These are some recent compliance-related stories that caught my eye:
What ‘Inside Job’ got wrong by Ezra Klein in the Washington Post
And ultimately, that’s what makes the financial crisis so scary. The complexity of the system far exceeded the capacity of the participants, experts and watchdogs. Even after the crisis happened, it was devilishly hard to understand what was going on. Some people managed to connect the right dots, in the right ways and at the right times, but not so many, and not through such reproducible methods, that it’s clear how we can make their success the norm. But it is clear that our key systems are going to continue growing more complex, and we’re not getting any smarter, or any less able to ignore risks that we know we should be preparing for. “Inside Job” may have missed that story, but the rest of us can’t afford to.
Flawed Incentives and Dubious Morals: JPMorgan & CDOs That Were “Built to Fail” by Matthew Philips in Freakonomics
See, the bankers at JPMorgan who sold these CDOs got paid regardless of how the things performed, whether every one of the thousands of mortgages stuffed into them paid off, or whether they all defaulted. So the incentive for the bankers was to sell as many CDOs as possible, even if they knew they were going to blow up in a year or two. It wasn’t their problem because it wasn’t their money. This raises an obvious moral question: were bankers morally remiss in pumping these mortgage bombs out into the world when they knew the wreckage they would cause? Or were they simply being good at their job?
Private Equity: compliance risk for portfolio company bribery? in The Bribery Act .com
Richard Alderman, Director of the SFO, has confirmed that in the SFO’s view Private Equity could have liability for the conduct of its investment portfolio businesses under the Bribery Act. … Speaking to an audience of Private Equity professionals Richard Alderman said that he assumed that those in the Private Equity industry have “a level of knowledge and due diligence that is very high because of the nature of what you do. You are, therefore, very well informed investors with a high degree of knowledge of what happens in the companies you invest in. In any dealings we have with you on cases we are likely to start from that assumption.”
What Does The SEC FCPA Unit Chief Do? in the FCPA Professor
Given Cheryl Scarboro’s recently announced departure from the FCPA Unit Chief position (see here for the prior post), the SEC recently posted (here) the opening for the position. The “Major Duties” portion of the job posting is actually an interesting and informative read. Want proof that the SEC executes “targeted sweeps and sector-wide investigations.” It is in the job description.