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Here’s a cautionary tale from a recent SEC Enforcement settlement – as reported in this Stinson blog:

In response to investor pressure to issue an earnings release within the same time frame as prior years, the company announced its 2017 year-end financial results on March 8th and furnished its earnings release on Form 8-K. The company issued the earnings release despite the departure of senior finance and accounting managers, pervasive ERP implementation and internal control issues, and a seven-week delay in the filing of its third quarter 2017 Form 10-Q.

According to the SEC, the earnings release materially misstated, among other things, the company’s earnings for 2017.

On March 19th, the company filed a Form 8-K with the Commission disclosing that it expected its 2017 Financial Results to differ from what had been reported in the March 8th earnings release. The company’s shares declined over eight percent that day.

The company settled with the SEC for $250,000. The pain of dealing with an Enforcement action – and the loss of credibility – was likely an even greater punishment…

FCPA: DOJ Revises Policy to Encourage Self-Disclosures

A couple weeks ago, the DOJ revised its FCPA “Corporate Enforcement Policy” to encourage more self-disclosures to the Department. Here’s an excerpt from an O’Melveny memo that describes the change:

The DOJ eliminated language that appeared to require companies, in disclosing conduct, to characterize that conduct as a violation of criminal law. The DOJ also clarified that companies, when identifying information not in their possession, need only identify evidence actually known to the companies at the time. The changes respond to concerns raised by companies and the defense bar about language in the CEP, and reflect the current Administration’s push to make DOJ policy towards corporate enforcement more reasonable.

While the policy doesn’t apply to SEC Enforcement, the memo does note that the the DOJ’s Criminal Division has expanded the CEP beyond FCPA cases, and stated that it will act as non­-binding guidance in Criminal Division cases involving healthcare, financial fraud, and other violations.

This Nixon Peabody memo blacklines the revisions – and explains they could be interpreted to encourage companies to share more information at an earlier stage of internal investigations in order to get full cooperation credit. We’re posting memos in our “FCPA” Practice Area as they come in…

California Consumer Privacy Act: FAQs

Ready or not, the CCPA takes effect January 1st. This memo from Womble Bond Dickinson lays out some “frequently asked questions” for companies that are trying to navigate compliance issues. Here’s one that could require some effort:

Question: Does the CCPA require changes to existing contracts?

Answer: If you are a business subject to the CCPA and do not want to be a data seller under the CCPA, then yes, you will need to amend contracts to add appropriate “service provider” language to the contract. If you are a service provider serving businesses subject to the CCPA, you can expect to receive requests from your customers described under the immediately preceding sentence. Also, where you yourself wear both hats, you may find you need to make both downstream and upstream changes to your agreements to comply with the CCPA.

– Liz Dunshee