Tag: SEC enforcement


SEC and CFTC Turn to Swaps and Security-Based Swaps Enforcement

Annette Nazareth is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP, and a former commissioner at the U.S. Securities and Exchange Commission. This post is based on a Davis Polk client memorandum.

The week of June 15, 2015 saw two of the first publicly announced enforcement actions brought by the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) to enforce security-based swap and swap regulatory requirements under Title VII of the Dodd-Frank Act. The SEC accepted an offer of settlement from a web-based “exchange” for, among other things, offering security-based swaps to retail investors in violation of the Securities Act of 1933 and the Securities Exchange Act of 1934. In a separate action, the CFTC obtained a federal court order against a Kansas City man in a case alleging violations of the antifraud provisions of the swap dealer external business conduct rules in Part 23 of the CFTC regulations. [1] Swap dealers and security-based swap market participants may wish to consider these orders and the agencies’ approach to enforcement as firms further develop, review and update their compliance programs.

READ MORE »

The Role of Chief Compliance Officers Must be Supported

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent public statement; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Chief Compliance Officers of Investment Advisers (CCOs) play an important and crucial role in fostering integrity in the securities industry. They are responsible for making sure that their firms comply with the rules that apply to their operations. As part of that effort, CCOs typically work with senior corporate leadership to instill a culture of compliance, nurture an environment where employees understand the value of honesty and integrity, and encourage everyone to take compliance issues seriously. CCOs of investment advisers (as with CCOs of other regulated entities) also work to prevent violations from occurring in the first place and, thus, prevent violations from causing harm to the firm, its investors, and market participants. Given the vital role that CCOs play, they need to be supported. Simply stated, the Commission needs capable and honest CCOs to help protect investors and the integrity of the capital markets.

READ MORE »

Government Preferences and SEC Enforcement

Jonas Heese is Assistant Professor of Business Administration in the Accounting & Management Unit at Harvard Business School.

The Securities and Exchange Commission’s (SEC) enforcement actions have been subject to increased scrutiny following the SEC’s failure to detect several accounting frauds. A growing literature investigates the reasons for such failure in SEC enforcement by examining the SEC’s choice of enforcement targets. While several studies recognize that the SEC and its enforcement actions are subject to political influence (e.g., Correia, 2014; Yu and Yu, 2011), they do not consider that such influence by the government may also reflect voters’ interests. Yet, economists such as Stigler (1971) and Peltzman (1976) have long emphasized that the government may also influence regulations and regulatory agencies to reflect voters’ interests—independent of firms’ political connections. In my paper, Government Preferences and SEC Enforcement, which was recently made publicly available on SSRN, I examine whether political influence by the president and Congress (“government”) on the SEC may reflect voters’ interests.

READ MORE »

A Threefold Cord—Working Together to Meet the Pervasive Challenge of Cyber-Crime

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent address at SINET Innovation Summit 2015; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Cybersecurity is an issue of profound importance in today’s technology-driven world. What was once a problem only for IT professionals is now a fact of life for all of us. I say “us” because, as you may know, hackers breached a government database a few weeks ago and stole the personal information of roughly four million government employees, which may well include me.

There’s hardly a day that goes by that we don’t hear of some new cyberattack. These incidents are clear illustrations of how the internet has become an integral part of our professional and personal lives. And while the benefits have been enormous, so, too, have the risks.

READ MORE »

The SEC’s Current Views on Private Equity

Alfred O. Rose and Randall W. Bodner are partners at Ropes & Gray LLP. This post is based on a Ropes & Gray publication.

As a follow-up to last year’s “Spreading Sunshine in Private Equity” speech, in which then-OCIE Director Andrew Bowden stated that the SEC had found that more than half of the funds examined by OCIE had allocated expenses and collected fees inappropriately and identified “lack of transparency” as a pervasive issue in the private equity industry, Marc Wyatt delivered a speech on May 13, 2015, reflecting on progress in the past year as well as identifying likely areas of scrutiny the private equity industry will face in the future. Although the speech has been widely reported, we wanted to highlight particular areas of interest. In this post, we examine the key takeaways from the speech, and outline best practices for the private equity industry going forward.

READ MORE »

Remarks Before the SEC Historical Society

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. The following post is based on Chair White’s remarks at the annual meeting of the SEC Historical Society, available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I was delighted to be able to speak at your annual meeting. This yearly event of the SEC Historical Society is always the right occasion to underscore that those of us who currently have the privilege of serving at the SEC are part of a long and important tradition. The staff of this agency is beyond compare in its dedication, high-mindedness and expertise, making us all very proud to work here.

The SEC alumni are undoubtedly the biggest, most supportive and most enthusiastic group of any government agency or private entity. The SEC’s history is one of important public service and a tradition of protecting investors and bringing confidence to the financial markets. The SEC’s commitment to markets that are both safe and fair, as well as dynamic, has given millions of people the opportunity to share in the growth of the American economy, while facilitating capital formation to fuel the economy.

Those of us here today, who are or who have been part of the SEC tradition, can be rightly proud of our role in shaping a financial system that meets the needs both of visionary entrepreneurs, and those contributing as much as they can to their 401(k) or for their children’s college education.

As a reminder of your service at the SEC, I have been asked to very briefly share with you some of what we are working on—now and for the near future. I think you will recognize in that work the mission that brought you to the agency and which should continue to resonate long after you left your SEC post.

READ MORE »

The SEC as the Whistleblower’s Advocate

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s recent address at the Ray Garrett, Jr. Corporate and Securities Law Institute–Northwestern University School of Law in Chicago, Illinois; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I am very honored to address the Garrett Institute, one of the most important programs in the country for corporate and securities lawyers, and to be in David’s home territory of Northwestern Law School where he served as Dean before going on to serve as a very distinguished Chairman of the SEC in the late 1980s.

Although the Garrett Institute was established 35 years ago to honor former SEC Chairman Ray Garrett, Jr., I really first came to learn about him when I did a bit of research for a speech I gave in honor of former SEC Commissioner Al Sommer on the importance of the SEC as an independent agency. Mr. Sommer, himself a legendary Commissioner, was recommended by Chairman Garrett to succeed him as Chairman. Seemingly, that did not come to pass because Commissioner Sommer was a Democrat during a Republican administration. That, however, did not stop Chairman Garrett, a Republican, from recommending the person he thought would be the best for the job.

READ MORE »

SEC Broadens Focus on and Requirements for 13D Amendment Disclosure

Philip Richter is co-head of the Mergers and Acquisitions Practice at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank publication authored by Mr. Richter, Steven Epstein, Abigail Pickering Bomba, and Gail Weinstein. Related research from the Program on Corporate Governance about blockholder disclosure includes The Law and Economics of Blockholder Disclosure by Lucian Bebchuk and Robert J. Jackson Jr. (discussed on the Forum here), and Pre-Disclosure Accumulations by Activist Investors: Evidence and Policy by Lucian Bebchuk, Alon Brav, Robert J. Jackson Jr., and Wei Jiang.

The SEC recently announced settlements of charges against insiders relating to three different going private transactions. The settlement orders (the “Orders”) reflect a general increased focus by the SEC on insiders’ compliance with Schedule 13D amendment requirements in connection with going private transactions (and possibly other extraordinary transactions), as well as possibly expanded requirements for disclosure of steps taken during the preliminary stage of consideration of a transaction. The charges were against eight directors, officers or major stockholders for their respective failures to file timely amendments to their Schedule 13D filings to disclose their plans to take the companies private. The charges were based on steps these parties had taken in furtherance of the going private transactions, but that had only been disclosed months (or in some cases years) afterward in the proxy statements or Schedule 13E-3 statements relating to the transactions. READ MORE »

How United States v. Newman Changes The Law

Jon N. Eisenberg is partner in the Government Enforcement practice at K&L Gates LLP. This post is based on a K&L Gates publication by Mr. Eisenberg. The complete publication, including footnotes, is available here.

In unsuccessfully seeking rehearing in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), reh’g denied, Nos. 13-1837, 13-1917 (2d Cir. Apr. 3, 2015), the Government acknowledged that the Second Circuit’s recent decision in Newman “will dramatically limit the Government’s ability to prosecute some of the most common, culpable, and market-threatening forms of insider trading,” and “arguably represents one of the most significant developments in insider trading law in a generation.” As we discuss below, Newman is a well-deserved generational setback for the Government. It reflects the Second Circuit’s reasonable reaction to Government overreach, and it establishes brighter lines to cabin prosecutorial and SEC discretion in bringing future criminal and civil insider trading actions.

READ MORE »

Regulators Working Together to Serve Investors

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent remarks at the North American Securities Administrators Association Annual NASAA/SEC 19(d) Conference; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

It is my honor to deliver the opening remarks for today’s [April 14, 2015] North American Securities Administrators Association (“NASAA”) and Securities and Exchange Commission (“SEC”) 19(d) Conference. For those who are keeping count, this is my seventh year as the SEC’s liaison to NASAA. It has been a privilege to serve you in this role, which I have done since my early days as a Commissioner. Before I begin my remarks, however, let me issue the standard disclaimer that the views I express today are my own, and do not necessarily reflect the views of the SEC, my fellow Commissioners, or members of the staff.

NASAA and the SEC have a long history of working together to provide a robust regulatory environment for businesses to grow and to protect the investors who fuel that growth. Today is a clear example of that partnership, where representatives from the SEC and state regulators come together to share ideas for increasing cooperation and collaboration. This partnership is crucial to achieving our common goal of protecting investors, maintaining market integrity, and facilitating capital formation.

READ MORE »

  • Subscribe

  • Cosponsored By:

  • Supported By:

  • Programs Faculty & Senior Fellows

    Lucian Bebchuk
    Alon Brav
    Robert Charles Clark
    John Coates
    Alma Cohen
    Stephen M. Davis
    Allen Ferrell
    Jesse Fried
    Oliver Hart
    Ben W. Heineman, Jr.
    Scott Hirst
    Howell Jackson
    Robert J. Jackson, Jr.
    Wei Jiang
    Reinier Kraakman
    Robert Pozen
    Mark Ramseyer
    Mark Roe
    Robert Sitkoff
    Holger Spamann
    Guhan Subramanian

  • Program on Corporate Governance Advisory Board

    William Ackman
    Peter Atkins
    Joseph Bachelder
    John Bader
    Allison Bennington
    Richard Breeden
    Daniel Burch
    Richard Climan
    Jesse Cohn
    Isaac Corré
    Scott Davis
    John Finley
    Daniel Fischel
    Stephen Fraidin
    Byron Georgiou
    Larry Hamdan
    Carl Icahn
    David Millstone
    Theodore Mirvis
    James Morphy
    Toby Myerson
    Barry Rosenstein
    Paul Rowe
    Rodman Ward