SEC Announces $25 Million Enforcement Action Over Company’s Use Of Stock Buyback Plans That SEC Alleged Failed To Comply With Rule 10b5-1
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.
DOJ Announces Safe Harbor For Companies That Self-Disclose Misconduct Discovered During M&A
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.
SEC Brings Enforcement Action Against Investment Advisor For Allegedly Failing To Disclose Conflicts Of Interest In SPACs Into Which It Invested Client Funds
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.
New York Fines Crypto Trading Platform $30M In First-Ever DFS Crypto Settlement
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.
U.S. Investment Firm Enters $6 Billion Parallel Resolutions With DOJ And SEC Over Allegations Of Fraudulent Conduct By Employees And Related Control Failures
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.).