Compliance Bits and Pieces for June 1

These are some compliance related stories that recently caught my attention.

The Symbolism of the Bull and the Bear by Amy Farber, New York Fed Research Library

The term “bear” dates back to 1709, when it was used as shorthand for the bearskin jobber occupation. The title “bearskin jobber” originates from a proverb highlighting the practice of selling bearskins before catching the bear. In a more modern sense, a bear is someone who expects prices to fall, thus selling stocks in hopes of a future compensation.

Reasonable Efforts May Be A Promisor’s Best Efforts by Keith Paul Bishop in California Corporate & Securities Law

Does a “best efforts” clause require a party to subordinate its interests to the other party or undertake extraordinary efforts to fulfill its obligations? Does a “best efforts” clause establish a fiduciary relationship between the parties? Is a “best efforts” requirement the same as good faith? … [T]he Court of Appeal rejected the plaintiff’s contention; holding that when a contract does not define “best efforts”, the promisor “must use the diligence of a reasonable person under comparable circumstances”.

Drachma! by David R. Kotok in Barry Ritholz’s The Big Picture

Since reintroduction in 1832, all modern Grecian drachma forms have ended badly.  The single exception WAS the exchange of the drachma for the euro in 2001. That chapter of Greek history is being re-written now.

After NLRB’s Memo, Drafting Employment Policies Got Trickier by Daniel Schwartz in Connecticut Employment Law Blog

I’ve had a little more time to digest the latest memo from the NLRB opining on what is and what isn’t appropriate for employers to have in their policies. And I’ve come to a very serious conclusion:

It’s an utter mess.

Occupy the regulatory system! by Suzy Khimm in the Washington Post

Many of the Occupy wonks once worked on Wall Street, and some of them still do. They’re former derivatives traders, risk analysts, compliance officers and hedge fund quants. They hail from Morgan Stanley, Deutsche Bank, Bear Stearns, D.E. Shaw, Merrill Lynch and JPMorgan Chase — and at least one is a former Securities and Exchange Commission regulator. They’re more likely to use a flowchart than protest signs to fight big banks. But they identify with the movement’s animating belief that America’s financial heavyweights wield too much power, and that its political leaders are too eager to do their bidding.

A Guidebook For What It Means To Know Your Customer by Joshua Horn in Fox Rothschild’s Securities Compliance Sentinel

On July 9, FINRA Rules 2090 and 2111 go into effect.  In Rule 2090, FINRA has defined what a member firm/registered representative must do to know their customers.  In addition, Rule 2111 defines suitability when it comes to investment recommendations.  For what this means for you as a practical matter, I have written the attached guidebook.

In Hindsight, 37.5 Million Dollars Isn’t Cool. You Know What’s Cool? A Billion Dollars by Bruce Carton in Compliance Week’s Enforcement Action

Yes, Sean Parker’s character (played by Justin Timberlake) uttered that memorable line in The Social Network, but you know who else might be saying that soon? Irving Picard, the court-appointed trustee in the Madoff case who is tasked with recovering funds for the victims of Madoff’s Ponzi scheme.
Image of the Bull and Bear at the Frankfurt Stock Exchange is by Thomas Richter

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