|
Hedge Funds and Private Equity Firms - get ready for expanded Federal Oversight with the Financial Reform Law
July 22, 2010 - by Adam Bullock
 One of the most significant pieces of U.S. financial regulation has been signed into law by President Barack Obama. This financial reform bill is loaded with major provisions. And while the law specifically targets the risk-taking Wall Street behavior that helped trigger financial turmoil, hedge funds and private equity firms should make sure to read the fine print.
One provision is pretty clear - Private equity firms and hedge funds with more than $150 million in assets must register with the SEC. And SEC registration typically brings increased oversight, including periodic inspection by SEC examiners.
(For interesting insight into the changes to the regulatory landscape for hedge funds, check out an article on HedgeCo.net that includes thoughts from Smarsh Founder & CEO Stephen Marsh.)
What's included among the SEC's requirements? There is a bevy of regulations and laws to be aware of, so let’s just look at the ones related to record-keeping, as documented in SEC 17a-4. Firms must:
- Preserve electronic business records and retain for a 3-6 year retention period.
- Store messages in their original form on tamperproof, non-rewritable and non-erasable media and messages must be stored in duplicate in separate locations.
- Time/date stamp and serialize archived messages. Messages must be indexed and searchable.
- Appoint an independent third-party downloader to access the organization's electronic records, if the case of the firm being unable or unwilling to do so.
Need some guidance on best practices for compliance with SEC 17a-4 and other SEC regulations? Give our account managers a call today; we work with thousands of broker-dealers and registered investment advisors, helping them navigate these rules and assisting with audit requests.
Adam Bullock is the digital media specialist for Smarsh and veteran blogger. In previous stops in his professional career, Adam has spent time with an Internet marketing firm as a project manager as well as a leading domain name registrar.
Related Products:
Supreme Court Unanimously Rejects Privacy Claim for Employees Who Text at Work
July 14, 2010 - by Wendy E. Lane, Esq.
 Just recently, the Supreme Court has unanimously upheld a police department's search of an officer's personal, sometimes sexually explicit, messages on a government-owned pager, saying the search did not violate his constitutional right of privacy.
In the case of Quon v. Arch Wireless Operating Company, the Ninth Circuit Court of Appeals examined whether the Ontario Police Department had violated an employee's right to privacy when its supervisors viewed the contents of his text messages that were transmitted using Department pagers.
At that time, the court held, among other things, that the Ontario Police Department's written and oral policies which put employees on notice that the Department would be monitoring their email, computer and text messages were overridden when a supervisor told the employees that he would monitor their text messages only if the employees failed to pay for overages on the Department's text-message provider's plan. Because the employee at issue had paid all overages resulting from his use of pager text messages, the court determined that the employee had a reasonable expectation of privacy in his text messages, and that the employer's subsequent monitoring of his text messages was unreasonable in scope.
Supreme Court Reversal
The Supreme Court reversed that ruling. The justices declined to directly rule on the issue of whether or not the employee had a reasonable expectation of privacy. Instead, the Court assumed, for the sake of argument, that the employee did have a reasonable expectation of privacy and found that the government search of the employee's text messages was reasonable because (1) "the search was motivated by a legitimate work-related purpose" and (2) the search "was not excessive in scope."
Given that the case involved a government employer and did not directly address the question of whether the employee had a reasonable expectation of privacy, private employers are left grappling more than ever with the question of how far they can go in monitoring employee electronic communications. However, employers may take some guidance from the Court's suggestions that a search, whether by a private or government employer, would generally be "regarded as reasonable and normal in the private-employer context" where "the employer [has] a legitimate reason for a search" and "the search [is] not excessively intrusive in light of that justification."
Special thanks to Wendy and Rutter, Hobbs & Davidoff for allowing us to include this excellent piece on the Transmissions from Smarsh blog! Visit www.RutterHobbs.com for more information on the forward-thinking, full-service law firm.
Wendy E. Lane specializes in trade secret, labor and employment issues, including but not limited to use and monitoring of social media in the work place, and also has significant experience in child advocacy and family law. She authored the first edition of a manual on adoption law used by pro bono attorneys and law students in finalizing adoptions of dependent children throughout Los Angeles. An advocate of children's rights, Wendy has dedicated substantial time as a volunteer and intern with various social service agencies and non-profit, charitable organizations.
The SEC Prematurely Celebrates Social Media Day
July 7, 2010 - by Adam Bullock
 The SEC helped ring in " Social Media Day" a day early with the June 29, 2010 announcement of their complaint against a Canadian couple who, among other methods, were fraudulently touting penny stocks on a Facebook page and Twitter.
Eric L. Bustillo, Director of the SEC's Miami Regional Office, explained that the couple used "the PennyStockChaser website, e-mail, text messages, Facebook and Twitter" to provide fraudulent information to those who signed up to receive messages. The issue with this? The couple was creating demand through their deceptive hyping, and in turn was selling millions of shares of these same companies, fraudulently profiting from this method.
This is significant from the standpoint that the SEC is looking beyond just emails - they are now searching for a company's social media presence. This is just another sign that social media is on the SEC's radar. I hope you had a great Social Media Day, and here's to a compliant year!
Adam Bullock is the digital media specialist for Smarsh and veteran blogger. In previous stops in his professional career, Adam has spent time with an Internet marketing firm as a project manager as well as a leading domain name registrar.
Related Products:
Social Media is Complicating E-Discovery
June 29, 2010 - by Adam Bullock
 The Deloitte Forensic Center released results from a survey of 337 respondents in information technology, legal, risk and compliance roles last week, and the data painted an interesting picture. A whopping eight percent of respondents said their company was "well prepared" to deal with the challenges of e-discovery today.
Forty-nine percent expected their companies' information technology department to increase e-discovery efforts. With that said, 61 percent of respondents expect their companies to be only somewhat effective or not effective at all in dealing with e-discovery challenges three years from now. Is there a lack of faith in companies in keeping up with the massive amount of data, or are they expecting e-discovery to get even more tricky in the years ahead...or both?
A gap exists: there is recognition of a need to act, but a lack of confidence that necessary action will occur. Meanwhile, the challenge of retaining a massive (and ever-growing!) amount of data is not going away. The dynamic nature of electronic content isn't slowing down.
A non-issue a few years ago, social media content is now top of mind in e-discovery circles. Sixty-two percent of survey respondents said their company is concerned about e-discovery challenges posed by social media websites.
The majority of companies are playing catch-up to the reality of social media in the workplace, and relevant case law will only continue to mount and make the risk of irresponsible content management that much clearer. A recent decision in the case of Crispin v. Christian Audigier, Judge Margaret Morrow of the U.S. District Court of Central California found that the messages sent between users on social networking websites like MySpace and Facebook were under the same jurisdiction as email under the Stored Communications Act.
Adam Bullock is the digital media specialist for Smarsh and veteran blogger. In previous stops in his professional career, Adam has spent time with an Internet marketing firm as a project manager as well as a leading domain name registrar.
Related Products:
Red Flags Rule Delayed, but Why Wait?
June 11, 2010 - by Adam Bullock
 Shortly before the enforcement deadline of June 1, 2010, the Federal Trade Commission announced that it has again delayed Red Flags Rule enforcement, this time until December 31, 2010.
For those of you scoring at home, this marks the fourth time the enforcement deadline for the Red Flags Rule has been extended. This rule was first introduced in October 2007. The latest extension comes hot off the heels of the American Medical Association's lawsuit looking to prevent the FTC from extending the Red Flags Rule to physicians.
Red Flags Rule or not, hopefully your company has client data protection and identity-theft prevention on its mind. Take the time to evaluate your written program and procedures used to detect "red flags" - identify theft spot patterns and practices. It's simply smart business to have your program in place sooner rather than later.
There are numerous benefits to having an up-to-date policy:
-
The sooner procedures are integrated into your corporate culture, the better prepared your company will be when the enforcement deadline comes.
-
Take a leadership role among your peers with a proactive approach, and build trust with your clients by demonstrating commitment to their data security.
-
If not already in place, form a solid foundation for comprehensive, organization-wide data security practices.
Adam Bullock is the digital media specialist for Smarsh and veteran blogger. In previous stops in his professional career, Adam has spent time with an Internet marketing firm as a project manager as well as a leading domain name registrar.
Related Products:
| 
View All Industry News
