SPA Industry Poll - 82% Call for Regulatory Focus

Final Results of SPA Industry Initiatives Poll: 82% of Members Call for More Interaction with Regulators, Two-Thirds of SPA Members Also Support Educational Advertisements, Industry Directory and Single Disclosure Document

The results of the SPA's December 2008 have been tabulated, and a large majority (82.0%) of the members of the US structured products industry are calling for enhanced relationships with regulators in the wake of recent market disruption events.

Also, majorities of participants in the survey called for a single,FINRA-approved disclosure document for the industry (66.7%), more educational advertising in mainstream newspapers (65.5%), and a directory of structured products providers, services and professionals (65.8%).

Approximately half of the respondents agreed that a centralized clearinghouse was a primary objective (51.3%) and that a certification program for marketers was a worthy initiative (54.5%).
When asked which of the six initiatives would be most important to their respondent's employer, with an opportunity to make multiple choices, the regulatory initiative was again the most prominent answer.

Regulatory interaction - 44.3%
Single disclosure document - 39.8%
Clearinghouse - 35.4%
Advertising - 23.01%
Certification examination - 19.5%

The poll was conducted over the last two weeks among a diversified group of 114 structured products professionals. The group was comprised of sell-side professionals (39.4%), wholesalers/distributors (20.2%), third-party vendors (13.1%), internal/external counsel (12.1%).

As a result of the poll, the SPA will be setting up four executive committees in January 2009 to consider how best to accomplish these objectives: a front-office executive committee, a distribution committee, as well as internal counsel and external counsel committees to meet on a quarterly basis.

A full copy of the report will be made available shortly for those who sign up at [http://spa-2008.blogspot.com/2008/12/form-for-participants-on-spas-state-of.html]http://spa-2008.blogspot.com/2008/12/form-for-participants-on-spas-state-of.html

Compliance Update: Bad Week for Ethics Affects Everyone in the Industry

Special report by
Janaya Moscony, CFA

Last week witnessed yet another terrible week for the United States with mind-blowing breaches of fiduciary duty. The governor of Illinois allegedly attempted to sell a senate seat to the highest bidder and then had the audacity to show up for work the following day. Marc Dreier, the Yale graduated, highly regarded securities lawyer is accused of swindling more than $100 million by selling bogus investments to hedge funds. Then Bernard Madoff, a giant on Wall Street and former Chairman of the board of directors of NASDAQ (we all know who he is by now), admitted to a massive fraudulent scheme that Charles Ponzi would appreciate.

While Charles Ponzi attracted 30,000 investors in 1920 and issued notes totaling $15 million, the Form ADV filed my Madoff on behalf of his business stated that he advised between 11 and 25 clients. He has apparently admitted to fraud potentially exceeding $50 billion. The SEC complaint states that Madoff informed two senior employees that he planned to surrender to authorities in a about a week, "...but before he did that, he had approximately $200 - 300 million left, and he planned to use that money to make payments to certain selected employees, family and friends."

Can we blame the public for its cynical view, if not total disgust, of our industry? We can only keep saying "99% of the profession is upstanding" for so long.

As professionals working in compliance, how do we react when fiduciary breaches are at the highest level, premeditated and extensive? The best compliance programs require a pervasive attitude of compliance which must demand cooperation from the top. Where was the breakdown in this case? We will find out the details in the coming weeks.

Compliance begins with transparency. The Compliance Department must be able to monitor equally at all levels including the pinnacle of the organization. Of course, for competitive proprietary reasons, access to the records at the top may be limited to a few. However, the actions and records of the top executives of any organization must be reviewed and monitored just the same as they are reviewed for every other member of the organization.

We know with the current environment that all departments are under pressure and resources are limited. However, it is imperative to not only ensure compliance with your existing program, but to continually monitor and evaluate the program in light of any changes to your business model and after considering relevant regulator feedback. Take a step back from the day to day compliance routines and give some thought to how well the compliance program addresses all relevant potential risk. Is management disclosing all relevant information in order for you, as a CCO, to do your job sufficiently? With the New Year approaching, this is a good time to document such a review. Having a qualified unrelated third party assist with such an evaluation or mock audit is always a prudent idea.

The financial markets can't survive without ethics. Last week the very foundation of our industry was severely shaken and the damage will be far reaching. As a nation, we are already drifting towards increased regulation and it is becoming very clear that this may in fact be necessary in order to maintain the integrity of certain players.

We wish our final issue for 2008 was not on such a somber note. However, as an industry, we will adapt and survive. Frauds tend to be discovered in the subsequent crash after an excessive upward move. It is a game of musical chairs on the way down.

Happy Holidays and cherish your time with family and friends. They are the ones who will help us get through these difficult times.

Janaya Moscony, CFA
SEC Compliance Consultants, Inc.
Ph: 610-415-9261 x1
cell: 484-802-0208
fax: 610-415-9262
www.seccc.com