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Can’t we just ask the regulator?: Difference between revisions
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Sure, regulators purport to render their rules in plain English, but often by way of aspiration rather than outcome. And, at the end of the day, if regulations ''are'' confusing the market, whether or not regulators believe they ''should'' be, this is reason enough to clarify them. If you can’t just rewrite them — a continually morphing regulatory textscape might be even worse than static rules no one understands — then at least be prepared to clarify, through official guidance, what you take your own rules to mean and how you intend to enforce them. | Sure, regulators purport to render their rules in plain English, but often by way of aspiration rather than outcome. And, at the end of the day, if regulations ''are'' confusing the market, whether or not regulators believe they ''should'' be, this is reason enough to clarify them. If you can’t just rewrite them — a continually morphing regulatory textscape might be even worse than static rules no one understands — then at least be prepared to clarify, through official guidance, what you take your own rules to mean and how you intend to enforce them. | ||
Continental tax authorities might occasionally issue, and be bound by a tax ruling The SEC | Continental tax authorities might occasionally issue, and be bound by a tax ruling. The SEC has been known to issue the odd “no-action letter”, more by way of forbearance from enforcement, rather than enduring interpretation of its rules, though one eventually crystallises into the other. | ||
But this is not, in the Anglo-Saxon markets, the done thing. It is as if regulators are keeping the option to retrospectively smack down | But this is not, in the Anglo-Saxon markets, the done thing. There are no [[Bright-line test|bright lines]], after all. It is as if regulators are keeping the option to retrospectively smack down the regulat''ed'' to suit the political climate. Perhaps regulators fear the [[precedent]] an erroneous ruling night create: their own staff, just as prone to budget cuts, downskilling and outsourcing, might have no better idea what the rules are meant to mean than anyone else. | ||
Probably all of the above. | Perhaps the underfunded gamekeeper fears the poacher’s skill in finding loopholes and running around the spirit in which the rules were put in place. | ||
Probably all of the above. In any case, regulators will not generally tell you what they think their rules mean. We think this is a pity. | |||
== JPMorgan, the NDA and the whistleblowers == | == JPMorgan, the NDA and the whistleblowers == | ||
In related news we hear that, in January 2024, JPMorgan agreed to pay the [[SEC]] a US$18m fine for signing [[confidentiality agreement]]s that violated Rule 21F-17(a) of the [[Securities Exchange Act of 1934]]. | |||
This rule says one must not stifle “whistleblowers’: citizens who wish to inform the [[Securities and Exchange Commission|SEC]] about possible securities law violations they have witnessed. Where their information leads to conviction, whistleblowers stand to be rewarded. | |||
We don’t know the specifics, but the settlement doesn’t seem to suggest that Morgan intended to, or took any positive steps to, enforce its NDAs in this way. Rather that the confidentiality agreements ''might'' have had that effect, or been used this way. The very fact of an NDA might have a chilling effect on a whistleblower: that was enough for the SEC. | |||
If that is right then | If that is right then a wholesale rewrite of confidentiality agreements is shortly to descend on us. Downtrodden inhouse counsel, who already spend far too much time on NDAs (in that they spend any time at all) will not be cheered. The NDA is a well-understood beast: its principles are standardised, even if their articulation is not. It is implicit. One principle is “you may disclose confidential information to a regulator if you are asked for it, or compelled to do so”. | ||
According to [[SEC]]’s worldview, Rule 21F-17(a) requires something more than that: you must be free to disclose information that may indicate violations ''if you feel like it''. Whether a regulator asks you or not. No-one is ''obliged'' to be a whistleblower, however, so the market standard [[Confidentiality agreement|NDA]] would not, explicitly, permit you to blow your whistle. You might try to get home if you have a general “this agreement is to be read to be consistent with all laws as they apply to the parties” but that is reaching a bit. | |||
JPMorgan’s standard NDA — not, alas, the OneNDA — said: | |||
{{Quote|“[JPMS client] and [JPMS client’s] attorneys are neither prohibited nor restricted from responding to any inquiry about this settlement or its underlying facts by FINRA, the SEC, or any other government entity or self-regulatory organization or as required by law.”<ref>{{plainlink|https://www.sec.gov/files/litigation/admin/2024/34-99344.pdf|SEC settlement order}}</ref>}} | {{Quote|“[JPMS client] and [JPMS client’s] attorneys are neither prohibited nor restricted from responding to any inquiry about this settlement or its underlying facts by FINRA, the SEC, or any other government entity or self-regulatory organization or as required by law.”<ref>{{plainlink|https://www.sec.gov/files/litigation/admin/2024/34-99344.pdf|SEC settlement order}}</ref>}} | ||
As far as market standards go this is pretty much on the money, and for a US legal document, blessedly short: you can ''answer questions'' from regulators — with or without compulsion — but you can’t ''volunteer'' things they did not ask for. Rather, it does not say you ''can'' volunteer things. | |||
Editorialising for a bit — I know, right: who? me? — then unless JPMorgan wilfully meant to prevent whistleblowing, this seems like a ''bad'' precedent. Nothing in the {{Plainlink|https://www.sec.gov/news/press-release/2024-7|SEC’s press release}} about the fine indicates this is the case. So firstly, JPMorgan is being fined, basically, for agreeing to pretty standard NDAs. | Editorialising for a bit — I know, right: who? me? — then unless JPMorgan wilfully meant to prevent whistleblowing, this seems like a ''bad'' precedent. Nothing in the {{Plainlink|https://www.sec.gov/news/press-release/2024-7|SEC’s press release}} about the fine indicates this is the case. So firstly, JPMorgan is being fined, basically, for agreeing to pretty standard NDAs. | ||