Compliance Bits & Pieces for MF Global Edition

MF Gloabl clearly took a big bet on European sovereign debt. It looks like Jon Corzine, the head of the company, essentially went “all-in” and bet the company on the trades.  He lost. His counterparties called collateral and the company quickly lost liquidity and solvency. On Halloween, MF Global filed for bankruptcy, listing $39.7 billion in debt and $41 billion in assets and put thousands of people out of work.

Unfortunately, it looks like some of the customer accounts were tied up in the company’s proprietary trading. It looks like $1.2 billion is missing from customer accounts.

MF Global and the great Wall St re-hypothecation scandal by Christopher Elias in Thomson Reuters

Under the U.S. Federal Reserve Board’s Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client’s liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets.

But in the UK, there is absolutely no statutory limit on the amount that can be re-hypothecated. In fact, brokers are free to re-hypothecate all and even more than the assets deposited by clients. Instead it is up to clients to negotiate a limit or prohibition on re-hypothecation. On the above example a UK broker could, and frequently would, re-hypothecate 100% of the pledged securities ($500).

Statement of Jon S. Corzine before the US House of Representatives Committee on Agriculture (.pdf)

Recognizing the enormous impact on many peoples’ lives resulting from the events surrounding the MF Global bankruptcy, I appear at today’s hearing with great sadness. My sadness, of course, pales in comparison to the losses and hardships that customers, employees and investors have suffered as a result of MF Global’s bankruptcy. Their plight weighs on my mind every day – every hour. And, as the chief executive officer of MF Global at the time of its bankruptcy, I apologize to all those affected.

Before I address what happened, I must make clear that since my departure from MF Global on November 3, 2011, I have had limited access to many relevant documents, including internal communications and account statements, and even my own notes, all of which are essential to my being able to testify accurately about the chaotic, sleepless nights preceding the declaration of bankruptcy. Furthermore, even when I was at MF Global, my involvement in the firm’s clearing, settlement and payment mechanisms, and accounting was limited.

Corzine Rebuffed Internal Warnings on Risks by Aaron Lucchetti and Julie Steinberg in the Wall Street Journal

MF Global Holdings Ltd.’s executive in charge of controlling risks raised serious concerns several times last year to directors at the securities firm about the growing bet on European bonds by his boss, Jon S. Corzine, people familiar with the matter said.

The board allowed the company’s exposure to troubled European sovereign debt to swell from about $1.5 billion in late 2010 to $6.3 billion shortly before MF Global tumbled into bankruptcy Oct. 31, these people said. The executive who challenged Mr. Corzine resigned in March.

The disagreement shows that concerns about the big bet grew inside the company months before the trade rattled regulators, investors and customers. The executive, Michael Roseman, whose title was chief risk officer, also expressed concerns directly to Mr. Corzine in meetings of just the two men and with other people present, people familiar with the situation said.

The Corzine lesson on executive departures by Theo Francis in Footnoted*

The only other indicator that something might be wrong was the fact that MF Global paid Roseman $1.35 million as he left. But this is all MF Global’s July proxy had to say on the subject:

“Mr. Michael Roseman’s employment with the Company ended effective March 31, 2010. In connection with his separation from the Company, Mr. Roseman was paid severance totaling $1,350,000 under his employment agreement. Mr. Roseman’s severance payment was calculated by adding his fiscal 2011 target cash bonus amount ($500,000), his fiscal 2011 target equity bonus amount ($500,000) and his fiscal 2011 salary ($350,000). All of Mr. Roseman’s unvested restricted stock units vested as of March 31, 2011.”

This is where reading between the lines becomes so critical. Executives who quit of their own volition, especially non-CEOs, rarely get big bucks on their way out the door. Often, that’s a sign that they went unwillingly. And yet, it offers no hint as to why he left: Poor performance? Personality conflict? Someone’s brother-in-law needed a job? There are a million potential reasons, good and bad, for easing someone out, and investors shouldn’t be left to guess.

Paperwork Dotted with Legal-Sounding Gibberish

Whenever you hear about a “prime bank” investment opportunity, walk away. A prime bank opportunity generally is described by the sponsor as an international investing program involving complex financial instruments that are too technical and complicated for non-experts to understand. If it’s too technical for you to invest why would you? – Astronomical returns are promised in exchange for secrecy about this lucrative international banking platform.

The SEC’s case against Frank L. Pavlico and his firm, The Milan Group, was just another prime bank scheme. It caught my eye because the SEC also brought charges against a lawyer involved in the scheme, Brynee K. Baylor.

What kept my attention was this quote from Stephen L. Cohen, Associate Director of the SEC’s Division of Enforcement:

“Pavlico and Baylor produced paperwork dotted with legal-sounding gibberish designed to deceive investors into believing this is a highly-sophisticated investment opportunity.”

And in the complaint:

“These documents were legal-sounding gibberish dotted with meaningless legal and financial terms that were designed to deceive investors into believing they were participants in a legitimate investment.”

A complaint by one of the deceived investors (.pdf) lays out what the scheme was offering. if the investor would deposit $325,000 into Baylor’s trust account Milan would provide a leased instrument with a value of $10 million. This would then be monetized and the resulting funds would be used to acquire a larger instrument.

These are just allegations, nothing has been proven and the defendants have not settled the charges.

Sources:

SEC Targeting Suspicious Investment Returns

Last week, the SEC announced THREE actions against investment advisers for compliance failures. The Securities and Exchange Commission has turned the dial a little higher and announced FOUR enforcement actions against multiple hedge funds by identifying abnormal investment performance. (Does their dial turn all the way up to 11?)

The SEC launched an initiative to combat hedge fund fraud by identifying abnormal investment performance — the Aberrational Performance Inquiry. Back in March, SEC Enforcement Director Robert Khuzami revealed during congressional testimony that the SEC had launched an initiative that would focus on funds that consistently outperform the market.  Enforcement is now focusing on hedge funds that outperform “market indexes by 3% and [are] doing it on a steady basis.” Khuzami referred to such performance as “aberrational,” and stated that Enforcement is “canvassing all hedge funds” for such “aberrational performance.” The SEC Enforcement Division’s Asset Management Unit uses proprietary risk analytics to evaluate hedge fund returns. Performance that appears inconsistent with a fund’s investment strategy or other benchmarks can form a basis for further scrutiny. This initiative came directly from from the Madoff scandal. If they had focused on Madoff’s consistent and aberrational returns, the SEC may have caught him sooner.

Half a year later, Khuzami is crediting Aberrational Performance Inquiry initiative with these four enforcement actions.

Michael Balboa and Gilles De Charsonville

These two were nabbed for overvaluing the reported returns and net asset value of the Millennium Global Emerging Credit Fund, organized to invest in sovereign and corporate debt instruments from emerging markets. Among the fund assets were Nigerian payment adjusted warrants and Uruguayan value recovery rights.

In October 2008, the hedge fund’s reported assets were $844 million. The SEC’s complaint alleges that Balboa, the fund’s former portfolio manager, schemed with two European-based brokers including Gilles De Charsonville to inflate the fund’s reported monthly returns and net asset value by manipulating its supposedly independent valuation process.

Apparently the SEC found Balboa’s action particularly egregious because the the U.S. Attorney’s Office for the Southern District of New York announced the arrest of Balboa and filing of a criminal action against him.

According to the SEC complaint, from at least January to October 2008, Balboa provided De Charsonville and another broker with fictional prices for two of the fund’s illiquid securities holdings for them to pass on to the fund’s outside valuation agent and its auditor. The scheme caused the fund to  overvalue these holdings by as much as $163 million in August 2008.  That meant falsely-positive monthly returns, millions of dollars more in management fees, another $410 million in new investments, and the avoidance of  about $230 million in redemptions.

The SEC is crediting their new initiative with this enforcement action, but the fund has been in liquidation since October of 2008.

ThinkStrategy Capital Management and Chetan Kapur

The SEC charged ThinkStrategy Capital Management LLC and its sole managing director Chetan Kapur with fraud in connection with two funds. ThinkStrategy Capital Fund was an equities-trading fund that ceased operations in 2007.  TS Multi-Strategy Fund was a fund of hedge funds. At its peak in 2008, ThinkStrategy managed approximately $520 million in assets.

The SEC’s complaint alleges that ThinkStrategy and Kapur engaged in a pattern of deceptive conduct designed to bolster their track record, size, and credentials. They materially overstated the performance of the Capital Fund and gave investors the false impression that the fund’s returns were consistently positive and minimally volatile. ThinkStrategy and Kapur also repeatedly inflated the firm’s assets, exaggerated the firm’s longevity and performance history. In 2008 they reported a 4.6% return when they actually had a -89.9% return. It looks like the trouble started in June of 2006.

They also made claims about the quality of their due diligence checks. Unfortunately, they ended up invested in the Bayou Superfund, Valhalla/Victory Funds and Finvest Primer Fund, each of which was revealed to be engaged in serious fraud.

ThinkStrategy also faked a management team, listing several individuals as principals or directors who had no affiliation with the firm. A few were Kapur’s classmates at Wharton. Kapur himself claimed to have an MBA from Wharton, even though he only had an undergraduate degree. Kapur claimed to have over 15 years of experience as an “investor, money manager, researcher, and system designer”. That means he would have started his career in 1988 at the age of 14.

As with most SEC settlements, these are merely allegations against Kapur and ThinkStrategy which they neither admit or deny.  The funds wound down over a year ago and other investors brought suit. In this case, I’m not sure you can credit the SEC with shutting down a bad fund using this Aberrational Performance Inquiry initiative.

Patrick Rooney and Solaris Management

According to the SEC’s complaint, Rooney and Solaris made a radical change in the fund’s investment strategy, contrary to the fund’s offering documents and marketing materials, by going all in for Positron Corp. In late 2008, Solaris held over 1.1 billion shares of Positron stock and had liquidated all of its non-Positron investments.

That’s certainly a risky binary bet on one company. You don’t usually see concentrated, undiversified, and illiquid position in a cash-poor company with a lengthy track record of losses.

The big problem was that Rooney was also the Chairman of Positron  and received salary and stock options from Positron.  Rooney and Solaris hid the Positron investments and Rooney’s relationship with the company from the fund’s investors for over four years. Although Rooney finally told investors about the Positron investments in a March 2009 newsletter, he allegedly lied by telling them he became Chairman to safeguard the fund’s investments.

It’s hard to see how Solaris would have been outperforming the market by more than 3% and fallen under the watchful eye of the new initiative.

LeadDog Capital Markets, Chris Messalas and Joseph LaRocco

The SEC instituted administrative proceedings against LeadDog Capital Markets LLC and its general partners and owners Chris Messalas and Joseph LaRocco. The charges were for misrepresenting or failing to disclose material information to investors in the LeadDog Capital LP fund.

The Fund was almost entirely invested in illiquid penny-stocks or other micro-cap private companies, each of which had received “going concern” opinions from their auditors, all but one of which had a consistent history of net losses, and most of which they or their affiliates owned or controlled

In addition, LeadDog, Messalas, and LaRocco allegedly misrepresented to, and concealed from, existing and prospective investors the substantial conflicts of interests and related party transactions that characterized the fund’s illiquid investments. For example, to induce one elderly investor to invest $500,000 in the fund, LeadDog, Messalas, and LaRocco represented falsely that at least half of the fund’s assets were liquid and could be marked to market each day, and that the investor could exit the fund at any time. In February 2009, the SEC alleges that 92% of the fund’s non-cash assets were illiquid and could not be marked-to-market on a daily basis.

In October 0f 2009, the fund’s auditors learned about some of the problems, resigned, and issued a retraction letter. Let’s assume that the date the problems were discovered. We could credit the initiative with taking action in this case. It would just be two years before charges were filed.

Assuming the allegations are true, these four cases are good cases for SEC enforcement. The consistent out performance initiative is a good one. However, these four just don’t seem to fit in the right time frame for the new enforcement initiative. Since these fund managers were not registered with the SEC, there is no good database for the SEC to check returns and easily find the outliers. Perhaps once Form PF reports start flowing, the SEC will have a better database to go looking for problems.

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Compliance Bits and Pieces for December 2

Here are some recent compliance-related stories that caught my attention.

The Enron cast: Where are they now? by Richard Partington in Financial News

The leading characters in the Enron saga have had varied fortunes since the disgraced trading giant collapsed into Chapter 11 bankruptcy a decade ago this week. A few went to prison, a couple have since died, while another employee went on to become a hugely successful billionaire trader. Financial News has ploughed through newspaper reports, personal and company websites and – where possible – contacted those involved to see where they are all now.

SEC Examines Internal Watchdog’s Interview By Robert Schmidt and Joshua Gallu in Bloomberg

The U.S. Securities and Exchange Commission’s internal watchdog has come under scrutiny for comments he made in a 75-minute videotaped interview about the agency and the stock market to a man who markets a “crash-proof retirement” plan through the Internet and a paid radio program. SEC Inspector General H. David Kotz has been contacted about the matter by the agency’s general counsel’s office, which also has briefed the SEC’s commissioners over concerns the interview could be construed as investment advice or an endorsement of financial services, according to two people briefed on the situation.

For Wall Street Watchdog, All Grunt Work, Little Glory by Ben Protess in DealBook

In an office park 20 miles outside Washington, the Financial Industry Regulatory Authority, Wall Street’s nonprofit self-regulator, has quietly built a small army of market police. Since Wall Street’s financial crisis in 2008, this fledgling fraud task force has entered the front lines of fighting insider trading, even if the group rarely earns the credit. Finra’s fraud group is akin to being the sous chef to the S.E.C. and other government regulators: the team prepares evidence against America’s most-wanted traders, but receives little of the glory when the cases are served.

SEC’s Whistleblower Annual Report

Sean McKessy, Chief Office of the Whistleblower

Dodd-Frank added Exchange Act Section 21F(g)(5) and requires that SEC’s Office of the Whistleblower to report to Congress annually on the whistleblower program. It’s due each October 30. I’m sure the SEC wanted to be in compliance, so they released the first annual report on the Dodd-Frank Whistleblower program (.pdf).

Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act added Section 21F to the Exchange Act and directs the Commission to make monetary awards to eligible individuals who voluntarily provide original information that leads to successful SEC enforcement actions resulting in monetary sanctions over $1,000,000. Awards are required to be made in the amount of 10% to 30% of the monetary sanctions collected and be paid from the SEC’s Investor Protection Fund.

However, the final whistleblower rules became effective on August 12, leaving only 7 weeks of data under the new program for this report, running to September 30.

Vanessa Schoenthaler notes that “during the seven weeks for which data is available, the Commission received 334 whistleblower tips. Among these, the most common complaints related to market manipulation (54), offering fraud (52) and corporate disclosures and financial statements (51). These tips were categorized by the whistleblowers themselves, not the Commission, and there are 84 that were submitted under the category of “other” or without a category at all, so it’s hard to say how accurate this information really is.”

The whistleblower was able to designate a location, with 37 states and 11 foreign countries in the mix. Although, almost 1/4 left the location blank. The most popular: China, California, Florida, Maryland, New York, and Texas.

The seven weeks of data shows over 20 tips per week coming in on Form TCR.  What will be more interesting is how many of this filings turn into meaningful investigations and how many are unfounded claims from disgruntled employees trying to get back at their company.

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Failure to Adequately Oversee Service Providers

Citing what it called “wholly inadequate” oversight of a faraway subadviser, the Securities and Exchange Commission fined and ordered repayment of advisory fees by Morgan Stanley Investment Management. According to the settlement, Morgan Stanley will repay its client, the Malaysia Fund, $1.8 million for fees it paid from 1996-2007 for “research, intelligence, and advice” that  AMMB Consultant Sendirian Berhad of Malaysia, was to provide as subadviser.

AMMB served as a sub-adviser to the Fund from inception until it was terminated at the end of 2007. The Research and Advisory Agreement specified that AMMB would register with the SEC as an investment adviser under the Investment Advisers Act and furnish Morgan Stanley “such investment advice, research and assistance, as [Morgan Stanley] shall from time to time reasonably request.” AMMB did not exercise investment discretion or authority over any of the assets in the Fund. Morgan Stanley took responsibility for monitoring AMMB’s performance of services. The Fund would pay AMMB an escalating fee based on the fund’s assets. During the relevant time period, the Fund paid AMMB advisory fees totaling $1,845,000. As the fund administrator, Morgan Stanley facilitated the Fund’s payment of AMMB’s advisory fees.

Section 15(c) of the Investment Company Act requires an investment adviser of a registered investment company to furnish such information as may reasonably be necessary for such company’s directors to evaluate the terms of any contract whereby a person undertakes regularly to serve or act as investment adviser of the company.

It was an OCIE exam in 2008 that first questioned the arrangement between AMMB and Morgan Stanley. AMMB did not provide any of the services it and Morgan Stanley represented to the Fund’s Board. Instead, AMMB provided two monthly reports that Morgan Stanley neither requested nor used in its management of the Fund. The first was a two-page list of the market capitalization of the Kuala Lumpur Composite Index. The second was a two-page comparison of the monthly performance of the Fund against other Malaysian equity trusts. For twelve years, the fund’s Board relied on Morgan Stanley’s representations and submissions of information regarding AMMB’s services when it unanimously approved the continuation of AMMB’s advisory contracts. The SEC stated that even though Morgan Stanley took responsibility for monitoring AMMB’s services, its oversight and involvement with AMMB during the relevant time period were wholly inadequate.

The settlement calls on the RIA to devise written procedures, reimburse the fund and pay a fine of $1.5 million.

If you are charging a fund for services provided by a third, then there is an obligation to make sure the third party is providing those services.  The SEC stated a violation of Section 206(2) of the Investment Advisers Act that prohibits an investment adviser from engaging “in any transaction, practice or course of business which operates as a fraud or deceit upon any client or prospective client”. It also imposes on investment advisers a fiduciary duty to act in “utmost good faith,” to fully and fairly disclose all material facts, and to use reasonable care to avoid misleading clients. SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 191, 194 (1963). Morgan Stanley willfully violated Section 206(2) of the Investment Advisers Act by representing and providing information to the Fund’s Board that AMMB was providing advisory services for the benefit of the Fund, which it was not.

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Three Compliance Failures

One for the money, two for the show, three because uh – uh, comes before four, and here we go!

 – Tigger

On Monday, the Securities and Exchange Commission announced not one, not two, but three actions against investment advisers for failing to put in place compliance procedures designed to prevent securities law violations. The firms charged with compliance failures in separate cases are Utah-based OMNI Investment Advisors Inc., Minneapolis-based Feltl & Company Inc., and Troy, Mich.-based Asset Advisors LLC. The SEC also charged OMNI’s owner Gary R. Beynon, who served as the firm’s chief compliance officer.

Under Rule 206(4)-7 of the Investment Advisers Act (the “Compliance Rule”) registered investment advisers are required to adopt and implement written policies and procedures that are reasonably designed to prevent, detect, and correct securities law violations. The Compliance Rule requires annual review of the policies and procedures for their adequacy and the effectiveness of their implementation. It also requires the designation of a chief compliance officer, responsible for administering the policies and procedures.

In the case of Asset Advisors, the SEC had previously warned the firm about compliance deficiencies. In 2007, the SEC examined Asset Advisors and issued a deficiency letter. The firm waited until November 2009 to update the compliance manual to incorporated the SEC comments. That happened to coincide with an announcement that the SEC was coming for another examination. The failings:

  • The firm did not collect from its staff written acknowledgements that the staff received the code of ethics.
  • The firm did not collect any quarterly transaction reports from any of its access persons.
  • The firm did not pre-clear any of its access person’s transactions in initial public offerings or limited offerings.
  • The firm failed to at least annually review its written policies and procedures and the effectiveness of their implementation.

Asset Advisors received the nuclear punishment. The SEC required the firm to close operations and transfer its advisory accounts to another SEC-registered investment adviser with a compliance program.

Feltl & Company was a dually-registered broker-dealer and investment adviser. The SEC charged the firm with failing to adopt and implement comprehensive written compliance policies and procedures. This failure resulted in Feltl engaging in hundreds of principal transactions with its advisory clients’ accounts without making the proper disclosures and obtaining consent in violation of Section 206(3) of the Advisers Act. It also resulted in Feltl charging undisclosed fees to its clients participating in Feltl’s wrap fee program by charging both wrap fees and commissions in violation of Section 206(2) of the Advisers Act. The SEC laid the blame for Feltl’s compliance breakdown on its failure to invest necessary resources in the firm’s advisory business as it changed and grew in relation to its brokerage business.

OMNI’s was penalized for a complete failure to adopt and implement a compliance program between September 2008 and August 2011. In 2007, the SEC examined OMNI and issued a deficiency letter noting several issues, including OMNI’s failure to conduct an adequate annual review of its compliance program. In November 2010, the Commission began another examination of OMNI. When the exam began, the Commission was provided with a Compliance Manual dated November 3, 2010, which was one day after OMNI responded to the examiners’ request to initiate an examination. OMNI was unable to provide the Commission with any compliance manual adopted and implemented prior to November 3, 2010. Additionally, OMNI was unable to provide any policies and procedures that would have been in effect prior to November 3, 2010. The November 3, 2010 Compliance Manual appeared to be an off-the-shelf compliance manual that included language from both broker-dealer and investment adviser regulations, and was not specifically tailored to OMNI’s business.

OMNI was owned by Gary Beynon who also served in the role of CCO after the previous CCO left in 2008. The big problem with OMNI was that Beynon left for a three-year religious mission to Brazil in 2008, leaving OMNI’s advisory representatives completely unsupervised. He wanted to keep the firm in business while he was away so he could return to the firm when his religious mission ended.

The SEC expects more when you are responsible for other people’s money.

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Compliance Officer Banned in the United Kingdom

As a compliance officer, I often find that many lessons come from enforcement actions. Those actions imposed on compliance officers are especially instructive. The latest to catch my attention comes from the United Kingdom.

The Financial Services Authority levied a £14,000 fine and banned a compliance officer from performing any significant influence function in regulated financial services. The circumstances arose from an employee’s attempt to conceal losses after the collapse of Lehman Brothers in 2008.

Dr Sandradee Joseph was Compliance Officer at Dynamic Decisions Capital Management (DDCM), a hedge fund management company based in London. One of DDCM’s funds suffered catastrophic losses during the fall of 2008, losing 85% of its assets under management. A fund employee, rather than report the losses, decided to enter into a complicated bond transaction to create false profits. Essentially, the employee was buying bond units at a steep discount, but reporting a much greater value when calculating the fund’s NAV. The fund had lost $255 million, but the employee booked a $268 million gain on the bond transaction. A bond that the fund had only paid $5 million.

Three problems arose that the FSA thinks were instances of the compliance officer not doing her job.

The first was that the fund’s prime broker terminated its agreement with the fund because of the bond transaction. Any trade that causes the prime broker to leave should be a big red flag.

The second was an unhappy investor. The investor had put $48 million into the fund. The bond happened to violate some of its investment restrictions: maturity greater than 12 months, issued by an unlisted entity, no option to convert equity, and greater than 3% of the fund’s NAV. Violations of an investor’s investment guidelines should be a big red flag for a compliance officer.

The third problem was another unhappy investor. The bond transaction also violated this investor’s permitted investments limitation. A second big red flag that the compliance officer failed to remedy. This investor dug a bit deeper and felt that the bond may have been fraudulent.

The compliance officer tried a few defenses that sound weak to me. They sounded weak to the FSA as well.

  • The compliance officer’s role was a reporting function and it was up to individual employee to ensure compliance.
  • The compliance officer was not the fund’s lawyer and she could take a back seat on legal matters.
  • The compliance officer felt enough advisers were looking at the issue.
  • The compliance officer did not understand the bond and was relying on external lawyers to review it. (However, she never instructed a  law firm to to carry out due diligence on the bond.)
  • The compliance officer believed the bond was legitimate. (Even though she disclosed that she didn’t understand it.)

The FSA lays out the lesson learned: “In her role, if [the compliance officer] became aware of concerns that the firm was not complying with its regulatory obligations, she should have taken steps to ensure that these concerns were investigated, to verify if the concerns appeared to be legitimate, and if so to take appropriate action.”

As a compliance officer, I initially found the punishment to be on the harsh side especially since it seems to single out the compliance officer. Then I dug a little deeper and saw that criminal investigations were started by the SFO and the investors filed suit against DDCM.

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Compliance Bits and Pieces for November 18

These are some recent compliance related stories that caught my attention:

Where the Bribes Are by the James Mintz Group

The Foreign Corrupt Practices Act, passed in 1977, has led to more than 200 cases covering activity in about 80 countries. On this map, the darker red that a country appears, the larger the total penalties assessed for FCPA violations in that country. Roll over a country to see the FCPA cases there (the bigger the box, the larger the penalty in that case). Click on each box for case details. Click on the sector list (lower left) for a breakdown by industry.

EEOC Advisory Opinion on Employer Use of Arrest & Conviction Records During Hiring Process in Littler’s  Privacy and Data Protection Practice Group

The Equal Employment Opportunity Commission’s Office of Legal Counsel released an advisory opinion on employer use of arrest and conviction records during the hiring process. The non-binding letter provides some insight into the Commission’s current enforcement position and suggests the Commission: (1) will continue to differentiate between arrest and conviction records; (2) may not be prepared to adopt a presumption of disparate impact in this context; and (3) will in the event of a finding of disparate impact, closely scrutinize the employer’s policy with regard to both how long convictions are disqualifying and whether the underlying criminal conduct is related to the job duties for the position in question.

Louis XIV, the Old Pretender and Splitting the GC/CCO Roles by Tom Fox

Hence the War of the Spanish Succession and all may not be as it appears at first blush. This is because a GC often prefers to keep issues in-house and “not take on the responsibility of reporting to an enforcement agency.” Recognizing that such a decision is not made lightly or without thorough discussions, if the GC is also the CCO, “In difficult situations, a CCO’s perspective about a controversial transaction or event would obviously go unnoticed, if that person was also serving as the GC who happened to agree with executive management.” Hutchins concludes by noting, even the attorney who balances the two roles “will face the challenges of conflicts and the consequences of the silent compliance voice when defaulting to the professional responsibility obligations of the legal profession.”

12 Tips on How to Build a Comprehensive Anti-Corruption Compliance Program by William M. Sullivan, Jr. and G. Derek Andreson of Pillsbury

Legal Issues Surrounding Social Media Background Checks by Michelle Sherman in TOm Fox’s FCPA Complinace and Ethics Blog