We have refreshed our website! Check out our new look at


A few months ago, the Forum for US Securities Lawyers in London started to produce a monthly US Securities Law Digest. These monthly updates are intended to provide a compilation of recent legal news relevant to a capital markets practice in the London and international markets. The news pieces have been collected and summarized from various sources, and links to the original sources are provided.

We continue to welcome any feedback that you may have about the monthly Digest.


Daniel Winterfeldt
Head of International Capital Markets
CMS Cameron McKenna LLP
Founder and Co-Chair of the Forum

Ed Bibko
Baker & McKenzie LLP
Co-Chair of the Forum


What brokers need to know about receiving cash fees

The Securities and Exchange Commission’s (the “SEC”) Division of Investment Management allowed a sanctioned broker-dealer official to be paid a cash solicitation fee from an RIA.

See the full article here.

The SEC Staff allowed the cash fees because the sanctioned official was not engaged in cash solicitation activities in his individual capacity. The SEC Staff granted the relief noting the firm will conduct any cash solicitation arrangement in compliance with Rule 206(4)-3 of the Investment Advisors Act of 1940, and will comply with the terms of the administrative order for 10 years. This broker has to follow the SEC rules to permit this individual to receive cash fees, any other approach would be a serious violation.

See the Securities Compliance Sentinel article here.

Corporate governance trends for 2013

Entering 2013, companies find themselves in a climate of uncertainty, highlighted by precarious debt crises (both at home and abroad), socio-political unrest in various regions around the globe, and unpredictable economic growth. While difficult to predict the full impact of these and other external pressures, Proskauer Rose has highlighted certain key issues trending in corporate governance that private investment funds and the boards of directors of their portfolio companies should be aware of in planning for 2013 and beyond.

See the Proskauer Rose update here.

Due diligence guidance to avoid Foreign Corrupt Practices Act issues in acquisitions and investments

In November 2012 the Criminal Division of the U.S. Department of Justice (the “DOJ”) and the Enforcement Division of the SEC released "A Resource Guide" clarifying, among other things, their approach to successor liability under the Foreign Corrupt Practices Act (the “FCPA”) in the mergers and acquisitions context. (See

The Resource Guide provides helpful guidance on the due diligence procedures acquirers can conduct to better evaluate potential post-acquisition liability of, and minimize the likelihood of a criminal or civil enforcement action being filed against, an acquired entity or the acquirer (under the theory of successor liability), in connection with violations of the FCPA.

See the Proskauer Rose article here.

U.S. authorities continue to target foreign bribery, issue guidance for compliance

On December 17, 2012, the SEC charged Allianz SE with violating the FCPA by making improper payments to Indonesian government officials between 2001 and 2008. According to the SEC, Allianz SE, a German based insurance and asset management company, made over $5m in profits from 295 insurance contracts obtained or retained through improper payments made by Allianz’s Indonesian subsidiary. The company has agreed to pay more than $12.3m to settle the SEC’s charges.

See the full Mishcon de Reya article here.

Ten Hallmarks of Effective Compliance Programs for Asia Pacific Companies

The Asia Pacific region remained a hotspot for US anti-corruption enforcement authorities in 2012. Six of the twelve corporate FCPA settlement agreements in the past year involved business operations in that region. In addition to these six resolutions, we include some prosecutions against individuals which confirm the enforcement focus on the decision makers who authorize bribery.

See the Clifford Chance article here.

The cutting edge of anti-corruption compliance: proactive audits

The FCPA world is fast-becoming the leader in new compliance strategies. The Justice Department and the SEC have embraced the requirement for conducting “proactive audits.”

Recent settlements have included new compliance program requirements for a company to conduct proactive audits of high-risk areas. It is a new and growing area for anti-corruption compliance.

The concept of a “proactive” audit, however, is nothing new. The strategy has been employed for years in other contexts but now has gained traction in the anti-corruption area.

See the Corruption, Crime & Compliance blog entry here.

10b5-1 plans making headlines

Rule 10b5-1 trading plans, and those using them, are making headlines. A Rule 10b5-1 trading plan is a written plan for buying or selling securities meeting the requirements of Exchange Act Rule 10b5-1(c). A properly adopted and implemented Rule 10b5-1 trading plan provides an affirmative defense against accusations of insider trading and allows the purchases and sales of securities even when the person using the plan is aware of material nonpublic information.

See the Blank Rome article here and the Davis Polk article here.

FCPA resource guide released by SEC and DOJ consistent with previous guidance

On December 28, 2012, the Council of Institutional Investors (“CII”) submitted a letter to the SEC requesting that the SEC implement rulemaking to impose new requirements with respect to Rule 10b5-1 trading plans.

See the Executive Compensation Law blog article here.

FINRA issues voluntary interim form to gather information from crowdfunding portals

On January 10, 2013, FINRA issued a voluntary Interim Form for Funding Portals (the “Interim Form”) for the purpose of gathering information from prospective crowdfunding portals under the Jumpstart our Business Startups Act (the “JOBS Act”). The JOBS Act, which was signed into law by President Obama on April 5, 2012, provides, in part, for an exemption from the registration requirements of the Securities Act of 1933 for certain entities that intend to act as funding portals pursuant to the JOBS Act. In order to develop rules specific to crowdfunding, FINRA has created the Interim Form which solicits certain information from prospective funding portals, including information about their ownership, funding, management, business relationships and compensation. In addition, FINRA has asked prospective funding portals to supplement the Interim Form with any additional information that would be helpful to FINRA’s development of crowdfunding rules under the JOBS Act. Once FINRA and the SEC have adopted final rules related to crowdfunding under the JOBS Act, FINRA will issue a final funding portal application.

See the Herrick Feinstein article here.

Internet crowdfunding websites spike although there are no rules

An intriguing phenomenon has occurred. Regulators have recently noticed that there is a sharp rise in Internet crowdfunding sites.

Ironically, the SEC still has not promulgated rules for allowing small businesses to raise capital online. The SEC believes that those rules are months away. Nonetheless, regulators estimate that there are almost 9,000 websites already dedicated to crowdfunding.

See the Securities Compliance Sentinel article here.

Equity crowdfunding — just a myth or a someday reality?

New Year's Eve came and went the same as it does every year. Some partied. Some slept. For all it was the end of one year and the beginning of another. But for those of us who are paying a lot of attention to the world of equity crowdfunding, December 31, 2012, represented an important date.

The JOBS Act was enacted by Congress and signed into law by the President on April 5, 2012. The legislation requires the SEC to issue final regulations regarding the crowdfunding portion of the JOBS Act within 270 days of the law's enactment. That date was December 31, 2012. The legislation further provides that equity crowdfunding is illegal until final regulations are issued by the SEC. The SEC missed this deadline and isn't even close to issuing final regulations to allow crowdfunding to become legal.

See the Fox Rothschild article here.

Can’t I let non-accredited investors in my 506 round?

Crowdfunding is not yet legal, but the crowd is getting anxious. I was recently pressed by someone, “Can’t I let a non-accredited investor in my 506 round? The rule says that I can have 35 non-accrediteds in my round.”

While it is true that Rule 506 says you can have up to 35 non-accredited investor in your round, it goes on to say that if you allow even one non-accredited investor in your round you have to comply with very detailed and comprehensive disclosure obligations. In contrast, if you are raising money from only accredited investors, there are no specific disclosure obligations required.

See the Start-up Law blog entry here.

I (still) got them 8210 blues

Almost two years ago, Alan Wolper of Ulmer Berne wrote an article discussing the Financial Industry Regulatory Authority’s (“FINRA”) seemingly tireless efforts to expand the scope of Rule 8210 beyond the clear bounds as established by the language of the rule itself. In particular, the problem on which Wolper focused was FINRA’s increasing use of Rule 8210 to request documents seemingly outside its jurisdiction because the documents at issue were created and possessed by non-member entities, albeit entities which typically had some affiliation, e.g., common ownership, with a member firm. (Remember, Rule 8210 applies only to member firms and individuals associated with such firms, but not to anyone else.) Recognizing its problem, FINRA began to employ the tactic of directing the 8210 requests not to the non-member entities themselves, but, rather, to associated persons of member firms who also happened to own or manage the non-member, insisting that the non-member’s documents were, therefore, somehow within the “possession, custody or control” of the associated person.

See the Ulmer Berne article here.

FINRA announces regulatory and examination priorities for 2013

At the beginning of each year, FINRA announces its regulatory and examination priorities for the year. The priorities are based on FINRA’s current assessment of both investor protection needs and market issues.

See the Foley & Lardner update here.

BrokerCheck requirement proposed

On January 18th, 2013, the SEC provided notice of FINRA’s filing of a proposed amendment to FINRA Rule 2267 (Investor Education and Protection). The amendment would require members to include a prominent description of and link to FINRA BrokerCheck on their websites, social media pages, and any comparable internet presence.

See the Winston & Strawn article here.

FINRA proposal requires disclosure of enhanced compensation

Continuing ongoing efforts to address conflicts of interest in the financial services industry, FINRA requested comments on a Proposed Rule requiring disclosure of conflicts of interest relating to recruitment compensation practices. The Proposed Rule addresses concerns that recruitment incentives could motivate financial advisors to churn customer accounts and to make unsuitable investment recommendations.

See the Morrison & Foerster update here.

Goldman Sachs seeks restitution from former board member convicted of insider tradingAfter spending close to $7 million in costs and $35 million in attorneys’ fees to unsuccessfully defend a director on its board accused of insider trading, Goldman Sachs has indicated that it intends to seek restitution of these advances. The new charges arise out of the insider trading conviction of Rajat Gupta for sharing confidential bank financial information with a former friend who founded and operates a hedge fund.

See the Sedgwick article here.

SEC charges market professional with insider trading The SEC filed insider trading charges against a registered representative employed in the Florida office of a broker. At the same time the U.S. Attorney for the District of New Jersey filed parallel criminal charges. SEC v. Dowd, Civil Action No. 3:13-cv-00494 (D. N.J.); U.S. v. Dowd (D.N.J.).

See the SEC Actions blog report here.

Court holds that nonconvertible securities with different voting rights not matchable under Section 16(b)In January 2013, in Gibbons v. Malone, the Second Circuit affirmed the lower court's dismissal of a shareholder suit brought under Section 16(b) of the Securities and Exchange Act of 1934 against a former director of Discovery Communications, Inc. Also known as the short swing profit rule, Section 16(b) provides for the disgorgement of any profits earned from the purchase and sale, or sale and purchase, by a corporate insider, of any equity security within a six-month period. In Gibbons, the corporate insider sold Series C common stock, which had no voting rights, and purchased Series A common stock which had voting rights, within a six-month period. The three-judge panel held that absent SEC guidance, the purchase and sale of different types of stock in the same company, where those securities are separately traded, nonconvertible, and come with different voting rights cannot be matched, and therefore do not trigger the short swing profit rule.

See the Gibson Dunn article here.

Insider trading enforcement and deterrenceIt is hard to know whether the government’s aggressive enforcement of insider trading laws deters criminals from violating securities laws. One key factor in this equation is the risk of getting caught. The Obama Administration can certainly point to an increase in enforcement – civil and criminal. Judges have been handing out stiff sentences for insider trading.

The 1980’s were the so-called glory years of insider trading enforcement with the prosecutions of Ivan Boesky and Michael Milken. The current decade has been another highwater era of enforcement. Traditionally, most insider trader cases were brought in the Southern District of New York. That has continued but federal prosecutors in other districts across the country are bringing more criminal insider trading cases than in the past.

See the Corruption, Crime & Compliance blog entry here.

New form of due diligence: relationships with compensation consultantsDue to recent SEC rulemaking, conflicts of interest with compensation consultants are at the forefront of disclosure issues in 2013 proxy season. The SEC added paragraph (e)(3)(iv) to Item 407 of Regulation S-K concerning issuers’ use of compensation consultants and related conflicts of interest to implement Section 952 of the Dodd-Frank Act. New Item 407(e)(3)(iv) disclosure, which should be addressed in any proxy or information statement for a meeting of shareholders at which directors will be elected occurring on or after January 1, 2013, expands disclosures related to compensation consultants.

See the Blank Rome update here.

Common disclosure flawsIn the 2012 proxy season, executive compensation disclosure continued to be an area of focus for the SEC staff. As such, the SEC staff issued numerous comments seeking additional information and disclosure about such matters as performance targets and the use of benchmarking and peer groups in compensation decision making, as well as clarifications with respect to summary compensation tables.

See the Blank Rome update here.

A checklist to comply with the new NASDAQ compensation committee independence rulesThe SEC has approved Nasdaq’s compensation committee independence rules. By July 1, 2013, most listed issuers must comply with these rules.

See the blog entry here.

Another “cherry-picking” enforcement action brought by the SECIn the December 2012 edition of the Foley and Lardner Investment Management Update, it was reported that an SEC enforcement matter was ongoing regarding a hedge fund manager who “cherry picked” investments over the interests of its clients. This past month, the SEC settled an enforcement matter (In the Matter of Middlecove Capital, LLC and Noah L. Myers, Investment Advisers Act of 1940 Release No. 3534 January 16, 2013), which included similar allegations against a Connecticut-based investment advisory firm and its principal owner and chief investment officer.

See the Foley & Lardner update here.

Insurance companies take steps to reduce their risks under guarantees in outstanding variable contractsThe 2008-2009 financial crisis, ongoing market volatility and persistently low interest rates have significantly increased the risks and costs to insurance companies of the lifetime income guarantee provisions in their variable annuity contracts. Insurance companies have responded in a number of ways. Some have exited the variable annuity market altogether. Others have redesigned the products they offer by reducing guarantee rates, increasing fees, limiting available investment options and/or tightening asset allocation programs.

See the Drinker Biddle & Reath update here.

New year's resolutions – annual filing obligations and compliance matters for private fund managersAs the new year begins, private fund managers should take some time to consider various action items that are potentially applicable to private fund managers, some of which may be new for many managers in 2013.

See the Proskauer Rose article here.

SEC previews hedge fund enforcement trends for 2013Not to be outdone by FINRA (see article above), the SEC often uses the first of the year to announce its priorities for examinations to be conducted within the investment management sector for the upcoming year. In a recent presentation by Bruce Karpati, Chief of the SEC’s Enforcement Division’s Asset Management Unit (“AMU”) set out the priority areas for AMU’s enforcement and inspection agenda for 2013.

See the Foley & Lardner update here.

Mary Jo White as SEC ChairmanPresident Obama’s recent naming of Mary Jo White to be Chairman of the SEC has been greeted with praise from almost all quarters. But because she is best known for her highly successful tenure as a federal prosecutor, in response to the news of her current appointment, some have raised questions about, as the New York Times put it, her “command of Wall Street arcana” because “[r]egulatory chiefs are often market experts or academics.”

See the Forbes article here.

The SEC continues to focus on investment fraud schemesAn analysis of the SEC’s case load demonstrates that actions involving offering and investment fund fraud have declined in the last two years compared to the immediate aftermath of the Madoff debacle. Nevertheless, these cases have become a staple of the SEC’s enforcement program.

Two new investment fund fraud cases were filed in January. The first is an affinity fraud action targeting the Lebanese and Druze communities in a Texas local. SEC v. Hamdan, Case No. 4:13:00215 (S.D. Tx. Filed Jan. 29, 2013). Mr. Hamdan is, according to the complaint, well known in the Lebanese and Druze communities in the Houston area. He served as the treasurer of the Houston branch of the American Druze Society, a non-profit cultural organization to which many area members of the Druze religion belong. Mr. Hamdan also developed a reputation as a successful day trader. That, coupled with his standing in the community, became the predicate for his scheme.

See the SEC Actions blog article here.

Proxy season preparation for 2013The 2013 proxy season brings with it new conflicts of interest and cybersecurity concerns, revised proxy advisory firm voting policies, Iran sanctions disclosures and possible shareholder activism related to director nominations. Say-on-pay continues to raise issues as companies address the results of these non-binding shareholder votes, and conflict minerals continues to be a significant concern. Moreover, behind these issues always lurks the remaining Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) corporate governance and executive compensation rulemaking initiatives that yet await SEC action.

See the Dykema Gossett article here.

Camping on "the street": a first step in the reform of the taxation of financial instruments and productsOn January 24, 2013, House Ways and Means Committee Chairman Camp (R-MI) released a discussion draft of proposals to reform the taxation of certain financial instruments and products (the "Camp Draft"). In brief, the Camp Draft does the following:

  • Requires most derivatives to be marked-to-market on an annual basis, subject to some limited exceptions;
  • Modifies the rules for determining issue price in debt modifications and exchange transactions;
  • Mandates the current inclusion of market discount in income over the life of a bond;
  • Liberalizes hedge identification requirements;
  • Directs the use of the average basis method for purposes of calculating gain or loss on the sale, exchange, or other disposition of specified securities; and
  • Offers several proposals that mainly are of interest to individual taxpayers, including an expansion of the scope of the wash sale rules.

While the Camp Draft is only a proposal, it does offer a glimpse into possible changes that may be in the offing, and the preliminary response from Treasury officials has been positive.

See the Sutherland Asbill & Brennan article here.

SEC issues report on first year of whistleblower program under the Dodd-Frank ActIn November, the SEC issued its first fiscal-year report on the whistle-blower program created by the 2010 Dodd-Frank Act. The report details the operations of the program and the SEC’s Office of the Whistleblower, the office in charge of administering the program. According to the report, during fiscal-year 2012, the Office of the Whistleblower returned over 3,000 phone calls to members of the public that had been made to the whistleblower hotline. During the same time period 3,001 tips were received. Of the 3,001 tips, the largest number dealt with corporate disclosures, followed by offering fraud and manipulation. The tips were received from all 50 states (California, Florida, and New York representing the three largest), as well as 49 countries (the United Kingdom, Canada, and India representing the three largest). Although only a single award has thus far been paid out, the fund from which awards are made is amply funded.

See the full Mishcon de Reya article here.

DOJ collects $9 billion in settlements; SEC obtains orders totalling $3.1 billionThe DOJ completed a banner year in terms of settlements with companies, collecting some $9 billionn through 35 agreements during 2012. Two of the settlements with financial services companies were for more than one billion dollars each: HSBC Bank USA, N.A. and HSBC Holdings, at $1.9 billion for money laundering, and UBS AG, at $1.5 billion for fraud. The settlements were all in the forms of non-prosecution agreements and deferred-prosecution agreements.

See the Mishcon de Reya article here.

Financial reporting manual updatesOn January 18th, the Division of Corporation Finance published updates to its Financial Reporting Manual. Significance testing for related businesses, auditor responsibility for cumulative period from inception amounts, and Public Company Accounting Oversight Board (“PCAOB”) requirements for auditors of non-issuer financial statements are included among the changes.

See the Winston & Strawn update here.

High-frequency tradingOn January 18, 2013, the Reuters blog MacroScope said that Representative Edward Markey has written the SEC advising it of his belief that the agency has authority to regulate high-frequency trading. Markey co-sponsored a bill passed in 1989 which allows the SEC to regulate practices which lead to extraordinary market volatility.

See the Winston and Strawn article here.

Remote streaming quote trader organization proposedOn January 18, 2013, the SEC provided notice of NASDAQ OMX PHLX's filing of a proposal to amend Exchange Rules 507 and 1014 to establish remote streaming quote trader organizations.

See the Winston and Strawn article here.

SEC and the US Attorneys Office charge former broker with securities fraud tied to market crisisThe SEC and the U.S. Attorney for the District of Connecticut filed, respectively, civil and criminal fraud charges against a former account executive at Jefferies & Co. arising out of the financial crisis. The charges center on the sale of mortgage backed securities or MBS to funds, including six connected with the Legacy Securities Public-Private Investment Program or PPIP. That fund was established by the U.S. government to help support the MBS market during the market crisis.

See the SEC Actions blog entry here.

Trends in SEC enforcementIn the last two years SEC Enforcement has filed record numbers of cases. This is a significant accomplishment. A critical question about those statistics, however, is the composition of the case load. Stated differently, in what areas is the newly reorganized Division focusing its resources?

See the SEC Actions blog entry here.

Foreign subsidiaries subject to Iran sanctions now permitted to engage in “wind-down” activities; SEC provides guidance on reporting requirementsOn December 26, 2012, the Office of Foreign Assets Controls (“OFAC”) issued a final rule amending the Iran Transaction Sanctions Regulations (“ITSR”). The rule adds a section to the ITSR to more formally implement the prohibition on foreign subsidiaries engaging in activities that violate the ITSR that went into effect on October 9, 2012. The rule also clarifies that those foreign subsidiaries are permitted to engage in transactions that are either eligible for general licenses or are exempted from the ITSR, and are eligible to apply for specific licenses as a U.S. person could apply for such licenses.

See the Williams Mullen article here.

What are the problems with ticks and minimum spreads?A senior Congressman has indicated that he wants to see a wide-ranging pilot program to examine different minimum spreads for different stocks. He believes that such a program would allow the SEC to determine if tick sizes in equity markets are appropriate.

See the Securities Compliance Sentinel article here.

No safe harbor for you because distributing the proceeds of a sale of securities isn't "in connection with" a securities contract according to Grede v. FCStoneOn January 4, 2013, the United States District Court for the Northern District of Illinois, Eastern Division issued a Memorandum Opinion and Order that seems demonstrably at odds with the majority of cases analyzing the § 546(e) safe harbor provision.

See the Haynes and Boone update here.

NYSE simplifies notice requirementsOn January 11, 2013, the SEC approved a proposal by the New York Stock Exchange (the “NYSE”) to amend Section 204.00 of the Listed Company Manual (the “Manual”) and related provisions. Generally, the changes clarify which Manual provisions trigger the reporting procedures described in amended Section 204.00 and modernize Section 204.00’s provisions to require listed company notifications to be made electronically through a web-based communication system upon the occurrence of certain events.

See the Debevoise & Plimpton article here.

Is the U.S. moving towards international accounting standards. . . Not really (again)Although it has been somewhat circumspect, the SEC seems to be stalling on a move towards adopting the international accounting standards of International Financial Reporting Standards (“IFRS”). Such an approach has left the Europeans in a tizzy!!

The United States has an interesting history with international accounting standards. The SEC and the American accounting industry has in many respects attempted to avoid such a move. There has notably been a good deal of frustration from outside of the United States as to the refusal by the SEC to issue a decision on the incorporation of IFRS.

See the Securities Compliance Sentinel article here.

Federal Reserve Board reaches over SEC for US broker-dealers of foreign banking organizationsThe Dodd-Frank directs the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) to impose enhanced prudential standards on bank holding companies, including foreign banking organizations, with total global consolidated assets of $50 billion or more. To this end, the Federal Reserve Board recently proposed rules that would implement the enhanced prudential standards (as well as some early remediation requirements). The enhanced prudential standards include risk-based capital and leverage requirements, liquidity standards and risk management measures, among other things.

See the Squire Sanders article here.

The United States Supreme Court will review the scope of federal preclusion of state securities claims

On January 18, 2013, the United States Supreme Court granted certiorari to resolve a circuit split concerning the extent to which the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) preempts state law claims that indirectly arise out of securities claims. The case could have important implications for investor suits against hedge funds and other investment funds that are not themselves covered by SLUSA, but that are set up for the purpose of investing in equities, options, and other covered securities.

See the Dechert article here.

New York Appeals Court precludes attempted end run around MorrisonA New York appellate court recently issued a decision favorable to securities issuers whose shares trade on non-US exchanges. The court held that certain hedge fund plaintiffs—whose federal securities fraud claims earlier were dismissed pursuant to the US Supreme Court’s decision in Morrison vs. National Australia Bank —could not pursue a new state court suit that was based on nearly identical allegations as the original federal suit. The decision comes in Viking Global Equities, LP v. Porsche Automobil Holding SE, where the New York Supreme Court, Appellate Division, First Department, held that the hedge fund plaintiffs’ claims should be dismissed pursuant to forum non convenience doctrine because the claims were more appropriately resolved in Germany, where the dispute was centered.

See the Mayer Brown article here.

SEC settles charges against a business development company and its executives for overvaluing assets and for internal control failuresOn November 28, 2012, the SEC announced the settlement of charges against KCAP Financial, Inc. (“KCAP”), Dayl W. Pearson, its president and chief executive officer, Michael I. Wirth, its chief financial officer, and R. Jonathan Corless, its chief investment officer, for materially overstating the value of KCAP’s assets and for failing to implement adequate internal controls over financial reporting. KCAP is a closed-end fund that is regulated as a business development company under the Investment Company Act. According to the SEC’s press release, the charges against KCAP, Pearson, Wirth and Corless represent the first enforcement action against a public company for failing to properly fair value its assets in accordance with FAS 157.

See the Davis Polk article here.

Anti-corruption digest - January 2013Eli Lilly has reached a $29 million settlement with the SEC related to allegations that Lilly subsidiaries in Russia, China, Brazil, and Poland made improper payments to government officials and government-employed physicians in those countries, through offshore vehicles.

See Dorsey & Whitney’s report here.

The supremes hand the SEC big win against hedge fund scammerThe United States Supreme Court refused to review a federal appeals court ruling approving a $62 million award against a former hedge fund manager, who defrauded hedge fund investors over several years.

See Lauer v. SEC., U.S., No. 12-260, 10/29/12 here.

See the Securities Compliance Sentinel article here.

Are exchanges in the SEC's crosshairs?Statements by certain United States Senators have indicated that they hope the SEC is cracking down on and scrutinizing the activities of the national securities exchanges and associations. Such statements were made after the SEC's fine of $5 million fine against NYSE. The SEC had previously announced that the NYSE agreed to pay $5 million to settle claims over its alleged compliance failures in 2008 surrounding certain front-running allegations. The NYSE, of course, settled the SEC's charges without admitting or denying any wrongdoing, and indicated that it improved its systems with updated technology.

See the Securities Compliance Sentinel article here.

It’s time for the SEC to join the digital age: why the SEC’s attempted crackdown on the use of social media is misguidedEarly last month, Netflix disclosed the fact that it and its Chief Executive Officer, Reed Hastings, had received “Wells Notices” from the Staff of the SEC. Those Wells Notices threatened civil claims and cease and desist proceedings against the company and Mr. Hastings predicated on Mr. Hastings’ June 2012 Facebook post touting the fact that Netflix users had streamed more than 1 billion hours of video that month. The SEC believes that Mr. Hastings’ post potentially violated SEC Regulation Fair Disclosure (“Regulation FD”), which requires companies and their representatives to disclose material nonpublic information through the filing of a Form 8-K with the SEC (it is worth noting that the SEC has not alleged that Mr. Hastings’ tweet constituted a misstatement). In what appears to be a direct reaction to the SEC’s threatened action, earlier this month Zipcar filed a Form 8-K disclosing a tweet by Scott Griffith, Zipcar’s Chief Executive Officer, posting a link to a Boston Globe article covering the Zipcar/Avis merger. The merger had been announced publicly two days prior to Mr. Griffith’s tweet. The SEC’s approach not only is contrary to the purpose of Regulation FD, but may very well curb corporate officers’ use of social media altogether, thereby restricting the amount of information ultimately available to the investing public.

See the Forbes article here.

SEC charges U.S. pharmaceutical Eli Lilly over alleged bribes made by subsidiaries in Russia, Brazil, China, and PolandSEC charges U.S. pharmaceutical Eli Lilly over alleged bribes made by subsidiaries in Russia, Brazil, China, and Poland. – The Associate Director of the SEC Enforcement Division, Antonia Chion, reiterated what has been a common theme from U.S. enforcement agencies, namely that “[w]hen a parent company learns tell-tale signs of a bribery scheme involving a subsidiary, it must take immediate action.”

See the Winston & Strawn article here.

Your internal investigation may not be safe anymoreThe SEC has been much more aggressive in policing a company's internal investigations.

There has been a direct causal relationship to the SEC's increased use of whistleblowers and its focus on a companies' use of internal investigations. We have seen that the SEC probably knows more about the matter before it begins its official inquiry or contacts the targeted company. That is why it is essential for companies to permit their counsel to investigate a matter as soon as possible prior to speaking with the SEC. Thus, the best defense to a regulatory investigation starts before it commences with a proper internal investigation. Companies are reminded that, finding out what went on and addressing it before the regulators do, will only enhance a positive response from said regulators.

See the Securities Compliance Sentinel article here.

Parent liabilityOn January 7th, 2013, the U.S. District Court denied a motion to dismiss in a federal securities fraud and common law fraud action. Plaintiff seeks to hold liable Credit Suisse Group ("CSG") for the alleged fraudulent conduct of brokers at its subsidiary, Credit Suisse Securities ("CSS"). Seeking dismissal, CSG argues it is not a control person of CSS nor is CSS its agent. Denying that motion, the Court holds plaintiff adequately alleged that CSS acted as CSG's agent. Although neither a parent-subsidiary relationship nor a shared-brand identity create a presumption of agency, those features, combined with plaintiff's allegations that the CSS brokers led a group reporting to CSG, make the agency allegations plausible. Plaintiff similarly adequately alleged facts establishing CSG as a control person under the Securities Exchange Act.

See the Winston & Strawn article here.

Copyright © 2013 Forum for US Securities Lawyers in London, All rights reserved.

unsubscribe from this list | update subscription preferences