Last week, the U.S. Attorney’s Office for the Eastern District of Virginia moved to dismiss public corruption charges against former Virginia Governor Robert McDonnell, and his wife, Maureen McDonnell. The decision comes after the U.S. Supreme Court unanimously vacated the former Governor’s corruption conviction earlier this summer. McDonnell v. United States, 579 U. S. ____ (2016). The government’s decision not to further pursue charges against the McDonnells is a signal that prosecutors are paying heed to the Supreme Court’s warnings about over-aggressive interpretations of criminal statutes and that they had scant additional evidence against the McDonnells.
FinCEN Proposal Looks to Extend AML Requirements to Non-Federally Regulated Banks
On August 25, 2016, the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, proposed a rule that would require all banks, regardless of whether they are subject to regulation by a “Federal functional regulator,” to establish and implement written AML programs, conduct ongoing customer due diligence, and identify and verify the identity of the beneficial owners of their legal entity customers. The proposal would also extend customer identification program requirements to banks not covered under existing rules.
Seventh Circuit Adopts Trulia Standard for Disclosure-Only Settlements
Last week, in an opinion authored by Judge Richard Posner, the U.S. Court of Appeals for the Seventh Circuit rejected a proposed class-action settlement arising from Walgreen Co.’s acquisition of the Swiss-based pharmacy company, Alliance Boots GmbH. In re Walgreen Co. Stockholder Litigation, No. 15-3799 (7th Circ. Aug. 10, 2016). Judge Posner’s sharply-worded opinion endorsed the Delaware Chancery Court’s holding in In re Trulia, Inc. Stockholder Litigation, 129 A.3d 884, 894 (Del. Ch. 2016) and represents another blow to disclosure-only settlements of merger litigation.
Joshua Newville Discusses Amendments to Rules Governing SEC Administrative Proceedings with Compliance Week
Last month, the SEC announced that it had adopted amendments updating the rules of practice governing its in-house administrative proceedings. On August 9, 2016, Compliance Week published an article on the recently-adopted amendments, entitled, SEC modifies administrative proceedings, but did it go far enough? The article features insights from Proskauer partner Joshua Newville, who discusses whether the amendments sufficiently address the SEC’s perceived “home-field advantage” in administrative proceedings.
Justice Department Launches New FCPA Pilot Program
The Department of Justice yesterday upped the ante in its efforts to encourage companies to self-report potential Foreign Corrupt Practices Act (“FCPA”) violations when it unveiled a one-year pilot program that includes carrots for companies who take the self-reporting route and sticks for those that don’t. This announcement follows the Department’s recent emphasis on prosecuting individuals in white collar cases, the addition of new resources to combat corruption that includes ten new FCPA prosecutors and three new squads of FBI agents dedicated to investigating corruption, and enhanced cooperation between U.S. law enforcement and their international counterparts. Assistant Attorney General of the Criminal Division Leslie Caldwell said that the objective of the pilot program is to provide greater transparency into the Department’s charging decisions and to provide an incentive for companies to self-disclose FCPA misconduct so that the Department can prosecute “individuals whose criminal wrongdoing might otherwise never be uncovered by or disclosed to law enforcement.”
Eleventh Circuit Considers Challenge to SEC Administrative Proceedings
Last week, in the consolidated cases of Charles Hill, Jr. v. SEC (No. 15-12831) and Gray Financial Group, Inc. v. SEC (No. 15-13738), the U.S. Court of Appeals for Eleventh Circuit heard oral argument on the question of whether federal district courts have jurisdiction to review constitutional challenges to SEC
DOL Open to Changing Fiduciary Proposal, But Some Press for it to be Scrapped
As we wrote about here, in April the Department of Labor issued its highly anticipated, re-proposed regulation addressing the standard of care for broker-dealers and other financial professionals who provide retirement investment advice. Since its release, the proposed rule has come under fire from critics who maintain that the DOL proposal, while well intentioned, will ultimately limit access to affordable retirement services and result in investor confusion. Last week, the chorus of opposition grew louder as the proposed rule’s 90-day notice-and-comment period came to an end.
Sensing the growing opposition, earlier this month Timothy Hauser, the Deputy Assistant Secretary for Program Operations in the DOL’s Employee Benefits Security Administration (“EBSA”), signaled that the DOL is open to reworking its controversial fiduciary proposal. Speaking at a meeting of the Securities and Exchange Commission’s Investor Advisory Committee, Mr. Hauser said that, while the DOL is committed to addressing the issue of conflicted investment advice, the agency is not “wedded to any particular choice of words or regulatory text.”
The Battle Lines Continue to Form Over the DOL’s Fiduciary Proposal
Earlier this month, the Securities Industry and Financial Markets Association (“SIFMA”) released its “Proposed Best Interests of the Customer Standard for Broker-Dealers” – an alternative to the U.S. Department of Labor’s (“DOL”) proposed regulation addressing the standard of care for broker-dealers and other financial professionals who provide retirement investment advice. Unlike the DOL’s proposed rule, which we wrote about here, SIFMA’s across-the-board proposal emphasizes disclosure and investor consent as mechanisms to promote a uniform “best interest” standard.
In remarks accompanying SIFMA’s announcement, Kenneth E. Bentsen, the organization’s President and CEO, reiterated SIFMA’s support for a uniform standard to govern broker-dealers and investment advisers providing investment advice to retail customers. Mr. Bentsen highlighted a number of issues with the current DOL proposal, expressing specific concern that it would limit access to affordable retirement services and result in investor confusion. Mr. Bentsen explained that, given the increased liability risk and compliance costs associated with the current DOL proposal, firms have indicated that, if enacted, they plan to shift their commission-based brokerage accounts to (more expensive) fee-based accounts. Because, according to Mr. Bentsen, most firms are willing to provide fee-based services only for higher-balanced accounts, this could potentially leave millions of consumers with “no option for advice or guidance.” In addition, Mr. Bentsen said that “it is hard to see how investors won’t be confused” by the DOL’s proposed rule, which will apply different standards to broker-dealers when they provide retirement-related investment advice than when they provide investment advice that is not retirement related.