These are some of the compliance-related stories that recently caught my attention.
The Effectiveness of SEC Enforcement in Deterring Financial Misconduct by Shiu-Yik Au
This paper examines how the Securities and Exchange Commission’s (SEC) enforcement actions and whom they target deter future financial misconduct. An enforcement action reduces the incidence of misconduct in other firms in the same industry and metropolitan statistical area (MSA) in the future. Furthermore, an enforcement that punishes a guilty company has a larger deterrence effect on future misconduct than punishing an officer, auditor, attorney, or other entity. In addition, the results are robust to using alternative measures of financial misconduct such as restatements and Fscore. These results have several policy implications on how regulatory agencies can maximize the value of their enforcements. [More…]
Simple Ethics Lesson of Tom Price by Matt Kelly in Radical Compliance
More than anything else, Price’s misconduct is an object lesson in where compliance policies come from. Someone does something stupid, everyone else recognizes it as stupid, and the ensuing clamor results in a new control. The control applies to everyone, makes the organization less efficient, and leaves employees grumbling. [More…]
Annual Reviews and Compliance’s Role: Annual Reviews of Policies and Procedures by Bailey Naples
One option, if you have the support, is to set up a policy review committee. If you are fortunate enough to have a Compliance Committee already established you can tie this right into your normal routine. The committee can divide up the policies between members to review and then they’ll report back to the committee at the next meeting. Forming a committee divides the work-load and holds all members to the deadline of review keeping the process moving along. [More…]
The lay of the law and private funds risk by Rebecca Akrofie in PFM
There’s no doubt private fund managers are becoming increasingly exposed to legal action, with portfolio company-related litigation being the most common. So far this year, big names like Benchmark Capital, Sycamore Partners and Apollo Asset Management have all become involved in lawsuits related in some way to the assets they own.
Marco Pierettori, general counsel at InvestIndustrial, a Europe-focused private equity firm, and Timothy Mungovan, a partner at Proskauer, an international law firm, share their thoughts on this trend, and the other legal headwinds fund managers should be aware of.
Concern: Fund liability for portfolio company problems …
Concern: Conflicts in co-investments …
Concern: Unicorn valuation mis-steps ….
Concern: Cybersecurity …
From Saturday Morning Breakfast Cereal: