USA: the SEC's failure to uncover Madoff's ponzi scheme - OIG report

The Office of Inspector General (OIG) - an independent office within the Securities and Exchange Commission (SEC) responsible for auditing and investigating the SEC's operations - has published the results of its investigation into the SEC's failure to uncover Bernard Madoff's ponzi scheme. A full report will be published shortly. Meanwhile, an executive summary has been published in which the OIG states:

The OIG investigation did not find evidence that any SEC personnel who worked on an SEC examination or investigation of Bernard L. Madoff Investment Securities, LLC (BMIS) had any financial or other inappropriate connection with Bernard Madoff or the Madoff family that influenced the conduct of their examination or investigatory work ... The OIG investigation did find, however, that the SEC received more than ample information in the form of detailed and substantive complaints over the years to warrant a thorough and comprehensive examination and/or investigation of Bernard Madoff and BMIS for operating a Ponzi scheme, and that despite three examinations and two investigations being conducted, a thorough and competent investigation or examination was never performed".

The response of the SEC chairman, Mary Schapiro, highlights some of the reforms that the SEC has taken and is available here. 

South Africa: King III Report and Code available online

Contrary to what I was expecting, the Institute of Directors in Southern Africa has made available online copies of the King III Report and Code. The Code is available here (pdf) and here (ipaper). The Report is available here (ipaper).

UK: issue 22 of LIST! published - UKLA reminder on compliance with the Listing Principles

Issue 22 of LIST! - the UK Listing Authority newsletter - was published at the end of August. The newsletter adopts a question and answer format to deal with some of the issues raised in the course of the UKLA's work. The newsletter also provide a reminder concerning compliance with the Listing Principles:

We sometimes get queries about the interaction between the Listing Principles (set out in LR7) and the Disclosure & Transparency Rules (DTRs) and Prospectus Rules (PRs).We therefore thought it would be helpful to remind issuers of the approach we take regarding compliance with the Listing Principles. The Principles are a general statement of the fundamental obligations of listed companies. They were introduced to ensure adherence to the spirit as well as the letter of the various rules, including the DTRs and PRs, comprising the listing regime.

Issuers should therefore be aware of the importance we place on compliance with the Principles on an ongoing basis. As our Handbook notes, a breach of a Listing Principle will make a listed company liable to disciplinary action by the FSA. While cases may be brought in conjunction with action for a breach of a specific rule or rules, the FSA is prepared to take enforcement action on the basis of the Principles alone, taking account of the standard of conduct required by the Listing Principle in question".

South Africa: King III Report and Code published

The King III Corporate Governance Report and Code will be published today by the Institute of Directors in Southern Africa. Further information is available here. The first King Report and Code was published in November 1994; King II was published in March 2002. It is unlikely that a copy of King III will be available online.

Update (2 September 2009): see here for an update and how to access the Report and Code online. 

UK: Gordon Brown on bank governance

An interview with the prime minister, the Rt Hon Gordon Brown MP, appears in today's Financial Times. The transcript has also been published here by the Daily Telegraph newspaper. As the FT notes, Mr Brown has "tempered his call for a crackdown on bankers’ remuneration with a warning that the UK could not be expected to take action unilaterally". Below are some of Mr Brown's comments:

... we’ve set up the Walker Review but it’s absolutely clear you cannot have banks in a position where the main board members – in some cases even some of the executives of the bank – don’t understand the risks that are being taken. And there is still a worry that unless systems of governance are improved, not just in Britain but around the world, that we end up in a situation where, for example, banks are holding subprime mortgages from the US but they don’t understand what the meaning of the asset is. So I think governance has got to be good.

... as many members of boards have recognised themselves, they did not have the information in a global marketplace on which to base their assessment of the risks that they were undertaking. Now that’s why I think you get quite strong recommendations from the Walker Review in Britain but that’s why I think you’ve got to have common standards of governance throughout the world and it would be unfair if we had tightened up all the arrangements for governance in a global economy when other countries have not done so. So one of the things that I’ll be looking for at Pittsburgh [where the G20 will meet this month] is an assurance that the governance arrangements of financial institutions are going to meet the highest standards possible in the future".

.... I think you’ve got to be absolutely clear that remuneration has got to be based on long-term success, not short-term speculative deals, that there’s got to be a clawback system in remuneration itself so that if things are not working in year two then there is a clawback that is possible as an example. And I think we’ve also got to look at whether the capital requirements of individual institutions would have to be increased in situations where the regulator thought that risk was higher"