Category: Compliance Bricks and Mortar

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

---

Private Fund Advisers Must Pay Close Attention to Nuances under Pay-to-Play Restrictions in Light of Upcoming Elections Nationwide

As the elections approach nationwide, advisers to private investment funds with current or prospective state or local government entity investors should be mindful of political activities by their personnel which could raise concerns under existing pay-to-play regulations. Given the magnitude of governmental plan investors in private funds, in addition to a potential loss of revenue, even the disclosure of a pay-to-play inquiry could result in significant reputational implications with current and prospective private fund investors. [More…]

---

Compliance Alert: Enforcement hammer falls on real estate by Kim Nemirow and Amanda Raad in the FCPA Blog

Regulators charged with enforcing anti-corruption, anti-money laundering, and economic sanctions laws and regulations have turned new attention to the real estate industry, and investigations and enforcement efforts span the globe.

Over recent years, U.S. and UK authorities have investigated real estate investors and their employees for allegedly making payments to government officials in order to construct and sell properties, as well as the conduct of management companies and the use of third parties to pay bribes, launder money, or evade economic sanctions. [More…]

---

Introduction to Blockchain Interview on Its impact on Practice and Firms by Ron Friedmann in Prism Legal

It is novel ledger technology that allows for the immutable recordation, transfer, settlement and audit of any currency or asset that can be “tokenized” – all in a decentralized environment that does not require the participants to trust each other. The innovation is in the decentralization, which tips our traditional thinking upside down because there is no longer a need for one party to be in charge or grant or deny access to a system. Blockchain technology is built on open protocols and often open source software. Blockchain technology also is new platform technology that is enabling an entirely new batch of “smart” transactions in capital markets, insurance, trade finance, supply chain management and smart cities. [More…]

---

The SEC and Whistleblowers: A Spotlight on Severance Agreements by John F. Savarese, Jeannemarie O’Brien, Wayne M. Carlin, and David B. Anders in NYU Law’s Program on Corporate Compliance and Enforcement

In the space of one week, the SEC brought two enforcement actions that reiterate its focus on protecting the rights of whistleblowers.  In each case, companies attempted to remove the financial incentives for departing employees to submit whistleblower reports to the SEC.  The result instead was a pair of administrative orders (on a neither admit nor deny basis) finding that each company violated SEC Rule 21F-17, which prohibits any person from taking any action to impede a whistleblower from communicating with the SEC about possible securities law violations.  In the Matter of BlueLinx Holdings Inc. (August 10, 2016); In the Matter of Health Net, Inc. (August 16, 2016).  [More…]

---

The Things You Learn at Strip Clubs… by Matt Kelly in Radical Compliance

According to an article in the New Orleans Times-Picayune, the Louisiana Department of Alcohol and Tobacco Control wants to launch a voluntary program with bar owners in the French Quarter to reduce a variety of violations, from liquor law abuses to human trafficking. Part of that program would be annual training for bar employees so they can avoid infractions in the first place—and yes, part of it would send mystery shoppers into the strip clubs to see what’s really happening inside. [More…]

---

The SEC Wants You to Know that It Intends to Protect Whistleblowers’ Rights by Kevin LaCroix in the D&O Diary

The SEC has long made it clear that it intends to protect whistleblowers and to suppress activities it believes will have the effect of discouraging whistleblower activity. The agency recently launched enforcement actions against companies that had incorporated various waivers in employee severance agreements that discouraged employees from reporting possible securities law violations to the SEC. The agency’s actions shows that the agency is prepared to actively target corporate actions the agency believe may suppress the whistleblowing process. [More…]

---

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

---

Anti-Corruption Laws and Other International Risks – What it Means for the Real Estate Industry and How to Protect against Risks by Ropes & Gray

The real estate industry is commonly viewed to be higher risk in light of the numerous government touch points, the heavy reliance on third parties such as joint venture partners or property managers, particularly in emerging or higher risk markets, and the frequency with which bad actors seek to launder ill-gotten gains through the purchase of property. However, as described in more detail below, these risks can effectively be managed by investors with robust compliance controls, including pre-transaction due diligence and post-investment compliance monitoring.[More…]

---

How Much Is A Whistleblower Waiver Really Worth? by Keith Paul Bishop in California Corporate & Securities Law

Unless someone successfully challenges the SEC’s enforcement position, it is likely that companies will eliminate waivers from their severance agreements. One might hypothesize that companies will reduce severance compensation as a result. But how much is a waiver worth to a former employee? Through fiscal 2015, the SEC paid out $54 million since its whistleblower rules went into effect in August 2011. While that is a sizable sum, only 22 tippers received payment. [More…]

---

Due Diligence Questions Chief Compliance Officers Should Ask In A Job Interview by Maurice Gilbert in the FCPA Compliance & Ethics Blog

What follows is an aggregate of questions candidates have recently asked management and Boards when being considered for a CCO role with a new employer. The list is unedited and unfiltered – their words to your ears.

Print and save this list. And so that we can all help one another, I hope you will respond below with questions of your own.

[More…]

---

No D&O Insurance Coverage for Costs of Responding to Informal SEC Investigation by Kevin LaCroix in the D&O Diary

Among the most frequently recurring D&O insurance coverage issues is the question of the carrier’s obligation to pay for costs incurred in connection with an informal SEC investigation. Indeed over the years, numerous policy revisions have been adopted in various forms by various carriers to address certain aspects of this issue. Yet the issues continue to arise, as shown most recently in District of Colorado Judge Robert E. Blackburn’s August 4, 2016 opinion (here), in which he held that the D&O policy at issue did not provide coverage for the insured company’s expenses incurred in responding to an informal SEC investigation. The opinion raises a number of issues, as discussed below. [More…]

---

No More Coffee for You by Adam Turteltaub in the SCCE’s Compliance and Ethics Blog

There’s a lesson to be learned here, other than that we all should avoid running for elected office.  It’s that proposed rules, whether they are legislation in a state house or policy in an organization, are never as clear as they appear on paper, and that once they meet the public eye, all kinds of questions are likely to be asked.  Worse, all kinds of assumptions are going to be made. [More…]

These are some of the compliance-related stories that recently caught my attention. They caught my attention after completion of my Pan-Mass Challenge ride last weekend. (Even though the ride is over, there is still time to donate: http://profile.pmc.org/DC0176.) This is the team photo taken on Saturday afternoon.

---

Compliance Careers Looking Good, Mostly by Matt Kelly in Radical Compliance

In the wake of last Friday’s stellar jobs report, let’s take a look this morning at the career trends working away on compliance officers—which, as often happens with this profession, is both good and bad news at the same time.[More…]

---

The Morning Risk Report: Court Ruling on Password Sharing Not the Last Word by Ben Dipietro in the Wall Street Journal

A U.S. appeals court ruling in a case involving the sharing of a work-related password will make it easier for companies to prosecute employees and former employees for accessing networks to which they no longer have permission to enter, but the issue remains unsettled and more action is needed to clarify the scope of the ruling, said one executive at a compliance services firm. French Caldwell, chief evangelist at compliance services firm MetricStream, said either more court rulings are needed to clarify the decision or Congress will have to act to specify what types of password sharing would be violations of U.S. law. [more…]

---

Exxon Mobil Climate Change Inquiry in New York Gains Allies by John Schwartz in the New York Times

Mr. Schneiderman began his investigation in November. His staff is looking at whether statements the company made to investors about climate risks — some as recently as last year — conflicted with the company’s own scientific research. [More…]

---

A Gold Medal in Integrity by Adam Turtletaub in SCCE’s Compliance & Ethics Blog

The Dutch team has very strict rules about alcohol consumption and leaving the team’s base of operations.  Yuri van Gelder, a gymnast, broke them.  After qualifying for the finals on the rings he went out drinking and stayed out into the small hours of the morning, Reuters reported.

So what did the team do?  They expelled him. [More…]

---

A Trip to the Dentist for Some Compliance Insight by Tom Fox in FCPA Compliance & Ethics

It struck me that the diverse problem solving requirements are very close to what the compliance professional must do and it pointed to the differences between the compliance discipline and the legal discipline in corporate America. Lawyers are there to protect the company. Such a role can include problem solving but it does not move to the types of solutions that a compliance professional must develop in a best practices compliance program. [More…]

---

FCPA Compliance: Does “Anything of Value” Really Mean “Anything of Value”? by Michael Volkov in Corruption Corime & Compliance

If I hire a relative to a foreign official with the intent to influence the foreign official, my liability should not depend on whether we can provide a precise calculation of the “intangible benefit” to the foreign official. Instead, a prosecutor will have to prove beyond a reasonable doubt that I acted with corrupt intent to influence the government official by hiring his or her relative. That seems sufficient in my mind without having to resolve the existential question of what constitutes an intangible benefit. [More…]

---

Last Lap for U.S. Bike Idol Evelyn Stevens by Jason Gay in the Wall Street Journal

Evelyn Stevens has lived the dream of every weekend warrior cyclist who’s ever wondered: What would happen if I quit my day job and rode my bike full time?

Most of us mortals would wind up pedaling straight back into the office. But Stevens, 33, climbed straight to the top of her sport. [More…]

---

If you enjoy Compliance Building, please join many of my other readers and support my Pan-Mass Challenge ride to fight cancer next week. (Thank you to those who have already donated.) I’m pedaling from the New York border to Provincetown on August 5-7. 100% of your donation goes to the fight against cancer. You can read more and donate here: http://profile.pmc.org/DC0176

After the picture, back to compliance…

---

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

---

The Real Value of Lawyers to Compliance by Michael Volkov in Corruption, Crime & Compliance

The most effective compliance programs usually are built around a strong partnership between a chief compliance officer and a general counsel. They are natural partners, assuming that egos do not get in the way, and should work together to advance the company’s compliance program. Lawyers have two very specific benefits that should be incorporated into an effective compliance program. [More…]

---

How Con Artists Manipulate Your Emotions in Genius (and Evil) Ways by Maria Konnikova in bigthink.com

The Ben Franklin effect is an oddly simple phenomenon. It was first discussed, as one could guess, by the man himself in his autobiographical writings. Benjamin Franklin used it on legislators that he was at odds with, to make them be more kind to him. [more…]

---

Why Your Compliance Officer Should Talk About Texting by Margaret Scavotto, JD, CHC in SCCEs The Compliance Ethics Blog

A growing number of corporations are establishing social media policies. This trend is particularly salient in the healthcare industry, where employee social media posts can violate HIPAA. The news abounds with stories of tweets, Facebook posts, and Snapchats taken in hospitals and nursing homes, many posted inadvertently, which raise both HIPAA issues and patient dignity concerns – two high priority items for any compliance officer. These social media policies can also be used to address employee texting, which can lead to similar violations. [More…]

---

A Ponzi Scheme Where One Investor Directly Paid Another by T. Gorman in SEC Actions

In the typical Ponzi scheme unscrupulous individuals induce investors to part with their cash based on a series of misrepresentations about the proposed investment. The investor money is then in part misappropriated and in part used to repay other investors in an effort to perpetuate the scheme. In the Commission’s latest Ponzi scheme case however, the alleged fraudster induced investors to repay other investors directly. [More…]

---

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

---

World’s 20 biggest banks rack up £252bn ‘conduct costs’ in five years by Sean Farrell in the Guardian

The cost of fines, legal bills and customer compensation racked up by the world’s 20 biggest banks over the five years to the end of 2015 amounted to £252bn, according to new research. So called “conduct costs” for the 20 banks rose 4.1%, or £10bn, compared with the previous rolling five-year period, 2010-2014. UK-based financial institutions Lloyds Banking Group, Royal Bank of Scotland and Barclays accounted for £11.3bn of extra costs while charges at five other banks fell. [More…]

---

Adding ‘father-son’ to the Familial Betrayal list by Bruce Carton in Compliance Week

A review of the Familial Betrayal archives here at Enforcement Action shows that we have not chronicled any father-son betrayals to date. We do, of course, have almost everything else, including husband-wife (and wife-husband), father-daughter, brother-sister,boyfriend-girlfriend, brother-in-law betraying brother-in-law, divorcee betraying divorcee.  [More…]

---

In Properties Targeted in 1MDB Case, a High-End House Tour by Hannah Karp and Peter Grant in the Wall Street Journal

The properties allegedly bought with funds misappropriated from a Malaysian investment fund would make for a stunning house tour of high-end real estate in New York and Los Angeles. Besides flashy real estate, the U.S. government alleges that money from the fund, known as 1Malaysia Development Bhd. or 1MDB, was used to buy a $35 million private jet and a stake in EMI Music Publishing.[More…]

---

Nations of the World Confront the Pokémon Menace by Karen Zraick in the New York Times

Indonesian officials also called it a national security threat that could allow its enemies to penetrate military sites and gain access to top-secret data. On Monday night, a French citizen working in Indonesia was temporarily detained after stumbling onto the grounds of a military base in West Java Province while searching, he said, for Pokémon figures. [More…]

---

There are two weeks to go. If you enjoy Compliance Building, please support my Pan-Mass Challenge ride to fight cancer on August 5-7. 100% of your donation goes to the fight against cancer. You can read more and donate here: http://profile.pmc.org/DC0176

I was biking all winter to stay in shape for this ride.

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

---

One Thought on Blockchain in Money Compliance

Blockchain could make AML obsolete, in theory. Blockchain is the decentralized database system that allows for recordkeeping of transactions nearly impossible to fake. And because of it, it sort of creates a world that is zero sum. It isn’t completely zero sum, especially in the beginning because no sources of transaction have been recorded, but eventually so many transaction have been recorded that whatever currency is being tracked could be traced to its original source, in this case the first transaction on the database. [More…]

---

Farewell to Ralph Stanley and Success in Repatriation by Tom Fox in FCPA Compliance Report

I thought about Stanley’s genius when considering one of the challenges in anti-corruption going forward; which is the issue of repatriation of the funds stolen from a country through bribery. Matt Stephenson, over at the Global Anti-Corruption Blog (GAB), has been a persistent commentator of the difficulties of such a repatriation. However, an article in the Financial Times (FT) by Kara Scannell, entitled “Moving money out of purgatory”, detailed one of the success stories in this area while also reporting on many of the difficulties outlined by Stephenson in the GAB. [More…]

---

Small Firm Cybersecurity Checklist

FINRA has created a Cybersecurity Checklist (Excel 114 KB) to assist small firms in establishing a cybersecurity program to identity and assess cybersecurity threats, protect assets from cyber intrusions, detect when their systems and assets have been compromised, plan for the response when a compromise occurs and implement a plan to recover lost, stolen or unavailable assets. This checklist is primarily derived from the National Institute of Standards and Technology (NIST) Cybersecurity Framework and FINRA’s Report on Cybersecurity Practices. Use of this checklist does not create a “safe harbor” with respect to FINRA rules, federal or state securities laws, or other applicable federal or state regulatory requirements.

---

Legislators Boast That Shrinking Size of GE Capital Proves Dodd-Frank Is a Success by Steven Lofchie in Cadwalder Cabinet

Facts belie the legislators’ political assertion that Dodd-Frank has had the effect of shrinking big firms and increasing market share for smaller firms. A look at the three most significant types of Dodd-Frank-regulated financial intermediaries: banks, broker-dealers and futures commission merchants (“FCMs”) makes this clear: [More…]

---

The average American woman now weighs as much as the average 1960s man by Christopher Ingraham in The Washington Post

The average American woman weighs 166.2 pounds,according to the Centers for Disease Control and Prevention. As reddit recently pointed out, that’s almost exactly as much as the average American man weighed in the early 1960s. [More…]

---

If you enjoy Compliance Building, please support my Pan-Mass Challenge ride to fight cancer. You can read more and donate here: https://www2.pmc.org/egifts/DC0176

---

 

 

Today marks the joining of the British North American colonies of Nova Scotia, New Brunswick, and the Province of Canada into a federation of four provinces on July 1, 1867.

These are some compliance-related stories that caught my attention recently, even though they have nothing to do with Canada.

---

BREXIT and Compliance by Jonathan Armstrong in SCCEs The Compliance Ethics Blog

In the short-term the change will be minimal. Longer term there is likely to be lots to do on the separation and with the UK putting in place agreements to replace current EU deals – many variations are currently possible. UK politicians have talked of a 6-month scoping exercise as the work on separation starts. Then there is effectively a notice period of two years as the UK exits the EU. [More…]

---

AIFMD Meets Brexit by Debevoise Plimpton

It is the uncertainty that now exists, and that will continue to exist during the transitional period that will begin on the day that the United Kingdom exits the European Union and end on some unknown date thereafter, that will be destabilising for the UK funds industry and potentially damage the popularity of the United Kingdom as a fund manager jurisdiction of choice [More…]

---

How to Hire Honest People By Bruce Weinstein, Ph.D. The Ethics Guy® in SCCEs The Compliance Ethics Blog

There are two downsides to asking a direct question about dishonesty. First, it immediately strikes fear in the candidate’s heart, even if the candidate is fundamentally an honest person. I don’t like the idea of making a job candidate squirm. The second is that the question seems to present a no-win situation for the candidate. [More…]

---

BATTLE OF THE SOMME WEEK – PART V: WHAT DID IT ALL MEAN? by Tom Fox in the FCPA Compliance Report

Today, July 1 is the 100^th anniversary of the first day of the Battle of the Somme. As I have written this week, there is no single battle in modern British history that has made a greater impression on the British psyche. The five month long battle cost the British some 420,000 casualties. For territory, it was worth a few miles. Daniel Todman, writing in the Financial Times (FT) article entitled “Stories of the Somme”, said, “Both in its scale and duration, the Somme was different to anything the British had done before. With wartime volunteers involved en masse in the most intense combat for the first time, the impact of the battle was felt throughout the Empire. The second world war saw combat that was just as horrific — and a global slaughter that was much worse — but Britain avoided the same enormous and prolonged commitment of its army to the task of breaking the strength of a great power opponent on land.” [More…]

---

‘Hold’ everything: SEC may be stuck at three commissioners for a while by Bruce Carton in Compliance Week

As I have been following here for many months, President Obama nominated Hester Peirce and Lisa Fairfax to be SEC commissioners in October 2015 to fill open Republican and Democrat seats on the Commission, respectively. Peirce is currently a senior research fellow at the Mercatus Center at George Mason University and Fairfax is a law professor at the George Washington University Law School. The story of how basically nothing has happened with their nominations is chronicledhere and elsewhere on this site, and is comparable to watching paint dry.

Yesterday, Andrew Ackerman of the WSJ reported, these two nominations were delayed even further by the Senate when an unidentified Democratic Senator moved to block any confirmation vote on Peirce through a procedural step known as a “hold.” The WSJ reported that “overcoming a hold generally requires the high hurdle of support from 60 senators.”  [More…]

These are some of the compliance-related stories that caught my attention while waiting for the results from the Brexit vote.

---

BEST PRACTICES FOR TODAY’S CCO by Julie DiMauro in the FCPA Blog

In addition to knowing their regulatory-reporting obligations, compliance officers should understand what their managers do, what products and services their company offers and the systems that sustain these products and services.

If a compliance officer lacks this background, it can be acquired through research, on-the-job training, observing business associates, and asking for outside educational opportunities. [More…]

---

General Solicitation Under Rule 506(b) After Citizen VC: Guiding Principles and Best Practices by Richard M. Leisner in the D&O Diary

It is too soon to know the-long term compliance effects of Citizen VC and the Companion C&DIs. Today is a good time, however, for careful analysis of these recent SEC pronouncements and their underlying rationale and regulatory provenance.

With this analytical foundation, this article suggests how best practices for conventional issuers might evolve for permissible general solicitation activities in future Rule 506(b) private offerings that will not violate the prohibitions of Rule 502(c). [More…]

---

HERE ARE THE TOP 5 SONGS ABOUT COMPLIANCE by Nicole Rose

The fastest way to change someone’s state is through music. The rhythm and pitch are managed in areas of the brain that deal with emotions and mood. Even the thought of a song is actually enough to stimulate the senses and ignite a positive response. For example, if I mention “You’ll Never Walk Alone” by Rodgers & Hammerstein or “For once in my life” by Stevie Wonder, you’ll probably have it in your head for at least a few minutes.  [More…]

---

Four Points on AML Compliance by Matt Kelly in Radical Compliance

We might dismiss contradictory regulators as a fact of life in compliance, but beware the larger point: if compliance officers get mixed messages about what regulators expect, you cannot develop a sound strategy to implement global AML programs. You can’t easily place big bets on new technology, or adopt global policies and procedures. Instead, you’re trapped reacting to one regulator’s request after another. And without an effective strategy, you can’t implement cost-effective techniques to manage compliance—you just throw bodies and money at the problem of the day. [More…]

---

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

---

Power plants are no longer America’s biggest climate problem. Transportation is. by Brad Plumer in Vox

Here’s an important energy milestone: For the first time since 1979, America’s cars, trucks, and airplanes emit more carbon dioxide than its power plants do. … But power plants are only about one-third of America’s CO2 emissions. Transportation, another third (and now the biggest source), remains much tougher to address. In fact, since 2013, transport emissions have been creeping upward again. [More…]

---

You won’t believe what gets an email flagged at Goldman: CNBC has the list by Eamon Javers

CNBC has obtained a document detailing more than 180 phrases flagged for scrutiny by the monitoring system. The document was produced in 2008, and the firm has updated its search terminology since then. But the list gives a rare peek inside a large bank’s real-time compliance surveillance operation, and reveals details of how that process works that even veteran Wall Street executives may not know. [More…]

---

The Orlando Tragedy and the Compliance Profession by Michael Scher in the FCPA Blog

The vigil in Florida’s state capital is one of many around the world. It’s in an old church. LGBT folks and families surround me. Police are here but I still feel threatened, checking the exits just in case. Is this the way LGBT kids feel; why they go to Pulse to feel normal, have fun, not be another target after so many? It’s crazy. They shouldn’t have to live this way. Slaves from near-by plantations made the bricks and built this church long ago. America can do better. – See more at: http://www.fcpablog.com/blog/2016/6/15/mike-scher-the-orlando-tragedy-and-the-compliance-profession.html#sthash.9kYaG9mA.dpuf [More…]

---

SEC Morgan Stanley Cybersecurity Enforcement Action: Key Takeaways by John Reed Stark

There are a slew of important takeaways from the SEC action, especially that cybersecurity failures can, and will, happen to any financial firm. And in this instance, after recognizing its cybersecurity failures, Morgan Stanley did just about everything right. Even better than right – Morgan Stanley actually excelled in its response. [More…]

---

Whistleblowers: No Reasonable Belief of Violation, No Protection by T. Gorman in SEC Actions

A recent decision by the eighth circuit court of appeals now adds to the debate over who can qualify as a whistleblower. Beacon v. Oracle America, Inc., No. 15-1729 (8th Cir. Decided June 6, 2016). There the court concluded that one must “establish that a reasonable person in his [the whistleblower’s] position, with the same training and experience, would have believed . . .” that the conduct complained of violated the federal securities laws to be engaged in protected activity. [More…]

---

Last weekend I rode in the B2VT. It was a grueling bike ride over 130 miles from the historic battlefields of Lexington to the Okemo Mountain in Vermont. I decided to ride because of my friend Jeff. He enjoyed big challenges and I loved taking on big challenges with him.

Jeff was diagnosed with cancer just before Thanksgiving. This terrible disease killed him just after the New Year. I’m riding the Pan-Mass Challenge raising money to fight cancer. I would appreciate your support. [Donate Here] Jeff’s birthday would have been this week. As a gift to my lost friend, I’m matching any donations I receive this week until I reach my fundraising goal.

Jeff would have loved the B2VT ride, especially once it took a turn for the worse. At mile 80, the already cool day turned cold in the mountains of New Hampshire and Vermont. Then cold rain came down in buckets and only occasionally relented to drizzle.

It reminded of the time Jeff and I competed in the Boston 24 Hour Adventure Race. In the middle of the night while trying to navigate to the waypoints in Blue Hills, it started raining. He quoted the line from Caddyshack: “I’d keep playing. I don’t think the heavy stuff’s gonna come down for quite awhile.” So we kept going and pushing on to the finish.

Back to this weekend, many riders in the B2VT were cursing the rain. Me too. It felt more like October than June. Riders were hurting. Some were starting to experience hypothermia. I pedaled on. If Jeff was still alive and along side me I know what he would have said: “I’d keep playing. I don’t think the heavy stuff’s gonna come down for quite awhile.” So I kept playing.

It’s what Jeff would have wanted.

I can’t think of a better way to remember him than to to ride for him and raise money to fight what killed him. Maybe we can help save the next person.

[Donate Here]