As thoughts turn toward summer vacations, and then the ultimate re-emersion into “office normalcy,” this may seem like a good time to take a break from compliance cares, litigation woes and regulatory and prosecutorial initiatives. But, alas, that might be short-sighted. While business men and women can take vacations, and relegate their problems to the proverbial “back burner,” their critical business issues and problems won’t be taking a vacation from them. This makes it critical to plan ahead, and also to consider what lies ahead.
About three decades ago, in Ernst & Ernst v. Hochfelder, the Supreme Court considered the fraudulent “mail rule” used by Leston B. Nay—head of infamous First Securities Co. of Chicago—to defraud his unwary clients. Nay imposed a simple “mail rule”: No mail addressed to him was to be opened whenever he was away from the office. The Nay “mail rule” provided a lesson in what not to do when senior executives go off on vacation: shut down important corporate policies, procedures and regimens. Conversely, the annals of SEC enforcement actions are replete with cases of chief executives who return from vacation and divulge material, nonpublic information, perhaps because their newly-mellowed states also mean their defenses are down.
