responding to complex regulations

Responding to Complex Regulations

With the U.S. about to embark on a massive deregulatory drive, the international setting for cross-border businesses has become more complex and uncertain. Although there were clear differences between the regulatory regimes in key global financial centers, the new U.S. approach is a real departure from what had been, until now, a tightening regulatory environment. For business, the key bilaterals to watch will be the U.S. end of Asia and European links, where agreements in areas ranging from privacy to trade may be substantially revisited. U.S.-Lat Am links, and in particular Mexico, are also in the spotlight. The North American Free Trade Agreement has already been put on the table by the U.S. administration with the promise of tougher regulatory moves. Finally, there are questions being raised about continued U.S. participation in the development of international financial architecture such as the Basel Committee on Banking Supervision.

Our Partners' Perspectives

What is the most important issue for global companies to address in managing their exposure to U.S. regulatory risk?

Complying with the Foreign Corrupt Practices Act (FCPA) and satisfying the Committee on Foreign Investment in the United States (CFIUS) remain the premiere challenges for companies active in international investment. In terms of ongoing regulatory exposure, regulations protecting the position of U.S. companies are likely to be strengthened and regulatory constraints loosened. With the new Administration examining many areas of regulation for revision, it is vital that companies maintain a careful watch on how new regulatory developments will affect their U.S. businesses and exposures.

Yariv Katz

New York

In terms of the European regulatory environment, what do you see as the most critical trends to watch?

Europe is wrestling with a series of linked issues: a low growth and low interest rate environment, Eurozone tensions and, inevitably, the new populism sweeping the region. Underlying these issues is growing non-compliance and legal risks, linked to expanding regulation, increased responsibilities for board members, enhanced enforcement powers, and investor activism. Legal and non-compliance risks are also increasingly linked to their reputational impact and potential for putting a company’s future at risk. Prompted by legislative changes, regulatory action, personal liability, and market expectations, boards of directors must give attention to risks of this nature, as well as to the instruments companies have to identify and manage those risks.

Bruno Cova

Milan

What do you see as the major trends to follow in the investment management industry in the year ahead?

Over the last 18 months, we’ve seen the industry continue to focus on alternatives, an area which bucks the trend toward passive strategies like indexing. Within the alternatives subsector, we’re continuing to see a greater emphasis on illiquid strategies (infrastructure, real estate, private equity, and credit) and closed-end, limited life funds. We expect a continued focus on closed-end credit funds and CDOs. New hedge fund launches may see a modest uptick, but we haven’t seen anything that would reverse the sluggishness in 2016. As in years past, the largest firms will likely seek to grow through acquisitions. In terms of regulation, the SEC may pull back from its more aggressive enforcement posture with respect to private equity, but continue focusing on traditional areas of concern such as valuation, conflicts of interest, and material misrepresentations in representations to fund investors.

Yousuf Dhamee, Nicolas Morgan, and Tram Nguyen

Los Angeles and New York

What are the top trends for our international clients to watch this year related to trade controls and cross-border transactions?

We expect two trends to accelerate this year, and they are in tension. First, cross-border transactions will continue to increase as a share of global M&A, as companies pursue strategic opportunities and global capital searches for greater returns. Second, the U.S. will continue to scrutinize—and occasionally block—transactions that impact national security or broadly-defined economic interests, as the new Administration’s stance toward economic nationalism is translated into policy and legislation. These trends will manifest across a spectrum of industries, particularly in technology, telecommunications, and aerospace, but may extend more broadly. As the U.S. ramps up defense and security spending, foreign investment opportunities and heightened scrutiny by government regulators will increase as well.

Scott Flicker

Washington, D.C.

What is the key area of focus for our clients to consider as the securities enforcement landscape continues to evolve?

Compliance programs, especially in the context of financial services, must adapt to changes in business and the regulatory landscape. The international enforcement environment is now more stringent, expansive, and extraterritorial in approach, and it is imperative that clients monitor their compliance programs to account for regulatory developments. By adopting a proactive approach and constructing a robust program, a company is better able to manage risk and stay ahead of the enforcement curve.

John Nowak

New York

40+

We have handled investigations for pharmaceutical and life sciences clients in 40+ countries around the world

A Closer Look

Case Study: Braskem's History-Making FCPA Settlement
Brexit: What's Next for Our Clients

Highlights of Our Client Successes

History-making FCPA settlement

Our lawyers represented Brazilian petrochemical company Braskem S.A. in the resolution of its U.S. Department of Justice and Securities and Exchange Commission investigations of corruption allegations against the company. In a history-making deal, Braskem agreed to pay a total of US$957M to authorities in the U.S., Brazil, and Switzerland to resolve investigations into the company’s participation in the Brazilian Lava Jato, or “Car Wash,” corruption scandal. The settlement broke new ground in addressing the complex issues at the heart of multijurisdictional, cross-border investigations. Odebrecht S.A., Braskem’s major shareholder, also announced its resolution of investigations with the same authorities with an agreement to pay an additional US$2.6B. The combined settlements constitute the largest Foreign Corrupt Practices Act (FCPA) settlements of all time, topping the resolutions in the Bonny Island and Alstom matters, in which our lawyers also played key roles.

Global chemical company fends off billion-euro criminal case

We guided Solvay-Rhodia, a leading global chemical company, to victory in a criminal case in which our client was accused of several financial offenses allegedly committed by minority shareholders. The allegations included misuse of corporate assets, insider trading, presentation of inaccurate financial statements, and market manipulation. The financial risk for Solvay-Rhodia was estimated at €1.3B. Following significant work by our lawyers on both financial and criminal aspects of the case, we succeeded in convincing the Court of Paris that there were no grounds for the charges against our client to go forward.

First-of-its-kind global compliance program in Korea

Our lawyers guided KCC Corporation, a leading Korean fine chemicals company, through the development and implementation of a global standard compliance program—one of the first of its kind in Korea. As part of our efforts to help KCC establish a culture of compliance, we created a tailored program involving employee education, evaluation of business operations to identify potential risks, and the implementation of best practices to minimize exposure to such risks. KCC was recognized at the ALB Korea Law Awards for this innovative global initiative.

An elite firm for FCPA matters

“Washington D.C.’s FCPA Bar,” Global Investigations Review