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THE LATEST ON GOVERNMENT INQUIRIES AND ENFORCEMENT ACTIONS

Government Investigations and White Collar Litigation Group

Government Investigations Group

Photo of Government Investigations Group Government investigations and related enforcement actions and litigation can take many forms, but they have one element in common: They require seasoned counsel to help clients navigate these difficult situations when their businesses and reputations are on the line. McGuireWoods’ national Government Investigations & White Collar Litigation Department has the experience and credibility clients have come to trust with their most sensitive matters.

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Ready or Not, Prepare to Start Answering Questions About Reg BI Compliance

Financial Institution Regulation
On June 5, 2019, the SEC adopted Regulation Best Interest (“Reg BI”), which requires broker-dealers and associated persons to make recommendations regarding securities transactions (or investments involving securities) that are in the “best interest” of their retail clients. The SEC also adopted Form CRS, requiring broker-dealers and investment advisers to provide a brief relationship summary… Continue Reading

The More Things Change, the More They Stay the Same –Joint Statement by FINRA and the SEC on the Customer Protection Rule and Digital Asset Securities

Financial Institution Regulation, Securities and Commodities
On Monday, July 8th, FINRA and the SEC took the unusual step of issuing a joint statement on broker-dealer custody of digital asset securities. In doing so, the Staffs of the SEC’s Division of Trading and Markets and of FINRA’s Office of General Counsel made clear that the SEC and FINRA will continue to apply… Continue Reading

SEC Adopts Regulation Best Interest

Financial Institution Regulation
On June 5, 2019, the Securities and Exchange Commission adopted, by a 3-1 vote, Regulation Best Interest (“Reg BI”) which, in the words of Chairman Clayton, would “substantially enhance the broker-dealer standard of conduct beyond existing suitability obligations.” The Chairman also noted: “the standard of conduct draws from key fiduciary principles and cannot be satisfied… Continue Reading

North American Securities Administrators Association (NASAA) Releases Model Cybersecurity Rule

Compliance
On May 21, the North American Securities Administrators Association (NASAA)—an organization comprised of 67 securities regulators within the United States (all fifty states as well as districts and territories), Canada, and Mexico—released a model cybersecurity rule package governing state-registered investment advisors’ cybersecurity and privacy practices.  The model rule package, which would need to be adopted… Continue Reading

D.C. Circuit Vacates SEC Sanctions, Says Negligent Omissions Are Not ‘Willful’ Under Advisers Act

Securities and Commodities
On April 30, the U.S. Circuit Court of Appeals for the District of Columbia Circuit vacated a Securities and Exchange Commission order imposing sanctions. The court held that an investment advisory firm and its owners did not violate Section 207 of the Investment Advisers Act of 1930, 15 U.S.C. § 80b-7, by negligently omitting material facts from the… Continue Reading

Suspicious Activity Monitoring and Reporting – FINRA Issues Notice Consolidating Governmental and Regulatory “Red Flag” Guidance

Anti-Money Laundering, Enforcement and Prosecution Policy and Trends, Financial Institution Regulation
Enforcement actions sanctioning firms and, in a few cases, individuals for failing to investigate and report suspicious activity have been significantly on the rise. SEC, FinCEN, FINRA, and others have been active in this area, particularly with regard to trading at, by, or through the financial institution.  One critical component of a financial institution’s ability… Continue Reading

SEC OCIE Highlights Potential Deficiencies in Firm Privacy Policies

Securities and Commodities
On April 16, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert highlighting Regulation S-P compliance deficiencies and issues it found in recent examinations of broker-dealers and investment advisers. Regulation S-P is the primary SEC rule detailing the safeguards these firms must take to protect customer privacy. The Risk Alert provides… Continue Reading

Recent New Jersey Rule Proposal Progresses State Efforts to Impose Fiduciary Duties on Brokers

Financial Institution Regulation, Securities and Commodities
On April 15, the New Jersey Bureau of Securities (the “Bureau”) issued a rule proposal to establish a uniform fiduciary duty standard applicable to investment advisers, brokers-dealers and their registered representatives and agents.  Specifically, the proposed rule (N.J.A.C. 13:47A-6.4), which could take effect as early as the end of the year, will require all investment… Continue Reading

Key Lessons for Colleges and Universities from Operation Varsity Blues

Enforcement and Prosecution Policy and Trends, Fraud, Deception and False Claims
On March 12, 2019, the United States Attorney’s Office for the District of Massachusetts announced federal criminal charges in “Operation Varsity Blues,” the largest college admissions case ever prosecuted by the Department of Justice. Fifty people have been charged for their involvement in what prosecutors describe as a nationwide conspiracy to get the children of… Continue Reading

What the Venezuela Sanctions May Mean for Future Sanctions Programs

Sanctions, Trade Embargo, and Export Controls
When the Trump Administration designated Venezuelan state-owned oil producer Petreoleos de Venezuela (“PdVSA”) on January 28, 2019, pursuant to preexisting sanctions relating to the political situation created by the Maduro regime, it sent a significant but not unanticipated ripple through the global petroleum markets.  The impact of the sanctions for commodities traders and petroleum refiners—particularly… Continue Reading

SEC Charges Its First Robo Actions – Increasing Scrutiny of the Investment Platform

Enforcement and Prosecution Policy and Trends, Financial Institution Regulation, Securities and Commodities
It was never a question of if, but rather, when the Securities and Exchange Commission would launch its first charges against robo-advisors and what those charges would be. Following then-SEC Chairperson, Mary Jo White’s keynote address at the SEC-Rock Center on Corporate Governance in 2016, regulators have been carefully monitoring robo-advisors’ compliance with the Investment… Continue Reading

FINRA’s 2018 Report on Cybersecurity Practices – Preventing “Spear Phishing” and “Whaling” Attacks

Financial Institution Regulation
This article was originally posted on our sister publication, Password Protected. On December 20, 2018, the Financial Industry Regulatory Authority (FINRA) released a report on cybersecurity practices for broker-dealers. Today’s post is the second in a series of summaries sharing essential, timely insight on how these practices impact your business. Please click here for the… Continue Reading

Congressional Investigations: Beyond Sensational Headlines — Incoming House Leaders Announce Broad Investigative Priorities Targeting Business Community

Election and Political Law, Enforcement and Prosecution Policy and Trends
In the politically explosive atmosphere of Washington, the talk of the town is focused on congressional investigations: who will be called before Congress, and when. Newspaper headlines blare the latest controversy — from use of personal emails for government business, to numerous investigations alleging corruption of current and former government employees, including several cabinet secretaries,… Continue Reading

CFPB Signals Potential for Fair Lending Rulemaking

Financial Institution Regulation
This post recently appeared in our sister publication, Consumer FinSights. In its recently published Fall 2018 Rulemaking Agenda, the Bureau of Consumer Financial Protection announced that it is considering future rulemaking activity regarding the requirements of the Equal Credit Opportunity Act (“ECOA”) – specifically, “concerning the disparate impact doctrine in light of recent Supreme Court… Continue Reading

Mulvaney’s First New Enforcement Action Continues Focus on Asset-Advance Firms

Enforcement and Prosecution Policy and Trends
In the latest sign of regulatory scrutiny of asset-advance companies offering consumers what regulators believe are in fact regulated “credit” under federal law and “loans” under state law, the Bureau of Consumer Financial Protection (BCFP) filed its first new lawsuit under Acting Director Mulvaney last Thursday. The complaint, filed in the Central District of California,… Continue Reading

Second Circuit Clarifies Limits of FCPA’s Extraterritorial Reach

Enforcement and Prosecution Policy and Trends
The U.S. Court of Appeals for the Second Circuit narrowed the reach of the Foreign Corrupt Practices Act (“FCPA” or “the Act”) in ruling that the government cannot use aiding and abetting or conspiracy statutes to charge a defendant with violating the FCPA if the defendant is not in the category of persons directly covered… Continue Reading

Implications of Judge Kavanaugh’s Nomination for Criminal Sentencing

Enforcement and Prosecution Policy and Trends
Imagine an individual who is convicted of fraudulently obtaining $5,000 but simultaneously acquitted by a jury of conspiring to fraudulently obtain $1 million. Yet at sentencing, the court bases its sentence of the defendant not on the $5,000 fraud of which he was convicted but on the $1 million conspiracy for which the judge finds… Continue Reading

Supreme Court Narrows Ability to Recover Internal Investigation Costs

Enforcement and Prosecution Policy and Trends
In January, this blog previewed the Supreme Court’s grant of certiorari in Lagos v. United States to resolve a circuit split regarding whether companies could recover costs of internal investigations under the Mandatory Victims Restitution Act (MVRA). At the end of May, the Court issued a unanimous opinion sharply curtailing the ability to recover such… Continue Reading

State Regulators Announce Cryptocurrency Crackdown

Enforcement and Prosecution Policy and Trends
On May 21, the North American Securities Administrators Association (“NASAA”) announced a massive and coordinated series of enforcement actions by U.S. state and Canadian provincial regulators to combat fraudulent practices involving cryptocurrency-related investment products. As cryptocurrencies have gained in popularity, companies have increasingly turned to a method known as an initial coin offering (“ICO”) to… Continue Reading

No Changes to CFPB This Year

Enforcement and Prosecution Policy and Trends, Financial Institution Regulation
In a statement on Thursday, April 26, a key House Republican on CFPB issues effectively admitted that despite his own efforts and those of the Trump Administration including Acting CFPB Director, Mick Mulvaney, Congress will almost certainly make no changes to the structure of the CFPB this year.  As a result, there will probably be… Continue Reading

Senate Votes to Strike Down Key CFPB Bulletin on Lending Discrimination in the Indirect Auto Market

Enforcement and Prosecution Policy and Trends, Financial Institution Regulation
On Wednesday, the U.S. Senate voted almost entirely along party lines to invalidate, under the Congressional Review Act, the Consumer Financial Protection Bureau’s (CFPB) (in)famous 2013 Bulletin on lending discrimination in the indirect auto market via discretionary mark-ups and dealer compensation policies.  The 2013 Bulletin, construing the Equal Credit Opportunity Act and its implementing rule,… Continue Reading

Supreme Court Holds DOJ’s Feet to the Fire in Tax Crime Case

Enforcement and Prosecution Policy and Trends
In Marinello v. United States, an opinion released yesterday, the Supreme Court adopted a narrowing interpretation of the tax code’s broadest criminal provision, the “tax obstruction” statute 26 U.S.C. § 7212(a).  The Court’s opinion is good news for taxpayers, their advisors, and the sound administration of the law. Marinello concerned whether the crime of “corruptly… Continue Reading

“White Hat” Ethical Hackers and Corporate Investigations

Fraud, Deception and False Claims
This post originally appeared in our sister publication, Password Protected. A “white hat” is an ethical computer hacker who specializes in penetration testing and other testing methodologies to ensure the security of an organization’s information systems. According to the Ethical Hacking Council, “The goal of the ethical hacker is to help the organization take pre-emptive measures against malicious… Continue Reading

SEC Launches Self-Reporting Initiative for Investment Advisers

Enforcement and Prosecution Policy and Trends
In line with Chairman Jay Clayton’s oft-stated priority of protecting the long-term interests of Main Street investors, on Feb. 12, 2018, the Securities and Exchange Commission’s Division of Enforcement announced the launch of a new self-reporting initiative for investment advisers. This new initiative — the Share Class Selection Disclosure Initiative — aims to address undisclosed… Continue Reading

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