The Cost of “Sox” 2016

"Sox" Reporting Requirements are Costly, but also Benefit Organizations

“Sox” Reporting Requirements are Costly, But Good for Organizations

In July 2002, Congress passed the Sarbanes-Oxley Act, also known as the Public Company Accounting Reform and Investor Protection Act (in the Senate) and the Corporate and Auditing Accountability and Responsibility Act (in the House), but commonly dubbed “SOX” for short. The legislation came on the heels of highly publicized corporate and accounting scandals—among them the Enron and WorldCom scandals—in which unholy unions were found to exist between corporate executives who committed less than forthright public disclosures and even outright fraud and the big CPA firms that aided, abetted, and shielded them.

The complex web of overstating assets, understating expenses, and misdirecting funds among a myriad of corporate subsidiaries and affiliates had become so sophisticated that even armies of government regulators were caught off guard—until the various houses of corporate cards collapsed. But the presumption that compliance with SOX would be straightforward and even a boon to corporate auditors has proven to be a questionable proposition.

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18 Months Till IASB Deadline—Are You Prepared?

Meeting the New Standard IFRS 9 is Stressing Institutions

Meeting the New Standard IFRS 9 is Stressing Institutions

Ever wonder what keeps all financial institutions around the globe—and the accounting for their sundry financial instruments—operating according to the same reporting standard? The London-based International Accounting Standards Board (IASB) founded in 2001 comprises fourteen board members from around the globe and sets International Financial Reporting Standards (IFRS) intended to bring “transparency, accountability and efficiency to financial markets around the world,” according to the IASB website (www.ifrs.org).

A prime goal of the independent public interest organization is to establish governance and due process regimes designed to keep global financial accounting standards free of special interest influence. Two years ago, it formulated an IFRS rule to address an irony of the 2008 global financial depression: while banking institutions worldwide might have had prior notice of pending problematic balance sheets, according to the accounting rules then in existence, only actual losses already suffered could be accounted for. IFRS 9 intends to change that.

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After Iran: OFAC Enforces Sanctions Violations

OFAC is wasting no time in settling the judicial score with previous Iran sanctions violators

OFAC is wasting no time in settling the judicial score with previous Iran sanctions violators

Just over a year ago, the Islamic Republic of Iran and the five permanent members of the UN plus Germany (collectively dubbed “P5+1”) signed an agreement that was hailed by some as a crucial diplomatic tool necessary to deconstruct—over a 15-year period—Iran’s budding nuclear weapons capability. But for Iran, the main motivation in signing the agreement was the short-term relief from “crippling economic sanctions.” In January 2016, those sanctions were officially lifted and, worldwide, businesses wasted no time in rushing to ink contracts with Iran. For other global enterprises, however, the “sanctions never existed.” Now the Office of Foreign Assets Control (OFAC) is wasting no time in settling the judicial score with previous Iran sanctions violators.

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Insider Trading: SEC Gets to the Heart of the Matter

Insider Trading in the Pharmaceutical Industry is Becoming Commonplace

Insider Trading in the Pharmaceutical Industry is Becoming Commonplace

Confidential drug trials are supposed to be just that—“confidential.” But when a cardiologist hired to be principal investigator of developmental trials for a clotting regulator got wind of significant setbacks in the course of clinical trials—and traded on that knowledge—the Securities and Exchange Commission (SEC) took the matter to heart.

Consultant to Clinical Trials

In 2014, a well-known Bridgeport, Connecticut, cardiologist, who also heads a clinical research consulting firm, was hired as principal investigator by a Durham, North Carolina, company (later merged with a California-based biopharmaceutical company) to oversee the clinical trials of a blood-clotting regulator drug. The drug was being developed for use by patients who suffer from “acute coronary syndrome” and who are required to undergo coronary revascularization procedures.

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Basel III Revises Risk-Based Capital Regulations

Basel III Revisions Intend to Prevent a Run on the Banks

Basel III Revisions Should Prevent a Run on the Banks

The Bank for International Settlements (BIS) was founded in Basel, Switzerland, in 1930 as an international organization to “foster international monetary and financial cooperation and serve as a bank for central banks.” During the last decade, it has promulgated a progression of Basel Accords designed to advise on how much capital major banks need to keep in reserve in order to guard against contemporary financial and operational risks. Its 2010 iteration—Basel III—has just been revised again out of concern that even the most recent capital reserve standards may not provide enough of a safety net.

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CFTC Orders $7.2 Million in Penalties and Restitution

Investment Firms that Steal from Investors will Pay the Price

Stealing from Investors Brings CFTC Censure

A Waterford, Michigan, “introducing broker” and its principal have been ordered to jointly and severally pay $7.2 million in restitution and penalties in connection with an investment scheme in which they promised investors a 300 percent return on initial investment—and then lied to investigators in the course of the investigation into the fraud. The time-worn caution to investors: “If it sounds too good to be true, it probably is,” once again rings in the ears of those defrauded.

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The Next Subprime Crash—Where Are the Regulators?

Easily Attainable Subprime Auto Loans are a Threat to the U.S. Economy

That Was Easy! Subprime Auto Loans Present a Threat to the U.S. Economy

Remember the Great Recession of 2008 brought on by the subprime mortgage debacle? Of course you do—the ramifications are still with us today as the both the US economy and the global economy struggle to recover. But lest you think that subprime lending problems became history with the passage of the Dodd-Frank Wall Street Reform Act along with its myriad of related consumer legislation, think again. The subprime hydra has merely morphed into a new consumer catastrophe waiting to happen as the financial sector bundles subprime auto loans to sell to investors. Old–very sour—wine in a new bottle.

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DOJ and SEC Cracking Down on FCPA Violators

SEC is Onto Companies Using Bribes to Win Business Contracts

The SEC is Onto Companies That Use Bribes to Win Business Contracts

In February 2016, the Securities and Exchange Commission (SEC) announced that a $795 million settlement had been reached with a Dutch telecommunications provider for allegedly violating the U.S. Foreign Corrupt Practices Act (FCPA). The defendant company was accused of bribing government officials in an effort to win contracts in Uzbekistan. The SEC and the Department of Justice (DOJ) have together filed more FCPA complaints in the first six months of 2016 than they did in all of 2015. Clearly, FCPA regulators are ramping up enforcement of FCPA activity globally, and the who’s who of defendants covers just about every industry in America.

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