Compliance Bits and Pieces for September 30

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

“Is there anything connected with this accelerator that involves the security of the country?” by Chris Yeh in Adventures in Capitalism

“It has only to do with the respect with which we regard one another, the dignity of man, our love of culture. It has to do with: Are we good painters, good sculptors, great poets? I mean all the things we really venerate in our country and are patriotic about. It has nothing to do directly with defending our country except to make it worth defending.” – physicist Robert Rathburn Wilson

California and Bust by Michael Lewis in Vanity Fair

The smart money says the U.S. economy will splinter, with some states thriving, some states not, and all eyes are on California as the nightmare scenario. After a hair-raising visit with former governor Arnold Schwarzenegger, who explains why the Golden State has cratered, Michael Lewis goes where the buck literally stops—the local level, where the likes of San Jose mayor Chuck Reed and Vallejo fire chief Paige Meyer are trying to avert even worse catastrophes and rethink what it means to be a society.

At SEC, Strategy Changes Course by Jean Eaglesham in the Wall Street Journal

In a major shift from the agency’s traditional enforcement strategy, the SEC could file more civil cases in which defendants are accused of negligence only, rather than harder-to-prove charges of intentional wrongdoing or recklessness, according to SEC officials.

Compliance Bits and Pieces for September 23

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

Forgotten Bookmarks: Investment in Reading Pays Off by Michael Popek in Forbes

I come across a lot of interesting items left behind in books, but I’d say that most of them don’t interest Forbes readers all that much. I hope this find will pique your interest:

Watch out: Blogger uses web to uncover suspected corruption in thebriberyact.com

This week the Daily Telegraph reported that a Chinese blogger has been running through the picture archives of Chinese State officials on the web and clocking the watches they wear.

The result.

The blogger reports that Chinese officials earning c.£10k a year appear to be sporting collections of watches valued at tens of thousands of pounds, including gold rolexes, cartiers and the like.

Inside Straight: Avoiding E-Mail Stupidity By Mark Herrmann in Above the Law

There’s one guy in your outfit who understands the need not to write stupid e-mails: That’s the guy who just spent all day in deposition being tortured with the stupid e-mails that he wrote three years ago.

That guy will control himself. He’ll write fewer and more carefully phrased e-mails for the next couple of weeks. Then he’ll go back to writing stupid stuff again, just like everyone else.

Compliance Bits and Pieces for September 16

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


How do You Evaluate a Risk Assessment? by Tom Fox

What is the amount of risk that your company is willing to accept? Before you even get to this question how does your company assess risk and subsequently evaluate that risk?

CEO pushes Reg FD limits on Twitter by Dominic Jones in IR Web Report

I applaud Meckler’s use of Twitter to communicate with investors. In an era where institutional investors spend billions annually to glean important information through private access to company executives, Twitter and other new media channels democratize access for all and can help to rebuild public confidence in company executives and the capital markets.

SEC Charges Former Consulting Executive and Friend with Insider Trading Ahead of Biotech Takeovers

The SEC alleges that Scott Allen learned confidential information in advance of the acquisitions of Millennium Pharmaceuticals Inc. and Sepracor Inc. through his work at a global consulting firm that was advising the acquiring Japanese companies as they made cash tender offers. Allen allegedly tipped his longtime friend John Michael Bennett, an independent filmmaker who had previously worked at a Wall Street investment bank, as each acquisition took shape. On the basis of the nonpublic information, Bennett purchased thousands of dollars in call options in the companies and also tipped his business partner at the independent film company they co-own. The insider trading by Bennett and his tippee generated more than $2.6 million in illicit profits. Allen received cash from Bennett in exchange for the tips.

Compliance Bits and Pieces for September 9

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

JP Morgan explains the euro crisis with LEGO/a> by Feliz Salmon

The woman with an oversized carrot and her friend in overalls with a shovel represent the Social Democrats and Greens.

Anti-Corruption Research Paper Competition Open for Submissions

We are asking young scholars from around the world to take up the challenge of providing innovative new ways to understand and fight corruption and are offering the possibility to showcase these approaches to a global audience of corruption researchers, practitioners and policy makers.

Veto, Veto, Pass! New Governor Means New Breach Notification Law in California by Brendon Tavelli in Proskauer’s Privacy Law Blog

On Wednesday, August 31, 2011, California became the third state this year to amend its existing security breach notification law when Governor Jerry Brown signed into law Senate Bill 24 (“SB 24”). Interestingly, the bill also marks the third time (in three years) that a bill attempting to beef up the state’s breach notice law has landed on the Governor’s desk. Former Governor Arnold Schwarzenegger vetoed the previous two.

NLRB Administrative Law Judge: Facebook Firings Illegal by Daniel Schwartz in the Connecticut Employment Law Blog

Now, for the first time, an administrative law judge (in Hispanics United of Buffalo) has found that employees’ comments about their working conditions on Facebook could be protected under federal labor laws.

Compliance Bits and Pieces – UK Edition

The first case under the new Bribery Act in the United Kingdom has come down, so I’m devoting this roundup of posts to that story.

BREAKING: First Bribery Act charges brought in record time in BriberyAct.com

The Press Association is reporting that a court official in London is the first person charged under Section 2 of the Bribery Act following an expose by the Sun Newspaper.

The case is of interest because it is a domestic bribery case and the charges have been brought, not by the SFO, but by the UK Crown Prosecution Service.

First Case Brought Under UK Bribery Act Looks Nothing Like You Expected by Bruce Carton in Enforcement Action

The first-ever action under the UK Bribery Act has now been filed–but it probably doesn’t look anything like what you expected.

Court employee faces first prosecution under Bribery Act in the Blog of the Crown Prosecution Service.

We have decided that Munir Yakub Patel should be prosecuted under the Bribery Act 2010 in relation to allegations of misconduct during his employment at Redbridge Magistrates’ Court, Ilford, London. He is the first person to be prosecuted under the new Act.

Patel, an administrative clerk, faces a charge under Section 2 of the Act for requesting and receiving a bribe intending to improperly perform his functions.

Court clerk becomes first person charged under Bribery Act by Owen Bowcott in The Guardian

The first person to be charged under the new Bribery Act will be a magistrates court clerk who allegedly accepted £500 for fixing a motoring offence, according to the Crown Prosecution Service (CPS).

Compliance Bits and Pieces for August 26

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

Does the SEC’s Revolving Door Raise Conflicts of Interest? by Bruce Carton in Securities Docket

Every year about four percent of the employees working at the Securities and Exchange Commission decide for various reasons to voluntarily leave the agency and seek greener pastures. Having spent years gaining experience and connections at the nation’s top financial regulator, these lawyers, accountants, economists, and others are often in high demand when they return to the private sector.

O’Donohoe on Potato Chips and Salty Snacks on EconTalk

Should the United States be making computer chips or potato chips? In a 1992 presidential debate, then-candidate Ross Perot stated “you make more making computer chips than potato chips.”  Russ Robert takes a long look at the potato chip manufacturing and distribution process. Well worth an hour of your time

Survey Finds Compliance Chiefs Doing Little Compliance-Related Work by Samuel Rubenfeld in WSJ.com’s Corruption Currents

A survey of corporate compliance professionals in the financial services industry found that 41% of them spend less than half of their time on compliance-related issues. Conducted by National Regulatory Services, the survey found that chief compliance officers spend the least amount of time on compliance-related tasks out of all compliance professionals. Overall, 59% of a chief’s day is spent on such tasks, a slight decline since 2008. Only 25% of them spend more than 90% of their day on compliance issues, a five-point drop since 2008.

Compliance Bits and Pieces for August 19

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

ABA Journal Seeks ‘Blawg 100′ Nominees

The editors of the ABA Journal are gearing up to select their annual list of the 100 best legal blogs, the Blawg 100. And they are seeking suggestions of blogs they should include. “Tell us about a blawg—not your own—that you read regularly and think other lawyers should know about,” they ask.

To nominate a law blog you think should be included, go to the Blawg 100 Amici page and submit it to the editors.

Breach Notification Obligations In All 50 States? by Kristen J. Mathews in Proskauer’s Privacy Law Blog

Did you know there are breach notification obligations in all 50 states (effective 9/2012), even though only 46 states have adopted them? How could that be, you ask? Because Texas said so. (Does that surprise you?)

Texas recently amended its breach notification law so that its consumer notification obligations apply not only to residents of Texas, but to any individual whose sensitive personal information was, or is reasonably believed to have been, acquired by an unauthorized person. Texas’s amended law (H.B. 300) specifically requires notification of data breaches to residents of states that have not enacted their own law requiring such notification (that is, Alabama, Kentucky, New Mexico and South Dakota).

Fair Valuation of Assets under Management Is Key Element of SEC Regime for Hedge Fund and Private Fund Advisers in Jim Hamilton’s World of Securities Regulation

Acting on a Dodd-Frank mandate, the SEC adopted regulations requiring that hedge fund and private fund advisers with $150 million assets under management register with the Commission. Given the $150 million asserts under management trigger for registration, the fair valuation of a fund’s assets is a critical element of the new regime. The SEC said in Adopting Release No. IA-3222 that hedge fund and private fund advisers must determine the amount of their assets under management based on the market value of those assets, or the fair value of those assets where market value is unavailable. They must calculate the assets on a gross basis, that is, without deducting liabilities, such as accrued fees and expenses or the amount of any borrowing. If a fund does not have an internal capability for valuing illiquid assets, the SEC expects it to obtain pricing or valuation services from an outside administrator or other service provider.

Former FrontPoint Manager Pleads Guilty to Insider Trading by Azam Ahmed in Dealbook

The portfolio manager, Joseph F. Skowron, known as Chip, admitted before a federal judge in Manhattan that he had avoided $30 million in losses by trading on tips leaked by a consultant for an expert network about the results of a clinical drug trial. He also admitted that he and the consultant, Dr. Yves Benhamou, had agreed to mislead the Securities and Exchange Commission about their actions. Mr. Skowron faces as much as five years in prison for the one count of conspiracy to commit securities fraud and obstruct justice and will pay a $5 million fine.

Is the SEC Covering Up Wall Street Crimes? by Matt Taibbi in Rolling Stone

Flynn discovered a directive on the enforcement division’s internal website ordering staff to destroy “any records obtained in connection” with closed MUIs. The directive appeared to violate federal law, which gives responsibility for maintaining and destroying all records to the National Archives and Records Administration. Over a decade earlier, in fact, the SEC had struck a deal with NARA stipulating that investigative records were to be maintained for 25 years – and that if any files were to be destroyed after that, the shredding was to be done by NARA, not the SEC.

But Flynn soon learned that the records for thousands of preliminary investigations no longer existed. In his letter to Congress, Flynn estimates that the practice of destroying MUIs had begun as early as 1993, and has resulted in at least 9,000 case files being destroyed.

Matt Taibbi Thinks It’s “Orwellian” For the Government Not To Keep Records On You Just Because You Haven’t Done Anything Wrong by Matt Levine in Dealbreaker

Matt Taibbi may actually be right that it breaks the law – he has, on occasion, been right about facts in the world, though it’s often a coincidence. Here he suggests that some SEC staffers were worried about personal criminal liability for not archiving records of preliminary inquiries, which sounds a little far-fetched but possible. And there are some more interesting accusations here – including some suggestive coincidences where SEC enforcement execs squashed investigations and then left for the firms that were being investigated. But we were always under the impression that the trouble with Big Brother was too much all-pervading surveillance, not too little.

Compliance Bits and Pieces for August 12

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

United Breaks Guitars: Lesson Learned for Companies and Whistleblowers by Tom Fox

The authors break their analysis down into two components, which I believe relate to the compliance context. The first is to understand what would drive an employee to go outside the internal reporting process? It is usually due to what the employee feels is a sense of betrayal. That is the employee has made a compliant in good faith but either nothing happens or nothing seems to happen. After the internal compliant has been initiated it must be triaged based on its severity. Just as a battlefield or hospital triage, the more serious a complaint, the quicker it should be investigated and resolved.

FSA seeks views on new regulatory guide: Financial Crime: a guide for firms

The Financial Services Authority recently published “CP11/12: Financial crime: a guide for firms“ seeking views on the FSA proposal for a new regulatory guide, Financial Crime: a guide for firms including bribery and corruption.

Dilbert.com

Compliance Bits and Pieces for August 5

Is it August already? The summer is flying by (as usual). There are still some interesting compliance-related stories floating by on the interwebz.

Don’t know if you’re carrying on business in the UK, or not? What do you do? in The Bribery Act .com

The key to its long arm jurisdiction rests in its application to any organisation which can be said to carry on part of a business in the UK. The Bribery Act does not elaborate on what carrying on business equates to and it remains one of our most frequently asked questions.

Revolving Door at S.E.C. Is Hurdle to Crisis Cleanup in Dealbook

A senior lawyer for the Securities and Exchange Commission recently took center stage in a major case involving a controversial mortgage security sold by Goldman Sachs. There was just one slight twist in the legal proceedings. The S.E.C. lawyer was not the prosecutor taking the deposition. He was the witness.

In response:
I Think I’ve Said This Before in The Epicurean Dealmaker

But I also say: What about it? Where would you propose we find adequately qualified people to staff the regulatory bodies of our fair if somewhat befuddled commonwealth?

Compliance Bits and Pieces for July 29

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

Backyard Hens: A Trend Coming Home to Roost? by James McWilliams in Freakonomics

These anecdotes remind us that, when it comes to the safety of chicken eggs, what matters is not so much the setting in which the birds are raised (factory or backyard), but rather quality control and managerial acumen. To thus boldly assert that the eggs of backyard hens are safer–something I hear all the time– is to place faith ahead of evidence. Again, we might very well, based on personal experience, have the grounds to claim that the backyard hen is a safe hen. But, by this measure, anyone who regularly eats factory eggs and avoids sickness can say the same thing about factory eggs. Bottom line is that we just don’t know.

Bribery, Legal Clarity, and Lame Excuses by Chris MacDonald in The Business Ethics Blog

Bribery is quite probably among the very oldest of unethical business practices, right up there with short-changing your customers and adulterating your products. Many modern economies have recognized that bribery has no place in a fair and efficient market, and have rightly taken action to prohibit what is widely acknowledged to be a pernicious practice. But not everyone is consistently appreciative of legislative efforts at curbing bribery. Take the U.S. Chamber of Commerce, for example. To see why the Chamber isn’t altogether happy about the U.S. government’s anti-bribery efforts, see this story from the Washington Post’s David S. Hilzenrath: “Quandary for U.S. companies: Whom to bribe?”

SEC Charges Liquor Giant Diageo with FCPA Violations

The SEC found that London-based Diageo plc paid more than $2.7 million through its subsidiaries to obtain lucrative sales and tax benefits relating to its Johnnie Walker and Windsor Scotch whiskeys, among other brands. Diageo agreed to pay more than $16 million to settle the SEC’s charges. The company also agreed to cease and desist from further violations of the FCPA’s books and records and internal controls provisions.

Image is backyard chicken by Steven Johnson /
CC BY 2.0