Compliance Bits and Pieces for August 27

Here are some recent stories I found interesting:

A Red Flag on G.M. Internal Controls by Peter J. Henning in the New York Times’ DealBook

General Motors filed its S-1 on Wednesday, and its list of potential risks to the company contains the usual array of obvious market threats and uncontrollable events that might be harmful to prospects, like the admonition that “our business is highly dependent on sales volume” – what a surprise.

After listing 30 different risk factors for its business, G.M. then drops this on investors: “We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.” That is quite a risk to put at the end of the list.

4,000 Investment Advisers Bound for State Regulation from Investor’s Watchdog

Among the myriad changes wrought by the Dodd-Frank Act, approximately 4,000 registered investment advisers (RIAs) will soon be examined by state securities regulators, rather than the SEC. With a few narrow exceptions, by this time next year state regulators will handle RIAs managing less than $100 million (the cut-off point under the old law was $25 million). This will help the SEC focus on the biggest funds, but it throws state securities regulators a Herculean challenge. As it is, state-regulated RIAs see examiners, on average, only once every five years.

Financial Reform Leaves New York Investment Advisers Unsure Where to Register by Compliance Avenue

The Dodd-Frank financial reform bill, signed into law by President Obama on July 21, 2010, has left behind an odd but important ambiguity for investment advisers located in New York state. The law requires most investment advisers with less than $100 million in assets under management to register with the securities commissioner of the state where the adviser maintains its principal office and place of business, provided that the adviser “would be subject to examination as an investment adviser” by such commissioner. Unlike most other states, however, New York has never conducted examinations of investment advisers and currently its General Business Laws provide no specific authority for such examinations.

Six Keys to Being Excellent at Anything by Tony Schwartz in the Harvard Business Review‘s Conversation

If you want to be really good at something, it’s going to involve relentlessly pushing past your comfort zone, along with frustration, struggle, setbacks and failures. That’s true as long as you want to continue to improve, or even maintain a high level of excellence. The reward is that being really good at something you’ve earned through your own hard work can be immensely satisfying. Here, then, are the six keys to achieving excellence we’ve found are most effective for our clients:

Promotional Expenses Defense under the FCPA by Tom Fox

So what is the problem with a US company paying for travel, room and board for foreign governmental officials to travel to the United States? The problem is that payment for such travel, lodging and expenses may run afoul of the prohibition against corrupt payments (or promises of them) made to obtain or retain business. The Foreign Corrupt Practices Act (FCPA) allows payments to foreign officials for expenses related directly to “the promotion, demonstration, or explanation of products or services” that are “reasonable and bona fide” 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A). This affirmative defense, however, is notoriously hard to use (and easy to abuse), mainly because no one is quite sure what reasonable and bona fide really mean.

Comments are closed.