The First 100 Days: Insider Trading Enforcement to Hold Steady?

In the months leading up to President Trump’s inauguration and even during his first 100 days in office, speculation has persisted on whether white-collar enforcement will continue to be robust and, if so, which areas will be targeted. Although Attorney General Jeff Sessions recently reinforced a general commitment to continue pursuing white-collar criminals in his remarks at the Ethics and Compliance Initiative Annual Conference, details remain sketchy.

In particular, it is unclear whether insider trading prosecutions will remain a priority given the current administration’s pro-business leanings. Although insider trading is considered to be a “bread and butter” type of white-collar prosecution, there has been little guidance whether that will hold steady. Adding to this uncertainty, several key leadership positions are still vacant at two crucial enforcers: the Securities and Exchange Commission (SEC), which is supposed to ensure that material, non-public information is not used for trading; and the U.S. Attorney’s Office for the Southern District of New York (SDNY), which has traditionally acted as a key gatekeeper in deterring insider-trading activity in light of its proximity to the nation’s financial markets. Specifically, the recently-confirmed Chairman of the SEC, Jay Clayton, has not yet appointed a new Enforcement Director, the majority of the SEC’s Commissioners are not in place, and a new SDNY U.S. Attorney has not even been named.

Despite this uncertainty, the SEC and SDNY federal prosecutor’s office have stayed the course in pursuing insider trading cases in these first 100 days. Continue Reading

The First 100 Days: Uncertainty in FCPA Enforcement

President Trump’s 2012 criticism of the Foreign Corrupt Practices Act (FCPA) is well-documented. At the time, news outlets reported that business mogul Trump commented on Wal-Mart’s alleged facilitation payments in Mexico to obtain various licenses and permits, opining that FCPA was a “horrible law and it should be changed,” and adding that it put U.S. businesses at a “huge disadvantage.” Trump went on to say, “[w]e are like the policemen for the world, it’s ridiculous.”

FCPA Under Previous Administrations

The FCPA was enacted nearly 40 years ago, but its enforcement only really began under President George W. Bush. The Obama administration stepped up enforcement further, opening more FCPA cases than all prior administrations combined. While the DOJ under Obama averaged 12 corporate FCPA resolutions each year from 2011 to 2015, 2016 was a record year for FCPA enforcement with a record 25 corporate resolutions and $2.43 billion in corporate fines and penalties collected by the DOJ and the SEC.

The FCPA Under President Trump Continue Reading

The First 100 Days: A Renewed Commitment to Health Care Enforcement

Healthcare fraud enforcement, which has received much less media attention than Republican-led efforts to repeal and replace the Affordable Care Act during the first 100 days of President Donald Trump’s administration, nevertheless had some key developments that provide signals for future trends in the space. Continue Reading

SEC Suffers Rare Loss in Insider Trading Case Before Agency Judge

Marking a rare loss for the Securities and Exchange Commission (SEC) in its favored administrative forum, SEC Administrative Law Judge (ALJ) James E. Grimes ruled against the agency on April 18, 2017, in In the Matter of Charles L. Hill, Jr.  Ironically, the SEC fought hard to keep the case in the administrative forum, after Respondent Hill filed an action in federal district court claiming the SEC’s “home court” forum was unconstitutional.  The district court enjoined the SEC, but the 11th Circuit vacated the district court’s order, and the case proceeded on the SEC’s administrative court.  There, the ALJ found the SEC’s circumstantial evidence not only to be insufficient, but fatally undermined by the credibility of witnesses who offered testimony favorable to Hill.

Continue Reading

SEC Disgorgement Power – Time Running Out?

On April 18, 2017, the U.S. Supreme Court heard oral argument in Kokesh v. Securities and Exchange Commission—a case which could determine whether the Securities and Exchange Commission’s power to disgorge ill-gotten gains is subject to a statute of limitations.  The SEC currently uses disgorgement as a tool to take in billions of dollars in payments annually from defendants in its enforcement actions.  Continue Reading

Has the DOJ Perspective on Corporate Compliance Evolved?: Three Ways the DOJ’s Recent Guidance Differs from the FCPA Resource Guide and U.S. Sentencing Guidelines

The U.S. Department of Justice (“DOJ”)’s Criminal Fraud Section recently issued guidance for corporate compliance programs in a document titled Evaluation of Corporate Compliance Programs (“Fraud Section Guidance”), which reflects a number of notable differences from prior guidance on similar issues. The Fraud Section Guidance contains a list of topics and questions used by the Fraud Section in evaluating corporate compliance programs. As several commentators have noted—and the Fraud Section acknowledges—many of the topics contained in this recent guidance are consistent with, among other things, the Resource Guide to the U.S. Foreign Corrupt Practices Act (“FCPA Guide”) and the current U.S. Sentencing Guidelines, both of which outline desired aspects of a corporate compliance program “best practices.” But it is the differences—areas where the DOJ has expanded on prior commentary—that may provide key insights into DOJ areas of concern.

Specifically, the Fraud Section Guidance provides more detail than prior guidance on three key topics, thereby providing companies with a roadmap for how to strengthen their compliance programs—at least from a DOJ perspective—through increased focus on (1) compliance functions, (2) training programs, and (3) testing of compliance programs. Continue Reading

SEC Chairman Nominee Jay Clayton Provides Insight on the Future of the SEC (Part 1)

President Donald Trump’s nominee for chairman of the U.S. Securities and Exchange Commission, Jay Clayton, testified before the Senate Banking Committee during his confirmation hearing on March 23, 2017.  In this two-part series, we recap the highlights of Clayton’s testimony regarding potential enforcement priorities and policy changes.

READ PART ONE HERE

March Madness in the Municipal Bond Market – A Focus on Gatekeepers

The month of March has brought with it the first-ever criminal municipal bond securities fraud conviction, the resolution of enforcement actions targeting banks and senior executives accused of shirking duties to oversee municipal bond issuances, and proposed rule amendments intended to improve municipal securities disclosures—continuing a trend of intensified regulatory enforcement that targets industry “gatekeepers” such as auditors, bond underwriters, and others that serve investor clients entering the municipal bond market.    Continue Reading

FCPA Pilot Program Extension Not Necessitate “Rush to Disclose”

On March 10, 2017, at the annual ABA White Collar Conference in Miami, Kenneth Blanco, Acting Assistant Attorney General for the DOJ’s Criminal Division, announced that the FCPA Pilot Program would stay in place beyond its current April 5, 2017 expiration date so the DOJ could “begin the process of evaluating the utility and the efficacy, whether to extend it and what revisions if any we should make to it.” Blanco went on to say: “The program will continue, however, in full force until we reach a final decision on those issues.”

Companies should not view this development as reason though to accelerate their self-disclosure analysis. In first announcing this program in April 2016, the DOJ was trying to incentivize companies to voluntarily disclose and remediate FCPA violations by offering up leniency in fines and other penalties as well as providing more transparency on its decision to decline certain cases. (See http://tinyurl.com/zrdeh2k for more about the program). However, some of these same incentives had routinely been found in settlements even before the program was piloted. And it’s not a sure thing that whatever comes next now—after the DOJ self-examination—would result in harsher fines or penalties even if a company held back from self-disclose after immediately discovering an FCPA issue. In fact, given the administration’s prior pronouncements on enforcing the FCPA (or not), it’s equally, if not all the more, likely that the next “program” could contain even more significant incentives for companies to proactively engage with the government. And more leniency may be in the offing, regardless of whether companies self-disclosed immediately or only had cooperation to offer where the DOJ had already independently learned of the possible FCPA violations.

In sum, the “rush to disclose” should not necessarily trump a company’s own full and measured internal evaluation of possible FCPA red flags. Until there is more clarity on the value the current DOJ places on cooperation with or without self-disclosure, the best approach remains to carefully assess whether there is truly something significant worth disclosing and to fully understand the myriad of consequences arising from such disclosure. This is the prudent course even in the face of the “blue light special” that appears to have just been announced.

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