Subject to Inquiry

Subject to Inquiry


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

The DFARS Rule on Covered Telecommunications Equipment or Services Is Final

The Department of Defense (DoD) issued a final rule on Covered Telecommunications Equipment or Services that implements Section 1656 of the National Defense Authorization Act for Fiscal Year 2018 (Pub. L. 115-91). To read more of our analysis, please click here.

Anti-Money Laundering, Enforcement and Prosecution Policy and Trends

The Brexit Deal; UK Crime Fighting with European Friends

Since Brexit, the relationship between the European Union (EU) and the UK concerning law enforcement cooperation is now governed by the UK-EU Trade and Cooperation Agreement (the Agreement).

The UK Government state that the safety and security of British citizens is a top priority.  It argues that the Agreement provides a comprehensive package of operational capabilities that will help protect the public and bring criminals to justice.

Meanwhile critics say the new arrangements fall far below that which the UK enjoyed as a member of the EU.  In particular access to ‘real time’ information sharing systems which is a major blow to UK law enforcement agencies.  They say that detection of crime will be slower and more cumbersome.

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Securities and Commodities

Congress Affirms and Extends SEC’s Disgorgement Powers

On January 1, 2021, the United States Senate joined the House of Representatives in overriding President Trump’s veto, and the National Defense Authorization Act (NDAA) became law. The NDAA was passed chiefly to authorize appropriations for military activities of the Department of Defense. The NDAA also includes a provision codifying the U.S. Securities and Exchange Commission’s (SEC) authority to seek in federal court actions disgorgement up to five years after the occurrence of securities laws violations, and expands that authority to ten years where those violations involve scienter-based (intentional) fraud. The new law resolves the much debated issues regarding the SEC’s disgorgement authority and the extended period during which the SEC now may seek disgorgement will have an immediate, significant impact on individuals and entities involved in SEC investigations and litigation.

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Financial Institution Regulation

FinCEN Director Blanco Comments on Section 314(b)’s New Guidance

On December 10, 2020, FinCEN Director Kenneth Blanco delivered prepared remarks at the ABA’s annual Financial Crimes Enforcement Conference. At the outset, Director Blanco addressed the importance of U.S. national security amidst the unprecedented environment created by the COVID-19 pandemic. In his remarks, Director Blanco announced “important guidance” and “much needed clarity” concerning FinCEN’s voluntary Section 314(b) information sharing program.

Section 314(b) of the USA PATRIOT Act provides financial institutions safe harbor from civil liability when sharing with another financial institution information regarding customers suspected of possible terrorist financing or money laundering activities. 31 C.F.R. § 1010.540(b)(1). Financial institutions share information under this provision to facilitate investigations of suspicious activity and assist in preparing more complete Suspicious Activity Reports (“SARs”).

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Compliance, Enforcement and Prosecution Policy and Trends

New Due Process Protection Act Amends Criminal Rule 5, May Strengthen Defendants’ Brady Rights

A new law will require all federal judges to enter an order at the beginning of every criminal case advising prosecutors of their duties under Brady v. Maryland, 373 U.S. 83 (1963) to disclose exculpatory evidence to the defense. Intentional violations of the orders could subject prosecutors to stern sanctions – up to and including vacating a conviction or disciplinary action against the prosecutor – or even contempt.

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

Another Cop on the Beat? CFP Board Signals Increased Enforcement Focus

Financial advisors have long used the Certified Financial Planner designation as an indicator to potential clients that they meet high standards of professionalism and ethics within their field.  The Certified Financial Planner Board of Standards, Inc. (the “CFP Board”), which grants the designation, markets it as demonstrating that its holder meets strict ethical standards.  Yet last year the CFP Board came under heavy criticism when investigative reporting showed a not insignificant number of CFP holders failed to disclose potential ethical violations, which resulted in incomplete or inaccurate information on the CFP Board’s website.  This criticism had a major impact:  the CFP Board revised its ethics code, revamped its disciplinary procedures, and is now signaling an increased focus on enforcing its standards.  As a result, financial advisors who previously did not face substantial scrutiny from the CFP Board may soon find themselves the focus of an enforcement regime eager to show its teeth.

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Compliance, Securities and Commodities

Pitfalls to Avoid in Investment Adviser Compliance Programs: SEC OCIE Risk Alert

On November 19, 2020, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a risk alert, OCIE Observations: Investment Adviser Compliance Programs, to provide the industry with insights regarding their findings in their examinations relating to Rule 206(4)-7 under the Investment Advisers Act of 1940 (“Advisers Act”) or the Compliance Rule.
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Compliance, Financial Institution Regulation, Securities and Commodities, Uncategorized

OCIE Finds Supervision Failures at Multiple-Branch Office Investment Advisers

On November 9, 2020, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) announced the results of its examination of nearly 40 SEC-registered investment advisers that operate multiple branch offices (the “Risk Alert”). Most of the firms examined conducted their advisory business out of at least 10 branch offices. OCIE observed a wide range of deficiencies across the advisers it examined, largely stemming from failures to implement policies and procedures designed to ensure compliance with the Advisers Act at branch offices. The Risk Alert serves as a warning, and reminder, to firms operating multiple branches of the need for careful attention to the unique risks posed by this model.

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Financial Institution Regulation, Securities and Commodities, Uncategorized

Yet Another Mutual Fund Fee Issue or “Death by a Thousand Cuts”: FINRA Sweep of Rights of Reinstatement Waivers

What is the Issue?

It may not be “death by a thousand cuts” but it may feel like it, as yet another mutual fund fee issue is being raised by the regulators. FINRA issued a “targeted examination letter” focused on Rights of Reinstatement (“RoR”) due to customers in certain mutual fund sales and purchases. RoRs involve fee waivers or rebates due to customers who redeem or sell shares in a fund and subsequently reinvest some or all of the proceeds from the sale/redemption in the same share class of that fund or another fund within the same fund family subject to stated terms and conditions. Interestingly, the time period between the sale/redemption and subsequent purchase of qualifying shares is determined by the fund issuers and described in the prospectuses or statement of additional information (“SAI”) and can vary from 90 days to 120 days, but can be as long as 365 days.[1] The waivers or rebates may involve a front-end sales charge waiver (often, but not always, involving A shares) or a rebate of all or part of a contingent deferred sales charge fee (“CDSC”) (for example, with C share transactions).

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FCA Bans Three People From Working in Financial Services Industry, for Non-Financial Misconduct

On 5 November, the Financial Conduct Authority, the UK’s financial services regulator, permanently banned three men convicted of non-financial criminal offences from ever working in the financial services industry, on the basis that they do not meet criteria defining a fit and proper person.

For details about this latest development and implications for the industry, please see our alert.

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