Compliance Bricks and Mortar for February 17

These are some of the compliance-related stories that recently caught my attention.


Court to Reconsider Authority of SEC Administrative Law Judges by Dave Michaels and Brent Kendall in the Wall Street Journal

The U.S. Court of Appeals for the District of Columbia Circuit said it would reconsider an appeal that argues the SEC’s administrative courts are unconstitutional. The argument was made by Raymond Lucia, a California financial adviser and radio personality who was accused of misleading investors about an investing strategy he called “Buckets of Money.”

The appeals court’s decision wipes out what was an earlier SEC victory in the case. In August, a panel of judges found in the SEC’s favor and dismissed Mr. Lucia’s appeal. In a separate ruling in December, an appeals court in Denver ruled the in-house courts don’t meet constitutional requirements. [More…]


SEC Chief Scales Back Powers of Enforcement Staff by Dave Michaels in the Wall Street Journal

The new Republican leader of the Securities and Exchange Commission has imposed fresh curbs on the agency’s enforcement staff, scaling back their powers to initiate investigations of alleged financial misdeeds. The move by Michael Piwowar—named acting head of the agency in late January by the Trump administration—narrows actions launched during the Obama administration designed to make it easier for the Wall Street regulator to launch probes in the wake of the financial crisis and a series of colossal investment scandals.[More…]


Microsoft’s New Cyber Assessment Tool Just Dropped by Matt Kelly in Radical Compliance

Just in time for everyone gathering at the RSA Conference in San Francisco this week, Microsoft has announced plans to rate the effectiveness of customers’ cybersecurity efforts—and at least one insurance company will start using that score to set prices for its cyber-insurance policies. [More…]


Ninth Circuit: Ethics Code Violations Insufficient to State Securities Law Claim by Kevin LaCroix in The D&O Diary

The Ninth Circuit, in a recent case arising out the departure of former H-P CEO Mark Hurd for alleged misconduct, examined whether a senior official’s violation of a company’s ethics code, after having touted the company’s high standards for ethics and compliance, may state a claim for violation of the federal securities laws. [More…]


Throwing Away a Legal Career for $310,000 by Peter J. Henning in DealBook

It appears that Jeffrey A. Wertkin may have tried to do just that by passing a copy of a sealed whistle-blower complaint against a Silicon Valley company to one of its employees in exchange for that amount. Unfortunately, he never actually got the money because he was met instead by an F.B.I. agent, who arrested him. Mr. Wertkin responded “My life is over,” according to a complaint filed in the Federal District Court in San Francisco. [More…]


Counterarguments to SEC Statistical Analysis in Enforcement Actions and Inquiries by Tiago Duarte-Silva and Nicolas Morgan in the CLS Blue Sky Blog

In an April 2016 action, the SEC showed that “proprietary accounts averaged a first-day gain of 0.26% while client accounts averaged a first-day loss of 1.02%” and supported its allegations by showing that the “difference between the allocations [by another investment adviser] of profitable trades to proprietary accounts as compared to profitable trades allocated to the client accounts is statistically significant; the probability of observing such an uneven allocation of profitable trades by chance is less than one-in-one-million.”  Another April 2016 action provided similar arguments. [More…]


Compliance Lessons from Super Bowl LI by Tom Fox in the FCPA Compliance Report

At one point in the fourth quarter, Atlanta had a 99.7% chance of winning the game. This means New England had a .3% chance of winning. While pollsters were drubbed for their abysmal predictions surrounding the Brexit vote and US presidential election, this number from the Super Bowl would seem to be of a magnitude as to simply being beyond belief. How could such a number be both so high and so wrong at the same time? [More…]


Image is Parallel Stripes by Mary Crandall
CC BY NC SA

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