2016: Naughty or Nice?

Regulatory enforcement, FCPA, SEC, FINRA, CFPB, CFTC

Regulators Fared Well in 2016

As 2016 draws to a close, mainstream media reports will be filled with all sorts of interesting—and not so interesting—statistics on everything from how many baby girls were named “Abigail” to how many baby boys were named “Zack,” the number of pizzas consumed on college campuses, which cellphone manufacturer had the most recalls, and how many ducks safely made it across a certain highway in northern Minnesota. But our statistics are, of course, much more fascinating and certainly more germane to your business governance. So let’s get started with our first annual Regulatory Year in Review.

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SEC Enforcement—“How Quaint”

SEC, Center for Risk and Quantitative Analytics, CRQA, quantitative analysis, quaints

With CRQA, the SEC Stays One Step Ahead of Fraudsters

One of the first things that SEC Chair Mary Jo White did when she assumed leadership of the agency in April 2013 was to order development of an analytics division to counter the technological edge that Wall Street traders seemed to have over SEC regulators. The realization that a lack of mathematicians, quantitative analysts, and assorted “techies” to assist with regulatory enforcement was hampering SEC efforts led to the formation of the Center for Risk and Quantitative Analytics (CRQA). After three years of operation, there are both skeptics and advocates weighing in with differing views of the CRQA, all of which lead us to examine: has the CRQA been a success?

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Tools of the Trade–Recycled

Fair Labor Standards Act, FLSA, tools of the trade, bicycle deliveries

Employers Have to Take Care of Their Employees’ Wellbeing

A decade ago the Occupational Safety and Health Administration (OSHA) published a final rule concerning employer-paid safety equipment known as Personal Protection Equipment or PPE. The rule carved out certain exceptions, such as for safety shoes, prescription safety eyewear, and other safety accessories, but as a matter of policy—and law—the agency recognized an implicit requirement that employers pay for PPE that is necessary to protect the safety and health of employees. Other business sectors outside of manufacturing and physical labor industries have also recognized the win-win benefits of assisting employees with the purchase costs of everything from laptops to home-Internet service, and other labor laws, in fact, require the employer to pay for certain equipment even if not related to safety. Last month, a federal court in New York ruled in a FLSA case involving bicycle-delivery persons and their job-required bicycles.

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BISness Compliance

Bureau of Industry and Security, BIS, Department of Commerce, national security, presidential order

BIS is a Watchdog that Protects our National Security

No, that’s not a typo in the title. BIS, the Bureau of Industry and Security, is America’s primary trade watchdog agency in charge of overseeing national security, foreign policy, and economic objectives by maintaining an effective export control policy. Such oversight is intended to promote continued strategic technology leadership for the United States at a time when America is under the constant threat of national security vulnerability from foreign investors—sometimes cloaked behind layers of corporate anonymity—who aggressively seek to control our leading high-tech companies. BIS is kept busy round the clock closely monitoring exports, trade agreements, and potential investments for any sign that the fruits of our brainpower may be at risk. This month, BIS actions warded off unwanted foreign suitors trying to woo a U.S. technology bride.

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Failing a Stress Test

Bank of England, BOE, stress test, capital reserve, liquidity risk

Results of a Bank Stress Test Forecast Economic Uncertainty

Nobody wants to fail a stress test, right? After running on a treadmill for ten minutes, every patient anticipates the all-clear from the cardiologist with no need for procedures, infusions, or any other remedial steps. But if you are a bank, your stress test isn’t in a doctor’s office, and your bad news can’t be cured by upping the statins. In November, one of Europe’s largest banks failed its stress test, and the doctor’s orders are: infuse $2.5 billion in fresh capital.

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New Workplace Injury Reporting

Will New OSHA Guidelines Reduce Workplace Accidents?

Will New OSHA Guidelines Reduce Workplace Accidents?

January 1, 2017, won’t just ring in the New Year, it will also ring in the effective date of a host of new government regulations. Among them is the Occupational Safety and Health Administration’s (OSHA) new workplace injury reporting rule that has already met with opposition from business groups who question whether the new rule might actually derail programs designed to reduce workplace accidents. The government, on the other hand, claims that the new reporting rule will pressure employers to maintain safer workplaces and erase any fear of retaliation that the injured employee might face when reporting an injury.

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Investments with an Impact

impact investing, Global Impact Investment Network, Environmental Social and Governance, ESG, U.S. Department of Labor Interpretive Bulletin 2015-01.

Impact Investments Bring Financial Returns While Effecting Social Change

Every investor wants to realize the optimum return on investment (ROI) when putting money to work, or he or she will likely not contribute resources to the enterprise. To contribute strictly on a goodwill basis without any regard for profit is not called an investment—it’s called charity. But what if an investor could integrate the financial need for profitability with the humanitarian need to better the world?

According to the Global Impact Investment Network (GIIN), that essentially defines impact investing: “Impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return” (www.thegiin.org). The desire—or some would say the need—for impact investing is growing and is expected to play an increasing role in the course of corporate governance.

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‘Conflict Cellphones’

conflict minerals, conflict diamonds, blood diamonds, Conflict Minerals Law, Form SD

Did the Minerals in that Smartphone Cause a Bloody Conflict?

On May 31, 2014, the reporting of the importation and use of “conflict materials” became mandatory in the United States. The Dodd-Frank Wall Street Reform Act (“Dodd-Frank”) directed the Securities and Exchange Commission (SEC) to promulgate rules for disclosing the use of certain minerals exported from the Democratic Republic of the Congo (DRC) and nine other countries and used extensively in, among other items, consumer electronics. Last month, the EU passed a similar law requiring compulsory checks as to the supply chain of conflict minerals starting in 2021. Companies operating globally need to be cognizant of where they may be subject to such ever-increasing import and use regulations.

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Beware the Personal Server

investment bank security breach, Cyber-security, personal servers, “Safeguards Rule”

Accessing Client Accounts from a Home Computer Alerted the SEC

While the question of whether cyber-security breaches from a personal computer cost a candidate the presidency may be the subject of debate for some years to come, the cost of that violation for one of America’s top investment houses is already clear: $1 million. In the financial sector, such lapses are being taken very seriously as demonstrated by what has been referred to as “the most significant SEC cyber-security-related action to date.”

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SEC CAT Unleashed

Securities and Exchange Commission, SEC, Consolidated Audit Trail, CAT, FINRA, NASD, Self-Regulatory Organizations, SROs, market misconduct

The CAT System will Monitor Market Misconduct

On November 15, the Securities and Exchange Commission (SEC) approved a new, cutting-edge plan for a single comprehensive database known as the Consolidated Audit Trail (CAT). Under the new system, regulators will be able to more efficiently track all trading activity in the US equity and options markets. Self-Regulatory Organizations (SROs) such as FINRA and NASD, as well as broker-dealers, will be required to record and report information under CAT—including the identity of the customer—resulting in a range of data elements that together will provide a complete lifecycle record of all orders and transactions in the US equity and options markets. It is important that compliance officers become thoroughly familiar with the new system and its requirements.

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