Compliance Bricks and Mortar – Harvey Edition

My thoughts go out to readers of Compliance Building in Texas who live in the path of Hurricane/Tropical Storm Harvey. I hope you were able to stay on high ground. It looks like this will be the first natural disaster of the Trump administration.

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


How the SEC Neglects to Enforce Control Person Liability by Marc I. Steinberg and Forrest Colby Roberts in the CLS Blue Sky Blog

Scholars and politicians alike have spoken and written at great length about the importance of gatekeepers in our current corporate governance system. However, relatively little has been done to discipline  gatekeepers who seem to have lost the keys to the gate.  Meanwhile, the country’s primary securities regulator, the Securities and Exchange Commission, refuses to employ one of its most powerful tools to keep gatekeepers in check.  Our recent article, Laxity at the Gates:  The SEC’s Neglect to Enforce Control Person Liability, examines the SEC’s reluctance to bring claims against corporate insiders under Section 20(a) of the Securities Exchange Act, known as the control person provision. [More…]


Audit Report Choice Looms for SEC by Matt Kelly in Radical Compliance

If Clayton wants to cast his lot with the critics who say the PCAOB’s demands upon audit firms (and by extension, upon the companies they audit) are out of control, repudiating its new audit report standard would send that message loud and clear. Or Clayton could toe the historical line, and approve that which the PCAOB has recommended. Or he could finesse some third way, approving the standard while adding caveats and clauses a-plenty to keep all constituencies at least quiet, if not content. [More…]


Improving the SEC’s Enforcement Program: A Ten-Point Blueprint for Reform by Bradley J. Bondi

The SEC should prioritize seeking out and penalizing those individuals, such as Bernie Madoff and Allen Stanford, who commit intentional wrongdoing through schemes designed to defraud investors. The “broken windows” approach, promoted by then-SEC Chair Mary Jo White, disproportionately emphasizes small and sometimes unintentional securities law violations in the hope that doing so will deter more significant violations. But a practical consequence of this is the disproportionate expenditure of the SEC’s limited resources on small and unintentional violations, often against well-intentioned executives and chief compliance officers for negligence-based violations or honest mistakes. As a result, more significant and intentional violations, such as Ponzi schemes, boiler rooms, and bucket shops, may go undetected, unpunished, and undeterred. [More…]


FinCEN expands beneficial owner reporting rules for real estate by Richard L. Cassin in the FCPA Blog

The Treasury Department’s Financial Crimes Enforcement Network added Honolulu Tuesday to a reporting program for real estate deals involving cash transactions. FinCEN also extended reporting requirements for six other metropolitan areas under a data collection program that started in March 2016. The new Geographic Targeting Order (pdf) runs through March 20, 2018.

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In a Boon to Prosecutors, Insider Trading Ruling Is Reshaped by Peter J. Henning in DealBook

Another problem is that the Second Circuit decision also upheld Mr. Martoma’s conviction on the ground that the payments Dr. Gilman received from SAC through the expert networking firm meant there was a quid pro quo relationship. Although he was not paid for the actual information provided to Mr. Martoma about the negative drug trial results, the majority opinion concluded there was enough evidence for the jury to a find a tangible benefit that would have met the requirement of the Newman case even before it was rejected in Salman. [More…]