Tag: Tracy Coenen

Bits and Pieces on Compliance

Here are a few stories and items that caught my eye this week, but I have not had time to build-out to a full post:

SEC Speaks on Compliance Issues to Investment Advisers by Joel Beck of BD Law Blog

Lori Richards, the Director of the SEC’s Office of Compliance Inspections and Examinations (OCIE) spoke on issues that the examiner staff will be reviewing. Here is a summary of Ms. Richards’ four key areas, but compliance officers for RIAs ought to take 4 minutes and read her speech:

1. Disclosure. The SEC is reverting to the main focus of securities regulation: disclosure. Here, RIAs should be careful that all disclosures are made to their clients, including any conflicts of interests.
2. Custody. Are your advisory clients’ assets safe? How do you know? With recent headline-grabbing articles on ponzi schemes and other fraudulent conduct, Ms. Richards indicated that SEC examiners will be focusing on controls over custody of assets.
3. Performance claims. Are yours accurate? They better be.
4. Resources. Does your compliance program have adequate resources devoted to it to ensure that the RIA carries out an effective compliance program?

Spotting a Ponzi scheme or investment scam by Tracy Coenen of The Fraud Files Blog

Have you invested with a potential Ponzi?.. . How would you spot a Ponzi scheme?

  • Does the business of the company make sense in light of market conditions and your general business knowledge?
  • Does the company exist because of some secret, revolutionary new process or product? If so, what proof is there that the technology or process is legitimate?
  • Does the company rely on some rare gem, piece of real estate, antique, or other hard-to-find item? If so, is the investment scheme really scalable to the extent that the promoters suggest?
  • Is the company guaranteeing rates of return on investments with them?
  • Can their promises be verified in any way?Does the company have a board of directors, auditors, lawyers, and other advisors typical of a company of its size?

SEC’s OCIE Unit Ramps Up Training on Detecting Ponzi Schemes by Bruce Carton of Securities Docket

Burned by its high-profile failure in the Madoff case, the SEC is ramping up its training of staff on how to detect certain types of securities fraud. Reuters reports that the SEC’s inspection unit (the Office of Compliance Inspections and Examinations) is now offering 90-minute classes for employees on topics such as “Basics of Ponzi schemes, affinity fraud and related schemes” and “Exam issues and techniques for detecting Ponzi schemes, affinity fraud and related schemes.” “We’re doing it because of Bernie Madoff,” one SEC official told Reuters.

The New York Times Blogophobia by Felix Salmon for Portfolio.com

What’s with the sudden blogophobia at the NYT? Between Craig Whitney’s astonishingly tone-deaf memo on how to write a blog, and the legal department’s heavy-handed nastygram trying to shut down Apartment Therapy, it seems that one of the most web-savvy media companies in the world has finally reached the point at which it reckons that the web-savvy types can’t be entrusted with the website any more, and the grownups need to step in and screw everything up.

Top Ten Ways to Prevent Employee Theft

From Tracy Coenen of the Fraud Files Blog, Top Ten Ways to Prevent Employee Theft:

1. Education . If employees are aware of fraud and how it happens, they will be your best on-the-job sleuths.

2. Surprise Audits . . .

3. Hotlines . A mechanism for anonymous reporting of fraud encourages employees to look out for the best interests of the company, without fear of reprisal.

4. Assessment of Internal Controls . Companies need to take an honest look at what fraud prevention controls they have in place. They also need to be honest about whether or not those procedures and policies are being followed and whether or not they really work.

5. Background Checks . . .

6. Open Door Policy . Make employees feel that it is okay to discuss concerns with management. And then when they do discuss their concerns, act accordingly. Ask lots of questions, but be supportive.

7. Perception of Fairness . . . .

8. Employee Empowerment . Give employees the authority and confidence to make decisions and take action. The more involved and empowered employees feel, the more likely they are to look out for the best interests of the business.

9. Continuous Improvement . Management should be constantly looking for ways to improve policies and procedures. Fraud prevention is an ongoing, dynamic process that requires continuous evaluation and improvement.

10. Employee Involvement . Your employees are the people who are most aware of areas vulnerable to fraud. Talk to them and ask for their help in securing the company’s assets. Fraud prevention applies to everyone, from the top down.