Compliance Bricks and Mortar – Page 32

Compliance Bits and Pieces for January 6

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

Obeying the Law is Hard by Chris MacDonald in the Business Ethics Blog

For businesses, following the law doesn’t exhaust ethical responsibilities, but it’s an awfully good start. Most of us probably think that following the law is absolute minimally-decent behaviour for business. You absolutely must follow the law, and a business certainly shouldn’t be praised for achieving that basic minimum, right? But in fact, it’s not always so easy for companies to follow the law.

ERC’s National Business Ethics Survey

45 percent of U.S. employees observed a violation of the law or ethics standards at their places of employment. Reporting of this wrongdoing was at all-time high – 65 percent – but so too was retaliation against employees who blew the whistle: more than one in five employees who reported misconduct they saw experienced some form of retaliation in return.

Ten Compliance Issues from 2011 by Tom Fox

So as part of the compliance commentariati, I submit, for your consideration, my Top Ten anti-corruption and anti-bribery issues over the past 12 months.

Amendments to the FCPA?…

UK Bribery Act goes live…

Crystal Ball Reading…

Chief Compliance Officer Upgrade…

Investigating Private Equity…

….

Conflict of Interest Risk Assessments – Part One by Jeff Kaplan in the Conflict of Interest Blog

Risk assessments are increasingly seen as essential to effective C&E programs. This is true for programs generally, of course, under the 2004 amendments to the Federal Sentencing Guidelines for Organizations. Risk assessments are also contemplated for anti-corruption compliance under the Good Practices Guidance of the OECD Anti-Bribery Working Group, the UK Bribery Act compliance guidance issued by the Ministry of Justice and settlements of various FCPA cases involving both compliance failures and model compliance programs.

Fraud Flashpoints: The Perils of Fake Social Media Profiles – A Growing GRC Concern – Part 1 by Daniel W. Draz in Corporate Compliance Insights

Everyone is talking about the use of social media applications in business, in fact it’s “all the rage!” While there’s no doubt it has incredible value and potential in a variety of business applications, something that most governance, risk and compliance (GRC) professionals don’t seem to be talking about is how the technology and usage of it applies in a corporate environment, where misinformation, competitive business intelligence, industrial espionage, “false profiles” and reliance on errant information, all generate the potential for significant business risk and liability.

In Depth On The Magyar Telekom and Deutsche Telekom Enforcement Action by the FCPA Professor

Total fines and penalties were approximately $95 million ($59.6 million against Magyar Telekom via a DOJ deferred prosecution agreement, $4.4 million against Deutsche Telekom via a DOJ non-prosecution agreement, and $31.2 million against Magyar Telekom via a settled SEC civil complaint). The SEC action against former Magyar executives remains active.

Handcuffs is from VectorPortal.com

Compliance Bits & Pieces for December 16

These are some compliance related stories that caught my attention:

Dodd-Frank Rules Will Crush Employment, Banks Warn by Paul Sperry for Investors Business Daily

Job-killing bank regulations threaten to wipe out all the gains in private-sector employment since the recovery began, the industry warns. Washington, however, is hiring thousands more bureaucrats to enforce the rules. Signed into law last year, the Dodd-Frank Act is the biggest rewrite of financial regulations since the New Deal. It was intended to rein in Wall Street “excesses.” But the banking industry says burdensome red tape is hurting economic growth and jobs in a still-sluggish labor market.

The SEC’s Plan of Operations In the Event of a Government Shutdown by Vanessa Schoenthaler in 100 F Street

Faced, yet again, with the possibility of a government shutdown (tomorrow at midnight), the Securities and Exchange Commission has published its latest Plan of Operations During a Lapse in Appropriations.

SEC Reform After Dodd-Frank and the Financial Crisis by Commissioner Daniel M. Gallagher

The Dodd-Frank Act presented an opportunity to make changes that could have served the U.S. capital markets very well. Indeed, the 2,319 pages of legislation were meant to address the problems associated with the Financial Crisis. It was both expected and necessary that Congress respond to those events. Although the full impact of the legislation will not be known for years as regulators toil on the implementation of the Act, it is becoming clear that the SEC will need to focus on a number of issues within the Commission’s core competencies that were not addressed in the legislation.

Feds Probe Richardson For Alleged Pay-To-Play Scheme by in the Christopher Matthews WSJ.com’s Corruption Currents

A federal grand jury in Albuquerque has been looking into “pay to play” complaints from former and current state officials, people familiar with the matter told the Journal. The officials contend in court filings and interviews that Richardson’s close allies steered more than $2 billion of public money into investment funds run by money managers who in turn agreed to pay millions of dollars in consulting fees to high-profile Democratic fund-raisers and other supporters of Richardson.

Compliance Bits & Pieces for MF Global Edition

MF Gloabl clearly took a big bet on European sovereign debt. It looks like Jon Corzine, the head of the company, essentially went “all-in” and bet the company on the trades. He lost. His counterparties called collateral and the company quickly lost liquidity and solvency. On Halloween, MF Global filed for bankruptcy, listing $39.7 billion in debt and $41 billion in assets and put thousands of people out of work.

Unfortunately, it looks like some of the customer accounts were tied up in the company’s proprietary trading. It looks like $1.2 billion is missing from customer accounts.

MF Global and the great Wall St re-hypothecation scandal by Christopher Elias in Thomson Reuters

Under the U.S. Federal Reserve Board’s Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client’s liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets.

But in the UK, there is absolutely no statutory limit on the amount that can be re-hypothecated. In fact, brokers are free to re-hypothecate all and even more than the assets deposited by clients. Instead it is up to clients to negotiate a limit or prohibition on re-hypothecation. On the above example a UK broker could, and frequently would, re-hypothecate 100% of the pledged securities ($500).

Statement of Jon S. Corzine before the US House of Representatives Committee on Agriculture (.pdf)

Recognizing the enormous impact on many peoples’ lives resulting from the events surrounding the MF Global bankruptcy, I appear at today’s hearing with great sadness. My sadness, of course, pales in comparison to the losses and hardships that customers, employees and investors have suffered as a result of MF Global’s bankruptcy. Their plight weighs on my mind every day – every hour. And, as the chief executive officer of MF Global at the time of its bankruptcy, I apologize to all those affected.

Before I address what happened, I must make clear that since my departure from MF Global on November 3, 2011, I have had limited access to many relevant documents, including internal communications and account statements, and even my own notes, all of which are essential to my being able to testify accurately about the chaotic, sleepless nights preceding the declaration of bankruptcy. Furthermore, even when I was at MF Global, my involvement in the firm’s clearing, settlement and payment mechanisms, and accounting was limited.

Corzine Rebuffed Internal Warnings on Risks by Aaron Lucchetti and Julie Steinberg in the Wall Street Journal

MF Global Holdings Ltd.’s executive in charge of controlling risks raised serious concerns several times last year to directors at the securities firm about the growing bet on European bonds by his boss, Jon S. Corzine, people familiar with the matter said.

The board allowed the company’s exposure to troubled European sovereign debt to swell from about $1.5 billion in late 2010 to $6.3 billion shortly before MF Global tumbled into bankruptcy Oct. 31, these people said. The executive who challenged Mr. Corzine resigned in March.

The disagreement shows that concerns about the big bet grew inside the company months before the trade rattled regulators, investors and customers. The executive, Michael Roseman, whose title was chief risk officer, also expressed concerns directly to Mr. Corzine in meetings of just the two men and with other people present, people familiar with the situation said.

The Corzine lesson on executive departures by Theo Francis in Footnoted*

The only other indicator that something might be wrong was the fact that MF Global paid Roseman $1.35 million as he left. But this is all MF Global’s July proxy had to say on the subject:

“Mr. Michael Roseman’s employment with the Company ended effective March 31, 2010. In connection with his separation from the Company, Mr. Roseman was paid severance totaling $1,350,000 under his employment agreement. Mr. Roseman’s severance payment was calculated by adding his fiscal 2011 target cash bonus amount ($500,000), his fiscal 2011 target equity bonus amount ($500,000) and his fiscal 2011 salary ($350,000). All of Mr. Roseman’s unvested restricted stock units vested as of March 31, 2011.”

This is where reading between the lines becomes so critical. Executives who quit of their own volition, especially non-CEOs, rarely get big bucks on their way out the door. Often, that’s a sign that they went unwillingly. And yet, it offers no hint as to why he left: Poor performance? Personality conflict? Someone’s brother-in-law needed a job? There are a million potential reasons, good and bad, for easing someone out, and investors shouldn’t be left to guess.

Compliance Bits and Pieces for December 2

Here are some recent compliance-related stories that caught my attention.

The Enron cast: Where are they now? by Richard Partington in Financial News

The leading characters in the Enron saga have had varied fortunes since the disgraced trading giant collapsed into Chapter 11 bankruptcy a decade ago this week. A few went to prison, a couple have since died, while another employee went on to become a hugely successful billionaire trader. Financial News has ploughed through newspaper reports, personal and company websites and – where possible – contacted those involved to see where they are all now.

SEC Examines Internal Watchdog’s Interview By Robert Schmidt and Joshua Gallu in Bloomberg

The U.S. Securities and Exchange Commission’s internal watchdog has come under scrutiny for comments he made in a 75-minute videotaped interview about the agency and the stock market to a man who markets a “crash-proof retirement” plan through the Internet and a paid radio program. SEC Inspector General H. David Kotz has been contacted about the matter by the agency’s general counsel’s office, which also has briefed the SEC’s commissioners over concerns the interview could be construed as investment advice or an endorsement of financial services, according to two people briefed on the situation.

For Wall Street Watchdog, All Grunt Work, Little Glory by Ben Protess in DealBook

In an office park 20 miles outside Washington, the Financial Industry Regulatory Authority, Wall Street’s nonprofit self-regulator, has quietly built a small army of market police. Since Wall Street’s financial crisis in 2008, this fledgling fraud task force has entered the front lines of fighting insider trading, even if the group rarely earns the credit. Finra’s fraud group is akin to being the sous chef to the S.E.C. and other government regulators: the team prepares evidence against America’s most-wanted traders, but receives little of the glory when the cases are served.

Compliance Bits and Pieces for November 18

These are some recent compliance related stories that caught my attention:

Where the Bribes Are by the James Mintz Group

The Foreign Corrupt Practices Act, passed in 1977, has led to more than 200 cases covering activity in about 80 countries. On this map, the darker red that a country appears, the larger the total penalties assessed for FCPA violations in that country. Roll over a country to see the FCPA cases there (the bigger the box, the larger the penalty in that case). Click on each box for case details. Click on the sector list (lower left) for a breakdown by industry.

EEOC Advisory Opinion on Employer Use of Arrest & Conviction Records During Hiring Process in Littler’s Privacy and Data Protection Practice Group

The Equal Employment Opportunity Commission’s Office of Legal Counsel released an advisory opinion on employer use of arrest and conviction records during the hiring process. The non-binding letter provides some insight into the Commission’s current enforcement position and suggests the Commission: (1) will continue to differentiate between arrest and conviction records; (2) may not be prepared to adopt a presumption of disparate impact in this context; and (3) will in the event of a finding of disparate impact, closely scrutinize the employer’s policy with regard to both how long convictions are disqualifying and whether the underlying criminal conduct is related to the job duties for the position in question.

Louis XIV, the Old Pretender and Splitting the GC/CCO Roles by Tom Fox

Hence the War of the Spanish Succession and all may not be as it appears at first blush. This is because a GC often prefers to keep issues in-house and “not take on the responsibility of reporting to an enforcement agency.” Recognizing that such a decision is not made lightly or without thorough discussions, if the GC is also the CCO, “In difficult situations, a CCO’s perspective about a controversial transaction or event would obviously go unnoticed, if that person was also serving as the GC who happened to agree with executive management.” Hutchins concludes by noting, even the attorney who balances the two roles “will face the challenges of conflicts and the consequences of the silent compliance voice when defaulting to the professional responsibility obligations of the legal profession.”

12 Tips on How to Build a Comprehensive Anti-Corruption Compliance Program by William M. Sullivan, Jr. and G. Derek Andreson of Pillsbury

Legal Issues Surrounding Social Media Background Checks by Michelle Sherman in TOm Fox’s FCPA Complinace and Ethics Blog

Compliance Bits and Pieces for November 4

Here are some compliance-related stories that recently caught my attention:

How Trustworthy Are You? from the Trusted Advisor

A summary infographic on five questions from the Trust Quotient self-assessment

Investigation Nation: SEC Employees and Inspector General Play Cat-and-Mouse by Bruce Carton in Compliance Week’s Enforcement Action

A group called Citizens for Responsibility and Ethics in Washington (CREW) has asked the SEC Inspector General to launch an investigation into whether SEC employees are using private email accounts and cell phones to avoid having their communications reviewed in SEC Inspector General investigations.

To Err Is Human . . . and Punishable by the SEC by Russell G. Ryan in CFO

Even as the SEC pleads for more resources from Congress to keep up with existing responsibilities and the mind-boggling array of new regulatory burdens dumped upon it by last year’s Dodd-Frank financial reform act, the agency reportedly intends to expand its enforcement reach. The regulator will apparently pursue not only its signature cases against deliberate and reckless fraudsters, but also cases against people who make merely negligent mistakes. Apparently, as the SEC has progressed with its investigations relating to the financial meltdown, it has found many examples of negligence and bad judgment, but fewer instances of deliberate fraud than most people assume.

The Seven Deadly Sins for a Compliance Program by Tom Fox

1. Putting the Code of Conduct on your Shelf
2. Ignoring your Company’s Culture
3. Worshiping at the Altar of Highest Grade Point Average
4. Letting the Money Talk
5. The Parent Trap – Do as I say, not as I do
6. Ethics in the Corner
7. Shooting or Ignoring the Messenger

When Prediction Markets Go Bad in Saturday Morning Breakfast Cereal

For some R Rated Humor

Compliance Bits and Pieces for October 28

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

The Role of Compliance and Ethics in Risk Management by Bruce Carton in Compliance Week’s Enforcement Action

Carlo V. di Florio, director of the SEC’s office of compliance inspections and examinations, recently spoke at the National Society of Compliance Professionals’ National Meeting held in Baltimore, Maryland. di Florio focused his remarks on three main points:

Ethics is fundamental to the securities laws, and ethical culture objectives should be central to an effective regulatory compliance program;
Leading standards have recognized the centrality of ethics and have explicitly integrated ethics into the elements of effective compliance and enterprise risk management; and
Organizations are making meaningful changes to embraced this trend and implement leading practices to make their regulatory compliance and risk management programs more effective.

SEC Raises the Bar on Tone at the Top by John T. Dalton in SAI Global’s Viewpoint

A Reuters article last week revealed that the Securities and Exchange Commission (SEC) has begun taking a new tact when conducting its compliance examinations at brokerage firms. Of note, this new practice by the SEC will require more direct involvement by a company’s executives and members of senior management in the compliance exam process, including on-site meetings and interviews with examiners. According to the article, the SEC had previously relied upon chief compliance officers as its primary points of contact for examinations, but that by involving top management, the SEC now hopes “to get more respect for chief compliance officers.

Everything Old is New Again: Alcoa and Olympus by Tom Fox

In an article in the Wall Street Journal (WSJ), entitled “Kickback Probe at Alcoa Heats Up”, reporter Dionne Searcey takes a look at the arrest of two figures in the bribery investigation of Alcoa’s activities in Bahrain in connection with the government owned manufacturing company known as Alba. In an article in the New York Times, entitled “Acquisitions at Olympus Scrutinized,” reporter Hiroko Tabuchi reviews “a tale of deals and advisors, with puzzling results.” Both cases present novel twists and turns that, if you told someone the facts, you would be accused of making up both stories.

Stay Away From These 5 Investigation Interview Mistakes by Lindsay Walker in Corporate Compliance Insights

1. Not Prepping for the Interview
2. Failing to Ask the Question
3. Failing to Build Rapport
4. Failing to Stop Denials
5. Showing Judgment

Firms Must Protect Customer Information – Always by Mark Astarita in SEClaw.com

The SEC has provided another example of an unintentional violation [of Regulation S-P], and charged three former brokerage executives for failing to protect confidential information about their customers. According to the Commission, when GunnAllen Financial Inc. was winding down its business operations last year, its former president and former national sales manager violated customer privacy rules by improperly transferring customer records to another firm. The SEC also accused the firm’s compliance director with failing to enforce the supervisory procedures in an unrelated incident.

DOL issues final rule on 401(k) investment advice exemptions By Hazel Bradford in Pensions & Investments

The Department of Labor on Monday finalized a rule spelling out permissible scenarios for giving investment advice to 401(k) participants without running afoul of prohibited transaction rules. The rule, which will goes into effect in 60 days, allows for providing investment advice under one of two scenarios: through the use of a computer model certified as unbiased, or through an adviser paid a “level,” or flat, fee that does not change based on investment choices.

Thanks to LexisNexis for selecting Compliance Building as one of the Top 25 Business Blogs of 2011. You can also vote on which of the 25 should be The Top blog.

The Top 25:

Compliance Bits and Pieces for October 21

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

The Abacus Sign by Felix Salmon

It’s funny, on the sign — something true, and accurate, and touching, and grammatical, and far too long to be a slogan, and gloriously bereft of punctuation, and ending even more gloriously in a mildly archaic preposition. Friedersdorf has managed to encapsulate the essence and the impropriety of the Abacus deal in just 45 words, and it’s fantastic that Spitz and Curran — and Furnas and Jardin and everybody who shared this image — managed to give those words the global recognition they deserved.

Coming Soon: #Occupy [Name of Your Company Here] by Broc Romanek in The Corporate Counsel .net

As we all begin to plan for another wild proxy season, I wonder how many are planning for the potential of major disruptions at their annual shareholder meetings as Occupy Wall Street-type protests quickly spread to avenues that we never dreamed of. Are you planning for protests at your annual meeting? How about one of your board meetings? Your CEO’s house? Your CEO’s golf game? Or when your CEO lands in the corporate jet at the airport? Or any of these for one – or more – of your directors?

More Woes for Companies with Chinese Connections by Kevin LaCroix in The D&O Diary

In a settlement that involves a company with significant Chinese operations — and that also may represent something of a template for the settlement of FCPA enforcement follow-on civil lawsuits — SciClone Pharmaceuticals and the individual defendant directors and officers have agreed to settle the consolidated derivative lawsuits that were filed following the company’s announcement that it was the target of SEC and DoJ investigations for possible FCPA violations.

Seven common regulatory compliance requirement assumptions to avoid by Kevin Beaver in IT Compliance Advisor

Compliance means different things to different people. Indeed, regulatory compliance requirements are — and should be — handled differently based on the unique needs of the business. The ugly reality is that there are so many assumptions being made about compliance that it often skews the perception of what’s really going on.

Compliance Building is a nominee for the Lexis Nexis Corporate & Securities Law Top 25 Blogs. Lexis Nexis invites you to comment on the announcement post:

Top 25 Business Law Blogs 2010 – Corporate & Securities Law Community

Compliance Bits and Pieces for October 14

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

A Study of Individual Liability under the Foreign Corrupt Practices Act (.pdf 6 pages)By M. Scott Peeler of Chadbourne & Park LLP

In this Special Report, Scott Peeler reviews lessons and patterns from his review of government initiated civil and criminal FCPA cases filed against individuals since 2005.

The Importance of a Strong Insider-Trading Compliance Program by Bruce Carton in Securities Docket

The short answer to the question of whether public companies have exposure to liability for insider trading by employees is, in theory, yes. But as a practical matter, the reality is that the liability is extremely limited. All public companies are not subject to the same requirements that apply to regulated entities such as broker-dealers and investment advisers. Under Section 15(f) of the Securities Exchange Act of 1934 and Section 204A of the Investment Advisors Act, such regulated entities are specifically required to adopt, maintain, and enforce policies and procedures designed to prevent insider trading. Indeed, regulated entities can be subject to “control person” liability if they “knowingly or recklessly failed to establish, maintain, or enforce” the insider-trading policies or procedures required by these laws.

Short-Term Debt, Rollover Risk, and Financial Crises by Tanju Yorulmazer in Liberty Street Economics

Compliance Bits and Pieces for October 7

These are some compliance-related stories that recently caught my eye:

How Well Do Financial Markets Separate News from Noise? Evidence from an Internet Blooper by Carlos Carvalho, Nicholas Klagge, and Emanuel Moench in Liberty Street Economics

How efficiently do financial markets process news of unexpected events? This question becomes particularly salient now, as multiple events across the globe drive market movements. Do these gyrations reflect responses to fundamental news or to “noise”? In general, it is very difficult to discern how well markets process information, because there is no objective way for observers to separate fundamental news from noise components when markets react to a news report. In this post, however, we examine an unusual episode involving a false news report that provides a unique look into this question. We find that even when noise can be clearly identified, markets may take as long as a week to fully process the “signal,” or relevant information, component of news.

Subcommittee Advances 5 Bills to Promote Job Growth

Five bills that ease the regulatory burden on small businesses and emerging growth companies were approved by a Financial Services subcommittee yesterday. The proposals make it easier for entrepreneurs and small businesses to access capital so their companies can grow and create jobs.

Cozy relationships and ‘peer benchmarking’ send CEOs’ pay soaring by Peter Whoriskey in The Washington Post

This is how it’s done in corporate America. At Amgen and at the vast majority of large U.S. companies, boards aim to pay their executives at levels equal to or above the median for executives at similar companies.

The idea behind setting executive pay this way, known as “peer benchmarking,” is to keep talented bosses from leaving.

But the practice has long been controversial because, as critics have pointed out, if every company tries to keep up with or exceed the median pay for executives, executive compensation will spiral upward, regardless of performance. Few if any corporate boards consider their executive teams to be below average, so the result has become known as the “Lake Wobegon” effect.

Overview of the Latest Corruption by American Companies by Mike Koehler in Corruption Currents

On a weekly basis – or so it seems – media allegations surface of corruption by or related to American companies. This article highlights three such instances: Koch Industries, Motorola Solutions, and Chevron.