83 Law Firms Sign On as Amici Curiae in Covington's Subpoena Battle With SEC

83 law firms back Covington in SEC subpoena fight

A group of 83 large U.S. law firms has thrown its weight behind Covington & Burling’s effort to resist a demand by the U.S. Securities and Exchange Commission to identify clients caught up in a cyberattack on the firm.

The firms, often fierce competitors for clients and legal talent, joined forces in a friend-of-the-court brief that called the SEC’s subpoena for Covington’s clients a breach of client confidentiality that any firm would resist under similar circumstances.

The SEC’s subpoena would risk turning attorneys “into witnesses against their own clients,” the firms wrote in a filing in Washington, D.C., federal court.

SEC Charges The Church of Jesus Christ of Latter-day Saints and Its Investment Management Company for Disclosure Failures and Misstated Filings

The Securities and Exchange Commission today announced charges against Ensign Peak Advisers Inc., a non-profit entity operated by The Church of Jesus Christ of Latter-day Saints to manage the Church’s investments, for failing to file forms that would have disclosed the Church’s equity investments, and for instead filing forms for shell companies that obscured the Church’s portfolio and misstated Ensign Peak’s control over the Church’s investment decisions. The SEC also announced charges against the Church for causing these violations. To settle the charges, Ensign Peak agreed to pay a $4 million penalty and the Church agreed to pay a $1 million penalty.

The SEC’s order finds that, from 1997 through 2019, Ensign Peak failed to file Forms 13F, the forms on which investment managers are required to disclose the value of certain securities they manage. According to the order, the Church was concerned that disclosure of its portfolio, which by 2018 grew to approximately $32 billion, would lead to negative consequences. To obscure the amount of the Church’s portfolio, and with the Church’s knowledge and approval, Ensign Peak created thirteen shell LLCs, ostensibly with locations throughout the U.S., and filed Forms 13F in the names of these LLCs rather than in Ensign Peak’s name….

SocGen to Pay $157 Million Over Allen Stanford Fraud Claims

Société Générale Private Banking has agreed to pay $157 million to settle a lawsuit that alleges a group of banks enabled the $7 billion Ponzi scheme of financier R. Allen Stanford, according to a federal court filing Tuesday in Texas.

The settlement comes as HSBC Bank, Toronto-Dominion Bank and Independent Bank — formerly Bank of Houston — are set to go to trial on Feb. 27 in Houston over claims they helped support Stanford’s fraud through the banking services they provided.

Trustmark National Bank also entered into a settlement prior to trial, agreeing to pay $100 million to the court-appointed receiver responsible for recouping funds to repay victims of the scheme, which came to light in 2009.

Elon Musk’s lawyer asks court to throw out SEC ‘Twitter sitter’ dealMusk had previously settled with the SEC over the tweets in 2018, and eventually struck a revised settlement agreement that called for a legal and regulatory compliance point person at Tesla (informally, a “Twitter sitter”) to pre-approve any of Musk’s tweets containing any information about the publicly traded company that could affect its stock price.

Musk’s attorney, Quinn Emanuel Partner Alex Spiro, wrote in a letter to the court this week that the SEC lacks support for their revised settlement agreement in light of the jury’s recent finding.

“The jury’s verdict provides further reason why the public interest in avoiding unconstitutional settlements easily subsumes the SEC’s purported stake in the consent decree,” Spiro wrote in a filing.

The SEC’s Other ‘Hotel California’ Docket

In a recent column I called the SEC out for its appalling dereliction of duty in refusing to decide administrative appeals from enforcement sanctions imposed by the agency’s administrative law judges (ALJs)….

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In my research for that column, I largely ignored the SEC’s parallel appellate docket: Appeals from enforcement sanctions imposed by the so-called self-regulatory organizations (“SROs”), primarily the Financial Industry Regulatory Authority (“FINRA”). I naively assumed this parallel docket was still operating business as usual. After all, appeals from SRO decisions are typically far less complicated that decisions from SEC ALJs, with less egregious conduct alleged, less paperwork in the administrative record, and lighter sanctions imposed.

Upon closer look, however, it turns out that appeals from SRO sanctions are nearly as stalled as those from ALJ sanctions, with SEC decisions almost as sporadic.

Wells Fargo Discloses US Probes as Scrutiny of Messaging Apps’ Use Widens

Wells Fargo & Co. said that US regulators are investigating its retention of employee communications over unapproved messaging apps, the latest bank to get caught up in an industrywide sweep that’s already yielded over $2 billion in fines.

Probes by the Securities and Exchange Commission and the Commodity Futures Trading Commission were disclosed Tuesday in a regulatory filing. They are investigating “compliance with records-retention requirements relating to business communications sent over unapproved electronic messaging channels,” San Francisco-based Wells Fargo said.

Kevin O’Leary Warns US Crypto Regulation Getting ‘Very Aggressive’ — ‘You’ve Got to Stay out of the Way of SEC’

Shark Tank star Kevin O’Leary has shared his outlook for the crypto industry following several enforcement actions by the U.S. Securities and Exchange Commission (SEC). Mr. Wonderful tweeted Monday:

“Venture funding for new crypto projects is virtually dead and aftermarket trading for existing projects is at massive discounts. Reason? The regulator is now regulating by enforcement, penalties, and massive fines.”

“The venture community has moved on to the next ‘big’ thing, AI,” he added.

O’Leary explained in an interview with Trader TV Live, published Sunday, that following the collapse of cryptocurrency exchange FTX, U.S. lawmakers are “pissed” about having to regularly meet to deal with the failures of crypto companies. Senators are “fatigued” and “really tired of gathering every six months when the next crypto company blows up and goes to zero,” the Shark Tank star described. He believes this is one of the reasons SEC Chairman Gary Gensler recently came down “heavy-handed” on crypto exchange Kraken over its staking program.

SEC’s Shadow Crypto Rule Taking Shape as Enforcement Cases Mount

Gensler suggests he’s frustrated over the crypto platforms’ unwillingness to come through his doors.

Kraken’s CEO “publicly said they were never going to register with the SEC – boldly said that,” Gensler said. “These platforms aren’t even coming in and asking for the meetings,” he said, adding that “I really deeply respect” the few that have come in.

For their part, industry insiders say the SEC rarely has a real path to offer crypto firms. Longo said few companies have made any headway on the registration question.

“That feels a bit hollow to people in the markets who are trying to figure out how to comply with what the agency wants,” she said.

China Urges State Companies to Drop PWC, KPMG, Deloitte, EY on Data RiskChinese authorities have urged state-owned firms to phase out using the four biggest international accounting firms, signaling continued concerns about data security even after Beijing reached a landmark deal to allow US audit inspections on hundreds of Chinese firms listed in New York.

China’s Ministry of Finance is among government entities that gave the so-called window guidance to some state-owned enterprises as recently as last month, urging them to let contracts with the Big Four auditing firms expire, according to people familiar with the matter. While offshore subsidiaries can still use US auditors, the parent firms were urged to hire local Chinese or Hong Kong accountants when contracts come up, one of the people said, asking not to be identified discussing private information.