On November 14, 2023, the Securities and Exchange Commission announced a settled enforcement action against Charter Communications, Inc. (“Company”) imposing a $25 million civil penalty over allegations that the Company had used stock buyback plans that did not comport with Rule 10b5-1 of the Securities Exchange Act of 1934.  The SEC claimed that the Company’s stock buyback plans did not comport with Rule 10b5-1 because the plans contained provisions that allowed the Company to change the total dollar amounts available to buy back stock and the timing of buybacks after the plans took effect; and while Rule 10b5-1 is a safe harbor rather than a standard that must be met, the SEC alleged that the use of buyback plans that did not meet the Rule 10b5-1 standard evidenced insufficient accounting controls in violation of Section 13(b)(2)(B) of the Exchange Act.

On October 30, 2023, the Securities and Exchange Commission filed claims against a software company (the “Company”) and its Chief Information Security Officer for alleged fraud and internal control failures relating to known cybersecurity risks and vulnerabilities.  SEC v. SolarWinds Corp., et al., No. 23-cv-9518 (S.D.N.Y. Oct. 30, 2023).  The SEC’s complaint alleges that the Company made misleading omissions, in connection with its disclosure in December 2020, that it had suffered a cyberattack that compromised its customers’ information.

On October 17, the Commodity Futures Trading Commission’s Division of Enforcement released an advisory instruction to CFTC staff for future enforcement actions.  The advisory provided guidance on the following:  (i) whether proposed civil monetary penalties are sufficient; (ii) circumstances when the imposition of a corporate compliance monitor is appropriate; (iii) what duties and responsibilities of monitors should be; and (iv) whether admissions should be recommended in a particular enforcement action.  While the guidance leaves ample room for interpretation and development over time, the unambiguous thrust is to send a message that the CFTC is seeking to increase the severity of sanctions, both in terms of the size of monetary penalties and associated undertakings, continuing a trend that the CFTC has been pushing for several years.

On September 13, 2023, the U.S. Securities and Exchange Commission brought a settled enforcement action against Stoner Cats 2 LLC for raising approximately $8 million through an unregistered offering of Non-Fungible Tokens (“NFTs”) that the SEC alleged were securities.  This action is another example of the SEC alleging that crypto assets were securities based on the specific manner in which they were offered.

On September 11, 2023, the U.S. Securities and Exchange Commission announced settled enforcement actions against nine separate investment advisory firms for alleged marketing rule violations, assessing a total of $850,000 in combined penalties.  In each case, the SEC alleged that the firms improperly provided hypothetical performance information on their firm websites without following the requirements of the marketing rule.

On September 27, 2023, the Securities and Exchange Commission announced settled enforcement actions against six officers, directors and major shareholders of various public companies for allegedly failing to timely report information about their holdings and transactions in company stock, and simultaneously announced settled actions against five public companies for allegedly contributing to these insiders’ filing failures or for failing to report their insiders’ filing delinquencies.  The actions are part of a recent SEC enforcement initiative aimed at ensuring compliance with ownership disclosure rules by company insiders.

On October 4, 2023, Deputy Attorney General Lisa O. Monaco announced a Department of Justice-wide safe harbor policy for voluntary self-disclosures made in connection with mergers and acquisitions.  During her remarks at the Society of Corporate Compliance and Ethics’ 22nd Annual Compliance and Ethics Institute, the Deputy Attorney General said that the Safe Harbor provides companies with the presumption that the DOJ will decline criminal prosecution when they voluntarily self-disclose misconduct by companies they are acquiring or have recently acquired.

On September 11, 2023, the Justice Department’s National Security Division (the “Division”) announced that it had made key appointments to lead the Division’s Corporate Enforcement program.  The new appointees include Ian Richardson as the first Chief Counsel for Corporate Enforcement and Christian Nauvel as Deputy Chief Counsel for Corporate Enforcement.  Richardson and Nauvel will be tasked with overseeing the Division’s investigation and prosecution of corporate crime deemed to relate to U.S. national security.  The Division had previously announced the establishment of these positions in March 2023, when Deputy Attorney General Lisa Monaco also announced that the Division would add more than 25 prosecutors to investigate and prosecute sanctions evasion, export control violations and other such economic crimes.

On August 25, 2023, the Securities and Exchange Commission (“SEC”) accepted an Offer of Settlement (the “settlement”) from 3M Company (“3M”), related to alleged violations of the Foreign Corrupt Practices Act’s (“FCPA”) books and records and internal accounting control provisions (§§ 13(b)(2)(A) – (B) of the Securities Exchange Act of 1934).  Without admitting or denying the findings, 3M agreed to pay $6,581,618 to resolve allegations that 3M’s China subsidiary (“3M-China”) improperly accounted for overseas trips it provided to 3M-China’s customers who were employed by Chinese state-owned entities (SOEs).  According to the SEC, 3M-China invited SOE customers, who are deemed foreign officials under the FCPA, “to attend overseas conferences, educational events, and health care facility visits … ostensibly as part of 3M-China’s marketing and outreach efforts, but that in fact were often a pretext to provide overseas travel, sightseeing and entertainment … to the Officials to obtain and retain business from the SOE Customers.”

On August 10, 2023, the U.S. Securities Exchange Commission (“SEC”) and the Department of Justice (“DOJ”), in coordination with Columbian authorities, announced that Colombian conglomerate Grupo Aval Acciones y Valores S.A (“Grupo Aval”) and its banking subsidiary Corporacion Financiera Colombiana S.A. (“Corficolombiana”) agreed to pay approximately $80 million USD for their alleged involvement in a scheme to pay $23 million USD in bribes to high-ranking government officials in Colombia, in violation of the anti-bribery provisions of the Foreign Corrupt Practices Act (“FCPA”).  In resolving these allegations, Corficolombiana entered into a three-year Deferred Prosecution Agreement (“DPA”) with the DOJ, and agreed to pay a $40.6 million USD criminal penalty, up to half of which may be credited against payments to the Columbian government.

On July 31, 2023, United States District Court Judge for the Southern District of New York Judge Rakoff, denied cryptocurrency company Terraform Labs, Pte Ltd. (“Company”) and its founder’s motion to dismiss a suit that had been brought against them by the Securities and Exchange Commission (the “SEC”).  The SEC sued the Company and its founder in February 2023 after the Company’s algorithmic stablecoin collapsed in May 2022, contributing to multiple bankruptcies.  The SEC alleged that the Company and its founder made false and materially misleading statements to entice U.S. investors to purchase and hold on to the Company’s products, which the SEC claimed were unregistered investment-contracts that qualified as securities under Section 5 of the Securities Act of 1933 (the “Securities Act”).  SEC v. Terraform Labs Pte. Ltd., 2023 WL 4858299, at *1 (S.D.N.Y. July 31, 2023).  The Court held that the SEC had alleged a plausible claim for relief, and enough facts to establish the cryptocurrencies at issue were investment contracts requiring registration under the securities laws.

On July 13, 2023, Judge Analisa Torres of the United States District Court for the Southern District of New York issued a decision on the parties’ cross-motions for summary judgment in SEC v. Ripple Labs, Inc., No. 1:20-cv-10832-AT-SN, holding that Ripple Labs, Inc. (the “Company”) unlawfully sold unregistered securities in violation of the Securities Act of 1933 (the “Securities Act”) by selling its cryptocurrency token, XRP, to certain institutional buyers, while at the same time holding XRP was not a security within the meaning of the Securities Act when sold on digital asset exchanges, given the different circumstances and expectations of buyers in those transactions.  The Court also held that the Company’s distributions of XRP to employees and third parties for the development of its project did not constitute sales of unregistered securities.  This is a pivotal decision for the cryptocurrency market and is a significant win for cryptocurrency exchanges in particular.

On July 5, the United States Court of Appeals for the D.C. Circuit granted an emergency injunction blocking the Financial Industry Regulatory Authority (“FINRA”) from halting the securities business of Alpine Securities Corporation (the “Company”) through an expedited hearing process pending the Company’s appeal challenging the constitutionality of FINRA’s enforcement proceedings.  Alpine Securities Corporation, et al v. Financial Industry Regulatory Authority, Inc., 1:23-cv-01506-BAH (July 5, 2023).  While noting that this was not a decision on the merits, the court found that the Company had shown a likelihood that it will succeed on the merits in its challenge to the structure of FINRA enforcement actions, having at this early stage “raised a serious argument that FINRA impermissibly exercises significant executive power.”

On June 30, 2023, the United States Supreme Court agreed to hear an appeal regarding the constitutionality of administrative proceedings in the case of George Jarkesy and Patriot28 LLC v. SEC, which could have important ramifications on how federal agencies bring actions against alleged wrongdoers.  This grant of certiorari stems from a May 18, 2022, Fifth Circuit decision, Jarkesy v. Sec. & Exch. Comm’n, 34 F.4th 446 (5th Cir. 2022), which held that the use of administrative proceedings by the Securities and Exchange Commission (“SEC”) was unconstitutional, but its reasoning could also impact proceedings before the Federal Trade Commission and other agencies.

On June 7, 2023, a United States District Judge in the Southern District of Texas dismissed conspiracy charges related to Foreign Corrupt Practices Act (“FCPA”) and money laundering violations brought against Paulo Jorge Da Costa Casquiero Murta (“Murta”) by the Department of Justice, finding that prosecutors had intentionally caused delays in Murta’s trial, in violation of both the Speedy Trial Act and Murta’s Sixth Amendment right to a speedy trial.  United States v. Murta, 4:17-CR-00514-8 (S.D. Tex. June 6, 2023).  Murta, who had been in U.S. custody since July 2021, argued that despite his repeated demands for a speedy trial, the government had intentionally delayed his trial.  The Court agreed and dismissed the charges against Murta with prejudice, finding that DOJ’s prosecutors had acted in bad faith.
 

On May 31, 2023, the United States Securities and Exchange Commission (SEC) fined a New York investment adviser (Investment Adviser) $1.4 million for allegedly failing to disclose conflicts of interest regarding special purpose acquisition companies (SPACs).  In the Matter of RTW Invs., L.P., SEC Administrative Proceeding 3-21473 (May 30, 2023).  According to the SEC, Investment Adviser personnel sponsored two separate SPACs while those same personnel simultaneously invested client funds in the SPACs, which the SEC alleged was a conflict of interest that required disclosure.  The Investment Adviser neither admitted nor denied the allegations in the SEC’s Order.
 

On June 1, 2023, the Supreme Court issued a unanimous decision in the consolidated cases United States v. SuperValu Inc. and United States v. Safeway, Inc. holding that the False Claims Act’s (“FCA”) scienter element refers to a defendant’s knowledge and subjective beliefs—not what an objectively reasonable person would have known or believed.  No. 21-1326 (June 1, 2023).

Two facially unrelated decisions, issued last week by the First Circuit and the Supreme Court, continued a recent theme of courts pushing back against potential prosecutorial overreach in the application of fraud statutes—especially in the area of honest services fraud.  In the first case, the First Circuit reversed the convictions of two “Varsity Blues” parents who had been found guilty of honest services fraud, among other charges, after paying money to individuals to help get their children into college under false pretenses.  And in the second case, the United States Supreme Court unanimously reversed the conviction of Joseph Percoco, a former manager of former New Governor Andrew Cuomo’s re-election campaign who had likewise been found guilty of honest services fraud, unanimously holding that the jury instructions used to convict him were too vague and would sweep in too much innocent conduct.

On May 11, 2023, the Securities and Exchange Commission (“SEC”) announced that Netherlands-based Koninklijke Philips N.V. (“Philips”) will pay more than $62 million to resolve claims that it violated the Foreign Corrupt Practices Act (“FCPA”) with respect to alleged conduct related to its sales of medical diagnostic equipment in China.  Admin. Proc. File No. 3-21411.  According to the SEC, Philips’ subsidiaries in China used special price discounts with distributors that created a risk that excessive distributor margins could be used to fund improper payments to employees.  Philips neither admitted nor denied wrongdoing as part of the settlement.

On May 1, 2023, the United States Supreme Court granted a writ of certiorari filed by alleged whistleblower against his former employer, a financial institution, in a case that is expected to clarify when the termination of a whistleblower amounts to unlawful retaliation under the Sarbanes-Oxley Act.

On April 14, 2023, the United States Supreme Court issued a unanimous decision in the consolidated cases of Axon Enterprises Inc. v. FTC and SEC v. Cochran, finding that constitutional challenges to the ability of the Federal Trade Commission (“FTC”) and the U.S. Securities and Exchange Commission (“SEC”) to bring certain claims as administrative proceedings can bypass the administrative appeals process and be brought directly in federal court. The Court concluded that the authorizing statutes of the regulatory agencies do not implicitly restrict federal district courts of original jurisdiction to hear any challenges to an agency’s constitutionality. Thus, although the Court did not decide the substance of the petitioners’ constitutional challenges to the agencies’ administrative proceeding processes, it allowed petitioners’ challenges to move forward in federal court.

On March 27, 2023, the Commodity Futures Trading Commission (“CFTC”) filed a civil enforcement action against three entities that operate a digital asset exchange (the “Company”) and its Founder and Chief Executive Officer (collectively “Defendants”) for willful violation of the Commodity Exchange Act (“CEA”) and CFTC regulations. Further, the CFTC charged the Company’s Former Chief Compliance Officer with aiding and abetting these violations. See Complaint, Commodity Futures Trading Comm’n v. Zhao, et al., Civil Action No. 1:23-cv-01887 (N.D. Ill. Mar. 27, 2023).

On March 28, 2023, the Securities and Exchange Commission (“SEC”) submitted a settlement agreement (“settlement”) to the United States District Court of the Eastern District of New York with Brazilian mining company Vale S.A. (“Vale” or “Company”). Under the settlement, without admitting or denying the findings, the Company will pay a total of $55.9 million to resolve charges brought against it by the SEC on April 28, 2022, regarding the Company’s allegedly false and misleading representations in its environmental, social, and governance (“ESG”) disclosures. The SEC averred in its complaint that the Company concealed the unsafe condition of its dams, which caused its ESG disclosures to be materially false and misleading for investors. See SEC v. Vale S.A., Case No. 22-cv-2405-LDH-SJB (Mar. 28, 2023).

On March 2, 2023, the Department of Justice (“DOJ”) announced that a multinational telecommunications company headquartered in Stockholm, Sweden (the “Company”) agreed to plead guilty and to pay a penalty of approximately $206 million after allegedly breaching the cooperation and disclosure provisions of a 2019 Deferred Prosecution Agreement (“DPA”) it had previously entered into to address claims that it participated in a scheme to pay bribes, falsify books and records, and failed to implement reasonable internal accounting controls in violation of the Foreign Corrupt Practices Act (“FCPA”).

On March 1, 2023, the Department of Justice (“DOJ”) unsealed an indictment against the founder, CEO, and Chairman of a publicly traded health care company (the “Company”), alleging that he had illegally executed trades pursuant to Rule 10b5-1 trading plans while in possession of material nonpublic information. The Securities and Exchange Commission (“SEC”) filed a concurrent civil suit against defendant for the same activity. In each case, the government alleged that defendant improperly used his 10b5-1 plans by entering into them while in possession of material nonpublic information and triggering sales shortly thereafter, without any form of cooling-off period.

On March 15, 2023, the Department of Justice (“DOJ”) announced that Michigan-based bank Sterling Bancorp, Inc. (“Sterling”) agreed to plead guilty to securities fraud for allegedly filing false statements relating to its 2017 initial public offering (“IPO”) and 2018 and 2019 annual financial reports. As part of its guilty plea, Sterling agreed to pay fines totaling $69 million, including $27.2 million in restitution to non-insider stockholders.

On January 9, 2023, the Securities Exchange Commission issued a cease-and-desist order against McDonald’s Corporation and the Company’s former CEO Stephen Easterbrook related to Easterbrook’s departure. The SEC’s order alleged that the Company failed to disclose in a Form 8-K that it exercised discretion in terminating Easterbrook “without cause,” and allowed him to retain more than $40 million in equity-based compensation that would have been forfeited if the company had terminated him “for cause;” and further alleged that Easterbrook withheld information about his relationships with Company employees in an internal investigation. Without admitting or denying the findings, the Company and Easterbrook consented to the entry of the Order. See In re Easterbrook & McDonald’s Corp., No. 3-21269 (Jan. 9, 2023).

On February 22, 2023, the United States Department of Justice issued the United States Attorney’s Offices’ Voluntary Self-Disclosure Policy for corporate criminal enforcement, which sets forth the criteria the 94 United States Attorney’s Offices will use to determine the appropriate resolution for a corporate entity that voluntarily self-discloses misconduct to a USAO. The VSD Policy is intended to provide incentives, including declinations or reduced fines, to corporations that timely disclose misconduct, cooperate with the DOJ’s investigation, and remediate misconduct. It applies to all USAOs and is effective immediately.

On February 3, 2023, the Securities and Exchange Commission (“SEC”) announced a settled enforcement action against video game maker Activision Blizzard Inc. (the “Company”) for an alleged failure to maintain procedures designed to collect employee complaints of workplace misconduct and analyze them for disclosure purposes. The SEC found that the lack of such procedures violated the Company’s obligation to maintain procedures designed to ensure that information required to be disclosed in the Company’s SEC reports was in fact timely reported. In addition, the SEC’s enforcement action alleged that the Company had improperly impeded former employees from communicating directly with the SEC staff about possible securities law violations by requiring those employees, through a clause in their separation agreements, to notify the Company of any requests from an administrative agency in connection with a report or complaint. Without admitting or denying the findings, the Company agreed to pay a $35 million civil penalty, but Commissioner Hester Peirce issued a spirited dissent arguing that the SEC’s allegations did not in fact amount to securities law violations.

On January 17, 2023, Assistant Attorney General Kenneth A. Polite delivered remarks announcing revisions to the Department of Justice (“DOJ”) Criminal Division’s Corporate Enforcement Policy (“CEP”) at Georgetown Law Center.  The revisions aim to encourage additional companies to voluntarily self-disclose potential criminal conduct they may uncover by setting more granular incentives that will be provided to companies in such circumstances.  While there is still substantial subjectivity embedded in the revised policy regarding when and how such incentives will be made available to companies, the revisions will put added pressure on companies to make self-disclosures in certain circumstances.

On December 14, a multinational telecommunications company headquartered in Stockholm, Sweden (the “Company”), announced it had reached agreement with the U.S. Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”) to extend the Company’s independent compliance monitorship by one year, to June 2024.  The agreement to extend the monitor, which had been required under a 2019 resolution with the DOJ, was the result of the DOJ determining that the Company had failed to adequately disclose compliance matters that it had investigated in Iraq.

On November 15, 2022, the Securities and Exchange Commission (“SEC”) released its summary of enforcement actions for the 2022 fiscal year, which ended on June 30, 2022. The SEC announced that it filed 760 enforcement actions, a nine percent increase over 2021. The actions resulted in orders of a record-breaking $6.439 billion to be paid to the SEC, including roughly $4.2 billion in penalties. The SEC noted that the high numbers reflect its “sense of urgency to protect investors, hold wrongdoers accountable and deter future misconduct in our financial markets.”

On October 20, 2022, the Commodity Futures Trading Commission (“CFTC”) released its enforcement results for Fiscal Year (“FY”) 2022, reporting that it had filed 82 enforcement actions. Eighteen of the actions brought in FY 2022 involved cryptocurrency or other digital assets, an area which has seen progressively increasing scrutiny from the CFTC and other enforcement agencies. The CFTC also reported that it obtained orders collectively imposing over $2.5 billion in fines in that period.

On September 27, 2022, the SEC announced charges against affiliates of 11 financial institutions (15 broker-dealers and one investment adviser) for allegedly failing to maintain and preserve electronic communications and allegedly failing to reasonably supervise from January 2018 through September 2021. See SEC Press Release 2022-174 (Sept. 27, 2022).  On the same day, the CFTC announced charges against affiliates of the same 11 financial institutions for allegedly failing to maintain, preserve, or produce required records, and allegedly failing to supervise matters related to their businesses as swap dealers and futures commission merchants.

On September 15, 2022, Deputy Attorney General Lisa O. Monaco delivered remarks on the Department of Justice’s corporate prosecution priorities at New York University, at the invitation of the University’s Project on Corporate Compliance and Enforcement.  While many of her comments were simply a reiteration of existing priorities, some were potentially meaningful changes.  Indeed, by clarifying certain points and strengthening others, Monaco emphasized the “carrot and stick” approach to signal loud and clear that the DOJ remains as focused as ever on pursuing corporate crime.  She unambiguously encouraged corporations both to self-report potential criminal activity and cooperate in the investigation of culpable individuals, indicating that failure to do so could lead to severe consequences.  At the same time, as has long been the case, the policies leave somewhat subjective the true nature of any “carrot” and any “stick” that would apply in any given case, making the decision of how corporations should deal with potential criminal conduct one of the most challenging decisions corporations can face.

On September 13, 2022, the Securities and Exchange Commission (“SEC”) filed suit in the United States District Court for the Southern District of New York against an underwriter for allegedly failing to comply with the regulatory requirements of the Exchange Act’s Rule 15c2-12 (17 C.F.R. § 240.15c2-12), which provides a limited exception to certain disclosure requirements where underwriters have a reasonable belief that the municipal securities are being sold only to sophisticated investors that are each buying the securities for a single account.  See SEC v. Oppenheimer & Co., Inc., S.D.N.Y. No. 1:22-cv-7801 (Sept. 13, 2022).  The SEC also initiated settled enforcement actions with three other firms for similar alleged violations.  This is the first time that the SEC has initiated municipal-bond disclosure cases.

On September 6, 2022, the Securities and Exchange Commission announced that New York-based, registered investment advisor Perceptive Advisors LLC (“Investment Advisor”) had agreed to pay a $1.5 million civil penalty for allegedly failing to disclose conflicts of interest regarding ownership of its personnel in sponsors of special purpose acquisition companies (SPACs).  According to the SEC, the Investment Advisor used private client funds to facilitate transactions benefitting SPACs in which the Investment Advisor’s personnel and other clients had financial interests but failed to disclose the alleged conflicts resulting from those interests.

On August 5, 2022, the United States Court of Appeals for the Second Circuit overturned a judgment of approximately $1 million awarded to a purported whistleblower after a jury determined in 2017 that the financial institution unlawfully terminated the employee in retaliation for his refusal to change certain aspects of his research reports related to commercial mortgage-backed securities.  In narrowing the universe of alleged whistleblowers who may be entitled to relief for retaliation, the Second Circuit held that the trial judge failed to inform the jurors as to the critical burden whistleblowers bear under the Sarbanes-Oxley Act: namely, that a whistle-blower must prove that their employer intended the alleged employment action to be retaliatory.

On August 2, 2022, New York State’s Department of Financial Services (“DFS”) announced that Robinhood Crypto, LLC (“RHC”), a trading platform that allows customers to transact in cryptocurrencies, had agreed to pay a $30 million fine to resolve allegations of “significant” lapses in its compliance with New York State anti-money laundering and cybersecurity regulations.  In addition to the fine, the settlement will also require RHC to hire an independent consultant to evaluate the company’s remediation efforts and compliance with DFS regulations. RHC did not admit to the allegations contained in the Consent Order.

On July 21, 2022, the Securities and Exchange Commission (“SEC”) filed a complaint and the Department of Justice (“DOJ”) unsealed an indictment against Ishan Wahi, a former Coinbase employee, his brother, Nikhil Wahi, and friend, Sameer Ramani, for alleged insider trading.  SEC v. Ihan Wahi, Nikhil Wahi, and Sameer Ramani, 2:22-cv01009 (W.D. Wa. July 21, 2022); United States v. Ishan Wahi, Nikhil Wahi, and Sameer Ramani, 22-cr-392 (S.D.N.Y. 2022).  Both the complaint and indictment concern the same underlying conduct by Wahi, who allegedly provided dozens of tips to his brother and friend over several months to purchase certain digital assets tied to cryptocurrencies (the “digital assets”) shortly before they were publicly listed on Coinbase’s exchange.

On July 15, 2022, a panel of the United States Court of Appeals for the Second Circuit ruled against the Securities and Exchange Commission (“SEC”) in an interlocutory appeal the SEC had brought seeking to expand the scope of “scheme liability” under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c) thereunder.  SEC v. Rio Tinto plc, No. 21-2042 (2d Cir. Jul. 15, 2022).  Specifically, the SEC had urged the Second Circuit, in a case it had brought against a mining company and certain of its former executives (the “Defendants”), to hold that the Supreme Court’s decision in Lorenzo v. SEC, 139 S. Ct. 1094 (2019), abrogated the Second Circuit’s prior decision in Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005), which had found that a defendant can only be liable for scheme liability under Rule 10b-5(a) and (c) where they engage in misleading conduct beyond misstatements and omissions.  The Second Circuit panel ruled that Lentell remains good law, and that any expansion of the scheme liability provisions of Rule 10b-5(a) and (c) would need to come either from the Second Circuit en banc or the Supreme Court.

On June 23, 2022, FINRA’s Department of Enforcement announced a settlement in which a broker-dealer agreed to pay $3.6 million in fines, $4.77 million in disgorgement, and partial restitution of over $625,000 to resolve the broker-dealer’s alleged misconduct under the Exchange Act and NASD and FINRA Rules in connection with three IPOs and seven follow-on offerings between June 2016 and December 2018 for which the broker-dealer acted as underwriter, as well as for other supervisory and operational violations.

On June 15, 2022, the Securities and Exchange Commission (“SEC”) filed a complaint in the U.S. District Court for the Central District of California against registered broker-dealer Western International Securities, Inc. (“Western”) and five of its registered representatives (the “Registered Representatives”), alleging that they had violated the Best Interest Obligation under Rule 15l-1(a) of the Securities Exchange Act of 1934 (“Regulation Best Interest” or “Reg BI”) in connection with their recommendations to retail customers to purchase certain unrated debt securities.  This is the first action brought by the SEC to enforce Reg BI, and the litigation could lead to important legal rulings clarifying its scope.

On June 13, 2022, the Securities and Exchange Commission (“SEC”), announced that it had instituted a settled administrative proceeding accusing several investment advisers (the “Advisers”) that focused on robo-advising, and all of which were themselves subsidiaries of a prominent investment adviser, of violating Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 and Section 15(b) of the Securities Exchange Act of 1934.  Broadly, the SEC accused them of failing to invest client cash in ways that their own analyses showed would be optimal for the clients, and instead retaining cash in a way that benefitted the Advisers.  The Advisers did not admit or deny the SEC’s allegations as part of the resolution, but as part of the settlement agreed collectively to disgorge approximately $52 million and to pay a civil monetary penalty of $135 million and were also required to engage an independent consultant and engage in certain other undertakings.

On May 24, 2022, Glencore International A.G. of Switzerland (“Glencore”), an energy and commodities trading firm, and its affiliates Glencore Ltd. of New York and Chemoil Corporation of New York resolved long-running investigations by the Department of Justice (“DOJ”), the Commodity Futures Trading Commission (“CFTC”), and regulators in the UK and Brazil related to alleged foreign bribery and market manipulation schemes.  The companies agreed to pay total fines and monetary penalties in excess of $1.1 billion, including the largest penalty and disgorgement ever ordered by the CFTC, for conduct that spanned over ten years.  As part of its resolutions with the CFTC and the DOJ, Glencore and Glencore Ltd. have agreed to retain independent compliance monitors for three years and continue to cooperate fully and expeditiously with both enforcement agencies.  In addition to the corporate resolutions, two Glencore former employees have previously been charged.  A Glencore Ltd. senior fuel oil trader, Emilio Jose Heredia Collado, pleaded guilty in March 2021 to one count of conspiracy to engage in commodities price manipulation.  His sentencing is scheduled for June 17, 2022.  Similarly, in July 2021, a senior trader in charge of Glencore’s West Africa crude oil desk pleaded guilty to one count of conspiracy to violate the FCPA and one count of conspiracy to commit money laundering.

On March 4, 2021, the Securities & Exchange Commission (“SEC”) publicly announced the formation of a Climate and Environmental, Social and Governance (“ESG”) Task Force within its Enforcement Division.  This task force was reportedly staffed with 22 Enforcement staff members drawn from SEC headquarters, regional offices and specialized units.  The task force was assembled in response to, among other things, SEC Chairman Gary Gensler’s focus on investigating misstatements related to ESG disclosures.  In remarks by Chairman Gensler on July 7, 2021, he described the SEC as focused on “truth in advertising” and confirming that “funds that market themselves as ‘green,’ ‘sustainable,’ ‘low carbon,’ and so on” were in fact operating consistent with those disclosures.  Approximately 14 months later, the ESG Task Force has announced its debut enforcement action by ordering an investment adviser to pay a $1.5 million fine for alleged misrepresentations related to its ESG practices.

On May 18, 2022, a divided panel of the U.S. Court of Appeals for the Fifth Circuit issued a significant decision in George Jarkesy and Patriot28 LLC v. SEC, ruling that the use of administrative proceedings by the Securities and Exchange Commission (“SEC”) was unconstitutional because, among other reasons, the Court found that Congress impermissibly delegated the decision of whether to bring enforcement actions as administrative proceedings or district court actions without providing adequate guidance to the SEC.  The decision is limited to the Fifth Circuit and will undoubtedly be appealed, but it raises significant questions about the use of administrative proceedings even beyond the SEC.

On May 17, 2022, the U.S. Department of Justice (“DOJ”) and the U.S. Securities and Exchange Commission (“SEC”) announced parallel resolutions with a registered investment advisor (the “Advisor”), resolving criminal and civil securities fraud allegations concerning three portfolio managers’ concealment of downside risks associated with the Advisor’s trading strategy, “Structured Alpha,” and the failure to implement an adequate control function in the Advisor’s Structured Products Group.  United States v. AllianzGlobal Investors U.S. LLC, No. 1:22-cr-00279 (S.D.N.Y); Securities and Exchange Commission v. Tournant, Taylor, and Bond-Nelson, No. 1:22-cv-04016 (S.D.N.Y.).  Three related indictments of former portfolio managers of the Advisor whose conduct contributed to the Advisor’s settlement were also unsealed.  United States v. Gregoire Tourant, No. 22-cr-00276 (S.D.N.Y.); United States v. Trevor Taylor, No. 22-cr-00149 (S.D.N.Y.); United States v. Stephen Bond-Nelson, No. 22-cr-00137 (S.D.N.Y.).

On May 6, 2022, the long-awaited trial between the Securities and Exchange Commission (“SEC”) and James Im (“Im”)—a former Nomura trader—came to an end when a Manhattan federal jury found in favor of Im.  The SEC brought suit against Im in 2017, claiming that he committed securities fraud by making various alleged misstatements to his trading counterparties in connection with trading commercial residential mortgage backed securities (“RMBS”).  The jury’s decision – particularly in a civil trial as opposed to a criminal one – may raise further questions about the government’s multi-year pursuit of misstatements in the commercial RMBS market that began with the Department of Justice’s case against former trader Jesse Litvak.

On April 21, 2022, the Office of the Comptroller of the Currency (OCC) issued a consent order against Anchorage Digital Bank, a digital asset bank based in South Dakota.  Notably, Anchorage had previously become the first digital asset bank to be regulated by the OCC in January 2021.  In its consent order, the OCC determined that Anchorage had failed to adopt an effective compliance system as required by the Bank Secrecy Act and anti-money-laundering (“AML”) laws, specifically highlighting failures related to “internal controls for customer due diligence and procedures for monitoring suspicious activity, BSA officer and staff, and training.”