Category: Compliance Bricks and Mortar

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

Protecting the Compliance Officer: A Balanced Approach by Michael W. Peregrine in Corporate Counsel

From a governance perspective, it matters not that these chief compliance officer (CCO) enforcement actions appear to be narrowly focused in particular industry sectors. Rather, what matters is the potential these actions may have to more broadly destabilize the role and function of the compliance officer. The job is hard enough as it is. Should compliance officers feel (fairly or unfairly) that they are exposed to regulatory sanction for simply errors of omission or commission, the job will become even more challenging. Interest in compliance positions–especially in heavily regulated industries–may decline. Companies will be frustrated in their attempt to maintain effective compliance programs if they are unable to attract and maintain qualified, experienced compliance officers.
[More…]

Expanding personal liability for chief compliance officers by Brett Ingerman, Michael D. Hynes, Brian H. Benjet, Christian Michael Van Buskirk of DLA Piper

The imposition of personal liability on chief compliance officers is part of the regulators’ broader interest in compliance failures at the highest levels of financial institutions. Last Thursday, the Financial Industry Regulatory Authority (FINRA) sent letters to a dozen financial firms, inquiring about the methods by which the firms establish and maintain a culture of compliance. In addition to requesting general information on the firms’ practices, FINRA specifically requested information on how the firms established a “tone from the top.” FINRA characterized the request letters as an attempt to better understand how culture affects compliance, but the focus on the “tone from the top” suggests FINRA perceives or is at least particularly concerned about deficiencies among the highest ranking executives of financial firms. [More…]

Outsourced Compliance Officer Trend Renews Standards Debate by Stephen Dockery is WSJ.com’s Risk & Compliance Journal

It was also eventually cited by the SEC in a detailed risk alert in November on the “growing trend” of outsourcing chief compliance officers. The deep dive by the commission mentioned cases of strong compliance work by outsourced officers, but it also said some practices by off-site CCOs were cause for concern, where outsourced CCOs’ attention was lacking, or implementation of their suggestions never occurred.  [More…]

Compliance Careers Might Get Interesting, Part II by Matt Kelly in Radical Compliance

There we were, me and a small group of compliance professionals, talking shop about where good compliance officers come from these days. One person, a recruiter for asset management firms, told the tale of how she recently placed a chief compliance officer at a hedge fund in the Midwest. This CCO was “a dream candidate,” the recruiter said: accomplished scholar, top-ranked law school, work at two major law firms, a stint in investment banking, some time on the regulatory side, “and just a friendly person people would want to talk to.” [More…]

Rob Cohen Discusses SEC’s Analysis and Detection Center by David Smyth in Cady Bar the Door

Enter the Analysis and Detection Center.  I have a friend whose job requires him to think about insider trading for, oh, probably more than half of every day.  When the SEC filed its first case referring to the Analysis and Detection Center, he emailed me asking something like, “There is one?”  We both wondered what it was.  So did Bruce Carton.  It turns out the SEC is using it, whatever it is, to generate its own insider trading cases, without relying on FINRA or CBOE or any ol’ whistleblower. [More…]

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

CFTC Can’t Give Whistleblower Money Away by Jean Eaglesham in the Wall Street Journal

Since its Whistleblower Program was launched in 2011, the Commodity Futures Trading Commission has spent more on administrative costs than it has paid out in bounties, according to a Wall Street Journal analysis of the agency’s data. [More…]

An SEC investigation: to disclose, or not disclose? by Patrick Hunnius, Perrie Michael Weiner, Robert D. Weber, Caryn G. Schechtman of DLA Piper

In a recent decision, the Ninth Circuit addressed for a second time the question of whether an issuer’s disclosure of a Securities and Exchange Commission investigation can provide a sufficient basis for a plaintiff to plead “loss causation” in a securities class action. The court’s ruling – that disclosure of an investigation combined with “a subsequent revelation” can suffice to plead loss causation in a later civil action alleging securities fraud – should lead issuers to think more carefully about disclosure of such investigations at all.[More…]

6 Lawyers and Staff Caught in the Insider Trading Crosshairs by Casey Sullivan in Bloomberg DNA

With constant access to corporate information, lawyers can feel the urge to use it to their own financial advantage. We compiled a list of some of the lawyers and employees who have been caught in the prosecutors cross-hairs and pulled information about them from various media publications. [More…]

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

The Most Thankless Job on Wall Street Gets a New Worry: Recent enforcement actions find compliance officers personally liable
by Emily Glazer in the Wall Street Journal

Those officers on Wall Street in charge of ensuring that traders and other employees stay on the right side of laws and regulations are increasingly in the cross hairs themselves.

Several recent enforcement actions found compliance officers personally liable for mistakes within their firms. Meanwhile, New York’s principal financial regulator, backed by New York Gov. Andrew Cuomo, wants the power to seek criminal charges against compliance officers in some cases. [More…]

Implications of Mutual and Private Fund Convergence by Wulf Kaal in the CLS Blue Sky Blog

Mutual funds are becoming more like hedge funds as a matter of investment strategy while hedge funds are becoming more like mutual funds as a matter of the regulatory framework. The growth of the private fund industry and the proliferation of retail alternative funds in combination with the fundamental regulatory reform of the private fund industry through the Dodd-Frank Act and the JOBS Act make the convergence of mutual and private funds possible. Such convergence has large implications for the evolution of the private fund industry and the growth of the retail alternative fund market.[More…]

The Perils of Combining Audit and Compliance by Matt Kelly in Radical Compliance

Few compliance and audit executives believe that integrating those two functions is a wise idea, but good news for those of you forced by your CEO to march down that dubious path—you have some fresh guidance on how to make the trip with minimal missteps. [More…]

Crowdfunding Portals Begin to Register With the SEC by Steve Quinlivan in Dodd-Frank.com

The SEC registration process for Title III crowdfunding portals was recently commenced. So far we are aware of one Form Funding Portal that has been filed to begin the registration process. So that is good news.

The Rise of “Culture of Compliance” in Numbers in WSJ.com’s Risk & Compliance Journal

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

U.S. Banks Cut Off Mexican Clients, as Regulatory Pressure Increases by Rachel Louise Ensign,
Emily Glazer and Amy Guthrie in the Wall Street Journal

At issue are correspondent-banking relationships that allow Mexican banks to facilitate cross-border transactions and meet their clients’ needs for dealing in dollars—in effect, giving them access to the U.S. financial system. The global firms that provide those services are increasingly wary of dealing with Mexican banks as well as their customers, according to U.S. bankers and people familiar with the matter.[More…]

Why Does The SEC Have An FCPA Unit? by the FCPA Professor

Notwithstanding the fact that the SEC played an important role (indeed a more prominent role than the DOJ) in addressing the foreign corporate payment payments problem in the 1970s’s that led to enactment of the Foreign Corrupt Practices Act, it is a historical fact that the SEC never wanted any role in enforcing the FCPA’s anti-bribery provisions. [More…]

Where To Meet? The Answer May Have Surprising Consequences by Keith Paul Bishop in California Corporate & Securities Law

In my experience, companies most often hold board and shareholder meetings at or near their principal executive offices . As a result, many corporations hold their meetings in California even though they may be incorporated in Delaware, Nevada or some other jurisdiction. Geographical convenience, however, can have unforeseen consequences. Several provisions of the California General Corporation Law apply to foreign corporations based on where they hold their board or shareholder meetings. These include: [More…]

Shareholder Engagement: How to Handle ESG Inquiries by Broc Romanek in TheCorporateCounsel.net

Investor Relations and corporate governance teams increasingly are receiving investor questions about ESG matters. What should these teams do if they receive a call or letter? [More…]

Brick detail
by Grant MacDonald
CC BY NC

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

Star Wars Week Part I – How do You Evaluate a Risk Assessment? by Tom Fox in the FCPA Compliance Report

Today I begin a series of Star Wars themed blog posts to celebrate the upcoming release of the next entry in the Star Wars franchise, Episode VII – The Force Awakens. Please note that I will only use the first three movies, now known as Episodes IV-VI, for the themes this week. So if you are a millennial and the prequels are your Star Wars sorry but you can write about them as the first three are my Star Wars movies.

Star Wars Week Part II – The Empire Strikes Back – Levels of Due Diligence

Star Wars Week, Part III – VI – Return of the Jedi-Moderating Training

Star Wars Week Part IV – Disruption Innovation in Compliance

Five Predictions for 2016 in Private Funds Management

SEC wrist-slaps real estate GPs: After completing a ‘sweep’, or coordinated inspection review, the US Securities and Exchange Commission (SEC) needs about two years to evaluate its findings before bringing enforcement action. With private equity firms, a sweep was finished in 2012 that led to more than a dozen enforcement cases in 2015 and more expected next year. A similar sweep of real estate advisors began a year or so after the private equity exams started, so if the timeline stays true, 2016 will be when real estate enforcement cases begin coming through. Already senior SEC officials have sounded the alarm on real estate GPs charging fees for certain ancillary services like property management without proper disclosure. [More…]

Section 12(g)(1)(A) – How The SEC Is Putting Words In Congress’ Mouth by Keith Paul Bishop

That, however, is not what Section 12(g)(1)(A) literally states.  Congress was quite specific.  The shareholder trigger is either 2,000 persons or 500 persons who are not accredited investors.  There is no “or more” in the statute.  Read literally, an issuer would have to have a class of equity security (other than an exempted security) held of record by either exactly 2,000 persons or 500 non-accredited persons.

Surely, Congress did not intend such an odd rule.  It must have meant, as the SEC states, 2,000 or more or 500 or more. [More…]

Regulation Crowdfunding: The Long Wait Is Over, But Is Equity Crowdfunding D.O.A.? by by Sam Effron and Kristin Gerb in Mintz Levin’s Securities Matters

What we think will make Reg. CRWD offerings particularly burdensome and expensive, however, will be the compliance requirements for issuers and intermediaries. The SEC has created new “Form C”, which issuers utilizing Reg. CRWD will be required to file for all filings related to a Reg. CRWD, including an initial offering statement (and updates thereto) and ongoing annual reports. The initial Form C will need to be filed at least 21 days before any offering commences, and the disclosure requirements for a Reg. CRWD offering are extensive. [More…]

CFTC Brings First Insider Trading Case by Bruce Carton in Compliance Week

Until last week, the CFTC had never been brought an insider trading case for commodities trading. Indeed, the only example of insider commodities trading that most lawyers (or anyone else) could probably point to would be the ill-fated effort of the Duke brothers in the Eddie Murphy movie Trading Places.[More…]

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

A Compliance Plan or a Compliance Idea? by John Nocero in SCCE’s The Compliance & Ethics Blog

Much of what we do is dictated by our compliance plan. But we also need to be able to react based on arising risks or incidental findings. Often, being able to reprioritize is most important. I write a goal list of what I am going to get done each week, but some weeks are impossible to predict. You often need to make changes in real-time. Very rarely you can ever say you are totally locked in to a particular plan. Maybe it is better to characterize the compliance plan as a compliance idea – you are pointed in the right direction, but you are ready to make an adjustment if needed. [More…]

GP charged for failing to disclose portfolio company loans By: Katherine Bucaccio in Private Funds Management

The US Securities and Exchange Commission (SEC) has charged San Francisco-based private equity firm JH Partners for failing to disclose loans that the firm made to its portfolio companies, according to an SEC order filed at the end of last month.

The SEC claims that JH Partners and some of its principals provided approximately $62 million in direct loans to portfolio companies across three of its funds from 2006 to 2012. Through the loans, the firm acquired interests in the portfolio companies that were senior to the equity interests held by the funds, however, JH Partners did not disclose the loans or the potential conflict of interest to its LPs. [More…]

Unfair & Unbalanced Podcast with Tom Fox & Roy Snell – Episode #1

Taped at SCCE’s 2015 Compliance & Ethics Institute at the ARIA in Las Vegas. In this first episode, noted FCPA lawyer and blogger Tom Fox, and Society of Corporate Compliance & Ethics CEO, Roy Snell, discuss the importance of an independent compliance officer, misconceptions about compliance in general (hint: it’s not that hard), updating the Federal Sentencing Guidelines, the most important word in the Yates Memo, and some of the immediate effects of the Volkswagen scandal. [More…]

Brick in front of Belly Timber by Eli Christman
CC BY

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

Your next PR battle is brewing in Private Funds Management

Last week, the California Public Employees’ Retirement System (CalPERS) released carried interest data that several media outlets were quick to spin as private equity somehow being more expensive than investors had realized, and that fees charged for outsized performance were egregious (when in fact they were shown to be below industry standards). It was yet another reminder that often the reporters writing such stories don’t understand the core concepts and structures of the asset class. [More…]

Making It Harder to Prove White-Collar Crimes by Peter J. Henning in the NY Times’ DealBook

But one provision tucked in the legislation could have a significant impact on prosecuting regulatory offenses, the type often pursued against businesses and corporate managers. The law would require that if a federal criminal offense did not specifically set forth the intent needed to establish a violation, then prosecutors must show the defendant’s state of mind was “knowing.” A further requirement is that “if the offense consists of conduct that a reasonable person in the same or similar circumstances would not know, or would not have reason to believe, was unlawful, the government must prove that the defendant knew, or had reason to believe, the conduct was unlawful.” [More…]

Is the City Link verdict a win for the industry? in Private Equity International

Former City Link directors must have breathed a sigh of relief. Last week a UK court found them not guilty of failing to notify the government of upcoming redundancies following the collapse of the company. [More...]

Investment Advisers Don’t Need Mystery Monitors by Norm Champ in the Wall Street Journal opinion section

Mandating examinations of investment-management firms by third parties presents all of the risks of these earlier failed attempts to outsource government power. These examinations would cost investment managers, and ultimately their clients, a great deal of money. The firms conducting the examinations would have a guaranteed revenue source with little incentive to produce quality exams or keep costs down. As with proxy advisory firms, the examining firms could develop their own agendas for examinations that have nothing to do with safeguarding investors. [More…]

Fairness of SEC Judges Is in Spotlight by Jean Eaglesham in the Wall Street Journal

The SEC won against 86% of defendants in contested cases in its own courts from October 2010 through September 2015, according to an updated analysis by The Wall Street Journal—significantly higher than the agency’s 70% win rate in federal court. A page-one Wall Street Journal article in May reporting the agency’s different win rates has since been cited in numerous legal challenges. [More…]

U.S. and UK risk assessments differ on real estate-related AML by Alex Zerden and Sarah Freuden in the FCPA Blog