Category: Social Networking and Web 2.0

The House Financial Services Committee Wants to be Your Friend

Congressman Bachus must have let one of his grandkids near the computer. The House Committee on Financial Services, of which Congressman Bachus is the chairman, has jumped into the world of social media. They have a Twitter feed, a YouTube Channel, a Facebook page and a blog: The Bottom Line.

Even though the SEC has not yet come out with its final whistleblower rule, the committee has set up its own whistle blower form. They have a comment box so you can send comments about legislation.

As for the blog,

“We will bring to your attention what we think is important and interesting. We will post what we’re reading and what we’re thinking. We will post short reaction pieces and longer thought pieces. We will blog about ideas and policies that we support and that we don’t support. We will try to entertain. Most importantly, we will try to engage our readers.”

It’s a nice, although extremely partisan, attempt to provide more information. I’m all for open government and an open discussion of the issues. Maybe using these communication channel will help bring more openness. Maybe they will just bring more grandstanding and partisan bickering.

One of the features on the committee’s website is Collateral Damage: the real impact of the Democrat’s bailout bill.  I get the sense that the website is more about political propaganda than open government.

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The SEC is Looking at Advisers’ Use of Social Media

According to a story in Investment News, the Securities and Exchange Commission began a sweep of investment advisers’ use of social media and social networking last month.

The story hast a quote from Doug Flynn, an adviser at Flynn Zito Capital Management LLC, that is exactly on target for traditional investment advisers:

“I’d love to start tweeting to the general public once they can clearly tell me what I can and can’t do. However, putting yourself out there too much without specific guidelines is just not worth the risk.”

I don’t think the same is true for private fund managers who will soon have to register with SEC as investment advisers. How does the SEC’s regulation of Web 2.0 affect private fund managers once they register as investment advisers?

Not much.

Private funds are limited by the prohibition on general solicitation and advertisement.  They usually rely on Regulation D to keep from having to register the interests in their funds. Rule 502(c) of Regulation D states that “neither the issuer nor any person acting on its behalf shall offer or sell the securities by any form of general solicitation or general advertising, including, but not limited to, the following:

1. Any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio; and

2. Any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. . . “

The very public nature of social media and social networking sites are going to put them squarely in the box limited by this regulation. Even though there is some ability for a fund manager to use social media under the Investment Advisers Act, that ability is curtailed by the limitations under the Securities Act. Certainly, fund managers and their personnel can use web 2.0 tools for personal reasons and business reasons not related to advertising their firm or its funds. (You will notice that I don’t publish posts about my firm or its funds.)

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Materials from Social Media Policies

Virtual Corporate Counsel Forum

As a follow-up to my presentation on social media polices at the Virtual Corporate Counsel Forum, I’m publishing the slide deck and links to some of the items I discussed.

Social Media Policies

Download the Slidedeck: ALM social media policy

FTC Action against Ann Taylor

FTC Action Against Reverb

SEC Guidance on the Use of Company Websites

Organized Labor and Social Media Policies

Advice Memorandum from the National Labor Relations Board in Sears Holdings (Roebucks) Case 18-CA-19081

Basic policy:
Be professional, kind, discreet, authentic. Represent us well. Remember that you can’t control it once you hit “update.” by Jay Shepherd on his Gruntled Employees blog

In the slide deck, I mention PBworks. I serve on a board of advisers for them and have a financial interest in the company.

Organized Labor and Social Media Policies

While preparing for my presentation today on social media policies, I came a cross this great article by Seth Borden: Labor Disputes Arising out of Social Media.

Having organized labor in your workforce will complicate the creation and enforcement of a social media policy. Potential unionizing activities offer similar problems. Employers must consider traditional labor law principles when creating and enforcing workplace social media policies.

The National Labor Relations Board has issued advice on social media policies. Sears had a policy that prohibited “disparagement of company’s or competitors’ products, services, executive leadership, employees, strategy, and business prospects.” The NLRB’s Division of Advice concluded that the charge against Sears should be dismissed. However, Mr. Borden concludes that the current make-up of the NLRB is more labor friendly and could rule the other way if again presented with a similar policy.

The challenges of drafting a social media policy will be to carry the existing law involving email and surveillance limitations to the current age of web publishing. This is not a unique challenge. You can see the same challenge with FINRA in the financial services industry.

If you have organized labor in your workforce and are concerned about social media use by your employees you should spend a few minutes and read Borden’s article.

Seth Borden is a partner in the New York office of McKenna Long & Aldridge and a member of the firm’s labor and employment practice. He co-writes the firm’s blog, Labor Relations Today, covering developments in labor law.

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Image of Unfair to Organized Labor sign is by Thomas Hawk

Virtual Corporate Counsel Forum: Social Media Policies

Virtual Corporate Counsel Forum

The folks at ALM are producing an online version of their Corporate Counsel’s annual General Counsel Conferences. I’m stepping in to fill a lat minute vacancy for one session: Social Media Policies: Crafting a Uniform Policy Across your Organization and Enforcing It. I’ll be joining Valerie L. Boccadoro, Director and Senior Intellectual Property Counsel at Toys R Us. I will be sharing my social media policies database and some thoughts on the regulatory issues that affect web publishing.

Registration is free, but is only open to general counsel/in-house corporate counsel.

Here is the full agenda for the day:

9:15 – 10:15 am

Social Media: Privacy & Security (CLE Eligible)

  • Ensuring your organization’s intellectual property is safe and protected
  • Protecting your clients and your employees
  • Twitter, Linked-in and Facebook: Exposure, liability and consequences
  • Watching the web: what do you have out there and how did it get there?

Bill McComas, Esq.
Partner
Shapiro Sher Guinot & Sandler
Michele Gibbons
Partner
Mayer Brown

10:15 – 11:15 am

Selecting the Right Fee Arrangement (CLE Eligible)

In view of the high cost of litigation in the face of shrinking corporate budgets, the need to select the right fee arrangement for an organization’s disputes is becoming more and more important. Our speaker, an experienced patent litigator, will review the options available to in-house counsel and outside counsel in setting up the right kind of fee arrangement, including identifying:

  • factors involved in determining what kinds fee arrangement makes sense in the context of the particular dispute;
  • different kinds of fee arrangements which are potentially available and discussing the best circumstances for considering each kind of arrangement;
  • cost saving techniques to reduce unnecessary expenditures; and
  • best practices for matching litigation activities to client goals and resources


Charles R. Macedo, Partner, Amster, Rothstein & Ebenstein;
Author, The Corporate Insider’s Guide to US Patent Practice, published by Oxford University Press

11:30 am – 12:30 pm

Effective Information Management Improves Corporate Litigation Readiness (CLE Eligible)

Information Management means different things to different people. For corporate legal departments with increasing eDiscovery demands and decreasing legal budgets, Information Management is a way to meet eDiscovery requirements, lower their legal risk and operate within budget. Many organizations do not have a tested process and therefore expend resources and dollars beyond what is necessary. This presentation will:

  • Review current Discovery responsibilities
  • Discuss how an organization’s data infrastructure won’t lend itself to effective and efficient eDiscovery
  • Review Information Management best practices to better proactively prepare for eDiscovery

William Tolson
Director of Product Marketing/Evangelism
Iron Mountain
William F. Savarino
Partner
Cohen Mohr LLP

12:30 – 1:30 pm

The Real Rate Report: Understanding the True Drivers of Legal Costs (CLE Eligible)

CT TyMetrix, in collaboration with The Corporate Executive Board’s Legal and Compliance practice/General Counsel Roundtable, brings you the industry’s first (and only) quantitative analysis of over $4 Billion in legal spend from more than 4,000 law firms and 50,000+ individual billers. The 2010 Real Rate Report will provide corporate legal departments, claims organizations and law firms with the first reliable benchmark data on law firm pricing, staffing practices, and realized rates across geographies, practice areas, matter types and timekeeper types.

The session will discuss how putting data to work can provide perspectives on trends and practices. The session will highlight reliable benchmarks that can be used to evaluate and negotiate rates across geographies, practice areas, professional levels, and other segments, as well as other insights.


Craig Raeburn
Vice President of Product Management
CT TyMetrix
Keith Brown, Esquire
Lead Business Consultant
CT TyMetrix

1:45 – 2:45 pm

Management, Measurement and More – Best Practices for Maximizing Your Legal Spend

As many law departments continue to face budget cuts, in-house counsel are challenged to find new ways to maximize their legal spend and control costs. Join LexisNexis® CounselLink™ representatives and in-house counsel from leading law departments as they share their perspectives on:

  • The impact of the dynamic economic climate on their law departments and the reporting tools used to optimize and justify spending decisions – comparing the decline in 2009 to the predicted upward trend in 2010
  • Alternative fee arrangements and how the right data and reporting can help identify outside counsel that are underperforming
  • In-sourcing versus outsourcing legal work, and the considerations and methods to make smarter decisions
  • Managing relationships with outside counsel and how using metrics and reporting can help ease difficult dialogues and garner greater productivity

Don’t miss this opportunity to the hear best practices and first-hand experiences of our GC panelists who have found the right balance between their budget and their business needs and improved the management and efficacy of their law departments.


Mary Clark
Vice President of Law
LexisNexis
Patrick Ryan
Director of Administration
City of Chicago Department of Law
Robin Sangston
Vice President, Legal Affairs and Chief Compliance Officer
Cox Communications, Inc.

2:45 pm – 3:45 pm

Social Media Policies: Crafting a Uniform Policy Across your Organization and Enforcing It (CLE Eligible)

  • Social Media and the struggle to keep IT, compliance & legal up to date
  • Policies and protocols to monitor and manage the burgeoning communications
  • Understanding the risks involved with the technology before you dive in
  • Creating a policy beyond banning social media all together
  • Using the tools to create realistic and enforceable social networking policies

Valerie L. Boccadoro
Director and Senior Intellectual Property Counsel
Toys R Us
Doug Cornelius
Chief Compliance Officer
Beacon Capital Partners, LLC.

4:00 pm – 5:00 pm

Driving Risk Out of the eDiscovery Process (CLE Eligible)

From the obligation to identify and preserve, through to the critical processes of analysis and review, the entire eDiscovery process can be complicated and cumbersome.  Developing and executing an eDiscovery preparedness plan that is repeatable, defensible, and cost effective often presents a challenge, considering the legal risks and enormous amount of time and resources it can consume if done without the proper people, processes and tools.

This presentation will help attendees understand how their organizations can:

  • Create a foundation for an organized, systematic, and defensible approach to eDiscovery – resulting in predictable legal costs and reduced risk
  • Analyze data in the wild, and in real-time – making more informed strategic legal decisions earlier in the eDiscovery process and reducing downstream review fees
  • Create a symbiotic relationship between legal and IT – ensuring legally defensible audit trails throughout the eDiscovery process

Keith Zoellner
Chief Technology Officer
StoredIQ
Ursala Talley
Vice President, Marketing
StoredIQ
Jake Frazier
Managing Director
Huron Consulting Group

Social Networking Malware as Affinity Fraud

Panda Security released its first annual Social Media Risk Index for small- and medium-sized businesses. They surveyed 315 US SMBs with up to 1,000 employees during the month of July.

33 percent of these companies had experienced a malware or virus infection from social networks

23 percent citing employee privacy violations resulting in the loss of sensitive data from social networks

Panda concluded that Facebook provided the majority of the reported malware and privacy violations. That should not be a surprise since Facebook is the most widely used social media site.

I was surprised to see how high Twitter was in list of sources causing problems. Yes, Twitter was half of Facebook. But Twitter’s popularity is much less than half of Facebook. I would pin the responsibility on the widespread use of URL shorteners in Twitter. If a friend sent a link from nytimes.com, I would be much more likely to click on that link than one from nigerianmoneymakingtips.com. When the link is hidden behind the URL shortener (http://bit.ly/aBzaiB), you do not know the destination. (Tell me you didn’t click on that link?) Yes, there are many tools that will expose the URL, but that is not the default for the services.

I think the vast majority of people realize that the Nigerian banker does not really have the millions of dollars promised to you. We are more likely to click on a link sent from a friend or a stranger saying they have money for us.

That is the increased danger from social network sites. They are a type of affinity fraud, preying on those in a similar social circle.  Instead of looking directly for money, they are looking indirectly for passwords and account information.

Affinity frauds exploit the trust and friendship that exist in groups of people who have something in common. They usually enlist respected community leaders from within a group to spread the word about the scheme.

Taking this to social networking sites, the relationship are exposed through the connections memorialized in the site. The leaders are those with the most connections.

By spreading the message from compromised account to compromised account, the malware is piggy-backing on the social connections. The better infections make it look like the message is from the person and the link is tied to something of interest, like the Most Hilarious Video.

The leaders for a social networking site end up being the leaders because the message gets sent to the most people. If I mistakenly send a malware url on Twitter, only a few thousand people will be potential targets. If Chris Brogan sent the message, it would be seen by over 150,000 people. If Kim Kardashian was the sender, then over 4 million people would be on the receiving end.

I don’t think that the malware and privacy concerns should deter businesses from using these tools. You just need to recognize the additional threats. We have become better at spotting the email scams and blocking malicious emails. We just need to improve the technology and increase employee knowledge to reduce the likelihood of social network malware infections.

If You Want to Defend Your Privacy from Geek and Poke

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Active Privacy Defense by Geek and Poke

Blatant Self-Promotion

Each year, LexisNexis “honors a select group of blogs that set the online standard for a given industry.” This year, they expanded Top Blogs to include their Business Law Communities.

Compliance Building is one of the nominated candidates for the LexisNexis Top 25 Business Law Blogs of 2010, featured on the LexisNexis Corporate & Securities Law Community and the LexisNexis UCC, Commercial Contracts & Business Law Community.

Looking at the list of candidates, I see many blogs that I read regularly. If you are looking for a list of business law blogs to read, the list of nominees is a great place to start.

I think most of the nominated blogs are much better than mine. Whether its on quality, popularity, or some other factors, there is no way I will make it into the top 25. I will sit back and take the consolation prize: the honor of being nominated.

Lexis Nexis invites you to comment on the announcement post at either of the following links:

Top 25 Business Law Blogs 2010 – Corporate & Securities Law Community

Top 25 Business Law Blogs 2010 – UCC, Commercial Contracts & Business Law Community

To comment, you have to register. Registration is free and supposedly does not result in sales contacts. The comment period for nominations ends on October 8, 2010. They don’t say how they will end up selecting the top 25 out of the nominees other based on their review and your comments.

I’m also not sure how the Lexis-Nexis Communities fits in with the Martindale Hubbell Connected platform. There seems to be whole lot so substantive information in Communities that is missing in Connected. They should get these two sites together.

Vote for the business law blogs you feel are the best. Include Compliance Building if you think it’s worthy.

The Second FTC Action for Online Endorsements

Back in December, the Federal Trade Commission released new guidelines that specifically required bloggers to disclose any material connections to a product or company they are writing about. In May, they brought their first action under those guidelines against Ann Taylor. The FTC declined to bring an enforcement action.

Last week, they brought their second action. A public relations agency hired by video game developers had employees pose as ordinary consumers posting game reviews at the online iTunes store, and did not disclose that the reviews came from paid employees working on behalf of the developers.

This time they decided to enforce. Reverb Communications, Inc. and its sole owner, Tracie Snitker, are required to remove any posted endorsements that misrepresent the authors and fail to disclose the connection between Reverb and Snitker and the seller of a product or service. Reverb would get paid to promote the games and would often get paid a percentage of sales.

The posted reviews were published between November 2008 and May 2009. The endorsed products by giving them 4 and 5 star ratings in iTunes. They also submitted positive written comments like these:

  • “Amazing new game”
  • “ONE of the BEST”
  • “One of the best apps just got better”

I’m sure you noticed that the publication dates of the reviews predate the new guidelines were finally adopted. That means the FTC is willing to go back retroactively and enforce these guidelines.

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Social Media as a Risk Factor

It’s official. Social media is a risk factor. At least according to Estee Lauder and lululemon athletica.

Over at Footnoted, Michelle Leder and her team dig through SEC filings digging up the dirt on bad corporate behavior. They were digging through the 10-K for Estee Lauder when Theo Francis came across a new risk factor.

Our inability to anticipate and respond to market trends and changes in consumer preferences could adversely affect our financial results.

Our continued success depends on our ability to anticipate, gauge and react in a timely and cost-effective manner to changes in consumer tastes for skin care, makeup, fragrance and hair care products, their attitudes toward our industry and brands, as well as to where and how consumers shop for those products. We must continually work to develop, produce and market new products, maintain and enhance the recognition of our brands, achieve a favorable mix of products, and refine our approach as to how and where we market and sell our products. While we devote considerable effort and resources to shape, analyze and respond to consumer preferences, we recognize that consumer tastes cannot be predicted with certainty and can change rapidly. The issue is compounded by the increasing use of social and digital media by consumers and the speed by which information and opinions are shared. If we are unable to anticipate and respond to sudden challenges that we may face in the marketplace, trends in the market for our products and changing consumer demands and sentiment, our financial results will suffer.

It’s not exactly: “We could lose millions if the Twitteratti turn on us.”

Public companies disclose risk factors in their SEC filings trying to inform its stockholders and potential purchasers of its stock about potential losses. Failure to disclose a risk could result in a shareholder suit that the company was hiding its risks.

It looks like Estee Lauder is covering itself in case its customers get ugly in social media, start attacking the company, and stop buying its products.

Ever vigilant, Theo Francis poured back through the SEC database to see if any other companies had disclosed social media as a risk factor in its SEC filings. The only other consumer-product company they  found that lists social media as a risk factor in its 10-K was lululemon athletica, a Vancouver-based maker of “yoga-inspired apparel.”

Social media is not a new disclosure in SEC filings, but it was mostly discussed in marketing strategies and business strategies for tech and media companies. For example, Estee Lauder’s competitor Elizabeth Arden talks about the use of social media as part of its marketing strategy, but does not disclose it as a risk factor.

I wonder if we will see other companies start adding social media as a risk factor. Have you seen any other companies list it as a risk factor?

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Supreme Court Rules on the Privacy of Text Messages

Sort of.

The Supreme Court issued its ruling in Ontario v. Quon regarding a police chief reviewing the content of a police officer’s text messages with consent or a warrant. Many commenters hoped that the Court would issue a broad statement on an employee’s privacy rights in this age of cloud computing and web 2.0.

The Court chose to rule on very narrow grounds and not address the electronic privacy issue:

“A broad holding concerning employees’ privacy expectations vis-à-vis employer-provided technological equipment might have implications for future cases that cannot be predicted. It is preferable to dispose of this case on narrower grounds.”

The Justices were hesitant to jump into the battle about electronic privacy:

“The Court must proceed with care when considering the whole concept of privacy expectations in communications made on electronic equipment owned by a government employer. The judiciary risks error by elaborating too fully on the Fourth Amendment implications of emerging technology before its role in society has become clear.

…

Prudence counsels caution before the facts in the instant case are used to establish far-reaching premises that define the existence, and extent, of privacy expectations enjoyed by employees when using employer-provided communication devices. Rapid changes in the dynamics of communication and information transmission are evident not just in the technology itself but in what society accepts as proper behavior.”

Instead, the Justices looked narrowly as the special situation of the government as an employer.  Since its the government, the Fourth Amendment’s protection against warrantless searches comes into play. (This is not applicable for a private employer.)  The standard  is that

“when conducted for a “non-investigatory, work-related purpos[e]”or for the “investigatio[n] of work-related misconduct,” a government employer’s warrantless search is reasonable if it is “‘justified at its inception’” and if “‘the measures adopted are reasonably related to the objectives of thesearch and not excessively intrusive in light of’” the circumstances giving rise to the search.”

Even if a government employee could assume some level of privacy in their messages, it would not have been reasonable for them to conclude that his messages were in all circumstances immune from scrutiny by the government employer.

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