The Securities and Exchange Commission (SEC) recently announced an administrative settlement with Apex Fund Services (US) Inc., a firm providing administrative services to private funds, based on its alleged failure to heed red flags and correct faulty accounting by two private equity managers.

The SEC alleged that, in carrying out its contractual fund administration functions,

On May 23, 2016, the Second Circuit presented a significant setback to the Department of Justice (DOJ) by reversing a $1.27 billion penalty against Bank of America and Countrywide Loans.  As we’ve posted before, in October 2012, DOJ filed a civil suit against Bank of America and Countrywide based on mortgages sold to Fannie Mae and Freddie Mac.  The Government alleged that Countrywide had a program named “the Hustle” or “High-Speed Swim Lane,” which rewarded the speed of processing residential mortgage loans regardless of their quality.  This, according to the Government, resulted in thousands of fraudulent or defective loans that were subsequently sold to Government Sponsored Entities (GSEs) such as Fannie Mae and Freddie Mac.  Although Countrywide started the program in August 2007, the program continued after Bank of America purchased Countrywide in 2008.  
Continue Reading Second Circuit Reverses $1.27B Penalty Under FIRREA

[Editor’s Note:  This past Friday, Perkins Coie Partner Lou Mejia, former SEC Chief Litigation Counsel, joined the chair of the SEC Enforcement Division’s Financial Reporting and Audit Group on a panel to discuss the agency’s latest enforcement efforts surrounding financial reporting fraud].

Margaret McGuire, the chair of the SEC Enforcement Division’s Financial Reporting and Audit Group (formerly a “Task Force”), participated in a panel at the American Law Institute’s Accountants’ Liability 2015 Conference in Washington, D.C. on October 2, 2015, during which she outlined the Group’s latest enforcement initiatives.  The Financial Reporting and Audit Group was formed in 2013 with the stated goal to strengthen the agency’s efforts to identify and prosecute securities law violations related to financial reporting and audit failures.  From 2013 to 2014 alone, the percentage of audit firm clients sued by the SEC more than tripled (4% to 14%).
Continue Reading The SEC Turns Up The Heat On Financial Reporting Fraud

Note: An earlier post on Perkins Coie’s In the Arena: Law and Politics Update discussed, from a campaign finance lawyer’s perspective, why the prosecution in United States v. Harber signals greater jeopardy in the future for operatives in down-ballot races who coordinate with hastily-formed “super PACs.” And an earlier version of this post, which offers

The Securities and Exchange Commission announced this week that it has awarded its first whistleblower payout to a former company officer. The redacted order indicates that the former officer will receive an award between $475,000 and $575,000 for reporting high-quality, original information about a securities fraud that resulted in an SEC enforcement action with sanctions exceeding $1 million. The identity of the officer and the nature of the enforcement action were redacted by the Commission to protect the anonymity of the whistleblower, as required by law.

While the SEC has publicized other significant whistleblower awards over the last two years, this particular announcement serves as an alarm bell of sorts to internal gatekeepers and decision makers responsible for handling allegations of misconduct. The Commission normally will not consider information provided by officers, directors, trustees, or partners who learn about a fraud through another employee reporting the misconduct to be original information derived from independent knowledge or independent analysis. But, an exception exists under Rule 21F-4(b)(4)(v)(C) for reporting information to the Commission more than 120 days after other responsible compliance personnel possessed the information and failed to adequately address the issue.

In the SEC press release accompanying the order, SEC representatives made clear that they will continue to entertain tips from corporate employees at all levels:
Continue Reading SEC Awards First Whistleblower Payout to Former Company Officer

Taking aim at credit card issuers who promote offers to consumers such as “convenience checks,” deferred interest/promotional interest rate purchases and balance transfers, the Consumer Financial Protection Bureau (CFPB) released a Bulletin on September 3, 2014, putting those issuers on notice of the risk that those practices could constitute deceptive and/or abusive acts.  CFPB Director Richard Cordray criticized such interest rate promotions, maintaining that the offers “lure in consumers and then hit them with surprise charges.”  Last year, the CFPB foreshadowed these concerns, as it questioned consumer understanding and the clarity of disclosures to consumers.
Continue Reading CFPB Fires Warning Shot Over Deceptive Credit Card Interest Rate Promos

In a recent speech, SEC Chair Mary Jo White put directors of public companies on notice of their responsibility as “essential” and “important” gatekeepers upon whom their investors and the SEC rely.  Chair White described directors as the SEC’s “partners” in preventing, detecting, and stopping violations of the federal securities laws.  She set forth

With the Second Circuit’s recent reaffirmation of the SEC’s substantial discretion in negotiating the terms of settlement—notably vacating Judge Jed Rakoff’s rejection of the proposed $285 million settlement in SEC v. Citigroup Global Markets, Inc.—eyes are turning to the decision’s immediate impact on at least one other high-stakes case:  a $602 million insider trading settlement between the SEC and CR Intrinsic Investors, an affiliate of S.A.C. Capital Advisors.  Similar to the SEC-Citigroup settlement, CR Intrinsic was not required to admit wrongdoing in settling the SEC’s charges.  Judge Victor Marrero had conditionally approved the settlement pending the outcome of the Citigroup appeal.  
Continue Reading Revisiting SEC Consent Decrees in the Wake of SEC v. Citigroup