Financial Regulatory Forum

Internal compliance reporting programs must consider motivations for acting, experts say

By Stuart Gittleman, Compliance Complete

NEW YORK, Dec. 10 (Thomson Reuters Accelus) – Preventing fraud, not just reacting once it occurs, should be the goal of every corporate compliance program, but business has a mixed record in encouraging employees to report suspected misconduct internally, speakers at a Thomson Reuters forum said Tuesday.

Preventing fraud and encouraging internal reporting has also been mandatory for public companies since 2002. Among other things, Section 301 of the Sarbanes-Oxley Act requires issuers’ audit committees to establish procedures for employees to confidentially and anonymously submit concerns over questionable accounting or auditing matters. And Section 806 of Sarbanes-Oxley generally prohibits issuers from retaliating against employees for raising these concerns. (more…)

INTERVIEW: Whistleblowing is a duty if internal calls unheeded, U.S. bailout overseer tells compliance officers

By Stuart Gittleman

NEW YORK, July 31 (Thomson Reuters Accelus) - Compliance officers have a duty to become whistleblowers if their concerns are not heeded internally, Neil Barofsky, the watchdog over the U.S. financial crisis bailout program, told Compliance Complete in an interview.

Exposing wrongdoing is the only way to eradicate a “cancer” of fraud that can endanger companies and the larger economy, said Barfosky, who also in the interview warned on dangers of a revolving door between financial regulators and Wall Street.

Barofsky was appointed Special Inspector General for the Troubled Asset Relief Program in the aftermath of the September 2008 financial crash by President George W. Bush and served from mid-December through March 2011, when he left to teach at New York University School of Law.

Compliance lessons: U.S. Senate report on HSBC AML failings

By Susannah Hammond

LONDON/NEW YORK, July 20 (Thomson Reuters Accelus) - The United States Senate Permanent Sub-Committee on Investigations has published a report into U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing using HSBC Group plc as a case history. The report does not detail enforcement action taken, though there are several likely fines being considered by a number of U.S. authorities regarding HSBC’s anti-money laundering (AML) failings; it is however a valuable insight into the operations and associated compliance, risk and AML issues arising in a global financial services firm.  (more…)

U.S. brokerage regulator warns of ‘unpleasant surprises’ on ETNs

By Stuart Gittleman

NEW YORK, July 11 (Thomson Reuters Accelus) – The Financial Industry Regulatory Authority, the U.S. brokerage regulator, warned investors Tuesday in an alert of the features and risks of exchange-traded notes.

The alert, Exchange-traded notes: avoid unpleasant surprises, listed the risks of certain ETNs and urged investors to carefully investigate before investing in them.  (more…)

Barclays scandal highlights value of monitoring and testing – governance experts

By Emmanuel Olaoye

WASHINGTON/NEW YORK, July 10 (Thomson Reuters Accelus) - A major theme in the Barclays scandal over rate-rigging is the firm’s failure to conduct adequate monitoring and testing of its compliance program, governance experts have told Thomson Reuters Accelus.

Barclays has agreed to pay $453 million to settle charges by U.S. and UK authorities that its employees manipulated the London Interbank Offered Rate, or LIBOR, a key benchmark for global financial transactions, including payments on mortgages, credit cards and other financial contracts.  (more…)

Barclays’ governance, compliance weaknesses exposed in U.S. regulator’s findings

By Emmanuel Olaoye

WASHINGTON/NEW YORK, July 3 (Thomson Reuters Accelus) - A U.S. regulator’s case against Barclays revealed significant failures with the bank’s internal controls as well as failures with its corporate governance.

Barclays agreed last week to pay $453 million to U.S. and British authorities to settle allegations that it rigged key interbank lending rates, called the London Inter-bank Offering Rate (Libor) and a separate Euribor rate, by manipulating its reported rates in submissions to the British Bankers Association, which calculated the benchmark figures. (more…)

JPMorgan AGM punctured by thorny hedge issues

By Christopher Elias

LONDON/NEW YORK, May 17 (Business Law Currents) - JPMorgan’s disastrous $2 billion hedge loss has raised some thorny issues on management oversight, corporate governance and the effectiveness of the Volcker Rule, as division at the banking giant’s annual general meeting highlight a growing tension between its shareholders and management.

Little more than a week ago, prior to Tuesday’s annual general meeting (AGM), JPMorgan announced that it had incurred a $2 billion loss as a result of a hedge gone wrong from its London offices with the possibility of $1 billion in additional losses to follow. (more…)

Firms urged to spend more, complain less to meet compliance challenge

By Rachel Wolcott

LONDON/NEW YORK, May 16 (Thomson Reuters Accelus) – Talk to any compliance officer these days and the chances are they will tell a story about too many new rules from too many jurisdictions that are too complicated and labour-intensive and expensive to implement. Each time another missive hits their desks from the Financial Services Authority (FSA), or one of the many other global, European Union or U.S. regulators, bankers, their compliance officers or risk managers, wonder quite how they will be able to manage the implementation process and also, perhaps more importantly how much it will all cost.

At the Cass-Capco Institute Paper Series on Risk conference held last month in London, a senior compliance official from a global systemically important financial (G-SIFI) institution said: “We are deluged with regulations that we don’t know will work, then we have to implement them. People are getting lost in a mire of complexity.”  (more…)

JPMorgan repeats basic mistakes managing traders, say officials

By Rachel Wolcott

LONDON/NEW YORK, May 15 (Thomson Reuters Accelus) – JPMorgan’s Chief Investment Office, which last week was responsible for more than $2 billion in mark-to-market losses, appears to have made some classic mistakes in the risk management of trading desks and the monitoring of traders. Although the CIO losses have not been blamed on a rogue trader, they do have much in common with the incidents at UBS and Société Générale, where single traders lost billions seemingly overnight.  (more…)

Private equity: bank regulators tighten the collar on leveraged loans

By Alex Lee

NEW YORK, May 11 (Business Law Currents) – With the leveraged finance market coming back to life, bank regulators want financial institutions to seriously tighten oversight and maintenance of their leveraged portfolios. Leveraged loans are heavily utilized by private equity shops for their transactional activities but there is an ever-increasing concern that while loan volume has gone up, underwriting practices have deteriorated to unacceptable standards.

On March 26, 2012, bank regulators released proposed guidance on leveraged lending for public comment. The Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency have proposed revising previous guidance issued in 2001 on leveraged finance as greater scrutiny is being placed on financial institution based risk factors. Proposals in this sector could potentially impact private equity shops by affecting one of their primary sources of funding for acquisition deals. (more…)

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