Here are some recent compliance-related stories that caught my attention:
Launching Into Unethical Behavior: Lessons from the Challenger Disaster by Ann E. Tenbrunsel and Max H. Bazerman in Freakonomics
On the night before the Challenger was set to launch, a group of NASA engineers and managers met with the shuttle contracting firm Morton Thiokol to discuss the safety of launching the shuttle given the low temperatures that were forecasted for the day of the launch. The engineers at Morton Thiokol noted problems with O-rings in 7 of the past 24 shuttle launches and noted a connection between low temperatures and O-ring problems. Based on this data, they recommended to their superiors and to NASA personnel that the shuttle should not be launched.
This year I can boil that lesson down to one telling insight, that sprang to mind thanks to two particular moments that happened during the conference: the superb keynote address given by U.S. Attorney Preet Bharara on Tuesday morning, and an outburst later that day from our first-ever Compliance Week protester.
“Profound personal integrity, repeatedly demonstrated and openly valued, is absolutely critical … The best-conceived compliance programs and practices and policies in the world will be too weak to stave off scandal if the core principles are not internalized, if there is not from the top a daily drumbeat for integrity.”
Hedge Fund Industry Asks for Global Regulatory Coordination as EU Implements Alternative Investment Fund Directive in Jim Hamilton’s World of Securities Regulation
During 2013 to 2015 there will be a passport for sales of EU alternative investment funds to investors within the EU. For US and other non-EU funds and managers, national private placement regimes will continue to operate. However, noted ESMA Chair Steven Maijoor, for these regimes to be used, appropriate co-operation arrangements will have to be put in place between the EU regulator concerned and the authority of the third country.
A Trader, an F.B.I. Witness, and Then a Suicide by Peter Lattman and William K. Rashbaum in the New York Times’ Dealbook
But the federal authorities’ techniques have rarely been seen on Wall Street before.
Late last year, F.B.I. agents conducted three simultaneous raids of large hedge funds. Two of those funds have since closed. And for the first time in an insider trading inquiry, the government has been using wiretaps — a method typically reserved for drug crimes and organized crime cases — to record the telephone conversations of Wall Street traders.
Be Careful Playing with Your New Things – Homeownership: