March 1 and April 30, 2020. Among other conditions, companies must convey through a current report a summary of why the relief is needed in their particular circumstances. The Commission may extend the time period for the relief, with any additional conditions it deems appropriate, or provide additional relief as circumstances warrant. Companies and their representatives are encouraged to contact SEC staff with questions or matters of particular concern.
Doing all you can to support the professionals and staff who work for you, to provide ongoing reassurance to clients, and to be, to the best of your ability, a genuinely helpful and calming resource to those who might be hit more severely, is your professional and ethical duty.
There’s a regulation in place for investment advisory firms like ours that an emergency preparedness plan must be in place in the event that employees are unable to reach their primary place of business. When regulators come in to a registered investment advisor’s office, they will usually request a copy and check to see if the firm’s plans are up to date and appropriate. It’s part of their normal course of protecting the public.
A couple of interesting features of this graphical representation stick out immediately. First, comments by institutional authors (which mostly appear in the upper half of the graph) seem to be qualitatively different from comments by private senders (which mostly appear in the lower half). Second, there are several tight clusters of documents, indicating nearly identical letters. In fact, a simple plagiarism tool indicates that 67 documents (roughly 13 percent) share 50 percent or more of their text with at least one other document. Most of these documents can be found in clusters 6, 7, and 8. On the other hand, 384 documents (around 73 percent) contain language deemed to be at least 90 percent unique, suggesting that a majority of authors produced highly bespoke opinions (rather than relying on a copy-and-paste template).
With plans to launch its own cryptocurrency later this year, Russia has updated its anti-bribery and AML laws to aid its burgeoning digital economy while dealing with corruption risks associated with the new technology amid reports the Federal Security Service (FSB) allegedly tried to extract a bribe worth $1 million in bitcoin from a media mogul last year.
[I]n a setback for the Department of Justice and its FCPA theory of prosecution, Judge Janet Bond Arterton (D. Conn) granted Hoskin’s motion for acquittal on the seven FCPA charges he was convicted of by the jury (See here for the decision. The judge denied Hoskin’s motion for acquittal on the five money laundering charges he was convicted of by the jury).
Over 500 victims had written to a Manhattan federal court judge to oppose early release for the 81-year-old Madoff from a 150-year sentence imposed in 2009, while only 20, or 4% of letter writers, supported it, prosecutors said.
Patrick Taylor has said that AI allows the compliance practitioner to understand the “subtle clues in that pattern of activity that will clue me in to take a different look.” He likened it to seeing “patterns in raked leaves” which allows you to then step in and take a deeper and broader look at an issue, either through an audit or investigation. This is where compliance practitioner can step back and literally keep an eye on the big picture and longer term as opposed to just the immediate numbers and information in front of them. It may also be the best hope for finding that kind of systemic fraudulent behavior.
We get a bonus day this year with the once-every-four year appearance of February 29 tomorrow. That means an extra day to catch up on some compliance reading.
Don’t expect the SEC to admit to conducting new sweep exams but sources are telling sister publication RCW that OCIE’s looking at compliance with the liquidity risk management rule and how advisor’s handle sweep accounts.
One of the Securities and Exchange Commission’s core enforcement powers may soon be overhauled or even scrapped entirely. For fifty years the SEC has sought “disgorgement” of the proceeds of unlawful activity as one of its main remedies in federal court, even though there is no explicit statutory authority for doing so. On March 3, 2020, the Supreme Court will hear oral argument in Charles C. Liu and Xin Wang v. SEC, No. 18-1501, in which the Justices have agreed to consider whether courts can order disgorgement as an “equitable remedy” for a violation of the securities laws. This post discusses the case’s legal backdrop, some of the ways the Court could decide it, and some of its potential consequences.
Although, in theory, sufficient disclosure should allow advisers to receive revenue sharing, in practice, the SEC attacks revenue sharing in all its forms regardless of the extent of the disclosure. Our conclusion is that the SEC has effectively banned revenue sharing. As support for our position, below are ten types of revenue sharing outlawed by the SEC (cases hyperlinked).
Ethisphere’s research supports the conclusion that ethics and financial performance go hand-in-hand. Our annual practice of tracking how the stock prices of publicly traded honorees compare to the Large Cap Index found that listed 2020 World’s Most Ethical Companies outperformed the large cap sector over five years by 13.5 percent. This “Ethics Premium” forms the basis upon which companies can correlate responsible behavior with shareholder value.
Modern finance is fast moving, extremely complex, and contributes to pervasive unknowns. Yet the processes governing how finance is regulated are typically slow, highly deliberative, and often reflect deeply ingrained and incredibly optimistic assumptions about our ability to understand the financial system and the potential impact of regulatory intervention. In our new paper, “Why Financial Regulation Keeps Falling Short,” we identify the key drivers of this fundamental mismatch between finance and financial regulation, demonstrate how this mismatch contributes to undesirable policy outcomes, and lay the conceptual foundations for understanding how the processes governing the creation of financial regulations can be improved to help close this gap.
Like many others, I look forward to Warren Buffett’s annual letter to Berkshire Hathaway shareholders, and like many others, I read his annual letter closely, looking for any investment insights I can glean as well for Buffett’s now-famous homespun brand of wisdom and humor. Although Buffett latest letter to Berkshire shareholders – which was published Saturday morning – does offer readers a little under each of these headings, I think many reading Buffet’s latest letter might have come away a little disappointed, as I discuss further below.
According to Ponzitracker’s research, 60 Ponzi schemes were allegedly uncovered in 2019 that involved a collective $3.245 billion in investor funds. The statistics mark an abrupt reversal to a multi-year downward trend that in 2018 saw the lowest number of alleged Ponzi scheme discoveries in ten years. In addition, the surge in alleged schemes – the largest percentage increase since 2009 – also comes on the heels of a blockbuster year for financial markets in 2019. While it remains to be seen whether the reversal is an anomaly or cause for concern, all of the data points suggest that 2019 was a banner year for Ponzi scheme discoveries and enforcement.
Good news for anti-corruption enthusiasts looking for something to read — we have two fresh pieces of literature this week that you can study and shoehorn into your compliance programs.
First, Transparency International just released its 2019 Corruption Perceptions Index, which is one of the go-to benchmarks to help compliance officers perform a corruption risk assessment. The short version: lots of countries are backsliding into more corruption.
Second, Britain’s Serious Fraud Office has quietly released its in-house guidance for how investigators should assess corporate compliance programs, akin to the U.S. Justice Department’s own guidance on how to evaluate compliance programs. The SFO material is much shorter and probably less informative, but still, it’s now available to the public.
With the New Year comes new responsibilities for certain asset managers who are exempt from registration with the U.S. Commodity Futures Trading Commission (“CFTC”) as commodity pool operators (“CPOs”) or commodity trading advisors (“CTAs”). Following recent amendments to CFTC rules applicable to asset managers (discussed further here), family offices, operators of business development companies (“BDCs”) and certain operators of registered investment companies (“RICs”) should reevaluate their CPO registration exemptions and, with respect to family offices, CTA registration exemptions. Asset managers affected by the rule amendments may be required to take additional action. In addition, as in years past, certain CPO and CTA registration exemptions, including those claimed under CFTC Rule 4.5, 4.13(a)(3) and 4.14(a)(8), must be renewed by March 2, 2020.
Ah, right, those whistleblowers the SEC has made as clear as possible it neither needs nor wants nor intends to compensate. Surely, then, Jay Clayton’s boys can’t have missed too much, right?
Your organization’s staff should always be considered the first line of defense against cyber threats. Unfortunately, they can also be the biggest risk factor when it comes to phishing. It takes just one employee to take the bait and that’s enough for attackers to steal intellectual data.
Channel Medsystems, Inc. v. Boston Scientific Corporation (Dec. 18, 2019) is the Delaware Court of Chancery’s first decision issued since the Delaware Supreme Court’s 2018 Akorn decision to evaluate whether an acquiror had a right, under a merger agreement, to terminate a pending acquisition on the grounds that there was a “Material Adverse Effect” or “Material Adverse Change” in the target company. (We use “MAE” and “MAC” interchangeably in this memorandum.) Akorn was the first case in which the Court of Chancery, post-trial, found the existence of an MAE and the first post-trial Delaware decision to find that an acquiror had the right to terminate a merger agreement based on an MAE. In Channel, by contrast, Chancellor Bouchard ruled, after trial, that there was not an MAE and that the acquiror was required to close the merger.
[T]he SEC Telegram matter is more than just the typical SEC emergency enforcement action. The SEC Telegram docket does not just provide a rapid-fire presentation of just about every issue facing cryptocurrency market participants today. The matter also offers a rare and vivid glimpse into the dramatic disparity between on the one hand, how the SEC enforcement division views digital token offerings (they should all be registered!) and on the other hand, how the so-called fintech bar views digital token offerings (they are not always securities!).
As the developments affecting the investment management industry continue to unfold, we have once again prepared our semiannual compendium of relevant Sidley Updates for our investment fund and adviser clients and friends.
The compendium includes a summary of each Sidley Update year-to-date, in reverse chronological order, along with a link to its full text. We have included all of the updates, making the compendium repetitive in instances where we revisited a topic to report on emerging information and breaking news in the industry.
Quite the compliance moment was witnessed in Korea this week, when the executive team at Samsung Electronics made a public display of signing a pledge to obey anti-corruption laws and build a new culture of compliance at the firm.
The firm’s top three executives — president Kim Hyun-seok, vice chairman Kim Ki-nam, and mobile communications head Koh Dong-jin — signed the pledge at a publicity event at Samsung headquarters on Monday. Like, in front of the cameras. With reporters around and publicity photos issued.
The Astros Cheating Scandal and Compliance Tom Fox FCPA Compliance & Ethics
Over the next few blogs, I will be exploring the MLB Report in detail, how it demonstrates that culture must be on the forefront of every Chief Compliance Officer (CCO) and corporation, what it means for the compliance community and how the MLB Report informs enforcement of anti-corruption laws such as the Foreign Corrupt Practices Act (FCPA).
What’s happening: The result is that private equity investors are talking about clearing the portfolio decks this year, locking in profits under the current taxation scheme.
The big picture: This is different than the decades-long debate over carried interest, which was about if PE investment profits should be taxed as capital gains or as ordinary income. If you no longer have a difference between the two rates, it no longer matters how carried interest is classified.
In 2017, we conducted a major global survey to give deeper insight into the increasingly important Environmental, Social and Governance (ESG) market. Performing for the Future revealed a picture of ESG investment driven by performance beliefs, coupled with challenges and evolving pathways to adoption. …
Our latest research uncovers the views of more than 300 institutional investors and world-leading institutions, revealing what is driving organizations to adopt ESG, how this is influencing adoption, and the barriers that must be overcome to deliver the best outcomes.
One luxury item is showing up more often in alleged graft-related asset seizures: wrist watches, especially the high-end variety with eye-watering price tags.
In November 2018, Venezuela’s former national treasurer Alejandro Andrade was sentenced in the United States to ten years in prison for his role in a plot to launder $1 billion in bribes. He also forfeited $1 billion in personal assets, including bank accounts, aircraft, real estate, vehicles, horses, and watches. Andrade used watches to pay some of the bribes.
Years ago, a firm I knew moved its chief compliance officer from a relatively nice office to a decidedly not nice one. The move was intended to send a message and it was received that way. I noted at the time that this would not end well for the firm. Sadly, I turned out to be right. In a recent post on the Harvard Corporate Governance Blog, “Bernie Ebbers and Board Oversight of the Office of Legal Affairs,” Michael W. Peregrine, McDermott Will & Emery LLP revisits the once-famous World Com accounting fraud scandal from the early 2000s and particularly the aspect of it that entailed the CEO (Ebbers) marginalizing corporate counsel. The details of this matter are less important (to me) than are the author’s very useful recommendations for mitigating this sort of risk.
Last week, the SEC’s Office of Compliance Inspections and Examinations released its 2020 Exam Priorities with a number of areas of interest to private fund managers. OCIE reported that it examined 15% of registered investment advisers (RIAs) during fiscal year 2019, down from approximately 17% of RIAs during FY 2018 but consistent with FY 2017’s 15% coverage rate. The four-week government shutdown in January 2019 reduced exam activity last year, but we expect the numbers to trend upward in 2020.
The Securities and Exchange Commission and the Commodity Futures Trading Commission expect to tackle a busy regulatory slate in 2020. For the chairs of both agencies — Jay Clayton at the SEC and Heath Tarbert at the CFTC — this year could also be their final opportunity to leave their mark given the looming presidential election and potential change in administration. While both bodies share certain concerns, including confronting regulatory challenges posed by the growth of digital assets, each have distinct priorities that appear ripe for action in 2020. Lawyers also note that regulators are facing a tight time frame to complete priorities given that the nation’s attention will shift to the presidential campaign by Labor Day.
Welcome to 2020, everyone! This has been a long winter break, but before we return to the grind of emails to answer and staff meetings to avoid, let’s spare a few moments to ponder how the corporate compliance landscape in the coming year.
Without further delay, then: my annual list of compliance issues worth watching in the next 12 months. In no particular order…
Clickbait titles don’t appeal to me but my original idea for a title here – “Incremental Change in 2020” – just sounded too lame. Unlike many other commentators, I shy away from bold predictions of big changes coming soon.
I’ve worked for three decades in the corporate legal market and have witnessed many incremental changes but few dramatic ones. Yet Big Law today does look rather different than it did when I started in the 1980s. The new look, however, flows from many small changes.
Last year 14 companies paid a record $2.9 billion to resolve FCPA cases. That includes amounts assessed in resolutions with the DOJ or SEC or both. There were four enforcement actions last year in the mega category — Ericsson at $1 billion, MTS at $850 million, Walmart at $282.7 million, and Fresenius at $231.7 million. Both Ericsson and MTS landed on our list of the ten biggest FCPA enforcement actions of all time.
2019 was a very significant year for every compliance practitioner and compliance program. Not only was it the year with the single highest amount of FCPA enforcement actions, fines and penalties assessed against corporations but it also saw the greatest number of individual prosecutions. Yet perhaps most significantly there were three noteworthy releases of information by the federal government which directly impacted compliance professionals in 2019. Two came from the Department of Justice (DOJ) and one came from the Department of Treasury, Office of Foreign Asset Control (OFAC). These three guidance’s contributed to the continued evolution of what constitutes a best practices compliance program.
I always enjoy a good drama, and what happened at the Hallmark Channel this week did not disappoint. Ethics and compliance officers might want to consider what happened there since the same basic plot line seems to be happening at lots of large organizations.
You might already have heard what happened, although the whole thing happened so fast that maybe you didn’t. Hallmark had agreed to air several ads from Zola Inc., a wedding planning firm, including one ad that featured a same-sex couple. That ad (with two women) started airing several weeks ago, during what is normally Hallmark’s busy season of broadcasting schlocky Christmastime romance movies.
A federal district court found a private fund to be a “beneficial owner” subject to Section 16 of the Securities Exchange Act of 1934, even though the fund had delegated voting and investment power to its investment adviser.1 Delegation has been relied upon by private funds in taking the position that the fund is a not a “beneficial owner” subject to Section 16. This ruling is likely to attract the interest of the Section 16(b) plaintiff’s bar, which reviews SEC filings for potential theories of private litigation.
