Whistleblowing protection for compliance officers still unsettled, experts say

”If liberty means anything at all, it means the right to tell people what they do not want to hear,” George Orwell told readers in Animal Farm, his parable of totalitarianism and centralized control.

This level of liberty is just as important in the monitoring of business as government, and it may be just as unwanted as in Orwell’s novel of a brave soul fighting overwhelming control, Jennifer Pacella, a law professor at Baruch College in New York City, said Tuesday. (more…)

Bank of America’s mortgage-fraud deal yields quick impact; message may not be what enforcers wanted

Bank of America's mortgage-fraud deal yields quick impact; message may not be what enforcers wanted

It took just one day for U.S. Attorney General Eric Holder’s announcement Thursday that Bank of America would pay $16.65 billion over charges of fraudulent mortgage origination, securitization and servicing to have an impact.

But the impact was probably one of the last things Holder wanted to see as a result of the deal. (more…)

New York state proposes regulatory framework for virtual currencies

Jim Urquhart

The New York State Department of Financial Services (DFS) is seeking public comment on a proposed “BitLicense” regulatory framework for New York virtual currency businesses, DFS Superintendent Benjamin M. Lawsky said Thursday.

The proposed framework – the first on a state-wide basis in the country – will require licensees to have strong compliance and supervisory policies and procedures. (more…)

SEC bars, fines advisory owner for misrepresenting GIPS compliance

The Securities and Exchange Commission has barred an investment adviser’s president and owner from the advisory and brokerage industries for misrepresenting his firm’s performance and its compliance with GIPS, the global investment performance standards.Tuesday’s ruling, by SEC administrative law judge Cameron Elliot, may be the first formal SEC sanction against an adviser or an associated person for misrepresenting its compliance with GIPS, which is voluntary, although the SEC has sanctioned a firm that also invented a client with large investments with the firm. The SEC has warned that its examiners will focus on disclosures over fees, expenses and performance.

GIPS, which is published by the CFA Institute and is considered an advisory industry best practice, includes guidance for the calculation and reporting of investment performance results to prospective clients, as well as specific guidelines for performance advertisements that claim GIPS compliance, the judge said.


Focus on bad bankers, not just their banks, New York’s Lawsky says

Focus on bad bankers, not just their banks, New York's Lawsky says

Banks don’t do bad things – people do – so the people behind the alleged violations should face more regulatory scrutiny and personal accountability, said Benjamin Lawsky, Superintendent of the New York State Department of Financial Services.

Focusing on individuals could better deter misconduct , and could also stop sending signals that the bank where the individuals worked – and the banking industry overall – are bad, Lawsky told reporters at a Reuters financial services regulatory summit in Manhattan. (more…)

Expect corruption crackdown to widen, intensify

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…)

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

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

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.

General solicitations (more…)

“Big data” tools will improve regulatory oversight, FINRA’s di Florio says

The Financial Industry Regulatory Authority is developing a suite of “big data” information sources and analytics to improve regulatory oversight of securities firms, according to Carlo di Florio, FINRA’s chief risk officer and head of strategy.

Leveraging technology and analytics can make for a “unique moment in regulation [that lets regulators] see things they couldn’t have seen or understood as well before,” di Florio said at an event this week hosted by the Securities Industry and Financial Markets Association compliance and legal society. (more…)

New York bills would protect compliance ‘good guys’ who stick their necks out

Two New York legislators are pushing a bill that would protect workers in financial services and other sectors from getting fired if they stick their necks out to report wrongdoing.

The lawmakers, Senator Diane Savino of Brooklyn and Staten Island and Assemblyman Tom Abinanti of Westchester County, want to undo the effect of a ruling by New York’s top judges held that the chief compliance officer of an investment adviser and hedge fund manager had no legal recourse after being fired for internally raising concerns over company practices. (more…)

U.S. regulators urge firms to improve business continuity and disaster recovery plans

Futures and securities firms should review their industry-wide and internal business continuity and disaster recovery plans to improve responsiveness to significant disruptions and reduce recovery time, their regulators said Friday in a staff advisory.

U.S. regulators have been particularly concerned over how financial firms plan for disasters since the attacks of September 11, 2001, and through the President’s Working Group on Financial Markets during the administration of George W. Bush urged the industry to strengthen its defenses. The concerns have included flooding following Hurricane Katrina and the threat of an influenza pandemic, and are growing. (more…)