Month: September 2009

IDC Task Force Report Identifies Key Characteristics for Strong Compliance Programs

IDC

Independent Directors Council published a new task force report on the characteristics of a strong mutual fund compliance program. These include an ethical, compliance-focused “tone at the top;” a collaborative approach by the fund’s chief compliance officer; a risk-based program tailored to the fund and the adviser’s business; transparency and candor among the CCO, fund board, and adviser; and knowledgeable staff armed with appropriate resources.

The adoption of the fund compliance program rule (Rule 38a-1 under the Investment Company Act of 1940) in 2003 presented mutual fund boards with the required addition of a chief compliance officer to administer the fund’s compliance program.

The report does not break any new ground or propose radical changes. But it does provide some resources to think about and evaluate compliance.

One of interesting structural issues with mutual funds is whether the CCO should serve as the fund’s and adviser’s CCO or only as the fund CCO. By separating the role, you remove potential conflicts. Plus, the fund CCO could serve as a useful complement or counterpoint to the adviser’s CCO. But the fund-only CCO may feel like an outsider and a threat since most of the employees will be working for the adviser.

Intellectual Property and Social Media

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This afternoon I am at the Harvard Club in New York City participating in Social Media: Risks & Rewards, an Incisive Media event. These are my notes from this session. Now that you are in social media, how do you deal with trademark and copyright issues? How do you protect them?

Speakers:

  • Valerie L. Boccadoro, Senior Intellectual Property Counsel of Toys R Us
  • Lesley Rosenthal, Vice President, General Counsel & Secretary of Lincoln Center for the Performing Arts, Inc.
  • Robert Ambrogi, Attorney of Law Office of Robert Ambrogi

Bob started off with a 12 part copyright quiz.

  1. Linking is not copyright infringement
  2. If it does not say it’s copyrighted, it’s not protected. False.
  3. As long as someone uses only uses an except they are free to republish it as fair use? False.
  4. If a material is copied for non-commercial use, it okay? No.
  5. A tweet is not protected by copyright law? False.
  6. If it’s old, I am free to use it. False.
  7. I am not liable for copyright infringement committed by others on my site. False (There are protections to the site owner, but you need to meet the specific requirements.)
  8. As the publisher I am free to grant permission to use material posted on my site. False. The writer holds the copyright.
  9. If I paid for it to be created, I own the copyright. False. This is subject to the “work for hire rules.”
  10. The copyright owner retains control of material posted to a social networking. False. (Although it may depend on the site and its term of service.)
  11. If it’s under a creative commons license, it is free to reuse. False. Creative commons is just a licensing structure.
  12. If material is posted anonymously, it is not copyright protected. False. The creator still holds the copyright.

Valerie was up next. Social media does not create any new rights. But things do move faster. There are things that they should do. First, you should do site sweeps, checking out sites and see how people are using your trademarks. The second step is to consider whether to enforce the trademark against the third party. Valerie provided a series of legal issues to consider and business issues to consider. The third step is report problems to the sites. Facebook, Twitter and YouTube have procedures for dealing with these issues. The fourth step is the traditional enforcement. Start with asking before bringing in the lawyers. The reality is that you cannot stop all infringement.

Last up was Lesley. She pointed out that non-profits have many of the same issues as businesses. She focuses on educating the people in her organization. Lincoln Center has several Facebok pages and Twitter handles. They are experiencing astronomic growth in fans and followers. They have lots of focus on clearing rights in their publications. You need to enforce or you risk abandonment of the mark.

Social Media Best Practices

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This afternoon I am at the Harvard Club in New York City participating in Social Media: Risks & Rewards, an Incisive Media event. My second panel presentation is Social Media Best Practices. (My morning presentation was Develop your Company’s Corporate Policy for Social Media.)

I was joined on the panel by:

  • John Lipsey, Vice President Corporate Counsel Services of LexisNexis, acting as the moderator
  • Vanessa DiMauro, CEO of Leader Networks
  • Eugene Weitz, soon to be former Corporate Counsel of Alcatel-Lucent
  • Daniel Goldman, Legal Counsel of Mayo Clinic

Unlike the earlier presentations which focused on what the company should be doing, this panel is focusing on how the individual lawyers in the audience could use social media to help them.

Here is the slide deck we are using:

Social Media Best Practices

Vanessa will be starting off with some highlights from her 2009 Networks for Counsel Studypdf-icon. (A Global Study of the Legal Industry’s Adoption of Online Professional Networking, Preferences, Usage and Future Predictions.)

Then Dan spends some time leading the discussion about Twitter.

I take over and talking about blogging as a personal knowledge management tool. You can get some sense of what I am going to say if you read Why I Blog.

Eugene then focuses on online professional networking. (He hates the term social networking.) He makes a case why it is particularly useful for in-house counsel.

We end with a discrete set of takeaways for the audience.

I plan to present two takeaways. First, listen to what people are saying about you and your company. Set up a Google news search and a Google blog search for your name and your company’s name. Second, use a blog as a personal knowledge management tool.

Vanessa has a great 20 minute action plan.

Your Business and the Social Media Sensation

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This morning I am at the Harvard Club at the Social Media: Risks & Rewards conference. The line-up for this panel:

  • Moderator: Monica Bay, Editor-in-Chief of Law Technology News
  • Michele Mitchell, VP of Audience Development and Retention of NBC Universal
  • Cheryl Givner, Managing Counsel Worldwide Marketing & Core Products of MasterCard Worldwide
  • Nicole Black, Of Counsel Fiandach & Fiandach
  • Andy Mitchell, VP Digital Marketing and Marketing Development of CNN Worldwide

Cheryl started off look at corporate brands in social media. Her first point was the United Breaks Guitars video complaint. Over 5.5 million people saw this and created a viral backlash against United. MasterCard runs a lot of analytics on what people are saying about the company. They just launched a Twitter feed: @MasterCardNews.

Niki emphasized the need for goals. But at the minimum, you need to know the basics of how these tools work. Then she moved on to the benefits of some of the major social media tools. She emphasized that professional networking and personal/social networking overlap. (Aren’t some of your professional colleagues also your friends?) People want to connect with a person when dealing with legal services.

Niki also pointed out that if you”lawyer-up” when you are subject to negative social media attention you are likely to increase the negative publicity. Demanding that someone remove criticism of your company is more likely to backfire.

Andy took the microphone to discuss how CNN has been using social media and how they involve their audience. There was the first presidential Twitter debate last year. CNN moved on to Facebook and took advantage of the Facebook Connect tool. The first test of their use of Facebook was one of the vice-presidential debate (“Debate the Debate”). CNN was out on the cutting edge of these tools for a mainstream media company. They generate tremendous traffic, updates and views. He made a strong case for how much consumers want to engage with brands. “Give up some control of your brand (But not so much that you risk harming your brand)”

Michele focused on social media trends. She emphasized the importance of a feedback loop. After all the ability to easily connect with consumers is a key way to leverage social media.

There was a question from the audience that emphasized the need to engage the legal department in developing the tools. An example was a marketing promotion for a hashtags sweepstakes and free shipping special. It ended up with a complaint from a state attorney general.

My first presentation is scheduled right after this one. I already published the outline and materials for the event: Develop your Company’s Corporate Policy for Social Media.

Develop your Company’s Corporate Policy for Social Media

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This morning I am at the Harvard Club in New York City participating in Social Media: Risks & Rewards an Incisive Media event. My first presentation is Develop your Company’s Corporate Policy for Social Media with David Morris, Group Counsel of TripAdvisor Media Group and Howard Greenstein, President of The Harbrooke Group.

The approach we took in creating a policy is to first decide the company’s position on using social media: Deter and block, Neutral or Actively Engage. Since are three of us on the panel, we each plan to take one of these positions and discuss a variety of topics that should be considered in a social media policy.

Here are the introductory slides and topic slides:

Develop your Company’s Corporate Policy for Social Media

Here are some sample social media policies that we shared with audience:

I also keep a ragtag collection of good policies and good articles on drafting policies using Delicious bookmarks: http://delicious.com/dougcornelius/blogging_policy.

Schwarzman Stands up for Placement Agents

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“Eliminating placement agents as a group because there were a few bad actors who have tarnished the industry is analogous to eliminating Major League Baseball because several of its players behaved illegally.”

Steven Schwarzman, The Blackstone Group’s chairman and chief executive, has submitted a comment letter on the SEC’s proposed ban on placement agents interacting with public pensions.  He comes squarely down on the side of placement agents. In fact, he credits placement agents with being essential to his fund-raising success.

The proposed SEC rule is fallout from investigations by the SEC and the New York District Attorney into a pay-to-play scandal involving “fixers” and prior scandal in New Mexico

References:

More on Free and Legal Services: WhichDraft

WhichDraft

After my previous post on Free and Law Firms, a new thing caught my attention in this area. In that post, I focused on some ways that the legal services industry is adopting some of the models Chris Anderson describes in his book.

WhichDraft is a resource that allows users to build a variety of high quality contracts free of charge. Users build contracts by answering a series of simple questions. WhichDraft then provides sample contractual provisions. It has a collection of interesting precedents that help you produce a better first draft of legal documents. By asking a few questions, the site fills in some key blanks and repetitive information.

I was a big fan of document assembly when I was at my prior law firm. But I hated the bulky desktop programs and all the training it took to show people how to use them. When you look at the time it takes to install the programs and train people, you end up with a huge additional investment on top of the software and document template drafting costs.

When document assembly finally evolved and began offering the assembly through a web-based interface, I think document assembly became ready for prime time. Set up is just a single installation on a server. Training is just showing people where to find the tool and 2-minute demo (at least it should be).

You can add WhichDraft to

References:

free the future of a radical price by Chris Anderson

SEC Announces New Division of Risk, Strategy, and Financial Innovation

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The Securities and Exchange Commission announced the creation of its new Division of Risk, Strategy, and Financial Innovation. University of Texas School of Law Professor Henry T. C. Hu will be its first Director. Professor Hu authored several articles that brought attention to potentially manipulative market practices using borrowed stock and derivatives.

“The new division combines the Office of Economic Analysis, the Office of Risk Assessment, and other functions to provide the Commission with sophisticated analysis that integrates economic, financial, and legal disciplines. The division’s responsibilities cover three broad areas: risk and economic analysis; strategic research; and financial innovation.”

But what is this new division going to be doing?

The new division will perform all of the functions previously performed by Office of Economic Analysis and Office of Risk Assessment, along with the following:

  1. strategic and long-term analysis
  2. identifying new developments and trends in financial markets and systemic risk
  3. making recommendations as to how these new developments and trends affect the Commission’s regulatory activities
  4. conducting research and analysis in furtherance and support of the functions of the Commission and its divisions and offices
  5. providing training on new developments and trends and other matters.

The SEC now has five divisions:

  • Division of Corporation Finance
  • Division of Enforcement
  • Division of Investment Management
  • Division of Trading and Markets
  • Division of Risk, Strategy, and Financial Innovation

According to Broc Romaneck, this is the first new division at the SEC since 1971. They divided Trading and Markets into Division of Enforcement and a Division of Market Regulation, and created a new Division of Investment Company Regulation, spun off from the Division of Corporate Regulation.

References:

Pfizer and Compliance

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Pfizer got itself in trouble for the way it was marketing some of its drugs. Enough trouble that they need to cough up a $2.3 billion fine to the Department of Justice. (Yes, that is billion.) Under its settlement with the DOJ, Pfizer will pay a $1.3 billion criminal fine related to the company’s illegal promotion of its now-withdrawn painkiller, Bextra, and $1 billion civil fine related to other medicines. It’s the largest health-care fraud settlement in the DOJ’s history.

But that’s not all.

As part of the settlement, Pfizer entered into a Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services. The Corporate Integrity Agreement establishes some new internal structures and requires Pfizer to continue maintenance of a corporate compliance program for a period of five years.

Pfizer already had a compliance program, headed by a chief compliance officer, which trains employees on how to properly promote Pfizer’s products. The big change is that the chief compliance officer will no longer report to the general counsel, but will report directly to the CEO. The change is intended to eliminate conflicts of interest and prevent Pfizer’s in-house lawyers from reviewing or editing reports required by the Corporate Integrity Agreement.

If you wonder whether the compliance program should report to the general counsel, the Department of Justice says they should not.

References: