Financial Regulatory Forum

Time to merge risk management and compliance?

By Rachel Wolcott

LONDON/NEW YORK, April 5 (Thomson Reuters Accelus) – Regulators’ rising interest in risk management combined with a long trail of big fines for compliance failures has some consultants and industry leaders wondering whether it is time for the two disciplines to come closer together if not merge completely.

More than ever there are areas of overlap between risk and compliance. Risk management is now hardwired into more rules and regulations since the beginning of the financial crisis. In the UK, for example, the Financial Services Authority (FSA) hasincreased its fines for risk management failures . The U.S.’s Securities and Exchange Commission (SEC) has also indicated that it intends to take risk management as well as other governance and compliance issues even more seriously than in the past. (more…)

Financial institutions and investment funds should prepare now for FATCA

By Steven D Bortnick, contributing author for Thomson Reuters Accelus

NEW YORK, April 4 (Thomson Reuters Accelus) – The enactment of the Foreign Account Tax Compliance Act (FATCA) as in March of 2010 has sent shock waves through financial institutions and investment fund management companies. FATCA aims to obtain information to prevent U.S. persons from evading taxation through the use of foreign entities. Although the law does not fully enter in force until January 1, 2013, the effort to become compliant with FATCA should begin immediately. Some tips on how to do so are noted below.

The legislation is the direct result of the events that led to UBS’ admission that it helped U.S. taxpayers evade U.S. income tax on U.S.-source income. While the goal is the increased collection of tax, the intention is not to create any new tax. FATCA’s goal is accomplished by adding an entirely new chapter to the Internal Revenue Code devoted to due diligence, reporting and withholding. Failure to comply will result in withholding tax at the rate of 30 percent, including withholding on items understood not to be taxable in the hands of foreign persons.  (more…)

SEC examiners enter U.S. boardrooms to gauge compliance

By Nick Paraskeva

NEW YORK, April 4 (Thomson Reuters Accelus) - The U.S. Securities and Exchange Commission plans to reach into the boardroom to assess a financial firm’s culture of compliance, a senior commission official told a conference in New York.

The agency, departing from traditional practice to take a page from bank regulators, intends to have direct discussions with the firm’s board about the regulatory issues board members and senior management team are paying attention to, and how they are navigating them. (more…)

Convicted inside trader Bauer warns others to “think harder” before breaking the law

By Emmanuel Olaoye

NEW YORK, (Thomson Reuters Accelus) - A former registered representative who was convicted last year of participating in a $37 million insider-trading scheme on Tuesday warned would-be securities law violators to think twice before breaking the law.

Garrett Bauer, a 44-year-old day trader, pled guilty in December to participating in the scheme, which lasted more than 15 years, as part of a three-man ring that included lawyer Matthew Kluger and middleman Kenneth Robinson. (more…)

U.S. Treasury wants financial institutions to help combat identity theft-related tax frauds

By Brett Wolf

NEW YORK (Thomson Reuters Accelus) - U.S. Treasury Department reminded financial institutions of their obligation to lend a hand as the Internal Revenue Service struggles to crack down on rampant schemes using identity theft to obtain fraudulent tax refunds via electronic filings.

“Financial institutions are critical in identifying tax refund fraud because the methods for tax-refund distribution – direct deposit into demand deposit accounts, issuance of paper checks, and direct deposit into prepaid access card accounts – are often negotiated and deposited at various financial services providers,” Treasury’s Financial Crimes Enforcement Network (FinCEN) stated in an advisory issued Friday. (more…)

Disclosure system no guarantee of protection for China-focused investors

By Helen H. Chan (Hong Kong)

HONG KONG/NEW YORK, March 26 (Business Law Currents) – China’s bourse regulators and the nation’s IPO watchdog, the China Securities Regulatory Commission, have been busy brainstorming improvements to legislation governing the disclosure requirements of listed companies in the PRC.

Aiming to bring increased transparency and other investor protection merits often associated with a disclosure-based securities regulatory framework, the CSRC is contemplating models from Hong Kong, the United States and other jurisdictions where listed companies are required to publicly disclose corporate and financial statements in a timely manner. (more…)

Corporate governance: succession planning through crises and emergency transitions

By Alex Lee

NEW YORK, March 23 (Business Law Currents) – In an environment of increased corporate governance scrutiny, succession planning through both departures and crises is a focal point for shareholder interests and transparency-related issues. Companies historically kept succession plans close to their vests, but recent succession episodes at Apple Inc., Bank of America Corpand Hewlett-Packard have highlighted the multitude of issues that shareholders have with respect to the concern shown by boards on such a significant matter.

In October 2009, the Securities and Exchange Commission (SEC) reversed its long-held position whereby the exclusion of shareholder requests for disclosure of succession plans from proxy statements was allowed. The SEC clearly recognized that succession planning-related matters are within the remit of shareholder proposals, and that boards must significantly address the issues as leadership voids or uncertainty could adversely affect companies. (more…)

Compensatory penalties, hedge-fund insider cases mark SEC enforcement trends

By Nick Paraskeva

NEW YORK, March 14 (Thomson Reuters Accelus) - The U.S. Securities and Exchange Commission wants more power to fine firms and individuals for fraud and market abuses, in the face of tougher public scrutiny and judicial opposition to recent settlements. While the agency has been imposing stiffer penalties, the amount remains constrained by the agency’s current authority, said George Canellos SEC New York Regional Office Director.

Canellos was speaking as part of a panel last week on trends in financial enforcement and securities litigation after Dodd-Frank. The panel was organized by NYU Stern Business School and NERA Economic Consulting. (more…)

Corporate governance: boardrooms fret over corporate espionage and federal guidance regimes

By Alex Lee

(Business Law Currents) – Dodd-Frank related governance issues such as say-on-pay and proxy access have been well known focal points for boardrooms during the 2012 proxy and annual meeting season, but another issue has topped headlines and is of increasing concern to boardrooms: business intelligence gathering activities. Faced with shareholder oversight, the risks posed by private intelligence gathering firms and governmental regulation in this area, companies must ensure that they abide by accepted best practices, the highest ethical standards and standards for compliance with laws.

Shareholders and governing bodies have enhanced scrutiny of corporate governance, with scandals such as MF Global highlighting abuses of corporate power and potential criminal activities by company officers. Effective corporate governance principles dictate that those who conduct unethical or, worse, illegal activities on behalf of a company must be brought to heel. (more…)

Grading Canada’s enforcement efforts

By John Mackie

CANADA, March 8 (Business Law Currents) – With the Supreme Court of Canada having put an end to the notion of a national securities regulator this past December, securities regulation and enforcement remain matters of provincial and territorial jurisdiction, at least for the time being. In the wake of that decision, several reports have recently been issued regarding enforcement activities by provincial regulators. (more…)

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