GRC Blog from The GRC Group

UBS Exec Agrees to $2.75 Million Settlement

GRC Group — Tue, 23 Feb 2010 17:25:55 +0000

The New York Attorney General’s office has reached a $2.75 million settlement with David Shulman, a former senior UBS executive, on charges of insider trading in auction-rate securities. According to the New York Times, this settlement follows one reached in October 2008 with former UBS general counsel David Aufhauser for $6.5 million. As part of the settlement, Shulman is prohibited from working in the securities sector until January 2011.

SEC Tried to Push Proxy Access through Back Door

GRC Group — Tue, 23 Feb 2010 17:24:41 +0000

The Securities and Exchange Commission, led by Chairman Mary Schapiro, is committed to providing shareholders with a more direct way to nominate directors of publicly held companies. In fact, according to Business Week, the agency tried to force “proxy access” upon Bank of America when negotiating the recent $150 settlement over the bank’s acquisition of Merrill Lynch. Although proxy access was ultimately excluded from the proposed settlement, Schapiro had hoped to use it as a test case to prove that the rationale was sound. Currently, shareholders who wish to challenge a company’s board nominees must distribute their own ballots. This process, according to Schapiro, major investors, and pension funds, is cost-prohibitive.

Weak Governance Boosts Likelihood of Class Action Suits

GRC Group — Mon, 22 Feb 2010 01:28:41 +0000

Over the past year, most securities litigation and SEC investigations have revolved around financial services companies. According to CFO Magazine, now the litigation and enforcement focus is shifting back to nonfinancial firms, specifically in the arenas of earnings guidance, insider trading, and accounting. Yet the largest financial hits are taken by companies that exhibit weaknesses in corporate governance. In other words, gaps in governance not only increase exposure to litigation, but also result in settlements with greater dollar amounts. One significant weak link is when board members and CEOs have worked together for so long that the board is more closely aligned to management than to shareholder interests. Another is when two or more board members serve together on other boards. Finally, companies whose boards include members with questionable qualifications are also exposed to greater risk. To mitigate this risk, C-level executives should conduct governance-risk benchmarking with competitors and industry leaders and present their findings to the board.

Council of Regulators Likely to Oversee Bank Risk

GRC Group — Mon, 22 Feb 2010 01:27:21 +0000

Amidst the plethora of banking reforms proposed in response to the economic crisis, a major point of contention has been the question of who should be in charge of oversight. Some members of Congress have sought to rein in the power of the Federal Reserve, while others favored giving the central bank oversight responsibilities. According to the New York Times, now it looks as though Congress and the Obama administration are on the verge of agreeing to form a council of regulators, led by the U.S. Treasury, to detect and mitigate excess risk and systemic instability. The proposed council would be chaired by the Treasury Secretary, while the Fed Chairman would act as vice-chair.

SEC Settles with BofA While New York Attorney General Sues

GRC Group — Tue, 09 Feb 2010 18:34:11 +0000

According to the New York Times, the Securities and Exchange Commission reached a long-awaited settlement with Bank of America over accusations that the financial giant withheld information from shareholders about Merrill Lynch losses when BofA took over the firm. Yet in the wake of the $150 million settlement, which was reached after a federal judge excoriated the SEC for attempting to settle for $33 million, New York Attorney General Andrew Cuomo filed civil fraud charges against former BofA CEO Kenneth Lewis and CFO Joe Price. The case stands out in sharp relief against the SEC’s case, which focused on Bank of America as a corporate entity, rather than the culpability of individual officers.