Compliance Bricks and Mortar for February 7


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

The Financial industry – Life is Getting Tough by Michael Volkov in Corruption, Crime & Compliance

In recent statements from the Justice Department and regulatory officials, prosecutors and regulators have warned the industry that individuals may be prosecuted in the future for money laundering violations. As I always say, when the government says something – they mean it. The government does not prosecute or enforce the laws in secret.

The FCPA and Fight Against Terrorism by Tom FOx in the FCPA Compliance and Ethics Blog

I admit it took me awhile to finally get it. I have long wondered what could have caused the explosion in Department of Justice (DOJ) and Securities and Exchange Commission (SEC) enforcement of the Foreign Corrupt Practices Act (FCPA). Starting in about 2004, FCPA enforcement has not only been on the increase from the previous 25 years of its previous existence but literally exploded. Of course, I had heard Dick Cassin and Dan Chapman, most prominently among others, talk and write about FCPA enforcement as an anti-terrorism security issue post 9/11, but I never quite bought into it because I did not understand the theoretical underpinnings of such an analysis.

SEC No-Action Letter Addresses “M&A Brokers” by Keith Paul Bishop in California Corporate & Securities Law blog

Martin A. Hewitt alerted me to this no-action letter issued on January 31, 2014 by the SEC’s Division of Trading and Markets.  The letter was issued in response to a request by six lawyers, including Mr. Hewitt.  In very broad terms the letter states that the Division would not recommend enforcement “if an M&A Broker were to effect securities transactions in connection with the transfer of ownership of a privately-held company under the terms and conditions described in your letter without registering as a broker-dealer pursuant to Section 15(b) of the Exchange Act”.  The letter describes an M&A broker as “a person engaged in the business of effecting securities transactions solely in connection with the transfer of ownership and control of a privately-held company (as defined below) through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the company, to a buyer that will actively operate the company or the business conducted with the assets of the company.”

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SEC Sanctions University Professors For Naked Short Scheme by Thomas O. Gorman in SEC Actions

Two university professors settled fraud charges brought in an SEC administrative proceeding centered on a naked short selling scheme. The scheme yielded profits of over $400,000. In the Matter of Gonul Colak, Adm. Proc. File No. 3-15712 (Jan. 3, 2014). Milen Kostov, a professor at an unidentified university, created an options trading scheme crafted to evade restrictions on naked short selling, profiting from pricing differences for hard to borrow securities and from holding the positions open. He shared the strategy with his friend Gonul Colak, also a professor at an unidentified university.