SEC Charges Grupo Aval with FCPA Violations, Agrees to $40 Million Settlement

Colombian Conglomerate Grupo Aval and Its Bank Subsidiary to Pay $40 Million to Settle FCPA Violations

The Securities and Exchange Commission today charged Colombian conglomerate Grupo Aval Acciones y Valores S.A., aka Grupo Aval S.A., and its bank subsidiary, Corporación Financiera Colombiana S.A. (Corficolombiana), with violating the Foreign Corrupt Practices Act (FCPA). Grupo Aval, whose shares are traded on the New York Stock Exchange, agreed to pay $40 million to settle the SEC charges.

According to the SEC’s order, Corficolombiana and a joint venture partner won a contract from the Colombian government for a 328-mile highway infrastructure project in Colombia. The SEC alleges that Corficolombiana, through its former president and with the joint venture partner, bribed government officials in Colombia to win an extension to the contract. At least $28 million in illicit payments were paid with the knowledge, approval, and assistance of Corficolombiana’s former president. According to the SEC’s order, Corficolombiana caused Grupo Aval’s violations and provided Grupo Aval with an improper financial benefit totaling approximately $32 million.

Crypto Asset Trading Platform Bittrex and Former CEO to Settle SEC Charges for Operating an Unregistered Exchange, Broker, and Clearing Agency

The Securities and Exchange Commission today announced that crypto asset trading platform Bittrex Inc. and its co-founder and former CEO, William Shihara, agreed to settle charges that they operated an unregistered national securities exchange, broker, and clearing agency. Bittrex Inc.’s foreign affiliate, Bittrex Global GmbH, also agreed to settle charges that it failed to register as a national securities exchange.

As alleged in the SEC’s complaint filed on April 17, 2023 in U.S. District Court for the Western District of Washington, Bittrex acted as an unregistered broker, exchange, and clearing agency by providing services to U.S. investors in connection with crypto assets that the SEC’s complaint alleges were offered and sold as securities. The complaint further alleges that Bittrex and Shihara, who was the company’s CEO from 2014 to 2019, directed issuers who sought to have their crypto assets made available for trading on Bittrex’s platform to first delete from public channels certain “problematic statements” that Shihara believed would lead a regulator, such as the SEC, to investigate whether the crypto asset was offered and sold as a security. As part of the settlement, the defendants neither admit nor deny the SEC’s allegations.

Robinhood defeats investors’ appeal over meme stock frenzy

Customers who owned stocks such as AMC Entertainment, the former Bed Bath & Beyond, and GameStop claimed in the proposed class action that they lost money because Robinhood stopped them from buying more as social media-fueled trading drove prices skyward.

Other holders of the stocks also said they were harmed, because the restrictions eventually caused prices of their stocks to fall.

But in a 3-0 decision, the 11th U.S. Circuit Court of Appeals in Atlanta said Robinhood’s standard customer agreement specifically authorized the restrictions and did not suggest that Robinhood would accept all trade orders.

Companies Grapple With Limits in Bringing AI Into the Boardroom

According to the Board Practices Quarterly report, only 13% of companies have an AI policy or code of conduct. Around one-third don’t have the protocol and another one-third are currently considering enacting it.

The report also shows that only 9% have revised corporate policies to include privacy, cyber, risk management, and record retention. About one-third haven’t revised yet, but 42% of companies said they are considering a change.

While more employees and management use AI, relatively few directors are knowledgeable with how to use AI tools nor have been receiving proper education.

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The bottom line: the gen AI evolution isn’t going away, leaving corporate boards forced to deal with it.

“Boards should be thinking about AI as part of their regular agenda,” said Jaworski. “There should be a line item in there that says, AI education.”

Emoji Context Matters When Judged by Courts and Regulators

In court cases, it may be appropriate to judge emojis because such cases may involve one or a small number of emojis, allowing the fact finder to conduct an in-depth review of the context, as well as interpretations offered by the sender and recipient. These factors may allow courts to apply an objective standard.

In contrast, broker-dealers engaged in “reasonably” reviewing thousands or millions of electronic communications by applying “risk-based” principles don’t have the luxury of parsing each emoji in the same manner as litigants or courts.

Therefore, before FINRA requires broker-dealers to apply unwritten and untested standards, FINRA staff may want to take a break 😎 and consult with firm management, compliance officers, and registered representatives about these issues. If the industry isn’t consulted, it’s easy to predict what will happen next 🤬.

SEC Gains Access to Identities of Law Firm Clients

Three Key Takeaways

Despite affirming the SEC’s broad investigative authority, the court limited the SEC’s requests to information directly connected to its stated investigative objectives. This decision reflects that courts increasingly view the SEC’s power much more narrowly than does the agency itself.

The outcome in this case may embolden the SEC to seek similar information in the future from law firms that experience a cyberattack, since it largely prevailed on its legal arguments against the law firm. But the agency received significant external criticism for seeking this information and the court ultimately exercised discretion to hold the SEC to a tighter standard of relevancy than is typical in subpoena enforcement actions, suggesting that the court was unsympathetic toward the agency’s actions. Under future SEC administrations, it would not be surprising to see the agency adopt tighter internal standards for subpoenaing law firms akin to those the agency has for subpoenaing the press.

SEC investigations are but one of the many legal challenges companies may face in the wake of a cybersecurity incident. Companies should not be deterred by this case from seeking legal counsel to help identify, navigate, and mitigate those risks, especially when involved early in the incident response.

WeWork Woes Makes It One of Biggest De-SPAC Failures

WeWork Inc. is already infamous for torching billions of Softbank Group Inc.’s cash. It’s been labeled a poster child for the excesses of Silicon Valley’s founder worship. And exemplifies the profligacy of a near-zero interest rate environment.

Now — after the office-sharing company said is has “substantial doubt” that it can remain solvent — it’s one of the biggest failures of a stock-market trend littered with blowups: SPAC-mania.

Trends in ESG Litigation and Enforcement

Do you expect the SEC’s new climate disclosure rules, if finalized, will change the scope of its ESG-related enforcement actions?

Enforcement actions covering topics that are now known as ESG-related are not new. Historically, these actions typically alleged violations of disclosure controls and procedures or material misstatements, as noted above. However, the SEC’s proposed climate rules would require detailed information about a company’s climate-related risks, greenhouse gas emissions, and climate-related financial metrics and targets, vastly increasing the amount of information disclosed in securities filings. As a result, the SEC would have more areas to police and companies would have more areas to govern with internal controls and procedures.

‘Divisive and Extreme’: Lawsuit Assailing Target’s ESG Agenda Shows How Dicey Topic Has Become

Anti-ESG forces have opened a new line of attack in their quest to get corporate America to deemphasize priorities such as diversity and support for LGBTQ communities by suing retailing giant Target, one of the highest-profile advocates of such causes.

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The Target suit, filed this week in federal court in Florida, differs in that it parses years of the companies’ Securities and Exchange filings to highlight what it deems to be false or misleading statements—in particular assertions that CEO Brian Cornell and the board were exercising oversight over the full range of ESG-related risks, and that their pursuit of ESG goals was aligned with enhancing shareholder value.

In fact, according to the suit, the CEO and board have adopted a “divisive and extreme” ESG agenda that is completely out of step with its core customer base of working families and has resulted in millions of dollars in lost sales and incinerated billions of dollars in shareholder value.