Editor column

Citation

Davis, H.A. (2009), "Editor column", Journal of Investment Compliance, Vol. 10 No. 4. https://doi.org/10.1108/joic.2009.31310daa.001

Editor column

Article Type: Editor column From: Journal of Investment Compliance, Volume 10, Issue 4

The US Securities and Exchange Commission has been quite sensitive to criticism over its failure to detect Bernard Madoff’s Ponzi scheme before it caused billions of dollars in investor losses. Early in her tenure as SEC Chair Mary Schapiro appointed Robert Khuzami as Director of the Commission’s Division of Enforcement. In our first article, Nader Salehi, Gerard Russello, and Vincent Hull report on the priorities Mr Khuzami has outlined in the course of a self-assessment his division has been conducting of its structure and processes. Next Rob Sobol comments from experience on the appropriate role of a chief compliance officer in an investment management firm, discussing the CCO’s working relationship with top management and the board, areas of expertise, functional priorities, need for industry savvy and diplomatic and problem-solving skills, and need to assess a firm’s compliance culture whether it be favorable or unfavorable.

In recent years, short-selling has been a controversial topic among regulators in all major markets. The SEC eliminated the “uptick” rule in July 2007 but now is considering whether to bring back some version of that rule. A number of temporary emergency rules were put in place in the fall of 2008 including a ban on short-selling the stocks of the largest financial institutions. Now the temporary rules from the financial crisis are being either eliminated or refined and made permanent. In the first of two articles on short-selling, Soo Yim, Timothy Silva, Stephanie Nicolas, and Tiffany Smith explain recent short-sale developments in the USA, including a permanent imposition of the close-out requirement. Then Leonard Ng and Tom Hunter bring us up to date on international harmonization of short-sale regulations, including basic principles proposed by the International Organization of Securities Commissions (IOSCO), more specific proposals from the European Union Committee of European Securities Regulators (CESR), and the likely elements of Financial Services Authority’s (FSA’s) permanent short-selling regime in the UK.

Moving into the fund arena, Thomas Cauley and Scott Rauscher discuss a recent court decision in which an investment adviser who recommended a fund that turned out to be a Ponzi scheme was not held liable for securities fraud, and then they explore other situations in which an adviser could face liablilty. Roger Lorence and Steven Etkind discuss the proper reporting of complicated transactions in which there is no substantial authority supporting a particular tax return position.

Steven Rabitz and Marissa Holob explain the SEC’s proposed new rules under the Adviser’s Act, in response to recent “pay-to-play” scandals, that would prohibit payments and contributions that could be construed as efforts to win investment advisory business from government entities. Susan Camillo, Robert Robertson, Kathleen Ziga, Karl Paulson Egbert, and Alpa Patel discuss a recent joint US Department of Labor-SEC hearing addressing various issues related to target-date funds, which have become popular investment options for personal and company sponsored retirement plans, including naming them in ways that are not misleading, possible regulation of “glide paths,” and the need for greater overall explanation and disclosure.

Guidelines and possible limits on bank officer compensation are another post-financial crisis regulatory issue. Philip Morgan and Neil Nick Robson explain the FSA’s new code of practice for the large financial institutions it regulates, which among other provisions requires certain large banks, building societies, and broker dealers to establish remuneration policies that are consistent with effective risk management. Eric Cafritz, Olivier Genicot, and Benoit Ternon explain new regulations for private placements in France, which the government has been trying to make more consistent with those of other countries in Europe.

Jeff Levering recommends a print distribution and website disclosure strategy for mutual funds that is both cost effective and compliant with the SEC’s summary prospectus rule. Finally, Matthew Zolnor takes a critical look at New York State’s recently tabled proposal to regulate credit default swaps.

The FINRA summary covers recent regulatory notices concerning life settlements, conflicts of interest in public offerings, trade reporting for transactions executed outside normal market hours, and margin requirements for non-traditional ETFs and concludes with a description of three disciplinary actions.

Henry A. DavisEditor