Author: Doug Cornelius

You can find out more about Doug on the About Doug page

Futures Trading and Social Networking

With this week’s release of FINRA’s guidance on social media sites for securities traders, I thought it would be interesting to look at how the futures trading regulatory body is dealing with the issues. It turns out that the National Futures Association recently amended its rules to address social media and released new interpretive notices (.pdf).

As with FINRA, the NFA took a platform neutral position. On-line communications are subject to the same standards as other types of communications.

All audio or video advertisement, regardless of whether its on the radio, television, the internet or any media accessible by the public is subject to the rule. That means it must be reviewed by the NFA before it is published if it contains a specific trading recommendation or claims of past profits.

Any electronic content that can be viewed by the general public, or even by a more closed community that includes current and potential customers, can be promotional material. That makes it subject to the requirements of NFA Compliance Rules 2-29, 2-36, or 2-39.

Members should have policies regarding employee conduct. These policies could require employees to notify the employer if they participate in any on-line trading or financial communities and provide screen names so that the employer can monitor employees’ posts periodically. Alternatively, the policy could simply prohibit participation in such communities. The Member must, of course, take reasonable steps to enforce whatever policies it adopts.

The notice also points out that you need to be careful about your hyperlinks. You could be held accountable for linking to third party content that is misleading.

Sources:

Weekend Book Review: Sonic Boom by Gregg Easterbrook

You may know Gregg Easterbrook from his previous book The Progress Paradox (one of his six books) or his articles in The Atlantic. I know him mostly from his hobby: writing the Tuesday Morning Quarterback column on ESPN.com.

Sonic Boom tries to look beyond the current recession. Easterbrook looks ahead to what to expect after we make our way out. He sees the continued growth of globalization, interconnectedness and technology improvements. That should lead to greater prosperity, knowledge growth, instability and financial distress.

Easterbrook starts off Sonic Boom by using the Chinese city of Shenzhen, with its population of 9 million. But thirty years ago, the city did not exist. In 2007, it sent out 21 million containers, making it the fourth largest port in the world.

His next example grabbed me because it revolves around Waltham, Massachusetts, which is just down the street from me. He even calls my alma mater, Brandeis University “an outstanding institution”. Waltham is an example because it was the home of the first modern factory in the US. (I wrote about this is an article for Wired: GeekDad Visits the Charles River Museum of Industry & Innovation.) Waltham went through some tough times as it went from being a center of manufacturing to center for high tech and venture capital.

The book continues by focusing on a city and the how globalization has affected each. There is disruption, innovation, loss, growth, distress, and gain. Easterbrook then uses the example to launch into further discussion.

All of the turmoil in the job markets makes employer-sponsored health-care a bad fit. “It’s ridiculous that our cell phones work wherever we go but our health-care coverage does not.”

Yes, globalization is displacing manufacturing jobs from the United States. But you also need to look at the advances in efficiency and technology that reduce manufacturing jobs. The US made 106 million tons of steel in 2007 with 159,000 workers. That is more than the 91 million tons of steel made in 1977 with 531,000 workers.

Globalization is also bringing peace. A few decades ago the world’s two most important countries had horns locked trying to destroy each other. The US and USSR had nuclear missiles aimed and fingers on the button. We would not even send athletes to the other’s hosting of the Olympic Games. Now the two most important countries are the US and China. We are locked “cooperative competition” of trade and finance.

Sure, China has a long way to go towards democracy and human rights. But the country is much better than it was 30 years ago.

If you have read Tuesday Morning Quarterback, you will encounter some familiar stories. You will also find the writing familiar as he has weaved some of these tales of economics into his football column.

Is Easterbrook right? Do I agree with everything he writes? Well, even Kurt Warner throws a few incomplete passes.

If you like football, then you should also read his Tuesday Morning Quaterback column on ESPN.com. I enjoyed reading Sonic Boom and recommend that you read it. With only one meaningful football game left this season, you’ll need something to read in the off-season.

Disclosure: Most of the links above are Amazon affiliate links.

Compliance Bits and Pieces for January 29

Here are some interesting stories from the past week:

French Supreme Court Limits the Scope of the Whistleblowing Process by Cecile Martin in the Privacy law Blog

For the first time the French Supreme Court addressed the issue of the validity of a Code of conducts that had been implemented by a listed company (Dassault Systèmes, a French Software company) in order to comply with the Sarbanes Oxley act. By its decision, The French Supreme Court, overruled the decision of the Court of Appeal, which had declared the whistleblowing system implemented by the Code of Conduct of Dassault Systèmes compliant with the French data protection authority (CNIL) and therefore legal.

America Bowl

There is only one football game left: Super Bowl XLIV. Coincidentally, our 44th president is also in office. This will never happen again. In celebration of this coincidence, Don Steinberg is matching the president to the corresponding Super Bowl to decide which is better.

Questions Arise on Timely Ethics Disclosures by Melissa Klein Aguilar in Compliance Week (sub required.)

Almost a decade after Enron’s implosion, some public companies appear to be dodging required ethics disclosures intended to prevent the sort of insider dealings that helped bring down the legendary energy company, according to a new academic analysis.

Three Little Words by Andrea Howe in Trust Matters

Here are three phrases, each three words long, that are an essential part of any Trusted Advisor toolkit:

  • “That makes sense.”
  • “Tell me more.”
  • “I don’t know.”

NERA Releases Annual Canadian Securities Class Action Study by Kevin LaCroix in The D&O Diary

On January 27, 2010, NERA Economic Consulting released its updated annual review of Canadian securities class litigation entitled “Trends in Canadian Securities Class Actions: 2009 Update” (here). The report presents an interesting study of the evolution of class action litigation in a jurisdiction outside the U.S.

Greek Minister of Defense Regulates Contacts with Defense Companies – The Wrage Blog

The Greek Minister of Defense has taken steps to increase transparency in its dealings with defense contractors. This summary is provided by Takis Kakouris of TRACE partner firm Zepos & Yannopoulos.

Governing Social Media: How to Monitor, Manage and Make the Most of Employee Use of Social Media

Join me, Kathleen Edmond, Chief Ethics Officer, Best Buy, and Janice Innis-Thompson, SVP & Chief Compliance Officer, TIAA-CREF, as we discuss compliance and governance issues of web 2.0 and social networking.

“Corporate Communication takes on a whole new meaning in a world of social media, where employees can freely post their views and spread documents, photographs and even videos across the globe with a click of a mouse. Companies that are ahead of the curve not only have established policies regarding use of social media sites by their executives and employees, but also are finding ways to use social media to their competitive advantage. Join our panel to hear about the risks and rewards that a well managed approach to social media can bring.”

Our Session: Governing Social Media: How to Monitor, Manage and Make the Most of Employee Use of Social Media

The Economist Special Report on Social Networking.

“An astonishing amount of time is being wasted on investigating the amount of time being wasted on social networks.”

I love reading The Economist because of lines like that. The January 28 issue has a special report on social networking. (The cover image is Steve Jobs dressed like Moses with his new tablet)

“Another [report], by Nucleus Research, an American firm, concluded that if companies banned employees from using Facebook while at work, their productivity would improve by 1.5%. This assumes that people would actually work rather than find some other way to pass the time they have to spare. In the same vein, perhaps companies should also ban water coolers and prohibit people sending e-mails to their friends. The assumption that firms can block access to the networks altogether is also rather heroic. Some employees now have web-enabled smart phones, so trying to stop them from surfing their favourite sites will be another waste of time.”

What is different about Web 2.0?

“All this shows just how far online communities have come. Until the mid-1990s they were largely ghettos for geeks who hid behind online aliases. Thanks to easy-to-use interfaces and fine-grained privacy controls, social networks have been transformed into vast public spaces where millions of people now feel comfortable using their real identities online.”

As is typical with The Economist, the report is straight forward and full of facts. There is none of the hyperbole of the social media snake oil salesman.

This special report will examine these issues in detail. It will argue that social networks are more robust than their critics think, though not every site will prosper, and that social-networking technologies are creating considerable benefits for the businesses that embrace them, whatever their size. Lastly, it will contend that this is just the beginning of an exciting new era of global interconnectedness that will spread ideas and innovations around the world faster than ever before.

The stories in the special report:

Tax on Carried Interest? Maybe Not.

Tucked into the Tax Extenders Act of 2009 (H.R. 4213) was a provision targeted at partnership interests held by partners providing services. H.R. 4213 flew through the legislative process of the House of Representatives. It was introduced on December 7, 2009 and passed by the House on December 9, mostly along party lines. The Carried Interest Tax is one of several dozen changes to the tax code included in that bill.

But will the bill pass in the Senate? Let’s hear from Sen. Debbie Stabenow (D-Michigan):

  • “I don’t think it’s going to be part of the Senate bill.”
  • “While members of the committee have brought it up, it won’t be part of any bill we pass.”
  • “You never know, but I seriously doubt it.”

The US Senate has not introduced anything similar to the Tax Extenders Act. With a Democratic controlled Senate I assumed that passage was inevitable.

But it appear that the divide between the House and the Senate on private equity and private funds appears to be growing. Both bodies keep talking about clamping down on hedge funds, but neither seems to know what one is and is not bothering to define it in the legislation.

Sources:

More on Data Privacy Day

Today is International Data Privacy Day.

Massachusetts Recognizes Data Privacy Day 2010 and touts the the new data security regulations.

Disney has enlisted Phineas and Ferb to help guide your kids through cyberspace and teach them about the rules of the road on the internet.

Google published their guiding privacy principles and published a video discussing them:

Data Privacy Day is January 28

Data Privacy Day is an annual international celebration to raise awareness and generate discussion about information privacy. Last year, both the U.S. Senate and House of Representatives recognized January 28th, 2009 as National Data Privacy Day.

Intel, Microsoft, Google, AT&T, LexisNexis and The Privacy Projects are sponsoring Data Privacy Day efforts, with assistance from Intuit and Oracle.

Even if you are not responsible for privacy at the office, you are responsible for your kids. The Data Privacy Day 2010 has some great resources for Teens, Young Adults, and Parents & Kids. Take a look at the FTC’s You Are Here to see some of the problems faced by kids online. Make sure to Visit the Security Plaza to learn about protecting your privacy (online and off).

You are responsible for your own online activity. In looking at a recent data breach, “123456”, “12345”, “123456789” and password were the most common passwords. Even Twitter banned these passwords, along with 366 other obvious passwords.

A list of 32 million passwords that an unknown hacker stole last month from RockYou, a company that makes software for users of social networking sites, provided a treasure trove of information for security analysis. About 20 percent of people on the RockYou list picked from the same, relatively small pool of 5,000 passwords. Hackers could easily break into many accounts just by trying the most common passwords.

Security experts advise that a password should consist of letters, numbers and even punctuation symbols. They should be changed regularly and you should not use the same password for all your online services.

Sources:

Hayek vs. Keynes Rap Anthem “Fear the Boom and Bust”

For you economics geeks, how about a rap duel between John Maynard Keynes and F. A. Hayek?

In Fear the Boom and Bust, John Maynard Keynes and F. A. Hayek, two of the great economists of the 20th century, come back to life to attend an economics conference on the economic crisis. Before the conference begins, and at the insistence of Lord Keynes, they go out for a night on the town and sing about why there’s a “boom and bust” cycle in modern economies and good reason to fear it.

It may be one the most bizarre things you see today.

If you liked the video, it can get more bizarre. There is Planet Money podcast that is just as strange, involving “a cable tv producer from New Jersey, a podcasting libertarian economist, an international pop superstar and the two dead economists who brought them all together.”

Sources: