Compliance Bits and Pieces for August 3

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

Four Signs Your Awesome Investment May Actually Be A Ponzi Scheme by Theo Francis in NPR’s Planet Money

[I]t turns out that the Ponzi industry is much broader and deeper than even the biggest blowups suggest. That’s one lesson of a slim new book, The Ponzi Scheme Puzzle: A History and Analysis of Con Artists and Victims, from Boston University Law Professor Tamar Frankel.

Should dentists and lawyers be rotated, like auditors? by Jeff Kaplan in the Conflict of Interest Blog

As a general matter, the professional relationships that expert service providers (e.g., doctors, lawyers, accountants) have with those they serve carry the potential for conflicts of interest, at least, where the provider’s advice can impact how she is paid. Of course, we rely on providers’ professional standards of conduct to mitigate those conflicts. Beyond this, we tend to think that having a good personal relationship with an expert provider will serve as a useful “inner control,” and steel the provider against the potential for COIs inherent in the very economic nature of the relationship.

Too bad that it apparently doesn’t work.

When Your Investment Target Has Drug Cartel Ties by Nick Elliott in’s Private Equity Beat

The firm had done some due diligence and found the businessman had a strong record going back eight years. Springer’s firm formed the same impression, but Springer said he was suspicious that there was no information before that time, so he asked the firm for more time to dig deeper.

Knight Capital Says Trading Glitch Cost It $440 Million by Nathaniel Popper in’s DealBook

$10 million a minute.

That’s about how much the trading problem that set off turmoil on the stock market on Wednesday morning is already costing the trading firm. The Knight Capital Group announced on Thursday that it lost $440 million when it sold all the stocks it accidentally bought Wednesday morning because a computer glitch. The losses are threatening the stability of the firm….

Loss Swamps Trading Firm in the Wall Street Journal

Knight officials blamed software installed earlier this week for causing the brokerage firm to enter millions of faulty trades in less than an hour on Wednesday morning. The orders roiled trading in almost 150 stocks and left Knight holding losing positions in many shares at the end of Wednesday’s trading session.

Knight Capital trading debacle shows Wall Street frailties by Andrew Tangel and Jim Puzzanghera in the Los Angeles Times

The high-speed trading arms race being waged on Wall Street has finally claimed its first major casualty.

Knight Capital Group, a brokerage that handles nearly 11% of all stock trading in U.S. companies, is in danger of collapsing after a software glitch triggered millions of unintended orders. The New Jersey firm lost $440 million in less than an hour — nearly four times the company’s profit last year.