Compliance Bricks and Mortar for May 3

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

SAC to Begin Clawing Back Compensation in Insider Trading Cases by Peter Lattman in DealBook

On Thursday, Mr. Cohen sought to convince SAC investors and regulators that he takes compliance seriously. In a letter to his investors, Mr. Cohen announced a broad set of changes that would bolster the fund’s compliance practices, including clawing back the pay of employees who violate the law.

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The Hunt for Steve Cohen By Bryan Burrough and Bethany McLean in Vanity Fair

With arrest after arrest in a massive, seven-year insider-trading investigation, U.S. Attorney Preet Bharara is getting closer to the biggest fish of them all: Steve Cohen, founder of SAC Capital, the $14 billion hedge fund, who some regard as the most successful stock picker of his time. C.E.O.’s have fallen, lives and companies have been upturned, but Cohen has thus far escaped. Bryan Burrough and Bethany McLean go deep inside Bharara’s probe—and SAC’s org chart—to reveal just how much blood is in Wall Street’s waters.

Prison For Illinois Men Who Hatched Comic Book Ponzi Scheme From Prison by Jordan D. Maglich in Ponzitracker

Three Illinois men are headed back to federal prison for masterminding a Ponzi scheme they concocted in prison that promised lucrative returns through the distribution of comic book rights.  Daniel Parrilli, 62, John Lauer, 48, and Christopher Anderson, 57, received 70-month, 31-month, and 95-month prison sentences, respectively, after previously pleading guilty to fraud charges.  The scheme raised more than $7 million from over 150 investors.

SEC Dings Investment Adviser for Custody Violations, Failure to Supervise by David Smyth and Elizabeth E. Spainhour in Cady Bar the Door

Readers of this space – and SEC observers generally – will recall a March 4 risk alert designed to warn investors about the ways U.S. investment advisers had recently been found to have violated the SEC’s asset custody rule.  The number and variety of violations were legion.  Advisers were not assuring themselves that clients were receiving quarterly account statements.  They weren’t subjecting themselves to surprise examinations designed to assure compliance with the rule.  The list went on, and the Commission’s Office of Compliance Inspections and Examinations closed with a polite reminder that “[a]dvisers may want to consider their policies and procedures and their compliance with the custody rule in light of the deficiencies noted in this Alert.”

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