From the President

By James D. Ratley


The Securities and Exchange Commission has had a few tough years. H. David Kotz, the SEC’s inspector general, said in a 2009 report on the SEC’s handling of Bernard Madoff’s huge Ponzi scheme, that from 1992 to 2008 the SEC received at least six complaints that should have raised red flags. “The SEC did take substantive action [after the complaints],” said Kotz in the interview article by Dick Carozza. “However, we determined that these examinations and investigations were not conducted in a thorough and competent manner and were, therefore, unable to uncover the Ponzi scheme.” Read the cover article to find what the SEC is doing to improve its investigation and enforcement efforts and how Kotz is monitoring its progress.

What happens when a company with a good reputation is maliciously smeared? Shareholders get scared, stock prices decline, and fraud can increase. In “Working with Legal Counsel: Beware of Cybersmear Attacks,” authors Michael Stagar and Erik Stagar write that CFEs can deter fraud resulting from irresponsible, anonymous posters, but they can only do it with assistance from their in-house or retained legal counsel. The authors say that legal counsel will review for potential claims involving defamation, violations of securities laws, infringement of trademark or other intellectual property rights, breach of confidentiality, trade secrets, employment contracts, as well as other business torts.

We received an enthusiastic response to the article on Suspicious Activity Reports in the last issue. In Robert Tie’s follow-up article, “Frontline Defenders Against Financial Crime,” financial service industry CFEs, attorneys, and former law enforcement officers offer inside tips on preparing accurate, complete SARs. Knowing whether to file a SAR and exactly how to prepare one aren’t simple matters. But Tie writes that financial institutions, guided by the U.S. Financial Crimes Enforcement Network and sometimes by Bank Secrecy Act reporting consultants, diligently feed actionable information to government agents and prosecutors.

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