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Part 1: Recent Compliance problem and Enforcement Action
Ominto, Inc. is an American development organization with international operations in entertainment, marketing, and e-commerce industries. Its head office is situated in Boca Raton, Florida. The organization invests or possesses strategic properties that offer value to its international customer base (Businesswire 1). Ominto is an innovator in worldwide Cash Back and was initial firm to market the service in different parts of the globe. It uses digital marketplaces such as Dubli.com, which helps customers to purchase at their preferred stores, make savings with top deals and coupons, and benefit from Cash Back after every purchase in over 120 nations across the globe (Businesswire 1). A wide range of brand names characterizes its website (Ominto.com) from travel firms and stores from diverse regions around the world, offering savings on Cash Back.
B. Non-compliant behavior
Recent reports released on March 1, 2018 highlighted that the company failed to comply with SEC guidelines (Guest 1). Precisely, it was not in compliance with regulatory agency’s listing requirement pursuant to the criteria of timely filing in accordance with Listing rule 5250 (c) (1) (Businesswire 1). The company delayed in filing its yearly records on Form 10-K for the year 2017. Subsequently, the organization was incapable of delivering its last quarter reports at the end of December 31, 2017 based on the requirements of Form 10-Q to the Securities and Exchange Commission (SEC) of the US (Larsen 1).
C. Regulatory agency
The Securities and Exchange Commission (SEC) which is the regulatory agency did not obtain its financial statements in second, third and fourth quarters of 2017. NASDAQ stock exchange, delivered a letter of non-compliance to Ominto Inc. on January 3, 2018. The letter described that the company’s behavior was contrary to the legal provisions on compliance (Larsen 1). In fact, the non-compliance was due to the failure of the organization to deliver audited monetary records and annual reports to the Securities and Exchange Commission (SEC). However, the firm responded that it was auditing process was in progress (Businesswire 1).
D. Penalties and punishments
The company lost its listing in the NASDAQ stock exchange. However, the letter indicated that in order to recapture its compliance status it should provide an appropriate plan by March 5, 2018 (Larsen 1). In the event NASDAQ approved the proposed plan, Ominto Inc. would be awarded an exception of more than 180 calendar days from the time the Form 10-K was supposed to be provided or up to June 27, 2018, to re-acquire the compliance. The non-compliance letter did not indicate the particular time it became effective on the listing of the firm’s stock on NASDAQ stock exchange (Businesswire 1). Additionally, Ominto Inc. faces delists from the NASDAQ capital market.
E. Steps to prevent the behavior
Ominto Inc. has delivered a plan aiming to prevent such behaviors in the future. One of the key plans to ensure timely filing of audited records by designing systems to store, log, and dispose of monetary statements that can help the company by promoting its ability to function more efficiently and assist it to comply with tax and legal requirements (Guest 1). Such mechanisms would also facilitate the business to produce meaningful reports. In so doing, it aims to generate reports and to capture data easily; hence, satisfying its permissible necessities.
Part 2: Student’s Opinion about the recent compliance problem an enforcement Action
Proper management of records is an essential function of any firm that is in the customer-driven business. It is extremely beneficial in service and sales sectors because they determine the success or failure of the business (Sadiq and Governatori 265). The filing of financial statements according to the legal provision demonstrates prudent dealing, which guarantees that the business is functioning above board. In the US, all stock corporations such as Ominto, Inc. are supposed to send their audited records to the Securities and Exchange Commission (SEC) on a quarterly basis (Larsen 1).
In my opinion, quarterly financial records are important for publicly traded organizations such as Ominto Inc. because they offer a certain level of confidence and authority to investors. External parties analyze such records to guarantee their completeness and accuracy (Guest 1). By completing form 10-Q in every quarter and delivering it to US, SEC, the company financial condition can be established. Similarly, by attaching financial statements to the 10-Q, the firms meets legal requirements. Finally, the form 10-K is filled at the end of the year, which illustrates the fiscal health of the business (Kennedy-Glans and Schulz 46).
Ominto Inc. breached the legal provisions because it has not provided its financial records since its first quarter 10-Q which took place in March 2017. In this regard, the company did not file both its September and June 10-Q as well as the 2017 end-of-year records (10-K) (Larsen 1). For this reason, I think there are grave questions concerning the business deals of its biggest shareholders. More importantly, I believe the stocks listed in the NASDAQ Capital Markets are overvalued. Therefore, the behaviors exhibited by the company last year illustrated uncertainty in its ability to comply with the law (Kennedy-Glans and Schulz 47).
The US Securities and Exchange Commission reacted in the right manner by informing NASDAQ stock exchange (Guest 1). In so doing, the NASDAQ would have a chance to change what is regarded as a misinformed decision to up-list Ominto Inc. Since the firm delayed to file both September and June 10-Q, it is non-compliant with the constant listing requirement of NASDAQ (Larsen 1). Therefore, it should deliver a strategy on how it intends to rectify the problem.
Due to the problem of non-compliance of Ominto Inc., its stock in the NASDAQ capital markets continued to lose value by more than 50 percent and I believe this will affect many shareholders. Both the shareholders and customers will suffer because the company may be making a huge amount of losses hence unable to meet its obligations (Sadiq and Governatori 266). Moreover, I anticipate that the organization would try to increase capital and to subsequently become delisted owing to the poor financial records management. Apart from unclear accounting, Ominto Inc. faces other challenges, which leads to the inability to file quarterly 10-Q forms (Larsen 1). For instance, it is highly probable that the organization has lost a huge amount of money from March 2017, from when it stopped delivering the form 10-Q to SEC. Furthermore, its inability to comply with legal provisions on financial states has raised the red flags hence the need to investigate the organization to safeguard the public and investors interest (Sadiq and Governatori 267). The regulatory authority must also initiate the process of delisting it to avert manipulative and fraudulent practices and enhancing equitable and just principles of business.
Part 3: Student’s Opinion About compliance
A. Term GRC
Prior to the assignment, I did not understand the term GRC. However, after conducting various studies on the websites listed in this assignment, I came to realize that GRC stands for Governance, Risk management and compliance (Elgammal et al. 126). Precisely, governance is the integration of processes designed and implemented by the board of management that are mirrored in the corporate structure and the way it is utilized to accomplish intended goals. In addition, risk management encompasses management and prediction of risks that could hamper the company from consistently attaining its goals under uncertainly (Sadiq and Governatori 270). More importantly, compliance is used to mean the ability to adhere to regulations and laws (mandated boundaries) and firm’s procedures and policies (voluntary boundaries). More importantly, compliance plays an integral part in business functions because it helps the firm to serve with integrity, handle uncertainties, and accomplish its objectives. The management team should ensure that all business deal follow the specified regulations and ensure that it weigh the probable cost linked to non-compliance relative to the anticipated expenditure to attain compliance (Elgammal et al. 133).
B. Compliance becoming its own industry
Prior to this assignment, I was not aware that compliance is turning out to be its own industry. In fact, compliance is becoming a discrete industry owing to a wide range of monetary crisis leading to questions about standards, culture, and governance of the entire financial service sector. The reactions to these challenges have called for the need for distinct compliance function in the industries (Sadiq and Governatori 272). For instance, they is a positive trend which emphasis on accountability in commercial transactions. Consequently, compliance has become an important function in business (Kennedy-Glans and Schulz 59). For instance, some organizations have instituted various regimes intended to oversee adherence to regulatory requirements such as the Compliance Function. Some organizations have also formulated the position of Chief Compliance Officer (CCO) that sits in senior management team to handle compliance issues in the firm. There is also a trend towards adopting judgment-based supervision (Elgammal et al. 142).
C. Compliance Job
Organizations have a broad range of job positions such as Chief Executive Officer (CEO), Chief Finance Officer (CFO), branch managers, General mangers, and department managers. Other lower cadre jobs include the supervisors, section leads, and supervisors (Kennedy-Glans and Schulz 60). After graduation, I expect to serve in one of these job positions such as department manager or supervisor. In such roles, I anticipate to engage in compliance activities (Sadiq and Governatori 273). Each of these positions requires persons who are able to pay close attention on compliance issues. Although some organizations hire chief compliance officer, (CCO), who provides advice to other managers on compliance to statutory and internal requirements, the organization expects its employees to understands issues pertaining to adherence to the laws (Elgammal et al. 143).
If after graduation, I will be hired in a job that does not have compliance, I will be required to performance compliance activities. The world is moving towards a regime that focuses on strict adherence to the applicable rules (Elgammal et al. 144). Every job would incorporate skills on submission to the stated guidelines to minimize losses and liability. In fact, the obedience to instructions in all business practices is an economic risk that compels other areas of commerce to determine the benefits versus risk of investment (Sadiq and Governatori 265). More important, jobs such as internal auditing of the firm’s finances would be required to demonstrate independent especially in monitoring and guarantying the results of any advice provided.
E. Future functions of compliance
In the next 5-10 years in the US legal environment of business, compliance function would be highly emphasized in all transactions (Kennedy-Glans and Schulz 62). It will be involved in development of strategies on the way to achieve market integrity, promote fair treatment of customers and strengthening the financial soundness (Elgammal et al. 145). Furthermore, the business community would use their function in the control, surveillance and advisory to the regulatory relationships.
Business Wire. “Ominto, Inc. Announces Non-Compliance With Nasdaq Stock Market Listing Requirements”. Businesswire.Com, 2018, https://www.businesswire.com/news/home/20180305006245/en/Ominto-Announces-Non-Compliance-Nasdaq-Stock-Market-Listing. Accessed 9 Apr 2018.
Elgammal, Amal, et al. “Formalizing and appling compliance patterns for business process compliance.” Software & Systems Modeling 15.1 (2016): 119-146.
Guest, Post. “Will The Nasdaq Finally Delist Ominto Inc. This Month”. Valuewalk, 2017, https://www.valuewalk.com/2017/10/will-nasdaq-delist-ominto-inc/. Accessed 9 Apr 2018.
Kennedy-Glans, Donna, and Robert Schulz. Corporate integrity: a toolkit for managing beyond compliance. John Wiley & Sons, 2010.
Larsen, Keith. “Boca Raton Company Gets Noncompliance Letter From Nasdaq”. Bizjournals.Com, 2018, https://www.bizjournals.com/southflorida/news/2018/01/09/ominto-gets-noncompliance-letter-from.html. Accessed 9 Apr 2018.
Sadiq, Shazia, and Guido Governatori. “Managing regulatory compliance in business processes.” Handbook on Business Process Management 2. Springer, Berlin, Heidelberg, 2015. 265-288.
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