Compliance Bricks and Mortar for December 6

Bricks Boston 1

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

When blowing the whistle is a conflict of interest in Conflicts of Interest Blog

Employees generally owe duties of loyalty to their companies (at least under US law), but for some time whistleblowing has not seen as a breach of such duty. This was the underpinning of an important Supreme Court case thirty years ago – Dirks v SEC – which held that an employee who told a securities analyst about a fraud at the employee’s company had not breached a fiduciary duty to the company (and hence under applicable law the securities analyst could not be prosecuted for insider trading based on this disclosure). But not all duties of loyalty are the same, and lawyers (and other professionals) are typically seen as having a stronger duty in this area than are employees in general.

When Good People Do Bad Things by Peter J. Henning in DealBook

That is the conundrum of many white-collar crime cases: successful business people act in ways that put careers and personal fortunes at risk for seemingly modest gains, and sometimes the misconduct benefits their company but themselves only indirectly.

SEC CustodyFest Vol. 2: Electric Boogaloo by David Smyth in Cady Bar the Door

I know you’ve been eagerly awaiting the return of SEC CustodyFest. Let’s turn to the second matter brought by the SEC on October 28th: Further Lane Asset Management. This case actually did not revolve around the investment adviser custody rule; other issues were at play as well.

Hedge-fund ‘Fight Club’ traded illegal tips instead of punches by Bloomberg in

The hedge-fund analysts vacationed together in the Hamptons, gambled in Las Vegas and adopted a creed that parodied the rules in the Brad Pitt film “Fight Club.” Instead of trading punches, they traded illegal tips that allowed their portfolio managers to reap tens of millions of dollars in profit. Having pleaded guilty to insider trading, four of the men are now set to be witnesses against SAC Capital Advisors fund manager Michael Steinberg.

Notes for building a chart comparing crowdfunding exemptions by William Carleton

On the working theory that more states are going to establish investment crowdfunding exemptions, I’m thinking it makes sense to start building a chart to compare them all. And to compare state exemptions against the prospective federal exemption under Title III of the JOBS Act.

AML: A Corporate Governance Issue by Wilmer Hale (.pdf) in the Banking Law Journal

Bank Secrecy Act (“BSA”) was passed, there is no doubt those efforts have picked up intensity in recent years and that this increased focus will continue. Indeed, the comptroller of the currency has said that “[i]n the wake of the financial crisis, too many banks inappropriately cut staffing and spending for BSA and anti-money laundering compliance as austerity measures.”

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