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Sarah Aberg is special counsel in the White Collar Defense and Corporate Investigations Group in the firm's New York office.

On August 6, 2021, the Securities and Exchange Commission (“SEC”) approved Nasdaq’s Board Diversity Rule (Nasdaq Stock Market LLC Rules 5605(f) and 5606), which requires listed companies to have at least two diverse board members or to explain their failure to meet the requirement, with some exceptions.  The Board Diversity Rule also requires companies to publish statistics on the diversity of their board members.  The rule is intended to increase transparency into the diversity of corporate boards, giving investors more information to consider when deciding which companies are worthy of investment.  As investors have increasingly voiced concern over enhanced diversity in corporate leadership, the Board Diversity Rule may not only increase board transparency, but also cause Nasdaq-listed companies to increase board diversity.

Continue Reading SEC Approves Nasdaq Diversity Rule

In Van Buren v. United States, No. 19-783, 2021 WL 2229206 (U.S. June 3, 2021), the United States Supreme Court issued an opinion drastically limiting the application of the Computer Fraud and Abuse Act (CFAA) (18 U.S.C. § 1030 et seq.), holding that the “exceeds authorized access” clause of the Act applies only to those who obtain information from particular areas in the computer—such as files, folders, or databases—to which the individual is not authorized to access under any circumstances. However, the Supreme Court excluded application of the clause to individuals who misuse their access to obtain information otherwise available to them for an unauthorized purpose. The Court’s Van Buren decision resolves a long-standing circuit split over the meaning of this key phase of the CFAA, and simultaneously creates new challenges for employers seeking to hold liable employees who misuse company information to the employer’s detriment.
Continue Reading Supreme Court Resolves Circuit Split Over CFAA

During a May 19, 2021 webcast at the Financial Industry Regulatory Authority’s (“FINRA”) annual conference, Amy Sochard, FINRA’s Vice President of Advertising Regulation, indicated that the organization will seek public feedback on gamification practices utilized by some stock trading platforms to attract investors with a view toward issuing new rules or guidance.  “Gamification” refers to the application of typical elements of game playing, such as point scoring, competition with others, and rules of play, by trading platforms, online retailers or vendors to encourage engagement with a product or service.
Continue Reading Game On: FINRA Hints at Upcoming Gamification Sweep

During a March 9, 2021 industry conference, one of the four current U.S. Securities and Exchange (“SEC”) commissioners floated a new approach to calculating penalties for corporate misconduct.  Caroline A. Crenshaw, who was tapped by President Donald Trump last June to fill one of the Democratic slots on the Commission, told attendees at the Council of Institutional Investors virtual conference that the SEC needed to revisit its approach to assessing corporate penalties, and implement a new approach that tailored penalties to the “egregiousness of the actual misconduct,” accounted for all benefits of the misconduct that accrued to the corporation, and eliminated consideration of potential adverse impacts on shareholders.  If ultimately accepted by the Commission, Crenshaw’s proposed approach would likely result in materially greater penalties for corporate misconduct.
Continue Reading SEC Commissioner Calls for a Brave New Approach to Corporate Penalties

On December 10, 2020, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a Fact Sheet clarifying the circumstances under which financial institutions can share information under Section 314(b) of the USA Patriot Act (“Section 314(b)”), 31 C.F.R. § 1010.540.  In a speech on the same day, FinCEN’s director, Kenneth Blanco, urged financial institutions to take advantage of the program.
Continue Reading FinCEN Provides Clarity for Section 314(b) Information Sharing

On December 1, 2020, the Commodities Futures Trading Commission (CFTC) Division of Enforcement published its annual report for Fiscal Year 2020.  According to the report, the Division filed a record number of enforcement actions in 2020 and achieved a number of firsts, despite the unprecedented challenges presented by the COVID-19 pandemic.  In addition, the report provides a number of key insights into the Division’s enforcement concerns in several key areas, including compliance, digital assets, anti-money laundering (AML), market surveillance and its whistleblower program.    
Continue Reading CFTC’s Enforcement Division Announces Record-Breaking 2020 and Outlines Priorities for 2021

On November 19, 2020, Peter Driscoll, director of the Office of Compliance Inspection and Examination (“OCIE”) of the Securities and Exchange Commission (“SEC”), gave a speech urging advisory firms to empower their Chief Compliance Officers (“CCOs”).  The speech, made at the SEC’s annual compliance outreach conference, accompanied OCIE’s Risk Alert, issued the same day, identifying notable deficiencies and weaknesses regarding Registered Investment Advisors (“RIAs”) CCOs and compliance departments.  Driscoll’s speech complemented the Risk Alert by outlining the fundamental requirements for CCOs:  “empowered, senior and with authority.”
Continue Reading OCIE Director Instructs Advisers to Empower Chief Compliance Officers

On September 17, 2020, Stephanie Avakian, Director of the SEC’s Division of Enforcement, spoke at the Institute for Law and Economics, University of Pennsylvania Carey Law School Virtual Program.  Ms. Avakian used her time to highlight the Division’s enforcement priorities, operations, and challenges in the years since Jay Clayton became the director of the SEC in May 2017.
Continue Reading Despite Challenges, It’s Full Steam Ahead For SEC’s Enforcement Division

On September 10, 2020, the Commodities Futures Trading Commission (CFTC) issued the latest in a series of circulars regarding corporate compliance released this summer by government agencies. In June, the Criminal Division of the Department of Justice (DOJ) issued updated guidance regarding its evaluation of corporate compliance programs (see our prior blog here). In July, DOJ and the Securities and Exchange Commission (SEC) jointly issued an updated Resource Guide to the U.S. Foreign Corrupt Practices Act, which includes a 12-part section covering the “hallmarks” of effective corporate compliance programs. The instant CFTC guidance is the first issued by CFTC on this topic. The guidance signals to commodities market participants that compliance programs that do not meet guideline standards are fair game for CFTC examination and enforcement staff.
Continue Reading CFTC Throws its Hat into the Corporate Compliance Arena

For the first time outside of the originating case itself, a federal appeals court was called upon to apply the principles governing disgorgement in SEC enforcement actions established by the United States Supreme Court’s high-profile decision in Liu v. Securities & Exchange Comm’n, No. 18-1501, 2020 WL 3405845 (U.S. June 22, 2020) (blog article here).  In Securities & Exchange Comm’n v. Yang, No. 19-55289, 2020 WL 4530630 (9th Cir. Aug. 6, 2020), the United States Court of Appeals for the Ninth Circuit reviewed a district court order, issued some eighteen months before the Supreme Court spoke in Liu, awarding the SEC disgorgement.  In an unpublished memorandum decision, the Court of Appeals reversed the disgorgement awards and remanded the case to the district court to explicitly determine whether the awards comported with the requirements for such relief under Liu.  The Yang decision drew attention because it served as an example of how the high court’s decision is impacting appellate review of disgorgement awards.  If Yang is any indication, courts of appeal will be remanding cases to district courts with instruction to reach specific findings regarding compliance with Liu’s disgorgement requirements.
Continue Reading Ninth Circuit Reverses SEC Disgorgement Award and Remands in First Decision Post-Liu

A recent enforcement action offers a glimpse of the Financial Industry Regulatory Authority’s (“FINRA”) expectations for firms conducting anti-money laundering (“AML”) due diligence and transaction monitoring.  On July 27, 2020, FINRA settled with broker-dealer JKR & Company (“JKR”) over allegations that the firm failed to detect, investigate, and report suspicious activity in four customer accounts in violation of FINRA Rules 3310(a) and 2010.  JKR agreed to a $50,000 fine and a censure to resolve the matter.  The settlement is notable in that FINRA applied transaction monitoring and due diligence expectations common in the banking industry to a broker-dealer.  It also serves as a reminder that FINRA expects member firms to not only establish written AML policies and procedures, but also to put their AML programs into practice in order to meet their regulatory obligations.
Continue Reading FINRA Settlement Highlights Importance of Anti-Money Laundering Due Diligence and Monitoring