Financial Regulatory Forum

IA brief: Account takeovers are big cybersecurity risk for advisers

By Jason Wallace, Compliance Complete

NEW YORK, April 24, 2014 (Thomson Reuters Accelus) - A recent cybersecurity roundtable hosted by the Securities and Exchange Commission should act as a call to action for investment advisers, as the threat of cyber attacks is high for all companies and increasing daily, say event panelists.

Investment advisers, whether small or midsize, are not immune from these attacks and now is a good time to recognize the firm’s risks, review available guidance, hone formal policies and procedures, and preparing for an imminent SEC exam module concerning cybersecurity. (more…)

IA brief: SEC opens door to social media ratings and client lists

By Jason Wallace, Compliance Complete

NEW YORK, April 22, 2014 (Thomson Reuters Accelus) - The Securities and Exchange Commission’s guidance update this week on investment adviser use of social media and the applicability of the testimonial rule will help ease uncertainty over using of certain features of social media sites like Yelp, Foursquare, Facebook and LinkedIn.

The guidance, in the form of 9 questions and answers, primarily focused on the use of third-party review sites and whether it would trigger a testimonial violation. The guidance included specific examples opening the door to using Yelp, Foursquare or a similar site that offers a business review feature, granted certain conditions are achieved. (more…)

Expect corruption crackdown to widen, intensify

By Stuart Gittleman, Compliance Complete

NEW YORK, Apr. 15, 2014 (Thomson Reuters Accelus) – Companies and financial firms that are potentially subject to the Foreign Corrupt Practices Act and other anti-corruption regimes should expect more of the enforcement crackdown they have seen in recent years, except in greater quantity and intensity, two former U.S. government officials said last week.

The ex-officials, Cheryl Scarboro, a law partner at Simpson Thacher & Bartlett, and Greg Andres, a partner at the law firm Davis Polk & Wardwell, respectively headed the Securities and Exchange Commission Enforcement Division FCPA unit and the Department of Justice Criminal Division fraud section. They spoke at an FCPA and anti-corruption seminar at the New York City Bar Association. (more…)

Forget HFT; “High Intelligence Trading” is the new frontier for technology, markets, regulation

By Henry Engler, Compliance Complete

NEW YORK, Apr. 10, 2014 (Thomson Reuters Accelus) - While fast is good, smart is better, and with untold resources of computing power and memory banks in the clouds, the new frontier in electronic trading combines sophisticated intelligent software with rapid-fire processing, enabling traders to stay one step ahead of the regulators.

“What’s the difference between pure speed and adding intelligence to that speed?” asked Terry Keene, head of iSys, a technology integration firm, at a conference focused on high performance computing. The answer is “big data analytics” that brings decision-making and trading to a “near-time” environment, he added. (more…)

Clearinghouses’ default “waterfall” offers no panacea against their potential failure

By Bora Yagiz, Compliance Complete

NEW YORK, Apr. 10, 2014 (Thomson Reuters Accelus) - The push of derivative contracts into central counterparties (CCP) – also known as clearinghouses — has been underway for more than five years, yet it remains unclear how these entities would fare under stressed market conditions in the U.S. (more…)

Special report: UK regulators face mounting concerns over their handling of multi-million pound fund collapse

By Alex Davidson, Compliance Complete

LONDON, Apr. 4, 2014 (Thomson Reuters Accelus) – Regulators face searching questions about whether they acted effectively in the multi-million pound collapse in 2012 of an unregulated collective investment scheme (UCIS). The then Financial Services Authority’s (FSA) decisions concerning the Connaught Income Fund, Series 1, a UK-domiciled fund based in London, will come under fresh scrutiny at a debate in Westminster Hall, between members of parliament and HM Treasury this month, subject to scheduling. The Financial Conduct Authority (FCA) has said that the FSA, its predecessor body, acquitted itself well in dealing with the situation. Detractors, including investors, MPs and independent financial advisers (IFAs), have said the regulator failed to act appropriately on warnings about the misappropriation of multiple millions of pounds from the fund.
Some have found fault with the regulator, fund operators and IFAs who sold the Connaught fund, but it remains to be seen who, if anyone, will be held broadly accountable. Critics of the regulator have said it failed to investigate effectively evidence of financial misappropriation and insolvency, at Tiuta Plc (Tiuta), a regulated mortgage lender, to which the fund was lending money. The evidence was provided by whistleblower George Patellis, chief executive of Tiuta, which, like its unregulated subsidiary,Tiuta International (TIL), was a specialist partner to the Connaught fund. (more…)

The JOBS Act at age two – prodigy or enfant terrible?

By Stuart Gittleman, Compliance Complete

NEW YORK, Apr. 3, 2014 (Thomson Reuters Accelus) - The financial services industry is still getting used to the two-year old JOBS Act, as funds gingerly begin to explore new general-solicitation freedoms and “crowdfunding” venues sort through the rules, speakers said at a Fordham Law School forum in New York.

As mandated by the JOBS – or Jumpstart Our Business Startups – Act enacted in April 2012, the Securities and Exchange Commission has adopted rules for general solicitations that became effective in September 2013, and is reviewing comments to a December 2013 set of proposed crowd-funding rules. (more…)

Book by high-profile author Lewis may spur high-frequency-trading reform push, success unclear

By Emmanuel Olaoye, Compliance Complete

WASHINGTON/NEW YORK, Apr. 2, 2014 (Thomson Reuters Accelus) - During a clip on Sunday night’s “60 Minutes” program, host Steve Kroft asked bestselling author Michael Lewis why he was so opposed to high frequency trading.

“If it wasn’t so complicated, it would be illegal,” said Lewis, who is the author of a new book called “Flash Boys: A Wall Street Revolt.”  (more…)

Insight: U.S. OCC’s “heightened expectations” standards for bank governance, and how to meet them

By Abel Picardi, Compliance Complete

NEW YORK, Mar. 21 (Thomson Reuters Accelus) – Proposed risk standards for banks regulated by the Office of the Comptroller of the Currency (OCC) will expose top executives and directors of federally chartered insured institutions to greater accountability for any legal, risk or compliance shortcomings.
The OCC proposed the standards in January as way to broaden and enforce the application of its “heightened expectations” for bank stability. The expectations were issued in 2010, in response to the financial crisis. The proposed guidelines’ focus on top bank governance directly aims to limit ”accountability risk,” or the risk that a leadership not held to the consequences of its decisions can endanger an institution. (more…)

Better career paths, new reporting lines as compliance gains status at banks – global report

By Bora Yagiz, Compliance Complete

NEW YORK, Mar. 20 (Thomson Reuters Accelus) - The increasingly important role compliance risk management plays in the banking sector is demonstrated in areas ranging from reorganized risk departments to clearer reporting lines and more rewarding career paths, according to a report by the financial consultancy Accenture.

“The roles of the risk, and especially of the compliance, departments have increasingly been gaining stature within banks in the last five years or so,” said Steve Culp, senior managing director of finance and risk services at Accenture. “Banks are more frequently increasingly adopting organizational structures that connect and align the compliance officers more closely with their decision-making bodies, such as with senior management or the board.”  (more…)

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