Category: Compliance Bricks and Mortar

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

We chat with Harvey Pitt about CCO independence, prestige in The FCPA Blog

The FCPA Blog wanted to explore the idea of the dual-hatted compliance officer — the one who occupies both the general counsel and chief compliance officer roles in a company. We talked with the former SEC Chairman and now Kalorama Partners CEO, Harvey Pitt. The conversation turned into a thoughtful exchange about what it means to be an independent and effective CCO in any industry today. Executive editor Julie DiMauro asked the questions for the FCPA Blog.

Update: When will payroll employment exceed the pre-recession peak? in Calculated Risk

Right now it appears payrolls will exceed the pre-recession peak in mid-2014.

Currently there are about 1.5 million fewer payroll jobs than before the recession started, and at the recent pace of job growth it will take about 8 months to reach the previous peak.

Of course this doesn’t include population growth and new entrants into the workforce (the workforce has continued to grow).

“Demo Days” and General Solicitation by Joe Wallin in Startup Law Blog

I’ve been writing an article on general solicitation, a long one, and doing a lot of research. As part of that, I found the attached SEC No-Action letter that I wanted to share with everyone, because it directly hits on the question of whether “demo days” constitute general solicitation.

Just Who Is A Promoter And Why You May Want To Know by Keith Paul Bishop in California Corporate & Securities Law

The SEC’s adoption of its so-called “bad actor” rules makes knowing the meaning of “promoter” important for issuers relying on Rule 506 under the Securities Act.  Under these amendments, the disqualification provisions apply to a long list of covered persons.   Buried in this list is “any promoter connected with the issuer in any capacity at the time of such sale.”  The adopting release provides this additional color: …

The Texans Are 2-7: What is Missing from Your Compliance Program? by Tom Fox in FCPA Compliance and Ethics Blog

I thought about Reed and the Texans when I read a post from the noted site JDSupra entitled, “What’s the One Thing Missing From Your Corporate Compliance Program?” They put that question to various compliance attorneys writing on JD Supra, asking each to commit to just one essential element that, in their experience, they regularly see missing from corporate programs; IE., programs that are required to address myriad regulatory issues to do with privacy and data security, insider trading, bribery and corruption, and other such matters across numerous jurisdictions. I found the replies quite interesting and perhaps some insights which the Texans can use.

Classic KM quote by Jack Vinson in Knowledge Jolt with Jack

“He who receives ideas from me, receives instruction himself without lessening mine; as he who lights his taper at mine receives light without darkening me”
-Thomas Jefferson

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

Happy Birthday, Federal Sentencing Guidelines for Organizations by Jeff Kaplan in Conflicts of Interest Blog

Twenty-two years ago today the Federal Sentencing Guidelines for Organizations went into effect. Although only a set of rules (i.e., not an actual statute), these Guidelines have had a revolutionary effect on how many governments around the world seek to prevent/detect business crime and what businesses do – i.e., develop and implement C&E programs – to try to stay out of trouble.

Paradise By the Dashboard Light and Compliance Tune-Ups by Tom Fox

Meatloaf’s standard Paradise by the Dashboard Light, is the lead in for today’s blog post (the ‘automotive’ focus of the song and not the ‘paradise’ focus for the less prurient among you.) I still think that one of the most significant Foreign Corrupt Practices Act (FCPA) enforcement matters over the past couple of years was the Morgan Stanley Declination to Prosecute. In this Declination the Department of Justice (DOJ) listed a variety of factors which led to its decision not to prosecute the company for the FCPA violations of its Managing Director Garth Peterson. Although all of the factors were clearly important in the DOJ’s calculus, one which has stuck with me is the 35 separate compliance reminders that Peterson received over the seven years in question. That is five reminders a year. I do not think that such a number of reminders will induce compliance fatigue.

Colonel Solicitation by William Carleton

The article says that one must have 10 years of experience in the industry, or something like that, to be invited to participate in the forum. That sounds like a group of folks who might have pre-existing relationships with one another. The entrepreneur engaged in solicitation, for sure – cold calling, really, if the article recites the story accurately – but was this solicitation of a general, public nature?

Maybe he was engaged in solicitation of a lower rank or grade. We might call it “Colonel Solicitation.”

My kids and I are suffering from a candy hangover this morning after sweeping through the neighborhood trick-or-treating. I’ll try to regain my focus by reading some of these compliance-related stories that recently caught my attention.

Bold and Unrelenting Enforcement from the SEC: A Six Month Review by Terence Healy in The CLS Blue Sky Blog

Mary Jo White promised Congress she would pursue a “bold and unrelenting” enforcement program as Chairman of the Securities and Exchange Commission (“SEC”). In public remarks last week, White reiterated her desire for the Enforcement Division “to be everywhere” and to be “felt and feared” in areas beyond where its resources can reach. Now, six months into her tenure, it is time to take measure of what this new enforcement model may mean for public companies.

Red Sox Win the World Series: Character Does Matter – in Sports and Compliance by Tom Fox

The Red Sox certainly showed their character after last year’s miserable season. Seemingly disdaining the current analytical mania in professional baseball, the brought seasoned veterans, who no other teams ostensibly wanted, into the clubhouse and, much like the Phoenix, rose from last years’ ashes to claim the championship. So character does matter. It matters in baseball and I would posit it matters in business.

SEC to take ‘swipe’ at RIAs that have never been examined by Trevor Hunnicutt in Investment News

The Securities and Exchange Commission plans to make examining the estimated 4,000 advisers who have never been visited by regulators an enforcement priority next year, according to Andrew J. Bowden, director of the SEC’s Office of Compliance Inspections and Examinations. Speaking in Manhattan on Thursday, Mr. Bowden said the commission will zero in on about half of the firms that have never been examined, a group that includes those that have been registered for more than three years and are based in the United States.

Goldman, Feeling Robbed, Still Has to Pay for Accused’s Defense by Peter J. Henning in DealBook

A victim of a crime would never be expected to pay for the perpetrator’s lawyer to defend the case. But corporate law can be counterintuitive, and Goldman Sachs found itself on the wrong side of a court decision that found that the bank’s bylaws require it to advance the legal fees of a former employee who has been accused of stealing its computer code.

The image is the Kids Soap – Candy Bricks by ajsweetsoap available from Etsy.

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

White softens stance on minor securities violations by Mark Schoeff Jr. in Investment News

Securities and Exchange Commission Chairman Mary Jo White told compliance officers Tuesday that the agency will work with them to address regulatory lapses before resorting to enforcement.

“The balance is critical,” Ms. White told a meeting of the National Society of Compliance Professionals in Washington. “We’re not seeking for every minor violation to bring an enforcement action by any means. It’s not a game of gotcha at all.”

In Praise of Electronically Monitoring Employees by Andrew McAfee in Harvard Business Review

We got to observe what happened at 392 locations across five chains (all of them sit-down places like Applebee’s or Chili’s, although neither of these were part of the research) both before and after they started using Restaurant Guard, a new piece of theft-detection software from NCR. NCR supplied us with the data but did not support the research in any other way. The data covered almost two years and 39 of the 50 states.

Is There a Glass Ceiling in Corporate Crime? in Freakonomics

Our podcast “Women Are Not Men” looked at a variety of gender gaps, including the fact that the vast majority of violent crime is committed by men. A new paper by Darrell J. Steffensmeier, Jennifer Schwartz, and Michael Roche in the American Sociological Review finds that women are less likely to be involved in corporate crime as well.

The Tuck Rule, the Push Rule and Retaliation Against Whistleblowers by Tom Fox

In thinking about that play and the Patriots loss to the Jets, I considered the following: is it now the beginning of the end of the Patriots dynasty which started on an equally obscure rule and penalty, aka “The Tuck Rule”? In the play during a 2001 playoff game, Raiders’ cornerback Charles Woodson sacked Patriots’ quarterback Tom Brady, which in turn, caused a fumble that was eventually recovered by Raiders’ linebacker Greg Biekert, and would have almost certainly sealed the game. Officials reviewed the play and eventually determined that Brady’s arm was moving forward, when it was actually moving backwards, thus making it an incomplete pass. Got it?

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

Wrapping Up My Five-Year Experiment by Kathleen Edmond

Of course, this blog is near and dear to my heart and is among the loose-ends I want to tie up before I go. Over the past five years, I have covered dozens of issues on every relevant topic I could get my hands on. It has been a gratifying experience and I intend to relaunch KathleenEdmond.com at some point in the future. However, I will do so from an independent perspective, not as a representative of Best Buy Co., Inc.

In the Crosshairs by Erik Kolb in PERE

With the private funds industry now effectively supervised, US regulators look to be setting their sights on separate accounts. Is their concern really warranted?

The government shutdown in SEC filings in Footnoted

It’s now been two weeks since the government shutdown began. While the number of companies mentioning the crisis in Washington in their routine filings to the SEC can’t quite be described as a thundering roar, we did count about 15 companies that have had something to say about the mess in Washington DC in their filings over the past two weeks.

Social media hot topic at SCCE conference by Aarti Maharaj in Corporate Secretary

One of the hotly debated topics at this year’s annual Society of Corporate Compliance and Ethics (SCCE) Conference was the role social media should play in supporting the compliance and ethics officer. It is now six months since the SEC officially deemed social media a suitable outlet for companies to disseminate material information to investors. But in this new post Dodd-Frank era, compliance officers and corporate governance professionals are still skeptical about the legal obligations and risks associated with using this relatively new medium.

Ethics, Compliance and School Drop-Off Etiquette by Tom Fox

When one parent begins to feel that his or her time is more “Valuable” than another’s that is where the problems begin. Hmmm… let’s see if we can paint this dilemma in a business context. Perhaps there is an industry or global standard designed to ensure workplace safety, clean production of milk powder or even provide a level playing field for conducting global business and winning sales contracts. Once one parent or Company feels that they are above the rest, we start down a slippery slope.

“The definition of insanity is continuing to do the same thing over and over, and then expecting different results.”

The US Congress continues to show it’s inability to operate as it has been unable to pass a bill that will fund the operations of the federal government. A big chunk of Congressmen want overturn the Affordable Care Act. The House of Representatives has passed forty bills that repeal the law. Forty times it has passed in the House and Forty times it has died in the Senate. Now they have tried again and harnessed the repeal of the law to the funding bills. Insanity.

Enough ranting. Here are some the compliance-related stories that recently caught my attention.

If One Bad Actor Spoils The Whole Barrel, What’s An Issuer To Do? by Keith Paul Bishop in California Corporate & Securities Law

The Jackson Five had it wrong. Under the SEC’s recently adopted Rule 506(d), one bad actor can indeed spoil the whole bunch. To some extent issuers can exercise some control over who becomes or remains a covered persons. However, an issuer may not be able to rid itself of all bad actors.

TD Bank To Pay $52.5 Million In Fines To Regulators Over Role In Rothstein Ponzi Scheme by Jordan D. Maglich in Ponzitracker

TD Bank was the primary banking institution used by Rothstein while he sold over $1 billion in purportedly-discounted pre-lawsuit settlements to investors for several years until October 2009. Potential investors were told that the settlements had already been deposited into a separate trust account in their name at TD Bank, and were provided so-called “lock letters” signed by Spinosa indicating that distribution of the funds was restricted only to the investor named in the lock letter. Spinosa also participated in at least one conference call with potential investors in which he supplied scripted answers to a series of Rothstein’s questions. In total, Rothstein raised approximately $1.4 billion from investors.

Crowdfunding v. Rule 506(c) Offerings by Joe Wallin in Startup Law Blog

Rule 506(c) offerings are not crowdfunding offerings under the JOBS Act.  Crowdfunding is embodied in Title III of the JOBS Act. The repeal of the ban on general solicitation in all accredited investor Rule 506 offerings appears in Title II of the JOBS Act.  So, the SEC’s repeal of the ban on general solicitation is not what is referred to as crowdfunding under the JOBS Act.

Toward a New SEC Enforcement Doctrine by Thomas O. Gorman in SEC Actions

New SEC Chair Mary Jo White has launched a new get tough policy. She modified the much discussed and often criticized “neither admit nor deny” settlement policy of the agency. Now she has outlined a new policy centered on a series of basic principles which will govern SEC enforcement. While many of those principles are familiar, the key will be how they implemented to achieve the Commission’s statutory mission and goals.

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

An entrepreneur who, come September 23, will not be tweeting for investors by William Carleton

And not for concern that SEC proposed rules would impose pre-filing, information filing and other requirements. No, he was looking only at that “price” 506(c), the actual final rule that becomes effective next week, exacts: verification of the accredited status of all purchasers.

“From my point of view,” he told me, “the wealthier a person or family is, the less likely they’re going to give you any kind of information about their finances.”

The Red Baron and Leading in Compliance by Tom Fox

I thought about those fanciful flights of Snoopy vs. The Red Baron when I considered the compliance implications found in this past weekend’s Corner Office Section of the New York Times (NYT), where Adam Bryant interviewed Bob Moritz, chairman and senior partner of PricewaterhouseCoopers LLP (PwC), in an article entitled “Want to Learn about Diversity? Become a Foreigner”. In this article Bryant detailed several leadership lessons that Moritz had experienced over the years which I thought had quite a bit of application to the compliance practitioner.

10 Common Questions Regarding General Solicitation by Joe Wallin in the Startup Law Blog

On September 23, 2013, startups are going to be able to generally solicit their securities offerings under Rule 506(c) of Regulation D.

There are a couple of catches.

This Picture Is Worth 471 Words (More or Less) by Keith Paul Bishop in California Corporate & Securities Law

Monday is the big day for the SEC’s “Bad Actor” and “General Solicitation” rule amendments.   I’ve previously observed that many are likely to find the Bad Actor amendments to be bad rules when it comes to compliance.  Today’s blog is devoted to just one interpretational problem with the Bad Actor amendments.

Don’t get too excited about JPMorgan’s admissions to the SEC by Alison Frankel in Bloomberg

But if you look closely at what JPMorgan actually admitted, you’ll see that the SEC settlement won’t be of much use to shareholders in the class action. Don’t misunderstand me: JPMorgan is extremely unlikely to escape from the private shareholder case without paying a lot of money. That’s not because of the SEC settlement, however. As I’ll explain, the bank’s lawyers did a very good job of tailoring JPMorgan’s admissions to the SEC to minimize their impact in the class action. In fact, I suspect that future SEC defendants are going to look at the JPMorgan settlement as a model for how to quench regulators’ thirst for blood without spilling a drop in parallel shareholder litigation.

Twitter announces its IPO in a tweet by Robert C. White Jr. in Securities Edge

In its IPO filing process Twitter took advantage of one of the key available provisions of the JOBS Act. Section 6(e) of the Securities Act allows an “emerging growth company” to file an IPO registration statement on a confidential basis. This provision is designed to give the company and the SEC time to identify and work through potential problem areas or issues before investors see any information. It also allows companies to keep material nonpublic information confidential until late in the SEC review process. If the company decides not to proceed with its IPO, it has avoided the public disclosure of this information. If the company and the SEC can work out these problems and issues satisfactorily, the registration statement (amended as necessary) eventually becomes available to the public and the IPO process goes forward. This should make the registration process very quick and efficient after it emerges from the initial SEC review.

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

Embattled J.P. Morgan Bulks Up Oversight by Monica Langley and Dan Fitzpatrick in the Wall Street Journal

J.P. Morgan Chase & Co., facing a host of regulatory and legal woes, plans to spend an additional $4 billion and commit 5,000 extra employees this year to clean up its risk and compliance problems, according to people close to the bank.

As part of a companywide effort, the bank is spending an additional $1.5 billion on managing risk and complying with regulations, including a 30% increase in risk-control staffing, these people said. In addition, it expects to add $2.5 billion to its litigation reserves in the second half of the year, these people said.

The 506(c) Seed Financing Blues by William Carleton

I know I can’t just take from any Joe
Investment in my fledgling startup co.

But come the 23rd this month, I hear,
It’s dope to advertise with brazen cheer

My need for funds. The only legal catch:
My purchasers must be accreds. (Well, natch.)

FCPA Compliance and Ethics Report: The weekly report on all things compliance related by Tom Fox

The FCPA Compliance and Ethics Report, Episode 3 Videoblog

SEC Names Paul Levenson as Director of Boston Regional Office

Mr. Levenson joins the SEC from the U.S. Attorney’s Office for the District of Massachusetts, where he is an Assistant U.S. Attorney and Chief of the Economic Crimes Unit that is responsible for investigations and prosecutions of financial crimes. Mr. Levenson has successfully coordinated many criminal investigations with the SEC’s Division of Enforcement during his tenure in the U.S. Attorney’s Office. He will begin working at the SEC in late October.

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