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…)

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…)

Companies should use metrics to defend themselves from Dodd-Frank whistleblower claims, report says

By Emmanuel Olaoye

NEW YORK, March 5 (Thomson Reuters Accelus) - Companies in the United States should focus on implementing performance metrics to defend themselves from whistleblower claims and to prevent misconduct within the company, according to a report from consultancy PricewaterhouseCoopers.

Using metrics such as the turnover of compliance staff and the percentage of anonymous reports can help a company monitor the performance of its compliance program. It can also help to reduce the chances of an employee reporting misconduct directly to the Securities and Exchange Commission, PwC said in the report, which is an analysis of whistleblower rules included in the Dodd-Frank regulatory overhaul and adopted last May by the SEC. (more…)

Corporate governance: SEC, shareholder activism driving enhanced director disclosure

By Alex Lee

NEW YORK, Feb. 17 (Business Law Currents) – With a slew of Dodd-Frank and SEC driven regulations headlining the 2012 proxy season, enhanced director disclosure will be a prominent issue as investors demand heightened corporate accountability and broader levels of transparency. Rules put in place a couple years ago on compensation policies, risk incentivizing, director/nominee disclosure, board structure and oversight have now had the time to incubate sufficiently for companies to respond in a serious manner.

The Main Street versus Wall Street debate and the ensuing Occupy Wall Street movements have done much to expand public angst from mere disgruntlement with corporate America to even more emphasis on corporate governance in general. The public battle is now being waged increasingly on the battlefield of executive compensation, and as a consequence, on director disclosure. (more…)

SEC’s “re-markable” action against Credit Suisse traders

By Thomson Reuters Accelus – Staff

NEW YORK, Feb.10 (Business Law Currents) - A new SEC complaint against former Credit Suisse (CS) employees shines a harsh light on an underappreciated aspect of the financial crisis: mark-to-market manipulation. Charging four traders and investment bankers with violating securities laws, the commission’s civil action (“the complaint”) alleges a “colossal fraud” to misstate the value of bonds held in the bank’s portfolio. U.S. Attorney Preet Bharara of the Southern District of New York also filed a criminal indictment against CS investment banker David Higgs, a managing director of the bank’s London office. Bharara likewise filed a criminal information against CS trader Salmaan Siddiqui, who held the title of vice president.

Unlike more high-profile litigation revolving around the residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs), this particular case is noteworthy in that it attacks the accounting behind publicly filed documents, rather than allegations of material misrepresentations in the sales of securities. (more…)

Evidence, access aid job security when compliance staff raise a red flag

By Emmanuel Olaoye

NEW YORK, Feb. 9 (Thomson Reuters Accelus) - Two vivid reminders of the job-security perils faced by compliance officers and others who sound alarms at company practices were provided last week by a congressional hearing into the MF Global bankruptcy and a federal appeals court ruling on whistleblower law.

The risks may be part of the job, but skillful management of internal policies and wise self-protection can help avoid career-threatening retaliation, experts said. (more…)

Funds auditing expert network relationships, asking for guidance

By Rachel Wolcott

NEW YORK, Feb. 3 (Thomson Reuters Accelus) - Fund managers and investment firms are auditing their expert network relationships to ensure they do not breach insider trading rules. While many are reinforcing their rules and policies around these relationships, the fund industry has sought additional guidance from the U.S. Securities Exchange Commission (SEC) and its international counterparts.

The Galleon Case in 2010 started the industry’s self-examination of expert networks’ role in insider trading, and last week the UK Financial Services Authority (FSA) reinvigorated the issue with a £7.2 million fine given to David Einhorn and his Greenlight Capital fund.  (more…)

Corporate Governance: proxy advisory guidelines and the shifting landscape of benchmarking executive compensation

By Alex Lee

NEW YORK, Jan. 30 (Business Law Currents) – Last year’s introduction of say-on-pay regulations via Dodd-Frank helped to arm shareholders with the capacity to disapprove compensation policies, but the SEC’s evolving compensation disclosure regulations and recent updates from proxy advisory firms’ guidelines indicate that executive compensation remains a key issue. While the post-Lehman headlines of public outrage and calls for legislative scrutiny over executive compensation may have waned, now more than ever, companies need to exercise great care when considering executive compensation policies.

Boards are stuck between a rock and a hard place. On one hand, they must recruit, retain, incentivize, and properly compensate prized executives. On the other, the must deal with a growing public animosity towards excessive executive compensation and shareholder unrest, especially in periods where companies are not performing optimally. (more…)

UK insider trading fine against Einhorn a non-starter in U.S., experts say

By Stuart Gittleman

NEW YORK, Jan. 27 (Thomson Reuters Accelus) - The circumstances that led to UK trading-abuse penalties against U.S. fund manager Greenlight Capital and its portfolio manager David Einhorn probably would not have led to a similar case in the United States, securities lawyers told Thomson Reuters.

The UK Financial Services Authority (FSA) this week fined Greenlight Capital, a U.S. fund manager, and David Einhorn, its portfolio manager, for selling shares after receiving a tip that the issuer was planning an offering that would dilute the fund’s position.  (more…)

Einhorn/Greenlight Capital fine highlights duty for investors to seek absolute clarity over inside information

By Martin Coyle and Alex Robson

LONDON/NEW YORK, (Thomson Reuters Accelus) – A decision by the UK Financial Services Authority (FSA) to fine hedge fund manager David Einhorn and his Greenlight Capital fund 7.3 million pounds ($11.5 million) has highlighted the need for professional investors to ascertain clearly what constitutes inside information, securities lawyers said. The FSA said that it fined Einhorn 3.64 million pounds and Greenlight Capital 3.65 million pounds for using inside information that he obtained from a broker before selling shares in a UK public company in 2009. Einhorn’s is the biggest scalp by far of the FSA’s renewed determination to punish market manipulation as part of its “credible deterrence” policy.

The regulator said that Einhorn learned from a telephone conversation with the broker that British pub company Punch Taverns was on the verge of a significant equity fundraising, prompting the New York-based financier to sell down his holdings before an anticipated fall in the shares. (more…)

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