The latest compliance news: regulatory developments, punishments, guidance, permissions and new product and service offerings.

US Justice Department
NatWest Markets, part of UK-listed NatWest, yesterday pleaded guilty to various fraud schemes in the markets for US Treasury securities and futures contracts. The announcement comes days after the bank was punished by UK regulators for compliance failings.

The bank pleaded guilty to one count of wire fraud and one count of securities fraud in connection with a criminal information filed today in the District of Connecticut. US District Judge Omar A Williams accepted the pleas and sentenced NatWest to pay approximately $35 million in a criminal fine, restitution, and forfeiture. NatWest also will serve three years of probation and will agree to the imposition of an independent compliance monitor, the DoJ said in a statement. 

“As we have previously warned, there will be serious consequences for a company that breaches the terms of an agreement with the government. Today’s guilty plea by NatWest and the associated penalty show exactly that,” Deputy Attorney General Lisa O Monaco said. “Company executives should realize that investment in compliance programs can avoid situations like this, and take action accordingly.” 

“NatWest is a repeat offender,” Acting US Attorney Leonard C Boyle for the District of Connecticut, said. “In this instance, a criminal conviction was an appropriate penalty, given the conduct of NatWest’s supervisors, its compliance deficiencies, and its decision not to take the steps required to fulfill its agreement with this office that resolved a prior securities fraud scheme.”

The fraud schemes in which the firm was involved covered a period of more than six years from January 2008 to May 2014, the DoJ said.

Traders at the bank engaged in schemes to defraud in connection with the purchase and sale of US Treasury futures contracts. Separately, in 2018, two other traders employed at NatWest’s Singapore branch engaged in a fraud scheme in connection with the purchase and sale of US Treasury securities in the secondary (cash) market, the department said. 

The FBI and US Postal Inspection Service investigated this matter.

Last week, the UK’s Financial Conduct Authority fined NatWest £264.7 million ($350.17 million) after the lender was convicted of three offences of not following anti-money laundering rules.

Securities and Exchange Commission
The Securities and Exchange Commission has unveiled fraud charges against five Russian nationals for hacking into the US filing system to trade in firms before corporate announcements were made public.

The SEC’s complaint, filed in a federal district court in Massachusetts, alleges that defendant Ivan Yermakov used deceptive hacking techniques to access the filing agents’ systems and directly or indirectly provided not-yet-public corporate earnings announcements stolen from those systems to his co-defendants Vladislav Kliushin, Nikolai Rumiantcev, Mikhail Irzak, and Igor Sladkov.

From 2018 through 2020, the traders used 20 different brokerage accounts located in Denmark, the United Kingdom, Cyprus and Portugal to generate profits of at least $82 million using the stolen information to make trades before over 500 corporate earnings announcements. 

The defendants allegedly shared a portion of their enormous profits by funneling them through a Russian information technology company founded by Kliushin and for which Yermakov and Rumiantcev serve as directors, the SEC said in a statement earlier this week.

“With this action, the SEC, using its powerful analytical tools, has exposed a highly sophisticated and deceptive scheme to steal and monetize non-public corporate information,” Gurbir S Grewal, director of the SEC’s Division of Enforcement, said. “While we remain steadfast in our commitment to protect the integrity of our securities markets against bad actors no matter where they are located or what sophisticated tactics they use, we strongly encourage companies to shore up their safeguards against, and remain vigilant for cyber breaches that compromise their non-public information.”

Global Infrastructure Management
This week, the SEC also charged registered investment advisor Global Infrastructure Management, LLC for failing to properly offset management fees and for making misleading statements about the fees and expenses it charged. 

The firm agreed to pay a $4.5 million penalty to settle the SEC charges and has voluntarily repaid $5.4 million to its affected private fund clients. 

According to the SEC’s order, Global failed to offset certain portfolio company fees against management fees charged to clients, as it was required to do under the offering and governing documents. As a result, clients overpaid millions in additional management fees. The SEC’s order also found that Global provided investors with inconsistent statements about how Global would calculate management fees. In addition, the SEC’s order found that these violations were caused by deficiencies in Global’s compliance program, the regulator said. 

"Private equity fund advisors must ensure that investors do not pay more in fees or expenses than they bargained for and are given accurate information about fees and expenses," Adam S Aderton, co-chief of the SEC Enforcement Division’s Asset Management Unit, said.