Compliance Building

Starting a Green Real Estate Fund

Lisa Michelle Galley of the Our Green Journey blog and Galley Eco Capital posts her notes from a panel of green real estate fund managers about why investors and development partners want these funds and the do’s and dont’s for building a green fund.

Does commercial real estate need pure green real estate funds?

Green real estate funds align capital more clearly with mission
JV development partners are seeking a green fund’s concentrated expertise.
Green funds benefit from the superior financial performance of green assets.

Best practices for building a green real estate fund

Your team must have sustainability expertise.
Pay attention to both the leasing team and lease structure
Establish the right partnerships
Proper reporting is crucial.

Tenant Notification of Indoor Air Contamination in New York

New York passed Chapter 521 of the Laws of 2008, signed into law by Governor Paterson on September 4, 2008, effective December 3, 2008 which adds N.Y. Envtl. Conserv. Law (ECL) Section 27-2405 (“Tenant notification of indoor air contamination”).

The requirements of the new law apply only to test results that have been provided to the property owner by an “issuer,” which is defined to include:

(a) The New York State Department of Environmental Conservation (“NYSDEC”);

(b) A municipality that has entered a contract with NYSDEC to undertake an environmental restoration project;

(d) A “participant” in New York’s Brownfield Cleanup Program (“BCP”).

The definition of participant under the BCP is an applicant into the program who is liable for contamination as an owner or operator. A “volunteer” under the BCP is an applicant not liable for the contamination as a “bona fide” purchaser (i.e., an owner whose liability arises solely from ownership after the contaminants were released). In addition, the new law would not cover test results gathered during due diligence on a purchase or lease.

See also:

Duane Morris Alert: New York Law Requires Landlord Disclosure of Environmental Test Results to Tenants
NYSBA Real Property Law Section Blog: Indoor Air Contamination – Notice to Tenants

N.Y. Envtl. Conserv. Law (ECL)
§ 27-2405. Tenant notification of indoor air contamination.
1. For purposes of this section:
a. “test results” shall include the results of any tests conducted on indoor air, subslab air, ambient air, subslab groundwater samples, and subslab soil samples; and
b. “issuer” means:
(i) a person subject to an order issued pursuant to title thirteen of this article, article twelve of the navigation law, or title twelve-A of article thirteen of the public health law,
(ii) a participant as defined in subdivision 1 of section 27-1405 of this article subject to an agreement entered into pursuant to title fourteen of this article, or
(iii) by a municipality subject to a contract entered into pursuant to title five of article fifty-six of this chapter; or
(iv) by the department.
2. Any owner of real property or any owner’s agent to whom indoor air contamination test results have been provided by an issuer shall, in cases where test results exceed department of health indoor air guidelines or the occupational safety and health administration guidelines for indoor air quality, provide a fact sheet and timely notice of any public meetings required to be held to discuss such results to all tenants and occupants and upon request such test results and any closure letter, within fifteen days of receipt of such results. Generic fact sheets shall be prepared by the department of health and shall identify at a minimum the compound or contaminant of concern, reportable detection levels established by the department of health indoor air guidelines or the occupational safety and health administration guidelines for indoor air quality and health risks associated with exposure to such compound or contaminant and a means to obtain more information on the compound or contaminant.

3. For real property for which an engineering control is in place to mitigate indoor air contamination, or if the real property is subject to ongoing monitoring pursuant to an ongoing remedial program, the owner or
owner’s agent of real property to whom indoor air contamination test results have been provided by an issuer shall provide, or cause to be provided, fact sheets, and upon request any test results, or closure letter received by such owner or owner’s agent to any prospective tenant prior to the signing of a binding lease or rental agreement. Generic fact sheets shall be prepared by the department of health and shall identify at a minimum the compound or contaminant of concern, reportable detection levels established by the department of health indoor air guidelines or the occupational safety and health administration guidelines for indoor air quality and health risks associated with exposure to such compound or contaminant and a means to obtain more information on the compound or contaminant. Such notice shall be included in the rental or lease agreement and shall contain the following in at least twelve point type in bold face on the first page: “NOTIFICATION OF TEST RESULTS The property has been tested for contamination of indoor air: test results and additional information are available upon request.”

Gullibility

NPR’s Science Friday has an interesting broadcast on Gullibility. Ira Flatow interview Stephen Greenspan, author of Annals of Gullibility: Why We Get Duped and How to Avoid It.

Can science explain why some swindles are so successful? Why are some people more likely to try to buy the Brooklyn Bridge or send money to the heir of a deposed Nigerian prince online? In this segment of Science Friday, we’ll talk about gullibility and the psychological principles at work in scams, from the $15 ‘genuine Rolex’ watch to the Bernard Madoff Ponzi scheme.

Mr. Greenspan was also the author of an essay in the Wall Street Journal: Why We Keep Falling for Financial Scams.

One memorable quote was his take on the Madoff scheme. Mr. Greenspan point out that the scheme was not focused on greed. Madoff was not offering the high returns of typical Ponzi schemes. Instead, Madoff was offering a steady return. Madoff was offering safety. Mr. Greenspan points out that gullibility can be driven by the fear of losing money as much as it can be driven by the greed for money.

Lawyers and the Social Internet

Kevin O’Keefe, of Real Lawyers Have Blogs, put together his thoughts on what are the best social internet places for a lawyer or law firm to spend their resources: Lawyers and Social Media – It the Big Three. Kevin picks Blogs, Twitter and LinkedIn.

As usual, I agree with Kevin.

Every professional should have a profile on LinkedIn. Lawyers may rely on their law firm website, but lawyers do not stay at the same law firm for their entire career any more. I was at The Firm for 13 years, but everyone else I keep in touch with from law school had moved to a new place. I was the last person who was still at the same place. LinkedIn is great at keeping track of your job history. LinkedIn is the place to answer the question: How Ddo I know you? When I am planning to meet someone I always run a Google search and a LinkedIn search.

I have found this blog to be a wonderful networking tool. I have created and maintain many relationships through this blog. There is no better way to stay connected, develop your expertise and showcase your abilities than through a blog. It has been tough for me to give up on this blog since moving from knowledge management to compliance. (And obviously unsuccessful.) Compliance Space will come out of the dark in the near future. Although most of you will not be interested in it.

Twitter has exploded as a idea tool. As with most people, I was skeptical of what to do with a 140 character messaging system. But the open design has produced remarkable results for me.The micro-blogging aspect allows me communicate with people in a quick and easy way. Bigger thoughts end up in the blog. Lots of the background communication happens in Twitter.

I also use Twitter for research. Several times a day I search for “compliance”, “FCPA”, “CFIUS,” “Ethics”, and lots of other compliance terms. These tweets connect me with people, news, thoughts, thought-leaders and a plethora of information that helps me with my new role as Chief Compliance Officer.

One of the challenges of taking the new position, in this new area was the great network I had developed in the knowledge management and enterprise 2.0 areas. LinkedIn, blogs and Twitter are helping me to rapidly build a new network in the compliance area.

Facebook is great aggregator of information. I use it largely by having Facebook applications pull posts from blogs, my twitter updates and other sources rather than using Facebook as the primary creation point.

Unlike Kevin, I am still trying out new social internet sites. I still think Legal OnRamp has a bright future. Martindale-Hubble Connected has huge information repository that could create an incredibly powerful tool.

I try others to see what may develop. Eighteen months ago, I thought LinkedIn was boring and would not amount to much. I was wrong. It took a while for Twitter to catch on. I jump on others just to grab my name and to see what may happen. Usually I just waste 10 minutes to create profile (unfortunately, much longer for ABA’s LegallyMinded), see who else is there and explore the feature set. I have long list of bookmarks for dead social internet sites.

As with Kevin, I spend the vast majority of my time with the big three. You should too.

Originally posted on KM Space.

New Social Networks for Lawyers

Omar Ha-Redeye writes on slaw.ca about two new social networks for lawyers: Lawyrs Looking for Alternative Social Networks and Social Network on Jurafide for American Clients.

Jurafide.com is a networking and marketing site that facilitates communication between U.S. clients and non-U.S. lawyers.

Lawyrs.net looks like a social networking platform for lawyers with some group discussions and legal news.

Omar signed up on Lawyrs but finds that it is missing the ability to pull in your contacts and see who you know is in the site. A fatal flaw.

I did not bother signing up for either one. Legal OnRamp seems to be the dominant site in the world of social networking in the legal field. I previously wrote about my bad experiences with LawLink and ABA’s LegallyMinded. I still hold out some hope for Martindale Hubbell Connected. So, I am skeptical that either of these two companies with no apparent connection to the US legal market can provide an interesting online networking platform.

Originally posted on KM Space.

Anti-Fraud Provision of the Investment Advisers Act

On September 10, 2007, the SEC Adopted Rule 206(4)-8. The SEC adopted this rule in response to the decision in Goldstein v. SEC, 451 F.3rd, 873 (in which the Court of Appeals for the District of Columbia ruled that the “client” of an investment adviser was the pool itself and not an investor in the pool).

Rule 206(4)-8 makes it clear that the SEC may prohibit fraudulent conduct of an investment adviser that impacts an investor in the investment pool, regardless of whether the investment adviser has registered with the SEC.

The rule does not create a private right of action. It only provides the SEC with the authority to enforce the rule. But the SEC does have its broad authority to impose fines, sanctions bar individuals from the securities business and to seek criminal penalties.

The rule prohibits misleading statements and deceptive conduct and is not limited to “statements.” So, the rule is applicable to non-written misstatements or omissions. The rule would include presentations at investor meetings and phone calls.

The bad act need not be made in connection with the sale of securities. Unlike 10b-5, this rule applies to regular disclosures and investor letters.

Unlike Rule 10b-5, there is no “in connection with” requirement and the SEC would not have to prove reliance or harm by any individual in an enforcement action. Also, Rule 206(4)-8 contains no scienter requirement, unlike Rule 10b-5. The SEC need only prove that there was a misstatement or omission of a material fact.

The challenging piece is responding to requests for information from investors. If you are providing a piece of information to one investor and not providing it to others did you “omit to state a material fact”?

Although negligent conduct is proscribed, the SEC specifically stated that the rule does not create a fiduciary duty not otherwise imposed by law. This rule should not change the way an investment advisers perform their duties. It merely removes the doubt regarding the scope of the SEC’s authority created by Goldstein.

From Burden to Benefit: Making the most of regulatory risk management

The Economist Intelligence Unit published an executive briefing: From Burden to Benefit: Making the most of regulatory risk management (executive summary) (full report .pdf).

It is an irony of modern business that regulation, a concept designed to reduce risk by protecting the interests of corporates, customers and society at large, has itself become one of the most serious risks that companies face. From dealing with unfamiliar regulatory frameworks in overseas markets to scanning the environment for new threats, regulatory risk management has become a time-consuming and costly activity that demands board-level engagement and a rigorous approach.

According to the report, two-thirds of respondents say the biggest problem that hinders their company’s ability to manage regulatory risk is “complexity of the regulatory environment.”

On the positive side, most said they had strong capabilities dealing with regulatory risk. But the big weakness, was the problem of dealing with multiple regulatory environments, both domestically and internationally, and juggling multiple projects.

Thanks to Leon of SOX First for pointing out the report: Compliance Challenges.

Ohio Retirement System Lobbyist

map_ohio Ohio requires registration and annual filings if you are a Retirement System Lobbyist. See Ohio Revised Code §101.90. According to the law, it seems that any replacement agent hired by an investment fund is subject to registration if that agent discussed an investment offering with the Ohio retirement system.

Retirement system lobbyist means any person engaged to influence retirement system decisions or to conduct retirement system lobbying activity as one of the person’s main purposes on a regular and substantial basis. Retirement system lobbyist does not include an elected or appointed officer or employee of a federal or state agency, or political subdivision who attempts to influence or affect retirement system decisions in a fiduciary capacity as a representative of the officer’s or employee’s agency or political subdivision.

Engaged means to make any arrangement whereby an individual is employed or retained for compensation to act for or on behalf of an employer to actively advocate.

Compensation means a salary, gift, payment, benefit, subscription, loan, advance, reimbursement, or deposit of money or anything of value; or a contract, promise, or agreement, whether or not legally enforceable, to make compensation.

Employer means any person who, directly or indirectly, engages a retirement system lobbyist.

Retirement System Decisions means a decision of a retirement system regarding the investment of retirement system funds. Retirement system decision also includes the decision by a board of a retirement system to award a contract to an agent or an investment manager Retirement system lobbying activity means contacts made to promote, oppose, reward, or otherwise influence the outcome of a retirement system decision by direct communication with a member of a board of a state retirement system, a state retirement system investment official, or an employee of a state retirement system whose position involves substantial and material exercise of discretion in the investment of retirement system funds.

You are required to submit a report three times a year (due May 31, September 30 and January 31) using Form 1010.93 AGT (.pdf) The Office of the Legislative Inspector General launched the Ohio Lobbying Activity Center (OLAC). The OLAC is an online filing system that allows registered Agents/Lobbyists and their Employers to electronically register their lobbying engagements and file their tri-annual Activity and Expenditure Reports.

See:

Deloitte’s Year End Reporting Issues: An Update on Current Issues and Items on the Horizon

Deloitte, as part of their Financial Reporting Series presented a webinar on year end reporting issues. The panel consisted of:

Bob Uhl
Beth Ann Reese
Glen Donovan
Stuart Moss

Valuations will be a hot topic for year end reporting. The problem is the current “market impairment” existing for many securities.

Auction Rate Securities settlements offer some particular accounting issues. Credit derivatives will require enhanced disclosures (both qualitative and quantitative) about why you are using derivatives under Statement 161.

The SEC staff is expecting an increase in the number of goodwill impairments compared to prior years. They are also expecting greater disclosure about the impairments.

The SEC’s Division of Corporation Financial has several initiatives to address the current market conditions. They are focusing on improvements in communications with issues.

Liquidity and capital resource disclosure are likely to be a concern. Companies will need to disclose if the there are uncertianties in their ability to access financing.

AICPA’s Generally Accepted Privacy Principles

The AICPA and Canadian Institute of Chartered Accountants formed a privacy task force and developed the ten principles of the Generally Accepted Privacy Principles:

Principle 1: Management
The first principle of the Generally Accepted Privacy Principles (GAPP) is Management. This principle requires that the entity define, document, communicate, and assign accountability for its privacy polices and procedures. [More Detail]

Principle 2: Notice
The second principle of the Generally Accepted Privacy Principles (GAPP) is Notice. This principle requires that the entity provide notice about its privacy policies and procedures and identify the purpose for which personal information is collected, used, retained, and disclosed. [More Detail]

Principle 3: Choice and Consent
The third principle of the Generally Accepted Privacy Principles (GAPP) is Choice and Consent. This principle requires that the entity describe the choices available to the individual and obtain implicit or explicit consent with respect to the collection, use, and disclosure of personal information. [More Detail]

Principle 4: Collection
The fourth principle of the Generally Accepted Privacy Principles (GAPP) is Collection. This principle requires that the entity collect personal information only for the purposes identified in the notice. [More Detail]

Principle 5: Use and Retention
The fifth principle of the Generally Accepted Privacy Principles (GAPP) is Use and Retention. This principle requires that the entity limit the use of personal information to the purpose identified in the notice and for which the individual has provided implicit or explicit consent. [More Detail]

Principle 6: Access
The sixth principle of the Generally Accepted Privacy Principles (GAPP) is Access. This principle requires that the entity provide individuals with access to their personal information for review and update. [More Detail]

Principle 7: Disclosure to Third Parties
The seventh principle of the Generally Accepted Privacy Principles (GAPP) is Disclosure to Third Parties. This principle requires that the entity disclose personal information to third parties only for the purposes identified in the notice and only with the implicit or explicit consent of the individual. [More Detail]

Principle 8: Security for Privacy
The eighth principle of the Generally Accepted Privacy Principles (GAPP) is Security for Privacy. This principle requires that the entity protect personal information against unauthorized access (both physical and logical). [More Detail]

Principle 9: Quality
The ninth principle of the Generally Accepted Privacy Principles (GAPP) is Quality. This principle requires that the entity maintain accurate, complete, and relevant personal information for the purposes identified in the notice. [More Detail]

Principle 10: Monitoring and Enforcement
The tenth principle of the Generally Accepted Privacy Principles (GAPP) is Monitoring and Enforcement. This principle requires that the entity monitor compliance with its privacy policies and procedures and have procedures to address privacy-related inquiries and disputes. [More Detail]