Back blogging on a regular basis for the week. Hoping to keep it up. These are some other compliance-related stories that recently caught my attention.
The Scammer Threat to Your Hotline
By Ted Banks
SCCE’s The Compliance & Ethics Blog
Several of the companies that originally received the fake report have now received a message from one Ofir Gefen, who purports to be a Ph.D. candidate at the National University of Singapore. The messages were, according to Gefen’s email, part of a study to test response times of public companies based on whether the hotline call related to conduct that might benefit the company (e.g., bribery) or the language in the report. Gefen said “Once the claim was made, we’ve only recorded your initial response and did not pursue the matter any further. Thereby interfering with your day-to-day business as little as possible.” He admitted that this study involved a deception, and that there were no real people involved. He tracked response times, and then said (to reassure the companies that received the message) that all identifiable information would be scrubbed, and then the data would be uploaded to Amazon Mechanical Turk (MTurk), which I had never heard of before.
https://complianceandethics.org/the-scammer-threat-to-your-hotline-updated/
Update on Jailed Compliance Officer
By Matt Kelly
Radical Compliance
We have an update on Samuel Bickett, the corporate compliance officer jailed in Hong Kong on trumped-up charges that he assaulted a police officer. He is currently appealing his 18-week prison sentence, and spending the rest of his time helping other inmates he met during an early stint in Hong Kong’s maximum-security prison.
Bickett, you might recall, was sentenced in July on charges that he assaulted a plainclothes police officer in December 2019 while walking through a Hong Kong subway station. One problem with that case, however: the police officer was beating a teen-aged boy participating in pro-democracy protests, and never identified himself as a police officer despite others repeatedly asking whether he was.
https://www.radicalcompliance.com/2021/09/14/update-on-jailed-compliance-officer/
The Economics of Crypto Funds
By Paul P. Momtaz
The CLS Blue Sky Blog
The most striking finding is that crypto funds underperform the market, no matter the benchmark (equally-, value-, and liquidity-weighted crypto market benchmarks). For example, relative to the equally-weighted market benchmark, crypto funds underperform by 21 percent per year. This means that investors are on average better off if they invest in either Bitcoin, Ether, or both.The result is striking because crypto funds underperform the market even before fees. Considering that most of the funds charge investors substantial fees (a performance fee of 20 percent on the profits and a management fee of 2 percent on the assets under management are typical), the underperformance is even more pronounced.
https://clsbluesky.law.columbia.edu/2021/09/15/the-economics-of-crypto-funds/
Del. Court Substantially Denies Boeing Duty of Oversight Claim Dismissal Motion
By Kevin LaCroix
The D&O Diary
Of particular interest is Vice Chancellor Zurn’s conclusion that the plaintiffs had sufficiently alleged scienter — that is, not only that the directors acted inconsistently with their fiduciary duties, but they also “knew of their shortcomings.” Zurn noted that in Marchand the Delaware Supreme Court inferred scienter from the numerous oversight shortcomings alleged; Zurn said that “those allegations support an inference of scienter [in this case] as well.” Zurn added further that no inference is needed in this case, in light of the board’s own words showing that “directors knew the Board should have had structures in place to receive and consider safety information.” Zurn quoted from emails sent after the Ethiopian Air crash, in which the need for Board reporting on safety issues; she also referred to numerous public statements in which the Board was “crowing” about “taking specific actions to monitor safety that it did not actually perform.” These statements “evidence that at the least [the company’s new CEO and board chair] knew what the Company should have been doing all along.”
https://www.dandodiary.com/2021/09/articles/shareholders-derivative-litigation/del-court-substantially-denies-boeing-duty-of-oversight-claim-dismissal-motion/
Must A Corporation Have A Physical Location?
By Keith Paul Bishop
California Corporate & Securities Law
When it comes to corporations, California rejects the possibility of a corporation without a “there”. All California corporations and foreign corporations registering to transact intrastate business in California must annually file a Statement of Information (Form SI-550). Item 3a of the Statement requires disclosure of the corporation’s “complete street address, city, state and zip code of the corporation’s principal executive office”. Lest there be any doubt, the Secretary of State’s instructions state that the address must be a “physical address” and prohibit a P.O. Box address or an “in care of” address.
https://www.calcorporatelaw.com/must-a-corporation-have-a-physical-location
Former employer of ‘Roaring Kitty,’ who pumped up GameStop, fined for lack of oversight.
by Matt Phillips
The New York Times
The insurer MassMutual will pay a $4 million fine to Massachusetts securities regulators as part of a settlement involving the conduct of Keith Gill, a former employee and online trader known as “Roaring Kitty” whose relentless cheerleading for shares of GameStop was at the heart of the meme stock mania earlier this year.
https://www.nytimes.com/2021/09/16/business/roaring-kitty-gamestop-massmutual-settlement.html
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