27 November 2013 Regulatory Enforcement • FCA imposes worldwide freezing order on suspected boiler room, First Capital Wealth Limited – On 15 November 2013, a suspected boiler room (an outbound call centre selling questionable investments by telephone), First Capital Wealth Limited (FCW), had an unlimited worldwide asset freezing order imposed on it by the FCA after a High Court judge agreed that it posed a serious risk to consumers. At the hearing on 15 November 2013, the High Court also ordered that FCW be stopped from selling investments regulated by the FCA. • FCA releases statement in support of HM Treasury’s investigation into the Co-operative Bank – On 22 November 2013, the FCA released a statement regarding the investigation into the Co-operative Bank, announced recently by HM Treasury. The FCA said that it welcomed the investigation and “will make full resources available to support the investigation… The FCA is already undertaking work to establish whether it should commence a formal enforcement investigation and expects to reach a conclusion shortly.”
Total FSA/FCA fines •
FSA fines total for 2012: £311,569,256
•
FSA & FCA fines total for 2013: £443,087,738 (as at 27 November 2013)
Financial Crime • Transparency International to publish its 19th annual ‘Corruptions Index’ on 3 December 2013 – On 3 December 2013, Transparency International will release its 19th annual Corruption Perceptions Index (CPI) which will be available online here. • FATF President speech on connection between United Nations Security Council resolutions and FATF – The President of the Financial Action Task Force (“FATF”), Vladimir Nechasev, has published a speech regarding the connection between resolutions issued by the United Nations Security Council
and the FATF’s recommendations on the prevention of money laundering and terrorist financing in overseas jurisdictions. Mr Nechasev explains in his speech that the FATF recommendations are intended to help countries to effectively implement targeted financial sanctions measures against terrorist and nuclear proliferation financing, as required by the UN Security Council. • Justice Select Committee publishes its ninth report – On 8 November 2013, the Justice Select Committee published its ninth report, a consultation on guidelines relating to fraud, bribery and money laundering offences. In its report, the Justice Committee calls for future penalties given to corporate offenders to be more meaningful and less lenient.
Key Global Financial Enforcement Developments • U.S. District Court Judge, Jed Rakoff, comments on U.S. financial crime enforcement practices – On 12 November 2013, District Court Judge Jed Rakoff gave a speech entitled “Why Have No High Level Executives Been Prosecuted In Connection with the Financial Crisis?” Judge Rakoff criticised the shift in focus from prosecuting high-level individuals, adding that “the future deterrent value of successfully prosecuting individuals far outweighs the prophylactic benefits of imposing internal compliance measures that are often little more than window-dressing.” • Co-Director of SEC’s Division of Enforcement, Mr Andrew Ceresney, gives keynote speech at International Conference on Foreign Corrupt Practices Act – On 19 November 2013, Mr Ceresney gave the keynote address at the Internal Conference on the Foreign Corrupt Practices Act, outlining four priorities of the SEC in its FCPA enforcement efforts. These include: “(1) the creation of a culture of FCPA compliance among professionals and corporations; (2) international collaboration in combatting bribery; (3) the focus on individual FCPA misconduct; and (4) fostering cooperation with our investigations from companies and individuals,” priority (3) resonating with the comments of Judge Rakoff above.
Featured Story On 12 November 2013, the SEC announced its first ever deferred prosecution agreement with an individual, former hedge fund administrator Scott Herckis. Mr. Herckis voluntarily cooperated with authorities leading to an emergency enforcement action against hedge fund founder and manager Berton M. Hochfeld for misappropriating assets and overstating the fund’s performance, which halted the fraud and led to a $6 million distribution to harmed investors. Scott W. Friestad, an associate director of the SEC’s Division of Enforcement said that the SEC is “committed to rewarding proactive cooperation that helps us protect investors, however the most useful cooperators often aren’t innocent bystanders. To balance these competing considerations, the DPA holds Herckis accountable for his misconduct but gives him significant credit for reporting the fraud and providing full cooperation without any assurances of leniency.” The absence of DPAs for individuals under the new UK regime which will come into force early next year has been considered a notable omission. Given the influence that the U.S. experience of DPAs has had on the development of the UK regime, and the recent announcements of a review into creating incentives for whistleblowers (akin to those available in the U.S. – see paragraph 6.44 of the Serious Organised Crime Strategy Paper, October 2013), pressure is likely to build for DPAs for individuals in the UK as well. Attorney Advertising Materials These materials have been prepared by Winston & Strawn for informational purposes only. These materials do not constitute legal advice and cannot be relied upon by any taxpayer for the purpose of avoiding penalties imposed under the Internal Revenue Code. Receipt of this information does not create an attorney-client relationship. No reproduction or redistribution without written permission of Winston & Strawn. © 2013 Winston & Strawn
