It’s estimated there are more than 400 SPACs in the market looking for M&A targets. Some of these SPACs come with celebrity endorsements, and there’s even a rap video, thanks to Cassius Cuvée and Mags Lionne. Clearly, this movement can’t be ignored. This article gives a generalized summary of the typical structure, as well as some high-level questions you should be asking as a participant to, amongst other issues, manage litigation and SEC enforcement exposure.
As we await the impact of the Biden Administration on the direction of the SEC, we have been given a glimpse of what is to come in a speech last month by the newly confirmed commissioner, Caroline Crenshaw. Specifically, Commissioner Crenshaw’s speech focused on “individual culpability” and penalties in the SEC’s enforcement program. Strikingly, the Commissioner decried the SEC’s past stance on penalties: “It is clear to me that the Commission has historically placed too much emphasis on factors beyond the actual misconduct when imposing corporate penalties – including whether the corporation’s shareholders benefited from the misconduct, or whether they will be harmed by the assessment of a penalty. This approach is fundamentally flawed.” Commissioner Crenshaw then stated that she thinks the SEC should revisit its approach to corporate penalties. It remains to be seen how Crenshaw’s remarks will be observed at Enforcement with respect to corporate penalties, let alone the application of her observations about the focus on “factors beyond the actual misconduct” could also be extended to individuals who are similarly facing substantial penalties for factors beyond their misconduct.
The Division of Examination’s (former OCIE) annual announcement of its exam priorities is always noteworthy, as it provides helpful insight into this division’s thinking and can serve as a roadmap for regulated entities to focus their compliance and supervision planning. The announcement of these priorities is even more important following a change in the presidential administration and the changes at the Commission that inevitably follow. Not surprisingly, the recently announced Division of Examination priorities for 2021 (summarized below) align with the Biden Administration’s policy priorities and key trends in the financial landscape.
Climate-Related Risks – Examinations will carefully consider environmental, social and governance (ESG) issues, including climate change. In the same way that the Division of Examinations previously focused on entities’ plans and disclosures related to the challenges posed by the COVID-19 pandemic, the Division announced that it will scrutinize business continuity plans to ensure that they “account for the growing physical and other relevant risks associated with climate change.” The Division will be looking for “maturation and improvements to these plans” to ensure that “registrants are considering effective practices to help improve responses to large-scale events.” The announcement of this examination focus also coincides with the Division of Enforcement’s announcement of the creation of a Climate and ESG Task Force. Continue reading “SEC Exams for 2021 to Focus on Climate and ESG, Reg BI, Crypto, & More”
As political leaders continue to debate how to address climate change, the SEC is poised to take (enforcement) action. In the latest example of how the Biden Administration is influencing the priorities of the SEC, the agency recently announced the creation of a Climate and Environmental, Social and Governance (ESG) Task Force in the Division of Enforcement. According to the SEC, the task force’s “initial focus will be to identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules.” The task force will also focus on investment adviser and funds, analyzing their ESG strategies for disclosure and compliance issues.
The U.S. Securities and Exchange Commission (SEC) has restored the authority of senior Division of Enforcement (Enforcement) officials to initiate investigations, which had been revoked during the Trump administration.
On Tuesday, acting SEC chair, Allison Herren Lee, announced that certain senior Enforcement officials may once again exercise delegated authority to approve formal orders of investigation that empower Enforcement staff to subpoena documents and sworn testimony.
On January 8, 2021, the SEC issued a cease-and-desist order, Release No., 90875 (available here), formally resolving proceedings against Deutsche Bank AG. Deutsche Bank agreed to pay over $125 million as part of a global resolution of allegations that it violated the Foreign Corrupt Practices Act of 1977 (FCPA), in connection with its use of third-party intermediaries, business development consultants, and finders engaged to advance Deutsche Bank’s global business development efforts. The terms of Deutsche Bank’s universal settlement with the SEC and the U.S. Department of Justice included payment of more than $120 million, $43 million of that to resolve charges brought by the SEC, and the remainder in the form of criminal penalties paid to the Department of Justice.
On January 18, 2021, the incoming President’s Transition Team announced additional key administration post nominees, including Mr. Gary Gensler as SEC Chair. The announcement specifically provided the following regarding Mr. Gensler’s background:
Last week, on December 16, 2020, Chinese-based coffee chain Luckin Coffee Inc. (“Luckin”) agreed to a $180 million settlement with the United States Securities and Exchange Commission (“SEC”). Luckin’s American Depositary Shares traded on the Nasdaq until July 13, 2020. The settlement stems from allegations that Luckin defrauded investors by materially misstating revenues, expenses, and net operating losses. The SEC’s complaint alleges that these fraudulent accounting actions were taken in an attempt by Luckin to increase profitability and meet earnings estimates.
The case is a reminder of risks associated with investing in U.S. listed companies with Chinese operations, which the SEC flagged in a June 2011 bulletin and a December 2018 cautionary public statement. The case follows a number of SEC enforcement proceedings brought in 2011-2012 featuring trading halts or delistings of at least 50 companies in those years.