SEC credits self-reporting and cooperation in not imposing penalty on ICO sponsor

2019 ◽  
Vol 20 (2) ◽  
pp. 13-15
Author(s):  
Daniel Hawke
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Self Report ◽  
Content Type ◽  
Enforcement Action ◽  
Expert Analysis ◽  
Securities Laws ◽  
Insight Into ◽  
Civil Penalty ◽  
Do So

Purpose To explain a February 20, 2019 US Securities and Exchange Commission (SEC) settled enforcement action against Gladius Network LLC for failing to register an initial coin offering (ICO) under the federal securities laws, in which Gladius was able to avoid a civil penalty by self-reporting the violation and cooperating with the SEC enforcement staff. Design/methodology/approach Explains Gladius’ self-reporting, cooperation and remedial steps; why the SEC imposed no civil penalty on Gladius; and two similar cases the SEC instituted in July 2018 against companies that conducted unregistered ICOs, did not self-report, and were penalized. Provides analysis and conclusions. Findings The Gladius case offers important insight into how the SEC and its staff think about cooperation credit in resolving SEC enforcement actions and sends a clear message that self-reporting to the SEC can result in meaningful cooperation credit. In three recent cases, the Commission has made clear that once it put the industry on notice that ICOs could be securities that must be registered under the federal securities laws, a party risks enforcement action by failing to do so. Originality/value Expert analysis and guidance from an experienced securities lawyer who counsels clients on all manner of SEC enforcement, examination and regulatory policy matters.

SEC reporting obligations for insiders and large traders under Section 13 and Section 16 of the Exchange Act

2019 ◽  
Vol 20 (3) ◽  
pp. 39-53
Author(s):  
Arthur L. Zwickel ◽  
Keith D. Pisani ◽  
Alicia M. Harrison
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Individual Investors ◽  
Content Type ◽  
Disclosure Requirements ◽  
Beneficial Ownership ◽  
Expert Analysis ◽  
Investment Advisers ◽  
Trading Restrictions ◽  
A Current

Purpose The purpose of this paper is to provide investment advisers, broker dealers, individual investors and other securities firms with a current and detailed summary of the reporting regime under Sections 13 and 16 of the Securities Exchange Act of 1934 (the “Exchange Act”) and guidance on how to comply with the disclosure requirements of the U.S. Securities and Exchange Commission (the “SEC”) on Schedule 13D, Schedule 13G, Form 13F, Form 13H and Forms 3, 4 and 5. Design/methodology/approach The approach of this paper discusses the transactions or beneficial ownership interests in securities that trigger a reporting requirement under Section 13 and/or Section 16 of the Exchange Act, identifies the person or persons that have the obligation to file reports with the SEC, details the information required to be disclosed in the publicly available reports, and explains certain trading restrictions imposed on reporting persons as well as the potential adverse consequences of filing late or failing to make the requisite disclosures to the SEC. Findings The SEC continues to provide updated guidance on the disclosure requirements under Sections 13 and 16 of the Exchange Act, which individual investors and securities firms – largely insiders – must take into account when filing any new or amended reports on Schedule 13D, Schedule 13G, Form 13F, Form 13H and Forms 3, 4 and 5. Originality/value This article provides expert analysis and guidance from experienced securities lawyers.

Bringing order to non-GAAP financial measures: SEC sues to enforce “equal-or-greater-prominence” requirement

2019 ◽  
Vol 20 (4) ◽  
pp. 51-57
Author(s):  
Richard J. Parrino
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Financial Measures ◽  
Generally Accepted Accounting Principles ◽  
Enforcement Action ◽  
Accounting Principles ◽  
Depth Analysis ◽  
The Us ◽  
Earnings Releases

Purpose This article examines the first action by the US Securities and Exchange Commission to enforce the “equal-or-greater-prominence” requirement of its rules governing the presentation by SEC-reporting companies, in their SEC filings and earnings releases, of financial measures not prepared in accordance with generally accepted accounting principles (GAAP). Design/methodology/approach This article provides an in-depth analysis of the equal-or-greater-prominence rule and the SEC’s enforcement posture in the context of the SEC’s concern that some companies present non-GAAP financial measures in a manner that inappropriately gives the non-GAAP measures greater authority than the comparable GAAP financial measures. Findings Although the appropriate use of non-GAAP financial measures can enhance investor understanding of a company’s business and operating results, investors could be misled about the company’s GAAP results by disclosures that unduly highlight non-GAAP measures. The SEC’s enforcement action signals a focus on the manner in which companies present non-GAAP financial measures as well as on how they calculate the measures. Originality/value This article provides expert guidance on a major SEC disclosure requirement from an experienced securities lawyer.

SEC announces results of share class selection disclosure initiative

2019 ◽  
Vol 20 (4) ◽  
pp. 15-20
Author(s):  
Brenden Carroll ◽  
Mark Perlow ◽  
Christine Ayako Schleppegrell ◽  
Sam Scarritt-Selman
Keyword(s):  
Asset Management ◽  
Mutual Fund ◽  
Design Methodology ◽  
Self Report ◽  
Content Type ◽  
Expert Analysis

Purpose To explain the SEC’s Share Class Selection Disclosure Initiative (SCSD Initiative), the purpose it seeks to serve, the results it has generated, and its broader implications for the asset management industry. Design/methodology/approach Explains the newly announced results of the SEC’s Share Class Selection Disclosure Initiative. Provides background on the principles underlying the initiative, the mechanics by which the initiative’s self-reporting program operated, and industry reaction to the initiative. Analyzes the results the initiative generated, in terms of both aggregate disgorgement and the terms of settlement offered to self-reporting advisers. Draws conclusions and provides key takeaways. Findings Although the terms of the actual settlements were consistent with the framework of standardized settlement terms set forth in the SCSD Initiative, whether the standardized terms of settlement offered under the SCSD Initiative ultimately will be viewed as favorable will depend in large part upon how the SEC continues to treat advisers that did not self-report. Originality/value Expert analysis from experienced lawyers in the mutual fund and investment advisory industries.

What does it take to make the SEC happy? SEC criticism of broker-dealers’ due diligence for sales of unregistered securities leaves more questions than answers

2015 ◽  
Vol 16 (1) ◽  
pp. 52-58
Author(s):  
Bruce Bettigole ◽  
Charlie Kruly
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Due Diligence ◽  
Content Type ◽  
Enforcement Action

Purpose – To highlight the insufficient guidance offered by a recent Securities and Exchange Commission settlement regarding a broker-dealer’s obligation to inquire into its customers’ sales of unregistered securities. Design/methodology/approach – Discusses the traditional interpretation of Section 4(a)(4) of the Securities Act of 1933, which requires broker-dealers to conduct a reasonable inquiry into the basis for their customers’ proposed sales of unregistered securities. Then reviews a recent SEC settlement that appears to suggest the SEC believes there is a more stringent obligation on broker-dealers to inquire into their customers’ proposed sales of unregistered securities. Findings – The SEC’s recent settlement states that various inquiries conducted by a broker-dealer into its customers’ claimed registration exemptions were insufficient to satisfy the broker-dealer’s obligation under Section 4(a)(4). However, the settlement does not address why these inquiries were insufficient or what inquiries, if any, would have satisfied the broker-dealer’s obligations under Section 4(a)(4). Originality/value – This article analyses an SEC settlement that may, either intentionally or inadvertently, have used an enforcement action to attempt to heighten broker-dealers’ obligations under Section 4(a)(4).

2020 SEC risk alert provides guidance for private fund advisers

2020 ◽  
Vol 21 (1) ◽  
pp. 49-54
Author(s):  
Kenneth Breen ◽  
Phara Guberman
Keyword(s):  
Best Practices ◽  
Design Methodology ◽  
Conflicts Of Interest ◽  
Securities And Exchange Commission ◽  
Internal Controls ◽  
Content Type ◽  
Policies And Procedures ◽  
Expert Analysis ◽  
Practical Implications ◽  
The U.S

Purpose To analyze the U.S. Securities and Exchange Commission (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) June 2020 Risk Alert, which identified three categories of deficiencies that the SEC regularly finds in its reviews of advisers to private funds, in order to understand its guidance and recommend best practices. Design/methodology/approach The study discusses the categories of deficiencies that the SEC regularly finds in its reviews of private fund advisers, current SEC enforcement trends, and recommendations for disclosures, internal controls, policies and procedures. Findings The SEC will expect private funds to identify and remedy regular deficiencies in three primary categories: gaps in client and investor disclosures regarding conflicts of interest; deficiencies in disclosures related to fees and expenses; and issues with policies and procedures regarding the treatment of material nonpublic information. Practical implications Private fund advisers should expect increased scrutiny during examinations on the identified deficiencies and use this opportunity to be proactive in addressing these issues. Originality/value Expert analysis and guidance from experienced securities enforcement attorneys.

A failure to supervise: the SEC casts a shadow over internal investigations

2019 ◽  
Vol 20 (2) ◽  
pp. 9-12
Author(s):  
John P. Nowak ◽  
Thomas A. Zaccaro ◽  
Katherine K. Solomon
Keyword(s):  
Design Methodology ◽  
The United States ◽  
Securities And Exchange Commission ◽  
Red Flags ◽  
Content Type ◽  
General Terms ◽  
Expert Analysis ◽  
Investment Advisers ◽  
Internal Procedures

Purpose The purpose of this article is to highlight a recent settlement by the United States Securities and Exchange Commission (the “SEC”) in which it alleged that a regulated entity failed to supervise a representative principally because the entity did not establish clear guidance as to how its personnel should investigate red flags of a representative’s potential misconduct (e.g., how to follow up on the red flags and define the scope of any inquiry). Design/methodology/approach This article provides an overview of failure-to-supervise liability for broker-dealers and investment advisers, and highlights key takeaways from the SEC’s recent enforcement resolution that may be applied in establishing compliance procedures relating to internal investigations going forward. Findings The article concludes that the SEC appears to expect regulated entities to implement procedures guiding employees on “how to investigate” suspicious activity. Companies, however, should define such procedures in general terms to allow for flexibility in investigations, which can present unique or unforeseen situations. Internal procedures must also account for and preserve attorney-client privilege and attorney work product protections. Originality/value This article provides expert analysis and practical guidance from experienced lawyers in the Investigations and White Collar Defense and Securities Enforcement practices

Sanofi settles FCPA charges with SEC for $25.2 million

2019 ◽  
Vol 20 (1) ◽  
pp. 27-30
Author(s):  
Jennifer Kennedy Park ◽  
Abena Mainoo
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Internal Controls ◽  
Healthcare Industry ◽  
Foreign Corrupt Practices Act ◽  
Content Type ◽  
Enforcement Action ◽  
Compliance Programs ◽  
The Us ◽  
Practical Implications

Purpose To explain a recent enforcement action by the US Securities and Exchange Commission (SEC) highlighting risk factors for Foreign Corrupt Practices Act (FCPA) violations. Design/methodology/approach Summarizes the basis of the SEC’s enforcement action against Sanofi for violating the FCPA’s books and records and internal controls provisions, reviews the terms of the SEC’s resolution with Sanofi, explains Sanofi’s remedial efforts and cooperation with the SEC’s investigation, and discusses factors contributing to corruption risks in the healthcare industry. Findings The SEC’s enforcement action against Sanofi, and other recent enforcement actions, underscore the importance of comprehensive anti-corruption compliance programs and strong internal controls across large multinationals and their subsidiaries. Practical implications Companies operating in high-risk industries and markets should regularly assess and address corruption risks. Originality/value Practical guidance from experienced enforcement lawyers.

The SEC meditates on The DAO: tracing the initial arc of cryptosecurities regulation

2019 ◽  
Vol 20 (4) ◽  
pp. 58-67
Author(s):  
Aegis Frumento ◽  
Stephanie Korenman
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
The Us ◽  
Regulatory Principle ◽  
Securities Laws

Purpose The purpose of this paper is to review the first two years of the US Securities and Exchange Commission (SEC) efforts to regulate cryptosecurities to assess the trends of that regulation. Design/methodology/approach The authors review the SEC’s official pronouncements and informal statements about, and its enforcement actions against participants in, various early experiments in cryptosecurities. Findings The SEC has been evolving how to apply the US securities laws to cryptosecurities since its report on The DAO two years ago. When “coins” on a blockchain meet the traditional Howey Test, it is easy to categorize them as “securities.” However, the bedrock regulatory principle that some person must account for violations is frustrated by automated blockchain transactions, where no human is in control. This tension risks a “moral crumple zone” arising around cryptosecurities, in which persons might become liable for violations that they cannot fairly be said to have caused. Originality/value This paper provides valuable information and insights about the beginnings of US regulation of cryptosecurities and how the evolution of that regulation is trending after two years.

SEC staff expands relief from broker-dealer registration under US Securities Exchange Act for intermediaries in private M&A transactions

2014 ◽  
Vol 15 (2) ◽  
pp. 22-25
Author(s):  
Henry Kahn ◽  
Robert Welp ◽  
Richard Parrino
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Private Companies ◽  
Content Type ◽  
The Usa ◽  
Securities Laws ◽  
Privately Held

Purpose – To review the M&A Brokers “no-action” letter issued in February 2014 by the staff of the USA Securities and Exchange Commission that clarifies the circumstances in which intermediaries (M&A brokers) may receive transaction-based compensation for services provided in connection with sales of private companies without having to register and be regulated by the SEC as broker-dealers under the USA Securities Exchange Act of 1934. Design/methodology/approach – Examines the new SEC staff interpretative guidance on activities of M&A brokers in light of USA federal securities laws and previous staff no-action letters that address the application of broker-dealer registration requirements to such intermediaries when they render services in connection with purchases and sales of privately-held companies. Summarizes the manner in which the SEC staff’s new position expands the types of private M&A transactions on which intermediaries may advise and broadens the scope of services they may provide without subjecting themselves to Exchange Act registration. Findings – The M&A Brokers letter dispels much of the uncertainty existing under earlier SEC staff no-action letters about the scope of permissible activities in which unregistered intermediaries may engage in private M&A transactions. By broadening the scope of those activities under the federal statutory regime governing broker-dealers, the new staff guidance should facilitate the expansion of services provided by M&A brokers without registration and permit greater flexibility for M&A brokers and their clients to structure compensation arrangements. The paper cautions that, absent reform of more restrictive regulation under the securities laws of some states, the prospects for expanded involvement by unregistered intermediaries in private M&A transactions may not be fully realized. Originality/value – Expert guidance from experienced securities lawyers.

SEC charges “ICO Superstore” as unregistered broker-dealer

2019 ◽  
Vol 20 (1) ◽  
pp. 40-43
Author(s):  
John J. Sikora Jr. ◽  
Stephen P. Wink ◽  
Douglas K. Yatter ◽  
Naim Culhaci
Keyword(s):  
Financial Services ◽  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
The Us ◽  
Recent Developments ◽  
Practical Guidance ◽  
Securities Laws ◽  
Enforcement Activity

Purpose To analyze the settled order of the US Securities and Exchange Commission (SEC) against TokenLot LLC (TokenLot), which was the SEC’s first action charging a seller of digital tokens as an unregistered broker-dealer. Design/methodology/approach Analyzes the SEC’s order within the context of other recent actions by the SEC on cryptocurrencies and digital tokens and discusses future implications of the order in this area. Findings The SEC’s order against TokenLot as an unregistered broker-dealer was a logical next step in its enforcement activity in the cryptocurrency and digital token space.The order demonstrates that the SEC expects firms in the cryptocurrency space to use the well-established constructs of federal securities laws to evaluate their business activities to ensure those activities are legally compliant. Originality/value Practical guidance from experienced securities and financial services lawyers analyzing recent developments in a nascent area of SEC enforcement.

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