The recently issued Examination Priorities for 2016 reveals that the SEC’s priorities are organized around the same three thematic areas as last year: (i) retail investors, including retirement investments; (ii) market-wide risks; and (iii) the SEC’s increasing analysis of data to identify problematic activity.

US DOJ sealLast week, the DOJ announced its first corporate enforcement action under the Foreign Corrupt Practice Act (“FCPA”) for 2015. IAP World Services, Inc., a Florida-based defense and government contractor, agreed to pay $7.1 million in a non-prosecution agreement (NPA) for conspiring to bribe Kuwaiti officials in exchange for a contract to build a large-scale homeland surveillance system in Kuwait. The primary employee involved, James Rama, pleaded guilty to one count of conspiracy to violate the FCPA. (see here for criminal information and here for plea agreement). Fresh off the heels of the announcement that the DOJ has declined to prosecute Petro Tiger (only the second publicly-acknowledged declination of its kind), the IAP settlement is the first significant case from the DOJ in a year where FCPA enforcement has thus far been dominated by the SEC.

According to the NPA, Kuwait’s Ministry of the Interior started a homeland security project in 2004, which was divided into two phases. Rama and others allegedly created a shell company, Ramaco, which bid on and won the Phase I contract. Rama and IAP allegedly designated half of the approximately $4 million Ramaco received from the Phase I contract to bribe Kuwaiti officials through a consultant to assist IAP in gaining the lucrative Phase II contract.

In December, we wrote about the recent Supreme Court decision in Owens v. Dart Cherokee Basin Operating Co. In Owens, the Court held that class action defendants need not provide evidentiary submissions in support of their notice of removal of a case from state to federal court. Rather, they need only include in their notices a “plausible allegation” that the amount in controversy exceeds the $5 million jurisdictional threshold set forth in the Class Action Fairness Act (“CAFA”).

In so holding, the majority relied on the wording of the removal statute itself, which merely requires a “short and plain statement” setting forth a good-faith basis supporting removal. The Court’s decision thus set forth for corporate class action defendants the minimum requirements their notices of removal must contain. The Court, however, neither held nor addressed whether a “plausible allegation” will sustain the removing defendants’ evidentiary burden of proof where the class action plaintiffs contest whether the amount in controversy exceeds $5 million.

finra_logoIn a pair of recent opinions, the Securities and Exchange Commission (SEC) found that FINRA acted within the scope of its rules and governing statutory scheme in refusing to announce corporate actions for companies whose executives were subjects of regulatory actions alleging securities laws violations.

FINRA is a self-regulatory organization (SRO) responsible for regulating the market for securities.  It owns and operates the OTC Bulletin Board (OTCBB), an electronic inter-dealer quotation system that FINRA provides to its members for securities not listed on a national securities exchange, such as NASDAQ and NYSE.  FINRA provides various services for companies whose securities are listed on the OTCBB, such as processing requests to announce and effectuate certain corporate actions, including mergers, dividends, splits, and name and domicile changes.

In 2010, based on concerns that FINRA’s corporate action announcement processing services could potentially be used by companies to perpetrate stock fraud and other securities laws violations, FINRA proposed, and the SEC approved, FINRA Rule 6490.  This rule permits FINRA to deny an issuer’s request that FINRA announce a corporate action under certain circumstances.  Specifically, FINRA Rule 6490(d)(3) states that where a company-related action is deemed deficient (i.e., FINRA has actual knowledge that officers or directors connected to the company are the subject of an adjudicated or settled regulatory action related to fraud or other securities laws violations), FINRA may determine not to process the corporate action if refusing to do so promotes the protection of investors, the public interest and the maintenance of fair and orderly securities markets.

The US Supreme Court ruled on Monday that class action defendants need not provide evidentiary submissions in support of their attempts to remove a case from state to federal court.  Rather, they need only include in their notice of removal a “plausible allegation” that the amount in controversy exceeds the jurisdictional threshold.

In Owens v. Dart Cherokee Basin Operating Co., the plaintiff filed a putative class action in Kansas state court, alleging that the energy-company defendants underpaid royalties due on oil and gas leases.  The defendants removed the action to the U.S. District Court for the District of Kansas pursuant to the Class Action Fairness Act (“CAFA”), which gives federal jurisdiction over class actions only if the amount in controversy exceeds $5 million.  The defendants made the short and plain statement in their notice of removal that the alleged underpayments to putative class members totaled more than $8.2 million.  In response, the plaintiff moved to remand the case to state court on the ground that the removal notice included no evidence demonstrating that the amount in controversy exceeded $5 million.  The district court agreed with the plaintiff, finding that Tenth Circuit precedent required proof of the amount in controversy in the notice of removal under CAFA.  The Tenth Circuit refused to review the district court’s ruling.