Register

Company Overview

Bringing Transparency, Market Discipline and Accountability to the Financial Sector

The mission of Ethics Metrics LLC is to empower boards in the financial industry to govern ethically by bringing transparency, per global standards, to material interconnected risks that impact earnings and equity values.

The Ethics Metrics' services empower boards in the financial industry to effectively oversee, manage, price and act upon risk per their duty of care, duty to monitor and duty to act through our patent-pending process, the Ethics Framework™, and related services. We achieve this by integrating governance and oversight of risk with transparency and market discipline per global standards.

Ethics Metrics' is a signatory to the UN PRI, Principles of Responsible Investment, and is a member of the International Corporate Governance Network.

The Ethics Framework monitors, measures and rates levels of ethical and effective corporate governance by Boards of Directors of financial companies all along the continuum of the financial market. Ethics Metrics brings transparency with independent metrics to measure and rate the impact of ineffective oversight of risks, that include audit risks, compliance risks, internal controls, ethics violations, delisting risks, and investment risks by Boards of financial holding companies, their regulatory gatekeepers and boards of investment management firms.

Ethics Ratings of 1 and 2 indicate effective compliance risk management by Boards of Directors with the Code of Ethics and the corporate governance listing standards for well-managed and well-capitalized financial holding companies as measured by CAMELS Ratings of 1 and 2.

Ethics Ratings of 3, 4 and 5 are correlated to delisting and restatement risks due to ineffective oversight by Boards of Directors on detecting compliance violations by management and related audit risks by auditors on illegal acts per Section 10A of the Securities Exchange Act of 1934 that have a material impact on financial reporting. These include ineffective internal controls over financial reporting due to illegal acts, material misstatements and material weaknesses on unsafe and unsound practices per CAMELS Ratings of 3, 4 and 5. These include violations of the well-managed standards for financial holding companies with the most serious violations being firms in a troubled condition requiring prompt corrective action, per FDICIA, rather than a federal bailout as part of moral hazard. Accountability for these violations requires remediation to restore well-managed and well-capitalized standards per CAMELS Ratings of 1 and 2. This includes restatement of covenant violations and related material misstatements, and material weaknesses within misleading and fraudulent statements so as to prevent delisting of securities. Accountability may also include a new special risk assessment through the Systemic Resolution Fund for financial companies to cover the cost of failed financial holding companies. Financial companies are defined to include investment advisers with assets in excess of $10 billion. The Systemic Resolution Fund is a new concept within the draft legislation from the House, called "Financial Stability Improvement Act of 2009" and the draft legislation from the Senate, called ‘‘Restoring American Financial Stability Act of 2009."

By applying:

  • Section 10A Audit requirement for illegal acts from the Securities Exchange Act of 1934,
  • the safety and soundness standards, including prompt corrective action, per FDICIA with effect from 1991,
  • the well managed and well-capitalized standards for financial holding companies with effect from November 12, 1999,
  • violations of internal controls over financial reporting with effect from August 14, 2003 and
  • violations of SEC Rule 10A3 on corporate governance listing standards with effect from April 25, 2003,

many of the financial holding companies reaching a troubled condition breached all major federal regulations on safety and soundness and investor protection since 1934, yet there has been no accountability for these violations. Firms reaching the troubled condition were required to solve these violations to restore the well-managed and well-capitalized standards, but this did not happen, thus deepening the severity of the financial crisis. Many firms reaching the troubled condition were required to solve their financial difficulties through prompt corrective action but this did not happen. Instead, the firms received the federal bailout as part of the moral hazard and the underlying violations of the federal regulations on being well managed and well capitalized remain in place.

The Services Ethics Metrics Provides

Ethics Metrics is the only firm to offer an independent risk assessment of the health of financial holding companies and the board's role in the oversight of compliance risk. The firm enables transparency and market discipline in the financial marketplace by independently measuring and rating ten major governance, compliance and audit problems, including fraudulent statements, systemic risk and moral hazard, that caused the financial crisis.

Through its patent-pending Ethics Framework™, along with its Ethics Ratings™ and related Research Reports and advisory services, Ethics Metrics identifies, measures and rates the impact of compliance violations on earnings, capital and compensation, empowering investors and shareholders to price ethical corporate governance and creating an incentive for the leadership of financial organizations to implement and maintain ethical governance standards. Bringing transparency to price information asymmetry on corporate governance risks by financial holding companies is an alternative strategy offered by Ethics Metrics that was not cited in the Federal Reserve’s speech on "Confronting Too Big To Fail" on October 21, 2009.

The Ethics Framework™ is a holistic model that solves bank cyclicality by synchronizing compliance with required remediation on the safety and soundness regulations so firms are self-insuring per interconnected federal regulations as well managed and well capitalized financial holding companies and insured institutions. The model measures and rates degrees of compliance with FDICIA’s safety and soundness requirement that firms must have "minimum earnings sufficient to absorb losses without impairing capital." The model measures and rates safety and soundness standards on provisioning, capital, and compensation, among other components, as set forth per Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), the well managed and well capitalized standards of Gramm-Leach-Bliley Act of 1999, the draft Financial Stability Improvement Act of 2009, the draft Restoring American Financial Stability Act of 2009, and the IMF’s October 2009 Global Financial Stability Report. CAMELS Ratings of 1 and 2, the standards of the Code of Ethics per Sarbanes-Oxley 406, the corporate governance listing standards of the exchanges and matching Ethics Ratings of 1 and 2 represent compliance with these standards.

Ethics Metrics serves a diverse market including financial institutions, institutional investors, hedge funds, regulators and exchanges, lawyers, and auditors.

For shareholders and exchanges, the firm provides transparency to measure, rate and price ineffective corporate governance as a result of violations of the corporate governance listing standards by Boards of Directors, auditors and management. The SEC’s Staff Legal Bulletin No. 14E (CF), dated October 27, 2009, recognizes that "the board's role in the oversight of a company's management of risk is a significant policy matter regarding the governance of the corporation." Ethics Ratings of 3, 4 and 5 are correlated to ineffective oversight by Boards of Directors on detecting compliance violations by management and audit risks by auditors on illegal acts, that include unsafe and unsound practices per CAMELS Ratings of 3, 4 and 5 with extreme violations being firms in a troubled condition requiring prompt corrective action rather than a federal bailout as part of moral hazard. These violations qualify as a material weakness, per PCAOB Auditing Standard No 5, due to "ineffective oversight of the company's external financial reporting and internal control over financial reporting by the company's audit committee."

For audit committees, the firm provides products and services that measure and rate the effectiveness of corporate governance in overseeing (1) degrees of compliance by management with laws and regulations, the Code of Ethics and the corporate governance listing standards, (2) audit risks or the ineffectiveness of the external auditor in detecting and disclosing illegal acts per Section 10A that are material misstatements requiring restatements, and (3) material misstatements and material weaknesses that violate effective internal controls over financial reporting. The Ethics Framework enables the audit committee to measure, rate and manage effective internal controls over financial reporting based on degrees of compliance and related illegal acts, audit risks, delisting risks and restatement risks on an Ethics Rating scale of 1 to 5. Ethics Ratings of 1 and 2 represent effective internal controls over financial reporting.

For auditors, audit committees and users of audited financial statements, the firm solves audit risks of generally accepted accounting principles (GAAP) and internal controls over financial reporting (ICFR) per Sarbanes-Oxley 404. The audit risks are due to the failure of GAAP and ICFR to detect and disclose compliance risks and related contingent liabilities that qualify for ineffective internal controls over financial reporting based on exposure to illegal acts that equate to Ethics Ratings of 3, 4 and 5. The firm solves audit risks by providing a unified, independent Ethics Framework that measures and rates illegal acts, compliance risks, covenant violations, material misstatements, and material weaknesses for financial holding companies and federally insured financial institutions on an Ethics Rating Scale of 1 to 5. Ethics Metrics is the first to measure and rate audit quality based on exposure to audit risks. A rating service on audit quality is lacking in the financial market, according the Basel Committee on Banking Supervision’s December, 2008 report on "External audit quality and banking supervision." Audit risks require a qualified audit opinion and restatement to correct material illegal acts that cause misleading and fraudulent statements. Audit risks expose auditors to suspension from practicing and debarment by the Federal Reserve per 12 §263.94, "for knowingly or recklessly giving false or misleading information. The term "information" includes facts or other statements contained in testimony, financial statements, applications, affidavits, declarations, or any other document or written or oral statement."

For lawyers, the firm’s Ethics Ratings of 3, 4 and 5 represent ineffective internal controls over financial reporting as part of misleading and fraudulent statements used to obtain federal deposit insurance and funding from the public securities markets in violation of SEC Rule 10B5. These also represent violations of the well-managed standards for financial holding companies that require cessation of financial activities per Section 4(k)(4) of the BHC Act and delisting of securities due to ineffective corporate governance of compliance risk management. Ethics Ratings 3, 4 and 5 represent illegal acts and covenant violations of the well managed and well capitalized regulations for financial holding companies that require remediation per 12 §225.83(c) so as to prevent troubled condition per 12 §225.71(d) and the foregoing legal risks, including possibly prompt corrective action. Legal risks expose lawyers to suspension from practicing and debarment by the Federal Reserve per 12 §263.94, "for knowingly or recklessly giving false or misleading information. The term "information" includes facts or other statements contained in testimony, financial statements, applications, affidavits, declarations, or any other document or written or oral statement."

For regulators and exchanges, the firm provides a unified, independent model that measures and rates the financial health of financial holding companies and the effectiveness of Boards of Directors in overseeing compliance risk management and audit risks that contribute to fraudulent statements, systemic risks, delisting risks and moral hazard. The Special Inspector General for TARP stated in an audit report dated October 5, 2009, that the regulators lacked an independent risk assessment of the financial health of financial holding companies when approving firms, in a serious financial condition, for TARP.

For investment advisers, including those defined as a financial company, the firm provides transparency with actionable intelligence that empowers investment advisers to reassess, manage and price common risk exposures caused by ineffective corporate governance on compliance. Common risk exposures include delisting of securities, restatements of earnings and capital and special risk assessments to cover the cost of failed financial holding companies.

Founders of the firm include:

Ethics Metrics LLC is led by:

Beckwith B. Miller, CEO. Miller is a former senior banker with Barclays Bank specializing in global finance, credit risk management and new product development. Examples of creating innovative solutions for complex risk management issues include these products and solutions: asset sales into the forfait market, credit-enhanced notes by insurance companies, unified financial services for US companies prior to the European Union, and providing risk management advisory services. Bringing value by solving asymmetric informational risks through metrics and transparency is the driving force for the patent-pending process of the Ethics Framework and Ethics Metrics LLC.

Douglas Q. Holmes, Chairman. Holmes has been a successful banker and financier for more than 30 years. His career has included senior banker roles at Lazard Freres & Co., The First Boston Corporation and Kidder, Peabody & Co. in both New York and Chicago. He has also launched two private investment banks, Carleton McCreary Holmes & Co. and, subsequently, Holmes Hollister & Co.

Patrick J. Whalen, Esq., is a partner in the law firm of Spencer Fane Britt & Brown LLP. Whalen is recognized as a leading commercial litigator, with particular expertise in intellectual property and licensing disputes. The co-author of numerous books, he is co-founder of Ethics Metrics LLC.

Members of Advisory Board:

Howard R. Sutherland, Esq. Sutherland is a securities and mergers and acquisitions attorney in New York. From 2003 through 2009, Howard was the General Counsel and a member of the management committee of C.E. Unterberg, Towbin and, after CEUT's acquisition by Collins Stewart plc, of Collins Stewart LLC. From 2000 through 2002, he was Senior Counsel, Corporate Law with Merrill Lynch & Co., Inc. in New York. From 1995 to 2000, he was a corporate finance and M&A associate with Shearman & Sterling in London and New York. Prior to practicing law, Howard was a Marine infantry officer and Air Force Reserve fighter pilot.

Gary F. Henry. Henry is the Principal Consultant of G F Henry and Associates, a management consulting firm based in Charlottesville, Virginia. Mr. Henry has more than 30 years of distinguished experience, spanning leadership, strategy, business process, change management, finance, IT, product development, marketing and entrepreneurship. He has been a CEO, CFO and COO.

Contact Information:

Ethics Metrics LLC
501 E. Main Street, Suite 300
Charlottesville, VA 22902
www.ethicsmetrics.com
info@ethicsmetrics.com
434-962-6691