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Web Watch: Best of the Week Ending November 18

Bruce Carton | November 18, 2011

Throughout the week over at Securities Docket I highlight the most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation. Here is a digest of my picks for the week ending November 18.
Consolidated Audit Trail Will Revolutionize Insider Trading Enforcement
Cady Bar the Door | David Smyth | Nov 18, 2011
Bluesheeting, for those who haven't experienced it, is the archaic and cumbersome process by which SEC and FINRA staff collect equity stock trading information for particular issuers.... Enter the Consolidated Audit Trail, basically a continuous data stream that will allow SEC and FINRA staff to know what trades are being executed as they're happening.  The prospect of it is quite remarkable.  From a law enforcement perspective, it will make the early stages of insider trading cases much easier and faster to investigate.  No Bluesheets.  No paper requests for account documents.  No silly delays because compliance staff are on vacation. 
Can Rakoff consider 'public interest' in Citi/SEC settlement?
On the Case | Erin Geiger Smith | Nov 16, 2011
The crowd of reporters on hand when U.S. District Judge Jed Rakoff of Manhattan federal court grilled attorneys from the Securities and Exchange Commission and Citigroup last week about their proposed $285 million settlement -- not to the mention the spilled ink and megabytes on Rakoff's pointed questions about the settlement's fairness -- show the public has certainly taken an interest in the deal to resolve allegations Citi deceived investors in a mortgage-backed CDO vehicle. But the SEC is arguing that the public interest is not something Rakoff should -- or even can -- consider when deciding whether to approve the deal.
Congressional Insider Trading: Is It Legal?
Cato at Liberty | Walter Olson | Nov 16, 2011
So the question is: is all this legal? While there's some difference of opinion on the issue among law professors, the proper answer to that question is most likely going to be, “Yes, it's legal.” As UCLA's Stephen Bainbridge points out, existing insider trading law, developed by way of a long series of contested cases under the Securities and Exchange Commission's Rule 10b-5, assigns liability to persons who are not corporate insiders if they are violating a recognized duty of loyalty to those for whom they work. As applied to the investment whizzes of the Hill, this implies that trading on inside information might be a violation if done by Congressional staffers (since they owe a duty of loyalty to higher-ups) but not when done by members of Congress themselves.
Addressing The “Luncheon Law” Nature Of The FCPA
FCPA Professor | Mike Koehler | Nov 15, 2011
A lawyer once used the phrase “luncheon law”  in a conversation with me to describe the FCPA.  What did this person mean?  That the FCPA contains many vague and ambiguous terms, that there is little FCPA caselaw,  and that the enforcement agencies offer little official guidance (as noted in this prior post the DOJ has promised FCPA guidance in 2012).  The lawyer observed that in order to learn about the FCPA and FCPA enforcement one has to attend the luncheons during which the enforcement agency officials speak. The lawyer had a point and the “luncheon law” nature of the FCPA needs to be addressed. 
What Will Be the Legal Fallout for Olympus Corp.?
The Asian Lawyer | Anthony Lin | Nov 15, 2011
Last week, Olympus Corp. admitted that former executives disguised more than $1 billion in investment losses as fees and costs incurred in a series of acquisitions. The disclosure raised the prospect of a de-listing from the Tokyo Stock Exchange, a potentially catastrophic blow to shareholders who have already lost 80 percent of the value of their holdings in the month since the scandal first surfaced. In America, lawyers would be strapping in for years of litigation. First, prosecutors would take their shot at getting stiff sentences handed down to the responsible executives. Then securities class action lawyers would have their field day.But this is Japan, and things are likely to be a whole lot different.
Business Insider | Henry Blodgett | Nov 15, 2011
Rep. Bachus should return whatever money he made by betting on the direction of the markets (or anything else) in the fall of 2008. He should apologize for his behavior and jaw-dropping lack of judgement. He should urge his fellow members of Congress to immediately enact legislation that defends the fairness of the markets by holding Congress to the same insider trading laws as everyone else. He should then resign in disgrace.
Ethically Challenged Congress Needs Law or Code Banning Insider Trading
The Daily Beast | Zachary Karabell | Nov 15, 2011
Even if there is no stomach for such a bill, there is such a thing as ethical conduct and demanding that elected representatives behave accordingly. Many Wall Street firms, in fact, have stringent ethical guidelines about their employees trading in their personal accounts, and prohibit most activity on the grounds that even the appearance of a conflict of interest or of a questionable information edge is not acceptable for those who may be fiduciaries of other people's money. Most media companies have similar prohibitions. That Congress has fewer ethical restrictions than either journalists or bankers—neither of whom are held in high public esteem, judging from polls—says something about just how ethically challenged Congress actually is.
A Judge Who Just Wants to Know the Truth | Al Lewis | Nov 14, 2011
Either the SEC is a thuggish extortion racket, shaking down private corporations for hundreds of millions of dollars with baseless allegations, or some of America's biggest companies have evolved into the world's most sophisticated crime syndicates. Take your pick. But since Enron, just about every major bank, every major accounting firm and far too many publicly traded companies have settled allegations of massive fraud without admitting nor denying guilt. They pay millions for the privilege of stealing billions, while the regulators take bows, arguing that civil fines represent an efficient form of justice. Proving white-collar crime is indeed a tough endeavor, as the grossly underfunded SEC and overworked Justice Department argue. But not proving it is what brought America to where it is today: A nation led by charlatans who can easily dodge responsibility.