Compliance Bricks and Mortar for May 13

These are some compliance stories that recently caught my attention.


Coinbase earnings were bad. Worse still, the crypto exchange is now warning that bankruptcy could wipe out user funds
By Nicholas Gordon

Coinbase said in its earnings report Tuesday that it holds $256 billion in both fiat currencies and cryptocurrencies on behalf of its customers. Yet the exchange noted that in the event it ever declared bankruptcy, “the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings.” Coinbase users would become “general unsecured creditors,” meaning they have no right to claim any specific property from the exchange in proceedings. Their funds would become inaccessible.


Elon Musk’s Belated Disclosure of Twitter Stake Triggers Regulators’ Probes
By Dave Michaels

The Securities and Exchange Commission is probing Mr. Musk’s tardy submission of a public form that investors must file when they buy more than 5% of a company’s shares, the people said. The disclosure functions as an early sign to shareholders and companies that a significant investor could seek to control or influence a company.

The Tesla Inc. chief executive made his filing on April 4, at least 10 days after his stake surpassed the trigger point for disclosure. Mr. Musk hasn’t publicly explained why he didn’t file in a timely manner.


Federal Reserve Board issues enforcement action with former employee of Deutsche Bank

Romero altered the proposed annual base salary in an offer letter he received from a competing financial institution, and provided that offer letter containing the altered salary to the Bank in an effort to increase his annual base salary; …
[T]he Bank in December 2018 matched the altered salary from the competing financial institution and increased Romero’s annual base salary by approximately $28,000….


FTC Takes Action Against Lions Not Sheep and Owner for Slapping Bogus Made in USA Labels on Clothing Imported from China

Utah-based Lions Not Sheep is an apparel company that sells t-shirts, sweatshirts, jackets, and sweaters on their own website as well as through Amazon and Etsy. The company and its owner Whalen heavily marketed it through social media channels, claiming that it would “show people it’s possible to live your life as a LION, Not a sheep.” Their Made in USA claims online and on product labels included “Made in the USA,” “Made in America,” “Are your products USA Made?” “100% AMERICAN MADE,” and “BEST DAMN AMERICAN MADE GEAR ON THE PLANET.” In most cases, the products advertised using these claims consist of wholly imported shirts and hats with limited finishing work performed in the United States.


Compliance Bricks and Mortar for May 6

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


A Best Lawyers List Is Suing Another Best Lawyers List
By Jacob Gershman

[The New Jersey Supreme Court-appointed committee on attorney advertising] cautioned New Jersey attorneys against touting dubious distinctions. While lawyers in the state may promote their inclusion in lawyer directories like “Super Lawyers” or “Best Lawyers,” they may not advertise themselves as a “super lawyer” or the “best lawyer.” An attorney can still sip coffee from a “World’s Greatest Lawyer” mug like the Saul Goodman character on “Better Call Saul,” according to the advertising committee’s chairman.


SEC Nearly Doubles Size of Enforcement’s Crypto Assets and Cyber Unit

Since its creation in 2017, the unit has brought more than 80 enforcement actions related to fraudulent and unregistered crypto asset offerings and platforms, resulting in monetary relief totaling more than $2 billion. The expanded Crypto Assets and Cyber Unit will leverage the agency’s expertise to ensure investors are protected in the crypto markets….


The SEC’s New Risk Alert Warns about the Use of Alternative Data
by Andrew J. Ceresney, Avi Gesser, Julie M. Riewe, Kristin A. Snyder, Jonathan R. Tuttle, Charu A. Chandrasekhar, and Mengyi Xu

The Risk Alert should be considered along with the SEC’s September 2021 enforcement action against alternative data provider App Annie and EXAMS’ recent statement in its 2022 Priorities that it plans to scrutinize advisers’ use of alternative data in their business and investment decision-making processes.  When viewed together, these actions demonstrate the agency’s increasing scrutiny of the usage of alternative data for securities trading and the potential that such data may contain MNPI.  As discussed in our blog post on the case, the SEC found that alternative data provider App Annie made material misrepresentations and omissions about its policies and procedures for handling alternative data (in that case, data on companies’ mobile app usage) and failed to implement its policies and procedures involving such data.


The pandemic’s true death toll
The Economist

“How many people have died because of the covid-19 pandemic? The answer depends both on the data available, and on how you define “because”. Many people who die while infected with SARS-CoV-2 are never tested for it, and do not enter the official totals. Conversely, some people whose deaths have been attributed to covid-19 had other ailments that might have ended their lives on a similar timeframe anyway. And what about people who died of preventable causes during the pandemic, because hospitals full of covid-19 patients could not treat them? If such cases count, they must be offset by deaths that did not occur but would have in normal times, such as those caused by flu or air pollution.”

“Although the official number of deaths caused by covid-19 is now 6.2m, our single best estimate is that the actual toll is 21.3m people. We find that there is a 95% chance that the true value lies between 14.7m and 25m additional deaths.”

Compliance Bricks and Mortar for April 29

Postings have been few and far between. Work remains busy. Compliance requirements only increase. My non-work activities have kept me from writing. Of course I’ve been doing a lot of bicycle riding, mostly in preparation for the Pan Mass Challenge. I’m serving on my city’s Historical Commission. I joined the board of directors of MassBike, the state-wide cycling advocacy and education non-profit.

Here are a few stories that recently caught my attention.


Top 5 SEC Enforcement Developments
by Michael D. Birnbaum, Jina Choi, and Haimavatha V. Marlier, of Morrison & Foerster LLP

  1. Proposed Rules Changes on Cybersecurity
  2. Proposed Rules Changes on Climate-Related Disclosures
  3. Proposed Rule Changes for SPACs
  4. Guidance for Lawyers and CCOs Acting as Gatekeepers
  5. Ripple Executives Must Face Charges, but Key Defense Still in Play

Archegos founder Bill Hwang indicted for fraud; chief risk officer pleads guilty
By Jaclyn Jaeger

One example specifically cited was Archegos’s position in ViacomCBS stock. At one point, Hwang effectively controlled more than 50 percent of the freely trading shares of ViacomCBS, which nobody outside Archegos knew about, according to the Department of Justice. How much the ViacomCBS position constituted Archegos’s capital was often misrepresented on calls with risk personnel from counterparties, according to the SEC, which noted the figure at more than 60 percent as of January 2021.


Elon Musk’s Early Twitter Purchase Under FTC Scrutiny
By Josh Sisco and Jessica Toonkel

The Federal Trade Commission recently opened an inquiry into whether Musk failed to comply with an antitrust reporting requirement as he amassed his initial 9.1% stake in Twitter between the end of January and the beginning of April, The Information has learned. At the heart of the inquiry is whether Musk was initially buying as someone who wanted to influence Twitter management or whether he saw himself as more of a passive shareholder. Notably, Musk’s initial filing with the Securities and Exchange Commission categorized his purchase as a passive stake—which immediately raised questions given his public comments about how Twitter is run.


“The Name’s Bond:” Remarks at City Week
by Chair Gary Gensler

The fixed income markets may not, on the surface, seem like the most cinematic part of the financial system. There are no “meme” bonds (at least, not yet). The nightly news is more likely to focus on stocks.

And yet, bonds are far from the “dullest” market in the world. They’re incredibly important — to individuals, companies, and governments in the U.S. and around the world. Fixed income markets, particularly government securities, money markets, and repurchase agreements (“repos”), are integral to how central banks around the globe administer monetary policy. As individual investors start to approach retirement, they often turn to fixed income as a lower-risk investment.


And some cycling content:
Homestretch
The Homestretch Foundation seeks to close the gender pay gap for women endurance athletes and provide them with training, mentorship, and a community in which they can excel.


Compliance Bricks and Mortar for September 17

Back blogging on a regular basis for the week. Hoping to keep it up. These are some other compliance-related stories that recently caught my attention.


The Scammer Threat to Your Hotline
By Ted Banks
SCCE’s The Compliance & Ethics Blog

Several of the companies that originally received the fake report have now received a message from one Ofir Gefen, who purports to be a Ph.D. candidate at the National University of Singapore. The messages were, according to Gefen’s email, part of a study to test response times of public companies based on whether the hotline call related to conduct that might benefit the company (e.g., bribery) or the language in the report.  Gefen said “Once the claim was made, we’ve only recorded your initial response and did not pursue the matter any further. Thereby interfering with your day-to-day business as little as possible.” He admitted that this study involved a deception, and that there were no real people involved. He tracked response times, and then said (to reassure the companies that received the message) that all identifiable information would be scrubbed, and then the data would be uploaded to Amazon Mechanical Turk (MTurk), which I had never heard of before.

https://complianceandethics.org/the-scammer-threat-to-your-hotline-updated/

Update on Jailed Compliance Officer
By Matt Kelly
Radical Compliance

We have an update on Samuel Bickett, the corporate compliance officer jailed in Hong Kong on trumped-up charges that he assaulted a police officer. He is currently appealing his 18-week prison sentence, and spending the rest of his time helping other inmates he met during an early stint in Hong Kong’s maximum-security prison.

Bickett, you might recall, was sentenced in July on charges that he assaulted a plainclothes police officer in December 2019 while walking through a Hong Kong subway station. One problem with that case, however: the police officer was beating a teen-aged boy participating in pro-democracy protests, and never identified himself as a police officer despite others repeatedly asking whether he was.

https://www.radicalcompliance.com/2021/09/14/update-on-jailed-compliance-officer/

The Economics of Crypto Funds
By Paul P. Momtaz
The CLS Blue Sky Blog

The most striking finding is that crypto funds underperform the market, no matter the benchmark (equally-, value-, and liquidity-weighted crypto market benchmarks). For example, relative to the equally-weighted market benchmark, crypto funds underperform by 21 percent per year. This means that investors are on average better off if they invest in either Bitcoin, Ether, or both.The result is striking because crypto funds underperform the market even before fees. Considering that most of the funds charge investors substantial fees (a performance fee of 20 percent on the profits and a management fee of 2 percent on the assets under management are typical), the underperformance is even more pronounced.

https://clsbluesky.law.columbia.edu/2021/09/15/the-economics-of-crypto-funds/

Del. Court Substantially Denies Boeing Duty of Oversight Claim Dismissal Motion
By Kevin LaCroix
The D&O Diary

Of particular interest is Vice Chancellor Zurn’s conclusion that the plaintiffs had sufficiently alleged scienter — that is, not only that the directors acted inconsistently with their fiduciary duties, but they also “knew of their shortcomings.” Zurn noted that in Marchand the Delaware Supreme Court inferred scienter from the numerous oversight shortcomings alleged; Zurn said that “those allegations support an inference of scienter [in this case] as well.” Zurn added further that no inference is needed in this case, in light of the board’s own words showing that “directors knew the Board should have had structures in place to receive and consider safety information.” Zurn quoted from emails sent after the Ethiopian Air crash, in which the need for Board reporting on safety issues; she also referred to numerous public statements in which the Board was “crowing” about “taking specific actions to monitor safety that it did not actually perform.” These statements “evidence that at the least [the company’s new CEO and board chair] knew what the Company should have been doing all along.”

https://www.dandodiary.com/2021/09/articles/shareholders-derivative-litigation/del-court-substantially-denies-boeing-duty-of-oversight-claim-dismissal-motion/

Must A Corporation Have A Physical Location?
By Keith Paul Bishop
California Corporate & Securities Law

When it comes to corporations, California rejects the possibility of a corporation without a “there”.    All California corporations and foreign corporations registering to transact intrastate business in California must annually file a Statement of Information (Form SI-550).  Item 3a of the Statement requires disclosure of the corporation’s “complete street address, city, state and zip code of the corporation’s principal executive office”.  Lest there be any doubt, the Secretary of State’s instructions state that the address must be a “physical address” and prohibit a P.O. Box address or an “in care of” address.  

https://www.calcorporatelaw.com/must-a-corporation-have-a-physical-location

Former employer of ‘Roaring Kitty,’ who pumped up GameStop, fined for lack of oversight.
by Matt Phillips
The New York Times

The insurer MassMutual will pay a $4 million fine to Massachusetts securities regulators as part of a settlement involving the conduct of Keith Gill, a former employee and online trader known as “Roaring Kitty” whose relentless cheerleading for shares of GameStop was at the heart of the meme stock mania earlier this year.

https://www.nytimes.com/2021/09/16/business/roaring-kitty-gamestop-massmutual-settlement.html

Compliance Bricks and Mortar for September 10

Return Time.
Back to the office.
Back to school for the kids.
And back to blogging more regularly.

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


In Silicon Valley, Criminal Prosecutors See No Evil
by David Stretifeld
The New York Times

Federal prosecutors in Northern California took on only 57 white-collar crime cases in the 2020 fiscal year, down from 94 in 2019, according to researchers. Although 2021 is likely to show a rebound, the total will still be far below the heyday of prosecutorial action in 1995, when 350 cases were brought.

https://www.nytimes.com/2021/09/07/technology/in-silicon-valley-criminal-prosecutors-see-no-evil.html

Debevoise & Plimpton on the Latest Round of SEC Cybersecurity Enforcement Actions
By Avi Gesser, James Pastore and Mengyi Xu
The CLS Blue Sky Blog

On August 30, 2021, the SEC filed settled enforcement actions against three groups of broker-dealers and investment advisers for failing to protect confidential customer information in violation of Rule 30(a) of Regulation S-P (the “Safeguards Rule” or “Rule”). One group of the entities was also found to have violated Section 206(4) of the Advisers Act and Rule 206(4)-7, by allegedly providing misleading information in its breach notification to customers. These actions, which were announced just two weeks after the SEC imposed a $1 million civil penalty for an issuer’s allegedly misleading data breach disclosures in connection with a public company’s filings, demonstrate the agency’s increased efforts to enforce its cyber priorities, as we noted in July 2021 with the First American settlement.

https://clsbluesky.law.columbia.edu/2021/09/07/debevoise-plimpton-on-the-latest-round-of-sec-cybersecurity-enforcement-actions

Madoff Victims Get Second Crack at Citigroup’s $343 Million
By Bob Van Voris
Bloomberg

The U.S. Court of Appeals in New York on Monday reinstated a suit against Citi by Irving Picard, the trustee charged with recovering money for Madoff’s victims, over funds transferred to the bank. Picard claimed Citi failed to act on red flags concerning Madoff, but a bankruptcy court dismissed the suit, finding the trustee had not shown the bank acted with “willful blindness” to possible fraud.

The appeals court said “willful blindness” was the wrong standard to apply and the burden of proof shouldn’t have been on Picard. The ruling revived similar claims for $213 million from Legacy Capital Ltd., a British Virgin Islands corporation that invested solely with Madoff, and a $6.6 million claim against Khronos LLC, which provided accounting services to Legacy.

https://www.bloomberg.com/news/articles/2021-08-30/madoff-victims-get-second-crack-at-citigroup-s-343-million?

Bitcoin Uses More Electricity Than Many Countries. How Is That Possible?
By Jon Huang, Claire O’Neill and Hiroko Tabuchi
Illustrations by Eliana Rodgers
The New York Times

[C]onsider this: The process of creating Bitcoin to spend or trade consumes around 91 terawatt-hours of electricity annually, more than is used by Finland, a nation of about 5.5 million.

That usage, which is close to half-a-percent of all the electricity consumed in the world, has increased about tenfold in just the past five years.

https://www.nytimes.com/interactive/2021/09/03/climate/bitcoin-carbon-footprint-electricity.html

Compliance Bricks and Mortar for April 30

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


The Bizarre Case of Snowden and a Get-Rich-Quick Real Estate Investing Conference
Jack Poulson
Vice.com

Edward Snowden joined an online “elite real estate investment club” Saturday afternoon, spoke for several minutes about whistleblowing, called out one of the hosts for allegedly running a Ponzi scheme, then logged out in one of the more bizarre online conferences in recent memory.

https://www.vice.com/en/article/epndnz/the-bizarre-case-of-snowden-and-a-get-rich-quick-real-estate-investing-conference

Bitcoin, We Have a Problem
Matt Kelly
Radical Compliance

To be clear, Tesla made no inaccurate financial statements with this maneuver. But it did play fast and loose with a highly volatile asset (bitcoin) that gave the company a nice boost to the bottom line. Cynics would say Tesla came close to earnings management: it could see the value of bitcoin appreciating, and knew how much the company could sell to make up for any shortfalls that might exist on the operating side. 

Even if the price of bitcoin fell, Tesla still could have dumped the asset, and then booked the loss for a credit on tax liability. Heads it wins one way; tails it wins another. 

https://www.radicalcompliance.com/2021/04/27/bitcoin-we-have-a-problem/

FinCEN Commences Rulemaking Process for Implementation of Corporate Transparency Act Requiring Disclosure of Beneficial Ownership Information
Schulte Roth & Zabel LLP

On April 5, 2021, the Financial Crimes Enforcement Network, a bureau of the United States Department of the Treasury (“FinCEN” and “Treasury,” respectively) issued an advance notice of proposed rulemaking (“ANPRM”) beginning the process of implementing regulations under the Corporate Transparency Act (“CTA”). Enacted by Congress on Dec. 31, 2020, as part of the National Defense Authorization Act, the CTA requires certain companies created or registered to do business in the United States (each, a “Reporting Company”) to report certain identifying information, such as beneficial owners of 25% or more and certain control persons, directly to FinCEN. That information is to be held in a non-public database maintained by FinCEN and will be shared with law enforcement and federal regulators, among others. The reporting obligations discussed herein will only take effect upon the promulgation of final regulations by FinCEN, which FinCEN is required to issue by Jan. 1, 2022. The ANPRM is the first step in this rulemaking process and requests public comment on numerous questions relevant to the implementation of the CTA. Comments are due May 5, 2021.

https://www.srz.com/resources/fincen-commences-rulemaking-process-for-implementation-of.html

A rising actor, fake HBO deals and one of Hollywood’s most audacious Ponzi schemes
Michael Finnegan
Los Angeles Times

“This is the goose that lays the golden egg guys, lets just hope they keep coming month after month,” Yeghnazary wrote, suggesting they “ride this baby out as long as we can.” He brushed off Russell’s annoyance at Horwitz for refusing to let them see his business records.

https://www.latimes.com/california/story/2021-04-23/zachary-horwitz-hollywood-film-ponzi-scheme

New SEC Enforcement Director Alex Oh Resigns, Agency Says
Dave Michaels
Wall Street Journal

The new enforcement chief for the Securities and Exchange Commission resigned after just a few days on the job, the agency said Wednesday, following a judge’s questioning of her conduct in a lawsuit involving Exxon Mobil Corp.

https://www.wsj.com/articles/new-sec-enforcement-director-alex-oh-resigns-agency-says-11619644474

Compliance Bricks and Mortar for April 23

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


Alex Oh Named SEC Director of Enforcement

Washington D.C., April 22, 2021 — The Securities and Exchange Commission today announced that Alex Oh has been appointed Director of the Division of Enforcement. Oh was most recently a partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP and co-chair of the law firm’s Anti-Corruption & FCPA Practice Group. She was previously an Assistant U.S. Attorney in the Criminal Division of the U.S. Attorney’s Office for the Southern District of New York, where she was a member of the Securities & Commodities Fraud Task Force and the Major Crimes Unit.


Wirecard employees removed millions in cash using shopping bags
Olaf Storbeck
Financial Times

The practice started as early as 2012, and six-digit amounts of banknotes were often moved in Aldi and Lidl plastic bags, former employees told the police. The total amount, the current whereabouts of the cash and the purpose of removing it from the building are unclear. Wirecard, whose main business was processing payments for merchants, owned its own bank but did not have branches. As demand for cash grew over time, Wirecard Bank bought a safe which was located in the group’s headquarters in a Munich suburb.

https://www.ft.com/content/31a8ed93-f602-47f0-9120-4b4f152ec7bc

Former Goldman Analyst Barred by Finra for Insider Trading
Bloomberg Law

Maguire bought shares in two companies through undisclosed accounts after seeing internal emails that showed the analyst covering the stocks was raising his ratings from “neutral” to “buy,” according to a Tuesday statement from the Financial Industry Regulatory Authority. Maguire made the purchases in April and June 2020, after the upgrades were approved internally but before research reports announcing the changes were published.

https://news.bloomberglaw.com/securities-law/ex-goldman-research-analyst-barred-by-finra-for-insider-trading

Petitioner asks SEC to clarify when NFTs are securities, recommends NFT rulemaking
John Filar Atwood
Jim Hamilton’s World of Securities Regulation

Like initial coin offerings (ICOs) before them, non-fungible tokens (NFTs) have grown in popularity very quickly, and Arkonis Capital believes it is now time for the SEC to step in and provide guidance on whether NFTs are securities. In a rulemaking petition, Arkonis said that a concept release on how to regulate NFTs is a meaningful first step in providing guidance, but that it would only prove beneficial if it is followed by an SEC rulemaking on the regulation of NFTs.

https://jimhamiltonblog.blogspot.com/2021/04/petitioner-asks-sec-to-clarify-when.html

The Flu Vanished During Covid. What Will Its Return Look Like? 
Keith Collins
New York Times


Compliance Bricks and Mortar for April 16

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


U.S. Senate votes 53-45 to confirm Gary Gensler as Biden’s SEC chief
Katanga Johnson
Reuters

“Gary Gensler has the perfect mix of market expertise, regulatory experience and commitment to the public interest to be an outstanding SEC Chairman,” said Barbara Roper, chief investor advocate at Washington-based Consumer Federation of America.

https://www.reuters.com/business/finance/us-senate-votes-53-45-confirm-gary-gensler-bidens-sec-chief-2021-04-14/

Is Your Compliance Program Consumed by Process Rather Than Outcomes?
Duncan Milne
SCCE’s The Compliance & Ethics Blog

This approach significantly reduces the impact of the compliance program – senior management and the wider business can then view the compliance function as one of form over substance and a purely administrative cost center – something they are required to have rather than something they actually need. Or worse still, something that actually impedes business performance rather than enhancing it. It can be demotivating to compliance teams, generating endless content that nobody ends up reading, with any valuable insights getting lost in the trees.

https://complianceandethics.org/is-your-compliance-program-consumed-by-process-rather-than-outcomes/

SEC Accuses Actor of $690 Million Fraud Based on Fake Netflix Deal
Matt Robinson
Bloomberg

Zachary Horwitz never made it big on the Sunset Strip — there was the uncredited part in Brad Pitt’s “Fury” and a host of roles in low-budget thrillers and horror flicks. But federal charges suggest he had acting talent, duping several financial firms out of hundreds of millions of dollars and enabling him to live the Hollywood dream after all.

https://www.bloomberg.com/news/articles/2021-04-07/actor-s-690-million-fraud-based-on-fake-netflix-deal-sec-says

Division of Examinations issues ESG Risk Alert
Rodney F. Tonkovic, J.D.
Jim Hamilton’s World of Securities Regulation

The SEC’s Division of Examinations has issued a risk alert highlighting its recent observations from exams of firms offering ESG products and services. The alert gives the Division’s observations of deficiencies and internal control weaknesses derived from examinations of ESG investing by advisers and funds.

https://jimhamiltonblog.blogspot.com/2021/04/division-of-examinations-issues-esg.html

Compliance Bricks and Mortar for May 15

I hope you and your family are staying healthy during this pandemic. We are in a time of great distress. Our health and our economy are at risk. Our country is dividing itself over the correct response.

It’s been weeks since I’ve published a blog post. I’m trying to adapt to constantly working at home. The house is full of distractions. But it’s also full of family. My regular work routine is gone and I don’t know when it will come back.

Many firms are talking about how to get back in the office safely and what that might look like. Landlords are figuring out how to get buildings back to effective work spaces, how to deal with elevators and how to deal with commutes.

All of my bike rides have been cancelled or “re-imagined” into a different form. Disappointing, but clearly the right call for the health of riders and volunteers. I’ve only pedaled one short bike ride outside in the last month. Nonetheless, I’m 1100 miles ahead of my yearly biking distance goal. I’ve converted to indoor riding on my smart trainer and Zwift.

In all of this chaos and change in routines, my Compliance Building writing has fallen to the side. I’m hoping to get back to writing and back into a new routine. Let’s see if it works and how long it lasts.



Here are a few stories that I found interesting.


Firm Wants FINRA Award Nixed After ‘Inattentive’ Zoom Panel
By Dean Seal
Law360

The arbitrators were also “effectively advocating” for Dominick throughout the case, Wunderlich said, and when they were not “interrupting testimony, they would appear to be inattentive and failed to follow the proceedings.” This culminated with the final hearing, held virtually, in which one arbitrator continually looked at other screens, another blocked her screen for a period of time and, during closing arguments, the third simply walked away from the screen, the petition alleges.

https://www.law360.com/securities/articles/1270795/firm-wants-finra-award-nixed-after-inattentive-zoom-panel?

Compliance and Coronavirus
by Jim Belin and John Petrovski
Compliance Podcast Network

Welcome to the newest addition to the Compliance Podcast Network, Compliance and Coronavirus. As the Voice of Compliance, I wanted to start a podcast which will help to bring both clarity and sanity to the compliance practitioner and compliance profession during this worldwide health and healthcare crisis. In this episode, I am joined by Jim Belin, as self-styled ‘contrarian investor’ and John Petrovski, a long time commercial real estate specialist in the lending arena. We take a deep dive into the reopening of the economies of the states in which we reside and where the economy may be going into 2012 and beyond. 

http://fcpacompliancereport.com/2020/05/compliance-coronavirus-jim-belin-john-petrovski-reopening-economy/

FBI serves warrant on senator in investigation of stock sales linked to coronavirus
by DEL QUENTIN WILBERJENNIFER HABERKORN
Los Angeles Times

Federal agents seized a cellphone belonging to a prominent Republican senator on Wednesday night as part of the Justice Department’s investigation into controversial stock trades he made as the novel coronavirus first struck the U.S., a law enforcement official said.
Sen. Richard Burr of North Carolina, the chairman of the Senate Intelligence Committee, turned over his phone to agents after they served a search warrant on the lawmaker at his residence in the Washington area, the official said, speaking on condition of anonymity to discuss a law enforcement action.

https://www.latimes.com/politics/story/2020-05-13/fbi-serves-warrant-on-senator-stock-investigation

Tips to U.S. Securities and Exchange Commission have surged in recent weeks
Reuters

The agency has received over 4,000 such tips since mid-March, representing a 35% increase over the same period a year ago, Steven Peikin, co-director of the SEC’s Enforcement Division, told attendees of a virtual conference.

https://uk.reuters.com/article/usa-sec-enforcement/tips-to-us-securities-and-exchange-commission-have-surged-in-recent-weeks-official-idUKL1N2CU2MJ

SEC Enforcement Chief Discusses How the Division Is Responding During the Pandemic
By Steven R. Peikin
The CLS Blue Sky Blog

We are all too familiar with the many ways in which the COVID-19 pandemic has transformed our personal and professional lives over these last several months.[1] We are confronting new and serious personal challenges, all the while endeavoring to continue our respective professional responsibilities. Like most of you, the SEC Staff have been teleworking since March. The disruption and changed work environment has had – and will continue to have – a substantial impact on the activities of the Division of Enforcement. But I am gratified to report that we have continued to execute on our important mission to protect investors, promote capital formation, and maintain fair and orderly markets.
So this afternoon, I’d like to share with you how the Division of Enforcement is responding during this ongoing crisis. I’ll describe some of the work we are doing to detect and address COVID-19-related misconduct. Then I will turn to our regular docket of investigations and litigations. All of our regular enforcement responsibilities remain in place, and we are endeavoring to execute on them, though in many respects we have had to find new ways to do so. I’ll close with a brief discussion of where I see the Division going from here.

https://clsbluesky.law.columbia.edu/2020/05/13/sec-enforcement-chief-discusses-how-the-division-is-responding-during-the-pandemic/

Cost of Compliance: New decade, new challenges
by Sussannah Hammond & Mike Cowan
Thomson Reuters Regulatory Intelligence

For 11 years our Thomson Reuters Regulatory Intelligence Cost of Compliance Report has given an unparalleled insight into the challenges facing risk and compliance officers in financial services firms around the world.
This year a tightening of risk and compliance budgets, regulatory and cultural change and the possibility of increasing personal liability all provided evidence of a cyclical turn from the post-financial crisis years. It is too early to tell how COVID-19 will influence that inflexion over the long term, but already regulators are issuing a flurry of revisions to rules, and firms are asking for the postponement of various regulatory initiatives so they can focus on managing events.
The report findings seek to help firms with planning and resourcing, while allowing them to benchmark their own approach. This year’s edition closed before the widespread impact of the COVID-19 pandemic had become apparent; thus, the report analyzes both the survey responses and, in an additional dedicated section, looks in more detail what better risk and compliance practice will look like in the face of continuing uncertainty.

http://financial-risk-solutions.thomsonreuters.info/Cost-of-Compliance-2020

Compliance Bricks and Mortar for March 20

I’m going to assume that most of the readers of Compliance Building are working remotely. I hope your firms’ business continuity processes are holding up and you’re keeping things together.

I have to admit that I’m getting a little crazy being stuck in the house and working from home so many days in a row. I’ve cut back on riding outside and am spending more time on Zwift in my basement. If you’re a Zwift rider, let me know and we can ride a virtual meetup.

If your looking for compliance-related stories to read, here are a few that caught my attention.


Coronavirus, Systemic Risk, and Lessons from 2008
by Kathryn Judge
The CLS Blue Sky Blog

Banks cannot be blamed for starting the current crisis, nor can financial regulators be expected to contain it.  It is, at bottom, a public health crisis, and  the top priority must be to contain the spread of Covid-19. Yet the pandemic will inevitably trigger widespread economic problems, and while congressionally authorized fiscal support will be the most important tool for minimizing them, the health of the financial system will also come into play. If the reforms of the last decade work, the financial system should be able to absorb this shock and continue to provide the support that the real economy will so desperately need to recover.  But if runs, losses, and uncertainty take over – and sadly, this seems more likely at this stage – the financial system could magnify, rather than soften, the economic impact of Covid-19.

https://clsbluesky.law.columbia.edu/2020/03/16/lessons-from-the-last-crisis/

A Horse Racing Scandal: Lessons Learned
by David D. Dodge
SCCE’s The Compliance & Ethics Blog

Following the announcements of the federal indictments on March 9, Kentucky Derby-winning trainer Graham Motion stated that, “If this doesn’t wake up as an industry, I don’t know what will… it’s our own fault. We let it happen. This shows we are incapable of policing our own sport and that’s a sad situation.” Motion went on to express hope that “the indictments will bring the sport to rock bottom where opposition to the Horseracing Integrity Act will evaporate and the sport will finally embrace national standards for medications and safety.”

https://complianceandethics.org/a-horse-racing-scandal-lessons-learned/

SEC Has Two ‘Suspected’ Coronavirus Cases, Agency Official Says
by Andrew Ramonas
Bloomberg

Two workers at the SEC’s Washington headquarters may have the new coronavirus, an agency official said in a court filing. The Securities and Exchange Commission’s Enforcement Division has implemented an emergency policy of “either requiring or strongly encouraging telework for its personnel, depending on their individual circumstances and each employee’s physical proximity to the workstations of two suspected COVID-19 cases,” David Mendel, an SEC assistant chief litigation counsel, said in a letter to U.S. District Judge Alvin Hellerstein in New York March 13.

https://news.bloomberglaw.com/securities-law/sec-has-two-suspected-coronavirus-cases-agency-official-says

COVID-19 and the Compliance Risks Related to Sales and Marketing Practices
by Jennifer Kennedy Park and Jonathan Kelly
NYU Law’s Compliance & Enforcement

Those businesses hardest hit in the initial stages of the crisis — e.g., cruise lines, airlines and hotels —  quickly face pressures that raise the risks of private litigation and government enforcement in connection with sales and marketing efforts.  For example, what assurances should sales representatives in response to inquiries about the chances of contracting the virus in connection with the use of a product or service?  What information should be provided about safety measures being taken?  Do sales commission and incentive programs exacerbate the risks of non-compliant responses, and should they be suspended? 

https://wp.nyu.edu/compliance_enforcement/2020/03/17/covid-19-and-the-compliance-risks-related-to-sales-and-marketing-practices/

Freshfields Discusses How Companies Can Switch to Virtual Annual Meetings After Proxy Filings
By Pamela L. Marcogliese, Elizabeth K. Bieber and Jillian Simons
The CLS Blue Sky Blog

In light of the novel coronavirus, COVID-19, companies are considering the advisability of holding in-person annual meetings.  Given the timing of the COVID-19 emergence, companies with December 31 fiscal year ends may be weighing a change to their meeting format after filing their proxy statements and with little time until their annual meeting date.

https://clsbluesky.law.columbia.edu/2020/03/16/freshfields-discusses-how-companies-can-switch-to-virtual-annual-meetings-after-proxy-filings/

Welcome to Watopia – Let’s Be Nice

With many newly-arriving Zwifters worldwide there are a few tips that I think all of us experienced Zwifters need to follow. Let’s cut these newbies a little slack and lend a teaching hand as these new riders find out how many meters the Tron bike actually requires, how to see the real race results on Zwift Power, and most importantly how to connect with the Zwift community more intimately. Whether that’s through group rides, races or just a social club environment, let’s make these folks feel welcome.

https://zwiftinsider.com/welcome-to-watopia-lets-be-nice/