Compliance Bricks and Mortar – Page 28

Compliance Bricks and Mortar – March 1 Edition

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March comes in like a lion and out like a lamb. The same may be true of the SEC when it comes to the 2008 financial crisis and the SEC. This week’s Supreme Court decision in Gabelli v. SEC, means that the SEC has only 5 years after the date of the fraud to bring an enforcement action.

The 2008 financial crisis began in March 2008, when the Federal Reserve announced an unprecedented action to lend $30 billion to JPMorgan Chase to buy Bear Stearns. All the fraud that lead up to the collapse of Bear Stearns will be outside of the enforcement of the SEC in a few days.

The SEC is going to be left with post-collapse valuation failures as firms failed to write down their assets or fraudulently told their investors that everything was going to be okay, when the walls were collapsing around them.

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

People Need to Stop Selling Earnings Info to Undercover FBI Agents
by Bruce Carton in Compliance Week

Unfortunately, the saying “those who don’t know history are destined to repeat it” has once again turned out to be quite accurate. Prosecutors alleged this week that in June 2011, several months after Sebbag was sentenced, a Long Island financial advisor named Damian Perna embarked on a similar scheme in which he obtained draft earnings reports for several public companies through a contact at an investor relations firm. Bloomberg reports that “after getting an advance copy of one earnings report, Perna sold it for $7,000 to a Federal Bureau of Investigation agent working under cover, prosecutors said.”

Yunnan official’s airport tantrum goes viralBy Benjamin Kessler in the FCPA Blog

The Chinese internet’s latest exemplar of official arrogance run amok is Yan Linkun, a committee member of Shizong County (Qujing City, Yunnan Province) Chinese People’s Political Consultative Conference (CPPCC).

Best Practices for Internal Investigation Interviews by Michael Volkov in the Corruption, Crime, & Compliance Blog

An internal investigation is only as good as the information elicited during interviews. I do not mean to belittle the importance of collecting and reviewing documents. But documents provide the framework, the context and the outline of a series of events – the investigation story. Also, documents are invaluable tools for investigators when conducting interviews. They constrain the witness’ ability to fabricate or mislead. In many cases, they provide the boundaries for truth.

FTC Releases Top 10 Complaint Categories for 2012

“Identity theft is once more the top complaint received by the Federal Trade Commission, which has released its 2012 annual report of complaints. 2012 marks the first year in which the FTC received more than 2 million complaints overall, and 369,132, or 18 percent, were related to identity theft. Of those, more than 43 percent related to tax- or wage-related fraud. The report gives national data, as well as a state-by-state accounting of top complaint categories and a listing of the metropolitan areas that generated the most complaints. This includes the top 50 metropolitan areas for both fraud complaints and identity theft complaints.”

Compliance Bricks and Mortar – Russian Meteor Edition

Overnight a huge meteor streaked across the skies of Chelyabinsk, Russia. What does this have to do with compliance? Apparently, Russian drivers regularly use these cameras to fight corruption.

BREAKING: Huge Meteor Blazes Across Sky Over Russia; Sonic Boom Shatters Windows by Phil Plait in Bad Astronomy

Apparently, at about 09:30 local time, a very big meteor burned up over Chelyabinsk, a city in Russia just east of the Ural mountains, and about 1500 kilometers east of Moscow. The fireball was incredibly bright, rivaling the Sun! There was a pretty big sonic boom from the fireball, which set off car alarms and shattered windows. I’m seeing some reports of many people injured (by shattered glass blown out by the shock wave). I’m also seeing reports that some pieces have fallen to the ground, but again as I write this those are unconfirmed.

Why are there so many Russian dash cam videos on the internet? by Ryan Whitwam in Geek.com

There are several hard truths that have led to the explosion in Russian dash cam videos, including poor road conditions. Those long, hard winters do serious damage to the roads and lead to really tough driving conditions when local governments can’t clear snow and ice. As a result, accidents do happen more frequently.

It’s not all the fault of the elements, though. Corruption is rampant in the Russian Federation, and that’s led most motorists to take matters into their own hands. It’s not uncommon for a driver to be pulled over by the notorious Russian Highway Patrol (GAI) and harassed into paying a bribe. Dash cams afford at least a little protection from baseless accusations.

The Temptation to Trade on Confidential Information by peter Henning in Dealbook

Everyone loves a sure thing. And in the case of insider trading, the profits may be just too tempting.

Two cases filed last week by the Securities and Exchange Commission epitomize just how quickly some have jumped at the opportunity to profit from confidential information, despite the risks of being discovered and the subsequent costs.

In one case, two information technology workers learned that their company was involved in merger negotiations when one helped the chief executive figure out how to attach confidential deal documents to an e-mail. The other involved a husband learning about a confidential acquisition from his wife, who is a lawyer, after an event with a client’s general counsel was canceled on short notice.

‘Frustrated’ Madoff Now Second Guessing His Guilty Plea by Scott Cohn in CNBC.com

Writing to me from the federal prison where he is serving a life sentence for his epic fraud, Madoff said he is not getting credit for what he calls his “instrumental” role in returning money to his victims. Madoff wrote that he is so frustrated, he is having second thoughts about having pleaded guilty four years ago.

Mary Jo White’s Latest Conflict of Interest by Jonathan Weil in Bloomberg

White is the white-collar defense lawyer and former U.S. attorney nominated by President Barack Obama to lead the SEC. Her financial disclosures say that upon leaving New York-based Debevoise & Plimpton LLP, the law firm will give her $42,500 a month in retirement pay for life, or more than $500,000 a year.

What else is needed to make change successful? by Tom Fox

I have recently been involved with two clients who are about to embark upon major change in their businesses. They are very different and each has a very unique style or culture. As they prepare to set off on their journey I have wondered what else is needed to succeed beyond the ‘usual suspects’?

John Kotter and others have all put forward their ideas, mostly honed after years of practice and delivery. They are all very useful and I have many of their books on my shelf. But I am always drawn back to the question above. After going through some of my own success stories and taking out the usual suspects, I have identified a few things that I believe really matter.

The Dangers of Social Media and Employee Discipline by Michael Volkov in the Corruption, Crime & Compliance Blog

As if compliance officers do not have enough on their plates. I have written about this before – the risks of interfering with employees’ “protected activity” on social media. What a nightmare and what a maze of confusion!

The National Labor Relations Board, which has been re-energized under the Obama Administration, affirmed an Administrative Law Judge’s ruling that the nonprofit, Hispanics United of Buffalo, Inc. violated the National Labor Relations Act by terminating five employees for comments they made on Facebook in response to a coworker’s criticism of their job performance.

Compliance Bricks and Mortar – Blizzard Edition

I’m bunkered down waiting for a blizzard to unleash its wrath on Boston. While my snowblower is waiting for the flakes to fall from the sky, these are the compliance-related stories I’m reading.

‘Without Wheels’: Sometimes Circumstantial Evidence Can Be Quite Powerful by Bruce Carton in Compliance Week

The SEC alleged that Vance learned about the merger when he was asked to help Clear One’s CEO resolve an e-mail issue and saw confidential merger documents, and tipped Wellington. The agency also alleged some extraordinary steps that Vance and Wellington took so that they could have the funds to purchase Clear One shares the very next day:

Wellington allegedly obtained a $25,000 loan from an “online peer lending site.”

Vance allegedly borrowed $5,285 from his 401(k) retirement account, but also “sold personal computer equipment, and sold his truck to finance his purchases of Clear One shares.”

SEC Charges Husband With Insider Trading Using Wife’s Information by Thomas O. Gordon in SEC Actions

The action centers on the acquisition of National Semiconductor Corporation by Texas Instruments, announced after the close of the market on April 4, 2011. Defendant James Balchan, an IT specialist, is married to a partner in a law firm. One of her partners, called Partner A in the complaint, was a close friend of the general counsel of National Semiconductor. In honor of his friend the general counsel, the Partner A organized a “wine and dine” weekend. Mr. Balchan and his wife were invited.

Carried Interest Explained in Latest PEGCC Whiteboard Video

Judge: “Carried interest is commonly misunderstood in public discourse. Our newest whiteboard video demystifies the topic and answers questions about what carried interest really is, how it works and why it’s appropriately taxed at the capital gains rate.”

Annual Compliance Obligations — What You Need to Know in Pillsbury’s Investment Fund Law Blog

As the new year is upon us, there are some important annual compliance obligations Investment Advisers either registered with the Securities and Exchange Commission (the “SEC”) or with a particular state (“Investment Adviser”) should be aware of.

Two Hedge Fund Managers Charged in Alleged $311 Million Fraud Case by Debbie Cai in WSJ.com’s Corruption Currents

Two hedge fund managers were indicted for alleging defrauding institutional investors and causing total losses of more than $311 million, the U.S. Department of Justice said. …

The charges state between March 2005 and December 2008, Kiener led Bear Stearns entities to believe, under his management, Bear Stearns investment funds would be diversified and independently managed. However, Kiener allegedly funneled Bear Stearns money from K1 through the Oceanus Funds and back to K1, giving the false impression the funds were growing in size and were viable investments.

Compliance Bricks and Mortar for February 1

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

SEC Charges Former Jefferies Executive with Defrauding Investors in Mortgage-Backed Securities by Mark Astarita in the Securities Law Blog

According to the SEC’s complaint filed in federal court in Connecticut, the former executive arranged trades for customers as part of his job as a managing director on the MBS desk at Jefferies. The SEC alleges that the former executive would buy a MBS from one customer and sell it to another customer, but on many occasions he lied about the price at which his firm had bought the MBS so he could re-sell it to the other customer at a higher price and keep more money for the firm. On other occasions, he misled purchasers by creating a fictional seller to purport that he was arranging a MBS trade between customers when in reality he was just selling MBS out of his firm’s inventory at a higher price. Because MBS are generally illiquid and difficult to price, it is particularly important for brokers to provide honest and accurate information.

Floyd Landis’ Whistleblower Lawsuit Against Lance Armstrong and Others

I’m sure you have heard about the whistleblower lawsuit initiated by Lance Armstrong’s former teammate, Floyd Landis, but if not, where have you been? In this suit Landis has targeted several others that were part of the U.S. Postal Service team for being a part of or knowing of teammates using banned substances for performance enhancement.

What’s in a Name? Speculation, Hedging, They Are Not the Same Thing by Ernest E. Badway in Securities Compliance Sentinel

Recently, in a settled SEC enforcement action, a mutual fund manager allegedly used an option strategy, but the SEC believed it was more speculative than hedging. See http://www.sec.gov/litigation/admin/2012/33-9377.pdf.

Raising a Deaf Puppy in GeekDad

When we moved into our new house last year, we wanted to expand our family. It was time to get a dog. I grew up with a dog in my family and wanted my kids to have the same experience. I expected that would mean random items around the house would get destroyed by the playful puppy. What I didn’t expect was having to learn sign language.

Compliance Bricks and Mortar for January 25

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

The SEC at a Crossroads: Can Things Be Turned Around? by Broc Romanek in the CLS Blue Sky Blog

Over the past fifteen years, the SEC’s reputation has been routinely sullied – in the press, by the Courts and certainly in the halls of Congress. Although the mud slung at the SEC has intensified since the 2008 financial crisis and revelations of the Bernie Madoff Ponzi scheme, the Commission’s problems began well before then. Particularly, the Enron and World.com scandals forced editors to move journalists into the financial realm where bashing the SEC became good copy. More and more, the SEC has been losing major decisions in the Courts. Professor John Coffee of Columbia Law School recently indicated that “the SEC’s batting average is close to ‘zero for 2008’ in the few cases that it has taken to trial stemming from th[e] financial crisis.” And the SEC’s major case losing streak extends well before the 2008 crisis. In addition, recently departed SEC Chairman Mary Schapiro was asked by Congress to testify at what is likely a record rate for a SEC official. Those hearings almost never went well for poor Mary.

Chesapeake Lighthouses and Lighting the Way for Compliance by Tom Fox

I thought about the story of these lighthouses and how they literally lit the way for sailors for over 200 years when I read an article in the Q2 issue of Ethisphere Magazine, entitled “Imagination Working with Integrity: How General Electric Creates a Global Culture of Ethics”, by Michael Price. Price discusses how General Electric (GE) has made “ethics and compliance a benchmark of its operations around the world, and is, in many ways the gold standard that other companies look to when it comes to modeling global compliance and ethics programs.”

SEC Faces A Swarm Of Legal Issues In Considering The Investor Advisory Committee’s Recommendations Concerning General Solicitation by Keith Paul Bishop in California Corporate and Securities Law

The SEC’s Investor Advisory Committee held another meeting last week with Elisse B. Walter making her first public appearance as SEC Chairman. She and Commissioner Luis A. Aguilar had many kind words for the Committee’s recommendations with respect to lifting the ban on general solicitations in Rule 506 offerings. The insouciance of their remarks, however, was in sharp contrast with the missed deadlines and many legal issues swirling around the Committee and its recommendations.

Final FATCA Regulations Released in Compliance Avenue

While the Final Regulations will be effective when published in the Federal Register (expected to occur on January 28, 2013), the timelines for the various due diligence, reporting and withholding provisions incorporate the delayed deadlines set out in IRS Announcement 2012-42 and are being phased in to allow firms to develop the necessary systems and procedures and to align them with any intergovernmental agreements. For example, withholding agents, which may be U.S. or non-U.S. entities, will not be required to implement U.S. account verification procedures prior to January 1, 2014, and the deadline for foreign financial institutions (“FFIs”), generally including offshore investment vehicles, to file any required FATCA reports for fiscal years 2013 and 2014 will be March 31, 2015.

The Danger of a “Paper” Compliance Program by Michael Volkov in Corruption, Crime & Compliance

The FCPA Guidance contains many important compliance reminders which should be incorporated into every anti-corruption compliance program. Perhaps the most important observation included in the FCPA Guidance was the statement that:

DOJ and SEC have often encountered companies with compliance programs that are strong on paper but that nevertheless have significant FCPA violations because management has failed to effectively implement the program even in the face of obvious signs of corruption.

DOJ/SEC’s observation should be taken seriously. Every company should ask itself this basic question: Have we “effectively” implemented our compliance program?

Science: Ruining Everything Since 1543

Saturday Morning Breakfast Cereal is a daily-updated comic strip that’s a GeekDad favorite. The author, Zach Weiner, announced a new collection of his science related comics are being published in a single book: Science: Ruining Everything Since 1543. He’s creating this book as a Kickstarter project. Give him money now, and you get the book when he’s done. Plus there’s more great stuff if you want to open your wallet a bit wider.

Compliance Bricks and Mortar for January 4

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These are some of the compliance related stories that caught my attention during this first week of 2013 and last week of 2012.

Khuzami Posts Blog Comment Defending SEC’s Record, Policies by Bruce Carton in Compliance Week

In a December 27 post, Johnson wrote that as Robert Khuzami will reportedly soon step down as Director of Enforcement at the SEC, “the Obama administration should press for the appointment of Neil Barofsky, former special inspector general for the Troubled Asset Relief Program, to this position.” …

A day later, on Friday, December 28 at 5:55 pm, someone identified as “Robert Khuzami” fired back in the comments section of the blog post. (Although it is, of course, true that “On the Internet, nobody knows you’re a dog,” in this case an SEC spokesman confirmed to me that the comment was from Khuzami himself).

DOJ and SEC make Risk Assessment the Key to Compliance Effectiveness by Jim Bowers in Corporate Compliance Insights

Effective compliance programs are grounded on a company’s periodic assessment of risks. This premise underpins the compliance standards delineated in the Federal Sentencing Guidelines, the recent DOJ/SEC guidance and other federal regulatory guidelines. A compliance risk assessment provides an early warning process for detecting compliance threats, thereby enabling a company to address compliance problems before they become violations of law. The risk assessment process identifies and assesses compliance risks, evaluates controls put in place to mitigate those risks, and monitors the effectiveness of controls on an ongoing basis.

SEC Report Reviews Work of Enforcement Division by Thomas O. Gorman in SEC Actions

The SEC’s 2012 Agency Financial Report details its performance over the last government fiscal year which ended September 30, 2012. Two sections are devoted to the enforcement program, one which is an overview of the Division’s work and an Appendix which provides additional detail.

In discussing the work of the Enforcement Division the Report emphasizes what it calls the “full spectrum” of the program, referring to the different areas in which actions were brought in compiling a near record setting number of cases filed. Last year the Division brought 734 actions, second only to the record 735 initiated the prior year. Collectively, the actions resulted in about $3.1 billion in orders for disgorgement, penalties and other relief. The Division also made its “first whistleblower payout to an individual who provided high-quality significant information that helped stop a multi-million dollar fraud.” The Division clearly expects more from this program in the future.

Top Ten D&O Stories of 2012 by Kevin LaCroix in The D&O Diary

The year just finished included dramatic and important developments involving elections, tragedies and natural disasters. While there was nothing in the world of directors’ and officers’ liability to match this drama, it was nevertheless an eventful year in the world of D&O, with many significant developments. By way of review of the year’s events, here is The D&O Diary’s list of the Top Ten D&O stories of 2012….

Corp Fin’s New Position on Use of “Vote All of Board’s Recommendation” Button by Broc Romanek in TheCorporateCounsel.Net

Recently, Broadridge sent this letter to companies explaining a big change going forward over how voting choices will be displayed. Here is an excerpt from the letter:

Broadridge, transfer agents and other service providers in the proxy distribution industry were recently informed of a new interpretive position being taken by the staff of the SEC that will affect the 2013 proxy season. Under that position, Broadridge and other service providers can no longer present shareholders with a “Vote with the Board’s Recommendations” button when soliciting proxies or voting instructions online, over the telephone, or through Broadridge’s unique mobile voting platform, unless they are also presented with a “Vote Against the Board’s Recommendations” button.

Former SEC Chair Pitt Says Two No-Action Letters Block SEC Review of Outsourcing Voting to Proxy Advisory Firms in Jim Hamilton’s World of Securities Regulation

In remarks at a Chamber of Commerce seminar on the role of proxy advisory firms, former SEC Chair Harvey Pitt said that, while the outsourcing of shareholder voting authority to proxy advisory firms is a breach of an existing fiduciary obligation, the chances of SEC enforcement actions in this area are slim to none. This is because of two SEC no-action letters issued in 2004, Egan-Jones Proxy Services and Institutional Shareholder Services, which effectively encouraged the outsourcing of voting authority to proxy advisory firms.

Keyword: Seizure by Scott Greenfield in Simple Justice

Tim Hamilton, artist of the Eisner-nominated adaptation of Ray Bradbury’s Fahrenheit 451, had his advance payment for the upcoming graphic novel ARMY OF GOD, a non-fiction telling of Joseph Kony’s activities in the Congo, seized by the OFAC under suspicion that the money was being laundering for a terrorist organization… The federal banking authority, which monitors every wire, foreign and domestic, apparently seized the funds due to the title of the book, ARMY OF GOD, which threw up a red flag.

Corporate Compliance in 2013: All About Seeing the Data by Matt Kelly in Compliance Week

In one form or another, I hear this complaint regularly: that compliance departments cannot achieve the visibility into corporate operations that they need if they’re to do their jobs effectively. Once upon a time, when we were still mired in a more paper-centric world, the complaint was that other business departments never took compliance seriously. Now (mostly) everyone does, but in the data-centric world, nobody really knows the full scope of what’s going on at the business anyway.

Compliance Bricks and Mortar for the End of 2012

It’s been a slow week in compliance. The highways and trains have been near empty during my commute. It seems there are more seagulls than people in the Financial District. But a few compliance-related stories caught my attention.

Why a Popular Subsidy for Banks Died in the Senate by John Carney in CNBC’s NetNet

The program, which is known as TAG, was launched during the financial crisis to support liquidity and bank stability. The basic idea was to cover non-interest bearing deposit accounts used for things like payrolls that exceeded the normal FDIC insurance limits. Banks could opt-in and pay a fee that was supposedly based on estimates of the program’s costs.

SEC v. Schooler: Real Estate Investment Fraud Shut Down by Sarah Emery in The Race to The Bottom

To obtain a preliminary injunction granted, the SEC must establish a prima facie case that the Defendants violated securities law and a reasonable likelihood that the violations will be repeated. Defendants asserted that the interests in the general partnerships were not securities.

The definition of security does not explicitly include interests in general partnerships. The SEC, however, asserted that the interests were investment contracts. An investment contract is a “a contract, transaction, or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.”

The Financial Planning Flowchart by Nick Summers and Karen Weise in Bloomberg
Take a deep breath and answer honestly:

I’m going to end with some grammar humor from my favorite comic Saturday Morning Breakfast Cereal:

Compliance Bricks and Mortar – Mayan Apocalypse Edition

If you’re reading this, then the Mayan Apocalypse didn’t happen. (At least not yet.) That means back to work and a look at some of the compliance stories that caught my attention recently.

Dispatches From the Front Lines of the Ethics & Culture Wars by Matt Kelly in Compliance Week

Does your organization know what its values actually are? That was the first question I asked at our roundtable, playing to the cynics who say most companies either don’t have clearly articulated values beyond the profit motive, or don’t bother telling employees what those values are. More than a few roundtable participants reluctantly agreed that the cynics have a point.

Cole-Frieman & Mallon LLP 2012 End of Year Checklist

December is the busiest month of the year for most hedge fund managers. In addition to all of the administrative details involved in closing out the year, the regulatory landscape has shifted dramatically over the past year. As a result, year-end processes and 2013 planning are particularly important, especially for General Counsels, Chief Compliance Officers and key operations and financial personnel. We have updated our own year-end checklist to help managers stay on top of these priorities.

More on “Chaos in the SEC’s Inspector General’s Office: ‘He Said, They Said'” in CorporateCounsel.net

The latest is that former Assistant Inspector General Weber has filed a $20 million lawsuit alleging he was fired for being a whistleblower. And the complaint is full of juicy details (which may – or may not – be true). Here are some articles on this development: …

Banks Behaving Badly or Brother Can You Spare A Billion (or Two)? by Tom Fox

Remember when a billion dollars was real money? Over the past couple of weeks there have been some mammoth fines paid by financial institutions for conduct, which would appear to fall under the category of “Banks Behaving Badly”. Last week HSBC agreed to pay a fine of $1.92 billion for its transgressions involving money laundering. UBS is in the final stages of negotiations to pay $1.5 billion to resolve allegations that it tried to rig interest rate benchmark (i.e. ‘Libor’) to boost trading profits. Finally, on December 10, coming in at a paltry $327 million are our old friends Standard Chartered, which admitted processing thousands of transactions for Iranian and Sudanese clients through its American subsidiaries; subsequently to avoid having Iranian transactions detected by the US Treasury Department computer filters, Standard Chartered deliberately removed names and other identifying information, according to the authorities. All in all, it’s not been a bad couple of weeks for the US Treasury, given the current stalemate over the ‘fiscal cliff’ and the need to reduce the US deficit.

Does The Victims Of Corporate Fraud Compensation Fund Deny Due Process? by Keith Paul Bishop in California Corporate & Securities Law blog

Under SB 1058, a person who obtains a final judgment against a corporation based upon the corporation’s fraud, misrepresentation, or deceit, made with intent to defraud, may after “diligent collection efforts” submit a claim to the Secretary of State for payment from the fund. Cal. Corp. Code § 2282. The Secretary of State is required to give notice to the corporation (which may contest granting of the application for payment). Cal. Corp. Code § 2282.1 The Secretary of State may deny or grant the application or may enter into a compromise with the claimant to pay less in settlement than the full amount of the claim. Cal. Corp. Code § 2284. The legislation expressly authorizes only the judicial review of a denial of a claim. Cal. Corp. Code § 2287. If the Secretary of State grants the application, she is subrogated to the claimant’s rights. Cal. Corp. Code § 2293.

Compliance Bricks and Mortar for December 14

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

‘Tis the Season When Gifts Become Bribes by Alexandra Wrage in Corporate Counsel

People who are otherwise serious about the global scourge of bribery get frustrated when anyone raises the issue of gifts as bribes. Surely, most people will say, we haven’t reached the point where holiday gift-giving is so risky that we can’t hand out bottles of wine or silks tie and scarves.

Do Lanny Breuer And Robert Khuzami Actually Read FCPA Enforcement Actions? by the FCPA Professor

At the Guidance press conference (see here) Khuzami said that he was “interested in companies spending compliance dollars in the most sensible way” and he hoped that the guidance and the hypotheticals provided would help companies as to where they can “minimize investment and where they can maximize it.” Breuer added that the DOJ wants compliance programs “to address real matters of concern.”

Against this backdrop, the question must be asked: do Breuer and Khuzami actually read FCPA enforcement actions?

Recent Foreign Corrupt Practices Act enforcement actions have involved, to name just a few, allegations about a bottle of wine (see here), a Cartier watch (see here), a camera (see here), kitchen appliances and business suits (see here), television sets, laptops and appliances (see here), and tea sets and office furniture (see here).

You Need a “Shadow” If You Want to be a RIA Today by Ernest E. Badway in Securities Compliance Sentinel

The SEC, recently, sued a private equity fund adviser for, among other things, allegedly violating Investment Advisers Act of 1940 Rule 206(4)-7, for failing to have procedures requiring verification of client signatures and instructions by a second person. See http://www.sec.gov/litigation/complaints/2012/comp-pr2012-244.pdf.

Dickering Over The Price by Scott Greenfield

The reason is that HSBC is too big to fail. If indicted or convicted of money laundering for drug cartels and terrorists, as alleged, London based HongKong Shanghai Banking Corporation could have toppled the banking system, with devastating consequences. It would have been a disaster for the economy, both ours and the worlds. Too big to fail.

So the government decided, in an exercise of discretion, to take whatever spare change they had in their pocket and call it even.

SEC Charges Eight Mutual Fund Directors for Failure to Properly Oversee Asset Valuation in the Securities Law Blog

The funds, which were invested in some securities backed by subprime mortgages, fraudulently overstated the value of their securities as the housing market was on the brink of financial crisis in 2007. The SEC and other regulators previously charged the funds’ managers with fraud, and the firms later agreed to pay $200 million to settle the charges.

Compliance Bricks and Mortar for December 7

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

High-Speed Trades Hurt Investors, a Study Says by Nathaniel Popper and Christopher Leonard in the New York Times

A top government economist has concluded that the high-speed trading firms that have come to dominate the nation’s financial markets are taking significant profits from traditional investors.

The chief economist at the Commodity Futures Trading Commission, Andrei Kirilenko, reports in a coming study that high-frequency traders make an average profit of as much as $5.05 each time they go up against small traders buying and selling one of the most widely used financial contracts.

The Encyclopedia of Ethical Failure… by Dan Ariely

Wondering whether you can ask someone to give you a PhD in exchange for a kickback? Curious whether you can get away with stuffing ballot boxes? Allow me to introduce you to the Encyclopedia of Ethical Failure. Every couple years the Department of Defense publishes the Encyclopedia (Word doc), which is likely the most sarcastic government document out there. Interestingly, golf and taxes seem to turn up a lot.

An introduction to behavioral ethics

A quarter of a century ago, as a young criminal defense lawyer, I began to be struck by how different the causes of many white collar crimes were from the then (and still) traditional view. The latter saw (sees) white collar crimes as based largely on rational calculations by profoundly bad individuals – what was then the Ivan Boesky model and now is best associated with Bernie Madoff. Although there are certainly offenses of this sort, many of the crimes of which I became aware seemed based more on environmental factors than on the indelibly bad characters of those involved. While the field did not exist at the time, this turned out to be my introduction to what was to become “behavioral ethics.”