Here are news stories from the week that were easy to miss, but may have some lasting impact.
1. Here Come the Big-Money Whistleblower Awards
Since mandated by the Dodd-Frank Act, it was only a matter of time before the awards for whistleblowing on securities fraud started to grow. This week the SEC awarded its first serious award: $14 million. Awards under the Act may range from 10 to 30% of the amount of the fine collected – at the discretion of the SEC. Neither the case nor the whistleblower have been identified by the SEC, but simple math tells us that the fine could have been as much as $140 million. No matter who received the award, there can be little doubt that a $14 million payout for revealing corporate misdeeds will serve as powerful incentive to those considering dropping a dime to the SEC. Companies would be wise to ramp up their internal whistleblowing hotlines and incentives. There are those out there, in fact most of us, who would love to win that lottery ticket.
2. Guns, Alcohol, Motorcycles, Tattoos and 401Ks
Brokers mishandling client funds is not a new story, but this week the Financial Industry Regulatory Authority (FINRA) alleged that one broker in a small New York brokerage actually spent $600K of client money on tattoos, pet care, motorcycle accessories, firearms, and liquor—and another $39K on entertainment expenses. (If motorcycles, firearms and liquor aren’t entertainment…well.) Having worked on Wall Street in the ‘80s, I admit to having seen some egregious expense reports – but the times have changed and so has financial institution oversight. Something to remember before you get that “It’s all about the Benjamins” tattoo with your client’s cash.
The New York Post: Broker ‘invested’ 600K in tattoos, guns, bikes
3. The Reverse Cyber Hack: Honey Pots Cause Sticky Problems
Victims of cyber attacks are angry, and some of them are not going to take it anymore. Some companies have created special “decoy simulated data environments.” The goal is to lure hackers into attacking a false pool of data and potentially revealing enough information for the firms to counterattack and potentially disable the attackers. Aggressive? Definitively. Illegal? Possibly. Cyber-vigilantism is generally not encouraged by authorities. Damaging or impairing the computers of “suspected” hackers may be exposing the retaliators to legal penalties themselves. Some victims are creating such “honey pots” for more benign use, simply using the pools of data as decoys to keep the hackers away from their actual data. You are likely to hear more about the tactic as companies seek new ways to ring-fence their data and even seek retaliation against those seeking to hack a firm’s valuable data.
CFO: Beyond the Honey Pot
4. Breaking Really Bad…Credit Union Bad
We like to cheer the little guy, but even little guys can be bad. The former president of the tiny $20 million Telco Credit Union (with a mere 179 loans) pled guilty this week to bank fraud charges. The former exec changed the due dates and entered false loan payments concealing from examiners that 75% of the credit union’s loans were delinquent. She now faces a potential $1 million fine and up to 30 years in federal prison. That would be a big penalty for a very small fish.
5. Stopping Bourgeois Capitalism…Priceless
Michael Lewis, the writer, said that the Occupy protestors “definitely had a point to make…they just don’t know what it is.” Well, apparently their point is of the “If you can’t beat them – join them” variety. That’s right, Occupy has launched its own debit card. The Occupy Money Cooperative is hoping to help those without banks by offering the cards as a “bank alternative,” stating that it’s “like a bank but better.” But is it everywhere I like to protest?
Bloomberg: Occupy Wall Street Caves to Capitalism