Compliance August 28, 2009

EBSA Starts List of Approved Software for Form 5500 Filing

The Department of Labor's Employee Benefits Security Administration (EBSA) has begun its list of approved software for use in electronic filing of Form 5500.

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Guidance issued in 2007 requires all Form 5500’s to be filed electronically using the agency’s EFAST2 system for plan years beginning on or after 1/1/2009 (see “DoL Announces Changes to 2009 Form 5500”). The only approved software provider so far is ftwilliam.com.

Under the all-electronic EFAST2, filers choose between using EFAST2-approved vendor software or the EFAST2 Web-based filing system (IFILE) to prepare and submit their Form 5500 or Form 5500-SF. Completed forms are submitted via the Internet.

EBSA says EFAST2 electronic credentials must be obtained to sign and/or submit the Form 5500 or Form 5500-SF, or to prepare a return/report in IFILE. Electronic credentials can be obtained beginning in January by registering on the EFAST2 Web site, www.efast.dol.gov.

On its Approved Software Web page, EBSA said it “is working closely with commercial software developers to make 5500 electronic filing readily available to anyone interested.” Software developers who wish to design their own electronic filing program should call the EFAST Help Line telephone number, 866-463-3278, for specifications, validation criteria and records layout documents.

More information is available here.

Compliance August 28, 2009

SEC Ready to Ward off Next Madoff with New Hire

The U.S. Securities and Exchange Commission (SEC) is set to hire University of Texas professor Henry Hu to oversee risk analysis and seek out market areas where abuses may emerge, according to people familiar with the matter, Bloomberg reported.

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Hu, who has researched how complex securities and credit derivates pose systemic risk, will lead SEC staff members who identify areas of potential abuse and analyze the costs and benefits of regulating them, said the sources, who declined to be identified because the announcement is not yet public, according to Bloomberg. Hu will report to SEC Chairman Mary Schapiro.

“We are creating a new focus on risk assessment so we can look at those areas of the industry that create the biggest risk for investors,” Schapiro said in an interview with Bloomberg Television. The effort will give the SEC “a much better chance of catching the next Madoff much earlier,” Schapiro said.

The news report noted that the SEC has drawn fire from Congress for missing Bernard Madoff’s $65 billion Ponzi scheme and for letting Bear Stearns Cos. and Lehman Brothers Holdings Inc. load up on mortgage-backed securities before they collapsed last year. The agency now has two separate units that anticipate new areas of wrongdoing and evaluate how to regulate them.

Hu “is one of the leading scholars in law and financial markets,” said Darrell Duffie, a finance professor at Stanford University’s Graduate School of Business, who co-wrote a paper with Hu in 2008 on U.S. competitiveness in the global derivatives market. Hu is particularly focused on “disclosure of derivatives positions related to corporate governance issues,” he said, according to Bloomberg.

In June, Hu told a Senate committee that innovation in derivatives markets threatens to leave regulators unaware of certain products and the risks they pose. He told lawmakers he has urged creation of a centralized clearinghouse to collect information on over-the-counter derivatives since 1993. The news report said Hu has also testified to Congress on the collapse of hedge fund Long-Term Capital Management LP in 1998, the regulatory implications of the New York Stock Exchange’s public listing in 2006, and the role of credit-default swaps in the financial crisis last year. In 2007, he spoke on an SEC panel about the rights of shareholders to choose corporate directors.

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