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Russia Now Focal Point of Additional Sanctions and Export Controls, With an Added Bonus for Public Companies (Oh my!)

In response to a variety of activities allegedly undertaken by Russia, the U.S. Government has imposed a series of additional sanctions and export control measures since early March.  Collectively, the March and April sanctions take a variety of forms, including the suspension of entry into the United States and the denial of visas to certain non-U.S. citizens, denial of government credit and financial assistance, cessation of all foreign military financing, export controls changes, expanded sanctions authority, and additional designations of blocked persons.  These sanctions may affect anyone doing business with or in Russia.  Public companies should be particularly mindful of the potential for more reporting pursuant to Section 13(r)(1)(D) of the Securities and Exchange Act of 1934 (“34 Act”) as a side effect of certain of the additional sanctions.

Additional Sanctions Introduced and More Designations Under Existing Authorities

Following the determination that the Government of the Russian Federation violated the Chemical Weapons Convention based on the Navalny attack, the U.S. Government designated multiple new parties under existing sanctions authorities.  Pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), the U.S. State Department added six parties to its list of persons that are part of or act for, or on behalf of, the Russian intelligence or defense sectors.  The newly added parties are:

  • 27th Scientific Center;
  • 48 Central Scientific Research Institute Sergiev Posad;
  • 48 Central Scientific Research Institute Kirov;
  • 48 Central Scientific Research Institute Yekaterinburg;
  • State Scientific Research Institute of Organic Chemistry and Technology; and
  • 33rd Scientific Research

SEC Issues Rare Whistleblower Award to Audit Professional

On December 14, 2020, the Securities and Exchange Commission announced an award of more than $300,000 to a whistleblower who uncovered potential securities law violations in connection with audit-related responsibilities.  The whistleblower met with the SEC more than a dozen times and provided “high quality information and continuing assistance,” including identifying additional witnesses.  This is only the fourth time that the SEC has issued an award to an audit or compliance professional.

In announcing the award, Jane Norberg, Chief of the SEC’s Office of the Whistleblower, stated: “This award is an example of the important role that audit and compliance professionals can play in assisting the Commission’s enforcement efforts, especially when the entity is attempting to thwart an investigation.”  Compliance and audit professionals often have access to information that may evidence legal violations, as well as responsibilities to prevent or mitigate such violations.  While compliance and internal audit professionals generally are not considered eligible for whistleblower awards under the Program, there are three exceptions in which such personnel may become eligible whistleblowers:

  • when the whistleblower believes disclosure may prevent substantial injury to the financial interest or property of the entity or investors;
  • when the whistleblower believes that the entity is engaging in conduct that will impede an investigation; or
  • when at least 120 days have elapsed since the whistleblower reported the information to his or her supervisor or the entity’s audit committee, chief legal officer, chief compliance officer – or at least 120 days have elapsed since the whistleblower received
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