Thursday, March 18, 2010
The SEC settled charges that Innospec, Inc. (“Innospec”), a specialty chemical company incorporated in Delaware with principal offices in the United States and the United Kingdom, violated the anti-bribery, books and records, and internal controls provisions of the Foreign Corrupt Practices Act (“FCPA”). Innospec has offered to pay $40.2 million as part of a global settlement with the Commission, the Department of Justice, Fraud Section (“DOJ”), the United Kingdom’s Serious Fraud Office (“SFO”), and the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). This case is the first corruption-related settlement coordinated between the Commission, DOJ, and the SFO.
The SEC’s complaint alleges that from 2000 to 2007, Innospec routinely paid bribes to sell Tetra Ethyl Lead (“TEL”), a fuel additive that boosts the octane value of gasoline, to state owned refineries and oil companies in Iraq and Indonesia. Innospec also paid kickbacks to Iraq to obtain contracts under the United Nations Oil for Food Program (the “Program”). Innospec’s former management did nothing to stop the bribery, and in fact authorized and encouraged it. In addition, Innospec’s internal controls failed to detect the illicit conduct, which continued for nearly a decade. In all, Innospec made illicit payments of approximately $6,347,588 and promised an additional $2,870,377 in illicit payments to Iraqi ministries, Iraqi government officials, and Indonesian government officials in exchange for contracts worth approximately $176,717,341 in revenues and profits of $60,071,613.
In addition, from 2000 through 2003, Innospec obtained five Program contracts for the sale of TEL to the Iraqi Ministry of Oil and its component oil refineries (“MoO”) and paid kickbacks equaling 10% of the contract value on three of the contracts and offered kickbacks on the remaining two contracts. Innospec increased its agent’s commission as a means to funnel the payments to Iraq. Innospec artificially inflated its prices in the Program contracts and did not notify the UN of the kickback scheme. When the Program ended shortly before Innospec paid the promised kickbacks on two of the contracts, Innospec kept the promised payments as part of its profit.
After the Program was terminated in late 2003, Innospec continued to use its agent in Iraq to pay bribes to Iraqi officials to secure additional TEL sales. From at least 2004 through 2007, Innospec made payments totaling approximately $1,610,327 and promised an additional $884,480 to MoO officials so as to garner good will with Iraqi authorities, obtain additional orders under a Long Term Purchase Agreement that was executed in October 2004 (the “2004 LTPA”) and ensure the execution of a second LTPA in January 2008 (the “2008 LTPA”). Innospec also paid lavish travel and entertainment expenses for MoO officials, including paying for a seven day honeymoon, supplying mobile phone cards and cameras, and paying thousands in cash for “pocket money” to officials. Innospec also paid bribes to ensure the failure of a 2006 field test of MMT, a fuel product manufactured by a competitor of Innospec. Finally, Innospec promised additional bribes of approximately $850,000 in connection with the 2008 LTPA, which was thwarted due to the U.S. governments’ investigation of the Iraq bribery.
Innospec also had several schemes to pay bribes to Indonesian government officials from at least 2000 through 2005 to win contracts with state owned oil and gas companies.
Without admitting or denying the Commission’s allegations, Innospec has consented to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act; ordering it to pay $60,071,613 in disgorgement, provided that the Commission waive all but $11,200,000 of disgorgement and permitting payment in four installments based upon Innospec’s sworn Statement of Financial Condition; and ordering it to comply with certain undertakings regarding its FCPA compliance program, including an independent monitor for a period of three years. Based on its financial condition, Innospec offered to pay a reduced criminal fine of $14.1 million to the DOJ and a criminal fine of $12.7 million to the SFO. Innospec will pay $2.2 million to OFAC for unrelated conduct concerning allegations of violations of the Cuban Assets Control Regulations.
The SEC today issued a report warning firms that municipal securities rules prohibiting pay-to-play apply to affiliated financial professionals, not just a firm's employees. The pay-to-play rule, MSRB Rule G-37, generally prohibits firms from underwriting municipal bonds for an issuer for two years after a municipal finance professional (MFP) involved with that firm makes a campaign contribution to an elected official of that municipality.
In the Report of Investigation, the Commission makes clear that an executive who supervises the activities of a broker, dealer, or municipal securities dealer is not exempt from the MSRB's pay-to-play rule just because he or she may be outside the firm's corporate governance structure. As such, an executive may be deemed an MFP if he or she is not part of a broker-dealer, but oversees the broker-dealer from the vantage of the holding company.
When the Commission approved the rule in 1994, it indicated that banks and bank holding companies affiliated with brokers, dealers and municipal securities dealers were excluded from the rule. Since then, the Commission has not directly addressed whether directors, officers or employees of such banks and bank holding companies are MFPs if they supervise the public finance activities of brokers, dealers and municipal securities dealers or serve on executive committees that engage in such supervision.
The Commission's Report of Investigation stems from an Enforcement Division inquiry into whether JP Morgan Securities Inc. (JPMSI) violated the MSRB Rule. According to the Report, JPMSI underwrote municipal bonds issued by the state of California within two years after a then-Vice Chairman of JPMSI's parent bank holding company (JP Morgan Chase) gave a $1,000 contribution to a California elected official.
Under Section 21(a) of the Securities Exchange Act, the Commission may investigate violations of the federal securities laws and at its discretion "publish information concerning any such violations." JPMSI consented to the issuance of the Report without admitting or denying any of the statements or conclusions.
FINRA announced today that it has expelled Provident Asset Management, LLC, a Dallas-based broker-dealer, for marketing a series of fraudulent private placements offered by its affiliate, Provident Royalties, LLC, in a massive Ponzi scheme. Provident Asset Management misrepresented to investors that the funds raised through the offerings would be used to purchase interests in the oil and gas business, including exploration activity and the acquisition of real estate, oil and gas leases and mineral rights. In fact, investors' funds were commingled and used by an affiliated issuer to make dividend and principal payments to other investors. In addition, the firm acted as the agent in an oil and gas private placement offering but failed to establish an escrow account for investors' funds during the contingency period of the offering.
The action announced today is the first produced by a FINRA initiative involving active examinations and investigations of broker-dealers involved in retail sales of private placement interests, as well as broker-dealers affiliated with private placement issuers. FINRA is looking at firms' compliance with suitability, supervision and advertising rules, as well as potential instances of fraud. The initiative was undertaken in response to an increase in investor complaints involving private placements and Securities and Exchange Commission actions halting sales of certain private placement offerings.
FINRA found that from September 2006 through January 2009, Provident Asset Management marketed and sold preferred stock and limited partnership interests in a series of 23 private placements offered by Provident Royalties, LLC. Provident Asset Management's only business line was acting as the wholesaling broker-dealer for the Provident Royalties' offerings, which were sold to customers through more than 50 retail broker-dealers nationwide, raising over $480 million through approximately 7,700 individual investments made by thousands of investors.
In concluding this settlement, Provident Asset Management neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
As the Wall St. Journal reported this morning, Judge Pauley, who is responsible for overseeing the 2003 Analysts' Settlement between major securities firms and the SEC that separated the investment banking from the research departments, rejected a modification that would have permitted:
Research personnel and Investment Banking personnel to communicater with each other, outside the presence of internal legal or compliance staff, regarding market or industry trends, conditions or developments, provided that such communications are consistent in nature with the types of communications that an analyst might have with investing customers.
The Judge said(Download Order1) such a proposed amendment (approved by the SEC) is "counterintuitive and would undermine the separation between research and investment banking." The court did permit the other modifications proposed by the parties which the firms stated were appropriate to eliminate in light of existing SRO rules.
In its request(Download Requesttomodify2003Settlement) the firms state that they "strongly believe" that all operative provisions of the settlement should be abrogated, and that the firms and the SEC agree that the remaining provisions will be reconsidered at the earlier of the Court's approval of these modifications or the effective date of new equity research analyst rules currently being considered by FINRA, with the expectation that if such rules address the remaining provisions, the SEC will agree to a further amendment or modification, unless the SEC believes the modification would not be in the public interest.
Wednesday, March 17, 2010
Tuesday, March 16, 2010
On Monday, March 15, 2010, the SEC obtained a freeze on the assets of Russian defendants allegedly responsible for a hi-tech market manipulation scheme. According to the SEC, BroCo Investments, Inc. and its president Valery Maltsev hijacked the online brokerage accounts of unwitting investors using stolen usernames and passwords and subsequently placed unauthorized trades through the compromised accounts to manipulate the markets of at least thirty-eight issuers between August 2009 and December 2009. In almost every instance, prior to intruding into these accounts, the Defendants acquired positions in their own account. Then, just minutes later, without the accountholders' knowledge, the Defendants, and/or individuals acting in concert with them, placed scores of unauthorized buy orders at above-market prices using the compromised accounts. After these unauthorized buy orders were placed, the Defendants sold the positions held in their own account at the artificially inflated prices. In other instances, the Defendants profited by covering short positions previously established in their account while placing unauthorized sell orders through the compromised accounts at substantially lower prices. This illicit account activity artificially affected the share price and trading volume for each of the thinly-traded issuers and enabled the Defendants to sell their holdings at a substantial profit, realizing at least $255,532 in ill-gotten gains.
The SEC today issued an administrative Order imposing sanctions on Prime Capital Services, Inc. and Gilman Ciocia, Inc. The Order finds that from approximately November 1999 through February 2007, Prime Capital Services, Inc. (PCS) sold unsuitable variable annuities to senior citizens in south Florida by means of material misrepresentations and omissions. It also finds that PCS's parent company, Gilman Ciocia, Inc. (G&C), aided and abetted the broker-dealer's fraud by arranging and marketing free-lunch seminars in the south Florida area at which PCS registered representatives recruited elderly customers whom they later induced to buy variable annuities.
Based on the above, the Commission has issued an Order that, among other things, orders PCS to disgorge $97,389.05 plus $46,873.53 in prejudgment interest and orders G&C to pay $1 in disgorgement and a civil monetary penalty of $450,000 to be paid in three installments. In addition, PCS and G&C have agreed to a number of undertakings, including hiring an independent compliance consultant to review and recommend changes to PCS's supervisory procedures; restricting certain associated persons from involvement in variable annuity sales until the independent compliance consultant has completed its review; refunding the variable annuity fees incurred by certain elderly customers of particular registered representatives; and giving notice of the settlement to elderly customers who bought variable annuities from particular registered representatives in the past five years. PCS and G&C consented to the issuance of the Order without admitting or denying any of the findings of the Order.
An important issue in any financial reform package adopted by Congress is the so-called "harmonization" of regulatory treatment of broker-dealers and investment advisers that provide personalized investment advice to retail customers. While "harmonization" can be subject to many interpretations, there is broad consensus among the broker-dealer and investment adviser industries that the standard of care applicable to those providing investment advice to retail customers should not turn on whether they are registered as broker-dealers, investment advisers or both. However, this broad consensus has not translated into agreement about how to accomplish the harmonization. Investment advisers have campaigned on the slogan that the fiduciary duty applicable to investment advisers is a higher standard than the "watered-down" suitability standard applicable to broker-dealers. While this is a highly debatable assertion in my mind, a sensible legislative solution would be for Congress to adopt a broad principle of comparable regulation and leave to the SEC the appropriate, context-specific standards.
Unfortunately, this is not the approach taken in Senator Dodd's legislative proposal. Instead, his proposal calls for the SEC to conduct yet another study and prepare an exhaustive report. Then,
"If the study . . . identifies any gaps or overlap in the legal or regulatory standards in the protection of retail customers relating to the standards of care for brokers, dealers, investment advisers, persons associated with brokers or dealers, and persons associated with investment advisers for providing personalized investment advice about securities to such retail customers, the Commission, not later than 2 years after the date of enactment of this Act, shall . . . commence a rulemaking, as necessary or appropriate in the public interest and for the protection of retail customers, to address such regulatory gaps and overlap that can be addressed by rule, using its authority under the Securities Exchange Act of 1934 . . . and the Investment Advisers Act of 1940 . . . and . . . consider and take into account the findings, conclusions, and recommendations of the study required under this section."
Section 913(f), Restoring American Financial Stability Act of 2010.
Frankly, it's hard for me to see this as another more than a stalling for more time. RAND did a comprehensive report on the broker-dealer and investment adviser industries a few years ago, at the SEC's request, which provides unrefuted evidence of investor confusion about the differences among advice providers. Industry representatives and academics have fully explored the legal and regulatory issues. We don't need another study, and the SEC has better uses for its time. Most importantly, retail investors deserve prompt action.
Just as a reminder of how this issue has played out to date -- In December 2009 the House passed legislation that requires the SEC to promulgate rules to provide that the standard of conduct for all brokers, dealers and investment advisers, "when providing personalized investment advice about securities to retail customers…, shall be to act in the best interest of the customer without regard to the financial or other interest of the [advice provider]." The proposed legislation goes on to state that the "standard of conduct shall be no less stringent than the standard applicable to investment advisers under section 206(1) and (2) of the [IAA] when providing personalized investment advice about securities…." The provision, however, specifically excepts broker-dealers from having a "continuing duty of care or loyalty to the customer after providing personalized investment advice about securities." "Retail investor" is defined as a natural person who receives personalized investment advice about securities from an advice provider and who uses such advice "primarily for personal, family, or household purposes."
In contrast, the earlier, pre-Dodd Senate version, which was never voted out of committee, took a more straightforward approach and simply eliminated the broker-dealer exclusion from the definition of "investment adviser" in the IAA. The SEC would have the authority to exempt any person or transaction from the principal trades prohibition if it finds that the adviser protects investors against conflicts of interest or principal transactions that are not in the best interests of the interests of the investor. Under both the House and Senate versions, the SEC is supposed to promulgate rules enhancing disclosure of conflicts of interest.
This issue is an important one affecting the interests of retail investors, but, given the broad consensus on its advisability, it should not be difficult to accomplish. It does not bode well for significant financial reform if Congress cannot address this issue promptly and directly.
(Thanks to Michael Keefe, UCin '10, for his research assistance.)
Monday, March 15, 2010
Excerpt from Speech by SEC Commissioner Luis Aguilar, Making Sure Investors Benefit from Money Market Fund Reform, Investment Company Institute and Federal Bar Association Mutual Funds and Investment Management Conference, Phoenix, AZ, March 15, 2010:
Potential Further Action
Notwithstanding the substantial reform recently made as to Rule 2a-7, more may be in the works. Besides what may be contained in the pending money market fund report by the President’s Working Group on Financial Markets, the Chairman as well as senior staff at the Commission have telegraphed a desire to see more fundamental structural change in the money market fund industry. In particular, the staff is examining the merits of a floating, mark-to-market NAV for money market funds, rather than the stable one-dollar price. Other ideas under consideration include real-time disclosure of the shadow price; mandatory redemptions-in-kind for large redemptions (such as by institutional investors); a private liquidity facility to provide liquidity to money market funds in times of stress; and a possible "two-tiered" system of money market funds, with a stable NAV only for money market funds subject to greater risk-limiting conditions and possible liquidity facility requirements, among others.
I believe that any consideration of future reforms should be careful not to jeopardize the tremendous value money market funds bring to investors. As the Commission considers further money market reform, I believe two fundamental priorities must be at the forefront of our consideration. The first priority should be to recognize that money market fund investments have historically worked well for all investors, particularly for retail investors. All contemplated proposals should take retail investors into account and make sure that they are able to continue to participate and benefit.
In addition, any further reform should not be so “transformational” that the money market fund is no longer an economically attractive product. Future proposals should be rigorously analyzed to determine the consequences that would result. One consequence no one wants to see is a flight of trillions of dollars to unregistered vehicles that have no regulatory oversight or accountability. As a second round of reform is contemplated, there needs to be serious consideration given to what other reforms should be made regarding unregistered vehicles to insure that there is no regulatory end-run
The SEC oday charged three former senior executives and a former director of infoUSA Inc., an Omaha-based database compilation company, for their roles in a scheme in which the CEO funneled illegal compensation to himself in the form of perks worth millions of dollars. According to the SEC, Vinod Gupta, the former CEO and Chairman of infoUSA Inc. and infoGROUP Inc. (Info), fraudulently used corporate funds to pay almost $9.5 million in personal expenses to support his lavish lifestyle. He additionally caused the company to enter into $9.3 million of undisclosed business transactions between Info and other companies in which he had a personal stake. The SEC also charged the former chairman of Info's audit committee, Vasant H. Raval, and two of the company's former chief financial officers, Rajnish K. Das and Stormy L. Dean, for enabling Gupta to carry out the scheme.
The SEC's complaints, filed in federal district court in Nebraska, allege that from 2003 to 2007, Gupta improperly used corporate funds for more than $3 million worth of personal jet travel for himself, family, and friends to such destinations as South Africa, Italy, and Cancun. He also used investor money to pay $2.8 million in expenses related to his yacht; $1.3 million in personal credit card expenses; and other costs associated with 28 club memberships, 20 automobiles, homes around the country, and three personal life insurance policies. The SEC alleges that Raval, the Chairman of the Audit Committee, failed to respond appropriately to various red flags concerning Gupta's expenses and Info's related party transactions with Gupta's other entities. Two Info internal auditors raised concerns to Raval that Gupta was submitting requests for reimbursement of personal expenses, yet Raval failed to take meaningful action to further investigate the matter and he omitted critical facts in a report to the board concerning Gupta's expenses.
The SEC further alleges that Das and Dean allowed Gupta to support his lavish lifestyle by rubber-stamping hundreds of his expense reimbursement requests. Das and Dean approved Gupta's expense reimbursement requests despite the fact that the requests lacked sufficient explanation of business purpose and supporting documentation, even in the face of concerns raised by several Info employees. Das and Dean also signed management representation letters to Info's outside auditor falsely representing that all related party transactions with Gupta's entities had been properly recorded and disclosed in Info's financial statements.
Gupta, Raval, and Info agreed to settle the SEC's charges without admitting or denying the allegations against them.
Gupta agreed to pay disgorgement of $4,045,000, prejudgment interest of $1,145,400, and a penalty of $2,240,700. He consented to an order barring him from serving as an officer or director of a public company, and placing restrictions on the voting of his Info common stock.
Raval agreed to pay a $50,000 penalty and consented to an order barring him from serving as an officer or director of a public company for five years.
The SEC's case against Das and Dean is ongoing.
Senator Chris Dodd, Chair of the Senate Banking Committee, just released the Senate Democrats' summary(Download FinancialReformSummary231510FINAL) of proposed federal financial reform. (In case you've forgotten, the House passed a version last December.) Here are some of the highlights, many of which were widely reported over the weekend:
1. The consumer protection "watchdog" will be housed in the Federal Reserve instead of being established as an independent agency. The director will be appointed by the President and confirmed by the Senate, and it will have the authority to write and enforce consumer protection rules.
2. Creates a process for liquidating failed financial firms and imposes new capital and leverage requirements that make it undesirable to get too big. It will require regulators to adopt the Volcker Rule, i.e., prohibit proprietary trading.
3. Creates a council to identify and address systemic risks before they threaten the economy's stability. It will be composed of federal financial regulators and an independent member.
4. Eliminates loopholes for OTC derivatives, asset-backed securities, hedge funds, mortgage bankers, and payday lenders. It will require central clearing and exchange trading for derivatives that can be cleared and will require margin for un-cleared trades.
5. Provides shareholders with a "Say on pay" nonbinding resolution on executive compensation and gives the SEC authority to grant shareholders proxy access to nominate directors.
6. New rules on credit-rating agencies. It will create an Office of Credit Ratings at the SEC and will require the SEC to examine NRSROs annually. In addition, investors could bring private rights of action against ratings agencies for a knowing or reckless failure to conduct a reasonable investigation of the facts or to obtain analysis from an independent source.
7. Strengthens oversight and empowers regulators to pursue financial fraud aggressively. This includes requiring a study on whether broker dealers who give investment advice should be held to the same fiduciary standards as investment advisers. It will also provide self-funding for the SEC.
There are many other provisions (including increased regulation of securitization and municipal securities, and increasing the accountability of the New York Federal Reserve Bank). As always, the devil is in the details, and we can expect a lot of horse-trading in the weeks ahead. Stay tuned!
Sunday, March 14, 2010
Shareholders in the Jury Box: A Populist Check Against Corporate Mismanagement, by Ann M. Scarlett,
Saint Louis University - School of Law, was recently posted on SSRN. Here is the abstract:
The recent subprime mortgage disaster exposed corporate officers and directors who mismanaged their corporations, failed to exercise proper oversight, and acted in their self-interest. Two previous waves of corporate scandals in this decade revealed similar misconduct. After the initial scandals, Congress and the Securities and Exchange Commission attempted to prevent the next crisis in corporate governance through legislative and regulatory actions such as the Sarbanes-Oxley Act of 2002. Those attempts failed. Shareholder derivative litigation has also failed because judges accord corporate executives great deference and thus rarely impose liability for breaches of fiduciary duties.
To prevent the next crisis in corporate governance, the answer is not to enact more laws but to change the enforcer of the current laws. That enforcer already exists - the civil jury. Most states, however, deny any right to jury trial for shareholder derivative litigation. In these states, shareholders largely fail in their attempts to hold corporate executives liable for breaching their fiduciary duties. Extending a jury trial right to all states would reinvigorate shareholder derivative litigation and offer a populist check against corporate executives’ misconduct. This simple change would coerce corporate executives to properly oversee their companies and fulfill their fiduciary duties because they would know that their misconduct would be adjudicated by a jury of average Americans - similar to their shareholders. Empowering the civil jury would also help restore shareholders’ trust in corporate management, which could rebuild confidence in the stock markets.
Regulatory Arbitrage, by Victor Fleischer, University of Colorado Law School, was recently posted on SSRN. Here is the abstract:
Most of us share a vague intuition that the rich, sophisticated, well-advised, and politically connected somehow game the system to avoid regulatory burdens the rest of us comply with. The intuition is correct; this Article explains how it’s done.
Regulatory gamesmanship typically relies on a planning technique known as regulatory arbitrage, which occurs when parties take advantage of a gap between the economics of a deal and its regulatory treatment, restructuring the deal to reduce or avoid regulatory costs without unduly altering the underlying economics of the deal. This Article provides the first comprehensive theory of regulatory arbitrage, identifying the conditions under which arbitrage takes place and the various legal, business, professional, ethical, and political constraints on arbitrage. This theoretical framework reveals how regulatory arbitrage distorts regulatory competition, shifts the incidence of regulatory costs, and fosters a lack of transparency and accountability that undermines the rule of law.
Harming Business Clients with Zealous Advocacy: Rethinking the Attorney Advisor's Touchstone, by Paula Schaefer, University of Tennessee College of Law, was recently posted on SSRN. Here is the abstract:
Joseph Collins was a successful business lawyer, with a sophisticated practice at Mayer Brown LLP. In January 2010, Collins was sentenced to seven years in prison for his role in a massive fraud that cost investors millions and sent his client Refco, Inc. into bankruptcy. At sentencing, the judge reportedly stated, “I think this is a case of excessive loyalty to his client.” Collins’ own testimony reflects a lawyer who believed he was zealously representing his client's interests. But in reality, Collins’ conduct was not “loyal” to his client. He contributed to his client’s destruction.
With the Collins example and others, I argue that business lawyers act as zealous advocates to their own clients’ peril. I explain that professional conduct rules are central to the problem. The advisor’s duties are relegated to a single rule that provides scant direction about how to advise. In the absence of direction, lawyers fill in the gaps with zealous advocacy. After examining the problems of the zealous advocacy mantra, I suggest that “fiduciary duty” would be a preferable touchstone for attorney-advisors. While it is true lawyers are already fiduciaries, fiduciary duty is not the focus for most lawyers. I argue that it should be. Using fiduciary duty as a framework, I propose professional conduct rules that would provide direction to business lawyers that is more consistent with their clients’ interests.
Bank CEOS, Inside Debt Compensation, and the Financial Crisis, by Frederick Tung, Emory University - School of Law, and Xue Wang, Emory University - Goizueta Business School, was recently posted on SSRN. Here is the abstract:
Bank executives’ compensation has been widely identified as a culprit in the Financial Crisis. The structure of banker pay, equity-based compensation in particular, has been blamed for excessive short-term risk taking by banks, and policy makers and academics have proposed reforms. In a recent prominent paper, Fahlenbrach and Stulz (2009) show that no association exists between better bank CEO-shareholder alignment before the Crisis and bank performance during the Crisis. We extend Fahlenbrach and Stulz (2009) by offering a new approach to investigating the link between banker compensation and the Financial Crisis. We hypothesize that bank CEOs’ inside debt holdings reduce risk taking and agency costs of debt within banks. Consistent with our hypothesis, we find that bank CEOs’ inside debt holdings preceding the Financial Crisis are significantly positively associated with bank performance and significantly negatively associated with bank risk taking during the Crisis.