White Collar Criminal Defense Group

The SEC Will Require Admissions of Wrongdoing to Build Back Trust in America’s Institutions

Takeaways:

The SEC’s Director of Enforcement plans to build back trust in America’s institutions “without fear or favor” by:

• Tackling misconduct by “Crafting Appropriate Remedies”
• Cracking down on egregious conduct by instituting officer and director bars in cases of scienter-based violations

Gurbir Grewal, the former Attorney General of New Jersey and current Director of Enforcement for the Securities and Exchange Commission, has big plans to build back trust in the SEC. In public comments at SEC Speaks 2021 in Washington D.C., Director Grewal did not shy away from calling out the repeated lapses by big business and the double standard used by regulators. While acknowledging that this decline in public trust is not attributed to a single cause, Director Grewal revealed the agency’s plan to build back trust in America’s institutions “without fear or favor.”

Among other enforcement actions, Director Grewal signaled that the agency will tackle misconduct by ‘Crafting Appropriate Remedies.’ This includes requiring admissions of wrongdoing in “cases where heightened accountability and acceptance of responsibility are in the public interest.” Director Grewal and the SEC believe these admissions of wrongdoing will make strides in restoring public trust in American institutions. Director Grewal spoke directly to lawyers, counselors, and gatekeepers with influence over market behavior to join him in modeling excellence in compliance efforts. To the SEC, this means, “firms need to think rigorously about how their specific business models and products interact with both emerging risks and enforcement priorities, and tailor their compliance practices and policies accordingly.”

These efforts to build back trust do not require admissions of wrongdoing in every case. Director Grewal acknowledged that this requirement is prophylactic, aimed at curbing misconduct that harms the public the most. In pursuit of building trust, the SEC will crack down on egregious conduct by instituting officer and director bars in cases of scienter-based violations. Finally, Director Grewal noted that conduct-based injunctions, such as prohibiting a defendant from engaging in such activities as stock trading and securities offerings are important remedies.

To read Director Grewal’s full statement at SEC Speaks 2021, follow the link: https://www.sec.gov/news/speech/grewal-sec-speaks-101321

Biden Administration Increases Efforts in Corruption Fight

Takeaway:

Given the Biden Administrations National Security Study Memorandum, as well as the easing of the COVID-19 pandemic, it is now an opportune time for companies to review their compliance protocols and training in order to avoid investigations and potential enforcement actions.

In June, the Biden Administration issued a National Security Study Memorandum (NSSM), which established the fight against corruption as a core national security interest of the U.S.  The NSSM directed more than a dozen government agencies to conduct a 200-day interagency review and to issue reports and recommendations on how the U.S. government could better combat corruption in five (5) major areas:

• Modernizing, improving, and increasing resources for intelligence collection and analysis of corruption at home and abroad.

• Curbing elicit financing by establishing “beneficial ownership” to prevent illicit actors from hiding the proceeds of corruption behind shell companies, limiting the ability of illicit actors to buy residential real estate anonymously, and closing loopholes in existing regulatory regimes.

• Holding corrupt individuals and transnational criminal organizations accountable by building upon existing anticorruption sanctions such as the Global Magnitsky Act, bolstering criminal or civil enforcement actions, and increasing support to grow the capacity of civil society, the media, state and local bodies, international partners, and other oversight and accountability actors.

• Building and maintaining relationships with like-minded international partners through the UN, G7, Financial Action Task Force, and similar bodies to counteract corruption from autocratic and kleptocratic governments, foreign state-owned or affiliated enterprises, and transnational criminal organizations.

• Improving enforcement measures and focusing on anticorruption best practices in the implementation of foreign assistance programs and security cooperation.

Given this new guidance, as well as the easing of the COVID-19 pandemic, companies are well-advised to review their compliance protocols and training to avoid investigations and enforcement actions.     

Pietragallo Gordon Alfano Bosick & Raspanti, LLP has significant experience in the defense of FCPA and Qui Tam matters and assists companies and their leadership in conducting internal investigations to proactively enhance compliance in the ever-changing landscape of government enforcement actions.  We assist clients in all 50 states, the District of Columbia, and abroad.