The increase in cross-border cooperation in civil and criminal enforcement was "unprecedented" during the first half of 2017, according to a new report from Baker & Hostetler.
The law firm's 2017 Mid-Year Cross-Border Government Investigations and Regulatory Enforcement Review is intended to help corporate and general counsel navigate the challenges of complying with a myriad of international legal and regulatory regimes.
George Stamboulidis, co-leader of the law firm's white-collar defense and corporate investigations, and Patrick Campbell, a partner and member of the practice group, highlighted at least four areas of the report that general counsel whose companies have cross-border operations might find valuable.
First, they cited the unprecedented increase in international coordination in civil and criminal investigations and enforcement, especially in the area of securities fraud.
"In particular, the U.S. and overseas regulators are really focusing on insider trading and market manipulation these days," Campbell said.
The report states that the cooperation is so prevalent that the sharing of information often now happens informally among law enforcement.
Campbell said a second key point is that deferred and nonprosecution agreements, which were pioneered in the U.S., "are beginning to catch on in other jurisdictions, especially in the U.K." And other countries across the globe, he added, are considering them.
"It's another thing to be on the lookout for," Campbell said. "Deferred and nonprosecution agreements can always be on the menu."
A third, and major point, is the differences in global laws concerning the treatment of attorney-client privilege. Especially concerning and somewhat surprising to Campbell was a U.K. ruling that allowed the Serious Fraud Office to acquire and use in court information from a company's own internal investigation.
"The information would have been protected in a U.S. court," Campbell said. "So if you are a general counsel in the U.S. and have a subsidiary in the U.K., you have to think about the different rules when it comes to an internal investigation."
Differing data privacy rules also can be a factor if a general counsel wants to transfer data gathered in an internal investigation in another country to an office in the U.S., according to Campbell. Some countries' privacy laws forbid such transfers, especially when it involves employees' personal information.
Stamboulidis said another important takeaway from the report is its discussion on "spoofing," a tactic in which traders place sham orders to artificially inflate or depress the price of a security so they can later cancel the order and profit off the manipulated price. Not long ago, it was a common trading tactic.
But in 2017 there has been a "flurry" of spoofing prosecutions by several different U.S. agencies, Stamboulidis said, with some massive penalties and fines. "And everybody is in on it," he said, with the U.S. Department of Justice, the U.S. Securities and Exchange Commission and the Federal Trade Commission all bringing actions.
The report notes that in August a federal appeals court unanimously upheld the constitutionality of the anti-spoofing law under the Dodd-Frank Act. "This ruling will likely embolden U.S. regulators to continue targeting companies and individuals involved in spoofing-related activity," the report stated.
And it's not just a U.S. trend. "Spoofing is one type of illegal conduct that regulators around the world are looking at now," Campbell added. "Singapore has brought its first criminal case, and now the U.K. is focusing on it too."
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