Compliance Bricks and Mortar for November 2

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

21-Month Sentence Just One of the Consequences of Former Deloitte Partner’s Insider Trading by Bruce Carton in Compliance Week

A big part of the SEC and DOJ’s enforcement of the insider trading laws is to bring cases that will deter others from violating the insider trading laws in the future. Although the recently-concluded case against Thomas P. Flanagan ended with a lighter prison sentence than it could have, the full slate of consequences for Flanagan should be sufficient to make the next audit partner who is considering trading on a client’s non-public information think twice.

Hold Your JOBS Act Horses by Jay Gould in Pillsbury’s Investment Fund Law Blog

When can private fund managers start posting performance numbers on their websites and sponsoring the Super Bowl?  Not yet, according to Senator Carl Levin (D-MI) in letters dated October 5,2012 and October 12, 2012, (the “Levin Letters”) rebuking the SEC for having missed the point of the legislation in the SEC rulemaking process.  As you recall, on August 29, 2012, the SEC proposed rules pursuant to Section 201 of the Jumpstart our Business Startups Act (“JOBS Act”) that, if adopted in final form, would allow private issuers, including private funds, to generally solicit and advertise as long as the investors are all “accredited investors.”

Fighting corruption with bumper stickers and public toilets: ambient accountability by Dieter Zinnbauer in Space for Transparency

One of our most simple ways of doing this is to make them more aware of their rights: in the very place where those rights are most likely to be abused.Take for inspiration this passenger bill of rights, displayed literally right in your face at the backrest of the driver’s seat in New York taxis. Imagine how much more effectively you can claim your rights and how much more hesitant a corrupt driver will be to try to take advantage of you, even if you are not from New York and have no idea how this place works.

Avon Warns of Further Firings Amid FCPA Probe by Samuel Rubenfield in WSJ.com’s Corruption Currents

Avon Products Inc. said it may have to fire more people as it continues its internal probe into allegations of foreign bribery….Many top Avon executives, including a group vice president and a vice chairman, have resigned or been fired in the past few years amid the bribery probe.

Principles-Based Compliance Isn’t Supposed to Be Easy by Matt Kelly in Compliance Week

That compliance executive is correct: the right to be forgotten is entirely impractical in modern business, and contradicts many other rules we already place on businesses for good reason, such as maintaining records to enforce contracts, audit finances, or protect public security. If compliance officers ever wanted to point to a regulation that shows no understanding of business, the right to be forgotten would be a great one.

The Thirteen Dirty Secrets That A Fraudster Does Not Want You To Know? by Joshua Horn in Securities Compliance Sentinel

The late great comedian, George Carlin, was made famous by his routine, “The Seven Dirty Words You Can Never Say On Televisions”. Likewise, fraudsters do not want compliance personnel to ever mention the 13 common dirty traits that may uncover a fraud.

Two Actions Against Investment Advisers by Thomas O. Gorman in SEC Actions

The Commission filed two settled administrative proceedings this week against investment advisers. Each centered on the disclosures made to clients. One involved advertisements while the other involved the fees charged.

Since the early 1990s the advertisements for the bond program have claimed that it has had “no down years” since it’s the inception….In 2005 BTS learned that about half of its clients would have had a down year in 2004 with losses of up to 3.3% following the buy/sell signals. The fact that a significant percentage of its clients likely would have had results which materially varied from the “no down year” claim made the advertisements false and misleading, violating Advisers Act Section 206(4), according to the Order.

The second named as Respondents Tilden Louchs & Woodnorth, LLC, Woodnorth, LLC, LaSalle St. Securities, LLC and Ralph Loucks….Beginning in late October 2007, and continuing until early 2012, Tilden charged client commissions that exceeded the fees it paid LaSalle to execute trades. The higher commissions represented undisclosed compensation for Tilden and Mr. Loucks. Under this arrangement clients paid on average $143.77 per trade, according to the Order. At the same time Tilden paid LaSalle an average of $37.47 to execute the trades. The excess went to Tilden. The arrangement was not disclosed. To the contrary, the Forms ADV told clients they were getting a discount. Tilden had over $186,000 in undisclosed compensation, shared by Mr. Loucks. The Order alleges violations of Advisers Act Section 206(2) and 207.

Exchange got black eye from going dark: Arthur Levitt in Investment News

“People look to the New York Stock Exchange (NYX) as being the symbol of American capitalism, and to see the exchange go down for two days without an adequate backup plan is very, very unfortunate,” Levitt said on a Bloomberg Radio interview. “To see the New York Stock Exchange crippled is a body blow that will really shake the image of that institution for a long time to come.”

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