ESG Due Diligence Update: First lessons from Recent Rulings in the EU

There has been a major shift in the European Union (“EU”) in recent years around Environment, Social and Governance (“ESG“), from voluntary corporate social responsibility initiatives to a much more regulated and legislation-driven ESG regime. A key component driving this shift is the Corporate Sustainability Due Diligence Directive of June 13, 2024 (“CS3D”),[1] which established due diligence requirements for large EU companies and groups,[2] as well as large multinational entities, including those based in the US that are operating in the EU.[3]

The CS3D lays out rules that address (i) due diligence obligations for companies in relation to the adverse ESG impacts of their operations, (ii) liability for companies not complying with these requirements, and (iii) the obligation for companies to adopt and put into effect a transition plan for climate change mitigation.

Insider Dealing: Increasing Scope and Greater Focus from UK and US Enforcement – Are You up to Speed?

By Hannah Laming, Daniel Berick, Grace King and Malak Abbas on August 12, 2024 Posted in Anti-corruption, Compliance Program, Corporate compliance, Corporate Finance/M&A, General, Government Investigation, Securities Litigation and Enforcement, Serious Fraud Office (SFO), U.S. Congress, U.S. Securities and Exchange Commission, U.S. Securities and Exchange Commission, United Kingdom, United States, US Department of Justice

The UK and US enforcement agencies have been actively pursuing insider dealing (“insider trading”, in US parlance) since the COVID-19 pandemic ended. The UK and US have different securities enforcement regimes, but both have seen recent developments expanding the scope of conduct that can be prosecuted. For individuals and organizations trading across multiple jurisdictions, it is important to keep abreast of the scope of these offenses and of the different rules that apply in key enforcement jurisdictions. In this article, we will summarize the UK and US criminal offenses of insider dealing and highlight some key similarities and differences between those enforcement regimes. We will review recent legislative changes and enforcement activity and touch upon how enforcement agencies are signaling greater abilities to identify insider dealing, through reporting and the use of more advanced technical capabilities.

SEC v. Jarkesy: Possible Implications for the SEC’s FCPA Enforcement

By Elizabeth Profaci on August 7, 2024 Posted in Courts, Department of Justice, FCPA Jurisdiction, Foreign Corrupt Practices Act, Foreign Corrupt Practices Act (FCPA), Government Investigation, Securities Litigation and Enforcement, U.S. Securities and Exchange Commission, U.S. Securities and Exchange Commission, US Department of Justice

On June 27, 2024, the Supreme Court issued its opinion in Securities Exchange Commission v. Jarkesy. The Court held that the Seventh Amendment entitles a defendant to a jury trial when the SEC seeks civil penalties for securities fraud, because these cases replicate common law fraud claims. S.E.C. v. Jarkesy, No. 22-859, slip op. at 6 (U.S. 2024), as we noted in our earlier post. Therefore, these types of claims must be heard by an Article III court. One impact of this ruling is that the SEC’s administrative proceeding (“AP”) enforcement mechanism is no longer available for matters where the SEC brings a fraud claim and seeks civil penalties, and otherwise fails to reach a negotiated settlement with the defendant prior to filing. However, even though Jarkesy did not address the Foreign Corrupt Practices Act (“FCPA”) directly, the case will potentially have some impact on FCPA enforcement because the SEC will likely be unable to use the AP process for contested FCPA matters where a penalty is sought, and instead will be required to file these matters in federal district court. This will pose additional risk and resource calculations for the SEC, as discussed below.

OFAC Guidance on the Statute of Limitations Extension

By Kevin McCart, Adam Klauder and Mary Maloney on July 31, 2024 Posted in Anti-corruption, Anti-money laundering, Anti-terrorism financing laws, Compliance Program, Corporate compliance, Courts, Economic sanctions, General, Government Investigation, OFAC, Sanctions, Sanctions, United States, US Department of Justice, US Treasury

OFAC will only apply new 10-year statute of limitations for a violation that occurred after April 24, 2019; if the violation occurred on or before April 24, 2019, OFAC will only apply the previous 5-year statute of limitations
OFAC’s record keeping requirements and administrative subpoena authority to be extended to 10 years

The President’s signing of the 21st Century Peace through Strength Act (the “Act”)[1] on April 24, 2024 marked one of the most significant expansions of the sanctions enforcement authority of the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). For many decades OFAC’s civil enforcement actions have been limited to five years pursuant to the statute of limitations found at 28 U.S.C. § 2462. Section 3111 of the Act extended “the amount of time that regulators and prosecutors have to investigate and prosecute civil and criminal sanctions violations from five to 10 years,” as discussed in a previous blog post. This extension applies to sanctions enforcement actions pursuant to both the International Emergency Economic Powers Act (“IEEPA”) and the Trading with the Enemy Act (“TWEA”).

Does the Seventh Amendment Limit State Administrative Adjudication?

By Squire Patton Boggs on July 22, 2024 Posted in Courts, Department of Justice, General, Government Investigation, Securities Litigation and Enforcement, U.S. Securities and Exchange Commission, U.S. Supreme Court, United States, US Department of Justice

At Global Investigations and Compliance Review, we’ve been keeping close tabs on the fallout from the Supreme Court decisions at the end of June. We mentioned in a previous post that the SEC v. Jarkesy opinion may have consequences beyond the specific situation of SEC civil penalties. As we think about this more, there could be further implications even for state enforcement programs.

State agencies usually aren’t concerned with the Seventh Amendment, because it is assumed not to apply to states. (The Seventh Amendment states the right to a jury in appropriate civil cases.) But contributor Keith Bradley points out, in the Yale Journal of Regulation’s Notice and Comment blog, that this assumption has not been well-tested, because states provide civil juries just like federal courts. Jarkesy creates an unusual moment with the federal constitutional right being different from state constitutions. We might start to see defendants in state enforcement argue that they have right to a jury under Jarkesy. This will take some time to develop, but keep an eye out.

Recent DFSA Enforcement Activity and Future Priorities

By Richard Gibbon and Katy Fisher on July 19, 2024 Posted in Anti-corruption, Anti-money laundering, Compliance Program, Corporate compliance, General, Government Investigation, Industry Investigations, Middle East, Money Service Business, Sanctions, Sanctions, United Arab Emirates

In this article, we summarize the trends that have emerged from enforcement actions published between 2022 and the present day by the Dubai Financial Services Authority (the “DFSA”).

Foreign Ownership, Control or Influence (FOCI) Mitigation Specifically for Unclassified Contracts

By Shannon Reaves, Chris Griner, Tom Firestone, Greg Jaeger, Tamara Rozina and Erin Bruce on July 11, 2024 Posted in Compliance Program, Corporate compliance, Foreign Direct Investment and National Security Control, Government Investigation, Industry Investigations, United States

In May 2024, the US Department of Defense (DoD) published the long-awaited DoD Instruction [1] (FOCI Instruction) expanding the FOCI review process from solely US government contractors that access classified information to all US government contractors performing on certain unclassified contracts with a value exceeding US$5 million. For the uninitiated, the US government mitigates FOCI at US companies that require security clearances through the implementation of FOCI mitigation plans. These plans vary based on the nature of the FOCI (and other risks), and can include security controls at the cleared US companies, such as requirements for independent directors, visitation and access controls, restrictions on communications with the foreign owner, and limitations on shared services and operations, among other requirements. Typically, parties that work with the DoD to implement and comply with these mitigation plans do so in order to obtain or maintain facility security clearances (FCLs) required for performance on classified contracts.

WEBINAR- The 2024 Revolution in Administrative Law: Chevron and Beyond

By Squire Patton Boggs on July 8, 2024 Posted in Anti-corruption, Compliance Program, Corporate compliance, Courts, Cybersecurity, Department of Justice, Federal Trade Commission, General, Government Investigation, Intellectual Property, Securities Litigation and Enforcement, U.S. Congress, U.S. Securities and Exchange Commission, U.S. Supreme Court, United States, US Department of Justice, US Treasury

Join #TeamSPB’s Ben Glassman and Keith Bradley for a timely webinar on the major decisions recently issued by SCOTUS. The panel will cover each of the recent decisions (Loper Bright v. Raimondo, SEC v. Jarkesy, Ohio v. EPA, and Corner Post v. the Fed) and discuss the consequences, as well as the opportunities and challenges, that may lie ahead. Key topics will include:

What does the 2024 revolution mean for the future of the administrative state?
What opportunities does it present for litigating against the government?
How will it affect agency decision making?
What does it mean for regulated businesses?

The webinar will be held on Tuesday, July 16, 2024, at 10 – 11 a.m. ET.
For additional information and registration, click here.

End of the Chevron Era: The Future of Agency Enforcement Shifts to Courts

With its second of two landmark decisions impacting the future of federal agency enforcement, SCOTUS struck down the Chevron decision last week. In a 6-3 decision in Loper Bright Enterprises v. Raimondo, the Court shifted enforcement power away from agencies and to the federal courts. The implications of the Chevron decision are both significant and wide-reaching. Our team of specialists from government investigations, policy, appellate, and litigation dive into the key aspects of the decision as well as risks and opportunities in Chevron Has Fallen: Supreme Court Seismically Shifts Regulatory Power From Agencies to Courts. While speculation and uncertainty will rule the discussion in the near term, one thing is certain: a new era in enforcement has begun.

As developments evolve around this landmark decision, our Global Investigations & Compliance Report team will keep you up to date on the latest news.

SCOTUS Ruling in Jarkesy Foreshadows Big Changes in Federal Enforcement

By Squire Patton Boggs on July 2, 2024 Posted in Compliance Program, Corporate compliance, Courts, Department of Justice, FCPA Jurisdiction, Foreign Corrupt Practices Act, Foreign Corrupt Practices Act (FCPA), Government Investigation, Securities Litigation and Enforcement, U.S. Securities and Exchange Commission, U.S. Securities and Exchange Commission, United States

SPB’s Keith Bradley authored an article for Bloomberg Law covering a recent SCOTUS decision with significant ramifications: SEC v. Jarkesy. We believe that Jarkesy will decidedly shift the landscape of agency adjudication and regulatory enforcement. For the background and possible implications of this decision, read the full article at Supreme Court’s Jarkesy Ruling Upends SEC Enforcement Practices (bloomberglaw.com). We plan to discuss the impact of Jarkesy on other specific areas of enforcement in future posts.