yvonne i. pytlik coping with the increased strain of regulatory demands july 14, 2011 dreman value...

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DREMAN VALUE MANAGEMENT, L.L.C.

Coping with the increasing strain of regulatory demandsCoping with the increasing strain of regulatory demands

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2011 Integrated Framework - Governance, Risk and Compliance

Yvonne I. PytlikYvonne I. PytlikChief Compliance Officer Chief Compliance Officer

Dreman Value Management, L.L.C.Dreman Value Management, [email protected]; Tel: 781-835-8360

Dodd Frank Act & Financial Regulatory Reform Dodd Frank Act & Financial Regulatory Reform

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Coping with the increasing strain of regulatory demandsCoping with the increasing strain of regulatory demands

•The Dodd-Frank Act and the Road Ahead for Financial Regulatory ReformThe Dodd-Frank Act and the Road Ahead for Financial Regulatory ReformWhat It Does, What It Means, and What Happens NextWhat It Does, What It Means, and What Happens NextNew Investment Adviser Requirements New Investment Adviser Requirements

•Elaboration and Domestic Implementation of the Framework for Basel IIIElaboration and Domestic Implementation of the Framework for Basel III Reforming Minimum Capital RequirementsReforming Minimum Capital Requirements Dividend PolicyDividend Policy

• Practical Solutions – Integrated Governance, Risk and Compliance Practical Solutions – Integrated Governance, Risk and Compliance FrameworkFramework

• 2011 Regulatory and Industry Trends - Compliance Risk as a Critical 2011 Regulatory and Industry Trends - Compliance Risk as a Critical Business Risk for Asset ManagersBusiness Risk for Asset Managers


Agenda

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Establish a centralized PMO to allow for unified and efficient strategy and process that are Establish a centralized PMO to allow for unified and efficient strategy and process that are critical for meeting compliance deadlines. Major regulatory requirements:critical for meeting compliance deadlines. Major regulatory requirements:

Derivatives regulationsDerivatives regulations for over the counter swaps (CFTC): registering swap entities, for over the counter swaps (CFTC): registering swap entities, swap counterparties and regulatory monitoring, swap transactions.swap counterparties and regulatory monitoring, swap transactions.Systemic RiskSystemic Risk - macro prudential regulations of financial institutions - macro prudential regulations of financial institutionsBank regulatory and supervisory frameworkBank regulatory and supervisory framework – Thrifts/ holding companies – Thrifts/ holding companiesBank Holding CompanyBank Holding Company supervisory initiatives and capital requirements supervisory initiatives and capital requirements The Volker RuleThe Volker RuleInsurance regulationsInsurance regulations and insurers under Dodd Frank and insurers under Dodd Frank Investor protectionInvestor protection – new oversight structure over previously unregulated firms – new oversight structure over previously unregulated firmsSecuritization and credit rating agenciesSecuritization and credit rating agenciesNew Registration requirementsNew Registration requirements for Hedge Funds and Private funds for Hedge Funds and Private fundsDisclosuresDisclosures – Risk factors and liquidity disclosures in the 10-K and 10-Q – Risk factors and liquidity disclosures in the 10-K and 10-Q Deposit InsuranceDeposit Insurance/ FDIC/ FDICConsumer ProtectionConsumer Protection

Implementation of the Framework for Basel IIIImplementation of the Framework for Basel III


The Dodd Frank Act & Financial Regulatory ReformThe Dodd Frank Act & Financial Regulatory ReformExecutive SummaryExecutive Summary

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March 21, 2011– Governance, Enterprise Risk Management and Internal March 21, 2011– Governance, Enterprise Risk Management and Internal ControlsControls

““The financial crisis revealed just how dramatically risk The financial crisis revealed just how dramatically risk management failures can harm investors, jeopardize market integrity and management failures can harm investors, jeopardize market integrity and hinder capital formation. It also revealed the need for better oversight of hinder capital formation. It also revealed the need for better oversight of risk at the board and senior management levels, and the need for stronger risk at the board and senior management levels, and the need for stronger independence, standing and authority among a firm’s internal risk independence, standing and authority among a firm’s internal risk management, control and compliance functions”. management, control and compliance functions”.

As a result, the SEC is focusing its exams on the risk As a result, the SEC is focusing its exams on the risk management as it pertains to the corporate governance and enterprise risk management as it pertains to the corporate governance and enterprise risk management framework of a firm so the SEC can assess the firm’s system management framework of a firm so the SEC can assess the firm’s system of checks and balances.of checks and balances.


Carlo V. di Florio, Director of Compliance Inspections and ExaminationsU.S. Securities and Exchange Commission

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The SEC key provisions of the Dodd-Frank Act for investment advisers The SEC key provisions of the Dodd-Frank Act for investment advisers

and what the Commission staff is doing to respond to these changes:and what the Commission staff is doing to respond to these changes:

Shifting Responsibilities for AdvisersShifting Responsibilities for Advisers

Section 410 of the Dodd-Frank Act raises the asset threshold for SEC registration from $25 million in Section 410 of the Dodd-Frank Act raises the asset threshold for SEC registration from $25 million in assets under management to $100 million.assets under management to $100 million.

Regulation of Private FundsRegulation of Private Funds

Concerns how private equity firms and their advisers manage conflicts of interest.Concerns how private equity firms and their advisers manage conflicts of interest.

Regulation of Securities-Based Swaps and Market ParticipantsRegulation of Securities-Based Swaps and Market Participants

Title VII of the Dodd-Frank Act creates a new regulatory regime for key participants in swaps markets.Title VII of the Dodd-Frank Act creates a new regulatory regime for key participants in swaps markets.

Regulation of Municipal AdvisorsRegulation of Municipal Advisors

The Dodd-Frank Act also establishes a new registration regime for municipal advisors.The Dodd-Frank Act also establishes a new registration regime for municipal advisors.

913 and 914 Studies913 and 914 Studies

The Commission recently released several staff studies mandated by Dodd-Frank related to improving The Commission recently released several staff studies mandated by Dodd-Frank related to improving the investment adviser and broker-dealer regulatory frameworks.the investment adviser and broker-dealer regulatory frameworks.

WhistleblowersWhistleblowers

Section 922 of the Dodd-Frank Act requires the SEC to pay awards to individuals who voluntarily Section 922 of the Dodd-Frank Act requires the SEC to pay awards to individuals who voluntarily provide the Commission with original information that leads to the successful enforcementprovide the Commission with original information that leads to the successful enforcement.


The Dodd Frank for Advisers and the SEC National Exam Program

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The SEC key provisions of the Dodd-Frank Act for investment advisers The SEC key provisions of the Dodd-Frank Act for investment advisers

and what the Commission staff is doing to respond to these changes:and what the Commission staff is doing to respond to these changes:

Improved Disclosure and Corporate Governance Rules. The Dodd Frank Act directs the Commission to Improved Disclosure and Corporate Governance Rules. The Dodd Frank Act directs the Commission to take action on a number of corporate governance and executive compensation topics, including:take action on a number of corporate governance and executive compensation topics, including:

““Say-on-Pay” and “Golden Parachute.”Say-on-Pay” and “Golden Parachute.” In January 2011, the Commission adopted rules to implement the provisions of In January 2011, the Commission adopted rules to implement the provisions of the Dodd-Frank Act that require public companies subject to the federal proxy rules to provide their shareholders with an advisory the Dodd-Frank Act that require public companies subject to the federal proxy rules to provide their shareholders with an advisory vote on executive compensation, as well as an advisory vote on compensation arrangements and understandings in connection vote on executive compensation, as well as an advisory vote on compensation arrangements and understandings in connection with merger transactions.with merger transactions.

Compensation Committees and Compensation Consultants.Compensation Committees and Compensation Consultants. The Commission is required by Section 952 of the The Commission is required by Section 952 of the Dodd-Frank Act to mandate new listing standards relating to the independence of compensation committees and to establish new Dodd-Frank Act to mandate new listing standards relating to the independence of compensation committees and to establish new disclosure requirements and conflict of interest standards that boards must observe when retaining compensation consultants.disclosure requirements and conflict of interest standards that boards must observe when retaining compensation consultants.

Recovery of Erroneously Awarded Compensation.Recovery of Erroneously Awarded Compensation. Section 954 of the Dodd-Frank Act requires the Commission to Section 954 of the Dodd-Frank Act requires the Commission to adopt rules mandating new listing standards relating to specified executive compensation “clawback” policies.adopt rules mandating new listing standards relating to specified executive compensation “clawback” policies.

Pay versus Performance and Pay Ratios.Pay versus Performance and Pay Ratios. Under Section 953 of the Dodd-Frank Act, the Commission must adopt rules Under Section 953 of the Dodd-Frank Act, the Commission must adopt rules requiring new disclosures about the relationship between executive compensation and company performance, and the ratio requiring new disclosures about the relationship between executive compensation and company performance, and the ratio between the median of the annual total compensation of an issuer’s employees and the annual total compensation of the issuer’s between the median of the annual total compensation of an issuer’s employees and the annual total compensation of the issuer’s chief executive officer.chief executive officer.

Employee and Director Hedging.Employee and Director Hedging. Section 955 of the Dodd-Frank Act requires the Commission to adopt rules requiring Section 955 of the Dodd-Frank Act requires the Commission to adopt rules requiring disclosure by issuers of their policies relating to certain employee and director hedging activities.disclosure by issuers of their policies relating to certain employee and director hedging activities.


The Dodd Frank for Advisers and the SEC National Exam Program

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Regulatory Examinations Focus – Enterprise Risk ManagementRegulatory Examinations Focus – Enterprise Risk Management

For investment advisers as a group what does this mean? This is a For investment advisers as a group what does this mean? This is a business that has seen a significant degree of growth and consolidation within business that has seen a significant degree of growth and consolidation within the industry in recent years, and this gives rise to particular enterprise risk the industry in recent years, and this gives rise to particular enterprise risk issues such as:issues such as:

consolidating disparate technological platforms, systems and controlsconsolidating disparate technological platforms, systems and controlsfamiliarizing risk management, internal audit and compliance functions with new familiarizing risk management, internal audit and compliance functions with new business units business units revising business continuity planning revising business continuity planning managing differences in firm cultures that may complicate merger of procedures, managing differences in firm cultures that may complicate merger of procedures, processes, controls, etc.processes, controls, etc.

These are all issues that go beyond just chief compliance or risk These are all issues that go beyond just chief compliance or risk officers, and require senior management attention in order to ensure that the officers, and require senior management attention in order to ensure that the appropriate resources, senior management and business unit attention are appropriate resources, senior management and business unit attention are being invested.being invested.


2011 U.S. Securities and Exchange Commission Focus

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Regulatory Examinations Focus – Risk GovernanceRegulatory Examinations Focus – Risk Governance

The SEC will look at risk management practices and ask the following questions The SEC will look at risk management practices and ask the following questions about five levels of risk governance:about five levels of risk governance:

How do the How do the business units business units of an entity ensure they are taking and managing risk effectivelyof an entity ensure they are taking and managing risk effectively at the product at the product and asset class level in accordance with the risk appetite and tolerances set by the board and senior and asset class level in accordance with the risk appetite and tolerances set by the board and senior management of the whole organization? management of the whole organization?

How are How are key risk management, control and compliance functions key risk management, control and compliance functions structured and resourced to ensure they structured and resourced to ensure they are effectively embedded in the business process, while havingare effectively embedded in the business process, while having the necessary independence, standing and the necessary independence, standing and authority to be effective in helping the organization identify, manage and mitigate risk?authority to be effective in helping the organization identify, manage and mitigate risk?

How is How is senior management senior management ensuring effectiveensuring effective oversight of enterprise risk management oversight of enterprise risk management and embedding and embedding risk management in key business processes, includingrisk management in key business processes, including strategic planning, capital allocation, performance strategic planning, capital allocation, performance management and compensation incentives? management and compensation incentives?

How does the How does the internal audit process independently verify and provide the board and senior management internal audit process independently verify and provide the board and senior management with assurance regarding thewith assurance regarding the operating effectiveness of risk management operating effectiveness of risk management, compliance and control , compliance and control functions? functions?

How is the How is the board of directorsboard of directors staffed and structured to staffed and structured to ensure it can effectively set risk parameters, foster ensure it can effectively set risk parameters, foster an effective risk management culture, oversee risk-based compensation systems and effectively oversee the an effective risk management culture, oversee risk-based compensation systems and effectively oversee the risk profile of the firm?risk profile of the firm?


2011 U.S. Securities and Exchange Commission Focus

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ValuationValuation: Advisers’ valuation practices are a top priority, particularly when the adviser : Advisers’ valuation practices are a top priority, particularly when the adviser manages difficult to value instruments, such as derivative-based investment products. manages difficult to value instruments, such as derivative-based investment products.

Conflicts of InterestConflicts of Interest: This entails a review of procedures in place that identify, disclose and : This entails a review of procedures in place that identify, disclose and manage conflicts, including: allocation, insider trading, side letters, best execution, directed manage conflicts, including: allocation, insider trading, side letters, best execution, directed brokerage, soft dollars and new pay-to-play rules. brokerage, soft dollars and new pay-to-play rules.

Portfolio ManagementPortfolio Management:: Divergence of portfolio management from an advertised style is a Divergence of portfolio management from an advertised style is a risk indicator of additional control deficiencies and issues. risk indicator of additional control deficiencies and issues.

Performance and Advertising IssuesPerformance and Advertising Issues: Examiners will review both performance calculation : Examiners will review both performance calculation and the presentation of that performance in offering materials.and the presentation of that performance in offering materials.

Asset VerificationAsset Verification: The SEC continues to place emphasis on verifying customer assets and : The SEC continues to place emphasis on verifying customer assets and controls with respect to safeguarding of customer assets.controls with respect to safeguarding of customer assets.

Business Continuity/ Disaster RecoveryBusiness Continuity/ Disaster Recovery: Business continuity and disaster recovery : Business continuity and disaster recovery planning has always been an important part of the SEC overall examination program.planning has always been an important part of the SEC overall examination program.

Social Media – Social Media – emerging risk.emerging risk.


2011 Regulatory Hot Topics and High Risks – Investment Adviser

DREMAN VALUE MANAGEMENT, L.L.C.DREMAN VALUE MANAGEMENT, L.L.C.

2011 DVM Chief Compliance OfficerGovernance, Risk & Compliance Program

Yvonne I. Pytlik, MBA, CPAChief Compliance Officer for Investment Adviser - Dreman Value Management, L.L.C.

Chief Compliance Officer for Dreman Contrarian Mutual FundsEmail: [email protected] ; Tel: (201) 793-2046; Mobile: (781) 835-8360

Industry Experience and Best Practices: KPMG, Deutsche Bank, Global Compliance Risk Mgt Corp, DVM, RMA NYC

Practical Solutions – Practical Solutions – Integrated Governance, Risk and ComplianceIntegrated Governance, Risk and Compliance

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Dreman Value Management, L.L.C. is undertaking a pro-active approach to continue building an effective Risk Dreman Value Management, L.L.C. is undertaking a pro-active approach to continue building an effective Risk Governance and Compliance ProgramGovernance and Compliance Program led by the Chief Compliance Officer with support from the Executive led by the Chief Compliance Officer with support from the Executive Committee to meet increasing regulatory requirements and industry best practices for asset managers.Committee to meet increasing regulatory requirements and industry best practices for asset managers.

Year 2011 will continue with regulatory and industry efforts to define the path forward to the future of Year 2011 will continue with regulatory and industry efforts to define the path forward to the future of Compliance Programs with an effective governance, risk and compliance mitigation strategiesCompliance Programs with an effective governance, risk and compliance mitigation strategies . The most recent . The most recent financial crisis and major regulatory overhaul in the financial services industry are causing asset managers to financial crisis and major regulatory overhaul in the financial services industry are causing asset managers to challenge their governance, risk and compliance infrastructure, methodologies, standards, and processes to challenge their governance, risk and compliance infrastructure, methodologies, standards, and processes to further improve their compliance and risk governance efforts. further improve their compliance and risk governance efforts.

Compliance is a critical element of an overall business and asset management strategyCompliance is a critical element of an overall business and asset management strategy . Leading asset . Leading asset managers are taking proactive and comprehensive approach in identifying emerging risks, such as compliance managers are taking proactive and comprehensive approach in identifying emerging risks, such as compliance and business risks. Compliance risk is expected to increase even further due to re-assessing post-crisis economic and business risks. Compliance risk is expected to increase even further due to re-assessing post-crisis economic conditions and more stringent regulatory enforcement actions for compliance violations, combined with conditions and more stringent regulatory enforcement actions for compliance violations, combined with increasing complexity of regulatory landscape and higher compliance standards imposed by regulators, increasing complexity of regulatory landscape and higher compliance standards imposed by regulators, investors, shareholders and clients.investors, shareholders and clients.

The challenge for most asset managers is to effectively manage enterprise and compliance risks, find efficiency in The challenge for most asset managers is to effectively manage enterprise and compliance risks, find efficiency in the way that governance, risk and compliance program protect and create the greatest value for asset managers, the way that governance, risk and compliance program protect and create the greatest value for asset managers, investors, shareholders and clients. investors, shareholders and clients. The proactive approach is to achieve compliance with regulations while The proactive approach is to achieve compliance with regulations while adequately balancing risk, cost and value across the enterprise.adequately balancing risk, cost and value across the enterprise.

2011 GOVERNANCE, RISK & COMPLIANCE PROGRAM EXECUTIVE SUMMARY

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FORWARD LOOKING AND PRO-ACTIVE APPROACH TO COMPLIANCE

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Enterprise Risk Management& Compliance Committee

GOVERNANCE, RISK & COMPLIANCE PROGRAM OVERSIGHT

DVM ChairmanExecutive Committee

GOVERNANCE, RISK, COMPLIANCECOMMITTEECo-Chairman

YVONNE I. PYTLIK & E. CLIFTON HOOVERChief Compliance Officer & Chief Investment Officer

COE Committee & Conflicts of Interest

Best Execution & Brokerage and

Fair Valuation Committee


Dreman Contrarian MFsBoard of Trustees

Client Mutual Funds & Institutional Clients

Boards, CCOs

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MANAGEMENT COMMITTEE OVERSIGHTINTEGRATING GOVERNANCE, RISK, COMPLIANCE WITH BUSINESS STRATEGY

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Management Committees

Governance, Risk & Compliance Strategy

Written Policies and Procedures

Core Regulatory Compliance Monitoring Program

Investment Guidelines and Regulatory Monitoring Program

Trading Surveillance and Forensic Testing

On-going Compliance Program Assessment

Compliance Matters Reporting

ERM Risk Profile Business Strategic

Alignment with Enterprise Risk Management Program

Investment Risk (Market, Credit, Liquidity)

Regulatory & Compliance Risk

Operational & Financial Risk

Compliance Program

Enterprise Risk Management Program

Board and Client Reporting

Executive Committee Governance, Risk &

Compliance Committee

Committees Charter, Roles & Responsibilities

Compliance and Risk Executive Dashboard & Reporting

Annual Compliance Program Assessment

Risk Assessment Program, Methodologies and Standards

Risk Criteria and Key Risk Indicators (KRIs)

Risk- based Compliance Audit, Testing and Review Program

Emerging Risk Monitoring and Reporting

On-going Compliance and Business efforts in 2011

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GOVERNANCE, RISK & COMPLIANCE COMMITTEEGOVERNANCE, RISK & COMPLIANCE COMMITTEE

The Governance, Risk & Compliance Committee (“GRCo”) is Co-chaired by E. Clifton Hoover, Chief Investment Officer and The Governance, Risk & Compliance Committee (“GRCo”) is Co-chaired by E. Clifton Hoover, Chief Investment Officer and Yvonne I. Pytlik, Chief Compliance Officer at Dreman Value Management L.L.C. The GRCo is providing strategic Yvonne I. Pytlik, Chief Compliance Officer at Dreman Value Management L.L.C. The GRCo is providing strategic leadership and tactical direction to the firm’s approach to managing enterprise risks, with compliance as a critical leadership and tactical direction to the firm’s approach to managing enterprise risks, with compliance as a critical component of our overall business and asset management strategy. The GRCo is responsible for integrating the firm-component of our overall business and asset management strategy. The GRCo is responsible for integrating the firm-wide governance, risk and compliance strategy, risk methodologies and standards, risk mitigation strategies, and wide governance, risk and compliance strategy, risk methodologies and standards, risk mitigation strategies, and executive dashboard reporting. Our committee structure, GRC methodologies and standards, and compliance program executive dashboard reporting. Our committee structure, GRC methodologies and standards, and compliance program are an over-arching foundation across the firm to fulfill our fiduciary responsibilities to our clients and to ensure are an over-arching foundation across the firm to fulfill our fiduciary responsibilities to our clients and to ensure compliance with regulatory requirements at Dreman Value Management., L.L.C.compliance with regulatory requirements at Dreman Value Management., L.L.C.

The GRCo is comprised of three Committees: The GRCo is comprised of three Committees: 1/Enterprise Risk Management (“ERM”) – focused on Strategic Business, Regulatory/Compliance, Investment, 1/Enterprise Risk Management (“ERM”) – focused on Strategic Business, Regulatory/Compliance, Investment, Operational Risks; Operational Risks; 2/COE and Conflicts of Interest; and2/COE and Conflicts of Interest; and3/Best Execution and Brokerage; and Fair Valuation. 3/Best Execution and Brokerage; and Fair Valuation.

Each committee, under oversight from GRCo, is undertaking a robust and comprehensive approach in identifying Each committee, under oversight from GRCo, is undertaking a robust and comprehensive approach in identifying

emerging risks.emerging risks.

GRC Committee Oversight – Roles & Responsibilities

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2011 Chief Compliance OfficerGovernance, Risk & Compliance Program

Section II


Risk Assessment Methodology &Risk Assessment Methodology &High Risks and Mitigation Stragic PlanHigh Risks and Mitigation Stragic Plan

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The Governance, Risk & Compliance Committee and the CCO have adopted a Risk Assessment Methodology for evaluating The Governance, Risk & Compliance Committee and the CCO have adopted a Risk Assessment Methodology for evaluating the effectiveness of the Compliance Program and identifying key risk areas. The Risk Assessment Methodology encompasses the effectiveness of the Compliance Program and identifying key risk areas. The Risk Assessment Methodology encompasses the following three step process:the following three step process:

1.1. Inherent Risk AssessmentInherent Risk Assessment is performed to identify compliance risks: is performed to identify compliance risks:

The inherent risk score is determined based on impact (High, Medium, Low).The inherent risk score is determined based on impact (High, Medium, Low). The risk factors that are considered for the inherent risk assessment include: regulator identified factors, fiduciary responsibility, The risk factors that are considered for the inherent risk assessment include: regulator identified factors, fiduciary responsibility,

factors that could result in financial loss/ impact the operational objectives or performance of the business, potential legal and\or factors that could result in financial loss/ impact the operational objectives or performance of the business, potential legal and\or disciplinary actions, issues that could result in reputational damage and business unit management identified factors.disciplinary actions, issues that could result in reputational damage and business unit management identified factors.

The risk factors that are considered for the probability analysis include: frequency and volume of event, regulatory issues, deficiency The risk factors that are considered for the probability analysis include: frequency and volume of event, regulatory issues, deficiency letters/regulatory actions, compliance issues/violations, and high risk issues identified by external audit or 3letters/regulatory actions, compliance issues/violations, and high risk issues identified by external audit or 3 rdrd party reviews. party reviews.

A Risk Assessment Heat Map is developed, identifying where inherent risks reside within each business area. A Risk Assessment Heat Map is developed, identifying where inherent risks reside within each business area.

The Inherent Risk Assessment is utilized to determine the priority of the compliance review and testing schedule, to determine where to The Inherent Risk Assessment is utilized to determine the priority of the compliance review and testing schedule, to determine where to allocate compliance resources, and to determine where a more detailed analysis should be performed of high risk issues. allocate compliance resources, and to determine where a more detailed analysis should be performed of high risk issues.

2.2. Control Environment AssessmentControl Environment Assessment – Each inherent risk is evaluated based on the following criteria: – Each inherent risk is evaluated based on the following criteria:

Adequacy of the compliance policy.Adequacy of the compliance policy. Adequacy of the business procedure to ensure compliance.Adequacy of the business procedure to ensure compliance. Existence/evidence of supervision and business monitoring. Adequacy of training.Existence/evidence of supervision and business monitoring. Adequacy of training. Issues identified from the CCO interviews, reviews and testing.Issues identified from the CCO interviews, reviews and testing. Action steps taken by the business to address the recommendations for improvement.Action steps taken by the business to address the recommendations for improvement.

The control environment for each function/inherent risk is assigned a rating (Strong, Acceptable or Needs Improvement) basedThe control environment for each function/inherent risk is assigned a rating (Strong, Acceptable or Needs Improvement) basedon a subjective review of the above criteria.on a subjective review of the above criteria.

3.3. Overall Compliance Risk AssessmentOverall Compliance Risk Assessment – A compliance matrix is developed to determine the final Overall Compliance Risk Assessment Score – A compliance matrix is developed to determine the final Overall Compliance Risk Assessment Score (High, Medium, Low). (High, Medium, Low).

RISK ASSESSMENT METHODOLOGIES AND STANDARDS

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2011 HIGH RISKS AND MITIGATION STRATEGIC PLAN - Sample

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DVM Major Initiatives and DVM Major Initiatives and Recommendations for ImprovementRecommendations for Improvement

Implementation PlanImplementation Plan Target DateTarget DateStatusStatus

Person Person ResponsibleResponsible

1. The Executive Committee and the CCO 1. The Executive Committee and the CCO will be enhancing the Management will be enhancing the Management Committees Oversight structureCommittees Oversight structure

1.1. Management Committees Oversight – Integrating Governance, Management Committees Oversight – Integrating Governance, Risk, Compliance to be aligned with the current regulatory and Risk, Compliance to be aligned with the current regulatory and industry best practicesindustry best practices

June 2011 June 2011 CompletedCompleted

Yvonne I. Pytlik, Yvonne I. Pytlik, CCOCCO

Executive Executive CommitteeCommittee

2.The Chief Compliance Officer will 2.The Chief Compliance Officer will assess and enhance the current Risk assess and enhance the current Risk Governance and Compliance ProgramGovernance and Compliance Program

2. Risk Governance and Compliance Program Enhancements:2. Risk Governance and Compliance Program Enhancements:•Roles and Responsibilities in ComplianceRoles and Responsibilities in Compliance•Risk Assessment Methodologies and StandardsRisk Assessment Methodologies and Standards•Annual Risk-based Review & Testing Program.Annual Risk-based Review & Testing Program.

20102010CompletedCompleted


Executive Executive CommitteeCommittee

GRC CommitteeGRC Committee

3. Compliance Monitoring and 3. Compliance Monitoring and Surveillance ProgramSurveillance Program

3. Comprehensive Compliance Monitoring and Surveillance Program 3. Comprehensive Compliance Monitoring and Surveillance Program - Development and Enhancements.- Development and Enhancements.

March 31, March 31, 20112011

CompletedCompleted

Yvonne I. Pytlik, Yvonne I. Pytlik, CCO, ExCoCCO, ExCo

4. Firm-wide Compliance Program – 4. Firm-wide Compliance Program – Internal ControlsInternal Controls

4. Firm-wide Compliance Program – Internal Controls:4. Firm-wide Compliance Program – Internal Controls:•Firm-wide Compliance Training Development and Roll Out across Firm-wide Compliance Training Development and Roll Out across all business divisions.all business divisions.

20102010CompletedCompleted


GRC CommitteeGRC Committee

5. Code of Ethics – Personal Trading 5. Code of Ethics – Personal Trading MonitoringMonitoring

5. Comprehensive review and testing of the COE Monitoring 5. Comprehensive review and testing of the COE Monitoring Program. Establishing the COE and Conflicts Committee. Program. Establishing the COE and Conflicts Committee.

2010-20112010-2011CompletedCompleted

Yvonne I. Pytlik, Yvonne I. Pytlik, CCO, COE Cmt.CCO, COE Cmt.




Section III


Compliance Department Compliance Department Roles and ResponsibilitesRoles and Responsibilites

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Yvonne I. Pytlik is a senior executive and one of industry’s most highly regarded strategists in compliance risk management and corporate governance for financial institutions. Prior to joining Dreman, she was the Deputy Head of Global Compliance, Risk Management, and Strategic Planning at Deutsche Bank AG. Ms. Pytlik was responsible for global compliance risk management across all business lines, including capital markets, investment banking, asset management, and private wealth management. During her eight years at Deutsche Bank, she made significant contributions to the firm’s overall compliance organization, including the development and implementation of global compliance risk management functions in the Americas, Europe, and Asia-Pacific regions. Ms. Pytlik developed and implemented the Chief Compliance Officer Program Oversight initiatives for the asset management division.

Prior to joining Deutsche Bank, Ms. Pytlik was a Lead Senior Consultant in the Advisory and Information Risk Management Practice at KPMG, LLP. She was managing and supervising strategic business/ information risk assessment and process reengineering engagements for KPMG clients. Her experience also includes over 10 years in Internal Audit at major financial institutions, with a focus on the asset management and investment management business.

Ms. Pytlik has MBA from Suffolk University and BS in Management from University of Massachusetts. She is a Certified Public Accountant in MA and member of AICPA. She is also a member of numerous professional risk and compliance organizations. Ms. Pytlik currently serves on the Risk Governance Committee at the Risk Management Association in NYC, she is the Founder of the Global Compliance Risk Management Corp. where she currently serves on the Board of Directors. Her recent compliance expert opinions were published: ”New technologies to stop insider trading”, “Insider Trading – can it be stopped?” in the Wall Street & Technology and “Compliance Risk: a critical business risk for asset managers” in the Journal of Securities Laws, Regulations & Compliance by Henry Stewart Publications in UK.

Yvonne I. Pytlik, CPA, MBA Chief Compliance Officer

Yvonne I. Pytlik joined Dreman Value Management, L.L.C. in 2010 as the Chief Compliance Officer reporting to the Executive Committee and since June 2010 as the Chief Compliance Officer for Dreman Contrarian Mutual Funds reporting to the Board of Trustees.

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CHIEF COMPLIANCE OFFICERCHIEF COMPLIANCE OFFICER

The Chief Compliance Officer leads and provides oversight over the review, testing and monitoring of the effectiveness and adequacy of The Chief Compliance Officer leads and provides oversight over the review, testing and monitoring of the effectiveness and adequacy of the DVM Compliance Program on an annual and ongoing basis to ensure compliance with U.S. federal securities laws. the DVM Compliance Program on an annual and ongoing basis to ensure compliance with U.S. federal securities laws.

In early 2010, Dreman Value Management had appointed a new Chief Compliance Officer reporting to the Executive Committee leading In early 2010, Dreman Value Management had appointed a new Chief Compliance Officer reporting to the Executive Committee leading our firm’s efforts toward implementing and maintaining a robust Governance, Risk and Compliance Program. The Chief Compliance our firm’s efforts toward implementing and maintaining a robust Governance, Risk and Compliance Program. The Chief Compliance Officer reports independently to the Board of Trustees for Contrarian Mutual Funds.Officer reports independently to the Board of Trustees for Contrarian Mutual Funds.

Our committee structure, GRC methodologies and standards, and compliance program are an over-arching foundation across the firm to Our committee structure, GRC methodologies and standards, and compliance program are an over-arching foundation across the firm to fulfill DVM’s fiduciary responsibilities to our clients and to ensure compliance with regulatory requirements at Dreman Value fulfill DVM’s fiduciary responsibilities to our clients and to ensure compliance with regulatory requirements at Dreman Value Management., L.L.C. The CCO and GRC Committee Oversight at DVM support our Clients’ CCOs, their Mutual Fund Boards and Dreman Management., L.L.C. The CCO and GRC Committee Oversight at DVM support our Clients’ CCOs, their Mutual Fund Boards and Dreman Board of Trustees to fulfill their increased responsibilities over risk oversight and increased regulatory requirements. Board of Trustees to fulfill their increased responsibilities over risk oversight and increased regulatory requirements.

2010-2011 GOVERNANCE, RISK & COMPLIANCE COMMITTEE2010-2011 GOVERNANCE, RISK & COMPLIANCE COMMITTEE

The Governance, Risk & Compliance Committee (“GRCo”) is Co-chaired by E. Clifton Hoover, Chief Investment Officer and Yvonne I. Pytlik, The Governance, Risk & Compliance Committee (“GRCo”) is Co-chaired by E. Clifton Hoover, Chief Investment Officer and Yvonne I. Pytlik, Chief Compliance Officer at Dreman Value Management L.L.C. The GRCo is providing strategic leadership and tactical direction to the Chief Compliance Officer at Dreman Value Management L.L.C. The GRCo is providing strategic leadership and tactical direction to the firm’s approach to managing enterprise risks, with compliance as a critical component of our overall business and asset management firm’s approach to managing enterprise risks, with compliance as a critical component of our overall business and asset management strategy. The GRCo is responsible for integrating the firm-wide governance, risk and compliance strategy, risk methodologies and strategy. The GRCo is responsible for integrating the firm-wide governance, risk and compliance strategy, risk methodologies and standards, risk mitigation strategies, and executive dashboard reporting. The GRCo is comprised of three Committees: standards, risk mitigation strategies, and executive dashboard reporting. The GRCo is comprised of three Committees:

1/Enterprise Risk Management (“ERM”) Committee, led by Yvonne I. Pytlik, CCO and Mark Roach, Managing Director at DVM, is 1/Enterprise Risk Management (“ERM”) Committee, led by Yvonne I. Pytlik, CCO and Mark Roach, Managing Director at DVM, is responsible for the ERM monitoring and mitigation strategies, internal controls assessment firm-wide: Strategic Business Risks, responsible for the ERM monitoring and mitigation strategies, internal controls assessment firm-wide: Strategic Business Risks, Regulatory/Compliance, Investment, and Operational Risks; 2/COE and Conflicts of Interest Committee; 3/Best Execution, Brokerage and Regulatory/Compliance, Investment, and Operational Risks; 2/COE and Conflicts of Interest Committee; 3/Best Execution, Brokerage and Fair Valuation Committee. Fair Valuation Committee. Each committee, under an oversight from GRCo, is undertaking a robust and comprehensive approach in identifying emerging risks.Each committee, under an oversight from GRCo, is undertaking a robust and comprehensive approach in identifying emerging risks.

GOVERNANCE, RISK AND COMPLIANCE PROGRAM OVERSIGHT

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COMPLIANCE PROGRAMCOMPLIANCE PROGRAM

The Compliance department and the Business groups within DVM support the effectiveness of the Compliance Program. Compliance The Compliance department and the Business groups within DVM support the effectiveness of the Compliance Program. Compliance Officers are responsible for advising the business on trading and portfolio management issues, monitoring investment guidelines and Officers are responsible for advising the business on trading and portfolio management issues, monitoring investment guidelines and restrictions, reviewing and approving marketing materials, monitoring of the COE personal trading, AML program, proxy voting restrictions, reviewing and approving marketing materials, monitoring of the COE personal trading, AML program, proxy voting requirements, class actions processing, regulatory reporting and fillings, and overall monitoring of compliance with U.S. federal requirements, class actions processing, regulatory reporting and fillings, and overall monitoring of compliance with U.S. federal securities laws. securities laws.

COMPLIANCE TEAMCOMPLIANCE TEAM

The Compliance Team supports the Chief Compliance Officer, by conducting monitoring of compliance with U.S. federal securities laws The Compliance Team supports the Chief Compliance Officer, by conducting monitoring of compliance with U.S. federal securities laws and ensuring appropriate reporting to the clients, their CCOs and boards. The CCO conducts risk assessments on an annual and as-and ensuring appropriate reporting to the clients, their CCOs and boards. The CCO conducts risk assessments on an annual and as-needed basis, performs an on-going compliance risk monitoring and periodic compliance policy reviews. The CCO has developed and needed basis, performs an on-going compliance risk monitoring and periodic compliance policy reviews. The CCO has developed and implemented a robust compliance monitoring program covering major businesses within DVM, addressing a dynamic regulatory implemented a robust compliance monitoring program covering major businesses within DVM, addressing a dynamic regulatory environment and increased board and client standards. The Compliance team also conducts special reviews and/or investigations.environment and increased board and client standards. The Compliance team also conducts special reviews and/or investigations.

BUSINESS RESPONSIBILITIESBUSINESS RESPONSIBILITIES

The head of each business line, Portfolio Management, Trading, Operations, Marketing, Information Technology and each employee The head of each business line, Portfolio Management, Trading, Operations, Marketing, Information Technology and each employee at DVM are responsible to comply with all regulatory requirements applicable to DVM as an Investment Adviser and Investment at DVM are responsible to comply with all regulatory requirements applicable to DVM as an Investment Adviser and Investment Company; and support the effectiveness of the Compliance Program on an on-going basis with adequate supervision within each Company; and support the effectiveness of the Compliance Program on an on-going basis with adequate supervision within each business line. Each employee at DVM is responsible, as a matter of DVM Compliance Policy, to report and escalate any compliance business line. Each employee at DVM is responsible, as a matter of DVM Compliance Policy, to report and escalate any compliance violations , issues and compliance matters to the Chief Compliance Officer at Dreman Value Management, L.L.C. violations , issues and compliance matters to the Chief Compliance Officer at Dreman Value Management, L.L.C.

ANNUAL AND ON-GOING COMPLIANCE RISK-BASED REVIEW AND TESTING PROGRAMANNUAL AND ON-GOING COMPLIANCE RISK-BASED REVIEW AND TESTING PROGRAM

A risk-based annual compliance review and testing program has been developed, which includes interviews with the business, A risk-based annual compliance review and testing program has been developed, which includes interviews with the business, compliance audits and compliance monitoring. High risk issues identified by the risk assessment process are evaluated to determine, if compliance audits and compliance monitoring. High risk issues identified by the risk assessment process are evaluated to determine, if they are mitigated by the business and/or compliance monitoring programs. Accordingly, the risk-based reviews were performed to they are mitigated by the business and/or compliance monitoring programs. Accordingly, the risk-based reviews were performed to assess the adequacy and effectiveness of the DVM Compliance Program and to ensure compliance with U.S. federal securities laws. assess the adequacy and effectiveness of the DVM Compliance Program and to ensure compliance with U.S. federal securities laws. This process validated the adequacy of our compliance policies and procedures and how effectively these policies and procedures This process validated the adequacy of our compliance policies and procedures and how effectively these policies and procedures were implemented across major business areas at DVM. were implemented across major business areas at DVM.

COMPLIANCE PROGRAM

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COMPLIANCE DEPARTMENT – ROLES & RESPONSIBILITIES

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CCO CCO Compliance ProgramRisk Management

Investment Management Compliance Monitoring:

CRD Monitoring Manual Restriction

Monitoring Compliance Rules and test set

up Annual review of all client

portfolios monitoring Daily alerts and warnings

review and resolution Escalation - breaches, errors,

compliance matters Trading Surveillance and

Forensic Testing Program Automate and develop

monitoring programs Compliance Policies for IMC Client Certifications.

Code of Ethics and Personal Trading Monitoring/ PTA

Gifts Monitoring Client Files Maintenance Company/Client Contracts Conflicts of Interest Security Valuation Proxy Voting Privacy Protection Client Complaints Marketing Materials Review Safeguarding of Client Assets/

Reconciliations/ OPS Recordkeeping BCP All Regulatory Filings Client Disclosures Emails Review

Investment Management Monitoring

Core Compliance

Monitoring

Strategic alliance business, governance, risk, compliance

ERM / Compliance Program Strategy

Management Committees Membership, Co-Chairing GRC Committee, Board Reporting

Executive Dashboard & Reporting

Client Reporting/ Due Diligence

Compliance Department Oversight & Supervision

Compliance Program Oversight

Compliance & Risk Advisory Annual Assessment,

Reporting to Clients and Boards.

Annual & On-going Compliance Program Assessment

Written Policies and Procedures

Risk Assessment & Management, Methodology, Standards, KRIs

Annual / Quarterly Risk Assessment

Risk Monitoring (KRI) and Reporting

Risk- based Compliance Review Plan

Compliance Audit, Review and Testing

Remediation Action Plans Monitoring, Reporting and Implementing.


Yvonne I. PytlikChief Compliance Officer

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Investment Advisers Act of 1940 (Rule 206(4)-7) – Investment Advisers

Portfolio Management Process, Trading Practices Proprietary Trading / Code of Ethics Accuracy of Disclosures to Investors, Clients, Regulators Safeguarding of Client Assets, Accuracy of Creation of Required Records Advertising and Marketing Valuation/ Fees Affiliated Transactions and Conflicts of Interests Privacy Protection Business Continuity Plans Anti-Money Laundering Program

Investment Company Act of 1940 (Rule 38a-1) – Mutual Funds

Fund Governance Service Providers Pricing of Portfolio Securities Processing of Fund Shares Identification of Affiliates and Conflicts of Interests Protection of Non-public Information Fund Governance Market Timing, Late Trading, AML/KYC

FINRA Broker Dealer Regulatory Requirements (Rule 3012, 3013) - Supervision (WSPs), Registrations, Sales and Marketing Practices, Client Complaints, Books and Records, Gifts& Entertainment

Chief Compliance Officer (“CCO”) Rules and Regulations

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Governance, Risk & Compliance / CCO Program (*) (A)Governance, Risk & Compliance / CCO Program (*) (A) Investment Management Monitoring and Trading Surveillance Program & Forensic TestingInvestment Management Monitoring and Trading Surveillance Program & Forensic Testing

Compliance Department Monitoring Programs Review (***) (A)Compliance Department Monitoring Programs Review (***) (A)Investment Guidelines and Restrictions Monitoring – CRD (*) (A)Investment Guidelines and Restrictions Monitoring – CRD (*) (A) Manual Guidelines (**), (***) (A)Manual Guidelines (**), (***) (A)Trading Surveillance and Forensic Program (***) (A)Trading Surveillance and Forensic Program (***) (A)Trading with Affiliates - CRD (*) Trading with Affiliates - CRD (*)

• Approved Broker Dealer List on CRD Monitoring - CRD (*)Approved Broker Dealer List on CRD Monitoring - CRD (*)• Affiliated B/D and Affiliated Security - Prohibited by Client - CRD (*)Affiliated B/D and Affiliated Security - Prohibited by Client - CRD (*)• DVM Restricted Securities - CRD (*)DVM Restricted Securities - CRD (*)

Breaches / Error Trading Errors Monitoring (Cancels and Corrects) (*) OPS (**) ComplianceBreaches / Error Trading Errors Monitoring (Cancels and Corrects) (*) OPS (**) ComplianceCross-Trade Activity Monitoring (*) (**)Cross-Trade Activity Monitoring (*) (**)Trade Allocation/ Portfolio Bunching – CRD (*) (A)Trade Allocation/ Portfolio Bunching – CRD (*) (A)Soft Dollars (Prohibition/ Monitoring) - CRD (*) (***) BE CmtSoft Dollars (Prohibition/ Monitoring) - CRD (*) (***) BE CmtBest Execution and Directed Brokerage (*) (**)Best Execution and Directed Brokerage (*) (**) (***) BE Cmt(***) BE CmtWindow Dressing, Portfolio Pumping (***)Window Dressing, Portfolio Pumping (***)

Code of Ethics and Personal Trading Monitoring/ Gifts / Pay – to – Play PTA (*) (***) COE CommitteeCode of Ethics and Personal Trading Monitoring/ Gifts / Pay – to – Play PTA (*) (***) COE Committee Company & Client Contracts and Files Maintenance (*) (A)Company & Client Contracts and Files Maintenance (*) (A) Conflicts of Interest (*)Conflicts of Interest (*) Securities Valuation (*) OPS (***) Fair Valuation CmtSecurities Valuation (*) OPS (***) Fair Valuation Cmt Proxy Voting (*) (A)Proxy Voting (*) (A) Privacy Protection (*) (A)Privacy Protection (*) (A) Client Complaints (*) (***)Client Complaints (*) (***) Marketing Materials Review and Client Disclosures (*)Marketing Materials Review and Client Disclosures (*) Safeguarding of Client Assets/ Reconciliations (*) OPS (**) ComplianceSafeguarding of Client Assets/ Reconciliations (*) OPS (**) Compliance Recordkeeping Requirements (*) (A)Recordkeeping Requirements (*) (A) Business Continuity Planning (BCP) (*) (A)Business Continuity Planning (BCP) (*) (A) Communication with Clients/Certifications and Reporting (*) (**) (***) (A) CCO ReportCommunication with Clients/Certifications and Reporting (*) (**) (***) (A) CCO Report Regulatory Reporting (13G, 13F) (***), ADV (*) (A)Regulatory Reporting (13G, 13F) (***), ADV (*) (A) Email Reviews (***)Email Reviews (***)

2011 COMPLIANCE MONITORING AND SURVEILLANCE PROGRAM

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Monitoring frequency – (*) Daily, (**) Monthly, (***) Quarterly, (A) Annually. Risk-based monitoring program may be changed by the CCO.



Section IV


2011 Regulatory Trends &2011 Regulatory Trends &Industry Best PracticesIndustry Best Practices

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FORWARD LOOKING AND PRO-ACTIVE APPROACH TO GOVERNANCE, RISK AND FORWARD LOOKING AND PRO-ACTIVE APPROACH TO GOVERNANCE, RISK AND COMPLIANCE BECOMES A LEADING TREND FOR ASSET MANAGERS:COMPLIANCE BECOMES A LEADING TREND FOR ASSET MANAGERS:

Regulatory and business environment is forcing a fundamental change in regulatory landscape, Regulatory and business environment is forcing a fundamental change in regulatory landscape, organizational culture, risk governance, compliance and a holistic view on enterprise risk organizational culture, risk governance, compliance and a holistic view on enterprise risk management. The choice facing asset managers is not whether to implement these changes but management. The choice facing asset managers is not whether to implement these changes but what approach to take in implementing them. As the business and regulatory environment what approach to take in implementing them. As the business and regulatory environment continues to evolve, asset managers that succeed will be those who can demonstrate ability to drive continues to evolve, asset managers that succeed will be those who can demonstrate ability to drive business performance and achieve regulatory compliance, strategically aligning compliance risk business performance and achieve regulatory compliance, strategically aligning compliance risk management and business strategies.management and business strategies.

Asset managers aspire to reassess their compliance program and risk governance as a prudent Asset managers aspire to reassess their compliance program and risk governance as a prudent business practice that will benefit their firms, investors and shareholders. Looking forward, “single business practice that will benefit their firms, investors and shareholders. Looking forward, “single view across the organization toward future state of governance, risk and compliance program” view across the organization toward future state of governance, risk and compliance program” becomes a necessary response to the evolution of risk management. becomes a necessary response to the evolution of risk management.

Compliance program and integrated risk governance approach allows asset managers to analyze Compliance program and integrated risk governance approach allows asset managers to analyze current, evolving and emerging risks across the enterprise. Compliance and regulatory risk current, evolving and emerging risks across the enterprise. Compliance and regulatory risk management is a vital component to prevent compliance violations thus to mitigate significant management is a vital component to prevent compliance violations thus to mitigate significant business risk to asset managers. business risk to asset managers.

MAJOR REGULATORY TRENDS & INDUSTRY BEST PRACTICES


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FIDUCIARY RESPONSIBILITIESFIDUCIARY RESPONSIBILITIES

The SEC further is focusing on asset managers’ fiduciary standard of conduct and heightened regulatory The SEC further is focusing on asset managers’ fiduciary standard of conduct and heightened regulatory regime when providing services to their clients:regime when providing services to their clients:

• Regulation should be rationalized for investment advisers, particularly with respect to the services Regulation should be rationalized for investment advisers, particularly with respect to the services they provide to retail investors;they provide to retail investors;

• Investment advisers are fiduciaries to their clients with fundamental obligation to act in the best Investment advisers are fiduciaries to their clients with fundamental obligation to act in the best interests of clients and to provide investment advice in clients’ best interests;interests of clients and to provide investment advice in clients’ best interests;

• They have duty of undivided loyalty and utmost good faith and not engage in any activity in conflict They have duty of undivided loyalty and utmost good faith and not engage in any activity in conflict with the interest of any client; andwith the interest of any client; and

• Fiduciary obligations mandate to employ reasonable care to avoid misleading clients and provide full Fiduciary obligations mandate to employ reasonable care to avoid misleading clients and provide full and fair disclosure of all material facts to clients and prospective clients, including conflicts of and fair disclosure of all material facts to clients and prospective clients, including conflicts of interests. Generally, facts are “material” if a reasonable investor would consider them to be interests. Generally, facts are “material” if a reasonable investor would consider them to be important. important.

COMPLIANCE RISK: A CRITICAL BUSINESS RISK FOR ASSET MANAGERSCOMPLIANCE RISK: A CRITICAL BUSINESS RISK FOR ASSET MANAGERS

As an integral part of Governance, Risk & Compliance Program, asset managers are assessing their own As an integral part of Governance, Risk & Compliance Program, asset managers are assessing their own environments and understanding how compliance violations can be prevented, monitored and resolved in environments and understanding how compliance violations can be prevented, monitored and resolved in a timely manner. Having a strong governance, escalation process and remediation strategy is critical in a timely manner. Having a strong governance, escalation process and remediation strategy is critical in mitigating compliance and business risks. mitigating compliance and business risks.

MAJOR REGULATORY TRENDS & INDUSTRY BEST PRACTICES

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Committees OversightIntegrated Governance, Risk & ComplianceRegulatory Requirements

Compliance Policies Business ProceduresSupervision

Compliance Audit,Review andTesting Program

Reporting Monitoring Program Measuring

Risk AssessmentKey Risk IndicatorsGap AnalysisRisk Mitigation

Key Elements of An Effective Governance, Risk & Compliance Program:Key Elements of An Effective Governance, Risk & Compliance Program:

AN EFFECTIVE GRC PROGRAM – OUR APPROACH

Prudent Business Principles and Standards. Focus on leading regulatory and industry practices.Prudent Business Principles and Standards. Focus on leading regulatory and industry practices. Governance, Culture of Compliance “tone at the top” and Risk AwarenessGovernance, Culture of Compliance “tone at the top” and Risk Awareness Integrated Governance, Risk and ComplianceIntegrated Governance, Risk and Compliance Comprehensive Risk Assessment Methodologies and Mitigation Strategies Comprehensive Risk Assessment Methodologies and Mitigation Strategies Effective Compliance Risk Monitoring, Review and Testing Program; and ReportingEffective Compliance Risk Monitoring, Review and Testing Program; and Reporting

Material and Systemic Risks IdentificationMaterial and Systemic Risks IdentificationAligning High Risks With Mitigation StrategiesAligning High Risks With Mitigation Strategies

Manage Reputation Risk, Manage Reputation Risk, Create Value, Grow BusinessCreate Value, Grow Business




Section V


2011 Regulatory and Industry Trends – Compliance 2011 Regulatory and Industry Trends – Compliance Risk as a Critical Business Risk for Asset ManagersRisk as a Critical Business Risk for Asset Managers

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Compliance risk: A critical business risk for asset managersCompliance risk: A critical business risk for asset managers by by Yvonne I. Pytlik and Jennifer S. Myers, GlobalYvonne I. Pytlik and Jennifer S. Myers, Global

Compliance Risk Management Corporation, www.GlobalRMC.comCompliance Risk Management Corporation, www.GlobalRMC.com

Journal of Securities Law, Regulation & Compliance Journal of Securities Law, Regulation & Compliance

ISSN: 1758-0013 (Paper) 1758-0021 Volume 3, Number 2 Date: April 2010 Pages: 180 - 189 URL: ISSN: 1758-0013 (Paper) 1758-0021 Volume 3, Number 2 Date: April 2010 Pages: 180 - 189 URL: http://henrystewart.metapress.com/openurl.asp?genre=article&eissn=1758-0021&volume=3&issue=2&spage=180

Industry Expert Opinions and Publications – Additional References

1FORWARD LOOKING AND PRO-ACTIVE APPROACH TO COMPLIANCE

Abstract: 2010 presents a historical moment to define the path forward to the ‘future of enterprise risk management and mitigation strategies’ of increasing compliance risk for asset managers. The recent financial crises and cases of material compliance violations, Ponzi schemes, fraudulent activities, misappropriation of investors’ assets and collapse of major financial firms have had significant, harmful impact on investors and shareholders. Serious compliance violations, such as insider trading, have proven to be self-destructive to asset managers. No one is immune to these trends. ‘Enterprise Risk Management — 2010 and Beyond Forward Looking Approach by Asset Managers’ is a series of papers dedicated to regulatory developments and industry best practices in the enterprise risk management with a focus on ‘compliance risk: a critical business risk for asset managers’.

New Technologies To Stop Insider TradingNew Technologies To Stop Insider Trading – Yvonne I. PytlikWith the biggest insider trading trial in history currently under way, Wall Street firms are ramping up their technology to try to prevent market abuses before it's too late. "Firms recognize that insider trading and other serious compliance violations may significantly impact their business strategy or even pose a threat to their existence," says Yvonne Pytlik, chief compliance officer at Dreman Value Management, an asset management firm in Jersey City, N.J., for institutional clients that has $5 billion in assets under management.

“Firms are adopting a more enterprise-wide view of risk, governance and compliance, which helps detect market abuses such as insider trading, Dreman Value Management's Pytlik says. Companies are trying to integrate one single view across the organization. It's much more effective in identifying the highest risk in the organization rather than looking at a siloed environment." http://www.wallstreetandtech.com/articles/229301340?pgno=2

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Industry Expert Opinions and Publications – Additional References

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New Technologies To Stop Insider TradingNew Technologies To Stop Insider Trading – Yvonne I. PytlikWith the biggest insider trading trial in history currently under way, Wall Street firms are ramping up their technology to try to prevent market abuses before it's too late. "Firms recognize that insider trading and other serious compliance violations may significantly impact their business strategy or even pose a threat to their existence," says Yvonne Pytlik, chief compliance officer at Dreman Value Management, an asset management firm in Jersey City, N.J., for institutional clients that has $5 billion in assets under management.