Compliance Resources to Help you Stay Current

The Securities and Exchange Commission (SEC) adopted a new rule, making it imperative for brokers and dealers to engage risk controls before allowing customers to trade in the market.

Investment advisers previously omitted in the Securities and Exchange Commission (SEC) horizon have come under the SEC scanner with new rules proposed. They are intended to strengthen this omission and fill key gaps in the regulatory landscape.

The Securities and Exchange Commission today voted to propose new rules to strengthen the SEC's oversight of investment advisers and fill key gaps in the regulatory landscape.

The Securities & Exchange Commission is to propose new rules on the modus operandi of reporting and publicly disseminating security-based swap transactions. Security-based swaps are swaps based on a single security or loan or a narrow-based group or index of securities or events relating to a single issuer or issuers of securities in a narrow-based security index.

Yves M. Benhamou, M.D., a French doctor and medical researcher, has been charged by the Securities and Exchange Commission (SEC) of breaking security laws by tipping a hedge fund manager with confidential information with respect to a clinical trial in which he was involved.
 

The United States and European Union regulatory reform efforts were discussed in a high-level meeting between the top honchos of the Committee of European Securities Regulators (CESR) and the Securities and Exchange Commission (SEC). Mary L. Schapiro, the SEC Chairman, Carlos Tavares, the CESR Chairman, and 29 CESR member regulators participated in the dialogue.

The Securities and Exchange Commission (SEC) launched a new whistleblower program to boost their efforts to uncover fraud. This program offers individuals compensation for valuable tips/leads that are considered critical to the agency. The rule comes under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The procedure is clear-cut, mapping out a transparent process for prospective whistleblowers on how to qualify for the award, provide information and stake their claim for the award.

The Securities and Exchange Commission (SEC) adopted a new rule, making it imperative for brokers and dealers to engage risk controls before allowing customers to trade in the market.

Royal Bank of Scotland receives a fine of £28.6m for disclosing confidential loan details with Barclays. The Office of Fair Trade (OFT) on March 30th, 2010 announced a fine of £28.6m for breaching the Competition Act after RBS admitted the fault of its staff in divulging how much they intended to charge professional services companies, such as solicitors, estate agents and accountants, for loans to its rival staff at Barclays.

What is Competition Act?

At present, the Competition Act 1998 along with the Enterprise Act 2002 is a major source of competition policy. This act provides an efficient and modernized framework to categorize and deal with restrictive business practices and to put stop to abusive dominant market position.

The act was introduced to create open and vigorous competition as it offers lower price, better quality and increased choice to the consumers. Along with consumers, fair-dealing businessmen also get opportunity to flourish in competitive markets.

The Competition law works to harmonize the UK with EU competition policy. Any anti-competitive behavior is restricted in UK by two major ways:

Anti-competitive agreements–Chapter I of the Competition Act 1998 (CA98) and Article 81 of the EC Treaty prohibits anti-competitive agreements between businesses. This chapter talks about prohibiting business agreements that put stop, limit or misrepresent competition or are tried to do so and which affect trade in the UK and/or EU.

Abuse of a dominant position- Chapter II of CA98 and Article 82 of the EC Treaty prohibits dominant market holders from abusing the dominant position in a market. In a dominant position, a business usually becomes dominant enough to behave independently which can result into charging excessive high price, restrictive production, refusal of product supply and etc. Hence, to eradicate the mentioned problems from a market, the chapter II attempts to put a stop to abusing the dominant position in the market.

Role of OTF

OTF or the Office of Fair Trading works as the authority of consumers and competition in order to make markets more accessible and fair for the consumers.

By stopping hardcore or deliberate offenders, OTF functions to encourage businesses to comply with competition and consumer law and improves their trading practices through self-regulation. The agency also empowering consumers with the knowledge and skills to make informed choices and get the best value from markets, and helping them resolve problems with suppliers through Consumer Direct.

What Went Wrong for RBS

Between October 2007 and February or March 2008, two staffs of RBS’s Professional Practices Coverage Team disclosed pricing and loan related information to counterparts at Barclays. According to Barclays Bank’s disclosure, both generic and specific details about their bank's loan facilities have been leaked by the staffs, either over the phone or during social, client or industry events.

OFT’s investigation revealed that Barclays’ staff then used the information to fix its own pricing.

During the time of credit crunch, when banks found it much harder, and more expensive, to borrow from each other in the wholesale money markets, the offences took place, investigation suggests.

While RBS has blamed two of its employees for this ‘regrettable and isolated case’ and lent its cooperative hands to OFT, Barclays also claimed that it had, too, "voluntarily notified" the OFT about the fraudulent action of RBS staff.

Fine Low Down for RBS

Initially, RBS was fined with £33.6m, but the OFT considered the partially nationalized bank’s acknowledgement of penalty and cooperativeness throughout the investigation thereby reducing the fine to £28.6m. Barclays, however, escapes any fine or other penalty.

Cases of OFT Fines

In 2007, British Airways was fined £121m by the Office of Fair Trading (OFT) for the former’s anti-competitive behavior. The fine amount till date is the largest penalty OTF has levied against a single company. The charge against BA was price fixing and collaborating with Virgin Airways over the price of fuel surcharges.

In 2008, Connaught, Balfour Beatty, Carillion received penalties from OFT for various price fixing cases.

In 2009, OFT fined Hays with £30m. Hays, a recruitment firm was charged for forming a cartel that fixed prices and was accused for boycotting another firm in the construction job market.

Now in 2010, RBS is fined for price fixing.

OFT believes this case will prove that companies indulging disclosure of confidential information, will risk serious penalty.

Ali Nikpay, the OFT's senior director of cartels and criminal enforcement, priding OFT’s commitment to protect fair competition in market, announces "It is important that companies operating in the UK understand the seriousness of such conduct and ensure effective competition compliance throughout their organisation".

Source:

http://www.oft.gov.uk/advice_and_resources/resource_base/legal/competition-act-1998/

http://www.independent.co.uk/news/business/news/hays-and-oft-in-row-over-16330m-fine-for-role-in-cartel-1795713.html

http://www.oft.gov.uk/about/

http://www.businessweek.com/news/2010-03-30/rbs-fined-43-million-for-giving-prices-to-barclays-update1-.html

http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article2183054.ece

Conspiracy to fraudulently market dietary supplements over the Internet with illegal claims landed the Springfield, Mo. Business owner pleading guilty in federal court.

Conspiracy of Springfield

Springfield, Mo., was involved in fraudulently market dietary supplements over the Internet with illegal claims that these supplements could prevent, treat or cure a number of diseases. Around $17 million worth of products has been sold during 2005 and 2006 through several web sites.

Who Pleaded Guilty

Charles Thao of Springfield pleaded guilty before U.S. District Judge Richard E. Dorr accepting his role in conspiracies to violate the Food, Drug and Cosmetic Act, to defraud the United States, to commit wire fraud, to commit mail fraud and to commit money laundering.

Thao admitted that he along with his wife, co-defendant Mai Lor, who was also associated with Springfield, contracted with co-defendant Tony T. Pham, 41, of Grand Rapids, Mich., to market and distribute the dietary supplements.

Although no clinical testing had been done to check the reliability of the product, but it had been  claimed that six products sold over the Internet had been proven reliable through clinical testing for the treatment and prevention of diabetes, irritable bowel syndrome, gout, high cholesterol, high blood pressure, heartburn and diarrhea.

Impact

According to the terms of plea agreement, Thao is supposed to dissolve his business, Nutrapha Research, LLC, and will not initiate the company under any name for similar business purposes.

Thao is also supposed to forfeit to the government $17,421,059, the amount for which he and his co-defendants are jointly and severally liable, which represents the amount of proceeds obtained as a result of the offenses, three real estate properties in Springfield, three vehicles and the funds credited to various bank accounts.

Under federal statutes, Thao is subject to a sentence of up to 20 years in federal prison without parole for conspiracy to commit money laundering, and up to five years in federal prison without parole on each of the other three conspiracy counts to which he pleaded guilty today, plus a fine up to $250,000 or twice the gross gain on each of the four counts. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office

Similar Food Fraudulent Cases

2008 Chinese Milk Scandal –The 2008 Chinese milk scandal was a food safety incident in the People's Republic of China involving milk and infant formula, and other food materials and components, tainted with melamine.

This incident caused China lose an estimated 300,000 victims, six infants dying from kidney stones and other kidney damage, and a further 860 babies hospitalized. The chemical appeared to have been added to milk in order to cause it to appear to have a higher protein content.

Basmati rice Fraudulence - In 2002 the UK's Food Standards Agency (FSA) carried out the first DNA survey of basmati rice sold in the UK. It found that only 54 per cent of the bags labelled as such contained pure basmati rice - defined as a particular species of grain grown in the plains around the Ganges in northern India and east Pakistan. All the other samples had been diluted with inferior varieties - some by more than 60 per cent. One FSA official calculated that the fraud swindled consumers out of over £5 million that year alone

SK Foods – in 2010 February, Frederick Scott Salyer, owner of SK Foods, company which used to grow, process and distribute tomatoes, was charged of racketeering, wire fraud, mail fraud, money laundering and obstruction of justice. Salyer is alleged to have manipulated the industry through price fixing, bribery and mislabeling. Specifically, he is alleged to have bribed purchasing managers at food companies to guarantee that the companies purchased SK Foods' products over its competitors and for its competitors' pricing information.

Source:

http://www.federalcriminaldefenseblog.com/2010/....-fraud-and-mislabeling/

http://www.newscientist.com/....rise-of-food-fraud.html

http://www.justice.gov/usao/mow/news2010/thao.ple.htm

http://news.bbc.co.uk/2/hi/8478195.stm

 

The historic health care bill has resulted in U.S. debt price rise.

The benchmark 10-year note rose 9/32 to 99-23/32 and its yield fell to 3.664%. The 30-year bond rose 4/32 to 100-27/32 and its yield fell to 4.63%. The 2-year note rose 1/32 to 99-26/32 with a yield of 0.98%. The 5-year note rose 8/32 to 99-27/32 with a yield of 2.41%.

Continued crisis of Greece and other European countries, commonly known as ‘PIIGS’ is also fueling the demand of dollar dominated assets like Treasurys. Kevin Giddis, president of fixed income at Morgan Keegan believes that the PIIGS debt crisis will pass eventually, but as long as the near-term outlook for European economies remains cloudy, "I would hate to be a seller of Treasurys at these levels,".

Source: http://money.cnn.com/2...campaign=Feed%3A+rss%2Fmoney_markets+%28Markets%29

 

Released in December 2009, the ‘Pay-to-Play’ rule of SEC was intended “to ensure that the high standards and integrity of the municipal securities industry are maintained, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to perfect a free and open market and to protect investors and the public interest by: (i) prohibiting brokers, dealers and municipal securities dealers from engaging in municipal securities business with issuers if certain political contributions have been made to officials of such issuers; and (ii) requiring brokers, dealers and municipal securities dealers to disclose certain political contributions, as well as other information, to allow public scrutiny of political contributions and the municipal securities business of a broker, dealer or municipal securities dealer.”

In an announcement made on March 18, 2010, SEC clarifies that the municipal securities rule of pay-to-play does not only apply to just a firm's employees, rather affiliated financial firms also come in its purview.  

According to the pay-to-play rule, MSRB Rule G-37, firms should restrict themselves from underwriting municipal bonds for an issuer for two years after a municipal finance professional (MFP) involved with that firm makes a campaign contribution to an elected official of that municipality.

In fact, as per the rule, an investment adviser who makes a political contribution to an elected official in a position to influence the selection of the adviser can be barred for two years from providing advisory services for compensation, either directly or through a fund.

However, through its Report of Investigation, SEC clears that any executive supervising the activities of a broker, municipal securities or dealers will not be exempted from MSRB's pay-to-play rule just because he or she may be outside the firm's corporate governance structure.

Source:

http://www.sec.gov/news/press/2010/2010-42.htm

http://www.sec.gov/news/press/2009/2009-168.htm




 

SEC has devised a final rule on Proxy Disclosure Enhancements which will enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies. Good Corporate Governance is a result of proper accountability and accountability is impossible without transparency. In particular, the new rules require disclosures in proxy and information statements about:

• The relationship of a company's compensation policies and practices to risk management.
• The background and qualifications of directors and nominees.
• Legal actions involving a company's executive officers, directors and nominees.
• The consideration of diversity in the process by which candidates for director are considered for nomination.
• Board leadership structure and the board's role in risk oversight.
• Stock and option awards to company executives and directors.
• Potential conflicts of interests of compensation consultants.

Insider Trading, the term defines the act of trading of company stock or other securities by individuals with potential access to non-public information about the company. In most countries this kind of trading by company insiders is most common and is legal provided it adheres to all legal sanctions and does not take undue advantage of non-public information about the company.

Management decisions are driven by data both internal and external. Data driven issues in GRC becomes more critical performance. Addressing this issue can be done in the following way:

• Linking good data management practices to measurable business outcomes
• Making sure the outcomes committed are inline with business strategy objectives

The key elements that govern proper data management initiatives are

• Clear vision
• Disciplined governance driven approach to investment
• Prioritization process
• Best practice driven integration methodology
• Management oversight and follow through

More insight on implications and emerging trends in data quality read on

The Securities and Exchange Commission today launched its first-ever Web site devoted exclusively to investor education, providing investors with in-depth information and "top tips" on how to invest wisely, plan for the future, and avoid being scammed.