Key Takeaways
- On October 23, 2024, the New York City Bar Association hosted its third annual Compliance Institute with noteworthy keynote remarks from U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce and Principal Associate Deputy Attorney General (PADAG) Marshall Miller.
- During her keynote Q&A, Commissioner Peirce presented her vision for a compliance advisory committee, with the goal of providing the SEC with the means to collect and analyze concerns about new rules and regulations from in-house compliance personnel.
- PADAG Miller detailed the Department of Justice (DOJ or Department) efforts to reshape its approach to corporate criminal enforcement and he provided compliance professionals with takeaways on what companies must do to meet DOJ expectations.
Commissioner Peirce’s Proposed Compliance Advisory Committee
In response to compliance officer personal liability concerns and increasing SEC regulations, Commissioner Peirce proposed the creation of a compliance advisory committee, which would bring together SEC regulators and in-house compliance personnel from investment advisers and other regulated entities to foster the exchange of useful insights and feedback.[1] Commissioner Peirce stated that “everyone would benefit from hearing from this set of people, which is really uniquely situated within this regulated environment.”
Commissioner Peirce described a compliance-focused committee akin to the SEC’s existing advisory committees in other areas. Commissioner Peirce said there is precedent for the Commission to establish committees, pointing to similar committees on equity market structure and asset management as examples.
Commissioner Peirce explained that a compliance advisory committee would be “hugely beneficial” for obtaining real-time feedback from the compliance professionals implementing the rules. Referring to the recent marketing rule, Commissioner Peirce noted that the SEC has a “real interest in making sure implementation of the rule goes smoothly” and “it could be a way of collecting and filtering concerns about these rules and raising issues where people see problems in the industry that we might not be aware of.”
PADAG Miller on the DOJ’s ‘Overhauled’ Corporate Criminal Enforcement Program
PADAG Miller detailed the DOJ’s steps to “overhaul” its corporate criminal enforcement program over the past few years. This has included focusing on articulating clear, consistent and transparent policies, increasing consequences for bad actors, and new incentives for good corporate behavior and investment in compliance. The DOJ has also surged resources to address emerging corporate crime threats.[2]
PADAG Miller began by discussing the DOJ’s refinement of its enforcement efforts through a balance of consequences and incentives. While Miller noted that prosecutions have “the greatest deterrent impact by changing behavior and preventing misconduct,” the DOJ has “also clarified the rules of the road for corporate enforcement.” Miller pointed to each DOJ component now having a Voluntary Self-Disclosure Policy that sets forth what a company needs to do to self-report misconduct, and what a company can expect if it does. As we have previously described,[3] these voluntary self-disclosure policies can potentially provide companies with the opportunity for maximum cooperation credit, including a presumption of declination of prosecution. Miller noted that corporate voluntary self-disclosures to the Criminal Division are increasing every year, with more than twice as many last year as compared to 2021.
PADAG Miller also discussed that the DOJ now assesses incentive compensation systems as part of every Criminal Division resolution. In addition to incentive compensation schemes to promote ethical behavior, Miller emphasized that companies that claw back compensation from executives involved in wrongdoing can reduce their penalties by the clawback amount.
PADAG Miller then discussed the Department’s new, multifaceted whistleblowing regime. As we have described in prior alerts,[4] the DOJ’s whistleblower structure consists of a monetary awards program, launched on August 1, 2024, that is intended to encourage individuals who did not meaningfully participate in alleged criminal misconduct to report information for a chance to receive a percentage of any resulting forfeiture. Further, in early 2024 the DOJ launched whistleblower non-prosecution pilots in the Criminal Division and many U.S. Attorney’s Offices seeking to encourage individuals who did engage in misconduct to report information in the hopes of receiving a non-prosecution agreement. According to Miller, since the beginning of the monetary awards program, the DOJ has already received 200 tips. Miller also noted that U.S. Attorney’s Offices have reported that individual voluntary self-disclosures have resulted in promising ongoing investigations.
PADAG Miller concluded his speech by telling compliance professionals that the DOJ’s overhauled corporate criminal enforcement program places a particular premium on certain questions that executives and board members need to be asking, which really go to the foundation of effective compliance programs:
- Has the company empowered its compliance leaders and invested sufficiently in its compliance program?
- Does the company have effective internal detection and reporting systems and robust internal investigative capabilities, so that it can be positioned to decide whether to voluntarily self-disclose corporate misconduct?
- Does the company have compensation systems that promote compliance and enable clawbacks or escrowing of incentive compensation?
- Has the company assessed risks associated with national security and emerging technologies and taken appropriate steps to mitigate them?
If a company finds itself on the wrong side of a DOJ investigation, the outcome may well depend on the answers to these questions. Now is a good time to consult with outside counsel to ensure that your company’s compliance program is finely tuned to detect and remediate misconduct and is meeting the expectations outlined in PADAG Miller’s speech.
[1] Sarah Jarvis, SEC’s Peirce Calls For Compliance Advisory Committee, Law360 (October 23, 2024), https://www.law360.com/corporate/articles/2102517/sec-s-peirce-calls-for-compliance-advisory-committee.
[2] Principal Associate Deputy Attorney General Marshall Miller Delivers Remarks at the New York City Bar Association Compliance Institute (October 23, 2024) https://www.justice.gov/opa/speech/principal-associate-deputy-attorney-general-marshall-miller-delivers-remarks-new-york-0.
[3] See Confession, Cooperation and Corporate Compliance – DOJ Rolls Out Nationwide Standards and Incentives for Voluntary Self-Disclosure (March 1, 2023) https://www.bakerlaw.com/insights/confession-cooperation-and-corporate-compliance-doj-rolls-out-nationwide-standards-and-incentives-for-voluntary-self-disclosure/; DOJ’s Newly Revised Corporate Enforcement Policy Incentivizes Robust Compliance Programs, Cooperation and Remediation (January 30, 2023) https://www.bakerlaw.com/insights/dojs-newly-revised-corporate-enforcement-policy-incentivizes-robust-compliance-programs-cooperation-and-remediation/.
[4] See DOJ Corporate Whistleblower Awards Pilot Program (August 8, 2024) https://www.bakerlaw.com/insights/doj-corporate-whistleblower-awards-pilot-program/; 7 More US Attorneys’ Offices Issue Whistleblower Non-Prosecution Pilot Programs (September 26, 2024) https://www.bakerlaw.com/insights/7-more-us-attorneys-offices-issue-whistleblower-non-prosecution-pilot-programs/; DOJ’s Criminal Division Announces New Pilot Program on Voluntary Self-Disclosure for Individuals (April 17, 2024) https://www.bakerlaw.com/insights/dojs-criminal-division-announces-new-pilot-program-onvoluntary-self-disclosure-for-individuals/; SDNY Launches Whistleblower Program Aimed at Curbing Corporate and Public Corruption Crimes (January 16, 2024) https://www.bakerlaw.com/insights/sdny-launches-whistleblower-program-aimed-at-curbing-corporate-and-public-corruption-crimes/.
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