Enforcement & Litigation

Below is some of the most recent Compliance Week coverage on issues related to enforcement and litigation. Coverage focuses on developments related to SEC and DoJ enforcement, class action filings, precedent-setting court decisions, and more. Don't forget other Compliance Week resources, including former SEC staffer Bruce Carton's blog, and our weekly update on investigations and probes, and our ongoing list of class action filings and settlements.

Add the ABA to List of Proponents of Self-Funding for SEC

May 22, 2012

American Bar Association joins list of proponents of SEC self-funding, a concept that to date has been rejected by Congress.
 

Court: Disclosing to the Government Waives Privilege

May 22, 2012

The Ninth Circuit Court of Appeals recently joined several other courts in striking down the idea of "selective waiver," when it ruled that a company or individual couldn't voluntarily disclose information to the government and retain attorney-client privilege on it. "You should just assume that a document that goes to the government will no longer be privileged," Michael Doluisio, a partner with law firm Dechert, says.
 

Web Watch: Best of the Week Ending May 18

May 18, 2012

My picks for this week's most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation.
 

The 'Robin Hood' and 'Mother Teresa' Defenses in Insider Trading Cases

May 18, 2012

Federal judges seem unimpressed by novel strategies of insider trading defendants.
 

At the SEC, Investigations About Investigators Who Investigate Other Investigators

May 16, 2012

Allegations by and against individuals in the SEC's Office of Inspector General have spawned several new rounds of "investigating the investigator." Inside, Compliance Week legal blogger Bruce Carton runs down the latest round of investigations, including one against the SEC's new assistant inspector general for investigations.
 

Shareholders Weigh Derivative Suits to Push Governance Change

May 15, 2012

A shareholder derivative lawsuit brought this month by the California State Teachers Retirement System—its first ever—against Walmart is creating concern among companies that such suits could become a more common tool to push for governance changes. "The focus of this action, unprecedented in CalSTRS history, is corporate governance reform," said CalSTRS Chief Executive Officer Jack Ehnes.
 

Supreme Court Rules Against Corporate Liability Under TPVA

May 15, 2012

The U.S. Supreme Court ruled that companies can't be held liable for claims under the Torture Victim Protection Act, because the law only applies to individuals. And while the high court has yet to rule on another case that asks whether companies can be held liable in the United States for human rights abuses abroad under the Alien Tort Statute, it may have tipped its hand on where it stands. Details inside.
 

SEC Escalates Battle With D&T Shanghai Over Documents, Brings 102(e) Charges

May 10, 2012

SEC brings first-ever enforcement action against a foreign audit firm for failing to comply with a request by the agency under Section 106 of SOX.
 

Australia: Centro Securities Class Action Settles for Record $200 Million

May 08, 2012

Historic $200 million Centro settlement reportedly includes significant contribution from auditor PwC.
 

Compliance Rescues Morgan Stanley From FCPA Prosecution

May 08, 2012

Morgan Stanley was exonerated from Foreign Corrupt Practices Act violations last month, despite a guilty plea by one of its top executives. The Justice Department and the SEC are citing the bank's strong compliance program for why it declined to pursue charges. "Corporate America has been sent a clear message that those who try will be rewarded," says Roy Snell, CEO of the Society of Corporate Compliance and Ethics.
 

Memo To: Public Co. Employees About to Engage in Insider Trading; Re: Your Future (or Lack Thereof)

May 07, 2012

Dusting off my 2005 memo to all Public Company Employees About to Engage in Insider Trading in Advance of "Big News" About Their Companies.
 

M&A Shareholder Litigation Now 'Ubiquitous'

May 04, 2012

Shareholder litigation now follows virtually every significant acquisition, according to a recent study by Cornerstone Research and Professor Robert Daines of the Stanford Law School. While very few result in payments to shareholders, don't expect the legal wrangling over M&A to subside anytime soon. Details inside.
 

Study Identifies Key Factors to Predict Securities Class Action Settlements and Amounts

May 02, 2012

A recent academic study has identified several contributing factors to securities class-action lawsuit settlement amounts. The study found certain factors that indicate a case will probably settle, such as allegations of accounting violations. Settlement amounts are typically higher when allegations of insider trading are present and when the plaintiffs include institutional shareholders. More study results inside.
 

How Not to Go Public

May 01, 2012

Online coupon purveyor Groupon got a rude awakening early in its public-company life: The Internet darling was forced to drastically revise down earnings and to admit to several internal control weaknesses. Shareholders quickly filed lawsuits. Such suits are likely to become more common now that the JOBS Act makes it easier for companies to go public without proper control systems. More inside.
 

George Canellos Named Deputy Director of the SEC's Division of Enforcement

April 30, 2012

Canellos moving from Director of SEC's New York Regional Office to Deputy Director of Enforcement Division.
 

Web Watch: Best of the Week Ending April 27

April 27, 2012

My picks for this week's most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation.
 

David Green Takes Over at UK's SFO, Vows Agency is 'Here to Stay'

April 27, 2012

New Director of Serious Fraud Office vows to go hard after "top-end fraud."
 

SEC Disputes WSJ Report That it Blew Whistleblower's Cover

April 26, 2012

The Wall Street Journal alleged in a story published last week that the Securities and Exchange Commission inadvertently revealed the identity of a whistleblower who contacted the agency with information about his former employer. Not so, says the SEC. In a letter to the Journal, the Commission says the company already knew the executive had contacted the SEC. More details inside.
 

First Takes on the Walmart Bribery, Cover-Up Allegations

April 23, 2012

Over the weekend details emerged about stunning allegations of a massive bribery campaign at Walmart to win market share in Mexico and of an ensuing attempt to conceal payments. CW blogger Bruce Carton surveys the initial reaction to the news from various perspectives by leading corruption commentators.
 

Must-Read: Bloomberg on 'The SEC: Outmanned, Outgunned, and On a Roll'

April 20, 2012

Must-read Bloomberg article takes readers inside the Galleon insider trading probe from the perspective of the SEC's lead lawyer on the case.
 

Stanford Receiver Battles With State Politicians for Return of Millions in Campaign Contributions

April 19, 2012

Court-appointed receiver's effort to recover "ill-gotten" campaign contributions hits significant resistance.
 

The High Cost of FCPA Investigations

April 17, 2012

Forget about fines and penalties to settle a Foreign Corrupt Practices Act investigation; simply conducting one can run into the hundreds of millions of dollars. Just ask Avon: The cosmetics company has spent $249 million since 2009 to investigate charges of FCPA violations. Inside are more examples of those racking up massive FCPA costs and tips to hold down expenses.
 

Deloitte Warns Complying With SEC Demand May Land Its Partners in Chinese Prison

April 13, 2012

A recent warning from Deloitte Touche Tohmatsu illustrates the difficulties that arise from the United State's audit standoff with China. Deloitte argued in court papers that if it is forced to comply with an SEC subpoena for workpapers, its partners may be sent to prison in China for life. CW legal blogger Bruce Carton has the details inside.
 

SEC's Post-Morrison Study Draws 'Strong Disappointment' from Comm. Aguilar

April 12, 2012

SEC Commissioner Aguilar voices disappointment, "astonishment" at SEC study on Morrison issues.
 

How Individuals Can Win Non-Prosecution Agreements With the SEC

April 10, 2012

The SEC announced a landmark non-prosecution agreement last month, declining to prosecute a person (rather than a corporation) after he provided significant assistance during an investigation. The agency also issued guidance on how to win such credit. But rather than give executives a pathway to their own personal NPA, the guidelines illustrate just how difficult it will be to earn such a pass. More details inside.
 

Web Watch: Best of the Week Ending April 6

April 06, 2012

My picks for this week's most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation.
 

GAO Rules SEC May Not Add Post-Judgment Interest to Distribution Funds for Investors

April 04, 2012

Decision will result in less money going to injured investors and more money going to the Treasury.
 

Judge Sentences Insider Trading Defendant to Probation, Says He 'Betrayed His Country'

March 27, 2012

Defendant receives probation due to cooperation, but judge says defendant "betrayed his country" by undermining integrity of the financial markets.
 

New Technologies Already Bearing Fruit for SEC Enforcement

March 21, 2012

SEC Chair Mary Shapiro explains how new technology is enabling the SEC to work smarter and bring cases it might not have been able to bring in years past.
 

In Battle With Judge Rakoff, Round One at Appeals Court Goes to SEC

March 19, 2012

Second Circuit finds the SEC and Citigroup have a "strong likelihood" of success in setting aside Judge Rakoff's rejection of their settlement, and grants a stay of the proceedings before Judge Rakoff.
 

Officials Admit: Professional Whistleblowers Are Coming

March 15, 2012

The directors of the whistleblower offices at the SEC and CFTC both admit that, yes, the Dodd-Frank Act will likely give rise to "professional whistleblowers" who will scour companies for evidence of misconduct, hoping to file a report with regulators and collect a reward. Compliance Week legal blogger has more on the dispiriting news inside.
 

Insights from the Chiefs of the SEC and CFTC Whistleblower Offices

March 12, 2012

March 14 webcast featuring heads of Whistleblower Offices will explain how the programs work, and how the new whistleblower rules may affect the role of compliance professionals and the internal reporting process.
 

Stanford Roundup: Jury Convicts on 13 Counts, Allows Forfeiture of $330 Million

March 09, 2012

This week a federal jury found R. Allen Stanford guilty on thirteen counts. The convictions include charges of conspiracy, mail and wire fraud, and obstructing an SEC investigation. Here are the key things you need to know.
 

SEC's Schapiro Pleads Agency's Case for $1.566 Billion Budget in FY 2013

March 09, 2012

SEC Chairman Mary Schapiro testified on Capital Hill last week to make the case for why Congress should approve the President's $1.57 billion budget request for the agency, amounting to an increase of $245 million next year. She said it would allow the SEC to add 676 new staffers and invest $100 million in needed IT improvements.
 

Web Watch: Best of the Week Ending March 5

March 05, 2012

My picks for this week's most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation.
 

The SEC's Double Rainbow of 735 Enforcement Actions: 'What Does it Mean??!!', Part II

March 02, 2012

A Bloomberg article makes the case that the SEC's record 735 enforcement actions in 2011 are not as impressive as they may appear.
 

Will Allen Stanford Testify? Oh No He Won't

February 28, 2012

It now appears that we will never learn how a person who claims to now have total amnesia could have testified in his own defense about complicated events from years ago.
 

Big Compliance Burdens Coming for Mortgage Industry

February 28, 2012

The mortgage industry faces a host of new compliance challenges thanks to the $25 billion settlement reached with state and federal regulators this month, and expect no easy path to success. "Very little of this is able to be dealt with through automation," says Robert Bostrom of the law firm SNR Denton. "The whole point of this is to require human contact." Full details inside.
 

SEC Whistleblower Email a Hoax But 'Office of the Whistleblower is Real'

February 24, 2012

SEC warns people not to click on link in alarming hoax email supposedly sent by SEC's Whistleblower Office.
 

SEC Alleges China Coal Company Defrauded Investors

February 22, 2012

The SEC has charged two executives at a China-based coal company with fraud, saying the duo scammed investors with an empty shell company. The charges are merely the latest SEC enforcement action against questionable Chinese companies listed on U.S. exchanges.
 

Dealing With JV Compliance Takes Varsity Skills

February 22, 2012

A recent Justice Department FCPA settlement against a participant in an energy joint venture in Nigeria is yet another reminder of how challenging ethics and compliance can be in such arrangements. "The average JV hasn't been around a long time. It probably doesn't have a compliance officer; it doesn't have a lot of processes," says lawyer Jeff Kaplan. A close look at how to establish strong conduct at "JVs" is inside.
 

Delaware Court to Rule on Exclusive-Forum Bylaws

February 22, 2012

Investor activists are waging a courtroom battle this spring against scores of companies that have adopted bylaws designating Delaware as the exclusive legal forum for deciding shareholder litigation. If the Delaware Chancery Court upholds such "forum bylaws," expect more companies to follow suit, says Steven Haas, a lawyer with law firm Hunton & Williams.
 

Dateline Reykjavik: Supreme Court Upholds Iceland's First-Ever Insider Trading Conviction

February 17, 2012

Iceland's Supreme Court upholds a lower court ruling that found the former permanent secretary at Iceland's finance ministry guilty of insider trading, the country's first such conviction.
 

Brit Regulator Who Warned Cos. 'Be Frightened' Takes Her Leave

February 15, 2012

Margaret Cole, head of enforcement at Britain's Financial Services Authority, who steered the FSA from its famed "light touch" approach to regulation to warning companies they should "be frightened" of stronger enforcement, has decided to leave the FSA after seven years at the top.
 

President Proposes Over $1.5 Billion SEC Budget for FY2013, But House Likely to Resist

February 14, 2012

The Obama Administration proposed a $1.566 billion budget for the SEC for fiscal year 2013, which would increase the agency's appropriation by 19 percent from the current year. The increase would cover plans to hire an additional 191 staffers. Whether Congress will approve that is a different story.
 

FTC Scrutinizing Information-Sharing Agreements

February 14, 2012

A recent FTC enforcement action against three businesses for collusion via an industry trade association is sounding alarm bells, since the practice is so common. A consent decree with one of the businesses even overturns established safe-harbor practices. "This should be of interest to any company involved in competitor information exchanges," says Kathryn Fenton of law firm Jones Day.
 

If the SEC Forces Companies to Admit Guilt ...

February 14, 2012

The SEC has been under pressure for a while to change its policy of allowing defendants to settle charges without admitting guilt, and now a court could force its hand on the issue. A policy change would have dire consequences for companies, since it would set up a difficult decision to admit guilt or to fight lengthy court battles with the SEC. More details inside.
 

Stressed-Out Compliance Officers May Soon Feel Even More Heat From SEC

February 08, 2012

In recent speeches, SEC officials have suggested that they may scrutinize compliance programs at investment firms more closely and may bring more enforcement actions against compliance officers. The question, left unresolved by a recent case, is whether compliance officers can be considered "supervisors," which opens them to litigation.
 

Senate Passes STOCK Act, House Will Consider Bill Next Week

February 03, 2012

Last week, the Senate voted in favor of its version of the STOCK Act, which bans members of Congress and their staff from trading securities based on information gleaned from the legislative process. The House of Representatives, where the measure is less popular, is expected to take up the issue this week.
 

SEC Rolls Out First iPhone App

February 02, 2012

Last week the SEC quietly rolled out its first iPhone app. The app is basic, but for an agency that has often lagged behind in technology and social media, it is a step in the right direction. The app offers quick access to SEC news, upcoming events, and contact to the public affairs office.
 
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