SEC ISSUES PARTIAL STAY OF CONFLICT MINERALS RULES
On May 2, the SEC issued a partial stay of the conflict minerals rule, pushing back the May 31 date for compliance with the portion of the rule invalidated by the U.S. Court of Appeals for the D.C. Circuit in April.
In National Association of Manufacturers, et al. v. SEC, et al., the Court of Appeals for the D.C. Circuit concluded that to the extent the conflict minerals reporting "require[s] regulated entities to report to the Commission and to state on their website that any of their products" could not be found to be "DRC conflict free," the rule violates the First Amendment of the U.S. Constitution protecting freedom of expression. The Court of Appeals noted that there was no such "First Amendment objection to any other aspect of the conflict minerals report or required disclosures". The case was sent back to the trial court, subject to the Court of Appeals First Amendment ruling.
In issuing the partial stay, the SEC stated that it sought to avoid risk of First Amendment harm pending further proceedings. The stay of the effective date for the impugned portions of the rule will terminate upon the completion of judicial review. The SEC denied, however, the motion for a stay of the entire rule, despite the urgings of two of the SEC's five commissioners: "A full stay is essential because the district court could (and, in our view, should) determine that the entire rule is invalid." The joint statement on the Court of Appeals conflict minerals decision is available here.
The SEC press release regarding the partial stay is available here.
SEC EXPANDS PROBE INTO HIRING PRACTICES IN ASIA
In March, the SEC sent letters to five more banks seeking information about their hiring practices in Asia. The broadening SEC inquiry is focused on potential breaches of the Foreign Corrupt Practices Act in connection with the hiring of relatives of public officials in Asia. None of the banks has been accused of wrongdoing and the investigations are still in their preliminary stages. While the FCPA does not prohibit the hiring of relatives of government officials, the SEC is looking for evidence of quid pro quo arrangements in which a company wins a contract or other mandate in exchange for the company recruiting an unsuitable candidate for employment.
ISRAEL ENTERS INTO TAX-INFORMATION-SHARING ARRANGEMENT WITH U.S.
On May 1, the U.S. Department of the Treasury announced that the U.S. had entered into an agreement "in substance" with Israel under the Foreign Tax Account Compliance Act ("FATCA"). FATCA, passed in 2010, requires foreign banks to report assets being held by U.S. citizens and is scheduled to take effect on July 1, 2014. Foreign banks that refuse to identify or report information on U.S. citizen accounts may face 30 percent withholding on U.S. income and capital payments and may also see some payments from U.S. banks withheld.
In April, the U.S. government stated that jurisdictions that have FATCA agreements in substance will be treated as though they had formal FATCA agreements in effect through 2014. At the time of this announcement, the U.S. had signed formal intergovernmental-tax-sharing agreements with 26 jurisdictions (including, most recently, Belgium and Australia). Also recognizing jurisdictions with FATCA agreements in substance adds another 19 jurisdictions.
U.S. EXPANDS UKRAINE SANCTIONS
On April 28, the U.S. announced further sanctions in connection with the situation in Ukraine, consistent with indications that additional sanctions would be imposed if the US considered Russia had not meet its commitments under the 'Geneva Accord,' signed by representatives of the EU, Russia, Ukraine, and the U.S. on 17 April 2014. The Department of the Treasury imposed sanctions on seven senior Russian officials, and 17 companies, comprising several banks and energy companies. The sanctioned individuals will be subject to a U.S. visa ban and asset freeze while the companies will have their assets frozen. In addition, the Department of Commerce imposed restrictions on 13 of those companies with a presumption of denial for the export, re-export or other foreign transfer of U.S.-originated items to these companies. The State and Commerce Departments also announced a new policy to deny export license applications for high-technology items that could contribute to Russia's military capabilities.
ATTORNEY GENERAL ANNOUNCES DEDICATED KLEPTOCRACY SQUAD
Attorney General Announces Dedicated Kleptocracy Squad
On April 29, U.S. Attorney General Eric Holder announced a new dedicated FBI kleptocracy squad that will investigate and prosecute corruption around the globe in conjunction with the Asset Forfeiture and Money Laundering Section of the Department of Justice. Holder's announcement was made at the Ukraine Forum on Asset Recovery in London and noted that the Department of Justice had a response team in Kiev assisting with Ukraine's investigation into stolen assets in connection with the toppling of President Yanukovych and his regime. According to Holder, "this new initiative will provide the United States with increased capacity to respond rapidly to political crises as they arise -- so we can help prevent stolen assets from being dissipated or secreted away by deposed regimes".
Attorney General Holder's speech is available here.