PCAOB Enforcement Ramping Up?

Audit Regulator Steps Up Enforcement Under New Leader

The U.S. audit regulator is getting tougher on rule-breaking accountants after years of criticism for its alleged light touch. But there are limits to how much it can change.

The shift is being led by the new chair of the Public Company Accounting Oversight Board, Erica Williams, who said, “When people cheat, you need to…make sure that there are serious consequences.”

Wells Fargo Says SEC Is Examining its Hiring Practices

Wells Fargo & Co said on Monday that the U.S. Securities and Exchange Commission has begun investigating its hiring practices, after the Department of Justice had opened a related probe.

In its quarterly report filed with the SEC, the fourth-largest U.S. bank said both agencies “have undertaken formal or informal inquiries or investigations regarding the company’s hiring practices related to diversity.”

Wells Fargo drew scrutiny in June when it suspended a policy requiring that it interview a “diverse” group of people for some jobs, with half of the candidates being female or nonwhite.

The halt came after The New York Times said the policy had led some employees at the San Francisco-based bank to conduct “fake” interviews for jobs that had already been filled.

Elon Musk Is Busy With Twitter

The basic problem with Musk’s efforts to walk away from his deal to buy Twitter — beyond the transparent nonsense of his actual arguments — was that if he could walk away from this deal then no merger agreement would be binding; every buyer could change their mind and go to court and say “meh, contracts, they don’t matter.” That did not work out for him; the system held.

The basic problem with Musk’s efforts to walk away from these severance agreements — beyond the lack of actual arguments — is that if he can stiff these executives then no golden parachute is binding. The point of a golden parachute is that a CEO with a golden parachute will sell his company to a buyer whom he doesn’t like, if that’s what is best for shareholders. If the buyer can stiff the CEO on the parachute payments because they don’t like each other, then no buyer will ever pay severance, and no CEO will ever trust it.

SEC Awards More Than $10 Million to Whistleblower

The Securities and Exchange Commission today announced an award of more than $10 million to a whistleblower who provided information and assistance that significantly contributed to a successful SEC enforcement action.

The whistleblower provided important documents and met twice with Enforcement staff. The charges in the covered action had a close nexus with the whistleblower’s allegations, which were critical to the underlying investigation.

Judges keep knocking SEC gag rule but defendants can’t find a way to evade it

The Moraes and Novinger cases – along with another recently fizzled challenge to the SEC policy – show why it’s so hard, as a matter of procedure, for judges to impose change on the SEC, even when courts believe the government should not condone a policy that effectively forces defendants to waive their constitutional rights.

I want to be clear that Abrams, Jones and Duncan are offering a minority view among judges who have considered the SEC’s decades-old gag order policy. As the SEC told Abrams in an Oct. 18 letter responding to her sua sponte order calling on the agency to explain why its gag clauses don’t impinge on defendants’ 1st Amendment rights, the SEC has a compelling interest in litigating its cases in court, rather than in after-the-fact press releases or tweets.

The gag provision, the SEC said, simply gives the agency a right, if a defendant denies the agency’s accusations after settling, to vacate the deal and litigate to prove its allegations.

Crypto World Speculates About Widening Rally After Dogecoin Jump

A parabolic surge in meme cryptocurrency Dogecoin over the past week is encouraging speculation that other so-called alternative tokens could also catch a speculative tailwind.

The coin represented by an image of a Shiba Inu has climbed to almost 15 US cents from roughly 6 US cents over the period, an advance that in percentage terms far outstrips the performance of top token Bitcoin.

The proximal cause is the $44 billion purchase of Twitter Inc. by Elon Musk, a longtime supporter of the coin. Kunal Goel, a research analyst at Messari, said that some traders believe Musk will integrate the token into the platform.

Suits Targeting Firms Seeking to Boost Minorities Highlight ESG Risks

As I have previously noted (most recently here), something of an anti-ESG backlash has started to take shape, at least in certain quarters. Legislatures in several states have passed legislation prohibiting state pension funds from investing in ES- focused investments or prohibiting the state from doing business with companies that boycott certain industries. The backlash has also taken the form of litigation, as, for example, with respect to the lawsuit recently filed against Starbucks board pertaining to the company’s diversity, equity, and inclusion initiative (DEI).

As Alison Frankel discusses in an October 26, 2022 post on her On the Case blog (here), and in the latest manifestation of this kind of anti-ESG litigation, a nonprofit group has filed an action against the pharmaceutical giant Pfizer based on the company’s sponsorship of a foundation offering fellowships aimed at Black, Latino, Native American and other minority candidates. This latest lawsuit is yet another indication that the companies that get caught up in ESG litigation may the companies taking ESG initiatives, perhaps more so that ESG laggards.