Kaal claims by topic: compliance

422 atomic, individually citable claims from the published work of Wulf A. Kaal tagged compliance.

For cross border enforcement the critical question is not whether a judgment will be enforced in another Member State but when: eventual enforcement is insufficient if a party has time to remove assets, and delayed injunctions can be worthless. 2004
The issuer-buyer relationship and the incentives inside it are unlikely to be able to adequately control the principal-agent relationship between issuer and rating agency so as to ensure accurate ratings. 2009
Because many countries choose to combat securities fraud through government enforcement rather than private litigation, the United States should respect the right of other countries to regulate their own markets. 2010
For European jurisdictions the extraterritorial application of US law creates confusion and legal uncertainty and makes it harder to regulate private parties who engage in regulatory arbitrage by taking their litigation to the United States when convenient. 2010
Overlapping regulation and inconsistent legal rules create uncertainty, so that individual board members of European companies and their attorneys will not know which legal rules apply or what effects those rules may have. 2010
Legal uncertainty generates transaction costs, and European company boards will inevitably incur costs minimizing the information asymmetries created by different legal regimes that may or may not apply to their company. 2010
If national securities regulators are unable or unwilling to cooperate with each other, there is likely to be more securities fraud. 2010
The cost of tightening directors' duty to monitor risk depends not just on how far the requirement is tightened but on how it is tightened: the mix of agency enforcement versus civil litigation, and of substantive versus procedural change, drives the shape of the cost curve. 2010
The same combination of substantive and procedural rules imposes different monitoring costs in different cultural settings, so a rule package that is cheap in one country can be expensive in another. 2010
Codetermination makes the German supervisory board's decision making more cumbersome, so a co determined Aufsichtsrat may not respond quickly enough to fast moving events such as an escalation of portfolio risk or a liquidity crisis. 2010
Director independence does not produce effective risk monitoring: as the failure of independent director oversight at Lehman Brothers and other large U.S. financial firms shows, independent directors cannot monitor risk when managers, accountants and lawyers keep them in the dark. 2010
Because U.S. companies historically financed themselves through markets rather than through each other, U.S. managers are less attuned to risks accumulating at other firms, a blind spot that mattered once swaps and other complex instruments made firms directly vulnerable to each other's conditions. 2010
The United States compensates for its lenient corporate law treatment of risk taking under the business judgment rule with a comparatively strict disclosure regime and a robust securities class action litigation regime; substantive corporate law pushes the monitoring requirement toward leniency while securities enforcement pushes it back toward stringency. 2010
In the United States the duty to disclose risk indirectly generates risk monitoring, because directors who know they are responsible for disclosing risk have reason to monitor it even though corporate law imposes no explicit duty to monitor. 2010
Germany's 2005 introduction of the derivative suit tightened the standard of care only partially, because section 148(1) of the AktG conditions shareholder standing on holding shares worth roughly 100,000 euros, a threshold with no U.S. counterpart. 2010
Delaware courts have not explicitly imposed a duty to monitor risk, but that omission may be moot: because failing to disclose risk violates federal securities law, unmonitored risk is likely to become undisclosed risk and therefore actionable. 2010
Because of the political climate and concern about the social externalities of business failure, monitoring requirements and their enforcement procedures are likely to become more severe regardless of whether the increased monitoring costs are offset by fewer bad business decisions. 2010
If regulators lack the resources to protect against systemic risk, hedge fund regulation could be futile. 2011
Banks' lending practices and counterparty credit risk management can curtail hedge funds' excessive risk taking because banks can use the threat of cutting off future lending to change a fund's behavior. 2011
Because banks expect to be bailed out with taxpayer funds, they may have less incentive to monitor their hedge fund lending activities, even though hedge funds are not themselves counterparties in government bailouts. 2011
A standard objection to indirect regulation is that counterparty credit risk management will not work effectively unless the lending bank has an exclusive relationship with the hedge fund that lets it control the relationship. 2011
Contesting the exclusivity objection, exclusivity of a banking relationship is not the only effective way to exercise control and manage risk: the intensity, endurance, and quality of the relationship also influence how much control a bank can exercise over a hedge fund. 2011
Banks' role in monitoring hedge funds is not easily comparable to the principal agent problem between securities buyers and credit rating agencies, because banks have more influence over hedge funds than securities buyers have over rating agencies and their ratings. 2011
Requiring advisers to adopt written policies to prevent and detect securities law violations presumes those violations are foreseeable, yet because Dodd-Frank substantially changed securities law, the foreseeability of potential violations is itself further curtailed. 2011
Because Morrison ties Section 10(b) to the location of the securities transaction rather than to the place where the deception originated, the logic of the holding implies that the SEC likewise has no enforcement rights over securities transactions occurring outside the United States. 2011
Section 929P(b) may not have been necessary, because Section 10(b) already gives the SEC enforcement authority whenever a single U.S. securities transaction is affected by the alleged fraud. 2011
Foreign-cubed rulings such as Morrison determined the size of the plaintiff class in private suits, but were irrelevant to the SEC's ability to enforce wherever a U.S. securities transaction is connected to the alleged fraud. 2011
Read as more than a jurisdictional grant, the Dodd-Frank provision becomes an open-ended statute rather than the targeted authority the SEC already held under Section 10(b) and Section 30, and it is undesirable for the SEC to use such powers unilaterally without consulting foreign regulators and the U.S. foreign policy establishment. 2011
Section 929P(b) risks complications where the SEC proceeds unilaterally in situations in which coordinated enforcement with foreign regulators would be more effective, for example insider trading cases involving exchanges whose home regimes do not recognize comparable insider trading rules. 2011
Expanded SEC enforcement under the Dodd-Frank provision runs a serious risk of being perceived as an encroachment on the corporate governance of foreign companies. 2011
Overuse of the Dodd-Frank extraterritorial enforcement provision by the SEC or the DOJ could deter foreign companies from having U.S. operations. 2011
Regulatory triggers insufficiently incentivize executives to lower risk, because executives would not have to self-monitor and adjust their own risk-taking preferences in order to avoid the trigger. 2012
Ordinary SIFI creditors have suboptimal incentives to monitor management because they implicitly expect that the government will provide bailout funding given the nature of the entity. 2012
The impending threat of dilution from a possible conversion of investor-held contingent convertible bonds can motivate existing shareholders to become actively involved in the governance of the entity. 2012
An early trigger design for contingent convertible bonds in executive compensation enables earlier signaling of default risk, increases incentives for creditors and shareholders to monitor, and increases executives' incentives to lower risk-taking. 2012
Jurisdictional competition in global securities litigation after Morrison will be bifurcated, because some jurisdictions recognize private rights of action while others do not, and some, including the United States, extend government enforcement extraterritorially where private suits are barred. 2012
Bifurcation lets a party to a disputed offshore transaction reintroduce U.S. law into the civil liability regime by threatening to involve the SEC or DOJ unless the other party offers an attractive settlement. 2012
Government enforcement acts as a backstop that makes the case for choice of law freedom stronger: allowing parties to choose their legal regime is more defensible when bad choices, such as moving transactions to regimes with little regulation, do not thwart government enforcement. 2012
Losing the private adviser exemption imposed a bundle of obligations, disclosure duties and code of ethics requirements on top of inspections and record keeping, and the direct consequence was significantly higher legal fees for hedge funds. 2012
Advisers responded to Dodd-Frank registration mainly through administrative and advisory adjustments: the most common actions were outsourcing compliance work, hiring additional counsel, instituting new record keeping policies, hiring additional staff, changing marketing materials, and changing investor communications. 2012
Compliance with the registration and disclosure requirements cost a majority of surveyed advisers between $50,000 and $200,000, while a significant minority estimated total compliance cost from $200,000 to over $400,000. 2012
The time burden of complying with all federal rules applicable to hedge fund advisers has a median of 500 hours per year, with three quarters of respondents at 750 hours or less and a quarter above that, so the burden distribution is skewed rather than uniform. 2012
Among the minority of advisers who do factor regulation into fund sizing, the pressure runs in both directions: about 25% would go smaller to avoid regulatory hassle while about 50% would grow or need a certain size to cover the increased expenses. 2012
Registration and disclosure costs had not reached investors at the time of the survey: 76.09% of respondents reported that their investors' rate of return was not affected, while 23.91% believed investors would be affected. 2012
The incidence of Dodd-Frank compliance cost falls on the management company rather than the fund: the responses indicate that the management company bears the brunt of registration and disclosure costs, and whether and how those expenses will be passed to investors over time is unclear. 2012
Of the respondents reporting an effect on management company profits, 87.50% attributed it specifically to increased costs and decreased profits caused by the registration and reporting requirements. 2012
Respondents identified the creation of barriers to entry as an industry level effect of the registration and disclosure requirements, because the rules make the market environment for private funds less attractive to new entrants. 2012
The compliance burden has raised the minimum viable scale for launching a hedge fund: an adviser reports that the capital needed to start a fund in New York rose from roughly $25 to $50 million to at least $100 million because of the increased cost of compliance with the registration and disclosure requirements. 2012
Strategic adjustment to registration is a function of firm size: firms that planned a strategic response to Dodd-Frank were smaller than firms that did not. 2012
Quick absorption of registration costs does not settle the policy question: even if advisers absorb the reported cost implications relatively quickly after registration, the long-term cost implications of registration and reporting obligations could still affect the private fund industry. 2012
Mandatory reporting does not guarantee informative reporting: anecdotal evidence indicates that advisers can present the information required in Forms ADV and PF in ways that in effect flatten out and sanitize the disclosures. 2012
If a market evolves in which contingent capital designs appear to provide sufficient protection against systemic risk and contagion, decision makers may come to rely on the design of those securities and neglect their own role as monitors. 2012
Dynamic Regulation could help avoid the regulatory sine curve and its negative and costly consequences, and could provide a self enforcement mechanism independent of the existing regulatory structure and agency enforcement. 2013
Corporate Integrity Agreements are one form of dynamic governance that may be able to temporarily increase fiduciary duties as a form of quasi law. 2013
Although implementing dynamic elements in regulatory structures remains uncertain, promising regulatory tools with dynamic elements already exist, including contingent capital securities, corporate integrity agreements, and deferred prosecution agreements. 2013
Both the Sarbanes-Oxley Act and the Dodd-Frank Act were amended and revised, and some of their most controversial provisions were never enforced. 2013
Section 307 of Sarbanes-Oxley, the attorney up-the-ladder reporting mandate, has gone effectively unenforced: there is no evidence that the SEC ever charged an attorney with a violation of that section, even though lawyers were inevitably aware of executive misconduct in numerous instances. 2013
Prosecutors negotiating deferred prosecution agreements may lack the expertise needed to negotiate high level corporate governance changes such as personnel changes and internal corporate and compliance procedures. 2013
The institution specific and decentralized information generated by deferred prosecution agreements allows regulators to better understand shortcomings in a particular market segment or industry, so that rulemaking can be more narrowly tailored. 2013
Almost 300 deferred prosecution agreements have been executed since 2003, whereas before 2003 they were rarely used. 2013
Corporate integrity agreements improve corporate governance because the ease of reopened prosecution, increased government scrutiny, and the potential for crippling penalties improve boards' and managements' knowledge of pertinent issues in the institution and its monitoring. 2013
The threat of heightened scrutiny under a deferred prosecution or corporate integrity agreement optimizes incentives because increased government monitoring attaches only after a first time offense, giving institutions a reason to comply and self-regulate in order to avoid it. 2013
Unenforceable rules are irrelevant for purposes of economic analysis because they provide neither incentives nor sanctions, and legal rules without enforcement mechanisms do not qualify as institutions in the NIE framework. 2013
Mandatory quarterly Form PF reporting for large hedge fund advisers is designed to give the Financial Stability Oversight Council timely data for identifying emerging systemic risk trends and to align United States practice with international trends. 2013
Data staleness degrades systemic risk evaluation more than it degrades evaluation of bankruptcy disclosures, because many distressed investment strategies depend on the outcome of the restructuring process and creditors are therefore incentivized to hold their positions until it completes. 2013
Because the SEC is still working out the appropriate use of Form PF and still improving the form and its instructions, its enforcement division is unlikely to open investigations into alleged misreporting or failures to report. 2013
Form PF was created to improve SEC and CFTC investigations and examinations and to enable the Financial Stability Oversight Council to monitor systemic risk in U.S. financial markets. 2013
Mandatory ethics codes, disclosures, and client consents are effective instruments for curtailing fraudulent practices by investment advisers. 2013
The SEC mandated written compliance policies and procedures for investment advisers as a reaction to mutual fund industry scandals and in an effort to curb IAA violations. 2013
A chief compliance officer is effective only if he or she combines sufficient knowledge of IAA obligations with adequate authority to develop and enforce policies and procedures; knowledge without authority is insufficient. 2013
Enforcement of the IAA's prohibited transactions provision is limited because the Supreme Court in Transamerica Mortgage Advisors, Inc. v. Lewis held that a violation of that provision does not support an implied private right of action. 2013
With private enforcement foreclosed, enforcement of the IAA's prohibited transactions provision depends entirely on injunctive relief, administrative sanctions, and criminal prosecution, all of which require public actors to move. 2013
The liability standard for breach of fiduciary duty is set so high that courts rarely find directors in violation, because only a board's sustained or systematic failure to exercise oversight can produce liability. 2013
The decades long academic debate over improving fiduciary duty doctrine has overlooked Corporate Integrity Agreements entirely, even though the debate is otherwise framed as a choice between expanding and curtailing the doctrine. 2013
Corporate Integrity Agreements are a hybrid instrument: they are compliance programs funded by health care companies but administratively enforced by the government, that is, contracts between health care companies and the federal government carrying costly mandatory compliance measures and penalties. 2013
Because directors contractually agree to increase compliance through an open door policy for the government, CIAs substantially raise the liability risk for companies whose directors did not act in accordance with their fiduciary responsibilities. 2013
The contractual obligations contained in CIAs can enhance directors' default fiduciary duties, expanding the duty of care for directors of health care corporations beyond the legal standard set by Caremark and Stone v. Ritter. 2013
Noncompliance with a CIA carries serious penalties, because the OIG may prosecute the company or seek its exclusion from federal health care programs. 2013
Certification requirements that compel directors and officers to certify compliance with a CIA's provisions lower the procedural and enforcement hurdles for pursuing increased sanctions against noncompliant companies. 2013
CIAs often become the benchmark for expected conduct in a subsequent civil or criminal trial, which distinguishes them from ordinary contractual arrangements between companies and the government. 2013
Once a CIA has been executed it is much easier for the government to reopen a case than to pursue a new one, and this ease of further prosecution, combined with increased OIG scrutiny and the threat of crippling penalties, substantially affects board knowledge, monitoring, and management. 2013
If the government finds problems on inspection it can escalate beyond the CIA's own substantive provisions to criminal prosecution, fines, additional CIAs, and exclusion from federally funded health care programs. 2013
CIAs reach into the day to day compliance operations of corporations by elevating the chief compliance officer, typically mandating the appointment of a CCO who reports directly to the CEO rather than to the general counsel or chief financial officer and who has direct access to the board. 2013
By prescribing the number of board meetings devoted to compliance review and requiring specific board resolutions, CIA provisions let the government contractually determine how and when a board will interact. 2013
Certification requirements push directors to demand more detailed reports from corporate officers and to take a greater role in overseeing compliance with both the CIA and federal regulations. 2013
The additional CIA requirements, and especially the self-reporting provisions, force companies to spend additional resources and at times to alter their day to day operations after signing. 2013
Although CIAs are not laws, they go beyond aspirational governance standards because they set forth concrete governance rules that more clearly define the duties to be informed, to exercise oversight, and to maintain effective reporting systems, thereby requiring a higher standard of care. 2013
Unlike private contracts, CIAs are not the product of genuine bargaining choice: companies execute them to avoid further prosecution and exclusion from Medicaid and Medicare, so that once the government decides a CIA is warranted, a company that wishes to remain in its industry has its hands tied. 2013
Because CIAs combine contractual and public enforcement, with the OIG enforcing them and private rights of action also available, they are more than contractual arrangements, and a breach of a CIA may be treated like a breach of law for purposes of the duty of care. 2013
Boards are consistently held not liable for their companies' illegal marketing efforts even though federal law prohibits off-label marketing, but a board that certifies compliance with a CIA is certifying that the company properly monitors its sales teams' promotional activities, so CIAs contractually expand the applicable legal standard. 2013
Because CIAs mandate a chief compliance officer and dictate how that officer interacts with the board, they increase the board's knowledge and monitoring of compliance, and a board possessing such knowledge should play a bigger role in ensuring that the company meets federal and state standards. 2013
Courts treat companies that executed a CIA differently from other companies, and are increasingly recognizing the role of CIAs and their implications for directors' fiduciary duties. 2013
When a company operates under a CIA, the judicial distinction between the law and aspirational corporate governance becomes less clear. 2013
Abbott Labs set the stage for the Pfizer holding: although Abbott's Voluntary Compliance Plan was not a CIA, the Seventh Circuit used it as evidence that the directors knew of and should have stopped noncompliant activities. 2013
Courts assume that the boards of companies that executed a CIA have more knowledge and can exercise more control, and therefore hold those directors to a heightened fiduciary duty, rejecting directors' claims of ignorance because executing a CIA or a CIA like agreement means directors do know or should know about the noncompliance. 2013
As a unique hybrid category, CIAs transcend both the law of fiduciary duties and aspirational corporate governance, and courts may come to interpret CIAs and other hybrid forms such as deferred prosecution agreements as expanding the basic legal duty of care. 2013
Dodd-Frank Act compliance costs reduce the profitability of hedge fund advisers' investment management companies, but registration and disclosure requirements do not appear to reduce the returns of the hedge funds themselves. 2014
Analyst estimates place the annual cost of Dodd-Frank Act registration and disclosure compliance for hedge fund advisers in a range from $50,000 to $400,000 per year. 2014
The finding that Dodd-Frank Act registration does not depress hedge fund returns is consistent with prior evidence that higher administrative costs are only a second-order effect of the regulation. 2014
Governmental contracts are contractual arrangements between the government and a corporate entity under which the government imposes sanctions and institutional changes in exchange for foregoing further investigation and corporate criminal indictment. 2014
Targeted use of governmental contracts allows the government to successfully reform corporate governance not only in individual public corporations but across entire industries. 2014
Over 97 percent of the non and deferred prosecution agreements executed in the United States between 1993 and 2013 contained governance changes, including required business changes in 30 percent and board and senior management changes in 38 percent. 2014
More than 60 percent of the non and deferred prosecution agreements executed between 1993 and 2013 were preceded by preemptive remedial measures instituted by the corporate wrongdoer. 2014
The effectiveness of existing preemptive remedial measures is in question, because the majority of governmental contracts are executed only after those measures have already proved unsuccessful. 2014
Governmental contracts generate multilevel feedback processes across a sequence of stages: corporate self investigation, self reporting, preemptive remedial measures, negotiation, continuing wrongdoing, and execution of the contract. 2014
Preemptive remedial measures have a low success rate, as evidenced by the fact that more than 60 percent of deferred and non prosecution agreements executed between 1993 and 2013 refer to preemptive remedial measures that preceded them. 2014
Initial Form PF compliance was inexpensive for most filers: 59.18 percent of respondents put the total cost of completing Form PF for the first time under $10,000. 2014
Form PF compliance cost is sharply size dependent: quarterly filing large funds spent on average $155,286 on the initial filing, roughly sixteen times the $9,520 average reported by annually filing smaller funds. 2014
Measured against this study's survey data, the SEC marginally overestimated the cost of the initial Form PF filing for both annually filing smaller advisers and quarterly filing larger advisers. 2014
Recurring Form PF cost is also size dependent: quarterly filing large fund advisers pay on average $72,143 for subsequent filings while smaller advisers spend on average $5,262. 2014
For quarterly filing larger private fund advisers, the SEC substantially overestimated the cost of subsequent Form PF filings; the survey's estimate is roughly half of what the SEC projected. 2014
The SEC's error runs in the opposite direction for small advisers on recurring filings: the agency marginally underestimated the cost of subsequent Form PF filings for annually filing smaller private fund advisers. 2014
The SEC's time burden estimates for Form PF are miscalibrated in the same direction as its cost estimates for large filers: the study's data suggest the agency overestimates the hours larger private fund advisers need. 2014
Form PF compliance is not staff intensive for most filers: 67.35 percent of respondents used only one to three individuals and 69.39 percent reported the work took staff less than 50 hours. 2014
The dominant driver of Form PF time consumption is data gathering rather than form completion: 36 percent of respondents named data gathering as the task consuming most of their time, followed by delta options and ambiguous questions or unclear instructions. 2014
SEC flexibility in answering Form PF questions is valued by filers: 72.92 percent of respondents said the flexibility the SEC provides is helpful. 2014
Regulatory flexibility can backfire: a category of respondents reported that the flexibility the SEC provides is not useful precisely because it is unclear and generates confusion. 2014
Most private fund advisers did not need new infrastructure to comply: 65.22 percent reported that their existing internal reporting systems adequately capture the information Form PF requires. 2014
For a substantial minority, existing systems fail Form PF for a specific reason: 34.78 percent of respondents said their internal reporting systems were insufficient because the required answers demand further analysis and calculation beyond what the systems already produce. 2014
Form PF's counterparty disclosure proved far less burdensome in practice than anticipated: 93.75 percent of respondents encountered no difficulty identifying counterparties for the counterparty credit exposure questions. 2014
Working with a service provider imposes its own costs: filers reported that the arrangement requires investing time and money to develop interaction processes and bearing the burden of supplying the provider with the underlying information. 2014
On the cost evidence collected here for both smaller and larger advisers, the industry's long standing objection that mandatory registration and disclosure would inappropriately burden investment advisers is mostly unfounded. 2014
The study's cost findings are bounded to the short run: the data cannot establish what it will cost the private fund industry to keep completing and filing Form PF annually or quarterly over time. 2014
The increasing use of non prosecution and deferred prosecution agreements has allowed federal prosecutors to expand their traditional role incrementally, marking a shift in prosecutorial culture away from an ex post focus on punishment toward an ex ante emphasis on compliance. 2014
Prior scholarship on the corporate governance effects of non and deferred prosecution agreements rests largely on anecdotal evidence and individual case studies rather than on systematic evidence, which is why its conclusions about those effects are unreliable. 2014
Because the population of executed non and deferred prosecution agreements is now large, their real trends and real governance impact are quantifiable and measurable, so policy makers can be given evidence based guidance rather than conjecture. 2014
Once prosecutors have investigated and identified corporate wrongdoing, non and deferred prosecution agreements let them avoid an expensive trial against a sophisticated and well funded corporate defendant, which is one reason both sides have strong incentives to settle. 2014
Prosecutors favor non and deferred prosecution agreements because those agreements avoid the uncertainty of potentially catastrophic collateral consequences for the company, unlike an indictment. 2014
Existing corporate criminal liability combined with the absence of clear Department of Justice standards for charging businesses can push organizations to adopt unproven compliance programs and generate other inefficiencies. 2014
At the pre charging stage the government typically holds extraordinary bargaining power, which lets it extract fines and sanctions comparable to those following a criminal conviction while avoiding the risk and cost of trial. 2014
Coding of all publicly available non and deferred prosecution agreements executed between 1993 and 2013 shows that 97.41 percent of them, or 264 of 271 agreements, contained relevant corporate governance changes. 2014
The sharp proliferation of non and deferred prosecution agreements after 2002 is explained by a cluster of events: the collapse of Enron, the dismantling of Arthur Andersen, the creation of the Corporate Fraud Task Force, and the Thompson Memorandum. 2014
Waiver of rights provisions are the most prevalent governance term in the sample, appearing in 96 percent of agreements, followed by cooperation with the government at 91 percent and improved compliance programs at 75 percent. 2014
The less prevalent categories of governance change mandated by non and deferred prosecution agreements are increased monitoring at 46 percent of the sample, board changes at 38 percent, business changes at 30 percent, and senior management changes at 30 percent. 2014
Business change provisions in non and deferred prosecution agreements can go as far as requiring the entity to fundamentally change its business model or to shut down entire business units. 2014
Although 45 percent of sampled agreements required improved communication and training, only 11 percent required the entity to create the position of chief compliance officer, so the most structural compliance remedy is the rarest. 2014
The increasing execution of non and deferred prosecution agreements since 2002 has raised the overall regulatory burden borne by the corporate entities subject to them. 2014
Because 63.47 percent of the sampled agreements were executed even after the corporation had already instituted preemptive remedial measures, the current quantity, quality, comprehensiveness, and effectiveness of those preemptive measures may be insufficient to prevent an agreement. 2014
High quality and effective preemptive remedial measures are themselves part of good corporate governance and can help a corporation avoid investigation, prosecution, and the execution of a non or deferred prosecution agreement. 2014
Generic industry advice on building an effective compliance program cannot work in practice because it is written to apply to many firms at once while no two companies are sufficiently alike for general guidance to be effective. 2014
Governance reform delivered through non and deferred prosecution agreements is comparatively cheap for corporations because it adversely affects only a small number of board and management positions. 2014
Corporate wrongdoers are unlikely to prefer regulation by prosecution over regulation by legislation because prosecution and execution of an agreement carry large reputational implications. 2014
Regulation by prosecution denies corporations the channels of influence available under legislative and administrative rulemaking, since it offers no comment process and no opportunity to lobby regulations in their favor. 2014
In the long run, increased regulation by prosecution may be able to offset many of the shortcomings of legislative governance reform, even though it is less predictable than legislation. 2014
The underlying corporate governance problems in United States corporations may be more severe than non and deferred prosecution agreements are capable of adequately addressing. 2014
The evidence assembled in this study supports the conclusion that non and deferred prosecution agreements can play a legitimate role in addressing corporate governance shortcomings, contrary to the broad legitimacy critique in the literature. 2014
Corporate governance provisions in non and deferred prosecution agreements increased significantly over the decade to 2013, raising prosecutors' influence over corporate governance to unprecedented levels. 2014
This study finds no evidence of an inverse relationship between the size of regulated hedge fund advisers and the per-unit cost of compliance, contrary to the common complaint that financial regulation brings increasing returns to scale. 2014
The cost of Title IV compliance, and the other independent variables used as proxies for compliance cost, are associated with the size of hedge fund advisers as measured by assets under management. 2014
If the administrative and compliance costs created by Title IV disproportionally affect smaller hedge fund advisers, then over time smaller fund advisers could be forced out of the market or pushed to merge with other funds. 2014
Because there is no evidence of an inverse relationship between adviser size and per-unit compliance cost, industry concerns over the effect of Title IV compliance cost and possible barriers to entry for smaller funds and startups appear unjustified. 2014
The study's core hypothesis, drawn from the industry view and the anecdotal evidence, is that smaller hedge fund advisers pay more relative to their size than larger hedge fund advisers for Title IV compliance. 2014
Prior work shows that registration and the increased compliance requirements under the Dodd-Frank Act only marginally increase the cost structure of hedge funds. 2014
Linear, robust, and non-linear regression models all show positive and statistically significant coefficients, and compliance costs per unit of AUM do not diminish in the sample, so the hypothesis that smaller advisers pay relatively more is not supported. 2014
Form PF is structured so that single strategy fund advisers collect and provide only a fraction of the information a multi strategy adviser must make available, which makes reporting burden a function of strategy count rather than of adviser size. 2014
Because Form PF requires less information from single strategy advisers, hedge fund advisers that apply only a single strategy to their portfolios may incur overall lower compliance cost. 2014
In the open ended survey question on the effects of Title IV, 43.59 percent of respondents, the largest group, said the industry would be affected predominantly by increased costs. 2014
The majority of survey respondents believed that Title IV compliance costs $100,000.00 annually. 2014
The most common fund adviser response, at 47.67 percent of the 86 respondents to the question, estimates the annual compliance cost of Title IV in the range of $50,000 to $100,000. 2014
On the median annual time measure for Title IV compliance, 46 percent of respondents estimated between 100 and 250 hours per year and 32 percent estimated between 250 and 500 hours per year. 2014
The compliance and administrative costs created by Title IV of the Dodd-Frank Act are associated with the size of hedge fund advisers' assets under management. 2014
All regression models show positive and predominantly statistically significant coefficients, with 18 out of 30 coefficients in the entire sample statistically significant. 2014
Compliance costs per unit of AUM do not diminish in the entire sample or in the multi strategy subsample, so there is no support for the hypothesis that smaller advisers bear relatively higher Title IV compliance cost. 2014
While all coefficients are positive in the entire sample and the multi strategy subsample, the negative coefficients in the single strategy subsample suggest that the strategy employed by a hedge fund adviser could change the assessment of the effect of compliance cost. 2014
Even in the single strategy subsample only 9 of 30 coefficients are negative, so the strategy based qualification to the main finding is limited. 2014
There is no evidence that private fund adviser regulation in Title IV of the Dodd-Frank Act increases returns to scale, which counters the most damning putative concern raised about regulatory compliance costs. 2014
A long-term study of the effects of Title IV compliance costs could change the assessment that no policy intervention is needed, so the finding is provisional on the short observation window. 2014
Even though the private fund industry broadly accepted Form PF, the form's core problems for the SEC are the ambiguity of several questions, advisers' disagreement with the definition of funds, and correspondingly insufficient SEC guidance. 2014
SIFI designation changes the nature of regulation for a nonbank financial institution, subjecting it to substantial additional regulation and forcing it to change how it does business, which can in turn constrain its growth. 2014
More than forty percent of respondents in a prior study disagreed with the definitions or instructions in Form PF. 2014
Stock prices respond significantly and predictably in a positive direction to the DOJ press release announcing execution of a non- or deferred prosecution agreement and to the start of the N/DPA term. 2015
Because N/DPAs are contractual arrangements between corporations and the Department of Justice that remedy identified governance shortcomings, it is the DOJ, rather than Congress or the courts, that is changing U.S. corporate governance practice. 2015
The positive market reaction at announcement and at the start of the term is the market acknowledging that an N/DPA gives the firm an opportunity to be better managed, more compliant, and less exposed to penalties. 2015
Because the market reacts positively both to N/DPA announcements and to the governance improvements taking effect, the DOJ's escalation of N/DPA executions beginning in 2002 could be justified on market value grounds. 2015
The observed growth in N/DPA execution, especially since 2002, indicates that N/DPAs will continue to shape major U.S. corporations across a range of industries. 2015
Operating a mutual fund is materially more capital intensive than operating a hedge fund: the mutual fund adviser's required investment in trading and operational technology and in specialized staffing substantially exceeds what a hedge fund manager must spend. 2016
Private party litigation against hedge fund managers stays minimal because well counseled managers make extensive disclosures to investors who are presumed sophisticated, unlike mutual fund advisers who face ongoing high value investor suits. 2016
Hedge fund investors have almost no statutory remedy: the regime establishing a hedge fund investor's rights is severely limited, nearly to the point of nonexistence, in the United States and in the offshore jurisdictions where many hedge funds are chartered. 2016
Identical rules diverge in practice because the two vehicle types are structured, operated, and run as businesses differently; the Investment Advisers Act applies to both, yet its obligations are far more onerous for mutual fund managers. 2016
Best execution is a leading instance of nominal confluence: the obligation is nominally the same, but it is far more complicated and burdensome for the mutual fund manager than for the hedge fund adviser. 2016
Once a hedge fund adviser is already required to register with the SEC, the marginal regulatory burden of also running a mutual fund or retail alternative fund is small, which gives registered advisers an incentive to enter the registered fund space. 2016
Regulation could depress reported private fund performance through a compliance cost channel: because monthly performance is reported net of fees, a significant increase in compliance costs would show up immediately in monthly performance figures. 2016
Dodd-Frank Act compliance costs fall most heavily on advisers managing the largest number of reporting funds, because private fund advisers incur roughly $10,000 in compliance cost per reporting fund. 2016
Surveys of private fund managers conducted in 2012 and 2015 show that a clear majority of managers believed increased compliance costs negatively affect the industry. 2016
Private fund managers themselves distinguish costs from returns: a majority of surveyed managers opined that Dodd-Frank Act registration and disclosure requirements do not affect the returns of the private fund industry, even though compliance costs affect the profitability of their management companies. 2016
Estimates of annual Dodd-Frank Act compliance cost for private fund advisers range from $50,000 to $400,000 per year. 2016
Prior work by Kaal shows that Dodd-Frank Act registration and increased compliance requirements only marginally increase the cost structure of private funds, and finds non-robust evidence that higher administrative costs are a second-order effect that does not affect overall private fund returns. 2016
Deferred prosecution agreements produce relevant, real time, decentralized, high quality information for regulation in most industries and are used as a preferred alternative to litigation by both prosecutors and corporations. 2016
Deferred prosecution agreements produce superior feedback effects for regulation because the prosecutor's investigation and the negotiation and execution of the agreement signal regulatory needs in real time. 2016
The downsides of principles based regulation are a costly and time consuming transition from rules based regulation, uncertainty, and compliance problems that follow from that uncertainty. 2016
Deferred prosecution agreements and venture capital investment decisions increase the availability of relevant, decentralized, and timely information for rulemaking and give at least some estimate of where innovative trends exist and what regulatory challenges may accompany them. 2016
Post-LTCM counterparty credit risk management, in which regulators pressed banks to monitor and limit the leverage of their hedge fund clients, appears to have worked: the Amaranth failure produced no financial market repercussions. 2016
Hedge funds' risk management practices are typically evolved enough to constitute a major barrier to systemic shocks, and their trading counterparties and lenders further help prevent losses large enough to disrupt the financial system. 2016
When disruptive firms do not comply with existing rules or effectively create their own exemptions because the existing framework does not reach them, public policy goals can be undermined and incumbent firms that remain subject to the rules suffer severe competitive disadvantages. 2016
Expert testimony identifies recurring failures in private fund due diligence, including the absence of any written policy or process to ensure compliance and reliance on individuals with little or no experience, particularly with the particulars of hedge funds. 2016
The data suggest that since 2010 private fund advisers increasingly engage in investor due diligence in order to protect themselves from investor criticism and lawsuits. 2016
Despite bringing enforcement actions over misrepresentations about due diligence, the SEC has not taken a rigid enforcement position on whether particular due diligence industry practices are effective, and has merely acknowledged that practices became more robust after the financial crisis. 2016
Some of the most sensitive Form PF disclosures are not readily obtainable by the funds themselves: counterparty credit exposure often cannot be determined by individual fund managers, which makes the reporting requirement burdensome in practice. 2016
Contrary to the hedge fund industry's own predictions, the industry has absorbed Form PF quickly and the impact of the Dodd-Frank registration and disclosure rules has proven much less intense than the industry initially anticipated. 2016
The majority of hedge fund advisers spent less than $10,000 preparing their initial Form PF data reporting to the SEC, and subsequent annual filings cost about half of that initial amount. 2016