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Category Archives: Corporate Governance

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Is “Big Brother” Such A Bad Thing

Posted in Broker-Dealer Regulation, Corporate Governance, FINRA Compliance, FINRA CRD, FINRA Enforcement, Ponzi Schemes, Registered Representatives

FINRA recently announced a change to the supervision rule to require hiring firms to conduct background checks on new employees.  This rule change raises the question; what have member firms been doing all along.  In this day and age of instant information, having a new registered representative complete his/her U-4 should have only been a… Continue Reading


Posted in Corporate Governance, Hedge and Private Equity Funds, Securities Litigation

Former shareholders may pursue narrowed claims against some large private equity firms who allegedly conspired with one another minimizing competition for target companies.  See Dahl v. Bain Capital Partners LLC, D. Mass., 07-12388, 3/13/13), http://www.bloomberglaw.com/public/document/Klein_et_a_v_Bain_Capital_Partners_LLC_et_at_Docket_No_107cv1238. The plaintiffs previously held shares in various public companies that were, ultimately, acquired by private equity firms.  The complaint alleged… Continue Reading


Posted in Corporate Financing, Corporate Governance, Securities Legislation

A reverse triangular merger was not an assignment by operation of law.  See Meso Scale Diagnostics LLC v. Roche Diagostics GMBH, Del. Ch., C.A. No. 5589-VCP, 2/22/13, http://www.bloomberglaw.com/public/document/CONF_ORD_Meso_Scale_Diagnostics_LLC_vs_Roche_Diagnostics_GmbH_Do.  The court explained that a company entered into a series of contemporaneously executed agreements that granted it a new non-exclusive license. However, before the transaction was complete… Continue Reading

What Do Ethics Have To Do With It?

Posted in Broker-Dealer Regulation, Compliance and Supervision, Corporate Governance, Financial Industry Trends, FINRA Compliance, FINRA Enforcement

Having a strong compliance program is not the end of a firm’s obligation to itself and its customers. All firms should also make sure that it has a strong ethics program. An ethics program should include, among other things, the following: A written code of conduct; Having an ethical tone at the top of the… Continue Reading

You May Be Better Off Telling the SEC Before Making Corporate Announcements

Posted in Corporate Governance, SEC Enforcement

The SEC is actively encouraging companies to contact the SEC before making a public announcement. The SEC has indicated that it has its Staff reviewing Form 8-K disclosures.  These reviews concentrate on changes in auditors, directors or officers.  The SEC Staff then will follow-up with the company to inquire as to the basis for the announcement and its… Continue Reading

Who Wants To Learn A Way To Insulate Themselves From Liability.

Posted in Arbitration, Compliance and Supervision, Corporate Governance, Internal Investigations, Public Customer Arbitrations, Registered Representatives

In our hyper-fast world, financial advisors, like many in the service sector, have become lazy.  Let me be clear, I think financial advisors are working harder than ever to service their clients in these challenging times for which they should be commended. The laziness to which I refer is that I see financial advisors taking… Continue Reading

Game Changing Off-Label Marketing Decision Has Implications for Related Securities Lawsuits

Posted in Compliance and Supervision, Corporate Governance, Federal and State Criminal Activities, Internal Investigations, Securities Class Actions, Securities Litigation

The Second Circuit ruled that the First Amendment trumps the federal government’s enforcement off-label marketing prohibitions. The decision could change the face of pharmaceutical compliance and limit criminal, regulatory, and civil exposure to government and private plaintiffs.

Who Wants To Know More Techniques To Uncover Fraud?

Posted in Broker-Dealer Regulation, Corporate Governance, Financial Industry Trends, FINRA Compliance, SEC Compliance

In previous blogs, I have noted the importance of focusing on certain types of troublesome activity and the use of outside business disclosure forms to unravel or prevent fraud. There are also a number of other techniques as part of the overall culture of compliance that you can use to prevent/uncover fraud.  In no particular… Continue Reading

The Thirteen Dirty Secrets That A Fraudster Does Not Want You To Know?

Posted in Compliance and Supervision, Corporate Governance, Dodd-Frank, Registered Representatives

The late great comedian, George Carlin, was made famous by his routine, “The Seven Dirty Words You Can Never Say On Televisions”.  Likewise, fraudsters do not want compliance personnel to ever mention the 13 common dirty traits that may uncover a fraud. Although not as funny as George Carlin, focusing on these traits may be… Continue Reading

Who Else Wants To Avoid Being Considered A Supervisor?

Posted in Broker-Dealer Regulation, Corporate Governance, Dodd-Frank, FINRA Compliance, FINRA Enforcement, Investment Adviser Regulation, SEC Compliance, SEC Enforcement

 A simple review of FINRA’s enforcement proceedings demonstrates a new norm; compliance officers are being held accountable as supervisors for rules violations.  How can a compliance officer avoid being held accountable as a supervisor? The best way for compliance to insulate yourself is to make sure that there are clear divisions between compliance and supervisory… Continue Reading

Even Without Knowledge or Participation, Corporate Officers Can Be Criminally Liable for Subordinates’ Misdeeds

Posted in Compliance and Supervision, Corporate Governance, Federal and State Criminal Activities

At least, they can the health care and environmental arenas.  Under the responsible corporate officer (RCO) doctrine, the ability to control corporate conduct is sufficient to hold officers criminally liable, even if the officers did not participate in the misdeeds or have actual knowledge of them.  The D.C. Circuit recently revisited the RCO doctrine in a case… Continue Reading

America – Home of the European IPO

Posted in Corporate Governance, JOBS Act

Big news out of Europe today (besides fears of a Greek exit from the Euro returning like a slasher flick monster that just won’t die):  Michel Barnier, the EU’s top financial services regulator, is pushing for binding Say-on-Pay.  Barnier wants to give shareholders the power to curb “morally indefensible” pay.  This change would impact publicly… Continue Reading


Posted in Corporate Governance, Dodd-Frank, Financial Industry Trends, SEC Organization, Securities Legislation, Securities Registration

In its never ending quest to find suitable ways to address capital formation issues in the United States, the SEC’s Division of Corporation Finance is looking to see if foreign jurisdictions handle some of these issues better and if it could be applied in the United States.  For example, the SEC is looking to see if other… Continue Reading

The SEC Whistleblower Program May Have Spurred Corporate Reform

Posted in Compliance and Supervision, Corporate Governance, SEC Compliance, SEC Enforcement

There was plenty of debate when the SEC adopted its new whistle blower bounty program.  Many commentators thought that the program would result in an onslaught of whistle blowers directly reporting to the SEC instead of first contacting the subject corporation.  The Quarterly Fraud Index reported, however, that the opposite may actually be taking place.  The… Continue Reading

When the Government Blows the Whistle on a Whistleblower

Posted in Compliance and Supervision, Corporate Governance, Dodd-Frank, SEC Enforcement

Today’s Wall Street Journal includes a story (subscription required) of an attorney for the SEC inadvertently “outing” a whistleblower while interviewing an executive of the whistleblower’s former employer.  The SEC attorney apparently showed the executive the whistleblower’s notebook during the interview, and the executive recognized the whistleblower’s handwriting. Outing whistleblowers is certainly not the best… Continue Reading

No More Felons and Other Bad Guys in Regulation D Offerings

Posted in Compliance and Supervision, Corporate Governance, Dodd-Frank, Federal and State Criminal Activities, JOBS Act, SEC Compliance, SEC Enforcement, Securities Registration

Recently, the SEC announced that it would take steps to bar felons and bad actors from any Regulation D offering.  This rule was mandated by the Dodd-Frank Act, and the SEC issued the proposal last May 2011.  This new rule may be in place before the end of this year, but there is no certainty… Continue Reading

Ernest Badway to Speak at Internal Corporate Investigations and Forum for In-House Counsel National Institute

Posted in Corporate Governance, Financial Industry Trends, JOBS Act

Ernie will be moderating a panel on investigating and responding to data breaches.  The discussion will include the required specialized skills and active coordination with a company’s IT personnel and external IT experts. Among the various federal laws to be considered when  protected private information has been improperly accessed  are the HIPAA/HITECH, and/or Gramm-Leach-Bliley Act.  The panel… Continue Reading


Posted in Corporate Governance, Dodd-Frank, JOBS Act, Securities Legislation, Securities Registration

Recently, the SEC’s Division of Corporation Finance Director indicated that the SEC was reviewing certain issues in an attempt to assist small businesses with capital formation.  The SEC is assessing a number of initiatives, including, but not limited to, if the number of shareholders, currently 500, triggering reporting requirements could be increased.  Some have suggested… Continue Reading

Emerging Growth Companies – A Bigger Deal Than You Might Think

Posted in Corporate Governance, Dodd-Frank, JOBS Act, Sarbanes-Oxley, Securities Legislation, Securities Registration

Today’s post is the penultimate of this series covering the recently signed JOBS Act, and covers the Act’s Title I – Reopening American Capital Markets to Emerging Growth Companies.  Check back later this week for more on Crowdfunding and a recap on who the JOBS Act really helps and who needs to be watch out. Or, instead of… Continue Reading

It’s Official! The JOBS Act of 2012 and Changes to Reg A and Reg D

Posted in Corporate Governance, Dodd-Frank, JOBS Act, SEC Compliance, Securities Legislation, Securities Registration

This post is a continuance of a series reviewing the JOBS Act.  For more on the registration requirement threshold shift from 500 to 2000 investors, click here.  For Jim’s initial analysis of Crowdfunding, click here.  Check back later for a flushed-out analysis of Title I of the Jobs Act, which creates the “Emerging Growth Company” classification.   … Continue Reading

New Businesses and Obtaining Money

Posted in Corporate Governance, Hedge and Private Equity Funds, Securities Registration

Often, we are asked to consider assisting clients in obtaining funds for their start-up businesses.  Before asking for money, new businesses must have an understanding as to their business plan, need funding, and disposition of said funds.  Accordingly, new businesses must develop an understandable business plan.  Further, these entrepreneurs must consider the amount of capital necessary… Continue Reading

If England Attacks Executives’ Cheques, are US Execs’ Checks Next?

Posted in Corporate Governance, Dodd-Frank, Financial Industry Trends, Social Media

In law, America tends to follow in the footsteps of its older sister, Britain.  Sure, sure, we went our own way with that little Constitution thing back in the day.  But as of late, and particularly in the world of securities law and corporate governance, we’ve been following in their footsteps a bit.   Wall Street… Continue Reading

FCPA Action Against Private Equity and Hedge Funds

Posted in Corporate Governance, Federal and State Criminal Activities, SEC Enforcement

At a recent conference, federal regulators, including the DOJ and the SEC, stated that they are aggressively pursuing investigations into private equity and hedge funds and their FCPA compliance.  Most likely, we  will see a spike in enforcement issues for these funds regarding the FCPA as the new year begins.  The government will undoubtedly look… Continue Reading

SEC Rules on Reverse Merger Companies

Posted in Corporate Governance, SEC Compliance, SEC Enforcement, Securities Registration

Responding to numerous complaints, especially, regarding companies operating from the People’s Republic of China, the SEC has determined that it will tighten the listing requirements for companies involved in reverse mergers.  In particular, these new regulations will effect those companies listed on the Nasdaq, New York Stock Exchange, and the NYSE Amex.  As many know,… Continue Reading