Journal of Securities Law, Regulation & Compliance Volume 3 Number 2




                                    Compliance ri...
Pytlik and Myers




moment to define the path forward to the         Management is a critical strategic and
‘future of en...
Compliance risk: A critical business risk for asset managers




                             approach that regulators wil...
Pytlik and Myers




cally combated fraud in the financial mar-         In her testimony concerning the state
kets as one ...
Compliance risk: A critical business risk for asset managers




                             component to prevent complia...
Pytlik and Myers




  between compensation arrangements                 The Chief Compliance Officer should
  and corpora...
Compliance risk: A critical business risk for asset managers




                             authority within the organis...
Pytlik and Myers




• Portfolio trading monitoring, cross-           whether to implement these changes but
  trade activ...
Compliance risk: A critical business risk for asset managers




                                   cent) involved financi...
Pytlik and Myers




(20) Ibid.                                           Principles and Practices for Hedge Fund
(21) See...
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Yvonne I Pytlik Journal Of Securities Law, Regulation & Compliance April 2010 Volume 3 Number 2

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April 2010, Journal of Securities Law, Regulation & Compliance Volume 3 Number 2

Compliance risk: A critical business risk
for asset managers

ABSTRACT
2010 presents a historical moment to define the
path forward to the ‘future of enterprise risk
management and mitigation strategies’ of
increasing compliance risk for asset managers.1–4
The recent financial crises and cases of material
compliance violations, Ponzi schemes, fraudulent
activities, misappropriation of investors’ assets
and collapse of major financial firms have had
significant, harmful impact on investors and
shareholders. Serious compliance violations, such
as insider trading, have proven to be self-destructive
to asset managers. No one is immune to
these trends. ‘Enterprise Risk Management —
2010 and Beyond Forward Looking Approach
by Asset Managers’ is a series of papers dedicated
to regulatory developments and industry
best practices in the enterprise risk management
with a focus on ‘compliance risk: a critical business
risk for asset managers’.

Published in: Business, Economy & Finance
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Yvonne I Pytlik Journal Of Securities Law, Regulation & Compliance April 2010 Volume 3 Number 2

  1. 1. Journal of Securities Law, Regulation & Compliance Volume 3 Number 2 Compliance risk: A critical business risk for asset managers Yvonne I. Pytlik* and Jennifer S. Myers** Received (in revised form): 25th February, 2010 *Global Compliance Risk Management Corporation, 245 Park Avenue, 24th Floor, New York, NY 10022, USA. Tel: +1 781 835 8360; E-mail: ypytlik@GlobalRMC.com **Global Compliance Risk Management Corporation, 245 Park Avenue, 24th Floor, New York, NY 10022, USA. E-mail: jmyers@GlobalRMC.com Yvonne I. Pytlik is a Managing Partner at Global management and mitigation strategies’ of Compliance Risk Management Corporation increasing compliance risk for asset managers.1–4 (GlobalRMC) in New York City. GlobalRMC, a The recent financial crises and cases of material strategic advisory and compliance risk manage- compliance violations, Ponzi schemes, fraudulent ment firm, focuses on Enterprise Risk activities, misappropriation of investors’ assets Management principles, governance techniques and collapse of major financial firms have had and cutting-edge compliance solutions. Yvonne significant, harmful impact on investors and is a senior executive and one of the industry’s shareholders. Serious compliance violations, such most highly regarded strategists in compliance as insider trading, have proven to be self-destruc- risk management and corporate governance for tive to asset managers. No one is immune to financial institutions. As a global head of risk these trends. ‘Enterprise Risk Management — management at Deutsche Bank AG, she devel- 2010 and Beyond Forward Looking Approach oped and implemented global risk management by Asset Managers’ is a series of papers dedi- and governance oversight in the Americas, cated to regulatory developments and industry Europe and Asia-Pacific regions. She is a com- best practices in the enterprise risk management pliance subject-matter expert in CCO regula- with a focus on ‘compliance risk: a critical busi- tions for global asset managers. ness risk for asset managers’. Jennifer S. Myers is a Managing Partner at Keywords: risk management, compli- GlobalRMC. She is a senior compliance and risk ance, compliance risk, governance, management lawyer who provides analysis and chief compliance officer, SEC, FINRA, strategic advice to financial institutions and FED, FDIC, FSA asset managers on regulatory compliance, risk management, and corporate governance issues. She began her career at the New York City office INTRODUCTION of Shearman & Sterling. Jennifer holds a JD The most recent financial crisis and major degree from Harvard Law School and a BA from overhaul of financial services regulations are Yale University. causing asset managers to challenge their enterprise risk management infrastructure, Journal of Securities Law, ABSTRACT governance, methodologies, standards and Regulation & Compliance Vol. 3 No. 2, pp. 180–189 2010 presents a historical moment to define the processes to further improve their risk man- Henry Stewart Publications, 1758–0013 path forward to the ‘future of enterprise risk agement efforts. 2010 is a historical Page 180
  2. 2. Pytlik and Myers moment to define the path forward to the Management is a critical strategic and ‘future of enterprise risk management’ and business decision-making framework for mitigation strategies of increasing compli- identifying, monitoring and managing risk ance risk for asset managers. across the whole organisation. The recent array of material compli- The recent financial crisis and material ance violations, Ponzi schemes and fraud- compliance violations, in many cases, ulent activities,5 misappropriation of resulted from inadequate risk management investors’ assets and collapse of major functions and weaknesses in compliance financial institutions have had significant, governance leading to business risks. These harmful impact on investors and share- risks directly resulted in reputational holders.6 damage for asset managers, a collapse of Compliance is becoming a critical ele- financial institutions and significant capital ment of an overall enterprise risk manage- losses for investors and shareholders. ment framework. Leading asset managers In her 2010 Testimony Concerning the are taking a proactive and comprehensive State of the Financial Crisis, US Securities approach in identifying emerging risks, and Exchange Commission (SEC) such as compliance and business risks. Chairman Mary L. Schapiro highlighted Compliance risk is expected to increase the primary causes of the financial crisis even further due to re-assessing post-crisis related to risk management:7 economic conditions, increasing complex- ity of business offerings, global business • A siloed financial regulatory framework expansions combined with increasing that lacked the ability to monitor and complexity of the regulatory landscape, reduce risks across entities and markets. cross-jurisdictional regulations and the • Insufficient risk management and risk imposition of higher compliance standards oversight by boards and management. by regulators and investors. • Perverse incentives and asymmetric The challenge for most asset managers is compensation arrangements that to effectively manage enterprise and com- encouraged significant risk-taking. pliance risks, find efficiency in the way that • A widespread view that markets were risk management protects and creates the almost always self-correcting resulted in greatest value for asset managers, investors weaker standards and regulatory gaps. and shareholders by balancing risk, cost • The proliferation of complex financial and value across the enterprise. Asset man- products that was not fully transparent. agers who effectively address this challenge will not only protect their firm by creating The SEC and other regulatory agencies sustainable values, but will also outperform will continue to address legal and regula- their competitors. tory gaps that came to light during the recent crises thus helping policymakers to build better regulatory oversight across 2010 REGULATORY FOCUS financial services industry. Regulators are urging board members and senior managers to be more proactive in setting risk ‘appetite’ for financial institu- COMPLIANCE RISK IS EMERGING AS tions, establish effective risk governance CRITICAL BUSINESS RISK oversight and compliance programmes, Enterprise Risk Management with com- and in setting and maintaining a stated tol- pliance as a critical component to mitigate erance for risk. Enterprise Risk business risk is a forward-looking Page 181
  3. 3. Compliance risk: A critical business risk for asset managers approach that regulators will enforce and business risk, equally, material compliance pro-active asset management embrace violations lead to serious consequences for going forward to protect their firms, asset managers, which in turn, become investors and shareholders.8–10 business risk.13 Regulators and leading asset manage- The recent cases of insider trading, ment firms strive to improve their risk Ponzi schemes, fraud and other compli- management efforts and aspire towards the ance violations have had a tremendous integration of risk management infrastruc- impact on the industry. Serious compli- ture, methodologies and standards with ance violations impact investors, share- compliance as a critical component of a holders and are self-destructive to asset ‘single view of risk’ across the organisation. managers themselves. No one is immune The US Federal Reserve Board to these trends.14 Chairman Ben S. Bernake has explicitly As the recent demise of Galleon stated that ‘policy makers must insist that Management LP clearly shows, one of the the large financial firms be capable of mon- most significant business risks that asset itoring and managing their risk in a timely managers face today is compliance risk. manner and on an enterprise-wide basis’. Perhaps, a better word might be ‘vaporisa- In October 2009, a group of senior tion’ — in the face of parallel civil and financial supervisors from five major criminal cases brought by the SEC against nations reported that financial firms still Galleon, the former high-flying hedge need ‘full and ongoing commitment to fund went out of business in a matter of risk control by management, as well as days. dedication of considerable resources As Robert Khuzami, Director of the toward developing the necessary informa- SEC’s Division of Enforcement,15 point- tion technology infrastructure’ to imple- edly stated in announcing the Galleon ment the best practices for pro-active risk indictments: ‘We [SEC] are developing a management in their firms.11 variety of initiatives to do that involve President Obama’s ‘Financial greater specialisation and expertise, Regulatory Reform’ and other regulatory improved technological tools to track and initiatives currently before the US Senate, analyse trading, better coordination also impose higher regulatory standards among regulators and law enforcement, and implies best practices that will guide new legislative initiatives, and other the financial services industry in imple- means to address these areas. It would be menting effective risk management and wise for investment advisers and corpo- compliance programmes. This new regula- rate executives to closely look at today’s tory framework clearly positions case, their own internal operations, and Enterprise Risk Management as the best the increasing focus and scrutiny on practice for financial institutions to recali- hedge fund trading activity by the SEC brate in a post-crisis global financial and others, and consider what lessons can system.12 be learned and applied to their own operations.’16 COMPLIANCE VIOLATIONS ARE DETRIMENTAL TO ASSET REGULATORY ENFORCEMENT MANAGERS Regulatory agencies clearly will enforce As economic turmoil leads to compliance non-compliance and vigorously prosecute risk, reputational damage and eventually to firms for violations. The SEC has histori- Page 182
  4. 4. Pytlik and Myers cally combated fraud in the financial mar- In her testimony concerning the state kets as one of its key missions.17 of the financial crisis, SEC Chairman From fiscal year (FY) 2007 through FY Mary L. Schapiro stated: ‘Consistent and 2009, the SEC opened 2,610 investiga- vigorous enforcement is a vital part of risk tions and brought 1,991 cases charging a management and crisis avoidance — par- variety of securities laws violations includ- ticularly in times and areas of substantial ing, and beyond, those related to the causes financial innovation’ highlighting major of the financial crisis.18 Major recent regu- future regulatory initiatives:19 latory enforcement actions include: • The vital importance that vigorous • October 2009, Galleon Group founder enforcement of existing laws and regu- is arrested along with five others for lations plays in the fair and proper func- US$20m insider trading scheme involv- tioning of financial markets. ing IBM, Intel and McKinsey; • Vigorous enforcement is essential to • December 2008, Bernard L. Madoff, restoring and maintaining investor con- who is currently serving a 150-year fidence. sentence in federal prison, orchestrated • Through aggressive and even-handed a multi-billion dollar Ponzi scheme that enforcement, we deter others from swindled money from thousands of engaging in wrongdoing. investors; • Enforcement agencies should continue • September 2009, the SEC accuses Reza to work together to address financial Saleh for making US$8.6m in illegal crimes. profit, which he agreed to return in set- • Large financial crimes can often involve tlement with the SEC; multiple jurisdictions and legal frame- • February 2008, Hong Kong banker and works making it essential for different two others paid 24 million US Dollars agencies to work closely together. to settle civil charges. Even aside from the Galleon and Madoff LEADING ERM AND COMPLIANCE cases, this is a critical moment for asset INDUSTRY BEST PRACTICES managers to reassess their compliance risk Looking forward, a ‘single view across the management programmes. Both Congress organisation towards the future of enter- and the SEC have identified a need for prise risk management’ becomes a neces- more rigorous risk management practices sary response to the evolution of risk.20–22 for the financial institutions, and hedge Enterprise Risk Management practices fund regulation as key goals of an ambitious that ‘demonstrated a comprehensive financial regulatory reform programme. approach to viewing firm-wide exposures and risks’ were cited by the Senior Supervisory Group as differentiating fac- REGULATORY REFORMS tors to more effectively mitigate overall The SEC’s enforcement initiatives to date business risks. in 2010 reflect the broader scope of the Enterprise Risk Management, a firm- pending regulatory reform. The SEC con- wide integrated risk management siders much more aggressive enforcement approach allows financial firms to analyse a ‘vital part of risk management and crisis current, evolving and emerging risks avoidance’ to restore investor confidence across the whole firm. Compliance and and hold market participants accountable. regulatory risk management is a vital Page 183
  5. 5. Compliance risk: A critical business risk for asset managers component to prevent compliance viola- The compliance programme should tions thus to mitigate significant business generate a comprehensive and timely risk to financial firms, banks, hedge funds, report for senior management and govern- and asset managers. ance boards that provides current industry This is a critical moment for asset man- ‘hot topics’, emerging regulatory, business agers to reassess their compliance risk strategic, operational, financial, and market management programmes and take much risks. Both qualitative and quantitative more proactive actions to address compli- measures of internal controls’ effectiveness ance risk as a critical business risk. and mitigation strategies of high risks for There are several areas where proactive each business and compliance unit should asset managers may protect their firms and be an integral part of corporate risk gover- investors: first and foremost, having a nance and oversight. single view across the organisation and truly identifying in a systematic and methodological way the highest risk across CORPORATE RISK GOVERNANCE the organisation. One of these risks is In December 2009, the SEC adopted rule insider trading which should be on the amendments that will significantly agenda for boards and senior management improve disclosure in the key areas of risk, and executive committees.23 compensation, corporate governance and director qualifications, including: COMPLIANCE RISK MITIGATION • Management and Boards of Directors STRATEGIES to be more accountable. The quality of As an integral part of an enterprise risk a board’s oversight of risk management management strategy, financial firms can make an enormous difference in should be looking at their internal envi- our economy, and particularly in finan- ronments and achieving a greater under- cial markets. standing as to how compliance violations • A fundamental concept underlying cor- can be prevented, monitored and resolved porate law is that a company’s board of in a timely manner. directors, while charged with oversight Having a strong governance, escalation of the company, is accountable to its process and remediation strategy is critical shareholders, who in turn have the in mitigating compliance and business power to elect the board. risks. From that perspective, asset managers • Thus, boards are accountable to share- need strong methodologies and standards. holders for their decisions concerning, The second area to be evaluated in light among other things, executive pay, and of insider trading and other serious com- for their oversight of the companies’ pliance violations is companies’ compliance management and operations, including programmes across the organisation. What the risks that companies undertake. types of policies are in place to address • Enhanced disclosure about the deci- serious compliance violations, including sions and performance of directors will insider trading and other critical regulatory help shareholders make informed deci- rules and laws? What kinds of procedures sions about the election of directors. and control infrastructure are in place on • Short-term compensation incentives the business side, and what supervision is in can drive long-term risk. Another place to effectively identify insider trading lesson learned from the crisis is that and serious compliance violations?24 there can be a direct relationship Page 184
  6. 6. Pytlik and Myers between compensation arrangements The Chief Compliance Officer should and corporate risk taking. be empowered with full responsibility and • Financial institutions created asymmet- authority to develop and enforce appro- ric compensation packages that paid priate policies and procedures for the firm. employees enormous sums for short- term success, even if these same deci- sions result in significant long-term GUIDING PRINCIPLES FOR losses or failure for investors and tax- COMPLIANCE RISK MANAGEMENT payers.25 According to the SEC Rules, a compli- ance programme should be reasonably designed to ensure compliance with fed- FIDUCIARY RESPONSIBILITIES eral securities laws, including the follow- In addition, the SEC is focusing on asset ing key components:30–35 managers’ fiduciary standard of conduct as part of a heightened regulatory regime • Corporate governance with clearly when providing services to their defined accountabilities and responsibil- clients:26–28 ities for compliance programme; • ‘Tone at the Top’ and a strong compli- • Regulation should be rationalised for ance culture should be established broker-dealers and investment advisers, through senior management commit- particularly with respect to the services ment and partnership with compliance; they provide to retail investors. • Enterprise risk assessment and manage- • Investment advisers are fiduciaries to ment to properly identify systematic their clients with a fundamental obliga- risks and mitigation strategies across an tion to act in the best interests of clients organisation; and to provide investment advice in • Appropriate oversight committees as a clients’ best interests. forum for the business to raise its con- • They have a duty of undivided loyalty cerns with Compliance and Legal and utmost good faith and must not should be in place and meet regularly; engage in any activity in conflict with • A high awareness level of compliance the interest of any client. issues, including developing regulatory • Fiduciary obligations mandate reason- trends, should be established; able care to avoid misleading clients and • A risk assessment methodology and to provide full and fair disclosure of all risk-based compliance programme, material facts to clients and prospective including compliance audits, reviews clients, including conflicts of interests. and testing, and service provider over- Generally, facts are ‘material’ if a reason- sight should be in place; able investor would consider them to be • A ‘global view’ on compliance and important. regulatory requirements should be • Departure from fiduciary standards may extended to encompass all relevant constitute ‘fraud’. business activities and regions globally. Registered investment companies and registered investment advisers must have BUILDING AN EFFECTIVE effective compliance programmes29 to COMPLIANCE PROGRAMME prevent, detect and promptly correct com- The Chief Compliance Officer should pliance violations. have a position of sufficient seniority and Page 185
  7. 7. Compliance risk: A critical business risk for asset managers authority within the organisation to ment methodology to ensure that the compel others to adhere to the compli- identification and evaluation of compli- ance policies and procedures:36–38 ance risks is a proactive and dynamic process. • Written compliance policies and proc- Asset managers should consider estab- edures should be reasonably designed lishing a disciplined compliance risk and implemented to prevent, detect and assessment methodology for identifying, promptly correct any violation of the measuring and mitigating compliance federal securities laws. risks. • Comprehensive compliance monitor- ing, surveillance programmes and foren- sic testing over regulatory requirements ANNUAL RISK-BASED REVIEW AND should be established. TESTING PROGRAMME • Training should be regularly provided The review and testing programme is a by Compliance and Legal to business robust process to validate key infrastruc- personnel so they are aware of and may ture supporting the compliance pro- properly supervise compliance with gramme requirements in place, to identify regulatory requirements. potential conflicts of interest within the • Regular management reporting of organisation and to identify compliance standing compliance/legal issues and risk ‘trigger events’. The review and test- open audit points should be in place to ing programme should encompass an ensure accountability and expedient evaluation of the adequacy of the policies resolution of compliance issues. and procedures and an assessment of the • Open communication and escalation of effectiveness of their implementation, compliance matters and issues to invest- supervisory controls, existence and evi- ment company boards should be estab- dence of supervision, training and moni- lished. toring programmes by asset managers in • Compliance issues should be effectively connection with complying with federal resolved and business groups should securities laws. take responsibility for addressing areas identified for improvement. COMPLIANCE AND SURVEILLANCE MONITORING, FORENSIC TESTING COMPLIANCE RISK ASSESSMENT Asset managers should have a comprehen- METHODOLOGY sive on going compliance programme for A compliance risk assessment is an integral monitoring, surveillance and testing of part of a compliance programme, guiding business activities to prevent, detect and the allocation of compliance resources, promptly correct violations of federal assisting in the development of compli- securities laws. ance monitoring surveillance programmes, A comprehensive compliance pro- and testing activities for those areas that gramme should monitor the following key pose the greatest potential risks to asset regulations: managers and their clients. Because regulatory, economic, industry • Insider trading and Chinese walls, con- and operating conditions will continue to flicts of interests, portfolio management change, regulatory and market risk moni- — investment guidelines and restric- toring should be built into the risk assess- tions monitoring; Page 186
  8. 8. Pytlik and Myers • Portfolio trading monitoring, cross- whether to implement these changes but trade activity, trade allocation and what approach to take in implementing bunching, trading with affiliates, soft them. As the business and regulatory envi- dollars, insider trading, and personal ronment continues to evolve, asset man- trading monitoring; agers that succeed will be those that can • Gifts and entertainment monitoring; demonstrate the ability to drive business • Code of Ethics, proxy voting, conflicts performance and achieve regulatory com- of interests; sales practices, licensing and pliance by strategically aligning risk man- registration, disclosures, marketing agement and business strategies. materials review; One central mechanism for reducing • Anti-money laundering review and systemic risk and pro-actively manage monitoring. avoiding future crises as well as achieving regulatory compliance is to ensure the An asset manager’s goal should be to same rules apply to economically equiva- develop and implement system-based lent asset managers globally. Asset managers compliance monitoring, surveillance pro- should ensure that risk for similar products grammes and forensic testing with a max- and asset classes are mitigated similarly. imum level of automation. CONCLUSION CORPORATE OVERSIGHT AND Enterprise risk management is set to be on ESCALATION REPORTING regulatory authorities, boards, investors, The compliance programme should gen- shareholders and asset managers’ agendas erate a comprehensive and timely report for some time to come. As asset managers for senior management and investment seek the right enterprise risk management governance boards. These reports typically approaches, there is a clear need in the provide current industry ‘hot topics’ and financial services industry for more proac- emerging enterprise-wide risks, including: tive, leading practice toward the ‘future of business strategic, regulatory compliance, enterprise risk management’. A strategic operational, financial, credit and market enterprise risk management approach can risks. The qualitative and quantitative help asset managers to navigate and measurements of internal controls effec- develop a more forward-looking approach tiveness and mitigation strategies of high to effectively manage increasing compli- risks should encompass each business and ance risk as a critical business risk. compliance unit across an organisation. An effective compliance programme across the organisation is a critical compo- nent of business stability and success. FORWARD-LOOKING RISK MANAGEMENT AND COMPLIANCE The current economic and business envi- References ronment is forcing a fundamental change (1) Schapiro, M. L. (2010) ‘Testimony in the regulatory landscape, organisational Concerning the State of the Financial culture, corporate governance and compli- Crisis’, SEC, Before the Financial Crisis ance oversight of asset managers, and is Inquiry Commission, 14th January, moving the industry towards a holistic http://www.sec.gov/news/testimony/20 view of enterprise risk management.39–41 10/ts011410mls.htm. The choice facing asset managers is not Of the 1,991 cases, 519 (over 26 per Page 187
  9. 9. Compliance risk: A critical business risk for asset managers cent) involved financial fraud or public 15th March, 2010, and predecessor drafts. company reporting violations; 511 (over (5) See ref. 3. 25 per cent) involved fraud or other (6) Ibid. misconduct by broker-dealers, (7) See ref. 1. investment advisers, or transfer agents; (8) Ibid. 330 (over 16 per cent) involved (9) See ref. 2. fraudulent or unregistered offerings; and (10) See ref. 3. 272 (over 13 per cent) involved insider (11) October 2009, Senior Supervisors Group trading or market manipulation. Other issued the ‘Risk Management Lessons traditional programme areas include from the Global Banking Crisis of delinquent filings and municipal 2008’, which concludes that there are offerings. As part of these cases, the SEC four risk practices critical to achieve a has sued among others, public balance of the effective enterprise risk companies, corporate officers, auditors management and banks performance in and audit firms, attorneys, the financial crisis: Effective firm-wide broker-dealers, investment advisers, and risk identification and analysis; self-regulatory organisations under the Consistent application of independent SEC’s purview. and rigorous valuation practices across (2) Khuzami, R. (2009), Speech by SEC the firm; Effective management of Staff: Remarks at Press Conference, SEC funding liquidity, capital, and the balance Division of Enforcement, SEC, 16th sheet; and Informative and responsive October. http://www.sec.gov/news/ risk measurement and management speech/2009/spch101609rk.htm. reporting, http://www.sec.gov/news/ (3) Rodier, M. ‘Insider Trading — Can press/2009/report102109.pdf. Insider Trading Be Stopped’, Wall Street (12) See ref. 4. and Technology. In what has been (13) See ref. 3. termed the biggest insider trading ring (14) Ibid. in a generation, the SEC recently (15) See ref. 2. brought cases against the founder of the (16) Ibid. Galleon Group hedge fund and former (17) Litigation Release No. 21407/4th directors at a Bear Stearns hedge fund. February, 2010. Securities and Exchange In a series of interviews, Senior Editor Commission v. Bank of America Melanie Rodier spoke with Larry Tabb, Corporation, Civil Action Nos. 09-6829, founder and CEO of TABB Group, and 10-0215 (S.D.N.Y). Bank Of America Yvonne Pytlik, managing partner, Global Agrees to Pay US$150m to Settle SEC Compliance Risk Management Corp., Charges. SEC Charges State Street for about what processes and technology ‘Misleading Investors About Subprime financial firms can use to stop insider Mortgage Investments’. Boston-Based trading. http://www.globalcompliance Firm to Settle Charges by Repaying risk.com/index.php/news. Fund Investors More Than US$300m. (4) President’s Obama ‘Financial Regulatory ‘The Securities and Exchange Reform’ and the US Regulators are Commission today charged further imposing higher regulatory Boston-based State Street Bank and standards and best practices to guide Trust Company with misleading its ‘Financial Services Industry in investors about their exposure to implementing Risk Management and subprime investments while selectively Compliance Programs’. President disclosing more complete information to Obama’s Plan for Financial Regulatory specific investors’, http://www.sec.gov/ Reform. See generally, Draft of the litigation/litreleases/2010/lr21407.htm. Restoring American Financial Stability (18) See ref. 2. Act, as introduced to the US Senate on (19) See ref. 1. Page 188
  10. 10. Pytlik and Myers (20) Ibid. Principles and Practices for Hedge Fund (21) See ref. 2. Investors, http://amaicmte.org/Public/ (22) See ref. 3. Investors%20Report%20-%20Final.pdf. (23) Ibid. (29) ‘2010 and Beyond — Chief Compliance (24) Ibid. Officer Compliance Programme’ — (25) President’s Working Group on Financial New Regulatory Requirements and Markets (PWG) (2008) The Asset Best Practices, http://www.global Management Committee (‘AMC’) compliancerisk.com/pdfs/PytlikAuthor released best practices for Hedge Fund September2009F.pdf. Industry (‘AMC Report’), (30) See ref. 1. http://amaicmte.org/Public/AMC%20 (31) See ref. 2. Report%20-%20Final.pdf. (32) See ref. 3. (26) Managed Funds Association (2009), (33) See ref. 26. ‘Sound Practices for Hedge Funds’, (34) See ref. 25. released 31st March, http://www. (35) See ref. 28. managedfunds.org/mfas-sound-practices (36) See ref. 1. -for-hedge-fund-managers.asp. (37) See ref. 2. (27) See ref. 25. (38) See ref. 3. (28) President’s Working Group on Financial (39) See ref. 1. Markets (PWG) (2008) Investors (40) See ref. 2. Committee (‘IC Report’) issued (41) See ref. 3. Page 189

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