MF Global: A Lesson for Corporate Compliance Officers

http://ow.ly/87ERj

An article by Michael Peregrine posted on law.com on the LTN webpage.

The article discusses the recent meltdown of MF Global, and looks into the causes, and the investigations that have followed.

This article states, "A series of high-profile media reports allege that the MF Global risk officer's warnings were marginalized in the process, which may have contributed to the ultimate investment losses. At their core, such allegations raise highly practical concerns relating to the management of the corporate compliance and risk functions to which every board must be attentive and sensitive. The corporate counsel is uniquely positioned to brief organizational leadership in this regard."

The article further discusses some of the allegations as follows, "Specific allegations involving the CEO include his categorizing the risk officer's perspective as "extreme"; making a "him" (the risk officer) or "me" (the CEO) challenge to the board; questioning the risk officer's qualifications for the position; and expressing annoyance with the risk officer's persistent warnings. Ultimately, the risk officer left the organization but before the failure of the investment strategy, and his replacement was reportedly given a more limited portfolio, without the ability to comment on the trading strategy so heavily criticized by his predecessor."

The article additionally states, "...the crucial takeaway for clients is the importance attributed to appropriate dealings between corporate leadership and compliance and risk officers. As these media stories suggest, the cost of failing to get this right is very high.

Corporate counsel can well serve the client CEO and the board with cautionary guidance on the proper role of the compliance and risk officers within the organizational structure; their vertical and horizontal reporting relationships; and the deference that officers and directors are obligated to pay to compliance and risk officer presentations."

Technological improvements can assist in this regard, bringing compliance officers in closer contact with their legal counterparts, and "C" level corporate officers, as well as their internal IT departments.  A development from earlier this week that is related to this topic was referenced on the Litigation Support Technology and News blog...the release of the IGRM (Information Governance Reference Model) diagram from the EDRM organization. A link to that article is provided below, and the model is also shown here:

http://www.litigationsupporttechnologyandnews.com/2011/12/edrm-information-governance-reference.html