Securities Industry Commentator by Bill Singer Esq

April 22, 2020

Major Exporters Pledge to Avoid Disrupting Global Food Supplies (Bloomberg by Bryce Baschuk)

Man dies from coronavirus after calling it a 'political ploy' (New York Post)
John W. McDaniel, 60, purportedly characterized Ohio Gov. Mike DeWine's stay-at-home order closing bars and restaurants as "bull-shit." Further, McDaniel was reported as saying, "If you are paranoid about getting sick just don't go out. It shouldn't keep those of us from living our lives. The madness has to stop." The madness has not stopped; however, McDaniel died of complications from Covid-19. Condolences to his family. A warning to all those who think this pandemic is a fake. It is not. It is deadly serious.

Major Exporters Pledge to Avoid Disrupting Global Food Supplies (Bloomberg by Bryce Baschuk)
Covid-19-related export bans on agricultural products are exposing the fragility of international food-supply lines. Is it necessary? Is it a sound precaution? Lots of questions but fewer compelling answers.

In response to a Criminal Information, Chipotle Mexican Grill Inc. agreed to pay a $25 million criminal fine (purportedly the largest food-safety fine) and agreed to a three-year Deferred Prosecution Agreement ("DPA). As alleged in part in the DOJ Release:

According to the factual statement in the DPA, which the company agreed was true, Chipotle was implicated in at least five foodborne illness outbreaks between 2015 and 2018 connected to restaurants in the Los Angeles area, Boston, Virginia, and Ohio.  These incidents primarily stemmed from store-level employees' failure to follow company food safety protocols at company-owned restaurants, including a Chipotle policy requiring the exclusion of employees who were sick or recently had been sick.

For example, in August 2015, 234 consumers and employees of a Chipotle restaurant in Simi Valley, California reported becoming ill.  Although company policies required the restaurant to report certain employee illnesses to Chipotle safety officials and to implement enhanced food safety procedures, the restaurant did not pass along information regarding an ill employee until multiple consumers already had reported being sick.

In December 2015, a norovirus incident at a Chipotle restaurant in Boston sickened 141 people.  According to the DPA, that outbreak likely was the result of an ill apprentice manager who was ordered to continue working in violation of company policy after vomiting in the restaurant.  Two days later, the same employee helped package a catering order for a Boston College basketball team, whose members were among the consumers sickened by the outbreak.

In July 2018, approximately 647 people who dined at a Chipotle restaurant in Powell, Ohio reported illness related to Clostridium perfringens, a pathogen that grows rapidly when food is not held at appropriate temperatures.  The local health department found critical violations of local food regulations, including those specific to time and temperature controls for lettuce and beans.

As set out in the DPA, some store-level Chipotle employees from the 2015 to 2018 time period reported inadequate staffing and food safety training.  Employees also reported pressure to work while sick, even though that was against Chipotle's sick-exclusion policies.
As CNBC's Olick reports in part:

Regionally, sales fell across the nation but hardest in the West, down 13.6% month-to-month. Sales fell 9.1% in the South, 7.1% in the Northeast and 3.1% in the South. 

The supply of homes for sale fell a sharp 10.2% annually. Toward the end of the month, some sellers de-listed their properties, not wanting potential buyers touring their homes in person. Other measures showed a sharp drop in the number of new listings in March, reflecting fear in the market among both buyers and sellers.

Emerging Market Investments Entail Significant Disclosure, Financial Reporting and Other Risks; Remedies are Limited (SEC Release / Statement by SEC Chairman Jay Clayton; PCAOB Chairman William D. Duhnke III; SEC Chief Accountant Sagar Teotia; SEC Division of Corporation Finance Director William Hinman; and SEC Division of Investment Management Director Dalia Blass)
In part, the "Introduction" to the SEC Release asserts that [Ed: footnotes omitted]:

Over the past several decades, the portfolios of U.S. investors have become increasingly exposed to companies that are based in emerging markets or that otherwise have significant operations in emerging markets. This exposure includes investments in both U.S. issuers and foreign private issuers ("FPIs") that are based in emerging markets or have significant operations in emerging markets. During this time, China has grown to be the largest emerging market economy and the world's second largest economy.

The SEC's mission is threefold: protect our investors, preserve market integrity and facilitate capital formation. Ensuring that investors and other market participants have access to high-quality, reliable disclosure, including financial reporting, is at the core of our efforts to promote each of those objectives. This commitment to high-quality disclosure standards-including meaningful, principled oversight and enforcement-has long been a focus of the SEC and, since its inception, the PCAOB.

Our ability to promote and enforce these standards in emerging markets is limited and is significantly dependent on the actions of local authorities-which, in turn, are constrained by national policy considerations in those countries. As a result, in many emerging markets, including China, there is substantially greater risk that disclosures will be incomplete or misleading and, in the event of investor harm, substantially less access to recourse, in comparison to U.S. domestic companies. This significant asymmetry holds true even though disclosures, price quotes and other investor-oriented information often are presented in substantially the same form as for U.S. domestic companies. Immediately below, we summarize some of these risks and related considerations specific to issuers, auditors, index providers and financial professionals. In the body of this statement, these matters are discussed in more detail. . . .
It has come to Guest Blogger Stephen Kohn's attention that some FINRA Staff have been "demanding" that Rule 8210 On The Record interviews  be conducted by ZOOM or teleconferencing during the COVID-19 pandemic. Those subject to the Staff's OTR demand are being told that they must cooperate and agree to a scheduled ZOOM interview even if the witness and his/her attorney are unable to conduct the interview while both are in the same room. Who cares that an associated person took ill with the virus, spent  weeks in isolation, and is now told that they may be cited for a "Rule" violation for not being able to appear for an OTR or comply with demands for document production?  Stephen Kohn cares!  You should care, too!
In a Complaint filed in the United States District Court for the Middle District of Florida, the SEC alleged that Steven L. Brickner violated the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act  and Rule 10b-5 thereunder. Without admitting or denying the allegations in the Complaint, Brickner agreed to a judgment that permanently enjoins him from violating the charged provisions of the federal securities laws, and orders disgorgement with prejudgment interest and penalties. As alleged in part in the SEC Release:

[F]rom 2015 to 2019, Brickner falsely represented to investors that he would use their money to purchase a Colorado-licensed marijuana dispensary network and conduct an IPO or merge with an over-the-counter public company, generating significant profits for investors. However, according to the SEC's complaint, Brickner misappropriated approximately $3 million of investor money to fund his lavish lifestyle and for personal expenses, including $1.2 million to purchase classic and luxury cars, and $335,000 in expenses at an adult entertainment club. The SEC also alleges that Brickner misrepresented to investors his experience as a successful entrepreneur while failing to disclose he had filed for bankruptcy in 2016, and made baseless claims to investors about a purportedly "imminent" merger.

In the Matter [of] Claims for Award by [Redacted] ("Claimant 1") and [Redacted] ("Claimant 2") In Connection With Notice of Covered Action No. [Redacted] (CFTC Whistleblower Award Determination No. 20-WB-03 / Order Determining Whistleblower Award Claims)
The CFTC Claims Review Staff ("CRS") issued Preliminary Determinations recommending an Award to Claimant 1 but recommending the denial of an Award to Claimant 2, who failed to seek reconsideration. In ordering an award of a redacted percentage of collected fines for a redacted dollar amount payout, CFTC found that Claimant 1 had voluntariy provided original information that led to a successful enforcement action. Pointedly, the CFTC Order found that Claimant 1 provided "crucial information that Commission staff heavily relied on . . ." Bill Singer's Comment: One quibble with this CFTC Order: There is no indication of the dollar amount awarded. If there is a legitimate reason for this redaction, then CFTC should at least explain the rationale in a footnote. It does border a bit on the absurd for a federal regulator to trumpet its award of a redacted amount of dollars to a redacted individual who provided redacted information that prompted an investigation of a redacted company. Yes -- there are some aspects of every whistleblower matter that should not be disclosed and for which redaction is necessary. On the other hand, c'mon, you have to at least provide some of the basics or perhaps not issue a Press Release, right?