Posts Tagged ‘Securities enforcement’

Takeaways from the Past Year of SEC Private Equity Enforcement

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday December 17, 2014 at 9:02 am
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Editor’s Note: The following post comes to us from John J. Sikora, partner in the Litigation Department at Latham & Watkins LLP, and is based on a Latham & Watkins publication authored by Mr. Sikora and Nabil Sabki.

After a year of “first ever” actions targeting private equity, fund managers should be vigilant, even about seemingly small issues.

In reviewing the results of SEC Enforcement’s fiscal year that ended on September 30, the agency congratulated itself on its comprehensive approach to enforcement and its “first-ever” cases. Private equity fund managers should consider a number of important takeaways.

The SEC Continues to Pursue a Broken Windows/Zero Tolerance Approach

Although the Enforcement Division announced a record number of enforcement actions, and the largest aggregate financial recovery, 2014, unlike in years past, did not include a headline-grabbing case such as Enron, Worldcom or Madoff. More recently, the agency has chosen to emphasize its pursuit of smaller cases as a way of improving compliance in the industry. SEC Chair Mary Jo White and Enforcement Director Andrew Ceresney have each touted the agency’s “broken windows” approach to enforcement. A “broken windows” strategy means that the SEC will pursue even the smallest violations on the theory that publicly pursuing smaller matters will reduce the prevalence of larger violations. Ceresney has described “broken windows” as a zero tolerance policy. This past year illustrated the agency’s commitment to applying enforcement sanctions to what some might consider “foot fault” incidents. For example, in September 2014, the SEC announced a package of three dozen cases involving a failure to promptly file Section 13D and Section 13G reports, as well as Forms 3 and 4. Many of the filers charged were just days or weeks late in disclosing their positions. In announcing the cases, Ceresney emphasized that inadvertence was not a defense to late filings.

…continue reading: Takeaways from the Past Year of SEC Private Equity Enforcement

Justice Deferred is Justice Denied

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday November 3, 2014 at 9:15 am
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Editor’s Note: The following post comes to us from Peter R. Reilly of Texas A&M School of Law.

According to the U.S. Department of Justice (“DOJ”), deferred prosecution agreements are said to occupy an “important middle ground” between declining to prosecute on the one hand, and trials or guilty pleas on the other. A top DOJ official has declared that, over the last decade, the agreements have become a “mainstay” of white collar criminal law enforcement; a prominent criminal law professor calls their increased use part of the “biggest change in corporate law enforcement policy in the last ten years.”

…continue reading: Justice Deferred is Justice Denied

Elements of an Effective Whistleblower Hotline

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday October 25, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Bill Libit, Chief Operating Partner concentrating in the corporate and securities area at Chapman and Cutler LLP, and is based on a Chapman publication by Mr. Libit, Walt Draney, and Todd Freier.

It has been reported that approximately two-thirds of companies in the U.S. are affected by fraud, losing an estimated 1.2% of revenue each year to such activity. [1] Indirect costs associated with fraud, such as reputational damage and costs associated with investigation and remediation of the fraudulent acts, may also be substantial. When and where implemented, an internal whistleblower hotline is a critical component of a company’s anti-fraud program, as tips are consistently the most common method of detecting fraud. [2] Consequently, it is essential that companies consider implementing, if they have not already done so, effective whistleblower hotlines. [3] To the extent hotlines are currently in place, companies need to evaluate them to ensure that the hotlines are operating as intended and are effective in preventing and identifying unethical or potentially unlawful activity, including corporate fraud, securities violations and employment discrimination or harassment. This evaluation should be a key element of every company’s assessment of its compliance and ethics program.

…continue reading: Elements of an Effective Whistleblower Hotline

SEC Enforcement Actions Regarding Section 16 Reporting Obligations

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday October 14, 2014 at 9:09 am
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Editor’s Note: The following post comes to us from John P. Kelsh, partner in the Corporate and Securities group at Sidley Austin LLP, and is based on a Sidley Austin publication by Mr. Kelsh, Paul V. Gerlach, and Holly J. Gregory.

Last month, the SEC announced that it brought enforcement actions primarily relating to Section 16(a) under the Securities Exchange Act against 34 defendants. The defendants were 13 individuals who were or had been officers or directors of public companies, five individual investors, ten investment funds/advisers and six public companies.

This post briefly discusses several noteworthy points regarding this development and also discusses practical steps that companies could consider taking in response.

…continue reading: SEC Enforcement Actions Regarding Section 16 Reporting Obligations

Corporate Governance Enforcement in the Middle East and North Africa

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday October 12, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Alissa Amico, corporate governance project manager for the Middle East and North Africa at the Organization for Economic Co-Operation and Development (OECD), and is based on an OECD Corporate Governance Working Paper by Ms. Amico; the complete publication is available here.

As an echo of the last financial crisis, the two themes that have arguably dominated the corporate governance debate globally are investor activism and corporate governance enforcement. Recent years have seen by all accounts the highest rates of institutional investor activism on a range of issues such as executive remuneration, non-financial disclosure and board composition, and at the same time, increased oversight and enforcement. Stewardship-oriented initiatives and rigorous enforcement activity by securities but also banking sector regulators have seen a level of heightened interest in Europe and North America, and to a lesser extent in emerging markets.

…continue reading: Corporate Governance Enforcement in the Middle East and North Africa

The Effect of Deferred and Non-Prosecution Agreements on Corporate Governance

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday September 23, 2014 at 9:17 am
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Editor’s Note: The following post comes to us from Wulf A. Kaal and Timothy Lacine of University of St. Thomas School of Law.

The increasing use of Non- and Deferred Prosecution Agreements (N/DPAs) has enabled federal prosecutors to incrementally expand their traditional role, exemplifying a shift in prosecutorial culture from an ex-post focus on punishment to an ex-ante emphasis on compliance. N/DPAs are contractual arrangements between the government and corporate entities that allow the government to impose sanctions against the respective entity and set up institutional changes in exchange for the government’s agreement to forego further investigation and corporate criminal indictment. N/DPAs enable corporations to resolve allegations of corporate criminal conduct, strengthen corporate compliance mechanisms to prevent corporate wrongdoing in the future, and mitigate the risks that collateral consequences of a conviction can bring for companies, their shareholders, employees, and the economy.

…continue reading: The Effect of Deferred and Non-Prosecution Agreements on Corporate Governance

So Much for Bright-Line Tests on Extraterritorial Reach of US Securities Laws?

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday September 2, 2014 at 9:24 am
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Editor’s Note: The following post comes to us from Jonathan E. Richman, Partner in the Litigation Department and a co-head of the Securities Litigation Group at Proskauer Rose LLP, and is based on a Proskauer publication authored by Mr. Richman, Ralph C. Ferrara, Ann M. Ashton, and Tanya J. Dmitronow.

In its landmark 2010 decision in Morrison v. National Australia Bank, the Supreme Court articulated what seemed to be a bright-line test for determining the extent to which the U.S. securities laws apply to transactions with international elements. In so doing, the Court harshly rejected the fact-intensive “conduct/effects” tests propounded several decades ago by the Second Circuit and followed by many other courts throughout the country.

Last week, the Second Circuit got its revenge. In a long-awaited decision in ParkCentral Global Hub Limited v. Porsche Automobile Holdings SE, the court declined “to proffer a test that will reliably determine when a particular invocation of [the Securities Exchange Act's anti-fraud provision] will be deemed appropriately domestic or impermissibly extraterritorial.” Instead, the Second Circuit held that courts must carefully consider the facts and circumstances of each case to avoid the very result that the Supreme Court had hoped to prevent in Morrison: promiscuous application of the U.S. securities laws to transactions that have little, if any, relationship to the United States.

…continue reading: So Much for Bright-Line Tests on Extraterritorial Reach of US Securities Laws?

European Commission Imposes €20 Million Fine for Failing to Notify a Merger

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday August 10, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Sullivan & Cromwell LLP and is based on a Sullivan & Cromwell publication by Juan Rodriguez, Axel Beckmerhagen, Patrick Gorman.

On 23 July 2014, the European Commission fined Marine Harvest ASA €20 million for failing to notify its acquisition of Morpol ASA in accordance with the EU Merger Regulation and closing the transaction prior to receiving the European Commission’s approval. This is the first time the European Commission has imposed a fine in relation to a two-step transaction comprising a sale of a block of shares followed by a mandatory public bid for the remainder of the target’s shares. The level of fine is a further reminder that failure to comply with the EU Merger Regulation can have significant financial and reputational consequences.

…continue reading: European Commission Imposes €20 Million Fine for Failing to Notify a Merger

2014 Mid-Year Securities Enforcement Update

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday July 20, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Marc J. Fagel, partner in the Securities Enforcement and White Collar Defense Practice Groups at Gibson, Dunn & Crutcher LLP, and is based on a Gibson Dunn publication; the full publication, including footnotes, is available here.

Our mid-year report one year ago presented an exciting opportunity to discuss a time of great change at the SEC. A new Chair and a new Director of Enforcement had recently assumed the reins and begun making bold policy pronouncements. One year later, things have stabilized somewhat. The hot-button issues identified early in the new SEC administration—admissions for settling parties, a growing number of trials (and, for the agency, trial losses), and a renewed focus on public company accounting—remain the leading issues a year later, albeit with some interesting developments.

…continue reading: 2014 Mid-Year Securities Enforcement Update

Recent Developments in Whistleblower Protections

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday June 26, 2014 at 9:11 am
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Editor’s Note: The following post comes to us from Edmond T. FitzGerald, partner and head of the Executive Compensation Group at Davis Polk & Wardwell LLP, and is based on a Davis Polk client memorandum by Linda C. Thomsen, Antonio Perez-Marques, and Kyoko T. Lin. The complete publication, including footnotes, is available here.

The Sarbanes-Oxley Act of 2002 (“SOX”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) and the Consumer Financial Protection Act (“CFPA”) impose overlapping anti-retaliation provisions that generally prohibit retaliation against corporate “whistleblowers.” Recent headlines of whistleblower awards granted to individuals, especially under Dodd-Frank, underscore the fact that, even if a company’s economic exposure arising from the alleged violation of these provisions may be relatively circumscribed—generally limited to amounts based on the compensation of the employee who is allegedly retaliated against—the “real world” exposure, in the form of reputational and regulatory risk, can be significantly greater.

…continue reading: Recent Developments in Whistleblower Protections

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