A few days ago, a broken clock atop a local row of shops caught my eye. It wasn't so much that the clock showed the wrong time but that someone had added decorative holiday bows at its base. This means that the individual had to have seen that something was wrong but looked the other way. The clock remains frozen at 10:15 with jolly ribbons of red and green but no utility for those seeking help from its hands. Whether the error was due to benign neglect or malevolent design is unknown to the passerbys. What is obvious is that someone did not care enough to put things right.

In my line of work as a forensic economist, the attorneys remind me that intention counts from a legal perspective. Whether as part of a litigation or enforcement, questions are frequently asked about the effectiveness of risk management policies and procedures and the extent to which company executives or asset managers followed them. For some types of cases such as ERISA matters, the procedural prudence concept is often a cornerstone of my expert analysis as to what took place versus what should have taken place (assuming that deficiencies exist).

Based on December 11, 2014 comments by u.s. Securities and Exchange Commission (“SEC”) Chair, Mary Jo White, process will continue to get a hearty review by investment management regulators. Her speech, entitled “Enhancing Risk Monitoring and Regulatory Safeguards for the Asset Management Industry” lays out 2015 priorities for the “more than $63 trillion of assets under management.” These include conflicts of interest controls, protocols for enhanced transparency about mutual fund fees and risks and a third area described as “controls on portfolio composition risks and operational risks.” Chair White further details focus areas such as liquidity, leverage, use of derivatives, custody safeguards, internal systems integrity and access to data that can be readily compared across funds with sufficient granularity. She adds that the SEC is “considering ways to implement the new requirements for annual stress testing by large investment advisers and large funds, as required by the Dodd-Frank Act.”