Throughout the week over at Securities Docket I highlight the most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation. Here is a digest of my picks for the week ending December 14, 2014.

Criminalizing Insider Trading Promotes Economy-Weakening Egalitarianism

Keith Weiner, Forbes

The key to fraud is deception. The fraudster lies to his victims, in order to take their money. Even if you think that insider trading is bad, you can't really say with a straight face that it is an act of deception. You can quibble about fairness and level playing fields, but insider trading does not depend on lying. It simply isn't fraud. By calling it fraud, the government is trying to control how we think, and to shut down discussion.

For Bitcoin, Square Peg Meets Round Hole Under the Law

Peter J. Henning, DealBook

The advent of a new medium to conduct business inevitably means avenues for criminals to swoop in to take advantage. The development of Bitcoin, the virtual currency that is not issued by any government, presents challenges for the authorities to use laws that were not designed for the digital world to combat illegal conduct.

DealBook reported on “fraud, hacking and outright theft that have become an increasingly regular part of the virtual currency world.” Bitcoin itself is neither good nor bad, just a new means to conduct business, but virtual currency operates in ways that make it harder to prosecute violations.

The Effect of Audit Committee Expertise on Monitoring Financial Reporting

Udi Hoitash, Ganesh Krishnamoorthy, Arnold Wright, and Jeffrey Cohen, The Harvard Law School Forum on Corp. Gov. and Fin. Reg.

Contrary to prior studies that do not report a significant association between supervisory expertise and financial reporting quality (Krishnan and Visvanathan 2008; Dhaliwal et al. 2010), we identify instances in which audit committee members with both industry and supervisory expertise are associated with higher financial reporting quality and more effective monitoring of the external auditor. Specifically, we find that they are associated with lower income-increasing discretionary accruals and lower non-audit fees as a proportion of total fees than members who are supervisory experts alone. Overall, our results suggest that in order to more effectively monitor the financial reporting process, it is beneficial for an audit committee member to have industry expertise in addition to accounting expertise.

The Rogue Employee Myth: Prevention and Detection in a FCPA Compliance Program

Thomas R. Fox, FCPA Compliance and Ethics Blog

The clear lesson for the compliance practitioner from the Madoff employees' trial testimony to-date is that there cannot be one person or the ubiquitous ‘rogue employee' who decides to engage in bribery and corruption. There has to be more than one person. To circumvent a company's internal controls takes work. For in any criminal FCPA enforcement matter, it is because the company involved had such weak internal controls that such circumvention could occur in the first place. But more than this circumvention, it means that the company did not employ sufficient systems to detect such bribery and corruption. And if the documentation you are reviewing is cold to the touch that may now constitute a red flag.

Credit Crisis Litigation Update: It is Settlement Time

Faten Sabry, The Harvard Law School Forum on Corp. Gov. and Fin. Reg.In this post, we discuss the recent trends of settlement activity and review some of the major settlements in credit crisis litigation. We also discuss mortgage settlements that are related to repurchase demands mainly between mortgage sellers and Fannie Mae and Freddie Mac. We then examine the current trends in filings, including the types of claims made, the nature of defendants and plaintiffs in the litigation, and the financial products involved.

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