Compliance Bricks and Mortar – Page 7

Compliance Bricks and Mortar – Florence Edition

To all of you in the path of Hurricane Florence, I wish you the best in your battle against the winds and rain. If you need something to read, these are some of the compliance-related stories that recently caught my attention

Why Compliance Programs Fail—and How to Fix Them by Hui Chen and Eugene Soltes in the Harvard Business Review

The ubiquity of corporate misconduct is especially surprising given the staggering amount firms spend on compliance efforts—the training programs, hotlines, and other systems designed to prevent and detect violations of laws, regulations, and company policies. The average multinational spends several million dollars a year on compliance, while in highly regulated industries—like financial services and defense—the costs can be in the tens or even hundreds of millions. Still, all these assessments deeply underestimate the true costs of compliance, because training and other compliance activities consume thousands of valuable employee hours every year. [More…]

When You Anonymously Report on Trump by Matt Kelly in Radical Compliance

Like millions of other Americans, I read that anonymous opinion column in the New York Timeslast week, apparently written by some senior official in the Trump Administration quietly aghast at the nuttiness of President Trump — and I thought, “Wow, that guy is a cowardly jackass.”

….

How would a compliance officer handle an anonymous report like that?

After all, that’s the closest approximation to what this missive is. An employee is raising alarms about executive misconduct, and doing so anonymously. Compliance officers field reports like that all the time. So what layers could we peel back and examine here, to appreciate how our own whistleblower reporting systems might work better? [More…]

A Retrospective on the Demise of Long-Term Capital Management by Paul L. Lee

LTCM was the largest hedge fund operating in the United States and its brush with death provided a preview of some of the forces that would contribute to the near collapse of the U.S. financial system in September 2008. In August and September 1998, as in September 2008, market fears were all consuming. Secretary of the Treasury Robert Rubin was quoted at the time as saying that “the world is now experiencing its worst financial crisis in 50 years,” and Chairman of the Federal Reserve Board Alan Greenspan said that “he had never seen anything in his lifetime that compared to the terror of August 1998.” Ironically, the success of the U.S. authorities in minimizing the effects of the near collapse of LTCM and the effects of other market disruptions in the 1990s may have lulled the markets and the authorities themselves into a false sense of confidence in their ability to manage future crises.[More…]

How CEOs Reinvented the Dating Game Scandal in Stock Options by Edmund L. Andrews

In Dating Game 2.0, however, many top executives appear to be reaping the same kinds of windfalls with a new variant on the original scam. Instead of manipulating the dates of option grants to match a dip in the stock price, companies appear to be manipulating the stock price itself so that it’s low on the predetermined option date and higher right afterward. [More…]

Compliance Bricks and Mortar for September 7

These are some of the compliance-related stories that recently caught my attention or I missed while on vacation.

SEC Ratifies Appointment of ALJs and Lifts Stay on Pending Administrative Proceedings

The Securities and Exchange Commission (“SEC” or “Commission”) has issued an order clearing the way for cases to proceed before its own administrative law judges (“ALJs”), notwithstanding a Supreme Court decision issued earlier this year that declared the SEC’s prior appointment of ALJs to be unconstitutional. Respondents in nearly 200 SEC proceedings with pending cases will now be granted the opportunity to have their case reheard by a different ALJ. Through the ratification order, the Commission has also attempted to comply with the Appointments Clause of the Constitution. Whether this post hac ratification passes constitutional muster, however, remains to be tested in the courts. [More…]

Compliance, Monitoring, and Future CCOs by Matt Kelly

“Do you think I need to be a lawyer to be a chief compliance officer?”

Oh boy. That question again. [More…]

Respondents denied recovery of legal fees in first post-Lucia ALJ decision by Amanda Maine, J.D. In Jim Hamilton’s World of Securities Regulation

An SEC administrative law judge (ALJ) rejected an application for recovery of legal fees and expenses from two firms who had prevailed against the SEC’s Division of Enforcement last year and successfully had proceedings against them dismissed. While the ALJ found that the applicants had demonstrated their eligibility for recovery of legal fees and expenses under the Equal Access to Justice Act (EAJA), the SEC’s action had been substantially justified, even though it was eventually dismissed. The decision was the first initial decision issued by an ALJ following the Supreme Court’s Lucia decision, which determined that the ALJ in that proceeding was not appointed by the Commission in conformity with the Constitution. The Commission stayed all administrative proceedings following Lucia, but the stay was allowed to expire on August 22. The applicants waived their rights under Lucia to a new hearing before a different judge (In the Matter of Donald F. (“Jay”) Lathen, Jr., Release No. ID-1259, Patil, S.). [More…]

Adviser Pays $1.9 Million SEC Penalty For False Ads by T. Gorman in SEC Actions

In 2003 the firm created an analysis internally known as “research proof.” It calculated annualized returns from February 1995 — the earliest point for which the firm had stored fundamental ratings –for six hypothetical baskets of stocks. In 2006 MFS began using the research proof analysis in advertisements. The charts compared annualized returns from February 1995 through the date of publication for research proof’s hypothetical baskets. The charts showed that the hypothetical portfolios of “buy” stocks at the fundamental quant intersection performed better than either the hypothetical portfolio stocks rated “buy” by the firm’s quantitative models or the hypothetical portfolio of stocks rated “buy” by the adviser’s fundamental research. The same was true on the sell side. Stated differently, the charts illustrated the point that over time blended stock ratings provided better return potential than either fundamental or quantitative ratings alone. [More…]

What Happened to “Meaningfully Close Personal Relationship” in Insider Trading? by Peter Henning in The CLS Blue Sky Blog

An interesting question is whether the convictions in Newman of the two hedge fund portfolio managers might have survived after Martoma. The government’s lack of evidence of their knowledge of the benefit would likely defeat the prosecution, especially as they were third- and fourth-level tippees. But the relationship between the sources of the information and the initial tippees might have been enough to establish the quid pro quo under Martoma’s analysis. So long as there is an intention to benefit the recipient, there is unlawful tipping. [More…]

Compliance Bricks and Mortar for August 17

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

Compliance Activists vs. Effective Compliance Professionals by Roy Snell

Some of the most ineffective compliance professionals I have met run up and down the hall with their hair on fire over every little thing. Ineffective compliance professionals see their role as that of an activist. They are very visible and vocal. They see all that is wrong with the world, and they don’t recognize much of what is right with the world. They see the bad in people and seem to ignore the good in people. [More…]

The Summer of Ben DiPietro by Tom Fox in FCPA Compliance & Ethics

Last week Ben DiPietro announced his retirement from the Wall Street Journal (WSJ) Risk and Compliance Journal via Twitter. For a journalist practicing his trade in the realm of compliance in the early 21^stcentury, it certainly was an appropriate manner to communicate with his readers. Ben wrote, “OK, some breaking personal news: I’ve given notice to @wsj, my last day is Aug. 14. What’s next? Stay tuned!!!!!”.

Even if you were not lucky enough to meet Ben in person, if you are in the compliance field you are certainly familiar with his work on the Risk and Compliance Journal. It is the only major US publication reporting on compliance, its enforcement and risk on a daily basis. It is required reading for all compliance professionals to keep abreast of the top stories of the day. But more than simply the daily news, the Risk and Compliance Journal is able to get some truly must-readpieces in with a ridiculous low word limit which I find nothing short of phenomenal. [More…]

Do Import Tariffs Help Reduce Trade Deficits? by Mary Amiti, Mi Dai, Robert C. Feenstra, and John Romalis in Liberty Street Economics

The fact that the United States imports far more than it exports is viewed by some as unfair, so the idea is to try to reduce the amount that the nation imports from the rest of the world. While more costly imports are likely to reduce the quantity and value of imports into the United States, the story does not stop there, because we cannot presume that the value of exports will remain unchanged. In this post, we argue that U.S. exports will also fall, not only because of other countries’ retaliatory tariffs on U.S. exports, but also because the costs for U.S. firms producing goods for export will rise and make U.S. exports less competitive on the world market. The end result is likely to be lower imports and lower exports, with little or no improvement in the trade deficit. [More…]

The Pension Hole for U.S. Cities and States Is the Size of Germany’s Economy by Sarah Krouse in the Wall Street Journal

Many cities and states can no longer afford the unsustainable retirement promises made to millions of public workers over many years. By one estimate they are short $4 trillion, an amount that is roughly equal to the output of the world’s fourth-largest economy.

Certain pension funds face the prospect of insolvency unless governments increase taxes, divert funds or persuade workers to relinquish money they are owed. It is increasingly likely that retirees, as well as new workers, will be forced to take deeper benefit cuts. [More…]

Bullet-Proof Vest Whistleblower Aaron Westrick Receives Pillar Award by Ben Kostyack & Michael Ellis in the Whistleblower Protection Blog

Dr. Aaron Westrick was formerly the Director for Research and Marketing at Second Chance Body Armor (SCBA), which was the largest bullet proof vest company in the United States at the time. In 2001, a Japanese company, Toyobo, informed SCBA that the vests they were selling to American police departments, federal law enforcement agencies, and the U.S. military were unsafe. [More…]

Crime Policy Doesn’t Cover Employee Credit Card Overcharge Losses by Kevin LaCroix in The D&O Diary

A recent coverage dispute involving a Nevada club’s losses resulting from its employees’ theft from the club’s customers’ credit cards raises interesting issues with implications for coverage questions for other kinds of losses for which policyholders are seeking crime policy coverage. In the recent Nevada club credit card fraud case, District of Nevada Judge Andrew Gordon held that the club’s crime policy did not cover the club’s losses from the employees’ theft of funds from the customers’ credit card accounts because the losses did not result directly from the employees’ theft. [More…]

Compliance Bricks and Mortar for August 10

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

Automation & Control Lessons in Latest SEC Enforcement by Matt Kelly in Radical Compliance

We have an interesting enforcement action from the Securities and Exchange Commission this week, where the agency dinged a telecom company and its former executives $1.9 million for misleading statements on revenue projections.

The kicker: it looks like the company’s own sales automation software created the audit trail that painted the company into an enforcement corner. [More…]

Assessing the E&C Investigations Process

Investigations are one of the more difficult and riskier activities of an E&C program. Poorly-conducted investigations can create serious legal risks for an organization. In addition, the mishandling of investigations can damage the way in which employees perceive E&C programs, in particular where the report was initially made to the E&C department, through a hotline or otherwise. The mishandling of E&C investigations can corrode the sense of organizational justice and the culture of ethics and compliance at an organization. In short, E&C-related investigations are a serious business, and assessing them is therefore an important component of assessing an E&C program. [More…]

Embrace the best compliance resource of all by Richard Bistrong

I agree with Martin’s premise that through too much standardization, we might lose the best compliance resource we have: our gut. He’s right to warn that a myopic focus on “running searches and ticking the boxes” can divert our attention from the atmospherics of transactions, where a hunch might lead to hitting the pause button, even if we’re not sure exactly why. [More…]

Securities Regulation Daily’s top 10 developments for July 2018 by Brad Rosen, J.D.

As summer heads into its final stretch, Securities Regulation Daily will continue bringing all the legal and regulatory news for the financial markets fit to print. As always … stay tuned. [More…]

Compliance Bricks and Mortar – PMC Edition

As you’re reading this Friday, I’m somewhere between the New York state line and Sturbridge, Mass. for an extra day of riding before the official Pan Mass Challenge starts on Saturday. A huge number of supporters of Compliance Building have donated in support of the ride, with 100% of that money going to the Dana-Farber Cancer Institute to help fight cancer.

I’m leaving this one last request to donate. If you donate by Sunday morning, the bonus is that I will get the notification about your donation while I’m on the bike ride, providing some extra motivation to my tired legs. Donate Here: http://profile.pmc.org/DC0176

Is Silence Golden? Negative Effects of Mandatory Disclosure by Sudarshan Jayaraman and Joanna S. Wu in the CLS Blue Sky Blog

Disclosure regulation is a cornerstone of modern securities markets. Its economic consequences have been extensively studied and heavily debated. A widely recognized benefit of mandatory disclosure is that it levels the playing field by publicly disclosing to everyone what is known only to sophisticated investors. This leveling reduces trading costs and consequently reduces the firm’s cost of capital.

In our recent paper, available here, we show that this reduced informational advantage of sophisticated investors is not unambiguously desirable. In particular, when sophisticated investors stop trading in a firm’s stock, there is a reduction in the ability of firm managers to glean decision-relevant information from the stock price. In other words, mandatory disclosure impedes the feedback effect of stock prices on managerial decisions, which in turn could harm investment efficiency. [More…]

Measuring the impact of Ethics and Compliance Programs by Thomas Fox

How does one measure the impact of a corporate compliance program? One of the key metrics of a corporate compliance program is to demonstrate the effectiveness of corporate compliance programs. Slowly but surely a body of work is being built up to demonstrate that companies which invest in greater compliance are more profitable. Recently the Ethics & Compliance Initiative (ECI) added to the growing body of work in the release of their report entitled “Measuring the Impact of Ethics and Compliance Programs” (the ECI Report). [More…]

Bitcoin believers are flocking to a sympathetic SEC commissioner’s Twitter account by John Detrixhe

Peirce’s social media exposure got a boost from a Reddit user who goes by lamb0x, who called for readers on the site to “show her some love from the Crypto Community.” She’s not the first buttoned-down American official to win Twittersphere adoration—the chairman of the Commodity Futures Trading Commission, J. Christopher Giancarlo, had his turn in February after he gave senators an unexpected education on crypto slang during a hearing. [More…]

With Clock Ticking Faster on Its Cases, the S.E.C. Faces a Quandary by Peter Henning

At issue is the court’s ruling a year ago in Kokesh v. Securities and Exchange Commission. The decision imposed a five-year window on the agency to seek repayment of any ill-gotten gains. Already, the decision has resulted in the dismissal of an overseas bribery case because the S.E.C. took too long to file the charges and has spurred a lawsuit demanding that the agency repay billions of dollars it has recovered in other cases.

The challenge for the S.E.C. will be whether it can adjust to the restrictions without their hindering its enforcement. If the agency can’t, it will have to persuade Congress to give it more time to pursue charges when the underlying misconduct might not come to light until years later. [More…]

Compliance Bricks and Mortar for July 27

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

Commission extends post-Lucia stay 30 more days By Rodney F. Tonkovic, J.D.

The SEC has extended a stay of pending administrative proceedings for an additional 30 days. The initial order was issued on June 21, 2018 and stayed pending administrative proceedings until July 23, 2018, or further order. The Commission stated that it finds it prudent to extend the stay until August 22, 2018, or further order of the Commission (In re Pending Administrative Proceedings, Release No. 33-10522, July 20, 2018). [More…]

Tippees and Tippers: The Impact of Martoma II by John C. Coffee, Jr. in the CLS Blue Sky Blog

This is a column for insider trading junkies—a special breed who love all the nuances in this very nuanced subject. Late last month, a Second Circuit panel did something fairly unusual: It withdrew a 2017 decision and substituted a new opinion with a new rationale (but still with the same 2-1 division on the panel). The new decision in United States v. Martoma[1] has a less sweeping and more defensible rationale but still deviates from the law in other circuits. In addition, it has some nuances that future cases are certain to explore. Chief among these is the status of gossip: Can it be viewed as a “gift” with the tipper constructively trading and distributing the proceeds to the tippees? [More…]

Loyalty and conflicts of interest by Jeff Kaplan

Movie mogul Samuel Goldwyn famously said “I’ll take fifty percent efficiency to get one hundred percent loyalty.” But too much loyalty may be bad for reasons that go beyond inefficiency, as indicated by President Trump’s call for then FRI director Comey to be loyal to him. [More…]

Lessons in AI and Data for Compliance from the Houston Astros by Tom Fox

Yet all was forgotten and forgiven with the World Series win. It also turns out my razzing had very little impact on the Astros as now the story of how the Astros went from literally the worst team ever in baseball to World Series Champions has been chronicled by Sports Illustrated writer Ben Reiter in his book “Astroball: The New Way to Win It All”. The book tells the story of how two persons had a vision of using data analytics to literally change the game of baseball. The two men were Jeff Luhnow, the former Director of Scouting for the St. Louis Cardinals, and former NASA rocket scientist Sig Mejdal, who became Luhnow’s assistant at the Astros. Team owner Jim Crane had the foresight to buy into Luhnow’s vision and the wherewithal to put up with people like me who were unpitying in their criticism of the Astros and their plan. It turns out they did have a plan and, more importantly, they executed it. [More…]

Kristin Snyder Named Deputy Director of OCIE

Ms. Snyder has been with the SEC for 15 years. She has served as the Co-National Associate Director of OCIE’s Investment Company/Investment Adviser examination program since August 2016 and as the Associate Regional Director for Examinations in the SEC’s San Francisco office since November 2011. She will continue in both of these roles while also assuming this additional leadership role in OCIE. As Deputy Director, Ms. Snyder will oversee many of the office’s strategic initiatives and serve as the regional advisor to OCIE Director Peter B. Driscoll. [More…]

You Want What?: Responding to Individual Requests Under the GDPR by Jeremy Feigelson, Jane Shvets, and Christopher Garrett

With the EU General Data Protection Regulation (“GDPR”) in force for less than two months, many companies are already experiencing an increase in requests from individuals seeking to obtain a copy, or request correction or erasure, of their personal data under Articles 15 to 17 of the GDPR.

Do we have to respond?

Yes. A response is required even if the response is that the company will not honour the request because a relevant exemption applies.

[More…]

Pan Mass Challenge
On Pan-Mass Challenge weekend, August 3 – 5, I will bike across Massachusetts to raise money for life-saving cancer research and treatment at Dana-Farber Cancer Institute. 100% of your donation will go to cancer research and treatment at Dana-Farber Cancer Institute through its Jimmy Fund. I have made a personal commitment to raise $8000.00. I hope, that as a reader of Compliance Building, you will support my fundraising effort. You can donate through any of the following links:

Thank you,
Doug

Compliance Bricks and Mortar for July 20

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

Compliance 101: Defining a Control by Matt Kelly in Radical Compliance

Last week I was speaking at an ethics and compliance event in Houston, where one of the other speakers stumped the crowd with a deceptively simple question: What is a control?

After all, compliance officers talk about controls constantly. Effective controls are the lifeblood of what makes a compliance program work. Most of us can rattle off examples of controls, or recognize a control when we see one.

So my fellow speaker asked the audience: What is a control? [More…]

Demise of LIBOR benchmark takes center stage at MRAC meeting by Brad Rosen, J.D.

“LIBOR is a widely utilized benchmark that is no longer derived from a widely traded market. It is an enormous edifice built on an eroding foundation—an unsustainable structure,” stated CFTC Chairman J. Christopher Giancarlo in his opening remarks at the agency’s Market Risk Advisory Committee (MRAC) meeting held in Washington, D.C. In a similar vein, Commissioner Rostin Behnam, the committee’s sponsor, identified the rampant misconduct incited by the benchmark’s decline, noting that “LIBOR has been subject to pervasive fraud, abuse, and manipulation. Since June 2012, the CFTC has levied sanctions of more than $3.3 billion for LIBOR-related misconduct.” [More…]

6th Circ.: Crime Policy’s Computer Fraud Section Covers Email Scheme Losses by Kevin LaCroix in The D&O Diary

In the second policyholder-favorable federal appellate court decision on the issue in a matter of days, the Sixth Circuit has held that the Computer Fraud provisions of a commercial crime policy cover a company’s losses from an email payment instruction fraud scheme. Just last week, the Second Circuit ruledin the Medidata case that Computer Fraud coverage applied to losses incurred in a similar email scam. However, the Sixth Circuit’s decision may be even more helpful for policyholders as, unlike the Second Circuit’s decision, the policyholder-favorable ruling is not as dependent on very specific factual determinations about the way the fraudster manipulated the harmed company’s email program. The Sixth Circuit’s July 13, 2018 decision in the American Tooling Center (ATC) opinion can be found here. [More…]

The Premium for Money-Like Assets by Marco Cipriani and Gabriele La Spada in Liberty Street Economics

Several academic papers have documented investors’ willingness to pay a premium to hold money-like assets and focused on its implications for financial stability. In a New York Fed staff report, we estimate such premium using a quasi-natural experiment, the recent reform of the money market fund (MMF) industry by the Securities and Exchange Commission (SEC). [More…]

Two Recent Cases Highlight the Insider Trading Risks Associated with Cyber Breaches by Avi Gesser, James H.R. Windels, Joseph A. Hall, Laura Turano, and Zachary Shapiro in NYU Laws Compliance Enforcement

The recent convictions of two traders for using hacked press releases and the settlement of SEC insider trading charges against a former Equifax manager highlight the significant insider trading risks companies face when dealing with a cyber event. These risks come in two forms.

First, there is the risk that someone (either inside or outside the company) has gained unauthorized electronic access to material nonpublic information (“MNPI”) about the company or one of its business or transaction partners, and will use that information for illegal securities trading purposes. [More…]

Thank you,
Doug

Compliance Bricks and Mortar for July 13

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

SEC Investor Advocate’s 2019 objectives include broker-dealer standards of conduct, Kokesh concerns by Amanda Maine, J.D. in Jim Hamilton’s World of Securities Regulation

The SEC’s Office of the Investor Advocate (OIA) has submitted a report on its objectives for fiscal year 2019, which begins on October 1, 2018. The report expects the Commission to examine the impact on investors from proposed changes in the standards of conduct for broker-dealers, updates to its transfer agent and ETF rules, and enhancements to disclosures by mutual funds and variable annuities. The report also states that the SEC is considering possible approaches to help restore its ability to impose disgorgement orders after five years in the wake of the Kokesh decision, which may require legislative intervention. [More…]

A tiny nugget from the SEC’s new FOIA rules by Cydney Posner in Cooley Pubco

Yesterday, the SEC posted final amendments to its rules related to FOIA, the Freedom of Information Act, to conform to the FOIA Improvement Act of 2016 and to otherwise update and streamline the regulations. The changes will become effective 30 days after publication in the Federal Register. Due to the scope of the amendments, these final FOIA rules replace the SEC’s existing FOIA rules in their entirety, revamping the organization of the rules. What does that mean? It means that your standard form FOIA SEC rule references are probably soon to be out of date. [More…]

Three Insider Trading Cases by T. Gorman in SEC Actions

Despite the plethora of often complex judicial opinions the basic offense has remained the same: a corporate insider with confidential, material, non-public information that belongs to the firm converts it to his or her personal use either trading for their own account or furnishing the information to a relative or friend who trades and obtains the profits. Two new cases filed by the Commission and one jury verdict in a criminal case illustrate the point. [More…]

The Jim Jordan Compliance Angle… by Matt Kelly in Radical Compliance

Interesting detail about the proto-scandal swirling around Jim Jordan, the Republican congressman accused of turning a blind eye to sexual misconduct on the Ohio State wrestling team when he was assistant coach there: Jordan might have violated the school’s sexual harassment Code of Conduct.

For those not following this story, Jordan has represented Ohio’s 4th congressional district since 2007, and is a leading voice in the Tea Party wing of the party. He also worked as an assistant coach for the Ohio State wrestling team from 1987 to 1995. Earlier this month, numerous former wrestling students from that era accused Jordan of ignoring complaints they tried to raise about sexual abuse from a team doctor, Richard Strauss, who committed suicide in 2005. [More…]

Assessing compliance training by Kaplan & Walker

Training is not just another part of every C&E program; it is generally the part that touches the work lives of more of a company’s employees than do other elements. It should therefore be a significant focus of any program assessment. The possible avenues of inquiry here are broad, as one would imagine, and each assessment will have its own areas of particular focus. But a partial list of core training assessment questions might include the following. [More…]

U.S. Finance Watchdog Takes Aim at Cryptocurrency

The Financial Industry Regulatory Authority (FINRA), a self-regulatory body for broker-dealersm has released a regulatory notice to mandate its member to notify the authority if they engage in any cryptocurrency activity. Though the notice outlines what constitutes cryptocurrency activities, it does not detail how FINRA would use these disclosures nor does its website show any explanation. Since the self-regulatory body focuses on protecting retail investors in all financial markets, it can be assumed that the disclosures would help in this goal. [More…]

Thank you,
Doug

Compliance Bricks and Mortar for June 15

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

Is Over-Regulation Really the Reason There are Fewer IPOs? by Kevin LaCroix

There is one aspect of Coffee’s analysis that in my mind warrants further consideration. In discussing the advantages for smaller companies of raising money through venture capital or private equity rather than by going public, he notes that in the private markets “litigation risk is lower.” In a later section of his paper, Coffee notes that many of the costs of going public are “hidden,” noting, for example, the concerns small companies considering an IPO may have that when public “a stock price drop might spur litigation.” Coffee does not further elaborate on the possible impact that litigation fears could be having on smaller companies’ decisions to go public, nor does he suggest what might be done to address these concerns. However, it is noteworthy (and to me it rings true) that litigation fears could be among the reasons holding back smaller companies from going public. [More…]

Why Law Firms Should Never Accept Their Fees in Cryptocurrency by John Reed Stark

But having said all of the above, the risks for a law firm that accepts cryptocurrency run a perilous gamut of legal, regulatory, financial, ethical and reputational dangers. Simply stated, accepting cryptocurrency as a fee payment in today’s crypto-manic environment is, despite all of the bus dev allure, just not worth it. [More…]

Wall Street’s Top Cop Chases Loose Change by Stephen Gandel

But 13 months in, Clayton’s SEC appears to be giving quality short shrift, at least as measured by the settlements it is reaching. According to a recent, previously unreported study conducted by Urska Velikonja, a professor of law at Georgetown University, the SEC’s monetary punishments plunged 93 percent in the period from October 2017 to March 2018 — the first half of the SEC’s 2018 fiscal year — compared with the amount in the period a year earlier. The total of $102 million was down from $1.4 billion and was the lowest of any similar period for at least the past 12 years. The number of cases in the same period was down by a quarter. That suggests Clayton has refocused the SEC’s lens on either smaller fish or smaller frauds. [More…]

Insiders Pocket Gains on Buybacks, Vexing Regulator by Gretchen Morgenson and Tom McGinty

Taking advantage of price bumps that often accompany share-repurchase announcements, company executives have been selling significantly more of their stock immediately after the news than they do beforehand, according to an analysis by Robert J. Jackson, Jr. , a commissioner at the Securities and Exchange Commission. [More…]

FAQs on ZTE’s Compliance Settlement by Matt Kelly

The settlement calls for ZTE to hire a “special compliance coordinator,” who will be selected by the U.S. Bureau of Industry and Security. The “SCC” will have a term of 10 years, and report both to ZTE’s chief executive and board of directors; and to BIS. This person will “coordinate, monitor, assess, and report on” all compliance activities by ZTE. He or she will also have authority “to employ at ZTE’s expense as many assistants and other professional staff… as are reasonable.” The agreement mentions a minimum of six assistants. [More…]

Compliance Bricks and Mortar for June 1

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

What can we learn from employee reimbursement program disasters? by Julie DiMauro

Boston-based mutual fund company Fidelity fired or let resign about 200 people during the past year after discovering that some employees misused the firm’s partial-reimbursement program, the Wall Street Journal reported, citing a source familiar with the matter. [More…]

The Irrepressible Myth That SEC Overregulation Has Chilled IPOs by John C. Coffee, Jr.

If high regulatory costs and SEC overregulation were a cause of low and decreasing IPO volume, this would be a uniquely American problem. But it is not. IPO volume has declined even more dramatically in Canada and has declined on a level comparable to the U.S. in Europe and Japan. Because Canada has no national securities regulator, the decline of IPOs in Canada cannot be blamed on an overregulating national regulator. [More…]

Whistleblowing Hotlines: A Gray Area Under EU’s New Privacy Law by Henry Cutter

“The ambiguity is there,” said Vera Cherepanova, a compliance consultant based in Milan who wrote a paper for the FCPA Blog on how GDPR will affect the whistleblowing process. “For compliance officers, the problem is that we are not the center. We are not the key concept of the GDPR and basically no one is issuing any official information for us.” [More…]

A View From Virginia: Is It Ethical for Lawyers to Accept Bitcoins and Other Cryptocurrencies? by Sharon D. Nelson and John W. Simek & Jim McCauley

Nebraska is the only state we are aware of that has issued an ethical opinion specifically for Bitcoin usage. Nebraska’s opinion states that lawyers may accept payments in digital currencies, but must immediately convert them into U.S. dollars. Any refund of monies is also made in U.S. dollars and not in digital currency. [More…]