SIA Annual Seminar, DAY 3
The 2006 SIA Compliance and Legal Division Annual Seminar came to a close in Hollywood, Florida March 22. Once the tournament winners were announced, the general session was kicked off by seminar co-chair Linda Yarden's invitation to Seminar 2007 --"Survivor Phoenix." Next year's Annual Seminar begins on March 25, 2007, and will be held at the JW Marriott Resort & Spa in Phoenix, Arizona. Yarden joked that some of the "survivor" challenges will include: the race to book one of the 3 rooms at the main hotel; the networking challenge (passing out as many business cards as possible in a 3-day period); and finally, the CLE challenge (creative ways to get CLE credits for a round of golf or a one-hour hot stone massage). Seminar 2007 promises to be a great event.
Yarden's invitation was followed by the Enforcement Panel discussion which addressed current hot topics and enforcement priorities in the coming year.
Penalties were a subject of great discussion during the seminar; however, Linda Thomsen of the SEC commented that of the nearly 2000 cases brought in the past 4 years, the SEC imposed penalties against public issuers only 27 times. It was noted that this figure does not include the penalties against regulated entities. Thomsen strongly disagreed with moderator Ted Levine's comment that penalties were "totally out of control." And when asked how the NYSE comes up with the amount of the penalties, Susan Merrill stated that the first consideration is the conduct, but that the NYSE also considers the size of the entity. She described the process as one of good faith and give-and-take, and stated that the dollar amount of the fine is not simply "pulled out of a hat." Thomsen concluded that "Congress and the world" agree that penalties add to deterrence -- not exactly an indication that penalties are on the decline.
Susan Merrill then led the discussion on "cooperation," which was heavily discussed at the Seminar this year. She suggested we review NYSE Information Memo 05-65. Download file Merrill stated that she has repeatedly represented that waiver of the attorney-client privilege is not a requirement for "extraordinary" cooperation, but she acknowledged that no one seems to believe that representation. She stated that the NYSE staff would only ask for a waiver when it is absolutely necessary to get at the underlying facts - and that facts are not usually privileged. Merrill also said that if you reveal that you've conducted an internal investigation, the staff is going to ask for the report, and if you say "no," you better come up with a different way to get the underlying facts to the NYSE.
To conclude the discussion, each of the panel members was asked to identify the current enforcement priorities of their respective organizations. Merrill stated that the NYSE is focusing on market quality concerns, including limit order display and electronic transmission of orders ("the fat finger cases"). According to Thomsen, the SEC is focusing on retail investors and on hedge funds. She noted that there are billions of dollars wrapped up in hedge funds and that there has been a significant increase in cases involving these products in the last couple years. Patty Struck, the Securities Administrator for Wisconsin, noted that investors are the main priority for state regulators. She expressed concern that investors are far too often belittled and intimidated by their brokers, and opined that she would get less calls from individual investors if the brokers were more respectful to their customers by timely and thoroughly answering their questions. Finally, Barry Goldsmith, who is leaving the NASD for private practice, noted that the NASD's current priorities include: hedge funds; gifts and gratuities; failure to cooperate; equity index annuities, and; B-D self-offerings.
Levine concluded the Enforcement Panel discussion by stating that there had been a "call to the regulators," that he hoped there would be an end to multiple regulation this year, and therefore there would be no need to discuss the topic at Seminar 2007.
