2014 was the year of the regulator, and regulators show no sign of stepping out of the limelight. The series of market-stunning fines caught everyone’s attention and continues to do so. Regulatory penalties will become more, not less, painful and more difficult by jurisdiction.
The key area to watch is Europe, which is introducing wide-ranging reforms in a long-overdue effort to harmonize the region’s capital markets. Whether these are entirely successful depends on a mix of politics and economics. In the U.S., the advent of a Republican Congress may slow further reforms already slated, but is unlikely to reverse many in place. China has set on course a series of market reforms aimed not only at market modernization, but also at creating greater transparency and accountability and bringing it more in line with global regulatory standards. As these reform efforts continue to unfold, they will create further challenges for companies seeking to ensure their regulatory compliance, particularly when operating across borders.
What is the key trend for our clients to consider as the securities enforcement landscape continues to evolve in 2015?
For financial institutions, 2015 promises a continued and indeed an increasingly aggressive enforcement environment—from a myriad of federal and state investigatory agencies—both in the United States and abroad, particularly in Europe. As for private civil litigation by shareholders and other stakeholders, the high stock market has limited (and will continue to limit) the number of private suits. However, when a market correction occurs, traditional Section 10(b) and Section 11 suits will proliferate.
What is the most important issue for global companies to address in managing their exposure to U.S. regulatory risk?
Global companies must recognize that the U.S. government believes that it has the power to regulate conduct that was long considered to be outside of U.S. jurisdiction. Consequently, a thorough understanding of the evolving nature of U.S. regulatory risks is a necessity for any company operating in the global economy. Conducting a risk assessment, whether for corruption, sanctions, money laundering, or antitrust/competition, is an important compliance step for global companies seeking to minimize exposure and avoid conflict with U.S. regulations.
What are the top trends for our international clients to watch this year related to trade controls and regulation of cross-border transactions?
We are witnessing a mass exportation of U.S. laws governing banking, trade, and foreign investment. Our international clients will face increasing U.S. regulation, investigation, and enforcement activity directed at trade and transactions that previously were seen as having little or no nexus to the United States, national security, or U.S. law. The costs and burdens of compliance will go up in parallel with this increasing scrutiny of global economic operations.
What is the most significant development you expect to see in white collar litigation this year?
The globalization of enforcement and the expansion of the U.S. government’s perception of its jurisdiction is the most significant development we are seeing in white collar defense. As U.S. government agencies work closely with other countries’ governments to enforce U.S. laws, non- U.S.-based companies are becoming involved in these investigations. They may be unfamiliar with the U.S. legal system and need the assistance of experienced legal counsel to help them navigate this process.
In terms of the Western European regulatory environment, what do you see as the most critical trend to watch in 2015?
Europe’s banking sector is being overhauled with the introduction of the Single Supervisory Mechanism, giving the European Banking Authority sweeping powers and increased penalties. In the energy sector, the EU Accounting Directive (to be transposed into national law by July 2015) will require extractive companies to report all payments to governments. In the pharmaceutical sector, the recently adopted EFPIA disclosure code requires members to disclose transfers of value to healthcare professionals and organizations.
The record-setting amount in fines and legal settlements paid by banks in 2014
Source: Financial TimesThe firm represented a leading supplier for the global offshore energy industry in resolving an investigation of alleged corruption in two jurisdictions. We helped our client secure a declination from the U.S. Department of Justice and a comprehensive settlement with the Dutch Openbaar Ministerie. This landmark case is one of the first multijurisdictional cases in which the European regulator imposed a significant monetary penalty while the U.S. government did not pursue an enforcement action.
We advised American Stock Transfer & Trust Company, LLC, a private equity company, on the regulatory issues surrounding its US$1B acquisition by Australia’s Pacific Equity Partners. We also advised our client on a number of other complex transactions and matters, including the acquisition of DF King Inc., a major proxy advisory firm; a New York Department of Financial Services enforcement investigation; and the successful resolution of Bank Secrecy Act/Anti-Money Laundering and other compliance issues. In addition, we handled a major internal investigation and a related arbitration against a former director and officer.
We represented Freeport-McMoRan Inc. in its sale to Samchully Asset Management Co. Ltd. (Samchully AMC) of Freeport’s 33.3% interest in the Luna Energy Facility, a 570 MW natural gas-fired, combined-cycle power plant in New Mexico. Samchully AMC agreed to pay US$140M for Freeport’s stake in the plant. As part of the deal, we advised our client on a variety of federal energy regulatory issues, including successfully securing Federal Energy Regulatory Commission approval of the transfer of Freeport’s interest to Samchully, and also arranged a long-term power purchase agreement in which Freeport will sell natural gas to Samchully AMC and purchase energy and capacity produced by the Korean company’s stake in the Luna plant.