Skip to main content

26 posts tagged with "linkedin"

View All Tags

· 6 min read
FlaggGRC

C for Compliance in Japan Inc.

“Good laws have their origins in bad morals” quotes Macrobius, the Roman Writer.

In any legal system, may it be Common as has been adopted by India and the UK or Civil as has been adopted by some of the European countries, the primary origin of any law is a crime or indiscipline in the society. Law is introduced into the society to correct the wrongs and to discourage the wrongdoers from committing the same crimes. In other words, wrongs exist and hence do the laws..!

An example can be cited from a few pieces of legislation from different areas of laws:

In Finance laws, Sarbanes-Oxley Act of 2002 also known as the Public Company Accounting Reform and Investor Protection Act was enacted as a piece of US Federal legislation to ensure the accuracy of the financial information of a corporation, the need for enactment of which arose from a series of corporate and accounting scams. Similarly, in the domain of labor laws, the laws related to abolition of bonded labor, contract labor, etc. were introduced based on the need of protecting rights and interests of these labors.

These examples clearly suggest that enactment of laws has many a times been a corrective step towards the elimination of indiscipline in the society. Such corrective action by way of introducing stricter laws should ideally reduce the number of such crimes and indiscipline in due course of time. However, in spite of this corrective action, the newspapers and media are still able to earn their bread and butter everyday relying upon increasing number of scams and crimes happening in the society. Thus, it is clear that a mere corrective action is not enough and the situation calls for a preventive step in the first place. “Prevention is better than Cure” goes without saying. The need of an hour is a tool that prevents a person from committing the very action of crime and indiscipline in the first place and to give secondary importance to a corrective action i.e. enactment of sanctioning codes to cure the scenario. In view of this necessity, Compliance and Ethics management has proven to be very efficient and effective while serving as a preventive tool for indiscipline in the society.

Compliance simply means the act of complying with the applicable statutory as well as regulatory legislation. The term ethics is a set of morals and principles that a person possesses without any interference of legislation. Michael Joesephson, the President and Founder of Josephson Institute of Ethics, clarifies the difference by defining these terms as “Compliance is what we must do; ethics is about what we should do”. Compliance management can be termed as the process of identification of compliance and implementing it in such manner as required by law. Compliance and Ethics management, as a tool, has proven its efficiency not only with respect to a single natural person but also for an artificial person i.e. a corporation. Due to a huge number and complicated nature of the compliance that a corporation has to comply with, Compliance and Ethics Management is indeed primarily customized and best suited for a corporation. The tool enables a corporation to focus on achieving its goals and targets when its legal compliance are completely taken care of by this tool and the non-compliance are prevented at every stage of its functioning.

Compliance and Ethics Management program as an efficient tool of prevention of any non-compliance may be reaffirmed by citing a recent case of Non-prosecution Agreements (NPAs) entered into by Securities and Exchange Commission (SEC) with one of the Argentine Companies. Non-prosecution Agreements are the written agreements that are entered into by the SEC in which the SEC agrees not to take any enforcement action against the entity if it agrees to co-operate fully and truthfully with the investigations. It entered into such NPAs with one of the Argentine companies in relation to the settlements of violations under Foreign Corrupt Practices Act (FCPA). SEC chose to put this tool of NPA to use due to this Company's prompt initiative in reporting of its non-compliance. The Company was able to take such an initiative primarily since it implemented Compliance and Ethics Management Program in the organization. The non-compliance and misconducts were discovered by the Company as a result of adopting measures to improve its worldwide internal controls and compliance efforts, including implementation of an FCPA compliance training program in Argentina. The SEC took into account the significant remedial measures undertaken by the Company, including a comprehensive new compliance program throughout its operations. Among Company’s remedial measures have been new compliance training, termination of employment and business arrangements with all individuals involved in the wrongdoing, and strengthening its internal controls and its procedures for third party due diligence. The Company also conducted a risk assessment of its major operations worldwide to identify any other compliance problems. The Company has ceased operations in Argentina. Thus, Compliance-oriented steps taken by this Company and SEC’s decision of entering into NPAs with the Company only reiterates the efficiency and effectiveness of the Compliance and Ethics Management as a preventive tool.

Benjamine Disraeli, a former British politician opines “When men are pure, laws are useless; when men are corrupt, laws are broken”. This can be interpreted as a fact that the laws remain as mere corrective written instructions for maintaining discipline in the society. It is indeed the process of managing compliance and ethics that prevents this indiscipline from occurring in the society in the first place. It is the Compliance and Ethic Management that prevents the very enforcement of sanctions given under the laws against a person and its aftermaths. Though, the strength and potential of the Compliance and Ethics Management tool is highly untapped at the moment, the cases such as that of the Argentine Company will soon reveal its hidden significance and bring metamorphic change in any legal system.

(Please Note: This is only a research based article with the support of the Bibliography mentioned herein. It only provides information and personal analysis concerning the given topic.)

Visit https://flagggrc.tech to know more!

· 4 min read
FlaggGRC

Google Antitrust Probe in the EU and US

When there is a market, there is competition. In fact, a market is made up of several competing players in the same domain which give/offer a variety of choices, innovations, prices and quality levels to a consumer. Most jurisdictions have introduced Competition and Anti-trust laws to protect the interests of consumers and promote competition by preventing anti-competitive agreements and business practices. Strict enforcement of Anti-trust laws is the key to open and free markets. The unbundling or break-up of a company is one of several strict actions that antitrust regulators can take to stop the company from abusing its dominant position in the market. The term is a burning issue occupying a huge space in the media for the last few days after the European Parliament was expected to call for the unbundling or break-up of Google Inc. for its alleged dominant business activities.

The search engine giant is being investigated for its alleged anti-trust activities by the European Commission since the last 4 years. The EU through its press release of 30 November 2012 had declared initiation of proceedings which was followed by complaints from other search engine service providers.

While this action was being taken by the EU, Google’s competitors in the US had already charged Google with anti-trust-related allegations before the Federal Trade Commission. The company faced multiple allegations of abusing a dominant position in online search through various methods. Google was investigated by the Federal Trade Commission following the complaints received by the Commission from Microsoft Corp., MyTriggers.com, FairSearch, Yelp, etc. of the main allegation was that Google was unfairly downgrading its competitors from the search-engine results to direct users towards its own competing products. The investigations went on for 2 years and Google Inc. was given a clean chit by the Commission. The Commission through its Press Release of 3 January 2013 stated that “the evidence the FTC uncovered through this intensive investigation prompted us to require significant changes in Google’s business practices. However, regarding the specific allegations that the company biased its search results to hurt competition, the evidence collected to date did not justify legal action by the Commission…..The evidence did not demonstrate that Google’s actions in this area stifled competition in violation of U.S. law.” The decision of the Commission was highly criticised by the rival complainants. However, the Commission mentioned in its Press Release that “FTC’s mission is to protect competition and not individual competitors”.

Although Google Inc. is now free from anti-trust allegations in the US, the decision of the European Antitrust Regulator is still pending. The four-year old investigations have now taken such a turn that Andreas Schwab and Ramon Tremosa, the European Parliament members recently revealed a draft resolution proposing the separation of search engine services from other commercial services, which might ensure a level playing field for competitors. This move of unbundling or breaking-up a company is opted for as a measure by regulators when they conclude that the company has become anti-competitive. The draft resolution proposing unbundling is still in the form of a motion and is currently being debated by the European Union Legislators.

Although Google is undoubtedly a dominant player in the search engine services, it is necessary to determine whether it uses unfair means for retaining this position over other competitors. The question of whether the European Parliament will be able to directly enforce ‘unbundling’ over Google Inc. still persists. Although the answer is no, the resolution is likely to pressurise the European Commission to impose unbundling on Google. Can a body of politicians take over the investigations from the regulator and influence the regulator in their decision of the case? On the contrary, the resolution passed by the European Parliament members is likely to benefit the business community in Europe and hence, the Parliament members can also influence the regulator with a view to achieving a positive result. Let us hope however that this unusual stand of the European Parliament does not set a precedent. Whether Google Inc. is convicted by the EU regulator or not the decision must not be influenced in any manner much like the FTC in the US.

(Please Note: This is only a research based article. It only provides information and personal analysis concerning the given topic.)

Visit https://flagggrc.tech to know more!

· One min read
FlaggGRC

"One of the best examples of tick-the-box compliances is the privacy policy. They are either copied pasted from other websites or drafted very poorly"

Reach out to us at FlaggGRC Ventures LLP to find out if your privacy policy is actually effective. Let us help you assess if your policy has you covered in all situations.

Visit https://flagggrc.tech to know more!

· 4 min read
FlaggGRC

Regulatory reforms and the challenges on the Compliance front“Only in growth, reform, and change, paradoxically enough is true security to be found” says an American author. Banking and financial markets, where security in its literal sense is of prime importance, have strongly been affirming this through their reforms. It is indisputable that the 2007-08 financial crisis took a toll on almost all the major economies of the world. The crisis shook the stability of these economies and created the need for another big reform in banking and financial regulation. While it is necessary for regulatory bodies to bring in such reforms to maintain financial stability, it also gives rise to new regulatory compliance challenges for corporations, banks and financial institutions.

The key regulatory bodies including the Fed, CFPB, SEC and FINRA introduced the Dodd-Frank Wall Street Reform and the Consumer Protection Act to prevent excessive risk-taking and to bring back financial stability. While banks and financial institutions are still coping with new compliance requirements under the recently introduced Dodd-Frank Act, more amendments are expected in this already complex piece of legislation. Additionally, the geographical scope of applicability of acts such as the Foreign Corrupt Practices Act (FCPA) and the Foreign Account Tax Compliance Act (FATCA) is increasing globally with a view to targeting internationally located American companies and SEC issuers. Thus, non-compliances can no longer be brushed under the carpet under the pretext that issuer corporations are located outside the USA. A good example of this expanding scope would be conflict minerals-related compliance requirements under Sec. 1502 of the Dodd-Frank Act and the OECD framework, which drill down to the smallest branch or subsidiary of the SEC issuer irrespective of its location on the map.

Like American regulations, European directives too have adopted Basel, which requires adherence to vigorous risk management and compliance arrangements. For example, in the European market, Basel was incorporated into Germany’s Banking Act, which mandates robust governance arrangements. Basel II recommends that banks have their own risk management systems. Consequently, Sec 25a of the Banking Act as well as the BaFin now stipulate the minimum requirements for risk management and appropriate internal control procedures. Similarly, Pillar III of Basel II prescribes stricter disclosure requirements that are incorporated in Sec 26 of the Banking Act. For those operating in the insurance domain, Solvency II Directive Pillar II imposes qualitative requirements including risk management and compliance. Pillar III contains stricter reporting and disclosure requirements. As a result, the regulatory reforms undertaken in Germany recently are going to create numerous challenges for German corporations, banks and financial institutions until they come to terms with the updated compliance requirements. The rapidly increasing compliance and risk management requirements are certainly going to make them burn the midnight oil!

Another smart move by the regulatory authorities involves offering huge monetary returns and imposing hefty penalties. The significance of whistleblowers is ever-increasing. They are encouraged to speak up and given huge monetary awards for reporting non-compliances. This has made it easier for even common employees to report non-compliances, thus creating a new challenge for corporations on the compliance front. Also, regulatory bodies have always been using hefty penalties as a deterrent for non-compliances as an effective measure. With these new penalties set to attain even larger proportions, corporations will end up paying a much steeper price, possibly endangering their existence. For example, the dreaded penalty of 3.25 m euros, the largest penalty ever was imposed by BaFin on one of the investment management companies in the UK for incorrect and late disclosures under the Securities Trading Act.

On the one hand, regulatory reforms and stricter measures for non-compliances is the need of the hour for regulatory bodies in order to effectuate a steep drop in non-compliances. On the other hand, the broader ramifications of such reforms will make companies adopt a drastically different approach with regard to Compliance.

(Please Note: This is only a research based article providing personal analysis concerning the given topic.)

Visit https://flagggrc.tech to know more!