Articles Posted in sec enforcement

Has your company ever been denied access to banking or other financial services for any reason other than standard credit risk criteria, violation of terms of service, or excessive unexpected activity? Such practices are now illegal. This practice is called debanking and often occurs without a clear explanation to the customer, leaving individuals or businesses…

A U. S. Government Accountability Office (GAO) study, released in January of 2023 found that “Third-party litigation financing (TPLF) is an arrangement where a funder that is not a party to a lawsuit agrees to provide funding to a litigant (typically a plaintiff) or law firm in exchange for an interest in the potential recovery…

Regulatory agencies, including the Department of Justice and other federal and state authorities, have increased their focus on compliance with artificial intelligence (AI) risk frameworks, particularly within financial institutions. The rapid and widespread adoption of AI has introduced complex risks that traditional control systems were not designed to address. AI is no longer experimental. It…

Business owners have always understood the importance of managing internal costs to maintain profitability. However, recent economic conditions, including high interest rates and inflation, have created external cost pressures beyond a company’s control. These factors are contributing to increased corporate distress and a corresponding surge in litigation. As financial strain intensifies, companies are facing higher…

A company insider trading policy is not required by the U.S. Securities and Exchange Commission (SEC), but it is an important corporate governance document that establishes clear rules for employees and company insiders regarding trading in company securities. The policy is designed to prevent the misuse of material non-public information (MNPI), which could give individuals an unfair advantage in the securities markets. Illegal insider trading can expose a company and its leadership to severe legal, financial, and reputational consequences. A well-structured insider trading policy helps protect the company by establishing clear expectations and discouraging improper conduct. The SEC has published guidance outlining best practices for companies developing insider trading policies. Who and What Is Covered An insider trading policy should clearly identify who is subject to the rules and what types of activities are restricted. SEC Rule 10b-5 prohibits corporate insiders from using confidential corporate information to trade securities for personal gain. Covered individuals may include: The rule also prohibits “tipping,” which occurs when insiders share confidential information with third parties who then use that information to trade securities. A company’s policy should summarize relevant federal securities laws—including the Securities Exchange Act of 1934 and SEC Rule 10b-5—and explain how insiders may trade securities while remaining compliant with these regulations. Defining Key Terms Clear definitions help employees understand what information and conduct may create insider trading risks. Important terms typically addressed in the policy include: Material Information: Information that could reasonably affect the value of the company’s securities or influence an investor’s decision to buy, sell, or hold stock. Examples include: Non-Public Information: Information that has not yet been widely disseminated to the public or fully absorbed by the market. Insider: Any individual who has access to material non-public information due to their relationship with the company, including officers, directors, large shareholders, and individuals who receive confidential tips. Trading Restrictions and Procedures An insider trading policy should establish clear rules governing when and how insiders may trade company securities. Common procedures include: Blackout Periods: Pre-determined periods during which certain executives and directors may not trade securities, such as around quarterly earnings announcements or other major corporate events. Event-Specific Trading Restrictions: Temporary restrictions imposed when the company is involved in confidential transactions such as merger negotiations or strategic business developments. Pre-Clearance Requirements: Directors, officers, and employees with access to confidential information may be required to obtain approval from a designated compliance officer before trading company securities. Compliance, Enforcement, and Penalties An effective insider trading policy must address enforcement mechanisms and the consequences of violations. Key components include: Designated Compliance Officer: A specific individual—often the company’s general counsel—responsible for administering the policy and answering compliance questions. Reporting Violations: A confidential reporting channel allowing employees to report suspected violations without fear of retaliation. Penalties: Violations may result in serious consequences, including: Insider trading penalties can be severe and may include: Implementation and Best Practices For an insider trading policy to be effective, it must be properly implemented and communicated throughout the organization. Best practices include: Why Legal Guidance Matters As companies grow and evolve, insider trading risks and compliance requirements may also change. Maintaining a clear and enforceable insider trading policy helps protect the company and its leadership from significant legal exposure. The attorneys at Corporate Securities Legal LLP assist companies in developing insider trading policies, implementing compliance programs, and navigating federal securities regulations. Contact Corporate Securities Legal LLP to ensure your company’s insider trading policies remain compliant with current securities laws and regulatory expectations.

The Foreign Corrupt Practices Act of 1977 (FCPA) prohibits U.S. companies and individuals from offering or paying bribes to foreign officials in order to obtain or retain business advantages. The law applies to conduct occurring both outside and within the United States and broadly covers the use of mail or any means of interstate commerce in furtherance…

The risks presented by artificial intelligence (AI) are becoming an increasing concern for corporate boards as emerging technologies influence business strategy, operations, and long-term planning. At the same time, regulators are closely examining how accurately companies disclose AI-related risks and the mitigation measures being implemented. The U.S. Securities and Exchange Commission (SEC) has already initiated…

Fair and orderly securities markets depend on the accuracy and honesty of information provided to investors. Public companies and individuals involved in securities transactions are required to ensure that all filings and communications are complete, truthful, and not misleading. There is no tolerance under federal securities laws for inaccuracies—whether negligent or intentional. False or misleading…

August 13, 2019 The Securities and Exchange Commission (“SEC”) charged Antonio Bravata, a repeat securities law violator, with securities fraud after learning that Bravata was offering securities of a company he owned and controlled while serving his sentence for another Ponzi scheme. The SEC was able to put a stop to the securities offering before…

On November 29, 2018, the Securities and Exchange Commission (“SEC”) charged two celebrities with unlawfully touting initial coin offerings (“ICOs”). This is the first time that the SEC has brought touting violation charges involving ICOs. Professional boxer, Floyd Mayweather Jr. and music producer Khaled Khaled, commonly known as DJ Khaled, each received cease and desistorderswith…