Category: Compliance Bricks and Mortar

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

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An Insider-Trading Ruling that Delights Prosecutors – And One Manhattan Judge by Roger Parloff in The New Yorker

Last week, prosecutors rejoiced when the U.S. Supreme Court decided an insider-trading case called Salman v. United States, and in doing so clarified that leaking confidential information so that friends and relatives can make money in the stock market is a crime, even when the leaker doesn’t get an economic benefit. Perhaps the person most pleased with the decision, however, was not a prosecutor but a certain white-haired Manhattan judge with a neatly trimmed, white beard. [More…]

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US v. Newman – Not Quite Dead Yet by Gregory Morvillo in NYU Law’s Compliance & Enforcement

Last week the Supreme Court handed down a unanimous opinion in United States v. Salman.  It was a highly anticipated opinion by those of us who follow the evolution of insider trading law … and yes I recognize that following insider trading law is, at the least, a little bit geeky.  Nevertheless, many observers eagerly awaited the Supreme Court’s ruling.  As it turned out, the ruling was kind of a dud. [More…]

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Trump’s businesses could trip insider-trading law by Isaac Arnsdorf in Politico

When Trump told the New York Times “the president can’t have a conflict of interest,” he was probably referring to the Ethics in Government Act, which exempts the president, vice president, members of Congress and judges, according to Brett Kappel, an attorney at the law firm Ackerman who specializes in politics and ethics. But the text of the STOCK Act explicitly includes the president. [More…]

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This Weird United Airlines Case Just Happened by Matt Kelly in Radical Compliance

I speak of the SEC’s recent sanction against United Airlines, where the agency applied the spirit of the Foreign Corrupt Practices Act to a bribe United gave to a domestic government official here in the United States. That violation of United’s internal policies against bribery then became a books-and-records violation of the Securities Act, and presto: a $2.4 million fine against United on Dec. 2. [More…]

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

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Luis Aguilar recalls harrowing times at SEC by Jeff Benjamin in Investment News

Mr. Aguilar, who served as an SEC commissioner from July 2008 through December 2015, recalls his first year as being “the most active period with internal restructuring and changes in the regulatory environment. And this was all before Dodd-Frank.” On dealing with such high-profile regulatory fumbles as Bernie Madoff’s infamous Ponzi scheme, Mr. Aguilar said there was plenty of confusion and fear. [More..]

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Finra Fines Credit Suisse Unit Over Money-Laundering Failures by Samuel Rubenfeld in the Wall Street Journal

Credit Suisse expected its registered representatives to flag suspicious transactions for the anti-money laundering compliance department, which was then required to investigate the activity, Finra said. But the firm’s systems and procedures were not designed to detect transactions in order to cause the filing of a suspicious-activity report with the U.S. Treasury Department, Finra alleged. [More…]

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The Domestic Corrupt Practices Act Arrives According to the SEC by Steve Quinlivan in Dodd-Frank.com

The Securities and Exchange Commission announced that the parent company of United Airlines has agreed to pay $2.4 million to settle charges for providing a public official with more convenient flight options. The parent company did not admit or deny the SEC’s findings …
Wow. So the books and records provisions can be interpreted like it’s the Domestic Corrupt Practices Act. I wonder if it will become in vogue to self-report these sorts of issues and spawn another web of FCPA, Inc. like practices to advise on these matters.[More…]

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How Will the SEC Reach Quorum With Only Two Commissioners? by Broc Romanek in TheCorporateCounsel.net

No worries. Back in the 90s, President Clinton was slow to nominate new members to federal agencies and the SEC dropped down to a level of two Commissioners for a spell – Chair Levitt & Commissioner Wallman. In order to get business done, the SEC amended its rules to accommodate the Commission when it drops to such a low level. “The Rule of 2” – adopted in 1995 – is still on the books: [More…]

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

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Trump Risk Factors Begin to Appear in SEC Documents by Steve Quinlivan in Dodd-Frank.com

Risk factors related to uncertainties resulting from possible policies that may be implemented by President-elect Trump have begun to appear in SEC filings:

TPI Composites, Inc. Form 10-Q:

The results of the 2016 United States presidential and congressional elections may create regulatory uncertainty for the wind energy sector and may materially harm our business, financial condition and results of operations.

[More…]

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Dodd-Frank critic Paul Atkins in frame for top SEC post by Kara Scannell in Financial Times

The Securities and Exchange Commission may come to resemble its pre-crisis self under Donald Trump, if the legacy, testimony and votes of the man advising the president-elect on financial regulation are any guide to the policies investors and Wall Street can expect. Paul Atkins is a vocal critic of the Dodd Frank post-crisis regulations, believes in fewer rules for private investment funds and small businesses and opposes corporate penalties because, he says, they are ultimately paid by shareholders.  [More…]

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Donald Trump and the Indiana Carrier factory, explained by Matthew Yglesias in Vox

Americans still don’t know exactly what Trump and Pence offered or threatened. And the larger implications of the move are hotly disputed. Is this a first step toward Trump governing as a true champion of production workers? An alarming slide into crony capitalism? Or something worse? Most likely it’s something much more boring — a relatively minor piece of presidential public relations in which an important politician uses his Twitter feed to highlight a relatively small development that nonetheless reflects well on him. [More…]

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Evaluating the U.S. Performance Against Money Laundering by Samuel Rubenfeld in WSJ’s Risk and Compliance Journal

Ashsish Kumar is a policy analyst for the Financial Action Task Force, an international standard-setting body that provides the roadmap for countries on anti-money laundering and counter-terrorist financing. The body on Thursday released its latest evaluation report on the U.S., and Mr. Kumar discussed its findings. The conversation was lightly edited for clarity. [More…]

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An Efficient Investment-Risk Model of Compliance by Robert Bird and Stephen Park in the CLS Blue Sky Blog

The EIR model provides an analytical framework for addressing the effectiveness of different approaches to business regulation. It equips regulators with a dynamic understanding of how compliance functions respond to different kinds of regulatory mandates. We categorize regulatory rules as three basic archetypes of regulation. Direct Regulation consists of traditional command-and-control rules promulgated and enforced by government agencies through sanctions and penalties. Collaborative Regulation consists of hybrid public-private approaches to regulation that use non-coercive measures and often incorporate private standards. Market Contingent Regulation seeks to influence firm behavior by providing incentives or signals to regulated firms, such as market-leveraging taxes, fees, and permits and mandatory disclosure requirements. [More…]

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

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Four Companies to Watch for ‘Trump Risk’ by Matt Kelly in Radical Compliance

Last week two companies became the first public filers to cite the incoming Trump Administration as a risk worth disclosing in the Risk Factors section of their quarterly reports. We haven’t seen any more since then, although we will in the future.

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Which companies are most worth watching for what they say about the Trump Administration? I have five picks, in alphabetical order. [See the picks…]

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Why FCPA Compliance Makes America Great by Tom Fox in the FCPA Compliance Report

I began this week by considering the practical and legal reasons that I do not think the incoming Attorney General will lessen FCPA enforcement and President-Elect Trump would overturn the law by executive fiat. Since that time I have spoken about the compliance discipline in an attempt to demonstrate that good compliance is really good business and for that reason alone, the compliance profession is not going away under the incoming administration. Today, I want to return to the FCPA to demonstrate the effectiveness of the law in assisting American business interests outside the United States and making America great when companies are in compliance with the law. I also want to show how FCPA compliance puts forward a much wider variety of US interests to make America great again and again. [More…]

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JP Morgan Pays $264 Million to Resolve ‘Sons & Daughter Program’ FCPA Offenses by Richard L. Cassin in the FCPA Blog

JPMorgan Chase and a Hong Kong subsidiary agreed Thursday to pay $264.4 million to the DOJ, SEC, and Federal Reserve to resolve FCPA offenses for awarding prestigious jobs to relatives and friends of Chinese government officials to win banking deals. [More…]

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House Republicans ask White not to pass any ‘midnight rulemaking’ by Jacquelyn Lumb in Jim Hamilton’s World of Securities Regulation

In opening remarks at the House Financial Services Committee hearing to consider the SEC’s 2018 budget request, Chair Jeb Hensarling (R-Tex) strongly urged Chair Mary Jo White to resist the temptation to finalize any regulations, including Dodd-Frank Act Title VII regulations, in deference to the right of the incoming administration to set its own priorities. He said whenever there is a transfer of power from one administration to another, federal agencies are often tempted to rush pending rulemaking to implement policies of the outgoing administration. This type of “midnight rulemaking” is neither conducive to sound policy nor consistent with principles of democratic accountability, he warned. [More…]

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Financial Choice Act: One Provision Could Destroy the SEC’s Rulemaking Abilities by Broc Romanek in TheCorporateCounsel.net

The “Financial Choice Act” is much more than merely repealing big chunks of Dodd-Frank. There are a handful of provisions that would render the SEC’s ability to conduct rulemaking much more difficult. But this provision in particular – infamous “Section 631” – just blows me away:

SEC. 631. CONGRESSIONAL REVIEW. If the agency classified a rule as “major,” according to specified criteria, the rule would require a joint resolution of Congress to go into effect, unless the President finds that an emergency requires that it be effective (for 90 days). Congress would also have the right to disapprove certain non-major rules.

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LL.M.s in Corporate Compliance by Emily Cataneo in the LLM Guide

Law programs focusing on corporate compliance are growing in popularity following the financial regulatory reforms of the past decade. [More…]

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The Interstate of Things: Saying Goodbye to the Mass Pike Tollbooths by Sadalit Van Buren in A Matter of Degree

On October 28, the Massachusetts Turnpike switched to an all-electronic tolling method, and immediately thereafter, began to tear out the tollbooths that had been the gateways and choke points of the Pike since its construction in the 1950s and 1960s. Unobtrusive gantries over the highway now do all the data collection for the toll-taking. It’s been very strange to drive freely through spots that have been obstructed since I was born, and I’ve been reflecting on the change. [More…]

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We have passed the Autumnal equinox and are heading into the dark nights of winter. Maybe some of these of compliance-related stories will keep you awake during the longer nights.

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Why Don’t General Counsels Stop Corporate Crime? by Sureyya Burcu Avci and H. Nejat Seyhun in the HLS Forum on Corporate Governance and Financial Regulation

Evidence shows that in spite of these reforms enacted in SOX and explicit provisions and responsibilities given to corporate attorneys, most of the whistle-blowing in case of corporate fraud comes from employees (17%), non-financial market regulators (13%), and media (13%). [3] Clearly absent from this list are top in-house corporate counsels (GCs). In this paper, we investigate the potential reasons for the failure of corporate counsels to report and prevent corporate crime. [More…]

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Ex-official at SEC says whistleblowers do crucial work by Gretchen Morgenson

McKessy said that whistleblowers under the SEC’s program had prospered because the SEC guaranteed anonymity to those who come forward. “The SEC’s devotion to maintaining the confidentiality of whistleblowers is the biggest factor in the program’s success,” he said. [More…]

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SEC delivering on promise to scrutinize private equity firms by Todd Ehret, Regulatory Intelligence in Reuters

Assets under management by PE managers grew to $700 billion in 2000 thanks to the technology and dot-com boom. They have now swelled to more than $4.2 trillion according to the 2016 Preqin Private Equity Report. This tremendous growth in assets now dwarfs total hedge fund assets of approximately $2.8 trillion.

This industry largely went unregulated until the passage of the Dodd-Frank Act in 2010 which required PE and hedge fund managers to register by 2012. Two recently settled enforcement actions involving prominent PE firms added to the growing list of PE managers tripped up by the U.S. Securities and Exchange Commission’s (SEC) probe into PE firms. This, along with a handful of other expensive SEC settlements, and prominent public warnings by regulators to the industry are noteworthy and prompted our review below. We also highlight the top areas of concern and offer some suggestions. [More…]

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Andrew Weissmann On The FCPA – It Is “Very Easy For The People At The DOJ And SEC To Basically Impose A Tax For Doing Business” In Certain Countries by the FCPA Professor

FCPA Professor was the first to highlight the seeming irony when vocal FCPA enforcement critic and reform advocate Andrew Weissmann was selected to head the DOJ’s fraud section in January 2015 and how Weissmann should have stayed true to his former self when unveiling the DOJ’s “FCPA Pilot Program” in April 2016.

Weissmann’s prior positions on the FCPA are nicely captured in a 2010 panel event in which he speaks at great length regarding various aspects of the FCPA. [More…]

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

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Wells Fargo CEO Defends Bank Culture, Lays Blame With Bad Employees by Emily Glazer and Christina Rexrode in the Wall Street Journal

He later said through a spokeswoman that when the bank falls short “I feel accountable and our leadership team feels accountable—and we want all our stakeholders to know that.”

Rather, Mr. Stumpf said that some employees didn’t honor the bank’s culture. “I wish it would be zero, but if they’re not going to do the thing that we ask them to do—put customers first, honor our vision and values—I don’t want them here,” he said. “I really don’t.” [More…]

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Worst Bar Exam Results Ever? Only ONE Person From This Law School Passed The Bar Exam by Staci Zaretsky in Above the Law

Indiana Tech School of Law threw open its doors in 2013, amid cries that Indiana had no need for another law schoolduring a time when jobs for law school graduates were few and far between. The administration had hoped to enroll 100 students, but only 30 students signed up to attend, and just 27 enrolled. After three years of hard work, by the time Indiana Tech’s inaugural class was set to graduate this past May, 20 students earned a degree from the state’s fifth law school. [More…]

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Was This “Whiz Kid” An Investment Adviser? by Keith Paul Bishop in California Corporate & Securities Law

Earlier this week, the Securities and Exchange Commission announced that a self-styled “stock trading whiz kid” and his Los Angeles, California company have agreed to pay $1.5 million to settle a complaintfor violations of Rule 10b-5.  There is an odd disconnect between the SEC’s press release and its complaint.  The press release is headlined “stock newsletter fraud” and repeatedly refers to the defendant’s “newsletter company”.  In fact, the SEC never uses the word “newsletter” in the complaint.  Rather, the SEC alleges that the defendant and his company defrauded subscribers and potential subscribers to an on-line “chat room”, and two stock picking “alert services”. [More…]

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Social and Behavioral Sciences Team 2016 Annual Report from the Executive Office of the President (the Nudge Report)

On September 15, 2015, President Obama issued Executive Order 13707, “Using Behavioral Science Insights to Better Serve the American People.” The Order directs Federal Government agencies to apply behavioral science insights—research insights about how people make decisions and act on them—to the design of their policies and programs. The Order also charges the Social and Behavioral Sciences Team (SBST), a cross-agency group of applied behavioral scientists, program officials, and policymakers, with providing policy guidance and advice to Federal agencies in pursuit of this directive

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The Free-Time Paradox in America by Derek Thompson in The Atlantic

Here is the conundrum: Writers and economists from half a century ago and longer anticipated that the future would buy more leisure time for wealthy workers in America. Instead, it just bought them more work. Meanwhile, overall leisure has increased, but it’s the less-skilled poor who are soaking up all the free time, even though they would have the most to gain from working. Why? [More…]

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

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Whistle-Blowing Insiders: ‘Game Changer’ for the S.E.C. by Peter Henning in DealB%k

Since the program’s creation in 2011, the S.E.C. has received more than 14,000 tips, including almost 4,000 last year. That number falls well short of the original estimate of 30,000 submissions each year, but quality is far more important than quantity. Not surprisingly, agency officials heap praise on the program. Mary Jo White, the S.E.C. chairwoman, called it “a game changer for the agency,” while the director of the enforcement division, Andrew J. Ceresney, said that whistle-blowers “had a transformative impact.” [More…]

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Tribute to Star Trek and Anti-Corruption Programs by Tom Fox in FCPA Compliance & Ethics

The Original Series, now termed Star Trek – The Original Series (TOS), largely worked because of the interplay of the show’s three main characters, Captain Kirk, Mr. Spock and Dr. McCoy as representations of the Greek terms ethos, pathos and logos.

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All of this dovetails into compliance as well. The three basic tenets of a best practices compliance program are to prevent, detect and remedy. [More…]

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Is this the first shot in the SEC’s war against social media? by Joshua Horn in Securities Compliance Sentinel

The SEC can also use this information on an ongoing basis to assess what firms are putting out there on social media. The industry has to assume that the SEC will be doing more with this information than just tucking it away for examination purposes.Core Values

This new rule should incentivize you to review your social media policy, assuming that you have one. If you do not have one, you need to have one prepared. [More…]

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Is This The SEC Or The Lotto? by Keith Paul Bishop in California Corporate & Securities Law

The SEC’s total payout is impressive, but the number of payees is extremely small. According to the SEC, awards were paid to only 33 persons. Moreover, 77.6% of the payout, or $83 million, went to just 4 whistleblowers. From inception through fiscal 2015, the SEC received a total of 14,116 whistleblower tips and made payments to 22 persons. Based on these numbers, the probability of receiving an award is 0.00155. In comparison, the California Lottery posts the odds of winning $10 on its $1 “Set For Life” Scratchers game at 0.00962, or more than 6 times better. [More…]

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Joe Murphy to courts and regulators: Stop undermining compliance by Joe Murphy in the FCPA Blog

But there is a nasty little secret behind this conclusion. The legal system, which is supposed to help prevent business crime, actually undermines company compliance efforts. Instead of providing substantial incentives and recognizing the value of our work, there are strong undercurrents that undermine our efforts. [More…]

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