[IVC Revised 9.8.2017] PAGE 1

Department of Administrative Sciences Metropolitan College, Boston University

Syllabus

AD 678 Financial Regulation and Ethics

Fall 2017

Irena Vodenska, PhD, CFA ([email protected])

Associate Professor of Finance

1. Course Overview

1.1 AD678 – Financial Regulation

AD678 is a comprehensive financial regulation course, focusing on the key federal statutes that regulate securities and participants in the securities markets: the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley, the Dodd-Frank Act of 2010, the Foreign Corrupt Practices Act, and several criminal statutes applicable to securities fraud and related offenses. We will read statutes and case law, and use examples and guest speakers to understand the practical application of the law in real life. Federal law governs the issuance of securities (“going public”), regulates companies whose shares are being traded (known as “issuers”), and makes rules for everyone working in the securities industry, including investment bankers, brokers, dealers, and investment advisors. Issuers and investment firms (and their employees or directors) who violate federal securities laws and regulations face civil litigation from shareholders, enforcement actions by the Securities and Exchange Commission, and criminal prosecution by the U.S. Department of Justice. After successfully completing the course requirements, students should be familiar with the complex system laws, government agencies, self regulatory organizations (“SROs”) and courts governing the securities industry to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” (www.sec.gov/about/whatwedo.shtml) Students should also have a basic understanding of the separate system of federal laws and regulations governing the commercial banking and insurance sectors of the U.S. financial services industry. 1.2 Introduction

 A schedule of reading assignments and assigned problems is given in the course schedule

(see section 4.3). Students are expected to prepare for the lectures as well as to do reading and research on their own. The objective of the lectures will be to guide and clarify student learning. Students are expected to read the required chapters and other assigned readings and come to class prepared to participate in a group learning experience. Class attendance is mandatory, and absences in excess of two classes may result in failing grade for the course.

 There are two exams in this course. The first exam will cover the readings, lectures, and

assigned case studies within the first half of the course. The second exam will focus on the

[IVC Revised 9.8.2017] PAGE 2

material from the second half of the course. Reviewing notes of class room lectures and discussions and reading the key statues regulating the securities industry, and the case law that interprets these statues will be of paramount importance for preparing for the exams.

 In class we will discuss cases, identify issues, analyze and discuss questions, using current

events and news stories as well as hypothetical examples to better understand the application of securities regulations in the real world. Students need to come to class prepared to ask questions and offer their viewpoints on the assigned readings and case studies.

1.3 Prerequisites

a) Courses: Prereq: No prerequisite courses; Suggested reading before class starts:

Chapter 4 from “Legal Environment” book by Jeffrey F. Beatty, Susan S. Samuelson, and Patricia Sanchez Abril, 6th Ed. ISBN: 978-1-305-50748-7

b) Student Competencies:

General understanding of the US Legal System 2. Basic Information 2.1 Schedule Classroom: LAW 204 Dates and Times: Wednesdays 2:30 – 5:15 pm

2.2 Delivery Mode - Classroom Format

The classroom format is designed to bring students in-class to study the subject in the form of lectures delivered by a professor taking advantage of a personal live instruction. The class will meet in the classroom during the lectures and in the computer lab at 808 Commonwealth Avenue for the review classes, midterm and final exams. 2.3 Instructor:

Irena Vodenska, Ph.D., CFA Dr. Irena Vodenska is Associate Professor of Finance and Coordinator of Finance Programs at the Administrative Sciences Department at Metropolitan College, Boston University. She has obtained her Bachelor’s Degree in Management Information Systems from the University of Belgrade in 1993, and an MBA from Vanderbilt University in 1996. In 2009, she obtained her Ph.D. in Econophysics (Statistical Finance) from Boston University. In 2004, she became a Chartered Financial Analyst. Prof. Vodenska has been working in the financial industry in the United States and internationally for more than a decade in the 1990s and early 2000s. She has experienced firsthand the Russian Bond Crisis in 1998 and the demise of the Long Term Capital Management, contributing to a tremendous economic uncertainty contributed by the plummeting of the US Stock market. Academic Prof. Vodenska has been teaching at Boston University since 2002 at both, undergraduate and graduate levels. The courses that she has taught include Investment Analysis and Portfolio Management, Financial Concepts, Corporate Finance, Financial Markets and Institutions, Multinational Finance, and Derivatives Securities and Markets. Her primary areas of research include financial market volatility, systemic risk

[IVC Revised 9.8.2017] PAGE 3

and financial crises, risk management, derivatives, and news analytics. She has published articles in the European Physical Journal B, Nature’s Scientific Reports, Physical Review E, Journal Management, Risk Journal, PlosOne, Nature Communications, International Journal of Theoretical and Applied Finance, Quantitative Finance, and Journal of Complex Networks. In addition, she has been a reviewer for the journals Physica A, PlosOne, Nature’s Scientific Reports, Nature Communications, and Journal of Economic Interaction and Coordination. Prof. Vodenska has been awarded research grants by the European Commission and the National Science Foundation, as a Principal Investigator for Boston University, to study financial crises and systemic risk propagation in financial systems. Professional Dr. Vodenska’s professional experience is mainly in international finance, investments, financial analysis, and securities trading. She has been a NASDAQ registered market maker since 1996 and has traded US and international common stocks, preferred equities and convertible bonds. She has also managed hedge fund portfolios specializing in risk arbitrage, pair trading, and convertible arbitrage. While working in the investment industry, she has developed and actively utilized quantitative trading algorithms involving derivative products primarily used for hedging equity positions and protecting risk arbitrage portfolio investments. Prof. Vodenska has served on the CFA Educational Committee for the Boston Securities Analyst Society (BSAS) and has taught at the BSAS CFA preparatory courses in Boston. Contact: [email protected] (617) 358 - 0005 Office: Room 244, 808 Commonwealth Ave Hours: By appointment – please send me an email to schedule a time 2.4 Other Information a) Getting Started, or What Should I Do First? The job of a graduate student is to move forward human knowledge. I know this is intimidating, but my job is to challenge you. I want you to improve—there wouldn’t be much point in taking this course if you didn’t. Taking this course is not about memorizing a statute or a case—you could do that by reading on your own. This course is about becoming a critical thinker, learning to evaluate what you read, investing your brain power to offer novel answers to critical questions and situations, and evaluating the far-reaching consequences of your own conclusions and solutions. If that sounds ambitious, it is. I am here to help you through that process. This is challenging – and challenges are prerequisites for progress! Don’t expect to master financial regulation in the first week or even by the end of the course. There will always be room for growth in this area. However, when you successfully complete the class, you should expect to have a much better understanding of the securities industry and how and why it is regulated. I only know of one way to succeed at mastering this study material: be persistent, don’t give up, review the material until you master it, and attempt to explain it to someone who is new to the field! b) General Guidance There are no dumb questions. I really believe and practice this. If you have a question, ask! Challenge everything! The internet has made data accessible to everyone. In fact, there is really way too much of it. The problem is that you don’t know where to turn or how to evaluate the available data. Where does it come from? Who wrote it and why? What is their agenda? So keep in mind this warning: “Use the Internet resources carefully!”

[IVC Revised 9.8.2017] PAGE 4

I encourage you to challenge anything and everything. Don’t just read the textbook or assigned statues and cases. Read with a viewpoint, with questions to challenging what is being explained. However, if you challenge something, be sure to be able to back up your claim with research and correct references. This is a financial regulation course, where art and science merge in various aspects, and there are often more than one right answers to given situations. 3. Text & Materials

3.1 Required Text, Course material and Case studies:

 Palmiter, Alan, Securities Regulation: Examples and Explanations, 6th ed., ISBN-13: 978-1454833925, ISBN-10: 1454833920 (“Text”)

 The SEC website (https://www.sec.gov/about.shtml) is a great repository of helpful resources for understanding the materials in this course, including links to the full text of the statutes we study. It is very helpful to peruse the website for more information for all the topics in this class.

 Much of our course material will be publicly available statutes, regulations, and case law. I will post all case law on Blackboard and you can find links to the statutes via https://www.sec.gov/about/laws.shtml 3.2 Optional Readings:

Wall Street Journal at: www.wsj.com Business Week at: www.businessweek.com

3.3 Blackboard This course will use a Blackboard site. Students are required to have a BU ID and password to log in. If you do not have a BU ID yet, note that this takes some time so be sure to start this process well before class starts. The site is: http://learn.bu.edu

4. Course Overview and Details 4.1 Course Learning Goals and Objectives

 Understand the role of the Securities and Exchange Commission in regulating securities markets and their participants

 Understand how federal securities laws and regulations protect investors in the issuance of securities through disclosures by issuers

 Understand the ways in which issuers are regulated by the federal government, including through anti-fraud provisions, disclosure requirements, corporate governance regulations, and anti-bribery laws

 Understand how securities laws and regulations apply to the accountants, lawyers, and bankers for securities issuers

 Learn what constitutes insider trading  Consider the line between what is legal and what is ethical in the securities industry  Be introduced to the regulations that govern those who work in the securities industry, including

brokers, dealers, and investment advisors  Understand how federal law criminalizes bad behavior in the securities industry

[IVC Revised 9.8.2017] PAGE 5

 Be acquainted with the separate structure of federal laws and regulations governing the commercial banking and insurance sectors

4.2 Course Expectations

a) The course will be conducted by a sequence of weekly classroom lectures. A learning partnership and the development of a class community are essential to a meaningful experience in this course. Students learn from students. As a member of the class learning community, each student is responsible for contributing to the educational experience of the entire class. The class participation grade will reflect the quality and quantity of contributions to class discussions and teams as well as other voluntary activities inside and outside the classroom that enhance the course experience for everyone. The best way to judge your performance in this area is to ask yourself after every class: “what value did I provide in class today”?

b) Learning in this class requires significant preparation before class, and deep immersion in the

material. Skimming the materials will not suffice. The workload in and out of class will vary from week to week. Because much of your grade is based on class participation, you must prepare for class. Although every student is different, you should be spending at least two hours to prepare for most of our class sessions. This estimate includes time to read the assigned materials, think, read them again, and take careful notes. You should also be asking me (or your classmates) questions and doing additional background research if you have questions or curiosities.

c) Current Event Research Paper:

One of the best things about studying securities regulation is that the topic is in the news every day. Every day a new company chooses to go public, another executive at a public company is charged with violating anti-fraud provisions, or another public company is investigated for attempting to bribe foreign government officials. The current event research paper assignment asks that you choose one current event relevant to any of the topics we will study this semester, and write a research paper describing what happened, the relevant law, and the significance of the story for the industry, the company, the law, and/or you. How to choose your current event: The current event must have been in the news within the last six months. To find a topic of interest, start reading the financial and business news now. You might also visit the SEC’s website for press releases, or some of the many blogs on securities regulation, white-collar crime, or corruption. You can also follow the SEC on Twitter. Once you find a news story, you will research it more deeply, including the relevant law. Your story does not have to be a case that has gone to court already. It can be an investigation, a proposed new rule or regulation, or any other story that implicates the legal issues we discuss in class. What to include in your paper:  a detailed description of the current event  a detailed discussion of the relevant law – explain the law from the very beginning,

as if your reader knows nothing about the topic; this is how you demonstrate your understanding of the law

 an analysis of the current event – Why is it important to the industry? What companies will care about this news story? What will its impact be? Who will win?

[IVC Revised 9.8.2017] PAGE 6

Why? You can choose to answer any or all of these questions (or any other question). The goal is to demonstrate meaningful application of law to facts, and deep thinking about the issues presented by the news story

Logistics:  7-8 pages, double spaced  Citation required anytime what you just wrote down did not originate in your brain  The paper should be prepared using the APA writing style and guideline for

references’ format. You must provide a bibliography, and all direct quotations and data sources must be properly cited.

 The Department uses the APA style to facilitate reading the paper and understanding references without being as cumbersome as some other citation styles (such as Chicago or MLA).

 Students can download the student style guide from the American Psychological Association http://www.apastyle.org/elecref.html) web site or you can purchase the APA style guide from the book store. There is even a help disk that can be purchased for about $ 40 (http://www.apa.org/software/ ) that will walk you through the process as you write the paper if you desire a more “personal assistance”.

 Papers are to be RESEARCH PAPERS. Remember that work that you use from other authors MUST be referenced. Since it is assumed that you are not an authority on the topic that you are writing, it is expected that this paper is an overview of many different sources of information. Each of these must be attributed to the author using the APA format.

 This is your paper and not the cut and paste of someone else's work. The internet has led to a false sense of what research is all about. Those new to research tend to think that it means spending an afternoon surfing the internet and then an afternoon cutting from material available.

 Keep in mind that the Internet: (1) is not quality oriented as it has good materials and not so good materials, and does not know the difference; (2) is NOT a sole source location. In particular, sources such as Wikipedia are the works of individual submitters which are not reviewed. Thus while many entries provide excellent information, some are fundamentally flawed or just plain wrong.

 Keep in mind that the Boston University Library as well as your local, state and the national US Library of Congress have extensive online services. USE THEM.

d) Historic Financial Scams

Much of the law regulating the financial industry is reactive: Congress passes laws after things go badly. Thus, to truly understand securities regulation and white-collar criminal laws, one must know the historical context in which the laws were passed. For better or worse, financial scams usually involve larger than life characters and creative schemes. So I hope you have fun learning about the “bad guys” of the finance world. In teams, you will be asked to research one of the historic financial scams that connect to our laws today. You will present your learning to the class. Each presentation should explain:

 Who are the key players?  What was the financial scam or scheme?  What laws were violated? Or, if you were assigned a really old scam, what

current laws would have been violated?  What was the regulatory response to the scam? Did it lead to any changes in the

law?

[IVC Revised 9.8.2017] PAGE 7

The Scams (by Team #)

1. Charles Ponzi - The Original Ponzi Scheme 2. Ivar Kreuger - Match King Hoax 3. Eddie Antar – Crazy Eddie 4. Whitaker Wright 5. ZZZZ Best Cleaners (1986) 6. Ivan Boesky 7. Samuel Israel III 8. Bernie Madoff

e) Exams

You will have two exams in this course. The course material is dense, so we will divide it in half with each half being tested on separate exams. The exams are NOT cumulative. In most cases, the exams will ask students to answer a series of questions by applying the law they have learned to a hypothetical fact scenario.

4.3 Schedule

a) Class Schedule

Class Date Readings/Cases/Material Learning Goals/Class Questions 1 9/6 

Read “What We Do” on the SEC website

Text Chapter 1 Introduction to Securities Markets and Regulation, §§1.1.1 - 1.3.5, 1.5

Text: Chapter 12 Public Enforcement, §§12.1-12.4

 Introduction: Bad Things that Happen in Finance

 Overview: The History and Purpose of Securities Regulation in the U.S.

 Meet the SEC: what does the SEC do? How does it impact the finance industry?

 Understanding who can bring lawsuits or criminal charges for violations of securities laws

The differences among government enforcement, criminal charges, and shareholder litigation

What is the “Efficient Market Hypothesis”

2 9/13 Securities Act of 1933 (scan) Text: Chapter 4 Registration of

Securities Offerings, §§4.1, 4.2

Text: Chapter 6 Securities Act Liability

Inside the Deal that Made Bill Gates $350,000,000

What is the subject matter and structure of the Securities Act of 1933?

How are securities sold to the public? What is the role of underwriters? What are the anti-fraud provisions governing the

issuance of securities?

 Who can be held liable for fraud in the issuance of securities?

 What is “joint and several” liability as compared with “proportional” liability”?

 What are rights of contribution and indemnification?

 What is the “due diligence” defense?

[IVC Revised 9.8.2017] PAGE 8

 How is a prospectus helpful in a securities fraud defense?

What is “Gun-Jumping”? --- a “red herring”? 3 9/20 Text: Chapter 5 Exemptions from

Securities Act Registration JOBS Act of 2012 SEC, Securities Act Rule

Regulation D: Exemption for limited offers and sales without regard to dollar amount of offering. https://www.law.cornell.edu/c fr/text/17/230.506

What securities are exempt from the Securities Act? Why?

What transactions are exempt from the Securities Act? Why?

What is the goal of the JOBS Act? How do exemptions help small(er) businesses

raise capital efficiently? What limitations/requirements apply to the

exemption for small offerings? What is a “private placement”? What limitations/requirements apply to private

placements?

4 9/27 Text Chapter 2 Definition of Security

Text: Chapter 3 Materiality SEC v. Howey (U.S. 1946) TSC Industries Inc. v. Northway,

Inc. (U.S. 1976) Basic v. Levinson (U.S. 1988) SEC Staff Accounting Bulletin

#99: Materiality Presentation: Team 1

How did the Supreme Court define an “investment contract” in Howey?

What kinds of financial arrangements constitute “securities”?

What are the implications of being a security? How do the securities laws balance investors’

need for information against issuers’ burden of disclosure?

Why is materiality important? How did the Supreme Court define “material” in

TSC Industries? What did Basic v. Levinson add to the definition? What is the “half-truth rule”?

5 10/4 Text: Chapter 9 Rule 10b-5 Kardon v. National Gypsum Co.

(E.D. Pa. 1946) Blue Chip Stamps v. Manor Drug

Stores (U.S. 1975) Matrixx Initiatives, Inc. v.

Siracusano (U.S. 2011) In re HP Secs. Litig. (N.D. Cal.

2013) Central Bank of Denver v. First

Interstate Bank of Denver (U.S. 1994)

Dura Pharmaceuticals v. Broudo (U.S. 2005)

Erica P. John Fund Inc. v. Halliburton Co. (U.S. 2011)

Rule 10b-5 -- Origins and Overview Origins Private cause of action, standing? Scienter and materiality Reliance, loss causation and secondary liability What is the “Fraud on the Market” Theory? What are the requirements for certification of a

securities class action? SEC Enforcement

[IVC Revised 9.8.2017] PAGE 9

Fed.R.Civ.P., Rule 23 Presentation: Team 2

6 10/11 EXAM 1

7 10/18 Text Chapter 10 Insider Trading Chiarella v. U.S. (1980) U.S. v. O’Hagan (only through p.

666 of opinion) Dirks v. SEC United States v. Martoma (2d Cir.

2017)(dissent only) Presentation: Team 3

Insider Trading What is insider trading? When is it illegal? What are the penalties for illegal insider trading?

How is the law enforced? How was insider trading defined in Chiarella? How did O’Hagan expand government regulation

of insider trading? When is a “tippee” guilty of illegal insider

trading? When is a “tipper” guilty of illegal insider

trading? Corporate obligation to prevent illegal insider

trading Compare: Exchange Act Section 16(b) -- Insider

stock ownership reporting and short-swing profits liability

8 10/25 Securities Exchange Act of 1934 (scan)

Text: Chapter 8 Securities Exchange Act of 1934, Introduction and §§8.1 - 8.2.3

Bring in a copy of a prospectus or an S-1 registration statement, and a proxy statement for a new issuer of your choice

Presentation: Team 4

What is the subject matter and structure of the Securities Exchange Act of 1934?

How does the Exchange Act regulate issuers? What are the disclosure requirements of the

Exchange Act? (How) do they differ from Securities Act requirements?

What information is typically included in a securities registration statement?

--- in a prospectus? -- in a periodic report? How do they differ?

What is an S-3 filer? 9 11/1 Regulation of Public Companies

Text: Chapter 8, §§8.3 - 8.33 Regulation of Public Companies Text: Chapter 8, §§8.4 - 8.4.4 Proxy Regulation (A Summary) Text: Chapter 8, §§8.5 - 8.5.4 Regulation of Tender Offers (A Summary) Text: Chapter 1, §§1.4 -1.4.2 Beyond Disclosure: Federal

Public company registration and reporting requirements Registration requirements, holders of record,

exchange listing Reporting -- What forms must an issuer use to

comply with the reporting requirements of the Exchange Act?

What information must be included in SEC form filings?

How does an issuer determine what information to include in a required securities filing/disclosure document?

Proxy Disclosure

[IVC Revised 9.8.2017] PAGE 10

Incursions into Corporate Governance Text Chapter 8, §§8.3.4 - 8.3.5 Oversight of Corporate Misconduct Presentation: Team 5

Insider Stock Ownership, §16(b) Short-swing profits

The Williams Act -- 5% Stock Acquisitions and Tender Offers

Sarbanes Oxley and Dodd-Frank: Substantive regulation of issuers -- use of disclosure and listing requirements to affect corporate governance structures and ethics codes Understanding the ways in which SOX regulates

issuers Understanding ways in which Dodd-Frank

regulates issuers

10 11/8 Whistleblower law 18 U.S.C. §1514A (SARBOX) 15 U.S.C. § 78u-6 (Dodd-Frank

Act) https://www.sec.gov/about/offices/

owb/owb-resources.shtml Berman v. Neo@Ogilvy LLC Presentation: Team 6

Whistleblower protections under the securities laws What is a “whistleblower” and why does it need

protection? Understanding the different definitions and

remedies for retaliation under SOX and the Dodd-Frank Act

Does internal whistleblowing qualify for anti- retaliation protection?

The Dodd-Frank Act’s Bounty Program 11 11/15 Text Chapter 11 Regulation of the

Securities Industry Investment Company Act of 1940 Investment Advisor Act of 1940 Class to be held on Friday, November 17th at 2:30-5:15 pm for both sections at SAR 102

Regulation of the Securities Industry: Underwriters, Brokers, Dealers, Investment Advisors, and others

Understanding the roles of FINRA and the SEC in regulating the conduct of Broker/Dealers

How does the Exchange Act regulate securities market participants other than issuers?

Mutual funds and the Investment Company Act of 1940: What is a registered investment company? How does it differ from a “hedge fund” or “private equity fund”?

Understanding how the Investment Advisers Act of 1940 regulates the conduct of Investment Advisors

* 11/22 No Class Thanksgiving 12 11/29 DOJ-SEC Guide to the FCPA

https://www.sec.gov/spotlight/fore ign-corrupt-practices-act.shtml

Foreign Corrupt Practices Act: §13: Applicability of FCPA to public companies

with domestic-only activities Should the U.S. be regulating conduct outside of

its borders? What is something of value?

[IVC Revised 9.8.2017] PAGE 11

Recordkeeping and internal controls provisions of the FCPA:

https://www.sec.gov/spotlight/fcpa/fc pa-recordkeeping.pdf FINCEN, Bank Secrecy Act, https://www.fincen.gov/resources/ statutes- regulations/guidance/sharing- suspicious-activity-reports- securities-broker Office of Foreign Assets Control, Sanctions Regulations U.S. Department of the Treasury, Bank Secrecy Act Regulations, 31 CFR 1010.320 FinCen, Guidance on Preparing a Complete and Sufficient Suspicious Activity Report Narrative (Nov. 2003) Federal Deposit Insurance Act, Sections 3(q) and -(u), 8(b), -(e), - (g), and -(i)12 U.S.C. §§ 1813(q), -(u), 1818(b), -(e), -(g) and -(i) Bank Holding Company Act, 12 U.S.C. §§1843(c)(8), 1851 Presentation: Team 7 Current Event Paper Due

What level of intent is required to violate FCPA? Foreign Corrupt Practices Act: Realities of

Enforcement FINCEN and the Bank Secrecy Act “Suspicious Activity Reports” and their handling OFAC and Foreign Sanctions Regulations Federal Banking Laws governing securities

activities of commercial banks: Glass- Steagall Act, Gramm-Leach-Bliley Act, Bank Holding Company Act and the Volcker Rule

Bank regulatory agency enforcement powers “Institution-affiliated parties”

13 12/6  Text: Chapter 9 Racketeer Influenced and Corrupt Organizations Act, §9.5.3

 Text: Chapter 12, Criminal Enforcement, §§12.5 - 12.5.6

 18 U.S.C. Section 1348  U.S. v. Kaiser (2d Cir. 2010)  Boyle v. U.S. (U.S. 2009)  U.S. v. Milikowsky (2d Cir.

1995)

Criminal Liability for Violations of Financial Regulatory Statutes -- Criminal Securities Fraud: When does a violation become criminal? Understanding the far reach of federal prosecutors

-- How Federal prosecutors use of mail and wire fraud, RICO and criminal tax prosecutions to reach wide range of financial corruption and “white collar” crimes

Can an organized crime law be used against a legitimate business?

Difference between civil and criminal RICO What is an “enterprise” for the purposes of RICO?

[IVC Revised 9.8.2017] PAGE 12

 U.S. v. Ebbers (2d Cir. 2006) (just sentencing portion of opinion)

 “Yates Memorandum” (U.S. DOJ 9/9/2015)

 U.S. Sentencing Guidelines §8B2.1 (Effective Compliance & Ethics Program)

 U.S. Attorneys Manual 9- 28.000 (Prosecution of Business Organizations)

Presentation: Team 8

What steps can and should a public company take to best protect itself and its directors, officers and employees from criminal prosecution?

What factors do Federal prosecutors and judges take into account in sentencing corporations and “white collar criminals” convicted violations of the securities laws or other criminal offenses?

Should the sentencing judge consider impact on a defendant’s business in sentencing?

Is it reasonable to consider loss to shareholders in calculating defendant’s sentence?

14 12/13 EXAM 2

* No class on 11/22 (Thanksgiving break) 4.4 Course Grading You can expect to be challenged in this course, and excellent, research quality work will be rewarded with an ‘A’. Grades for this course will be curved. This is a Boston University course; that means something. One thing it means is that we recognize and reward excellence. Excellence is uncommon, even rare. Your grade, then, will reflect the standards of excellence set by Boston University, in which only truly distinguished work will receive the highest grade. Student participation is essential for a successful class. Contributing to the discussion each class will give you an opportunity to be heard, and to experience a rewarding learning environment. Each student is required to add value during class discussion. Use this opportunity, it’s yours. Course grades will be determined as follows:

A: One-page case write-up and class participation 20% B: Exams 40% C: Current event research paper 20% D: Historic financial scam presentation 20%

5. Requirements, Policies and Standards 5.1. Attendance Attendance at all classes is mandatory. Attendance will be taken early on in the class. In accordance with the department policy, any student missing more than 2 classes will be considered to have withdrawn. Students arriving late will be considered to have missed the class. 5.2. Timely Presentation of Materials Due

[IVC Revised 9.8.2017] PAGE 13

All assignments have due dates. These are the LAST DATES that stated material is due. I maintain the right to refuse, or downgrade, any materials presented after due dates. This is not a subject for discussion. Student should organize their time and work so as to turn in the assignment before the due date. To be absolutely clear, this means that the work will be accepted anytime up to that date but not after. Students should develop a schedule so that the work is built around their personal needs and obligations. Students should allow for contingencies and plan to hand in their work well before the last minute. That way, should some unforeseen problem arise, the timely presentation of work is not in jeopardy. 5.3. Discussion Expectations Please remember that your class participation is essential. You should read the assigned readings before coming to class and be ready to ask questions or answer your classmate questions. Each student should be prepared to discuss the assigned material in class. Before coming to class, you should submit a one-page case write up for a case of your choice pertaining to the class, i.e. if there are more than one cases to be discussed in class, you are required to write a one page summary only on one of the cases that you choose. If there are no cases to be discussed in class, you are not required to submit a write up on a case. 5.4. Student Preparation Minimal preparation is reading the material, and being able to summarize what it is about, what the major issues are, and some recommendations. Superior preparation involves being able to (i) summarize the situation or problem presented; (ii) recommend a solution to the discussed problem; (iii) support your recommendation with relevant details, and analyses; and (iv) discuss innovative solutions 5.5. Project Requirements You are to complete the current event research paper on your own. You will be preparing and presenting the historical financial scam as a team. The teams will be assigned by the instructor. 5.6. Grading Policy Grade inflation is not in the best interests of BU students or the reputation of the institution. I have a responsibility to differentiate the performance of my students, and to reward with high grades only those who do exceptionally well. A Grade of ‘A’ or ‘A minus’ will be limited only to those students truly distinguishing themselves in the course. The Academic Policy Committee of Metropolitan College recommends the following guidelines for distinguishing grades.

A, A- 20% B+, B, B- 80% Other As merited

Excellent work will be rewarded with an ‘A’. An ‘A’ grade requires quality excellence in all aspects of the course: homework, discussions, project, and exams. Grades will be curved. 5.7. Requests for Extensions The General position is that make up extensions are not given. There is no guarantee that a make- up will be permitted, and any request needs to be in writing and a written verification of the incident will

[IVC Revised 9.8.2017] PAGE 14

be expected. Sometimes, unfortunate situations occur that make fulfilling requirements impossible and, as such, requests for extensions will be evaluated on a case-by-case basis. This is not to penalize any individual student but to attempt to assure that there is a level playing field and the total class feels confident that no one has a unique advantage. If, for any reason, you are unable to meet any assignment deadline, a student should contact the instructor immediately and preferably in advance. All assignments must be completed. 5.8. Off-Syllabus Work Students will not be allowed to submit work for consideration that is beyond that defined in the syllabus. Students will not be allowed to submit extra work to improve their grade as this will be unfair to other students. 5.9. Satisfaction of Department Learning Goals

Course Number MET AD 678

Course Name Financial Regulation and Ethics

Department Goal Category (Substantial, Some, None)

Compliance

Critical and Innovative Thinking

Substantial Each student is required to individually critically regard any presented case or problem during each class. This requires detailed analysis and innovative thinking.

International Perspective

Some Through the course, students are required to read through extensive literature of securities industry statutes pertaining mostly to the US securities industry; however, increased exposure of the US firms to global markets have made them targets of bribes by foreign contractors which will be addressed in this course. Additionally, US large companies are multinational either by having foreign suppliers, operations abroad, or international sales, which brings the international perspective to the course naturally.

Communication Skills

Substantial Students are required to discuss and solve case studies, offer their opinions and argue for their solutions when challenged by other students. In addition, each student needs to write a current event research paper, describing a regulatory violation, and discussing, in detail, consequences of such violation. Students are also required to choose a historical financial scam to research and present the scam to the class, offering their perspective of the case.

Decision Making Substantial During class, students are continuously asked to offer their opinions and make decisions about discussed case law, along with their colleagues and the instructor. They have to make choices which requires critical decision-making skills.

Technical Tools & Techniques

Some This is a qualitative-oriented course with not many technical requirements. However, as part of evaluating the potential misreporting of companies financial statements, students will be required to calculate financial ratios, performance indicators and search for misrepresentation of companies’ financial results.

[IVC Revised 9.8.2017] PAGE 15

6. Academic Conduct Policy The academic conduct policy is summarized below. For the full text of the academic conduct code, please go to: http://www.bu.edu/met/metropolitan_college_people/student/resources/conduct/code.html

Any Plagiarism will be reported to the Dean and dealt with according to the Academic Conduct Code of Metropolitan College.

Boston University makes available to all faculty the plagiarism tool “Turn It In.com.” The site contains millions of papers from around the world. When a paper is submitted to TurnItIn.com, it is analyzed and compared to other work. TurnItIn.com reports if any parts of the paper are copied from other sources without proper attribution. Specifically, TurnItIn.com will detect plagiarism. 6.1 A Definition of Plagiarism “The academic counterpart of the bank embezzler and of the manufacturer who mislabels products is the plagiarist: the student or scholar who leads readers to believe that what they are reading is the original work of the writer when it is not. If it could be assumed that the distinction between plagiarism and honest use of sources is perfectly clear in everyone's mind, there would be no need for the explanation that follows; merely the warning with which this definition concludes would be enough. But it is apparent that sometimes people of goodwill draw the suspicion of guilt upon themselves (and, indeed, are guilty) simply because they are not aware of the illegitimacy of certain kinds of "borrowing" and of the procedures for correct identification of materials other than those gained through independent research and reflection." "The spectrum is a wide one. At one end there is a word-for-word copying of another's writing without enclosing the copied passage in quotation marks and identifying it in a footnote, both of which are necessary. (This includes, of course, the copying of all or any part of another student's paper.) It hardly seems possible that anyone of college age or more could do that without clear intent to deceive. At the other end there is the almost casual slipping in of a particularly apt term which one has come across in reading and which so aptly expresses one's opinion that one is tempted to make it personal property.” “Between these poles there are degrees and degrees, but they may be roughly placed in two groups. Close to outright and blatant deceit-but more the result, perhaps, of laziness than of bad intent-is the patching together of random jottings made in the course of reading, generally without careful identification of their source, and then woven into the text, so that the result is a mosaic of other people's ideas and words, the writer's sole contribution being the cement to hold the pieces together. Indicative of more effort and, for

Research Skills and Scholarship

Substantial

To complete the current event research paper, students are required to research regulatory scandals of large magnitudes including violation of key statutes by individuals and/or corporations. Students need to understand every detail of the law that governs the scandal and write a research paper describing and explaining specifics of the investigation and specific law application.

Professional Ethics and Standards

Substantial During the financial regulation class, professional ethics and standards are discussed almost at each lecture with examples emphasizing the grave consequences of illegal practices, insider trading or manipulating financial statements, overstating earnings, or understating losses.

[IVC Revised 9.8.2017] PAGE 16

that reason, somewhat closer to honest, though still dishonest, is the paraphrase, and abbreviated (and often skillfully prepared) restatement of someone else's analysis or conclusion, without acknowledgment that another person's text has been the basis for the recapitulation." The above paragraphs are from H. Martin and R. Ohmann, The Logic and Rhetoric of Exposition, Revised Edition. Copyright 1963, Holt, Rinehart & Winston. 6.2 Academic Conduct Code I. Philosophy of Discipline The objective of Metropolitan College in enforcing academic rules is to promote the kind of community atmosphere in which learning can best take place. This atmosphere can be maintained only so long as every student believes that his or her academic competence is being judged fairly and that he or she will not be put at a disadvantage because of the dishonesty of someone else. Penalties imposed should be carefully determined so as to be no more or no less than required to maintain the desired atmosphere. In defining violation of this code the intent is to protect the integrity of the educational process. II. Academic Misconduct Academic misconduct is conduct by which a student misrepresents his or her academic accomplishments or impedes other students' chances of being judged fairly for their academic work. Knowingly allowing others to represent your work as theirs is as serious an offense as submitting another's work as your own. III. Violations of this Code Violations of this code are acts that constitute an attempt to be dishonest or deceptive in the performance of academic work in or out of the classroom. To alter academic records, or to collaborate with another student or students in an act of academic misconduct. Violations include but are not limited to:

A. Cheating on examinations. Any attempt by a student to alter his or her performance on an examination in violation of that examination's stated or commonly understood ground rules.

B. Plagiarism. Any attempt by a student to represent the work of another as his or her own. Plagiarism includes each of the following: copying the answers of another student on an examination, copying or substantially restating the work of another person or persons in any oral or written work without citing the appropriate source, and collaboration with someone else in an academic endeavor without acknowledging his or her contribution (see section 6.1. above for a more detailed definition of plagiarism).

C. Misrepresentation or falsification of data presented for surveys, experiments, etc. D. Theft of an examination. Stealing or otherwise discovering and/or making known to others the

contents of an examination that has not yet been administered. E. Unauthorized conversation is not allowed during examinations. Any unauthorized conversation

may be considered prima facie evidence of cheating. F. Knowingly allowing another student to represent your work as his or her own. G. Forgery, alteration, or knowing misuse of graded examinations, grade lists, or official University

records or documents, including but not limited to transcripts, letters of recommendation, degree certificates, alteration of examinations or other work after submission.

H. Theft or destruction of examinations or papers after submission including purposefully altering possible poor performance.

I. Submitting the same work in more than one course without the consent of the instructors involved.

J. Altering or destroying another student's work or records, altering records of any kind, removing materials from libraries or offices without consent, or in any way interfering with the work of others so as to impede their academic performance.

K. Failure to comply with the sanctions imposed under the authority of this code.