Appealing to children can help to ensure lifetime brand loyalty, as well as provide a fairly direct means of accessing parents’ disposable income. But the interactive environment of the internet creates incentives for businesses not only to transmit messages to children, but also to collect information from them. To counteract the perceived threat to the privacy of children targeted by commercial sites, Congress enacted the Children’s Online Privacy Protection Act (COPPA) in 1998. Now, the FTC is revisiting the Rule implementing the Act, accepting public comment on the proposed changes until November 28, 2011.
Europe’s Debt Crisis – Reasons, Solutions, Perspectives
Parallel to the downgrade of America’s credit rating and its aftermath, there has been another predominant topic in the recent economic news: the European sovereign debt crisis. What appeared to be an internal Greek problem at first glance in early 2010 has now transformed into a serious European issue calling out for a diligent denouement. Considering that continental boundaries are not an obstacle to the spread of a financial crisis, the effects of Europe’s recent struggle on the U.S economy should be considered. (more…)
The Pursuit of Negligent Brokers: the SEC Lowers Its Burden For Bringing Civil Actions
SEC officials say they are going to start filing more civil suits against securities brokers based on claims of negligence only. This would be a significant deviation from their current practice of primarily suing firms for intentional fraud, which often carries steeper penalties, but also has a significantly higher burden of proof.
The SEC’s typical enforcement strategy is to file suits for intentional fraud against firms, rather than individual brokers. While the SEC often settles for claims of negligence, it rarely sues for negligence only. For instance, during the week of September 25th, the SEC News Digest reported updates on 29 of its enforcement proceedings, only one of which was for a suit based primarily on negligence. In addition, most of the SEC’s lawsuits resulting from the financial crisis, including its suits against Goldman Sachs and Bank of America, have been for intentional fraud and have not included penalties for any individual broker or executive. Moreover, individual brokers or company executives who participate in the alleged misconduct are often not named in the lawsuits or avoid being named as part of the settlement.
Update: 298 Page Volcker Rule Proposal Leaves Much To Be Desired (And Decided); Issue #1: Market Making
On October 12th the Federal Reserve, FDIC, Office of the Comptroller of the Currency, and SEC submitted the long-awaited proposal for implementation of Section 619 of the Dodd-Frank Act, widely referred to as the “Volcker Rule.” Legislators included this section in the Dodd-Frank Act in order to divide commercial banking and depository functions, which are federally insured, from banks’ investment activities (commonly referred to as “proprietary trading”). Given the fact that many large commercial banks, such as Bank of America and JP Morgan Chase, derive a significant portion of their revenue (8% and 9%, respectively) from their trading desk, the details of the rule could have enormous implications for the future financial strength and stability of depository institutions.
The proposal has several large exceptions to its prohibition on proprietary trading in order to allow banks to continue to provide important financial services to their customers. One of the largest exceptions is for market making. Market making can involve a number of activities, but at its core it consists of financial institutions accepting client requests to purchase (or sell) any given security without that financial institution immediately going out into the market and finding a seller (or buyer). In order to facilitate this process, financial institutions involved in market making may maintain a stock of various securities that they buy and sell to clients as needed to meet client demand. Under the new proposal, banks would be allowed to purchase and sell securities under the premise of market making so long as: a.) the bank “holds itself out” as being willing to buy and sell those securities to and/or from clients, b.) the purchases or sales do not exceed “reasonably expected near term demands” of clients, c.) the activities are primarily intended to generate income from fees, commissions, and bid-ask spreads (as opposed to appreciation or depreciation in the securities themselves), and d.) the compensation arrangements of employees engaged in market making is not designed to reward large returns that may result from the appreciation or depreciation of the securities themselves.
Say-On-Pay: Will It Turn Into Sue-On–Pay?
With this year’s annual shareholder meetings largely in the rear-view mirror, one of the issues worth taking a retrospective glance at is the advisory say-on-pay votes required by section 951 of the Dodd-Frank Act. The mandatory requirement of a shareholder vote on a corporate board’s compensation decisions (say-on-pay) has been controversial since its introduction given that, as a general principle of Corporation Law, directors enjoy discretion to set the compensation of company executives.
The Legal And Economic Implications Of The ECJ’s Decision On The Brüstle Patent
The European Court of Justice (ECJ) in Luxemburg ruled on Tuesday, October 18, 2011 in a landmark decision in the case C-34/10 Oliver Brüstle v Greenpeace e.V. and barred a broad range of human embryonic stem cell patents in a market consisting of more than half a billion people. In its ruling, the Court said that “a process which involves removal of a stem cell from a human embryo at the blastocyst stage, entailing the destruction of that embryo, cannot be patented. The use of human embryos for therapeutic or diagnostic purposes which are applied to the human embryo and are useful to it is patentable, but their use for purposes of scientific research is not patentable.”
Is Google “Cooking” It?
It was not long ago when Google was under the spotlight for Google Books Settlement. Now it looks like the lawsuits are piling up on Google. There are about 9 antitrust cases filed against the mega-search engine in the EU, one of which was filed by Microsoft against Google for dominating the search market as well as other areas such as the mobile-related realm. A number of small companies have also filed complaints against Google here in the US. The Department of Justice (DOJ) will review Google’s $400 million purchase of Admeld Inc., an Internet advertising company, to investigate whether the deal had an adverse effect on competition. Furthermore, the Federal Trade Commission (FTC) is conducting an antitrust investigation of Google’s dominance in the search-engine industry.
The Galleon Insider Trading Case: How To Sentence a Seemingly Victimless Crime?
In May 2011, Raj Rajaratnam, founder of the Galleon Group hedge fund, was found guilty on fourteen counts of insider trading. After having initially postponed the sentencing decision, US District Judge Richard Howell sentenced Rajaratnam to 11 years in prison on October 13th. This constitutes the longest prison sentence ever imposed in an insider trading case, though well short of the prosecutions requested 20 to 24 year sentence.
Copyright Slappdown: Could Businesses Use IP Law to Nuke Bad Online Reviews?
In the social media fueled economy, forward-thinking businesses are obligated to be concerned about their reputation on the web – drawing negative heat on a popular site can impact the bottom line.Until recently, a defamation suit against the user was the primary legal prophylactic for bad online buzz.But that was an unappetizing fix, not only because the Communications Decency Act (CDA) places the deep third-party pockets out of reach, but also because such suits carry the risk of running afoul of state anti-Slapp statutes.Now, businesses may have a new tactic – contractually acquiring prospective intellectual property rights in their customers’ online commentary.
Flying Under the Radar, New Municipal Advisor Rules May Alter the Municipal Securities Landscape
Dodd-Frank mandates fundamental changes in the oversight of the municipal securities market. Section 975 amends section 15B of the Securities Exchange Act of 1934 by requiring that municipal advisors register with the SEC in a similar manner as traditional investment advisors. The proposal has been met with controversy, as critics like Clifford Kirsch, a partner at Sutherland Asbill & Brennan, state that the proposal “goes much further than what was anticipated in Dodd-Frank.”
Municipal securities, such as municipal bonds, are issued by local governments and cities to fund their operations, as well as large projects. Historically, the municipal securities market has been less regulated than other capital markets, but Section 975 of Dodd-Frank significantly increases regulatory oversight of issuers and industry professionals. In December 2010, the SEC proposed rules specifying potential registration requirements and criteria governing mandatory registration for municipal securities advisors. Until Dodd-Frank, the activities of these advisors were largely unregulated. However, regulators came to the conclusion that change was needed when several municipalities were rocked by unscrupulous advice regarding the issuing of securities. For instance, Jefferson County, Alabama is in the midst of rare municipal bankruptcy proceedings after it relied on advice from JPMorgan and borrowed 3.2 billion dollars in floating instead of fixed rate debt. With the proposed municipal advisor rule, the SEC intends to protect municipalities from excessive risks and fees.