Doug Cornelius on compliance for private equity real estate
This happened one year ago:
Since then, it’s been a whirlwind of regulatory production. It was a huge bill. (My copy goes on for 848 pages.) The Regulations it requires are many times more massive that the bill itself.
We will experience the repercussions for years. So we may as well keep count.
Dodd-Frank Wall Street Reform and Consumer Protection Act (.pdf 2MB)
Over the past few weeks, Google+ has exploded as a new social web platform. We had friends on Facebook and followers on Twitter. Now there are Circles on Google+.
What does this mean from a compliance perspective?
Not much for right now. Google+ does not seem to present any new issues that we haven’t already seen in social media. My general impression is that it’s a hybrid of Twitter and Facebook. This is both in terms of privacy and the way communications flow.
I expect there will be a few hiccups with the privacy settings as we have already seen with Facebook. The use of “circles” allows you limit who can see your communications. But since anyone in that circle can then share it with people in their circle, any message can easily become public. If you want to keep you message a bit more private, there is a button that can check to prevent sharing.
To the extent you have a social media or communications policy you should make sure it takes into account Google+. To the extent you need to archive and preserve messages, you will need to take Google+ into account. Hopefully Smarsh and the other vendors will get access to the API so they can find a way to preserve the messages.
If you block access to social networking sites, Google+ is a little trickier to deal with. It looks like it operates as a subdomain on Google.com. I don’t think too many c0mpanies want to block access to Google.com. Your blocking software will need to make sure it only limits the plus.google.com subdomain. And it’s https:, not http:.
Will Google+ live long enough to be a concern for compliance? Maybe. I have a hard time believing people will use Facebook, Twitter and Google+. I suspect that Google+ will need to take users away from Facebook and Twitter to be successful.
I don’t suspect it will cause many people to abandon Facebook. Google+ is slicker, but Facebook has the bigger user base. As Andrew McAfee once told me, the new tool can’t just be a little better, it has to be many times better for people to switch. I don’t find Google+ to be that much better than Facebook. Most importantly for me, Facebook has the largest collection of close friends and family. (My “Family” circle on Google+ is empty, my “Friends” only has a few handfuls of people, and my “compliance” circle has a single person.)
Twitter is the most likely victim of Google+. It removes the 140 character shackle and threads conversations together. Twitter still has better integration with other platforms. On the other hand, there is the possibility that Google+ could tie together many of Google’s other platforms.
It will be hard to kill Twitter. All of the news coverage about placing the valuation of Twitter in the billions of dollars are tied to Twitter’s latest round of raising money from investors. I would guess that the company is sitting on a big pile cash that will take a long time to burn through, leaving them plenty of cash to improve the product and find ways to generate revenue.
Google+ will cause more compliance headaches. For now, it doesn’t appear to create any new headaches.
Sources:
What better way to celebrate the independence of the United States than by taking the day off from work, grilling meat, and watching stuff blow up.
In colonial Boston, official proclamations were read from the Old State House balcony, looking down State Street towards Long Wharf.
Each July 4th, the Captain Commanding of the Ancient and Honorable Artillery Company reads the Declaration of Independence from the balcony of the Old State House. The reading of the Declaration of Independence dates back to July 18, 1776, when Colonel Thomas Crafts performed this duty for the first time.
I’m once again speaking at the Enterprise 2.0 Conference.
Social Media & Social Networking: Some Cautionary Tales (Location: Room 312)
Social media (Twitter, LinkedIn) and enterprise social networking solutions (profiles, activity streams, social analytics) can deliver compelling business value. However, benefits do not come without risks. This panel discussion with experts and practitioners will provide insight as to the policy, governance, and security issues warranted to mitigate risks.
Moderator – Mike Gotta, Senior Technical Solution Marketing Manager for Enterprise Social Software, Cisco
Panelist – Julie LeMoine, Enterprise Collaboration, Innovation Expert
Panelist – Doug Cornelius, Chief Compliance Officer, Beacon Capital Partners LLC
Panelist – Stew Sutton, Principal Scientist, Knowledge Management, The Aerospace Corporation
Panelist – Suzanne McGann, Social Media Program Manager, Global Interactive Strategy, Medtronic
The session is Tuesday afternoon, 2:30 to 3:30 in Room 312 at the Hynes Convention Center. Stop by if you can.
I never thought the Bruins would win a championship under the current ownership. For the Celtics, Red Sox, and Patriots, it took a change of ownership for them to become championship caliber. The “Tone at the Top” was to win the championship. Nothing else was acceptable.
The owners of the Bruins had been accused of having the team be just good enough. That is, good enough to keep attendance up to sell beer and popcorn.
It’s been thirty-nine years since the Stanley Cup has been in Boston in the hands of a Bruins player, since the days of Bobby Orr and Phil Esposito in black and gold.
The professional recruiters of Howard-Sloan must have been up really late one night to come up with the idea of trying to find America’s Funniest Compliance Professional. Mitchell Berger, Howard-Sloan’s chief executive, said that for several years in the 1980s to ’90s, the firm put on a similar contest for accountants. I suppose if you can find funny accountants, you can find funny compliance officers.
It sounds like the pickings were slim. Compliance officials from around the country sent in demo tapes of their comedic skills. A mere 15 were submitted. From those, six performers were selected.
Give a round a round of applause and a belly laugh to Michael L. Shaw from pharmaceutical giant GlaxoSmithKline PLC, who earned the title of America’s Funniest Compliance Professional.
Even better, the event raised over $11,000 for juvenile diabetes research.
Thanks to Dennis Liu for highlighting the story for me.
Sources:
“If someone is being hit for a bribe, isn’t the easiest thing just to put it on Twitter? It goes round the world in next to no time.”
Richard Alderman, head of the U.K.’s Serious Fraud Office, is apparently serious about Twitter. After self-congratulating themselves for organizing the government overthrows in North Africa and the Middle East, social media sites are apparently ready to stop global corruption.
So I decided to search through Twitter to see what it had to say about bribery. I started with what I thought would be the most obvious using #bribe. The most common messages using that hashtag looked something like this example:
Had to resort to the best method of all just to get my niece to come to Target with me #bribe #sparklynailpolish
Not exactly focusing on the world’s problems.
But I did notice a message from @IPaidABribe, connected to the IPaidaBribe.com the Indian website mentioned in the Financial Times article. That led to this message:
I suppose that is closer to what Mr. Alderman was talking about.
On the other hand Mr. Alderman is in charge of enforcing the UK Bribery Act which makes it a crime to pay a bribe. So if you do report a bribe on Twitter, Mr. Alderman would be responsible for bringing charges against you. The SFO has said they would use prosecutorial discretion when bringing charges, so from a practical matter it would seem unlikely that you would end up with charges against you. But still, would you publicly announce that you just broke the law?
A few days ago, I heard about the Bribespot app for your smartphone that allows you to report bribery and see where it happening using the mapping tool. That would hide your identity when making your bribery report.
Sources
Some beer lovers who were fans of Pabst Blue Ribbon heard that its parent company, the Pabst Brewing Co., was up for sale. The previous owner had died, leaving it to a charitable trust. Charities couldn’t hold on to the asset so they had to sell it.
The beer lovers were a few hundred million dollars short on the purchase price. This is the 21st Century, so they decide to create a website, buyabeercompany.com, to crowdsource the purchase price. They even set up a Twitter account and Facebook page. Each investor would receive a “crowdsourced certificate of ownership,” as well as beer of a value equal to the amount invested.
Those of you with even a vague understanding of securities laws will see that this will not end well.
The fundraising effort was relatively successful. They elicited $14.75 million in pledges during their first few weeks. Apparently, they eventually raised $200 million in pledges from more than 5 million pledgors.
That was not enough money to purchase the company, but it was enough to get in trouble with the Securities and Exchange Commission.
Under Section 5(c) of the Securities Act, it’s unlawful to offer to sell a security unless it is registered with the SEC or there is an applicable exemption. There is no exemption for beer lovers.
From the SEC Administrative Order, it sounds like the beer lovers thought that by merely asking for pledges to eventually buy the company they were not offering securities for sale. The SEC disagreed and pointed to Section 2(a)(3) of the Securities Act that defines “offer to sell” as “every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security, for value.”
So how does Kickstarter not violate Securities Law? Those projects involve selling a product, not selling securities. I pledged for a trebuchette project on Kickstarter. I get two of the Trebuchettes; I don’t get an interest in the company making the product.
I suppose the beer lovers could merely have pre-sold cases of PBR to raise capital. But if you think the securities laws are tough to deal with, try dealing with interstate liquor sales.
Sources:
In a tearful statement to the media, Rep. Anthony Weiner admitted he posted a lewd picture of his anatomy to Twitter. Not only that, he says he’s engaged in “inappropriate” online communications with at least six other women.
It was just a few days ago that I revisited the Fabulous Fab Rule:
Don’t write emails so provocative that they wind up reproduced on the front page of the Wall Street Journal.
That rule is focused on email which for many companies is archived for years. That means it could end up in litigation or an enforcement action. The rule is really applicable to any type of publishing.
The internet has turned us all into publishers, or at least given us the ability to be publishers. Traditional publishers have layers of review before information, stories, and pictures get published. On the internet, the only layer of review is your common sense. That’s all that stands between you and that send button.
Weinergate is just another example of failed common sense. He never should have hit that send button.
I have not found anything new in the scandal. I don’t think you need a new policy prohibiting people from sending pictures of themselves in their underwear. (I suppose there is an exception if you are in the adult entertainment industry.) Common sense should take care of that.
I suppose its useful to compare this to Eliot Spitzer. He had his own sex scandal, but it required a government investigation. Weiner merely shot himself by sending out a public message.
Sources:
Image of Meet Congressman Weiner is by David Boyle
CC BY 2.0
Here are some compliance-related stories that recently caught my eye:
Gold is Not an Investment by Carl Richards in the NY TImes.com’s Bucks
Gold is not an investment. It’s a speculation. Investments are made by evaluating underlying value. Speculative bets are made by looking at the price of something and simply hoping the price goes up. Investing is about value; gambling is about price. Gold has no real underlying value. I know there is a market for it. I know it is real, just like real estate was real in 2007.
Historical Echoes: Communication before the Blog… in the Liberty Street Economics blog of the Federal Reserve Bank of New York
Over the years, the Federal Reserve System has used many methods to communicate about the role it plays in support of stable prices, full employment, and financial stability. Current communication tools include the new press conferences by the Chairman, speeches by Bank presidents, public websites, economic education programs, local outreach efforts, publications, and blogs like this one.
Ninety years ago, however, the options were more limited. The Fed was still new and the nation’s economy was plagued by a growing number of bank failures. The five posters below (from the mid-1920s), with their images of strength and stability, were part of a larger series designed for display at member banks. They were likely intended to inform the public about the Federal Reserve System and foster confidence in its member banks.
Hedge Funds and Advertising: “No advertising” rules more confusing than ever by Judy Gross in Hedge Rows
In the category of “Laws that Haven’t Caught Up with the 21st Century”, the internet aspects of the rules that prohibit hedge fund advisers from “advertising” may come in first place. The SEC rules only allow hedge funds to be offered on a “private placement” basis. This means no general solicitations are allowed. While this is understandable in regard to some venues (think giant billboard in Times Square), when it comes to the internet, these rules may leave you scratching your head.
Failing to Clarify: The Courts Try to Define “Foreign Official” in FCPA Cases by Michael Volkov in the FCPA Compliance and Ethics Blog
In three separate cases, Lindsey Manufacturing, O’Shea and Carson, defendants filed motions to dismiss challenging the DOJ’s interpretation of “foreign official” under the FCPA. Two of these cases have now been resolved and the Justice Department’s position has been upheld. While doing so, the courts have launched separate fact-specific tests to “guide” actors in resolving how the law applies to state-owned enterprises.
The SEC Proposes Rules for Disqualification of Felons and Other Bad Actors from Rule 506 Offerings in 100 F Street
Section 926 requires the adoption of rules disqualifying an offering from reliance on Rule 506 of Regulation D when certain felons or other “bad actors” are involved in the offering. Rule 506 is by far the most widely claimed exemption under Regulation D. For the 12 month period ended September 30, 2010 the Commission received 17,292 initial filings for offerings under Regulation D, of those 16,027 claimed a Rule 506 exemption.
