Securities Violations and Accounting Fraud

On June 22, 2020 the Department of Justice Antitrust Division (Antitrust Division) and the Securities and Exchange Commission (SEC) announced that they had signed an interagency Memorandum of Understanding (MOU) to allow for more cooperation and communication between the two agencies.

Although these agencies have worked together in the past, this is the first time the Antitrust Division and the SEC have entered into a formal agreement. The agencies hope that this agreement will improve competition in the securities industry. As SEC Chairman Jay Clayton explained, “As competition is embedded in our securities laws, there are many policy areas where the missions of the SEC and DOJ’s Antitrust Division align, but where our respective areas of expertise differ. By formalizing the exchange of knowledge between our agencies, we aim to foster even greater collaboration and cooperation to ensure that we maintain the efficient and competitive markets that American investors rely on.”


Continue Reading New Cooperation Agreement Between the DOJ Antitrust Division and SEC

Amongst those who operate or act (whether voluntarily or not) within global law enforcement arenas, there has long been a tendency in some quarters to view the UK law enforcement landscape with less trepidation than that in the US.[1] For many years law enforcement agencies in the United States and particularly the US Department of Justice (DOJ) and Securities and Exchange Commission – exponentially better funded and resourced – have drawn the limelight with billion-dollar bribery-related settlements such as the $1.78 billion settlement with Brazilian petrochemicals company, Petrobras, and the $1.01 billion settlement with Swedish telecommunications company Telia. There are signs, however, that a confluence of factors is now resulting in an increasingly aggressive posture being taken by UK law enforcement bodies and those who discount the appetite, powers and ability of those bodies may do so at their own peril.

Of all the UK law enforcement agencies, none has faced more apparent recent criticism and calls for reform than the UK Serious Fraud Office (SFO), the agency charged with tackling the top level of serious or complex fraud, bribery and corruption. The collapse of the 2019 trial of two former Tesco directors accused of false accounting (with the trial judge declaring that “I concluded in certain crucial areas the prosecution case was so weak it should not be left for a jury’s consideration”) was a high profile setback for the SFO, as was both the 2020 acquittal of three Barclays executives accused of making illegal payments to Qatar and the collapse of the case against the bank itself. Whilst it continues to defend itself against allegations that it is unfit for purpose and that a complete overhaul of the agency is necessary, the attacks appear to be having an unwelcome consequence for those in the SFO’s eyesight; namely, whilst the SFO faces increased scrutiny and the pressure of bringing significant prosecutions, there is likely to be much less shirking of high-profile investigations and, once an investigation is open, it will bring all its powers and expertise to bear. Put simply, once an investigation is opened, the SFO will play to win.


Continue Reading Ramped-Up Powers, Performance Anxiety and Political Pressure: A Perfect Storm for UK Law Enforcement Agencies?

On June 22, the US Supreme Court weighed in on a question it explicitly left open in Kokesh v. SEC – whether, and to what extent, the Securities and Exchange Commission (SEC) in a civil enforcement action may seek “disgorgement” as “equitable relief that may be appropriate or necessary for the benefit of investors” under

Remarkably, we issued the advisory notice below a decade ago to serve as a guide for avoiding and managing the most sensitive matters before increasingly ambitious US state prosecutors – guidance that, following years of public corruption, pay-to-play and other high-profile financial matters, particularly in New York and California, is every bit as apt now

Securities litigation and enforcement activity often surge in times of crisis. Indeed, bedrock federal securities regulations were borne out of an extended crisis: the stock market crash of 1929 and the decade-long Great Depression that followed.

COVID-19 has already set off a wave of securities litigation. These private lawsuits and putative class actions have been based on allegedly misleading statements in securities filings and public statements. But issues surrounding proof in the COVID-19 era, including demonstrating the “price impact” of alleged misrepresentations for purposes of reliance and loss causation, limit the viability of these claims.

As public companies anticipate the next wave of securities activity they should expect limitations on private lawsuits to prompt the Securities and Exchange Commission (SEC) to ramp up civil enforcement. The Department of Justice (DOJ) may even launch related criminal investigations in high-profile cases.

We discuss below recent COVID-19-related securities litigation and enforcement trends, special issues with reliance and loss causation, and best practices to avoid the expected onslaught of SEC enforcement and DOJ investigations.


Continue Reading Securities Enforcement Activity in the COVID-19 Era: A Backstop to Private Securities Litigation

According to the European Commission,[1] fraud offences against the European Union (EU) budget cost the EU and its member states over €1 billion in losses in 2018, in addition to the annual losses of around €150 billion resulting from VAT fraud. With current criminal enforcement efforts across the EU apparently failing to effectively tackle such offences, the EU established the European Public Prosecutor’s Office (EPPO) to act as an independent and decentralized office with the power to investigate and prosecute crimes against the EU budget, such as fraud, corruption, misappropriation and cross-border VAT-related fraud.

Set to become fully operational in November 2020, based in Luxemburg, with its funding for 2020 increased by nearly 50%, the EPPO is expected to ramp up prosecutions of corporate crime concerning the EU’s financial interests and facilitate the recovery of misused EU funds. Previously, only national authorities could investigate and prosecute such offences within the scope of their own borders.


Continue Reading European Public Prosecutor to Take EU Finance Fraudsters to Task?

UK law enforcement is not immune to the unprecedented levels of business disruption caused by COVID-19. While not all agencies have published specific guidance on how they propose to operate and conduct enforcement investigations during this crisis (including, for example, Her Majesty’s Revenue & Customs, the Serious Fraud Office, and the National Crime Agency), a