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Regulatory Enforcement Hotspots That Directors Must Not Overlook

Merrill Disclosure Solutions | October 14, 2015

SEC

As the supervisors of corporate regulatory compliance, corporate directors face increasing exposure to regulatory enforcement initiatives. Richard Girgenti, the national head of forensic advisory services at KPMG, outlines several US government enforcement priorities that directors should be tracking, in Directors Sailing In Uncharted Regulatory Waters from the June 2015 issue of Metropolitan Corporate Counsel. One of the hotspots is the rapidly advancing use of “sophisticated data analytics” by the SEC and other agencies “to make market manipulation and insider trading cases.” Mr. Girgenti also reports that the SEC is increasingly wielding civil fraud complaints and the use of administrative law judges in its enforcement actions. While much enforcement attention continues in the sectors of financial services, health care, and life sciences, he urges compliance vigilance among all directors, even those at companies in industries “not traditionally the focus of such intense enforcement activity.” The scope of the enforcement searchlight, he asserts, will encompass companies with global operations, “nontraditional” financial organizations and “new forms of payments,” plus retail and diversified industrial companies. Companies with strong compliance programs and a wholesome culture of compliance might merit some leniency in any government enforcement action that arises. He advises directors to assess “whether the internal controls have been designed and implemented to ensure that risks of misconduct within the organization have been addressed.”

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