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THE LATEST ON GOVERNMENT INQUIRIES AND ENFORCEMENT ACTIONS

Government Investigations and White Collar Litigation Group
Enforcement and Prosecution Policy and Trends

The Tip of the Iceberg Emerges: Initial Wave of Class Actions Reflect How Private Causes of Action Will Add Significantly to Price Gouging Litigation

As pandemic response task forces at the federal and state levels ramp up price gouging investigations and enforcement actions across the country, civil plaintiffs attorneys have jumped to the forefront by utilizing private causes of action to file price gouging-based class action lawsuits against dozens of major retailers and food supply companies.   Senate Majority Leader Mitch McConnell’s prediction that the COVID-19 crisis will be the “biggest trial lawyer bonanza in history” appears to be taking shape, as the number of putative class action lawsuits targeting price spikes in products that span the consumer spectrum—including N95 masks, toilet paper, hand sanitizer, medical supplies, consumer food items and emergency department physician services—escalates daily during the current crisis.  Notably, these lawsuits have attacked purported price gouging not just under existing price gouging statutes but also through an array of state laws, including consumer protection statutes, negligence, breach of implied contract, unjust enrichment and common law unconscionability.

As we discussed in a prior post, federal and state price gouging laws are widely varied, but frequently operate as a price cap that can cover products and services such as food, clothing, fuel, healthcare, hygiene supplies, transportation and storage.  Further, many state price gouging laws expressly include a private right of action, giving potential class action plaintiffs firms a wide berth from which to launch frontal assaults on industries and supply chains that may be operating without adequate awareness of the often strict pricing restrictions applicable during the current state of emergency.  For example, California’s 10% price cap lies at the core of several anti-gouging class actions filed against online and brick-and-mortar retailers.

Importantly, these laws are rarely invoked, largely untested and have never been applied in the type of widespread, sustained crisis in which we are now operating.  This could make it difficult for class action defendants to dispose of lawsuits in the early stages of motions practice, since courts will be addressing questions of first impression that could turn on the application of novel legal theories to a complex set of facts implicating entire supply chains, from the producer of production inputs to the retailer selling finished goods, and every player in between.

Companies in the retail supply chain that want to mitigate risk can and should take steps now to assess and document their pricing decisions in connection with the pandemic.  They should assume that they may be forced to defend these decisions down the road in a law enforcement or civil litigation setting.  Our Quick Reference Guide to Price Gouging Law can help them understand the legal lay of the land.

Price Gouging Laws Guide

McGuireWoods has implemented a price gouging team ready to respond to your inquiries regarding the application of federal and state price gouging mandates. For an overview of the Price Gouging Laws for each state and jurisdiction, click here.

For additional guidance on the effects of these laws or orders, please feel free to contact Alex Brackett, Kevin Lally, or Sarah Zielinski.

McGuireWoods’ Government Investigations & White Collar Litigation Department is a nationally recognized team of nearly 60 attorneys representing Fortune 100 and other companies and individuals in the full range of civil and criminal investigations and enforcement matters. Our team is comprised of a deep bench of former senior U.S. officials, including a former Deputy Attorney General of the United States, former U.S. Attorneys, more than a dozen federal prosecutors, and an Associate Counsel to the President of the United States. Strategically centered in Washington, D.C., our Government Investigations & White Collar Litigation Department has been honored as a Law360 Practice Group of the Year and earned the trust of international companies and individuals through our representation in some of the most notable enforcement matters over the past decade.

McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.

Enforcement and Prosecution Policy and Trends

Price Gouging Investigations Are Coming: What Industry Needs to Understand

Update: please see our May 14 post for information on private causes of action to file a series of price gouging-based class action lawsuits against several dozen major retailers and food supply companies.

In response to the national coronavirus health crisis, federal and state Attorneys General have elevated the investigation and prosecution of COVID-19-related crime, including price gouging, to the forefront of their enforcement priorities. Attorney General William Barr created a national COVID-19 task force staffed with attorneys from all 94 United States Attorney’s Office to coordinate expedited federal enforcement actions for price gouging. Multiple state Attorneys General have created similar task forces, established federal-state partnerships, or publicly pronounced that they will zealously pursue prosecution of companies that engage in price gouging. The Federal Trade Commission also has authority to regulate price gouging. Simple complaint forms are linked to the home pages of many of these organizations, and industry-wide investigations into the sales of certain goods have already begun in some jurisdictions.

Given the breadth of products and services covered by price gouging laws, and the potentially tight pricing tolerances of the caps under some laws, companies and industries that think they are immune from scrutiny should think again.

To date, several federal and state price gouging cases have been filed and thousands of complaints are being investigated. As states re-open and grand juries reconvene, federal and state law enforcement can be expected to actively pursue investigations and prosecutions against companies engaged in the manufacture, distribution or sale of a wide variety of consumer and healthcare goods and services that experienced price spikes following federal or state emergency declarations. The industries and the specific goods and services that will be targeted for investigation will vary by jurisdiction. The federal and state statutes and orders lack uniformity regarding the items covered, the extent of price increase prohibited and the time parameters covered. As a result, price increases on a particular good or service that may be legal in one jurisdiction may be deemed criminal price gouging elsewhere.

Federal Price Gouging Enforcement (Healthcare and PPE Focused)

Under federal law, the current anti-gouging order took effect on March 23, 2020, when President Donald Trump issued Executive Order 13910 invoking the Defense Production Act to designate select health and medical resources, as identified by the Secretary of Health and Human Services, as protected items. Tailored to address the current health crisis, these items include various types of personal protective equipment, medical equipment, and sterilization materials. Until such time as the Secretary of Health and Human services terminates this designation, it is a Class A misdemeanor punishable by up to one year imprisonment to sell any designated item at prices in excess of the prevailing market rates.

State Price Gouging Enforcement (Consumer Goods and Services Focused)

State price gouging laws and orders are far more varied. Some states have issued anti-gouging orders accompanying COVID-19 emergency declarations that are largely consistent with federal law. Many other states rely on price gouging statutes triggered by declarations of emergency that incorporate within their scope a wide array of goods and services, including fuel, pharmaceuticals, food and water, clothing, cleaning and hygiene materials, building supplies, and shipping and other transportation services. A small number of states do not have statutes proscribing price gouging, although many of them have indicated intention to pursue price gouging via unfair and deceptive trade practices or other consumer protection laws.

Importantly, state laws vary significantly in how price gouging is defined. In many states, there is a statutorily-set price cap that compares prices charged during the period when the emergency is in effect with prices charged for the same good or service during a defined time period prior to the emergency declaration (e.g., 10% above the price charged for that good or service on a particular day or over a number of days prior to when the emergency was declared). The tolerance cut-off and the comparative timeframe differ from state to state. Other states eschew price caps and rely on more amorphous terms such as “unconscionable” or “excessive” price increases. States with defined caps do tend to allow for larger price increases if they are tied to higher costs, but still tend to apply a cap (e.g., 10% over cost plus standard markup).

Compliance Challenges and Strategies

The patchwork of federal and state statutes and orders can make it difficult for companies operating regionally, nationally or internationally to remain in full compliance with price gouging laws during the COVID-19 crisis—particularly as many may not be aware that they are currently, and for some weeks have been, subject to pricing caps in states into which they sell goods or services. Adding to this difficulty is the fact that the current patchwork will unravel in a non-uniform way, with standards, timing and enforcement vigor that will vary by jurisdiction. Companies that find themselves out of compliance with these laws could be exposed to significant legal and reputational risks, as branding a corporation as a profiteer that cold-heartedly placed financial gain over national security and citizen health during a global pandemic will be a politically tempting headline to grab.

However, there are ways to manage these risks.  Companies that manufacture, distribute, or sell goods or services that fall within the scope of the anti-gouging statutes or orders should examine both their prices and their pricing mechanisms to confirm compliance. In the event that the price for a designated good or service increased from March 2020 to the current date, companies should assess the following:

  • Is the price increase the direct result of increased costs on the supply side, including, labor, materials and supplier price increases?
  • Was the good or service sold at a price beyond the prevailing market rate within a community or across the industry (and if so is there a justification)?
  • Did the price increase exceed a state-defined tolerance level, the most common of which is 10% above pre-crisis pricing (or 10% above cost plus standard markup)?
  • Can you document how and why prices increased, and is that information being preserved?
  • If prices are out of tolerance in certain markets, are you able to bring them into alignment with applicable caps?
Price Gouging Laws Guide

McGuireWoods has implemented a price gouging team ready to respond to your inquiries regarding the application of federal and state price gouging mandates. For an overview of the Price Gouging Laws for each state and jurisdiction, click here.

For additional guidance on the effects of these laws or orders, please feel free to contact Alex Brackett, Kevin Lally, or Sarah Zielinski.

McGuireWoods’ Government Investigations & White Collar Litigation Department is a nationally recognized team of nearly 60 attorneys representing Fortune 100 and other companies and individuals in the full range of civil and criminal investigations and enforcement matters. Our team is comprised of a deep bench of former senior U.S. officials, including a former Deputy Attorney General of the United States, former U.S. Attorneys, more than a dozen federal prosecutors, and an Associate Counsel to the President of the United States. Strategically centered in Washington, D.C., our Government Investigations & White Collar Litigation Department has been honored as a Law360 Practice Group of the Year and earned the trust of international companies and individuals through our representation in some of the most notable enforcement matters over the past decade.

McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.

Compliance

Congressional Investigations: A Month In, Congress Signals Close Scrutiny of CARES Act and Paycheck Protection Program

The CARES Act is only a month old, but plans for investigations to track the nearly $3 trillion in coronavirus relief funds are already emerging from Congress. Among the mechanisms for oversight created and funded by the CARES Act itself is the Congressional Oversight Commission, a five-member committee overseeing $500 billion in loans doled out by the Treasury Department targeting larger businesses.   Additionally, a new investigative select committee, chaired by Representative Jim Clyburn (D-SC) and operating under the House Committee on Oversight and Reform, will monitor President Trump’s implementation of coronavirus relief efforts.  And this anticipated congressional scrutiny comes on top of the expected investigative work of the new office created within the Treasury Department, the Special Inspector General for Pandemic Recovery (“SIGPR”), created to investigate how this $500B fund was utilized.

One of the programs included in the CARES Act most likely to be a target of congressional investigations—and already in the crosshairs of the media and Members of Congress from both parties—is the Paycheck Protection Program (“PPP”), which is designed to provide relief to small businesses during the COVID-19 crisis. The businesses and lenders participating in the PPP are likely to receive intense scrutiny not only because of the large sums of money that were distributed in such a short time frame (the initial program exhausted $349 billion in just 13 days, and Congress recently added another $310 billion), but also because of widespread media reports that the government-backed loans are not going to the small businesses for which the money was intended. In fact, Representative Clyburn recently announced that the new investigative committee will prioritize looking into how PPP funds went to publicly-traded companies. Representative Nydia Velazquez (D-NY), Chairwoman of the House Small Business Committee, has also publically said big firms that took funds from the PPP should pay them back. Other committees with jurisdiction could include the Senate Small Business Committee, the Senate Banking Committee, and the House Financial Services Committee.

Moreover, numerous lawmakers—including both Democrats and Republicans, each of whom have a political interest in seeing Main Street loans fulfilled—have expressed the need for more oversight in letters to the SBA and the Treasury Department and their Inspectors General, as well as to certain lending institutions, voicing concerns about where the money has gone and seeking explanations for how the Trump Administration will combat potential fraud. There can be no doubt that at least some of the concerns expressed below will translate into congressional inquiries and hearings. This recent flurry of letters regarding investigations includes:

  • Senator Elizabeth Warren (D-MA) and Representative Velazquez sent a letter to the SBA and Treasury Department Inspectors General asking those offices to open an investigation into whether (i) the PPP favored larger, wealthier, or existing customers; (ii) the SBA and Treasury Department rulemaking and guidance processes were effective in protecting against fraud, waste, and abuse; (iii) businesses that received loans were in need of those funds due to the COVID-19 pandemic; and (iv) companies with close ties to the Trump Administration or those with other political connections were able to receive PPP funds.
  • Senate Majority Leader Chuck Schumer (D-NY) and Senators Sherrod Brown (D-OH) and Benjamin Cardin (D-MD) sent a letter to the SBA Inspector General requesting that the IG investigate reports that certain lenders prioritized applications of their larger, wealthier clients to the detriment of smaller businesses, including “concierge-type services,” such as personalized assistance filling out paperwork and other administrative requirements.
  • Senator Marco Rubio (R-FL), Chairman of the Senate Committee on Small Business and Entrepreneurship, sent a letter to a number of large banking institutions requesting information on their application process amid concerns that certain lenders prioritized borrower applications, which Rubio said in a press release was a violation of congressional intent of the program. Senator Rubio has announced he will use the Committee’s subpoena powers to conduct aggressive oversight of the PPP.
  • Senators Diane Feinstein (D-CA) and Kamala Harris (D-CA) sent a letter to the Treasury Department calling for an investigation into why there were substantial funding disparities among states receiving PPP funds. Representative Jackie Speier (D-CA) wrote a similar letter to the Treasury Department and the SBA, requesting additional information on dispersal of PPP funds, including asking how SBA prioritizes lenders’ requests for funding.
  • Representatives Judy Chu (D-CA), Chairwoman of the House Small Business Subcommittee on Investigations, Oversight, and Regulations, and Representative Velazquez wrote a letter to the SBA and the Treasury Department urging new rules for PPP to ensure lenders do not set unreasonable, exclusionary, or inequitable conditions on applicants, citing concerns that lenders were only accepting applications from customers with a pre-existing business lending relationship or business checking account.
  • Representative Ron Kind (D-WI) sent a letter to the Treasury Department requesting more oversight over the second round of PPP funds to ensure the loans are going to small businesses who would not have otherwise been able to stay afloat during the COVID-19 crisis, and not to large or publicly traded businesses.

Members of Congress will also be receiving information about the loans from a group of inspectors general. The CARES Act created the Pandemic Response Accountability Committee (“PRAC”), where inspectors general from a variety of federal agencies—including SBA, FDIC, DOJ, DOD, and the Board of Governors of the Federal Reserve, among others—will have broad oversight authority. The PRAC is required to make regular reports to Congress (and the President), which will most certainly generate additional interest and likely lead to congressional investigations.

One thing these letters from Congress reveal: with such a tremendous amount of funding made available, and the pressure to pass the legislation and distribute the funds in an expeditious manner, Congress will closely scrutinize all parties to the programs. This includes the Executive agencies, the lenders, and especially the borrowers, already targets of Congress and the media.

Notably, the CARES Act provided substantial funding for oversight, and in several cases funded oversight arms into 2025. With an election cycle looming, this combination of factors—and the substantial noise out of Washington—suggests there will be years to come of political investigations.

About McGuireWoods’ Congressional Investigations Group

The Congressional Investigations practice at McGuireWoods is part of an elite Government Investigations & White Collar Litigation Department that was recently named a Law360 Practice Group of the Year for 2019. Our senior team is comprised of a deep bench of lawyers with decades of experience with investigations at the intersection of law and politics, including a former Deputy Attorney General of the United States, former U.S. Attorneys, more than a dozen federal prosecutors, an Associate Counsel to the President of the United States, and other former senior enforcement officials.  Ranging from the Major League Baseball steroid scandal, the Deepwater Horizon inquiries, and the USA Gymnastics sexual assault investigations, our Congressional Investigations lawyers have been in the trenches, representing a wide range of companies and individuals in the most high-politicized congressional investigations matters over the last few decades.  Our Congressional Investigations team also leverages the strengths of our highly regarded colleagues at McGuireWoods Consulting, our bipartisan legislative consulting arm comprised of former elected officials, senior Executive Branch officials, more than a dozen senior congressional staffers, and White House and legislative staff. Complementing our legal and legislative know-how, we maintain robust personal and professional relationships with Members of Congress and their staff, and have earned a reputation for knowing how to navigate the halls of Congress.

About McGuireWoods Consulting’s Federal Team

Our federal team assists clients in communicating with federal policymakers on complex legislative issues in every major area, from trade to healthcare to transportation. We draw on our Capitol Hill and executive branch relationships, policy experience, and strategic understanding of process to help clients fend off unwelcome initiatives and affirmatively shape sound policy environments for achieving business goals.

Compliance

DOJ Puts Collection of Civil Penalties on Hold in Response to COVID-19

In a pair of recent memoranda from the Executive Office for United States Attorneys (“EOUSA”) issued on March 31, 2020, and April 13, 2020, the United States Department of Justice (“DOJ”) has effectively halted enforcement actions and the collection of civil penalties.  Included in this temporary suspension is the collection of civil penalties incurred in suits under the False Claims Act (“FCA”).  The FCA is the federal government’s primary tool for recourse against false or fraudulent claims made against government programs.

In the FCA context, this suspension has implications for key government programs in light of the current coronavirus outbreak, including Medicare and Medicaid.  Pursuant to this new guidance, U.S. Attorney’s Offices will temporarily suspend enforcement activity on civil debt levied against health care providers who billed the government insurance programs for goods and services that were not rendered, were substandard, and/or medically unnecessary.  The temporary suspension will also affect enforcement activity on civil debt levied against other government contractors.

This moratorium on the collection of civil debt is effective until at least May 31, 2020, and may potentially be extended either by legislation or administrative action.  The temporary suspension applies broadly to collection activity on civil debts, including debts in active repayment.  The memoranda direct the U.S. Attorney’s Offices not to pursue new enforcement actions, and payments scheduled under active payment plans will not be considered in default if left unpaid.  However, interest may accrue depending on the type of civil debt, and affected parties may continue to make voluntary payments on interest or their full penalties.  The April 13, 2020, memorandum from the EOUSA clarifies that the collection of debts pursuant to voluntary settlement agreements may continue, since they are appropriately considered “voluntary payments.”

Although affirmative civil debt collection and enforcement actions are temporarily suspended, U.S. Attorneys may continue to investigate claims, file complaints, litigate cases to judgment, settle any affirmative civil enforcement matter, and pursue preparatory collection actions and other measures to protect the government’s interests.  This temporary suspension does not apply to ongoing litigation, appeals, or cases not subject to a final, non-appealable judgment, and the government’s remedies for breach of any settlement agreement remain intact at this time.

In addition, this temporary suspension does not extend to the collection of criminal penalties, including fines and restitution that are the result of a criminal conviction or plea and entered pursuant to a court order or judgment under a criminal statute.

Entities and individuals currently making payments to the federal government who wish to take advantage of the temporary suspension should ensure they fall within the parameters of the memoranda.  Before delaying payments, entities and individuals should seek legal guidance from their existing counsel or retain counsel to discuss their potential options, including possible outreach to the relevant authorities.

Please contact the authors for additional guidance on how these issuances and other COVID-19 considerations will affect federal enforcement actions and the related rules. McGuireWoods has published additional thought leadership related to how companies across various industries can address crucial coronavirus-related business and legal issues.

Compliance, Enforcement and Prosecution Policy and Trends, Financial Institution Regulation, Securities and Commodities

SEC Enforcement Co-Directors Issue Statement on Insider Trading

Under the leadership of U.S. Securities and Exchange Commission Chairman Jay Clayton, the SEC’s Division of Enforcement has made the protection of Main Street investors its overarching priority.  On March 23, 2020, Division of Enforcement Co-Directors Stephanie Avakian and Steven Peikin issued a statement to financial market participants re-emphasizing the SEC’s commitment to safeguard the integrity of the nation’s financial markets given the market disruption caused by the 2019 coronavirus disease (COVID-19).

In their Statement Regarding Market Integrity (found here: Statement Regarding Market Integrity) Co-Directors Avakian and Peikin reminded market participants – corporate issuers, broker-dealers, investment advisers, and other registrants – of the importance of controlling for the potential receipt and misuse of material nonpublic information (MNPI) in light of the unprecedented market and economic conditions caused by COVID-19.  They further cautioned that trading in a company’s securities on the basis of inside information (insider trading), or the improper dissemination of MNPI, may violate the antifraud provisions of the federal securities laws.

To start, the Co-Directors noted that in the current dynamic climate, corporate insiders are continually learning new MNPI that may be even more valuable than under normal circumstances particularly if a company’s earnings reports or required SEC disclosure filings are delayed due to COVID-19.  Given the unique circumstances, a greater number of persons may have access to MNPI, and companies would be wise to revisit corporate controls and remind those with access to keep this information confidential and comply with insider trading prohibitions.

Further, they urged companies to be mindful of, among other things, established disclosure controls and procedures, insider trading prohibitions, and codes of ethics, to ensure that companies are protecting against improper use and dissemination of MNPI.  Safeguarding confidential corporate information is particularly critical given the current work environment where many employees are forced to work remotely, corporate emergencies are hashed out from unsecure locations, and relaxed controls over confidential information could lead to its potential downstream misuse.

Finally, Co-Directors Avakian and Peikin reminded broker-dealers and investment advisers to adhere to policies and procedures designed to prevent the misuse of MNPI.  As the industry has seen in prior government enforcement investigations and actions involving market moving information related to congressional, legislative, and governmental agency actions, controlling the rapid flow of information concerning COVID-19 and its potential impact on market sectors and public issuers will be critical to financial services firms and other market participants using such information to inform investment decisions for themselves and investors.  Congressional, executive branch, and government agency information can be deemed confidential or MNPI, and financial firms and other market participants monitoring government information and actions need to be aware that each of the executive and legislative branches as well as government agencies have rules and guidance in place governing confidential and nonpublic information.  Now more than ever, market participants interacting with government employees should make clear that their firms and employees do not wish to receive confidential information or MNPI concerning congressional, legislative, and executive branch or other government agency actions, and firms would be well served to double down on policies designed to control for the possible receipt and misuse of confidential information or MNPI arising from those interactions.

In these challenging times, we recommend that market participants heed the Co-Directors’ reminder of the need to comply with the prohibitions on illegal securities trading.  Companies and financial institutions should take a fresh look at policies and procedures governing the potential receipt and misuse of confidential information or MNPI and remind/retrain their employees accordingly.  The SEC has made clear that it remains committed to maintaining the integrity of the financial markets and ensuring the protection of Main Street investors during these unprecedented times.

McGuireWoods Securities Enforcement and Litigation Team

The firm’s SEC and DOJ enforcement lawyers have extensive experience counseling clients on compliance with insider trading rules and regulations as well as defending government investigations and litigation involving allegations of insider trading. If you have any questions regarding these matters, please contact the authors of this alert. Additional information regarding McGuireWoods’ Securities Enforcement and Litigation Team is available here.

McGuireWoods Securities and Compliance Team

The firm’s securities compliance lawyers assist registrants with their reporting obligations under the Securities Exchange Act of 1934, including forms 10-K, 10-Q and 8-K, Section 16 reports and DEF 14A (proxy statements), as well as with Regulation FD and Regulation G compliance. We prepare insider trading policies, develop training programs, and assist with other aspects of securities transactions engaged in by company officers, directors and significant security holders, including 10b5-1 plans and Rule 144 compliance.

Energy Enforcement, Enforcement and Prosecution Policy and Trends

Cybersecurity and Infrastructure Security Agency Issues Initial Guidance on Essential Workers, Sectors

As many industries transition to alternate working arrangements in response to COVID-19, certain sectors and functions essential to the nation’s public health, safety and community well-being must continue to operate. The Cybersecurity and Infrastructure Security Agency (CISA) of the Department of Homeland Security recently released an initial list of “Essential Critical Infrastructure Workers” to help guide state/local officials and industry leaders on which sectors and functions should continue during the COVID-19 response. This memorandum was released after President Trump issued guidance that workers in critical infrastructure industry, as defined by DHS, “have a special responsibility” to maintain a normal work schedule.

The memo sets forth an initial, non-exhaustive list of essential workers that is intended to be advisory only. It is not intended to be a federal directive or standard. Government officials and industry leaders should “use their own judgment, informed by this list” to determine which services and functions are critical and must continue.

CISA is soliciting feedback on the list (in terms of the workers listed and the sectors included) and plans to update it in response. Feedback should be sent to CISA.CAT@CISA.DHS.GOV.

The preliminary list includes workers from the following sectors:

  • Healthcare/Public Health
  • Law Enforcement, Public Safety, First Responders
  • Food and Agriculture
  • Energy
  • Water and Wastewater
  • Transportation and Logistics
  • Public Works
  • Communications and Information Technology
  • Other Community-Based Government Operations and Essential Functions
  • Critical Manufacturing
  • Hazardous Materials
  • Financial Services
  • Chemical
  • Defense Industrial Base

CISA’s list was developed based on the following key principles:

  1. Response efforts to the COVID-19 pandemic are locally executed, state managed and federally supported.
  2. Everyone should follow guidance from the CDC, as well as state and local government officials, regarding strategies to limit disease spread.
  3. Workers should be encouraged to work remotely when possible and focus on core business activities. In-person, nonmandatory activities should be delayed until normal operations resume.
  4. When continuous remote work is not possible, businesses should enlist strategies to reduce the likelihood of spreading the disease. This includes, but is not limited to, separating staff by off-setting shift hours or days and/or social distancing. These steps can preserve the workforce and allow operations to continue.
  5. All organizations should implement their business continuity and pandemic plans, or put plans in place if they do not exist. Delaying implementation is not advised and puts at risk the viability of the business and the health and safety of employees.
  6. In the modern economy, reliance on technology and just-in-time supply chains means certain workers must be able to access certain sites, facilities and assets to ensure continuity of functions.
  7. Government employees, such as emergency managers, and the business community need to establish and maintain lines of communication.
  8. When government and businesses engage in discussions about critical infrastructure workers, they need to consider the implications of business operations beyond the jurisdiction where the asset or facility is located. Businesses can have sizeable economic and societal impacts as well as supply chain dependencies that are geographically distributed.
  9. Whenever possible, jurisdictions should align access and movement control policies related to critical infrastructure workers to lower the burden of workers crossing jurisdictional boundaries.

Companies already are working on identifying essential personnel and documenting the need for such personnel via company letters.

McGuireWoods can assist with business continuity planning and advise on documentation for essential personnel as needed.

McGuireWoods has published additional thought leadership related to how companies across various industries can address crucial COVID-19-related business and legal issues.

Anti-Money Laundering, Financial Institution Regulation, Fraud, Deception and False Claims

FinCEN Issues Statement to Financial Institutions on BSA/AML Compliance During COVID-19 Pandemic

The Financial Crimes Enforcement Network (FinCEN) released a statement to financial institutions on March 16, 2020, concerning the COVID-19 pandemic. The statement covered two main topics:

  1. Potential delays by financial institutions in filing required Bank Secrecy Act (BSA) reports
  2. Remaining alert to identify malicious or fraudulent transactions, which often arise during natural disasters

First, FinCEN addressed COVID-19-affected financial institutions that have concern over potential delays in their ability to file required BSA reports. It encourages these institutions to contact both FinCEN and their functional regulator “as soon as practicable” and keep them apprised as circumstances change. The statement directs financial institutions seeking to contact FinCEN to “call FinCEN’s Regulatory Support Section (RSS) at 1-800-949-2732 and select option 6 or e-mail at FRC@fincen.gov.”

Second, FinCEN advised institutions to remain vigilant regarding potential financial fraud, which has arisen in the wake of past natural disasters. It specified the following emerging trends on this front:

  1. Imposter scams, where bad actors impersonate government agencies, international organizations or healthcare organizations to solicit donations, steal personal information and distribute malware.
  2. Investment scams, where opportunistic individuals or companies falsely claim that publicly traded companies’ products or services “can prevent, detect, or cure coronavirus.” See SEC Notice on COVID-19-related investment scams.
  3. Product scams, where companies sell purported health products that are unapproved or unbranded and make claims as to their effect on the coronavirus.
  4. Insider trading related to the COVID-19 pandemic.

FinCEN also directed financial institutions to its prior advisory regarding disaster-related fraud, which discusses other relevant fraud types, including benefits fraud, charities fraud and cyber-related fraud.

Where suspicious transactions involve COVID-19, FinCEN advised individuals preparing suspicious activity reports (SARs) not only to identify the appropriate suspicious activity typologies, but also to enter “COVID19” in Field 2 of the SAR template.

FinCEN did not commit to extending any reporting deadlines. As a result, financial institutions should remain vigilant during this challenging time and develop methods to continue investigating fraud and related alerts in accordance with regulations and company policy. And if any COVID-19-related delays arise, contact FinCEN and functional regulators as soon as possible. A simple call or email now may avoid MRAs, penalties and other regulatory pitfalls later.

For details, see the full text of FinCEN’s release, available online.

McGuireWoods has a COVID-19 response team in place to address client questions that may arise, and firm attorneys will continue to monitor updates and developments from FinCen.

Compliance, Securities and Commodities

COVID-19: Securities Regulators and Industry Associations Issue Coronavirus Guidance and Relief

Update: Our May 21, 2020, alert provides our most recent discussion of information and guidance issued by the SEC, FINRA, MSRB and SIFMA.

As the Coronavirus, or COVID-19, continues to spread, the widespread impact on the markets, trading, firm operations, compliance obligations – every facet of the market, firms, and individuals working in the industry and customers are affected. Securities regulators and industry associations are racing to issue guidance, relief, and information to assist the industry. This post addresses a number of the recent securities regulator announcements, and we will continue to send updates as regulator guidance and relief efforts continue.

Securities & Exchange Commission

The U.S. Securities and Exchange Commission (“SEC”) issued conditional relief in a number of areas affecting funds, advisers, and public companies with respect to meeting their regulatory obligations as they grapple with the impacts of coronavirus.

The SEC issued the relief via  companion Releases, one under the Investment Advisers Act of 1940, as amended, (the “IA Release”), and one under the Investment Company Act of 1940, as amended, (the “ICA Release”), as well as an Order addressing public company filings recognizing the disruption caused by COVID 19 and investor interest in timely corporate information.

Registered Investment Advisers

  • In the IA Release, the SEC provided relief from (1) Form ADV amendment and delivery requirements and (2) Form PF filing requirements until April 30, 2020 to advisers who are unable to meet a filing deadline/delivery requirement as a result of the impact of COVID-19.
  • An adviser relying on the relief must, among other things, provide notice to the Commission via email at IARDLive@sec.gov and provide notice on the adviser’s public website as prescribed in the IA Release.
  • https://www.sec.gov/rules/other/2020/ia-5463.pdf

 

Registered Investment Companies and Business Development Companies

  • In the ICA Release, the SEC provided relief from:
    • Certain in-person board of director voting requirements (until June 15, 2020),
    • Certain Form N-CEN and Form N-PORT filing deadlines (until April 30, 2020),
    • Annual and semi-annual report transmittal deadlines (until April 30, 2020) and
    • Form N-23C-2 filing deadlines following the call or redemption of securities by closed-end funds and business development companies (until June 15, 2020).
  • In order to qualify for the relief, entities must satisfy certain conditions, including that they are unable to comply with the requirements due to the impact of COVID-19.
    • Other conditions include, but are not limited to, ratifying all non-in person votes taken in reliance on the relief at the next in-person meeting and, with respect to the filing relief, provide the specified notice to the Division of Investment Management of the SEC via email at EmergencyRelief@sec.gov.
  • https://www.sec.gov/rules/other/2020/ic-33817.pdf

Public Companies

  • On March 4th, the SEC issued an Order granting an extension to public companies for filing certain reports with the SEC as long as certain conditions are met. See, SEC Provides Conditional Regulatory Relief and Assistance for Companies Affected by the Coronavirus Disease 2019 (COVID-19). https://www.sec.gov/news/press-release/2020-53; and Securities Exchange Act of 1934 Release No. 34-88318 (March 4, 2020). Order under Section 36 of the Securities Exchange Act of 1934 Granting Exemption from Specified Provisions of the Exchange Act and Certain Rules Thereunder. https://www.sec.gov/rules/other/2020/34-88318.pdf
  • The SEC noted that “[t]he 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.”
  • Relief: Subject to specified conditions, publicly traded companies have 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 an 8-K (current report) a summary of why the relief is needed in their particular circumstances.
  • The SEC also granted registrants relief from furnishing proxy statements, annual reports, and other soliciting materials, as applicable, to security holders in areas where, as a result of COVID-19, mail delivery has been suspended, provided, however, that the registrant has made a good faith effort to furnish such soliciting or information materials in accordance with the rules governing the furnishing of such materials.
  • With respect to the substance of the filings, Chairman Clayton provided the following guidance to Companies in the Release:
    • To the fullest extent possible, Companies should provide investors with insight regarding their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus so information on material events is disclosed.
    • Companies should work with audit committees and auditors to ensure that their financial reporting, auditing and review processes are as robust as practicable in light of the circumstances in meeting the applicable requirements.
    • Companies providing forward-looking information to keep investors informed about material developments, including known trends or uncertainties regarding coronavirus, can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act for forward-looking statements.
  • Additionally, on March 13th, the SEC Division of Corporation Finance issued guidance designed to assist companies in complying with the federal proxy rules and shareholder meeting requirements given the public health and safety concerns relating to COVID-19.
    • Among other things, this guidance:
      • Provides that issuers may hold virtual meetings to the extent permitted by applicable state law. The guidance noted that issuers that have not already filed their definitive proxy materials should include clear disclosure and directions regarding such virtual meetings in their proxy materials.
      • Provides that an issuer that has already mailed its definitive proxy materials may notify shareholders of changes in the date, time or location of annual meetings without mailing additional soliciting materials or amending proxy materials provided certain conditions are met, including issuing a press release and filing the announcement as definitive additional soliciting material on EDGAR.
      • Encourages issuers to permit proponents of shareholder proposals to present them through alternative means during the 2020 proxy season.
    • https://www.sec.gov/ocr/staff-guidance-conducting-annual-meetings-light-covid-19-concerns?auHash=zrsDVFen7QmUL6Xou7EIHYov4Y6IfrRTjW3KPSVukQs

Financial Industry Regulatory Authority (“FINRA”)

FINRA has taken a number of steps to provide guidance and relief to the industry.

  • On March 9th, FINRA issued Regulatory Notice 20-08: Business Continuity Planning; Pandemic-Related Business Continuity Planning, Guidance and Regulatory Relief. https://www.finra.org/rules-guidance/notices/20-08
    • The Notice highlights firms’ Business Continuity Plan (“BCPs”) obligations and expectations around implementation in a pandemic situation. (FINRA also refers to Reg. Notice 09-59, which specifically addressed pandemic preparedness.)
    • Other areas addressed in the Notice specifically provide relief in connection with certain compliance obligations, including:
      • Remote Offices or Telework Arrangements
      • Cybersecurity
      • Form U4/Form BR
      • Emergency Office Relocations
      • Communicating with Customers
    • FINRA also highlighted the fact that pandemic emergencies at a firm may impact its ability to timely make regulatory filings (e.g., FOCUS filings, etc.) or timely respond to inquiries or investigations. FINRA noted that, if extra time is needed, firms should contact their Risk Monitoring Analyst or the relevant department seeking the information.
    • Military Personnel: FINRA also discussed the possibility that, in areas where declarations of emergency are declared, some personnel may volunteer or be called to active duty. If that is the case, Rule 1210 (registration) provides specific relief addressing licensing issues.
  • FINRA has created a COVID-19 Resource Site: https://www.finra.org/rules-guidance/key-topics/covid-19, which consolidates the guidance that has been issued to date. As new information is issued by the regulator, this site will be updated. To date, areas covered include:
    • Impact on Membership Application Program
      • Pre-filing meetings and membership interviews for new and continuing membership applications will be conducted via video conference.
      • FINRA will grant a courtesy extension on new or continuing membership applications, if needed.
    • Postponement of In-Person Arbitration & Mediation Hearings
      • FINRA is postponing all in-person arbitration and mediation proceedings scheduled through May 1, 2020.
      • FINRA staff will be contacting the parties to reschedule or discuss remote scheduling options.
      • All other case deadlines continue to apply and must be timely met unless the parties jointly agree otherwise.
    • Extensions for Exam Candidates
      • FINRA will grant a courtesy cancellation of an upcoming exam appointment and/or extend the candidate’s existing enrollment period to take a FINRA exam.

Municipal Securities Rulemaking Board

On March 9th, the MSRB issued MSRB Notice 2020-07: MSRB Reminds Regulated Entities of Application of Supervisory Requirements in Light of Coronavirus to remind firms of their supervision obligations pursuant to MSRB Rules G-27 and G-44, even during the operational challenges and disruption created by the coronavirus.

  • With respect to each of G-27 and G-44, the MSRB noted that in light of the current challenges, supervision does not require in person supervision and that technology “plays a prominent role in how dealers conduct their supervisory reviews and a reasonably designed supervisory system could incorporate remote supervision.”

SIFMA

SIFMA has put together a robust site linking industry and regulatory guidance and announcement. BCP and COVID-19 Resources: https://www.sifma.org/resources/general/bcp/.

  • This site includes, among other things:
    • Cybersecurity and Infrastructure Security Agency (CISA)
    • DTCC: Industry Operations
    • Exchange & CCP Guidance (CBOE, CME Group, ICE/NYSE, Nasdaq, Options Clearing Corp.)
    • Regulator Updates (SEC/FINRA, CFTC/NFA, MSRB, FCA, FFIEC)

We expect regulators will continue to issue new guidance and additional relief. We also anticipate that deadlines in the current relief issued may need to be extended further. We are monitoring the developments and will provide updates to our clients as information becomes available.  Please let us know if you have any questions or if there is anything else we can do to support you during this challenging time.

McGuireWoods’ COVID-19 Response Team helps clients navigate urgent and evolving legal and business issues arising from the novel coronavirus pandemic. Lawyers in our 21 offices are ready to assist quickly on questions involving healthcare, labor and employment, education, real estate and more. For assistance, contact a team member listed or send an email to covid-19@mcguirewoods.com.

Compliance, Energy Enforcement

FERC Directs NERC to Amend its Sanctions Guidelines by July 21, 2020

Entities registered with the North American Electric Reliability Corporation (NERC) to comply with mandatory electric reliability standards (Reliability Standards) or face civil penalties should take note of an order issued by the Federal Energy Regulatory Commission (FERC) on January 23, 2020 in Docket No. RR19-7-000 (January 23 Order).  In the January 23 Order, FERC, which oversees NERC in its role as the Electric Reliability Organization (ERO), ordered NERC to revise and refine its “NERC Sanctions Guidelines” that it uses to assess such penalties. NERC must submit a compliance filing no later than July 21, 2020, proposing amendments to its NERC Rules of Procedure to amend the Sanctions Guidelines consistent with FERC’s directives.

NERC and it Regional Entities have assessed hundreds of penalties every year since the late 2000s when NERC (subject to FERC review) gained enforcement authority over Reliability Standards violations. And, the stakes are potentially high with recent cases including several multi-million dollar fines. From a policy perspective, the importance of NERC penalties has grown with the recent focus of these regulators on cyber-security of the grid and as the NERC “Critical Infrastructure Protection” (CIP) program has matured greatly.  Preventing or mitigating the hacking of the grid is a major focus of both NERC and FERC.

In the July 23 Order, FERC accepted NERC’s “Five-Year Performance Assessment” and found that NERC continues to satisfy the statutory and regulatory requirements for certification as the ERO.  Yet, according to the January 23 Order, the NERC Sanction Guidelines (which are now 14 years old) may not have kept pace with the growth of the overall NERC program. FERC noted that, while it still agrees the guidelines are not to be used as a straightjacket to setting penalties, the thrust of the order is that NERC must add more specificity in how it gets from a fact pattern to a penalty number.  FERC directed NERC “to provide more transparency in th[e] guidelines as to how NERC and the Regional Entities apply the Base Penalty, Adjustment Factors and Non-Monetary Sanctions, and to submit for Commission review any ‘tools or formulae’ used to implement the Sanction Guidelines.” Specifically, NERC is directed to submit a compliance filing revising its Sanction Guidelines to explain how it addresses so-called “aggravating” factors such as:

  • Reliability risk
  • duration of violations
  • size of the entity
  • management involvement
  • repetitive violations
  • any other factors applied to increase a base penalty amount.

In its compliance filing, NERC also has to address how it applies factors that might reduce the penalty, such as:

  • settlement
  • self-reporting
  • admission of a violation
  • internal compliance programs
  • cooperation
  • any other credits used to decrease the base penalty amount.

Additionally, NERC must address whether and/or how non-monetary sanctions will be considered in reaching the final penalty amount; how to deal with multiple subsidiaries of a parent corporation that commit the same violations; how to calculate a single penalty for multiple violations by a single entity; and how NERC and the Regional Entities consider the violator’s financial ability to pay the penalty.

Although these sorts of factors have generally, and for years, been embraced by the existing Sanctions Guidelines, what has been missing up to now is any sort of explanation in NERC’s penalty cases as to how the various factors resulted in the actual penalty.  Moreover, NERC has never explained in general guidance, in any detailed way, how these factors weigh in the determinations.  This has left registered entities (and perhaps FERC itself – which must review and approve these penalties) somewhat mystified as to how various penalties in seemingly similar cases came out in seemingly different ways.  Notably, the factors outlined above bear a striking similarity to the factors outlined in FERC’s own Penalty Guidelines through which FERC assesses penalties in its own enforcement cases.  Indeed, this order may be the result of a judgment by FERC that NERC’s approach should more closely resemble the more formulaic approach used by FERC in assessing civil penalties.

As NERC proceeds with stakeholder processes to develop these new guidelines, registered entities should weigh in through their regular channels into NERC processes. And, when the process comes back to FERC for review in July of 2020, registered entities should monitor and consider participating in the docket and watch closely the developments thereafter. The outcome has the potential to affect NERC enforcement for years to come.

Other “areas for improvement” to be addressed in a separate compliance filing due no later than April 22, 2020 include:  1) information about whether and the extent to which NERC conducted audits of its Regional Entities during the five-year assessment period; 2) NERC’s process for developing and evaluating the success of guidance documents; 3) an explanation of NERC’s relationship with the Electric Information Sharing and Analysis Center (E-ISAC) and the use of E-ISAC metrics.

Compliance, Securities and Commodities

FINRA 2.0: FINRA Releases Its 2020 Risk Monitoring and Examination Priorities

FINRA’s examination program has undergone its most significant reorganization in decades. As stated in a press release, Oct. 1, 2018, FINRA’s goal for the reorganization was to “consolidate its Examination and Risk Monitoring Programs, integrating three separate programs into a single, unified program to drive more effective oversight and greater consistency, eliminate duplication and create a single point of accountability for the examination of firms.” The new look of the examination program was released, along with new management, on Dec. 12, 2019.

FINRA launches its revamped examination program with its release of its 2020 Risk Monitoring and Examination Priorities, issued on January 9th.

In 2020, FINRA is prioritizing risk monitoring, surveillance, and examination programs to further its mission of investor protection and market integrity.  The examination priorities are organized around four themes, which build on FINRA’s priorities from prior years:

  1. Sales practice and supervision;
  2. Market integrity;
  3. Financial management; and
  4. Firm operations.

One significant change in this year’s priorities letter is FINRA’s focus on providing guidance to firms – practical considerations and questions that firms should be focused on as they review their program for compliance with regulatory requirements. In the past, the letters have traditionally been a detailed description of issues and requirements. Providing practical guidance is far more valuable to firms and will aid their compliance efforts.

Sales Practice and Supervision

FINRA will continue to focus on areas it has discussed in previous annual priorities letters, including complex products, variable annuities, private placements, fixed income mark-up/mark-down disclosures, representatives acting in positions of trust or authority, and senior investors.  In addition to these areas, FINRA will evaluate firms’ compliance with obligations related to several new or emerging areas, discussed below.

Regulation Best Interest (Reg BI) and Form CRS

The SEC adopted Reg BI in June 2019, which establishes a “best interest” standard of conduct for broker-dealers.  The SEC also adopted a new form – Form CRS – which requires broker-dealers to provide a brief relationship summary to retail investors.  Firms must comply with Reg BI and Form CRS by June 30, 2020.

During the first half of 2020, FINRA plans to review firms’ preparedness for Reg BI.  After June 30, 2020, FINRA will focus on firms’ compliance with Reg BI, Form CRS, and related SEC guidance.  FINRA will work with the SEC to ensure consistency in evaluating broker-dealers and their associated persons for compliance with Reg BI and Form CRS.  FINRA’s 2020 Risk Monitoring and Examination Priorities Letter includes a list of factors FINRA may consider when reviewing firms for compliance with Reg BI.

Two of the questions posed by FINRA bear particular consideration: (1) Do your firm and your associated persons consider the express new elements of care, skill and costs when making recommendations to retail customers? (2) Do your firm and your associated persons consider reasonably available alternatives to the recommendation?  Both FINRA and the SEC have been explicit in their guidance that the Best Interest standard does not always mean the cheapest option available. That said, cost is a factor and the specific question regarding whether “reasonably available alternatives” will be an important consideration for firms. The regulators will be looking at what alternatives were available to firms to offer their customers and, if a firm chooses not to make those available, it will be important to ensure that there their review, assessment, and determinations are fully documented.

Communications with the Public

FINRA will continue to focus on firms’ compliance with obligations relating to FINRA Rule 2210 (Communications with the Public), as well as related supervisory and recordkeeping requirements.  In 2020, FINRA will expand its focus to private placement retail communications, by reviewing how firms handle retail communications regarding private placement securities via online distribution platforms, as well as traditional channels. As the SEC looks to expand retail access to private placements, firms will need to be vigilant in the manner in which these products are offered to customers.

FINRA will  also continue to focus on the challenges that the increasingly broad array of digital communications (i.e., texting, messaging, social media, or collaboration applications) pose to firms’ ability to comply with obligations related to the review and retention of such communications.

Cash Management and Bank Sweep Programs

FINRA recognizes that as commission practices change, cash management services that sweep investor cash into firms’ affiliated or partner banks or money market funds have taken on a greater significance. Bank Sweep Programs are offering more services to retail investors (such as check-writing, debit cards, and ATM withdrawals.  These added features raise concerns about firms’ compliance with a range of FINRA and SEC rules.  FINRA will therefore focus on firms’ compliance with such rules in the context of Bank Sweep Programs. Further, to the extent that firms benefit from these programs and, with commissions dropping and or going away in some instances, regulatory review of fees involved in providing services will increase, reviewing such areas as conflicts, disclosure, fairness, etc.

Sales of Initial Public Offering (IPO) Shares

In light of the growth of the IPO market over the past year, FINRA will focus on firms’ obligations under FINRA Rules 5130 (Restrictions on the Purchase and Sale of Initial Equity Public Offerings) and 5131 (New Issue Allocations and Distributions).

Trading Authorization

This year, FINRA will also focus on whether firms maintain reasonable supervisory systems relating to trading authorization, discretionary accounts, and key transaction descriptors.  It will review whether these supervisory systems are designed to detect and address registered representatives exercising discretion without written authorization from the client.

Market Integrity

FINRA will continue to review compliance with the ongoing obligations related to market manipulation, Trade Report and Compliance Engine (TRACE) reporting, short sales, and short tenders.  Certain firms will be required to begin reporting to the Consolidated Audit Trail (CAT) in April 2020, and that FINRA will work with those firms as they prepare for reporting.  The FINRA Letter reminds firms to continue devoting resources to ensure accuracy in their Order Audit Trail System (OATS) reporting, because OATS remains a critical part of the audit trail data that FINRA uses to meet its regulatory obligations.

In 2020, FINRA expects to focus on the following additional areas to promote market integrity:

  1. Direct market access controls;
  2. Best execution;
  3. Disclosure of order routing information; and
  4. Vendor display rule.

Financial Management

Firms can expect FINRA to continue its focus on compliance programs relating to Exchange Act Rule 15c3-3 (Customer Protection Rule) and Exchange Act Rule 15c3-1 (Net Capital Rule), as well as firms’ overall financial risk management programs.  FINRA has identified the following new areas of focus for 2020:

  1. Digital assets;
  2. Liquidity management;
  3. Contractual commitment arising from underwriting activities; and
  4. London Interbank Offered Rate (LIBOR) transition.

Firm Operations

As firms increasingly rely on technology for business systems and customer-facing activities, cybersecurity has become a large operational risk.  As such, FINRA will focus on cybersecurity and technology governance in 2020.  Specifically, firms should expect FINRA to assess whether their policies and procedures are designed to protect customer information and whether they are implementing controls appropriate to their business model and scale of operations.  FINRA will also ensure firms’ compliance with FINRA Rules 4370 (Business Continuity Plans and Emergency Contact Information), 3110 (Supervision), and 4511 (General Requirements), as well as Exchange Act Rules 17a-3 and 17a-4.

In terms of technology governance, it continues to be important for firms to ensure that all of the right stakeholders are at the table when new technology is being implemented or current technology modified. Often technological solutions are implemented to address an issue and there are unintended consequences creating regulatory gaps. Having compliance and risk at the table as these decisions are being made can often go a long way to mitigating that risk.

Conclusion

FINRA’s examination priorities for 2020 will largely follow prior focus areas, emphasizing firms’ compliance in important areas such as systems for supervision, sales practice risks, anti-money laundering and fraud, insider trading, and manipulation across markets and products.  New this year is an emphasis on Reg BI and Form CRS, as well as issues related to communications with the public, cash management and bank sweep programs, direct market access controls, best execution, disclosure of order routing information, and cybersecurity.

To support firms in their efforts to comply with federal securities laws and regulations, as well as FINRA rules, the 2020 Risk Monitoring and Examination Priorities Letter includes a list of practical considerations and questions for each topic, which may be helpful to firms in evaluating the state of their compliance, supervisory, and risk management programs.

 

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