Category: Compliance Bricks and Mortar

Here are some interesting articles from the past week:

When Investors Say Bad Things on Pay by Matt Kelly in Compliance Week‘s The Big Picture

Shareholders had their say on pay at two U.S. corporations last week—and for the first time ever in this country, the answer was “no.” Motorola held its annual meeting on May 3, where only 45 percent of shareholders cast votes in favor of its executive compensation plan; 44 percent voted against it, and 10 percent abstained. Occidental Petroleum then held its meeting last Friday. The company won’t disclosed precise results until later this week, but confirmed in a press release that its shareholders also gave management’s compensation plans the thumbs-down.

Creating a Dynamic Investment Management Regulatory Scheme by Andrew J. Donohue, Director of the Division of Investment Management at the Securities and Exchange Commission in Harvard Law School Forum on Corporate Governance and Financial Regulation

This year, not only is Congress considering comprehensive legislation that could impact even the most fundamental aspects of how our financial markets are governed, but we also saw last week the Supreme Court deliver a landmark decision concerning the regulation of investment companies. You just don’t see that every day (I guess thankfully, although in this case, it was gratifying to see the Court affirm a long-held approach regarding fund Boards’ review of advisory fees).

What Business is Wall Street In? by Mark Cuban in Business Insider

The best analogy for traders? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, traders do the same thing. A hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. A high frequency trader wants to jump in front of your trade and then sell that stock to you. A hacker will tell you that they are serving a purpose by identifying the weak links in your system. A trader will tell you they deserve the pennies they are making on the trade because they provide liquidity to the market.

The Hard Timers from The FCPA Blog

Compliance officers will want to keep a copy of the table below close at hand. What better way to answer those who insist that the FCPA is small potatoes, after all, when you look at the relatively few enforcement actions over the past 33 years. Each name on this list represents a terrible tragedy, often with permanent damage extending to families. Here are the 22 men (no women so far), most of them former company executives, who’ve spent time in prison for FCPA-related convictions.

A Glimpse Into SEC Enforcement, by Way of Goldman by Bruce Carton in Securities Docket

In a time of ongoing heightened scrutiny for the Securities and Exchange Commission, many current and former leaders of the SEC’s Division of Enforcement met recently for an extraordinary panel discussion at the National Press Club in Washington, D.C. The panel consisted of SEC legend (and former Enforcement Division director and federal judge) Stanley Sporkin; his son, Thomas Sporkin, who now leads the SEC’s new Office of Market Intelligence (OMI); George Curtis, a former Enforcement deputy director; and John Stark, former chief of the SEC’s Office of Internet Enforcement. That legal firepower was arguably matched by the audience, which included current SEC Associate Enforcement Director Scott Friestad, former Enforcement boss Linda Chatman Thomsen, and several dozen other leading SEC practitioners and followers.

Here are some recent compliance related stories that I found interesting:

Why Executive Pay Is So High by Neil Weinberg in Forbes.com

So [Gary] Wilson can say, with more than a little credibility, that the boards supposedly overseeing management are instead packed with lackeys with appalling frequency. It’s a familiar complaint but one that he believes is responsible for out-of-control pay, the short-term greed that helped spawn the recent financial meltdown and a staggering waste of resources. Wilson’s solution: Abolish the joint role of chief executive and chairman and install independent bosses to oversee boards.

The Executive Session by Fred Wilson in A VC

Every board meeting should end with an executive session. The term executive session is an oxymoron because it is a meeting of all the board members other than the executives of the company.The first time most CEOs hear of this idea, they hate it. The words “we want to meet without you” strike fear in the hearts of most CEOs. And understandably so.

What is the Cost of FCPA Compliance? Or what is the cost of non-compliance? by Tom Fox

How do you measure the cost of FCPA compliance? Put another way, can your company afford not to be FCPA compliant? What will the costs be if there are allegations of bribery and corruption in your company? Will the investigative costs exceed $100 million as they may well do in Avon’s case? Will your fine, penalty and any profit disgorgement exceed $550 million as happened with Halliburton or simply be in the $330-$340 million range as with its former Joint Venture partners?

Google Move Steps Up Interest in Web Disclosure By Melissa Klein Aguilar in Compliance Week

Last month, the search engine giant published a press release touting its first-quarter 2010 results—without actually detailing what the results were. Instead, it directed anybody curious to visit Google’s investors relations Website and announced that it intends to make all future announcements about financial performance exclusively through news posted there.

That’s a departure from prevalent practice in Corporate America, which is to publish the full text of earnings information in a press release. It also puts Google in the vanguard of companies taking advantage of guidance the Securities and Exchange Commission published nearly two years ago to encourage companies to use disclosure via Website more often.

How The Hell Did GM Pay Back Its Loans “in Full And Ahead of Schedule”? Well, It Didn’t.

I was on vacation last week and apparently missed lots of big news. A volcano kept me from going to Europe, but nothing stopped the SEC from bringing a case against Goldman Sachs. Here are some recent compliance related stories that I found interesting.

The SEC and the Rogue Inspector General by J Robert Brown Jr. in Race to the Bottom

We were dismayed at the leaks that revealed confidential discussions taking place at a closed Commission meeting about the Goldman case. We are equally dismayed at the recent announcement by the SEC’s Inspector General that he intends to look into allegations that the Goldman case was deliberately timed to coincide with financial reform efforts.

Trust Quotes #10: David Gebler by Charles Green in Trust Matters

CHG: What’s the difference between ethics and compliance? And does anyone care about the former?

DG: Compliance is the adherence to prescribed standards of behavior. Compliance training educates people on what behavior is expected of them.

Ethics is the determination of whether people will engage in the desired behavior and what should be done to encourage people to do things they know they should do, but often don’t.

The SEC, The Goldman Case and Critics by Tom Gorman in SEC Actions

Sometimes the SEC is an aggressive market regulator and at other times it appears to be the gang that can not shoot straight. In filing the Goldman case, discussed here, it not only brought the most significant enforcement action in years, but also responded to critics who claim the agency can not take on the Wall Street giants, but only the little guys.

SEC versus Goldman Sachs in Ten Seconds into the Future

It is going to be hard for the SEC to establish that GS defrauded investors by its failure to disclose Paulson’s role and intentions in ABACUS. Why? Paulson wanted to make a bet. A bet is not a sure thing. If Paulson or GS could affect the outcome of the bet then that is another matter.

NYPD to Bicycles: We Got You Now by Scott Greenfield in Simple Justice

In related news, the NYPD determined that the possibility that a pipe bomb could be placed in a bicycle gave rise to the theft of hundreds along Houston Street in Manhattan, in anticipation of President Obama’s trip to Cooper Union last week in honor of Earth Day.

Hedge Fund Industry Will Be Under Close Scrutiny by SEC Division of Enforcement by Frederic D. Firestone and Miachael A. Unger of McDermott, Will & Emery

The hedge fund industry is a top programmatic priority of the U.S. Securities and Exchange Commission (SEC) Division of Enforcement. The Division is currently allocating unprecedented resources to hedge fund issues and investigations. This focus will intensify if hedge fund legislation is passed.

Bourke Appeals Ruling in Most Complex, Convoluted Case in FCPA History by Mike Koehler in Corporate Compliance Insights

An FCPA trial like Bourke’s is rare. An FCPA appeal is even more rare. An FCPA appeal to the influential Second Circuit is even more rare. …This post summarizes the FCPA related issues in Bourke’s brief.

Synthetic CDs, Explained in NPR’s Planet Money

On today’s All Things Considered: A Glossary of Financial Terms, Adam Davidson explains the difference between a mortgage-backed security, a CDO, and a synthetic CDO. Also, why shorts aren’t bad, and what a tranche is.

Here are some interesting compliance stories from the past week:

Chief Compliance Officers, SEC-style by Matt Kelly in Compliance Week‘s The Big Picture

Griffin is the SEC’s first-ever chief compliance officer, and her arrival is long overdue. It stems from news that broke last May of an insider-trading scandal within the SEC, which is pretty scandalous considering these are the folks who enforce laws against insider trading at public companies. The SEC’s inspector general published a report painting an ugly picture of SEC compliance efforts, which boiled down to this: “The Commission lacks any true compliance system to monitor employees’ securities transactions.” The report suggested that perhaps the SEC should, you know, have one, and put a single executive in charge of it.

SEC’s new adviser exam schedule: ‘We simply show up’ by Jed Horowitz in Investment News

The SEC has indefinitely dropped its goal of inspecting some 11,000 registered investment advisers on a regular schedule, and is instead focusing its examination resources on advisers who are the subject of tips and complaints, an official said. “We simply show up, because if there are allegations of wrongdoing we don’t want to give firms a good deal of lead time to clean up,” Gene Gohlke, associate director of the SEC’s Office of Compliance, Inspections and Examination said at a Practising Law Institute investment management conference on Friday.

Electronic Systems Policy After ‘Stengart’ by Kristin Sostowski in the New Jersey Law Journal

The Stengart decision obviously has serious implications both for companies that seek to limit and monitor employees’ use of company computers and for attorneys who discover arguably privileged communications between an employee and the employee’s lawyer on a company’s computer systems. In the wake of the Stengart decision, New Jersey employers should re-examine their current electronic systems policies and e-discovery practices in collaboration with employment counsel, keeping in mind the following best practices….

XBRL U.S. Shows Common Errors, Checks Consistency by Melissa Klein Aguilar in Compliance Week‘s The Filing Cabinet

Information that might be of interest for those public companies preparing to comply with the Securities and Exchange Commission’s XRBL mandate for the first time: A new white paper detailing some of the most common errors companies make related to XBRL U.S. GAAP Taxonomy rules.

Here are some recent compliance related stories that I found interesting:

Bribe Fighter: The strange but true tale of a phony currency, shame, and a grass-roots movement that could go global By Jeremy Kahn in the Boston Globe

What good is a currency that is not even worth the paper it’s printed on? That’s the intriguing question raised by the new “zero rupee note” now circulating in southern India. It looks just like the country’s 50 rupee bill but with some crucial differences: It is printed on just one side on plain paper, it bears a big fat “0” denomination, and it isn’t legal tender.

OIG Issues Recs to Overhaul SEC Bounty Program by Melissa Klein Aguilar in Compliance Week’s The Filing Cabinet

The Securities and Exchange Commission’s bounty program for rewarding whistleblowers is sorely in need of an overhaul, according to the agency’s Inspector General, which issued nine recommendations for improving the program.

Staffer One Day, Opponent the Next by Tom McGinty in the Wall Street Journal

The revolving door can turn swiftly at the Securities and Exchange Commission. … Others argue that employees of every government agency leave for the private sector and that the rules in place guard against conflicts of interest. An SEC spokesman said the disclosures required of former employees constitute an extra precaution by the agency to ensure that the law and ethics considerations are followed.

My Commentary Part 2: Ernst & Young’s Letter To Audit Committee Members by Francine McKenna in re: The Auditors

Unfortunately for Ernst & Young, even before the release of the Lehman report, too many things had already gone wrong. Their credibility is, pretty much, shot to hell. Their only hope may be that both civil and criminal proceedings take so damn long that they’ll instead die a slow and painful death by litigation and suffocating legal fees than by the swift sword of an Arthur Andersen-type criminal indictment by the US Department of Justice.

Facebook Tells Employees Not to Sell Shares by Mark J. Astarita, Esq in SEClaw.com

Facebook has an interesting problem – it is in danger of having too many shareholders, an outcome that is being made possible by online trading sites like Sharespot.com, which allows shareholders in private companies to sell their shares to others. … Facebook is concerned that the expansion of its number of shareholders to 500 will force it to go public before management decides that it is time to do so, and has enacted a policy to attempt to forestall that event.

Nanny Sam To The Rescue: Stop the Startups! by Bob Rice in the Huffington Post

One of George Bush’s most memorable lines was his complaint that the French had no word for “entrepreneur”. Well, if Senator Dodd’s new financial reform bill becomes law, we may well have the word, but no longer any need for it. Dodd’s changes would disqualify about 75% of the individuals who currently fund our country’s early-stage ventures from making further investments. It would also impose brand new SEC filing requirements and long waiting periods on fledgling businesses before they can accept what is often desperately needed capital. If the idea is to strangle American innovation in its crib, the bill is a masterstroke.

SEC faces setbacks, skepticism in trying to reform its enforcement image by Zachary A. Goldfarb in the Washington Post

A year-long effort by the Securities and Exchange Commission to overhaul its enforcement of laws against corporate crime has run into courtroom setbacks and internal skepticism, underlining how difficult it is for the agency to remake itself as a get-tough cop.

Here are some recent stories that caught my eye:

Q&A with Ethisphere Executive Director Alex Brigham in Corporate Compliance Insights

The Ethisphere Institute recently announced the 2010 World’s Most Ethical Companies, highlighting 100 organizations that lead the way in promoting ethical business standards. These companies go beyond legal minimums, introduce innovative ideas benefiting the public and force their competitors to follow suit.

My Commentary Part 1: Ernst & Young’s Letter To Audit Committee Members from Francine McKenna in re: The Auditors

This is my commentary on the letter that Ernst & Young recently sent to Audit Committee members defending themselves against the findings in the Lehman Bankruptcy Examiner’s report. The Bankruptcy Examiner, Anton Valukas, found “colorable claims” against EY.

Q4 Whitepaper: The Current State of Social Media & Investor Relations

In a continuing effort to share how public companies are using social networks, Darrell Heaps, Co-Founder and CEO took a large audience of IR professionals on a guided tour of “The Current State of Social Media & Investor Relations”. Participants were provided with over 50 examples and case studies of how companies are using Twitter, Facebook, LinkedIn and IR blogs to mitigate share value, dramatically increase web site traffic and broaden their reach to potential investors.

WISPs Beyond Massachusetts by Joseph Lazzarotti in the Workplace Privacy, Data Management & Security Report

Over the past few months, many businesses, particularly in the Northeast Region, have been focusing on creating a written information security program (WISP) to comply with Massachusetts identity theft regulations that went into effect March 1, 2010. For many, this has been a significant effort, reaching most, if not all, parts of their organizations. However, it is important to remember that although Massachusetts may be the state with the most comprehensive set of rules for securing personal data, other states have enacted similar protections, and compliance with Massachusetts does NOT necessarily mean compliance with other states.

Broken Windows Fix Our Understanding by Don Boudreaux in Cafe Hayek

Do disasters help the economy? No, along with a video explanation: Disastrous Economic Fallacies – Terror as Stimulus?

Here are some interesting stories from the past week:

The Difference Between Wrong and Illegal by Charles H. Green

Do you know the difference between a wrong action and an illegal action? If you don’t, you are not alone. But neither are you to be trusted.

Ghostblogging will be the death of social media in the law by Kevin O’Keefe in Real Lawyers Have Blogs

We’re just scratching the surface of what social media can do for lawyers and law firms. But rather than learn how to harness this powerful relationship building tool, one with its roots in traditional client development, I’m finding some lawyers and law firms would rather pay to have someone else participate in social media for them.

Advisors Allowed to Get Social by Mark Astarita in onWall Street

As social media sites have become more popular with the general public, advisors have been drawn to them. But firms have generally banned their use because of advertising restrictions, and the lack of clear guidance from the regulators as to their use. That partially changed in January, with FINRA’s release of Regulatory Notice 10-06-Guidance on Blogs and Social Networking Web Sites. The notice dealt with five main areas.

Cahill taps firms tied to state pension investor By Aaron Lester, Michele Richinick, and Walter V. Robinson in the Boston Globe

Cahill, in an interview, expressed no qualms about receiving campaign contributions from companies that have or want business from the [Massachusetts] treasurer’s office and the five agencies he oversees, including the pension board. In fact, he acknowledged that he and his campaign aides routinely seek contributions from such companies.

Judge Uncorks True Feelings About Compliance Monitors by Matt Kelley in Compliance Week

Most events in federal court are terribly dull, the carefully scripted culmination of legal briefs fired back and forth among various parties for years. But once in a great while, a judge goes a little nuts—as happened last week with the new hero of compliance officers everywhere, District Court Judge Ellen Segal Huvelle.

Here are some compliance related stories from the past week:

Securities Docket Radio: Available Free on iTunes

Securities Docket Radio is now available as a free download on iTunes! To listen to or download the debut program featuring Bruce Carton’s interview with Sanjay Wadhwa, Deputy Chief of the SEC’s new Market Abuse Unit, please click on the iTunes link below.

Schapiro Details How The SEC Would Spend 2011 Budget by Melissa Klein Aguilar in Compliance Week’s The Filing Cabinet

SEC Chairman Mary Schapiro took to the Hill this week to provide lawmakers with details on how the agency would use the President’s budget request of $1.258 billion for fiscal 2011. If enacted, the 12 percent increase over the agency’s FY 2010 funding level would allow the SEC to hire an additional 374 professionals, bringing its total staff to just over 4,200.

Dear Moody’s Corp: Type this fast 3 times by Dominic Jones in IR Web Report

Moody’s Corporation (NYSE:MCO) is one company that is in the process of sending such a notice to its registered shareholders … Now remember that people are getting this on paper and they have to manually key in that long URL –http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=26180

Compliance Book of the Month: Money for Nothing by Matt Kelly in Compliance Week

The book Money for Nothing can be summed up in one sentence: The boards running corporations in America today are ineffective. But while that sentence may be accurate, it is not news to corporate compliance and governance officers, so those of you looking for a more substantive analysis or solutions to the governance problems you face might want to read elsewhere.

No, We Don’t Need to Suspend the FCPA In Haiti or Any Other Country! by the FCPA Professor

A topic in the blogosphere this week has been whether the FCPA needs to be suspended so that more U.S. companies will invest in Haiti. The spark igniting this discussion was an opinion piece on Monday by Wall Street Journal editorial board member Mary Anastasia O’Grady titled “Democrats and Haiti Telecom” (see here).

Turning Down The Information Firehose–ABA Article in Law Practice by David Hobbie in Caselines

Much of my work focuses on how attorneys can do a better job handling information….Research for the article was itself an interesting experiment in personal knowledge management. The most valuable resources were probably KM Lawyer Mary Abraham’s post “Managing the Firehose“, “PKM Professional” Harold Jarche’s posts on Sense-Making with Personal Knowledge Management, Patty Anklam on PKM as the “Third KM,” and the collection of resources compiled by a number of people on delicious at http://delicious.com/popular/pkm.