I’m back from vacation and have a big stack of compliance-related stories to read. These are some of them.
Why Haven’t Bankers Been Punished? Just Read These Insider SEC Emails by Jesse Eisinger in Pro Publica
James Kidney, a longtime SEC lawyer, was assigned to take the completed investigation and bring the case to trial. Right away, something seemed amiss. He thought that the staff had assembled enough evidence to support charging individuals. At the very least, he felt, the agency should continue to investigate more senior executives at Goldman and John Paulson & Co., the hedge fund run by John Paulson that made about a billion dollars from the Abacus deal. In his view, the SEC staff was more worried about the effect the case would have on Wall Street executives, a fear that deepened when he read an email from Reid Muoio, the head of the SEC’s team looking into complex mortgage securities. Muoio, who had worked at the agency for years, told colleagues that he had seen the “devasting [sic] impact our little ol’ civil actions reap on real people more often than I care to remember. It is the least favorite part of the job. Most of our civil defendants are good people who have done one bad thing.” This attitude agitated Kidney, and he felt that it held his agency back from pursuing the people who made the decisions that led to the financial collapse. [More…]
Yes, But WHY Are There So Many Fewer Publicly Traded Companies? by Kevin LaCroix in the D&O Diary
This often-overlooked observation is important, but it doesn’t address the more fundamental question of why there are so many fewer publicly traded companies than there once were. A recent academic paper documents the decline in the number of publicly traded companies and suggests several possible reasons for the decline. I have my own thoughts, as well. As discussed further below, these decline in the number of listed companies has important implications for the economy generally and for the D&O insurance marketplace in particular. [More…]
Private Offerings and Public Ends: Reconsidering the Regime for Classification of Investors Under the Securities Act of 1933 by Jonathan D. Glater in the CLS Blue Sky Blog
There are different ways to limit how much risk an investor takes on. One is to impose a fiduciary duty on a fund manager, for example, requiring that the level of risk be consistent with the goals of the future retiree. My article addresses another method: Restricting investment in securities more likely to be high-risk and, consequently, less certain to produce the return needed to achieve the goal of financially secure retirement. [More…]
Adviser official to pay $650K for soft-dollar manipulation, misuse by Amy Leisinger, J.D. in Jim Hamilton’s World of Securities Regulation
When the soft-dollar balance fell too low to pay the fake invoices, the court stated, the individuals churned the stocks in the funds’ brokerage accounts to generate more, increasing the trade commissions paid by the funds. When they knew the funds would need to close due to poor performance, they continued to trade in the accounts to eliminate the deficit in the soft-dollar balance that Archer would have had to pay when it closed the soft-dollar accounts. The excessive trading was inconsistent with the funds’ stated investment strategy, the court noted. [More…]
SEC warns of third party cybersecurity risks by Elizabeth Wu in PFM
Before using a third party vendor, firms should conduct significant amounts of due diligence on the vendor, warned Steven Levine, associate regional director, National Exam Program, Chicago Regional Office at the SEC at a compliance outreach event.
RT Jones is an example of the risks. The firm, a provider of investment advice for retirement plan participants, was a victim of a cyber-attack. The firm used a third-party hosted server containing client information for four years and failed to report it to the SEC, for which it was fined $75,000 in September 2015. [More…]
SEC’s Ceresney says more cybersecurity cases ‘coming down the pike’ by Bruce Carton in Compliance Week
The SEC has begun to bring cybersecurity-related enforcement actions under Regulation S-P of the Securities Act of 1933, and Enforcement Director Andrew Ceresney stated this week that more such cases are now “coming down the pike.” [More…]