Monthly Archives: November 2015

Category: Compliance

Just Because it’s Legal, Doesn’t Make it Right


EthicsA few weeks ago I attended the annual conference for the National Society of Compliance Professionals (NSCP).  Being a compliance oriented conference, the program covered many of the topics you would expect, including CCO responsibilities, effective compliance programs, risk management, vendor oversight, cybersecurity, AML and fraud, and SEC exam and enforcement action updates.

One particular session caught my eye though, maybe because it wasn’t the standard fare: Legal vs. Compliance vs. Ethics.

The panelists explained that compliance is something imposed by external authorities and legal requirements, while ethics are driven from internal values.   Since laws are often established after the fact to address a wrong, just because it is legal today (i.e. no law against it), doesn’t make it right.

Companies are collections of human beings, who may not always make the right choices.  Traditional internal controls are not sufficient to completely prevent bad corporate behavior, and because of the leverage that many companies have, their actions can have a disproportionate impact on society.  Regulators are starting to look beyond legal compliance to an organization’s culture of ethics.

Just like a strong compliance program, a strong ethics program requires many of the same elements:

  • Tone at the top, mood in the middle, buzz at the bottom
  • Written policies
  • Ongoing training and communication
  • Accountable leaders
  • As well as: adequate resources, discipline for violations, measurement, and risk assessment

Boston Financial’s Ethics Awareness Program, Integrity in Action, includes written ethics standards, company policies and an associate call line. Associates are expected to immediately report if they see or suspect an unethical, illegal or unsafe activity. This can be done by speaking directly to their manager, a human resources representative, or the associate call line. The Boston Financial Ethics policies include the following:

  • Corporate Code of Ethics and Professional Standards
  • Harassment
  • E-Mail and Internet
  • Conduct Guidelines
  • Equal Employment Opportunities (EEO)
  • Ethical Reporting and Anti-Retaliation
  • Drug and Alcohol
  • Social Media
  • Confidentiality Agreement

On an annual basis, each associate is required to complete an online ethics training session, to reacquaint themselves with all of the policies.

Earlier in the conference, a speaker from the SEC also commented about a culture of ethics and the importance of tone at the top.  As he mentioned, to make money, you need to stay in business, and that happens by doing the right things for your shareholders.

So why do ethics matter?  The panelists shared evidence that in a strong ethical culture:

  • Employees are 1/3 more likely to report misconduct
  • But 2/3 less likely to observe instances of it in the first place
  • Employees freely speak up to senior leaders, resulting in improved productivity
  • Shareholder returns seen to be 5% higher than peer organizations

And of course, because it’s all about doing the right thing.

Category: Technology

2015 Holiday Gadget Guide


In anticipation of Black Friday, Cyber Monday, and the busiest shopping month of the year, I’m back with Boston Financial’s annual gadget guide. This year I have some truly unique new finds to share with you. Whether you’re starting your holiday shopping list, or perhaps your own wish list, you’re sure to find something for everyone!

Keurig Kold – $369 –

The ever-innovative Keurig has done it again, this time putting SodaStream on notice with Kold. Kold has the ability to “brew” ice cold carbonated beverages at the touch of the button. It uses self-contained “pods” complete with carbonation beads and soda syrup to give you the freshest soda you’ve had (but at a stiff price of about $1.25 for an 8 oz pour.) I can almost taste an ice cold Coke now, brewed right at my desk.

Amazon Dash Button – $4.99/button
When it’s time to reorder laundry detergent, paper towels, or other household necessities, what could be easier than pressing a small wi-fi connected “button” in your pantry that will automagically place the order with Order your button, connect it to wi-fi, set up your ordering preferences, and you are set to go. The ultimate in convenience (and laziness) with a “dash” of cool tech.

Parrot Pot – $59 –
For those black thumbs out there, fear no more. The Parrot Pot is a great looking planter for your home that stores up to 2.5L of water within a hidden reservoir. Using your phone, the Parrot Pot app, and a Bluetooth connection, you can “tell” the planter what type of plant is in the planter, where you live, where the plant is located, and other attributes. The pot then does the rest, sampling sunlight, soil moisture, and other factors to give your green friends water when they need it.

Bluesmart Luggage – $399 –

Billed as the world’s first smart and connected luggage, the Bluesmart takes carry-on to a whole new level. Sure, it can hold enough of your stuff for a 2-3 day trip and fit into the overhead bin. But wait, there’s more beneath that aluminum and nylon skin. With built in GPS and connectivity to global cellular networks, you will have a better handle (no pun intended) on where your bag is than most airlines. It also sports two USB charging ports (one inside, one outside) for charging on the go. Combine that with built in locks, and a nice laptop/tablet pocket and storage compartments, and you are ready to fly in style.

Surface Book – $1499 – $3199 –
Microsoft put Apple on notice and continued the evolution of their Surface lineup with the Surface Book. Laptop meets tablet with this fully featured tablettop (my new tech term for this new breed of hybrids). The Surface Book runs Windows 10 and can be used with or without its unique keyboard, featuring a cool bulldozer-like hinge system. A secret lies under the keyboard and trackpad. When docked to its keyboard the Surface Book tablet leverages additional battery (up to 12 hours of battery life) and graphics horsepower lurking under the keys. When undocked, it can be used as a tablet along with the Surface Pen. A unique docking mechanism keeps everything secure and it is as light as some heavy smartphones. Get a display dock, and this is your one device for tablet, laptop, and home PC goodness.

Intel Compute Stick – $100 –
Not much bigger than most USB flash drives, and perhaps belonging at some state fairs, this is literally a PC on a stick. Plug it into the HDMI port of your TV or monitor, and wirelessly connect your keyboard and mouse via Bluetooth and you have a PC that can run Windows 10, has 32GB of memory, and can do your basic web tasks. Don’t expect blistering performance or the ability to run a lot of things at once, but what do you expect for something you can throw in your pocket after you shut down.

Haiku Ceiling Fan – $999 –
How can a ceiling fan make the list? Well, this just isn’t a $99 Home Depot special. The Haiku fan packs a lot into a tidy and modern package. With an ultra-efficient motor that beats Energy Star requirements by 750%, SenseMe technology that can sense when you come into and leave a room, temperature settings to automatically increase or decrease fan speed, connections to your Nest thermostat, and way too many other features to list, this may be the most “invisible” advanced device in your home. And yes, the company that makes it is actually called Big Ass Fans.

Tesla Model S P90D with AutoPilot – $100,000 –
A car with no equal. Let’s just say that me being able to “navigate” a Chicago highway for five miles, traveling at 65 miles per hour without my hands on the steering wheel or my feet on the pedals were both awe inspiring and nerve wracking at the same time. That combined with the eerie silence of dual electric motors going from zero to 60mph in under 3 seconds could make this my next vehicle. If only Terry Metzger or Mike Rizzo would grant my wish for a “company car.” Read my in-depth write-up here to see how the website, in-store, and test drive experience all come together.

Smartphones with Unique Features to Consider:

Everyone has heard about the latest from Apple and Samsung and with each release these phones typically add a faster processor, better camera, thinner and lighter form factor, and other subtle improvements. Being an equal opportunity gadget guy, I never lock myself into one tech ecosystem, so there are a few new smartphones that deserve mentions…

Microsoft Lumia 950XL with Display Dock and Continuum – $699 – With Microsoft’s acquisition of Nokia, the launch of Windows 10, and some interesting new features, Microsoft may have something interesting cooking with the Lumia 950XL. With a 5.7” large screen, fast processor, Windows 10 on-board, higher resolution than Samsung and Apple, and syncing with your other windows devices through OneDrive, all is lining up well. But, it changes when you add in the new Microsoft Display Dock. With the dock and the new Continuum feature, you can run a full size monitor, keyboard and mouse and use the full suite of Microsoft apps (Word, Excel, Outlook, etc.) Your phone literally becomes your computer at your desk and apps scale to fit the screen. The Microsoft Lumia 950XL should be released by the time you read this.

Blackberry PRIV – $699 –
Yes, last year I wrote that the bells of death were ringing for what was once the enterprise device that everyone had. Well, they have put out what could be their final effort with the PRIV (think Privacy and Privilege.) If it doesn’t gain traction, Blackberry may shrivel up and the future may be grim. The PRIV is the first Blackberry to run a specialized version of Android with layers of security that Blackberry is known for. And for those keyboard lovers, there is the trademark Blackberry keyboard which slides out from behind the 5.4” touchscreen.

Droid Turbo 2 – $624 –
Why does this phone deserve a mention? It boasts fairly standard smartphone specs in terms of camera, screen size, memory, and other features. There are two things which claim to set the phone apart from others. The first is the claim of a shatterproof screen. Using a very unique process with multiple layers and coatings, the screen has a 4 year guarantee against shattering and cracking. It also claims to have an impressive 48-hour battery life under normal conditions. Two pretty nice features in an otherwise mundane phone.

See anything that piques your interest? Are there any hot gadgets that you have found that aren’t on this list? Feel free to share your picks in the comments and happy holiday shopping!

Category: Webinar

Checking Under the Hood: Evolution of Transfer Agent Due Diligence


Operational-oversight-car-engineIf you were to get your car inspected today, there are dozens of things the mechanic must evaluate to demonstrate that your car is safe. The inspection checklist, required by law, includes things like checking safety devices (e.g., seat belts and head lights), testing the brakes and windshield wipers, and evaluating emissions control features.

Like cars, transfer agents are also regularly inspected. At its core, the purpose of this due diligence or operational oversight process is to demonstrate the strength of the transfer agent in helping the Fund manage financial, reputational and regulatory risk as it pertains to its transfer agency responsibilities.

Boston Financial has a comprehensive mix of policies, people, and processes in place to help clients with their operational oversight needs. Loosely aligned with the three lines of defense risk governance model, these include formal information security policies, the formation of committees to monitor operational quality, and third party penetration and vulnerability testing of the IT infrastructure (Figure 1).

Figure 1: Client oversight at Boston Financial is supported by a comprehensive mix of policies, people, and processes.

Figure 1: Client oversight at Boston Financial is supported by a comprehensive mix of policies, people, and processes.

Given the intricacy of the system, combined with the evolution of risk in our industry, how can an asset management firm begin to approach the operational oversight process?

Just as cars have evolved since the invention of the Model T in 1908, so have the rules regarding annual vehicle inspections. For example, in Massachusetts, cars manufactured before 1983 are exempt from emissions standards. The passage of mandatory seat belt legislation in 1994, led to the addition of the inspection of these devices to the annual safety checklist. While the car safety checklist has changed, the basic inspection process has not.

The same is true for your inspection of a transfer agent. Ideally the due diligence process is a continuous one collaboratively undertaken by the asset management firm and its business processing partner. This is why the fourth component of our operational oversight infrastructure is partnership. How a mutual fund company approaches their transfer agent “safety inspection” varies and may include any of the following: presentation by the transfer agent to the fund board of directors, on-site evaluations and strategy sessions, or reviewing the SOC1 or  due diligence questionnaire.

At Boston Financial, we have seen the volume of due diligence questionnaires increase exponentially over the last three years, from three in 2012 to more than 50 in 2015 (YTD). We have delivered more than 70 information security presentations to our clients and their boards and client participation in our annual CCO Due Diligence Forum, hosted last month, was higher than it has ever been.

Coupled with the spike in volume, is a shift in the range of questions asked. Given the seriousness of the risk posed by cybercriminals along with the present-day SEC examination priorities, IT risk management questions are still king, at 72% of the questions answered (YTD) in 2015. However, we are now seeing a rise in questions about risk management at the business processing level. This tells us that clients and their fund boards are becoming more concerned about financial risks from an operational perspective and regulatory risks caused by non-compliance with state and federal rules.

Unlike the automotive industry, there are currently no formal rules governing transfer agent inspection. While there is no regulatory guidance, it is clear that checking under the hood of the transfer agent is no longer as simple as reviewing the SOC 1 report or accepting the SIG Lite as proxy for a vendor oversight questionnaire. Each client’s due diligence process is different and should be tailored as needed based on their internal risk governance procedures, risk ranking results, and the scope of services delegated to the transfer agent. What stays constant throughout is that the transfer agent understands and continuously demonstrates – both through day-to-day performance excellence, and through the due diligence process – that they are they are partnering with the asset manager in mitigating risk and meeting their “safety goals”.