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What's New
Media obsession with "hacktivists" misses the point
Big investors weigh in on IFRS and FASB, as "condorsement" gains traction
The downside of deferred prosecutions
Financial services industry adoption of GRC systems disappoints Editor's Corner: Media tipsters as whistleblowers Tip of the Week
Protect individual files as well as systems Also Noted: IBM
Database security blooms in wake of fear; FSA also wants strong risk controls and much more... News From the Fierce Network:
1. Morgan Stanley fixed-income efforts flagging?
2. Domestic IPOs fare well amid concerns in Europe
3. Greenhill proactively confronts market doubts
 | Leveraging Predictive Analytics in the Data Center to Manage Performance & Risk - August 9, 12 pm ET
Complex IT environments are generating massive amounts of performance, metric, and alert data every day. It’s becoming increasingly difficult to sort through this information in a timely manner to take actionable steps to manage risk & minimize outages, improve operational efficiencies, or identify new growth opportunities. View this webcast to learn more. |
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Media tipsters as whistleblowers
Dodd-Frank, in its quest to clamp down on financial services industry fraud, authorized a program to encourage whistleblowers to report incriminating information to proper authorities. But just who qualifies for the big bounties is a big issue right now.
The new SEC whistleblower program, implemented under Section 922 of the Dodd-Frank Act, authorizes rich bounties to be paid to individuals "who act early to expose violations and who provide significant evidence that helps the SEC bring successful cases." This of course has led to fear in the executive suites that employees now have incentive to report all manner of information to authorities in hopes of a big windfall. The thought of a multimillion dollar payout would sway a lot of employees, they argue. The law has led to lots of concern as to who exactly would qualify for these rewards under the whistleblower provisions. Some have suggested that hedge funds and short sellers might qualify for rewards if they ferreted out fraud. That would pad their income if the hit a home run with a short position. Do auditors and lawyers also qualify for the bounties? And what about reporters and the inside-company sources that provide information to journalists? The issue of journalists and their sources has cropped up in the form of the long-running suit by two former Boeing internal auditors who leaked sensitive and rather negative information to the Seattle Post Intelligencer about the company's Sarbanes-Oxley compliance process. They were subsequently fired by the company for unauthorized media contact. But they went to court to argue that they were protected from retaliation by Sarbanes-Oxley. While the law required them to report their information to relevant authorities, their lawyer argued that by going to the media, they were essentially going to regulators. The Economist reports that the two men's lawyers are trying to drum up support for this view in Washington, as part of their efforts to push the issue all the way to Supreme Court. Recall that an appellate court ruled against them recently. Would it be wise for media tipsters and journalists to qualify for federal protection from retaliation and bounties for their leaks and articles? Media reportage can be devastatingly effective in turning up corporate malfeasance. If journalists, most of whom are relatively low paid, start to see corporate investigative reporting as a revenue generator, that's powerful incentive to do good work. But financial motivation would also seem to be odds with the lofty goals if journalists. They shouldn't be writing stories with financial gain in mind. One would hope accuracy and public service trumps the profit motive.- Jim Read more about: whistleblower, hedge funds, Boeing, Financial Services Industry
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Today's Top News Media obsession with "hacktivists" misses the point
It was hard to miss the many headlines recently about "hacktivist" groups such as Anonymous and LulzSec, whose antics have caused lots of frustration on the part of victims. But in the end, the activities of these groups are probably less harmful than the hardened criminals who don't care about media coverage. They just want money. A recent report from Panda takes both groups to task. As for the hacktivists, "They claim that their activities are 'peaceful protests,' despite their actions [being] purposefully enacted to cause economic loss and completely illegal. They say they represent everyone's 'best interest' but are not brave enough to appear publicly, hiding instead behind their pseudonyms." But the bigger cause for worry is the apparent step up in activity by perpetrators of malware, and their ability to breach the likes of Sony, Citigroup, RSA and other big companies who can afford top-notch cyber-protection. The point here is the cyber mayhem is getting worse. According to PC Magazine, Panda researchers also say 42 new malware strains were created every minute during the quarter, with Trojans accounting for 70 percent of all new malware threats, followed by viruses at 16 percent, and worms at 12 percent. Adware, though only representing 1.37 percent of all active malware during the second quarter, accounted for more than 9 percent of all computer infections. Needless to say, you cannot afford complacency now. You have to be active on all fronts. For more:
- here's the PC Magazine article Related articles:
Anonymous unleashes Bank of America docs
Hackers exact revenge on MasterCard, PayPal, Visa, Swiss bank
Hackers to go after Fed? Read more about: Citigroup, malware, Hacktivists, media coverage
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| The future of high frequency trading
July 27, 2pm ET / 11am PT
These days, the promise of high frequency trading (HFT) has given way to talk of an industry shakeout and the limits of growth. While some cheer, others are convinced that the HFT business is well-poised for future growth and primed to conquer new markets. HFT firms face some big challenges, from regulatory scrutiny to competitive pressure to a challenging hiring environment. Register Today! |
Big investors weigh in on IFRS and FASB, as "condorsement" gains traction
The switch to IFRS looms as a major compliance and financial challenge, and some have likened it to adoption of financial controls to conform to Sarbanes-Oxley. That may be going a bit far, but it will not be a snap. Clearly, this is a massive event for the financial reporting unit at companies. The specifics of the rollout have yet to be determined, as we've noted before, though many remain hopeful that the SEC will provide greater clarity at some point this year. As of now, there's still time for people to weigh in with comments, which is exactly what powerful institutional investors are doing. They are making clear that they have some issues with the International Accounting Standards Board (IASB), which does not view in the same way that they view the U.S.-based Financial Accounting Standards Board, notes cfo.com. The big knock on the IASB is that it has been seen for years now as being vulnerable to political pressure. This view gained ground in 2008 when the IASB allowed companies to retroactively reclassify assets so as to identify securities with big losses and get them off the balance sheet. To be fair, similar criticism of the FASB was voiced in 2009 when it adjusted its fair value rules in a way that gave companies more discretion over the valuation of securities for which markets had dried up. That allowed banks in particular to reduce write downs of mortgage-related securities and thus boost profits. In any case, U.S. companies and institutional investors have a long track record with the FASB and they are loath to replace that haphazardly. The issue is hot again now that the idea of "condorsement" is on the front burner. Some are concerned that making the GAAP a mere stalking horse for the IFRS misses the mark. For more:
- here's the article Related articles:
Firms clash over accounting rules
SEC offers new potential path to IFRS
IFRS filers to face XBRL delays Read more about: GAAP, Ifrs, Fasb, Condorsement
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The downside of deferred prosecutions
When it comes to financial crimes, the Justice Department has rewarded companies that self-report and cooperate with subsequent investigations with so-called deferred prosecutions, which essentially delays the consequences of crimes by pushing back actual indictments. The SEC has also embraced this approach. This works well in some cases, for example, when the crime can be traced back to a rogue employee. According to the New York Times, the typical process calls for government lawyers going to companies early in an inquiry, and telling them "to figure out whether improper activities occurred. Then those companies hire law firms to investigate and report back to the government." All this makes a lot of sense given the fiscal realities at the SEC and Justice Department. There's no way every single lead can be followed. By allowing more companies to effectively police themselves, they can show more results with less money. Is this movement relevant in light of the dearth of criminal prosecutions of top Wall Street officials who took big risks that ushered in the financial crisis? It may be that this more company-friendly policy can root out garden-variety crimes perpetrated by mid-level employees. But it may be much less effective when rooting out crimes perpetrated by the top executives. It would take a strong board to do that. As of now we have yet to see a top executive criminally charged, and we have yet to see a major deferred prosecution. The latter is more likely than the former. For more:
- here's the article Related articles:
Goldman Sachs: Too big to prosecute
Credit Suisse being investigated by DOJ Read more about: prosecutors, Wall Street, Justice Department, Financial Crimes
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Financial services industry adoption of GRC systems disappoints
If there's one industry that seems tailor made for more rigorous adoption of formal GRC programs, it would be the banking industry. The imperative is extreme at all levels--governance, risk management and compliance. You would think that this would lead to aggressive action at the IT level as well. But one could argue that the industry has been something of a disappointment for GRC firms, though that might be changing. At many banks, the GRC implementation problems seem almost overwhelming. Risk management is seen more in terms of operational risk, which could intersect with IT risk, which could also intersect with legal risk and portfolio risk and so on. The silos, one could argue, are so ingrained that a comprehensive picture of risk is difficult to achieve. One expert tells KMWorld that banks already have chief risk officers, chief financial officers, chief auditing executives and general counsels who "are strong in this area. But the more people you have with this focus, the more who build their own domains," he says. They store information in Word documents and spreadsheets, or they might be using GRC products from different vendors." In the end, companies may be stuck with multiple GRC systems set up for specific areas. How to start thinking about synergies across all this? It will likely take a driver, someone to step up and take it all to the next level. But who? Should the chief risk officer take this on? Or should the CIO take responsibility? For more:
- here's the article Related articles:
The rise of the chief risk officer
Still room for GRC start-ups
GRC vs. ERM battle brings the heat Read more about: spreadsheets, governance, banks, auditing
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Tip of the Week Protect individual files as well as systems
In any bustling company, a lot of information is going to change hands. And the primary means by which this information is exchange is via files. You couldn't do your work if you couldn't share files with others across the enterprise and across the office. But from a security standpoint, building protections around specific files is an idea that usually takes a back seat to network security. "The ability to embed security mechanisms directly into files themselves in native file formats remains missing in modern IT security strategy," notes Information Management. Companies would be wise to start thinking about developing specific file protection programs. "With advanced file protection, financial organizations can protect information automatically without changing how users currently work. It can enforce usage and protection policies for groups of sensitive files, embedding specific policies that determine how sensitive files that meet a certain criteria can be used, to limit who is allowed to open or forward such files. Having the ability to enforce policies can allow investors, analysts and others to share information safely and ensure that sensitive documents do not fall into the wrong hands." Companies can also better monitor the flow of and use of sensitive information via tags and tracking systems. "If files are tagged (for example, with visible and/or invisible digital watermarks), organizations can track that data as it travels outside of the corporate network, capturing detailed file usage activities in real-time and alerting IT staff to unauthorized access immediately." For more:
- here's the article Related articles:
Hackers step up attacks on security firms
A taxonomy of data that needs protection Read more about: Information Management, Network Security
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Also Noted
> PCI compliance in virtual data centers. Article
> Time to revisit D&O issues. Article
> FSA also wants strong risk controls. Article
> Risk management as a competitive driver. Article
> Pentagon breached by foreign hackers. Article
> More criticism of toothless Sarbox whistleblower protection. Article
> Database security blooms in wake of fear. Article
> Facta causes ripples abroad. Article And Finally... The top 10 iPhone passwords. Article > The future of high frequency trading, July 27, 2pm ET / 11am PT These days, the promise of high frequency trading (HFT) has given way to talk of an industry shakeout and the limits of growth. While some cheer, others are convinced that the HFT business is well-poised for future growth and primed to conquer new markets. HFT firms face some big challenges, from regulatory scrutiny to competitive pressure to a challenging hiring environment. Register today!
| > Whitepaper: IT GRC Turning Operational Risks into Returns Recent financial upheavals have resulted in a wave of increased regulations. As a result, companies across the spectrum must implement an effective IT governance, risk and compliance (GRC) framework. Download this white paper to learn how to turn IT GRC processese into strategic assets. | |
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