Surprisingly, there is little information available to institutional and individual investors alike as to how to mitigate the risk of losing money to fraudsters. The goal of this webcast is to empower investors to better protect themselves with knowledge of situations to avoid whenever possible. Attendees will hear experts talk about:

• Common causes of investment fraud;
• Enforcement and litigation trends relating to investment misdeeds;
• Lessons learned from financial scandals of the last decade;
• Role of the investment fiduciary in vetting service providers;
• Red flags to detect poor internal controls that could lead to fraud; and
• Regulatory action to stem financial fraud and preserve the integrity of the capital markets.

Speakers for this 75-minute event include:

• Dr. Susan Mangiero, CFA, FRM – Managing Director, FTI Consulting
• Jonathan Morris, Esq. – Day Pitney LLP / former General Counsel of Barclays Wealth
• Brian Ong – Senior Managing Director, FTI Consulting
• Karen Tyler, North Dakota Securities Commissioner and former president of the North American Securities

To attend this webcast scheduled for Wednesday, June 13, at 1 pm Eastern, please sign up below.

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 May 11.

via Web Watch: Best of the Week Ending May 11 – Compliance Week

According to a study done by Cornerstone Research and Robert Daines, a professor at Stanford Law School, “almost every acquisition over $100 million” announced last year attracted multiple lawsuits by target shareholders, who rarely received additional compensation as a result….

But what can’t be denied is that shareholder litigators have bellied their way up to the M&A table, where all parties involved in a transaction — financial and legal advisers, accountants and public-relations firms, writers of fairness opinions, experts in due diligence and post-merger integration — gather to divide up the fees. It’s unlikely they’ll be persuaded to leave anytime soon.

via Here comes the shareholder litigation – The Deal Pipeline

Wal-Mart appeared to commit virtually every governance sin in its handling of the Mexican bribery case, if the long, carefully reported New York Times story is true. The current Wal-Mart board of directors must get to the bottom of the bribery scheme in Mexico and the possible suppression by senior Wal-Mart leaders in Bentonville, Arkansas (the company’s global headquarters) of a full investigation.

In addition, the board must also review – and fix as necessary – the numerous company internal governing systems, processes and procedures that appear to have been non-existent or to have failed. And, most importantly, it must define the CEO’s core role as one which truly fuses high performance with high integrity, and does not exalt performance at the expense of integrity – and possibly discipline or remove the past CEO (still on the board) or the current CEO.

via Wal-Mart Bribery Case Raises Fundamental Governance Issues — The Harvard Law School Forum on Corporate Governance and Financial Regulation

My picks for this week’s most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation.

via Web Watch: Best of the Week Ending April 27 – Compliance Week

Somewhere in the United States is a bank account with $452 million sitting there, waiting to be paid out to anyone who helps the Securities and Exchange Commission identify and pursue cases of corporate fraud.

Well, anyone who meets the right criteria, that is.

The fund was created by the Dodd–Frank Act and is earmarked for payouts to whistleblowers.  Although not a single award has been paid out yet, that is about to change, as the SEC’s new Office of the Whistleblower continues to expand its operations and readies the first wave of whistleblower payments. As the office concludes its first year of operation, answers to questions about the SEC’s whistleblower program are beginning to emerge, such as the quality and volume of tips generated and the effect they are having on corporate compliance.

Sean McKessy joined the SEC as its first chief of the Office of the Whistleblower in February 2011. In the year that’s passed, the SEC has taken several steps to take this office from a mere concept to a fully functioning operation, including:

• Adopting final rules to govern the operations and procedures of the whistleblower program, which took effect on Aug. 12, 2011;
• Hiring Jane Norberg as deputy chief;
• Staffing the office with five lawyers and a paralegal on detail from other parts of the agency; and
• Launching an Office of the Whistleblower Website with detailed information about the program and links to the SEC’s Tips, Complaints, and Referrals Portal for submitting a whistleblower tip online.

Although little public data is available yet on the tips whistleblowers are submitting, early indicators suggest a steady flow of high-quality information is making its way to the regulator. In the SEC’s annual report on the Whistleblower Program, issued last November, the agency disclosed that in the seven weeks from the day the Whistleblower Office effectively opened its doors (Aug. 12) until the end of that fiscal year (Sept. 30), the SEC received 334 whistleblower complaints—an average of about seven per day. The most common complaints were about market manipulation (16.2 percent), corporate disclosures and financial statements (15.3 percent), and offering fraud (15.6 percent). In that short time, the SEC received tips from individuals in 37 states and many foreign countries, including 10 tips from China, 9 from the United Kingdom, and 3 from Australia.

Apparently, activity hasn’t dropped off since then. At the annual SEC Speaks conference in February 2012, SEC Chairman Mary Shapiro stated that the whistleblower program had provided the agency with “hundreds of higher-quality tips, helping us to avoid investigatory dead-ends and, at the same time, prodding companies to enhance their internal compliance programs.”

Last month McKessy offered a similar assessment when he said the agency was “very encouraged with the percentage of high-quality information that comes in through the portal.” He stated that the SEC was seeing some “very specific, timely, and credible tips coming through people who are participating in the program.” Some whistleblowers have even submitted audio recordings of conversations, McKessy added.

The biggest question for compliance officers, of course, is whether that potential of monetary rewards will tempt employees to ignore the company’s internal complaint hotline in favor of blabbing to the SEC. Indeed, when the SEC was writing the rules for its whistleblower program, many public companies and business groups such as the Association of Corporate Counsel and the U.S. Chamber of Commerce lobbied hard for a requirement that employees must first report potential violations of the securities laws internally before blowing the whistle to the SEC. The SEC considered these views, but ultimately rejected any such requirement, deciding to encourage—but not require—initial internal reporting in other ways. Among them:

• A 120-day “grace period” where an employee who reports information internally to his or her company may wait before reporting the same information to the SEC. If the whistleblower reports the information to the SEC within this 120-day period, the SEC will hold the whistleblower’s “place in line” by considering the tip to have been provided to the SEC on the date of the original internal report; and
• A rule stating that when determining the percentage of a whistleblower’s award (which can range from 10 to 30 percent of any total settlement), the award may be revised upward if the whistleblower first reports possible misconduct internally.

Unimpressed by these incentives, the U.S. Chamber of Commerce denounced the SEC’s final rule, predicting that that the lack of a “report internally first” requirement would inevitably lead employees to take complaints to the government. The Chamber of Commerce warned that the rule would undermine companies’ internal compliance systems and “put trial lawyer profits ahead of effective compliance and corporate governance.” The Chamber argued that the rule will only make detecting fraud that much harder and more expensive.

The SEC’s final rule also prompted U.S. Rep. Michael G. Grimm (R-N.Y.) to introduce the “Whistleblower Improvement Act of 2011,” which would “require a whistleblower employee, as a prerequisite to eligibility for a whistleblower award, to: (1) first report information relating to misconduct to his or her employer before reporting it to the SEC, and (2) report such information to the SEC within 180 days after reporting it to the employer.” The Chamber of Commerce anticipates that the Whistleblower Improvement Act will receive further legislative consideration this year.

Despite all those fears, however, employees don’t actually seem to be bypassing the internal hotline. In fact, McKessy says, most tips to the SEC have already been reported. “I’d be hard pressed to think of one [complaint] where it was a true insider tip that was not reported to anyone else,” he said recently.

On another occasion in March, McKessy added that while he doesn’t yet have hard data to prove it, anecdotal evidence suggests that the whistleblower program is not “destroying internal compliance programs or pushing people to subvert their internal compliance programs.” He added that a significant majority of individuals who have approached the SEC with complaints about their company say that they also “reported internally before they came to us. They reported to their boss, they went to the audit committee in some instances, they called their anonymous hotlines.”

McKessy’s observations are buoyed by a report released in April showing that for the third consecutive quarter, fraud reporting within companies has reached an all-time high. The fourth-quarter 2011 findings of the Quarterly Corporate Fraud Index by The Network and BDO Consulting, which are based on compliance reporting activity from more than 1,400 organizations worldwide, show fraud now accounts for 21.6 percent of all reporting activity, an increase of 2 percentage points compared to the same quarter of 2010. In addition, the report found that the total number of reported fraud-related incidents also rose 15.2 percent during that time.

Luis Ramos, CEO of The Network, suggested that “the upward trend in fraud reporting may actually indicate that organizations are working harder than ever to fight the risks posed by fraud.” He said companies are doing more to promote a workplace where employees are willing to report fraud internally. In time—perhaps as part of its next annual report on the whistleblower program, which should be released in November—the SEC will have a more robust set of data to assess the effect of its whistleblower rules on internal corporate compliance programs.

For now, at least, it looks as if fraud tips are coming in strong to both the SEC and to corporate compliance departments.

Originally published in Compliance Week. Reprinted with permission.
© 2012 Haymarket Media, Inc. All Rights Reserved. Compliance Week can be found at http://www.complianceweek.com. Call (888) 519-9200 for more information.

The U.S. Department of Justice and the Securities and Exchange Commission are investigating, and Wal-Mart Stores Inc. has hired outside counsel to assist with its own investigation, but the question remains: What could in-house counsel at Wal-Mart could have done to prevent this ugly scenario?

via An In-House Counsel Corporate Corruption Playbook – Corporate Counsel

And yet the market was taken by surprise [by the NYT’s Walmart exposé], with $12 billion of market capitalization evaporating from Walmart and Walmex in one day. Which raises the obvious question: shouldn’t the NYT, which can always use a bit of extra revenue, take advantage of the fact that its stories can move markets so much? Not directly: I’m not suggesting that the New York Times Company should start buying out-of-the-money put options on Mexican corporates in advance of its own stories. But how much would hedge funds pay to be able to see the NYT’s big investigative stories during the trading day prior to the appearance of the story? It’s entirely normal, and perfectly ethical, for news organizations, including Reuters, to give faster access to the best-paying customers.

via Could the NYT make money from its scoops? — Reuters.

My picks for this week’s most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation.

via Web Watch: Best of the Week Ending April 20 – Compliance Week.

The materials from the webcast can be downloaded here.