These are some of the compliance-related stories I’ve been reading while digging out of the snow this week.
Can the S.E.C. Force Repayment of Ill-Gotten Gains?
by Peter Henning
DealBook
The issue before the Supreme Court will be whether a District Court can order a defendant to repay money obtained by fraud or trading on confidential information, or whether it is a penalty beyond the “equitable” power of the courts to require. The S.E.C. is sure to argue that a defendant who engages in fraud or insider trading should not be allowed to keep the profits, much as a thief has no claim to the money that is stolen.
https://www.nytimes.com/2019/11/29/business/dealbook/sec-fraud-disgorgement.html
A Common-Sense Approach to Corporate Purpose, ESG and Sustainability
by Frank B. Glassner
Harvard Law School Forum on Corporate Governance and Financial Regulation
The [Business Roundtable] lists stakeholders in the order of “customers” first, followed by “employees,” “suppliers,” “communities” and finally “shareholders.” This sequence does not alter the longstanding presumption that shareholders occupy the position of first among equals. As equity owners and providers of capital, shareholders have always required a high and continuous level of attention from companies. Voting power gives shareholders a direct voice in corporate governance; their investment decisions determine a company’s stock price and cost of capital. Accordingly, shareholders remain the primary audience for a company’s sustainability story. It is also important to remember that a company’s creditors, specifically investors in its fixed income securities, rank with shareholders at the top of the stakeholder list.
https://corpgov.law.harvard.edu/2019/12/01/a-common-sense-approach-to-corporate-purpose-esg-and-sustainability-2/
Compliance Under Fire: Two More Tales
by Matt Kelly
Radical Compliance
Neither of these stories is good. They, along with other tales of retaliation against CCOs I’ve collected over the years, are a reminder that corporate compliance must be important after all — because when you do the job well, you can piss people off. Let’s stand by those compliance folks who do the right thing. Attention must be paid.
http://www.radicalcompliance.com/2019/11/27/compliance-under-fire-two-more-tales/
Does ethics training actually affect business conduct?
by Jeff Kaplan
Conflict of Interest Blog
In “Can Ethics be Taught? Evidence from Securities Exams and Investment Adviser Misconduct,” forthcoming in the Journal of Financial Economics, Zachary T Kowaleski of University of Notre Dame, Andrew Sutherland of the Massachusetts Institute of Technology, and Felix Vetter of the London School of Economics “study the consequences of a 2010 change in the investment adviser qualification exam that reallocated coverage from the rules and ethics section to the technical material section. Comparing advisers with the same employer in the same location and year, we find those passing the exam with more rules and ethics coverage are one-fourth less likely to commit misconduct. The exam change appears to affect advisers’ perception of acceptable conduct, and not just their awareness of specific rules or selection into the qualification.
http://conflictofinterestblog.com/2019/11/does-ethics-training-actually-affect-business-conduct.html
Why complying with Reg BI can’t wait for the last minute
by Jeff Benjamin
InvestmentNews
The good news is, the Securities and Exchange Commission’s upcoming Regulation Best Interest is not expected to dramatically change most daily business activities for financial advisers and registered representatives.
The good news is, the Securities and Exchange Commission’s upcoming Regulation Best Interest is not expected to dramatically change most daily business activities for financial advisers and registered representatives. The bad news is, advisers and broker-dealer reps will still need to prepare for Reg BI, and that preparation might be expensive and time-consuming.
https://www.investmentnews.com/article/20191204/FREE/191209976/why-complying-with-reg-bi-cant-wait-for-the-last-minute
