D.C. Circuit Rejects SEC’s Program Testing Exchange Fees and Rebates

On June 16, 2020, the U.S. Court of Appeals for the District of Columbia Circuit held that the Securities and Exchange Commission (“SEC”) lacks the authority to administer a two-year pilot program designed to review the fees and rebate structure used by U.S. stock exchanges.  As discussed in our previous article, major U.S. exchanges, such as New York Stock Exchange, CBOE,  Global Markets, and Nasdaq sought review to challenge the pilot program.  In New York Stock Exchange LLC  v. SEC, No. 19-1042 (D.C. Cir. Jun. 16, 2020), the Court sided with the exchanges, holding that the SEC exceeded its authority by creating a program whose thrust was merely to test whether the current pricing structure was problematic. Continue Reading

While You Were Social Distancing: GSA’s Progress On Section 846, Schedules Consolidation, And Other Major Initiatives

Just as you’re probably tired of reading COVID-19 articles, we’ve grown tired of writing them.  So, in an effort to party like it’s 2019, we’ve decided to survey the non-COVID-19 initiatives underway at the General Services Administration (“GSA”) while everyone is working from home.  Our survey shows progress continues on Multiple Award Schedule (“MAS”) modifications, a new Verified Product Portal (“VPP”) is on the horizon, and work related to Sections 846 and 889 conSetinues to progress.  Obviously, none of these has anything to do with COVID-19, but they will have an impact on your Federal business, whether you’re working from home or (eventually, and soon we hope) back in the office.  Here’s a look of major projects GSA has been working on while you’ve been social distancing. Continue Reading

Supreme Court Limits SEC’s Authority to Disgorge Ill-Gotten Gains in Civil Suits

On Monday, the Supreme Court placed significant limits on the Securities and Exchange Commission’s (“SEC”) ability to seek disgorgement, a powerful tool that often was used more like a penalty than an equitable remedy.  The Supreme Court held the SEC may only seek disgorgement of ill-gotten gains that do not exceed a wrongdoer’s net profits and are awarded for victims under 15 U.S.C. §78u(d)(5)’s provision of equitable relief.  This opinion reaffirms the SEC’s power to seek disgorgement of ill-gotten gains through civil actions as equitable relief, eliminating any doubt created by its prior opinion in Kokesh v. SEC.  However, the Supreme Court left a few key questions for lower courts to decide, such as what may be considered legitimate expenses and deducted from a disgorgement award, and whether the Government can retain the funds disgorged by the defendants.  The resolution of these issues may provide additional relief to future defendants in SEC enforcement cases.

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Prepare for a Perfect Storm of COVID-19 Whistleblower Claims

Whistleblowers are a common character in investigations into governmental abuse.  They famously have exposed covert government surveillance programs, political corruption scandals, and even led to the impeachment of the president of the United States.  Some statutes also empower whistleblowers to bring claims against private businesses on behalf of the government for financial misconduct involving fraud, waste, and abuse.  In the wake of the COVID-19 pandemic, we expect to see a surge of new whistleblower claims alleging misconduct under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  Whistleblower claims could be detrimental or even fatal for businesses already struggling to recover from the economic impact of COVID-19.  Now more than ever, businesses must understand the risks and prepare for the inevitable emergence of whistleblowers to protect themselves from future claims.   Continue Reading

COVID-19 Judicial Task Force Proposes Protocols to Reinstate Jury Trials

On June 4, 2020, the Jury Subgroup of the COVID-19 Judicial Task Force of the U.S. federal courts issued a report (the “Report”) containing recommendations for conducting jury trials and convening grand juries during the pandemic.  Although many federal courts have continued to hold remote hearings and conferences over the last few months, jury trials have largely been suspended across the country to protect the safety of potential jurors and court personnel.  However, as government stay-at-home orders are lifted and courts prepare to reopen their doors, advocates have called for the reinstatement of jury trials to maintain litigants’ constitutional rights and preserve public confidence in the courts.  Convened to recommend directives and policy changes related to the COVID-19 health emergency, the Task Force is made up of federal judges, clerks, attorneys, and executives from a number of circuits across the U.S. Continue Reading

Materiality Concerns For CARES Act Enforcement Cases

With the Department of Justice’s (DOJ) decision to drop charges against Michael Flynn, materiality has come to the forefront of popular legal discourse.  At the same time, prosecutors and whistleblowers will carefully consider enforcement/false claims actions against entities who may have wrongfully received relief funds under the Coronavirus Aid, Recovery, and Economic Stability Act (CARES Act).  Such actions likely will turn on whether alleged misrepresentations were materially false.  Those applying for CARES Act funds, such as those under the Paycheck Protection Program (PPP), must ensure all of their representations and certifications are truthful.  However, those accused of making misrepresentations in order to receive government funds may find refuge in a more narrow view of the materiality requirement. Continue Reading

DOJ Updates Corporate Compliance Guidance

The United States Department of Justice (DOJ) released updated guidance regarding its Evaluation of Corporate Compliance Programs on June 1, 2020.  The release comes just over a year since the guidance was last updated in April 2019.[1]  While these latest changes are less extensive than the most recent ones, there are some key differences that suggest the DOJ may be shifting some areas of focus when it comes to assessing the effectiveness of corporate compliance programs. Continue Reading

DOD CMMC Update – Third Party Auditors Gear Up and COTS Providers Get a Pass

A lot has happened since the Department of Defense (“DOD”) released its Cybersecurity Maturity Model Certification (CMMC) v. 1.0 back in February (see our prior discussion here).  In addition to developments with the CMMC Accreditation Body (“CMMC AB”), DOD has clarified applicability of the program to Commercially available off-the-shelf (“COTS”) providers and the impact of COVID-19 on program implementation.      Continue Reading

Using “Prospective Hindsight” To Identify And Mitigate Risks During A Crisis

In 1657, mathematician Blaise Pascal commented in a letter to his church leaders “I have made this longer than usual because I did not have time to make it shorter.” More than 100 years later, another Frenchman, Napoleon Bonaparte, offered a similar remark to his valet as he prepared to head out for battle. “Dress me slowly,” he said, “I’m in a hurry.” The irony of the quotations makes people smile, but few quibble with their underlying truthfulness. Often, the more in a hurry you are, the more you need to slow down. Continue Reading

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