Good Risk Governance Pays

Good Risk Governance Pays

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Category Archives: Financial Reporting

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Investment Vendor Due Diligence and the Fiduciary Rule

Posted in Compliance, Credit Risk, Disclosure and Transparency, Fiduciary Liability, Financial Reporting, Liquidity, Susan Mangiero
When I was a university professor and gave written homework, I frequently found myself in the position of having to remind students that reliance on a spell checker may not always produce good results. “I through the ball” is grammatically incorrect but would not reveal itself as an error. Someone would have to know that “threw” is… Continue Reading

Investment Benchmarking “Must Do” Tasks

Posted in Disclosure and Transparency, Financial Reporting, Governance, Investment Management, Regulation, Risk Management
Whenever the topic of performance measurement comes up in conversation, I think back to a story someone told me about a woman who took the number two spot in a race. Proud of her accomplishment, she telephoned friends and family with the news. Here’s the catch. Only one other runner competed. Technically, her statement was… Continue Reading

Effective Business Communications – Is Squeaky Clean Better?

Posted in Banking, Derivatives, Ethics, Financial Reporting, Investment Management, Trading
During a recent conversation with colleagues about effective business communication, the topic arose as to whether it is okay to use a swear word or two in conversations with colleagues and clients. Having worked on several tradings desks at different banks, my experience likely reflects two extremes. At one financial institution, I traded foreign exchange… Continue Reading

One Size Does Not Fit All When It Comes To Pay

Posted in Compliance, Disclosure and Transparency, Financial Reporting, Governance, Key Person, Regulation
At a time when skilled talent is hard to find, business executives may want to resist the urge to socially engineer. One tech company CEO learned this lesson the hard way. According to “Seattle company copes with backlash on $70,000 minimum wage” (Seattle Times, August 1, 2015), across-the-board raises to establish a minimum base salary,… Continue Reading

Investment Performance Magic Can Cost Millions

Posted in Compliance, Disclosure and Transparency, Financial Reporting, Investment Management, Regulation
Having spent a few days in Las Vegas over the holidays, one is reminded of the lure of legerdemain. A few bells go off, some flashing lights and a win here and there can tempt even the most staid rationalist into believing that magic can happen. If you have seen “Chicago,” you may recall Billy Flynn’s musical urging… Continue Reading

Financial Fraud At Ball State University

Posted in Broker Dealers, Compliance, Ethics, Financial Reporting, Fraud, Key Person, Trading
According to “Ex-prosecutor helps Ball State avert future fraud” (Indianapolis Business Journal, December 7, 2014), the university has hired a team to implement safeguards in the aftermath of losing more than $13 million in several investment scams. Using a reputable brokerage firm, establishing a third party managed hotline for whistleblowers and ensuring custodial best practices for securities are some… Continue Reading

Do CEOs Work Hard Enough?

Posted in Disclosure and Transparency, Financial Reporting, Governance, Key Person, Regulation, Valuation
By invitation of the head of the finance department, Dr. Chinmoy Ghosh, I am guest lecturing to students this fall as part of a Financial Risk Management graduate-level course. During a recent session about executive compensation – one of the topics I was asked to address – more than a few students opined that CEOs earn too much and… Continue Reading

SEC Reports Strong Enforcement Year Due to New Analytical Tools

Posted in Compliance, Disclosure and Transparency, Financial Reporting, Hedge Fund, Regulation
According to an October 16, 2014 press release, the U.S. Securities and Exchange Commission (“SEC”) reports a “record 755 enforcement actions covering a wide range of misconduct, and obtained orders totaling $4.16 billion in disgorgement and penalties…” for the fiscal year-end ending in September 2014. One reason given for this increase from prior years is the “enhanced use of data… Continue Reading

Article About Foreign Corrupt Practices Act (FCPA) and Institutional Investors

Posted in Compliance, Disclosure and Transparency, Ethics, Financial Reporting, Fraud, International Investing, Litigation, Regulation, Risk Management
When I was asked to co-author something for The Corporate Counselor, I suggested an article about the Foreign Corrupt Practices Act (“FCPA”) and its implications for institutional investors and their counsel. I had not seen much on the subject yet knew that it was starting to percolate as an important topic for several reasons. First, it… Continue Reading

Using Leverage to Chase Returns

Posted in Derivatives, Disclosure and Transparency, Financial Reporting, Investment Management, Leverage, Liquidity, Litigation, Municipal Bonds, Pension, Regulation, Risk Management
It is no secret that pension economics is becoming the topic du jour in public finance land. On August 11, 2014, the U.S. Securities and Exchange Commission (“SEC”) made known its allegations of securities fraud against the State of Kansas. According to the official cease-and-desist order, information made available to municipal bond investors “failed to… Continue Reading

Executive Compensation: Governance and Litigation Considerations

Posted in Compliance, Disclosure and Transparency, Financial Reporting, Key Person, Litigation, Regulation
On June 25, 2014, I co-presented with Attorney Jeffrey P. Crandall on the topic of executive compensation and related governance and litigation consideratons. Sponsored by the Practising Law Institute, our talk addressed topics such as “say on pay,” clawbacks, Section 162(m) lawsuits, valuation and Dodd-Frank mandates. With so much to address, an hour was a… Continue Reading

Muni Bonds, Pensions and Financial Disclosures

Posted in Compliance, Derivatives, Disclosure and Transparency, Financial Reporting, Hedge Fund, Liquidity, Litigation, Municipal Bonds, Pension, Regulation
I had the pleasure of co-presenting on February 19 with senior attorney Elaine Greenberg as part of an educational briefing for the Practising Law Institute. A partner with Orrick, Herrington & Sutcliffe LLP and the former chief of the Municipal Securities and Public Pensions Enforcement Unit, part of the U.S. Securities and Exchange Commission (“SEC”), Attorney… Continue Reading

Investment Advisers Sanctioned

Posted in Compliance, Disclosure and Transparency, Financial Reporting, Governance, Regulation
Here is a hat tip to the professionals at CounselWorks LLC for pointing out the news item regarding sanctions against several investment advisory firms by the U.S. Securities and Exchange Commission (“SEC”). In their October 23, 2013 press release, the SEC described a failure to correct deficiencies as the reason for punitive action. Problems that… Continue Reading

SEC Charges That Muni Bond Investers Were Defrauded

Posted in Disclosure and Transparency, Financial Reporting, Fraud, Municipal Bonds
  According to its July 29, 2013 SEC News Digest, the U.S. Securities and Exchange Commission (“SEC”) charged the municipal bond underwriter, City Securities Corporation (“City Securities”), and a debt securities issuer, Indiana-based West Clark Community Schools (“West Clark”), with “falsely stating to bond investors that the school district had been properly providing annual financial… Continue Reading

Investment Advisors and SEC Audit Preparation

Posted in Financial Reporting, Investment Management, Regulation, Valuation
In a timely and informative article, Shearman and Sterling attorneys Nathan Greene and Jesse Kanach talk about effective compliance as being “pivotal to a firm’s success” for registered investment advisers and investment companies.  They add that failure to pass an examination conducted by the U.S. Securities and Exchange Commission (“SEC”) – Office of Compliance Inspections… Continue Reading

CFTC Regulation and Compliance: Not Just for Commodities Brokers Anymore

Posted in Broker Dealers, Commodities, Compliance, Disclosure and Transparency, Financial Reporting, Hedge Fund, Regulation, Trading
Although the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed over two years ago, regulators and financial market participants are still grappling with its complexities. Some aspects are still being finalized which adds to the challenge of compliance. According to “U.S. regulators yet to implement one-third of Dodd-Frank rules” by reporter Pat Dulnier (Bank… Continue Reading

Risk Management Survey Says More Work Is Needed

Posted in Compliance, Derivatives, Disclosure and Transparency, Financial Reporting, Model Risk, Risk Management
After the last few years, it seemed that risk managers were finally getting their due respect. Alas, a new survey suggests that more work remains to be done. According to “Too good to fail? New challenges for risk management in financial services” by Rob Mitchell with the Economist Intelligence Unit, “Inculcating and embedding a stronger… Continue Reading

Pension Risk Disclosures – Clear As Mud

Posted in Financial Reporting
While some regulatory efforts are underway to promote transparency about “true” pension economics and the risk to investors, many questions remain about a sponsor’s legal liabilities. This concern transcends all types of retirement plans, whether defined contribution or defined benefit. Additionally, as billions of dollars make their way to “hard-to-value” investments, concerns about liquidity and… Continue Reading

Financial Risk Reporting – Recipe For Next Wave of Litigation?

Posted in Compliance, Financial Reporting, Litigation
According to today’s news reports, the U.S. Securities and Exchange Commission may soon investigate the California Public Employees’ Retirement System (“CalPERS”) for its disclosures about inherent risks. If true, this type of inquiry could quickly lead to serious trouble for other public retirement plans as well as ERISA plans. For that matter, any issuer of… Continue Reading