Category: Compliance Bricks and Mortar

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

White: SEC’s No. 1 priority is more adviser examinations By Mark Schoeff Jr. in Investment News

The Securities and Exchange Commission’s top priority is to increase the number of investment adviser examinations it handles every year. How to go about doing that is another question.

“Significant additional coverage is essential if investors are to be appropriately protected,” SEC Chairman Mary Jo White told lawmakers today, pointing out that in fiscal 2012, the agency examined only 8% of registered investment advisers, who now number about 11,000.

The Importance of a Senior Executive Compliance Committee by Michael Volkov in Corruption, Crime & Compliance

We all know that corporate boards play an all important role in an effective compliance program. Not as much attention is paid to the operation of senior executive compliance committees. This is a different animal than the compliance committee at the board level. A senior executive compliance committee consists of the key senior corporate officers needed to carry out an effective compliance program.

A PWC Compliance Survey conducted last year found that 71 percent of surveyed companies have a senior executive compliance management committee. But not all committees guarantee success. Some committees work well and some do not.

Four Keys to Compliance Leadership by Tom Fox

I recently read an excellent article it the Corner Office section of the New York Times (NYT), entitled “We’re Family Yes, but We’re Still Accountable”, in which Adam Bryant reported on his interview with Brooke Denihan Barrett, the co-Chief Executive Officer (co-CEO) of the Denihan Hospitality Group (Denihan), a 50-year old family business which focuses on the hospitality business.

Training
Accountability
Listening
Hiring and Promotion

Reflections on the updated COSO Internal Control Framework by Norman Marks

I am still in the process of my detailed review of the update. However, I have already formed two opinions:

1. The assertion that “an effective system of internal control reduces, to an acceptable level, the risk of not achieving an entity objective and may relate to one, two, or all three categories of objectives” is excellent and I am pleased that it comes before any discussion of principles

2. The assertion that follows, that this (reducing risk to an acceptable level) requires that “each of the five components and relevant principles is present and functioning” creates a serious problem

Marketing The FCPA … The FCPA Risks Of … Well, Just About Everything by Mike Koehler in the FCPA Professor

It is a common FCPA Inc. marketing device.

Pluck any FCPA-related item from the news and use that news as the hook to write about FCPA compliance services.  Profile any recent instance of FCPA scrutiny and use that scrutiny as the hook to write about a supposed new trend and how that new trend of course indicates the need for FCPA compliance services.

It seems as if everything now-a-days is a “sobering reminder,” that there is constant speculation as to which industry “is going to be the next target,”  and that every company is warned to ask itself will it be prepared when the ”government knocks on the door.”

Image is the Palazzo Barberini a Montelibretti, herringbone bond wall.

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

AIFMD Update – US Private Fund Advisers Marketing in the UK in Compliance Avenue

Recent news from the UK suggests that these AIFMs have most likely been granted a reprieve until July 22, 2014 to comply with AIFMD in the UK. Earlier this week, the UK’s HM Treasury (“HMT”) published “Transposition of the Alternative Investment Fund Managers Directive [the ‘AIFMD’]: Questions and Answers” (the “Q&As”) which suggest that they intend to make certain amendments to the current draft of The Alternative Investment Fund Managers Regulations 2013. With the amendments, the final UK regulations implementing AIFMD would permit “existing” U.S. AIFMs (and other third country AIFMs) and “existing” AIFMs from the European Economic Area (comprised of the EU, Lichtenstein, Norway and Iceland) (“EEA”) to have the benefit of the UK’s “transitional provision” which provides a twelve-month transition period until July 22, 2014. Generally, “existing” AIFMs are those in existence and operating as of July 22, 2013. Under the transitional provision, these non-UK AIFMs will be able to market fund interests in the UK without requiring the AIFMs to register with the UK Financial Conduct Authority or generally comply with the AIFMD until July 22, 2014. HMT also states that they intend to amend the draft regulations so that AIFMs relying on this transitional provision will not need to be authorized in order to launch and market new funds in the UK during this period. During the transitional period, these non-UK AIFMs would need to comply with general UK marketing regulations.

The Moral of a Recent Second Circuit Opinion: Don’t Rely on Commas for Disambiguation by Ken Adams in Adams on Contract Drafting

Via this post by Ray Ward I learned of the recent opinion of the Second Circuit Court of Appeals in AIG v. Bank of America (PDF copy here). In the opinion, the court states that whether a modifying phrase following a list of nouns or phrases modifies each item on the entire list, or only the last item, depends on whether the modifying phrase is separated from the last item by a comma.

Use Planes, Trains and Automobiles to get to Compliance Week 2013 by Tom Fox

To say I am excited would be putting it mildly. Yes that most premier of compliance related conferences is on the short horizon; Compliance Week 2013 is nearly upon us. It will be from May 20-22 at the Mayflower Hotel in Washington DC. As usual, Matt Kelly and his outstanding team have put together a first rate program for the General Counsel (GC), compliance practitioner (in-house or outside counsel), FCPA Bar/FCPA Inc. or even Mike Volkov’s good friends, the FCPA Paparazzi. If there is one national compliance conference that you can attend each year, for my money, this is the event. …

For the FCPA consigliori amongst you, I will once again be leading a conversation on the most recent Foreign Corrupt Practices Act (FCPA) developments. With the recent Parker Drilling Company and Ralph Lauren Corporation resolutions and the various individuals who have been indicted or have pled out, it promises to be an interesting and informative time for anyone interested in all things FCPA. If it turns out that after my session you are still craving more insight about effective compliance with the FCPA there will be a session entitled “FCPA Guidance, Right From the Source”. This session will address any lingering questions you may have about the FCPA guidance published last fall by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC). The panel will include the top FCPA enforcers from both the DOJ and SEC, who will offer their latest thinking on anti-bribery enforcement and answer questions from the audience about best practices and putting agency guidance to good use.

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

Kathleen Edmond of Best Buy Receives ERC’s Carol R. Marshall Award for Innovation in Corporate Ethics

Established last year as a posthumous honor to former ERC Board member Carol R. Marshall, the award recognizes a chief ethics and compliance officer for innovation and leadership in building or enhancing a corporate ethics and compliance program. The ERC selects an honoree who is a national leader who advances the ethics and compliance field and serves as a role model in the profession.

The Crystal Ball: What Might Top the SEC’s Agenda? by Dave Lynn in TheCorporateCounsel.net

Mary Jo White’s nomination to be the 31st Chair of the SEC was approved last week by the Senate Banking Committee, in a vote of 21 to 1, and as noted in this article, her nomination goes on to the full Senate for consideration at some point soon after the Easter recess. With the possibility of a new Chair arriving soon, the question inevitably arises as to what will (or should) top the Corp Fin rulemaking agenda?

FBI has cooperating witness for soccer fraud probe

An FBI probe into alleged corruption in international soccer has recently intensified after investigators persuaded a key party to be a cooperating witness, U.S. law enforcement sources said…..The deepening of the probe indicates that a succession of corruption scandals involving FIFA and other international soccer bodies in the past few years may continue to cast a cloud over the sport for some time.

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

NoDoz: Early Birds Needed to Work at SEC by Bruce Carton in Compliance Week

What impact will White will have on the SEC? For one thing, it appears that those at the agency who work closely with the chairman will need to set their alarm clocks to go off quite a bit earlier. White is known to be a tireless, “24/7” worker who often sends detailed emails to her colleagues at 3 a.m.

You Might Be Surprised By Who Counts (And Who Doesn’t) In California by Keith Paul Bishop in California Corporate and Securities Law

Many issuers continue to rely on California’s limited offering exemption to avoid the necessity of qualifying the offer and sale of their securities. The exemption, found in Corporations Code Section 25102(f), requires that sales be made to not more than 35 persons. Thus, it is important to know who counts and who doesn’t.

The Telltale Signs of Corporate Fraud by Stephen J. Dubner in Freakonomics

A new working paper (abstract; PDF) by Tanja Artiga Gonzalez, Markus Schmid, and David Yermack looks for the telltale signs of corporate fraud. The paper is called “Smokescreen: How Managers Behave When They Have Something To Hide”:

SEC Issues Guidance Update on Social Media Filings by Investment Companies

The Securities and Exchange Commission today published a guidance update from its staff to clarify the obligations of mutual funds and other investment companies to seek review of materials posted on their social media sites.

Additional Materials:

• IM Guidance Update: Filing Requirements for Certain Electronic Communications

The card above comes courtesy of the House Financial Services Committee lamenting the failure to prosecute individuals and companies in the financial industry. Last week Chairman Hensarling and Oversight & Investigations Subcommittee Chairman McHenry sent a letter to Attorney General Holder and Treasury Secretary Lew seeking any and all documents related to the consideration of economic factors in the decision to prosecute large banks for financial crimes. The committee’s investigation comes out of Mr. Holder’s recent comments at a Senate Judiciary Committee Hearing in which the Attorney General suggested some large financial institutions are now “too big to jail.”

Here are some of the other compliance related stories that recently caught my attention:

Lessons from Bill Belichick for the Compliance Practitioner by Tom Fox

One of the things that struck me about the Belichick player evaluation system and how it was used by all three men for their respective teams is that is a building block system. It takes a system and builds that system, building block by building block until the overall system is completed. This is then fine-tuned and updated through continuous monitoring, assessment and review. For the compliance practitioner, I found this approach to have several valuable lessons.

BEA Reporting for Fund Managers: the SEC is not the only regulator gathering investment-related data in the Hedge Fund Law Blog

The BEA collects data on U.S. direct investment abroad, among other mandates. Its tools include Form BEA-11 (“BEA-11”) for U.S. persons that have ownership interests in foreign affiliates. Historically, these filings received almost no attention. Enforcement of the filing requirements was rare, but is expected to increase following the BEA’s announcement in May of 2012 that it would be more vigilant. [Note: Enforcement penalties include civil and criminal fines and even imprisonment for failure to file.]

JPMorgan Hid Trades Banned by Volcker Rule, Senate Probe Finds by Cheyenne Hopkins in Bloomberg

JPMorgan Chase & Co. engaged in high-risk proprietary trading under the guise of ordinary hedging, said Senate investigators, who urged U.S. regulators to strengthen the proposed ban on such trades known as the Volcker rule. Regulators should require banks that hold federally insured deposits to explicitly link positions in derivatives to the underlying risk they are hedging, the Senate’s Permanent Subcommittee on Investigations recommended in a 300-page report released yesterday.

Anti-Corruption Enthusiasts, We Need Your Help! by Matt Kelly in Compliance Week

Calling all FCPA and anti-corruption enthusiasts, Compliance Week needs your help! Compliance Week and Kroll Advisory have teamed up to undertake a major survey on corporate anti-corruption programs, and we’re asking compliance executives to participate. The survey itself—the 2013 “Global Anti-Bribery Benchmarking Report”—can be found here: http://surveys.harveyresearch.com/se.ashx?s=0D146E2D11F8D225.

This Is Not a Story About Last Place by Jason Gay in the Wall Street Journal

This is a story about a guy who finished last. Which is technically true. You can look up the results of the race, and you’ll see his name, right there, lonely at the bottom. Taylor Phinney. USA. Finishing time of six hours, twenty-two minutes, fifty-four seconds. One hundred-and-ninth place. Last.

But this story is better than that.

Overnight a huge meteor streaked across the skies of Chelyabinsk, Russia. What does this have to do with compliance? Apparently, Russian drivers regularly use these cameras to fight corruption.

BREAKING: Huge Meteor Blazes Across Sky Over Russia; Sonic Boom Shatters Windows by Phil Plait in Bad Astronomy

Apparently, at about 09:30 local time, a very big meteor burned up over Chelyabinsk, a city in Russia just east of the Ural mountains, and about 1500 kilometers east of Moscow. The fireball was incredibly bright, rivaling the Sun! There was a pretty big sonic boom from the fireball, which set off car alarms and shattered windows. I’m seeing some reports of many people injured (by shattered glass blown out by the shock wave). I’m also seeing reports that some pieces have fallen to the ground, but again as I write this those are unconfirmed.

Why are there so many Russian dash cam videos on the internet? by Ryan Whitwam in Geek.com

There are several hard truths that have led to the explosion in Russian dash cam videos, including poor road conditions. Those long, hard winters do serious damage to the roads and lead to really tough driving conditions when local governments can’t clear snow and ice. As a result, accidents do happen more frequently.

It’s not all the fault of the elements, though. Corruption is rampant in the Russian Federation, and that’s led most motorists to take matters into their own hands. It’s not uncommon for a driver to be pulled over by the notorious Russian Highway Patrol (GAI) and harassed into paying a bribe. Dash cams afford at least a little protection from baseless accusations.

The Temptation to Trade on Confidential Information by peter Henning in Dealbook

Everyone loves a sure thing. And in the case of insider trading, the profits may be just too tempting.

Two cases filed last week by the Securities and Exchange Commission epitomize just how quickly some have jumped at the opportunity to profit from confidential information, despite the risks of being discovered and the subsequent costs.

In one case, two information technology workers learned that their company was involved in merger negotiations when one helped the chief executive figure out how to attach confidential deal documents to an e-mail. The other involved a husband learning about a confidential acquisition from his wife, who is a lawyer, after an event with a client’s general counsel was canceled on short notice.

‘Frustrated’ Madoff Now Second Guessing His Guilty Plea by Scott Cohn in CNBC.com

Writing to me from the federal prison where he is serving a life sentence for his epic fraud, Madoff said he is not getting credit for what he calls his “instrumental” role in returning money to his victims. Madoff wrote that he is so frustrated, he is having second thoughts about having pleaded guilty four years ago.

Mary Jo White’s Latest Conflict of Interest by Jonathan Weil in Bloomberg

White is the white-collar defense lawyer and former U.S. attorney nominated by President Barack Obama to lead the SEC. Her financial disclosures say that upon leaving New York-based Debevoise & Plimpton LLP, the law firm will give her $42,500 a month in retirement pay for life, or more than $500,000 a year.

What else is needed to make change successful? by Tom Fox

I have recently been involved with two clients who are about to embark upon major change in their businesses.  They are very different and each has a very unique style or culture.  As they prepare to set off on their journey I have wondered what else is needed to succeed beyond the ‘usual suspects’?

John Kotter and others have all put forward their ideas, mostly honed after years of practice and delivery.  They are all very useful and I have many of their books on my shelf.  But I am always drawn back to the question above.  After going through some of my own success stories and taking out the usual suspects, I have identified a few things that I believe really matter.

The Dangers of Social Media and Employee Discipline by Michael Volkov in the Corruption, Crime & Compliance Blog

As if compliance officers do not have enough on their plates. I have written about this before – the risks of interfering with employees’ “protected activity” on social media. What a nightmare and what a maze of confusion!

The National Labor Relations Board, which has been re-energized under the Obama Administration, affirmed an Administrative Law Judge’s ruling that the nonprofit, Hispanics United of Buffalo, Inc. violated the National Labor Relations Act by terminating five employees for comments they made on Facebook in response to a coworker’s criticism of their job performance.