Artificial Intelligence—For Real Contracts

Computers Can Now Do Document Review

Computers Can Now Perform Document Review

Can a computer “think”? Twenty years ago, the world hailed advances made by IBM computer engineers when on February 10, 1996, “Deep Blue,” utilizing predictive evaluation functions capable of evaluating 100 million positions per second, beat the world’s reigning chess champion, Garry Kasparov. From there, predictive coding technology took off in applications such as the filtering of documents as to relevancy in litigation as well as in contract management services. The technology still required that the computer be programmed with data sets as its “brains,” and it was not really deemed capable of learning per se. But the question remained: Can a computer “think”? Experts in the field of Artificial Intelligence (AI) are now telling us that the answer is “yes.”

Continue reading

Minding the Gatekeeper

“If gold rusts, what will iron do?”

—Geoffrey Chaucer

The Gatekeeper Failed to Watch the Funds

The Gatekeeper Failed to Watch the Funds

In early June, the Securities and Exchange Commission (SEC) settled an enforcement action against the world’s largest independent fund administrator and consultant after charging the firm with faulty accounting practices in its management of two private funds. Known in the investment world as a “gatekeeper,” such fund administrators have the responsibility not only to serve as a consultant to both public and private funds, but also to keep alert for red flags of financial impropriety, to keep accurate records and prepare honest financial statements, and, in general, to serve as the integrity gatekeeper between the fund’s managers and its investors. But as the recent action involving two of its administered funds shows, the charged administrator failed miserably.

Continue reading

Hacking Our Way to Cybersecurity

Law Firms Are Susceptible to Hacking

Law Firms Have to Protect from Hacking

From major retail chains to credit card companies to government agencies, sooner or later everyone is vulnerable to a cyber-attack. That is simply a reality of 21st Century technology dependence. But while some organizations may seem to be more likely targets because of the vast financial theft value or because of the opportunity to embarrass a country by leaking its deepest secrets, the hacking of a law firm’s boring briefs would not appear to be very high up there on a hacker’s wish list. Until now. The past couple of years have seen an explosive increase in the number of security breaches at both domestic and international law firms. And just what holy grail is the law-firm hacker likely to be seeking? The prize, it seems is now insider information about pending M & A transactions. Illicit profiting remains the mainstay of all breaking-and-entering artists be it through the front doors of stores or via back doors of computer programs.

Continue reading

The Upcoming Brexit Vote—Countdown to Calamity?

The Brexit Decision: Bullseye or Disaster?

The Brexit Decision: Bullseye or Disaster?

On June 23, the UK will vote on a referendum formally titled The United Kingdom European Union Membership Referendum, but popularly dubbed “BREXIT”—an acronym for “British Exit” from the EU. With less than two weeks to go before the vote, most recent polls showed the two camps, referred to as “Leave” and “Remain,” respectively, as just about neck-in-neck, with the result that aside from die-hard proponents for one side or the other espousing the urgency of the matter, most Brits looked upon the horse race with a yawn. But all that changed with the emergence of a new poll released over the weekend by Opinium Poll and commissioned by the pro-BREXIT Burges Group think tank. The poll claims a stunning nineteen-point lead for the “Leave” camp (fifty-two to thirty-three), and suddenly bankers, markets, and pundits are taking the issues quite seriously.

Continue reading

A $1.75 Billion Game of Russian Roulette?

Russian Eurobonds Might Offer a Sound Investment

Russian Eurobonds- a Sound Investment?

The last time Russia issued the popular ten-year sovereign debt eurobonds was in 2013—before its 2014 invasion of the Ukraine and annexation of the Crimea with its concomitant Western financial sanctions. But on May 23, Russian Finance Minister Anton Siluanov surprised the investment world by announcing the offering of such bonds in order to raise $3 billion to finance Russia’s growing budget deficit. So great was the demand for the bonds that the ministry decided to extend the offering to May 24, when, according to ministry sources, demand hit $7 billion. When the dust settled, Russia had sold $1.75 billion in ten-year, dollar-denominated eurobonds pegged at about 4.75 percent. However, critics point to the rejection of the offering by twenty-five foreign banks as a possible sign of mistrust in the issuer and a level of unacceptable risk.

Continue reading

Testing the Limits of Regulatory Authority

Has FINRA Overstepped its Bounds?

Has FINRA Overstepped its Bounds?

FINRA, the Financial Industry Regulatory Authority, was authorized by Congress to police broker-dealers and to bring disciplinary lawsuits against financial industry members that it believes have violated securities laws. But which securities laws is it authorized to enforce? And which actions exceed its legislative authority? Those are the questions currently pending before a Maryland court in the case of Scottsdale Capital Advisors Corp. et al. v. the Financial Industry Regulatory Authority, brought by an Arizona penny-stock broker.

Continue reading

Corporate Transparency: Seeing Through Governance Fraud

Trying to Stop the Chain of Corruption

Stopping the Chain of Corruption

During a recent trip to Mexico, Pope Francis called out government and corporate leadership on their dismal record regarding entrenched corruption. But his hosts’ fraternity of fraud is by no means an exclusive one. From Italy to Japan, from the U.S. to the Ukraine, corporate corruption cases have soared to the extent that some observers have come to believe that ‘corporate realism’ and ROI (Return On Investment) go hand in hand. Now strong, albeit less ecclesiastic, voices are sounding the alarm about corporate governance failures—and what to do about them.

Continue reading

Board Diversity: The Other Corporate Dividend

Looking for More Women in the Boardroom

Women are Still Absent from the Boardroom

In 2007, the nonprofit organization Catalyst, Inc. published a study in which it found that “Fortune 500 companies with the highest representation of women board directors attained significantly higher financial performance, on average, than those with the lowest representation of women board directors” (The Bottom Line: Corporate Performance and Women’s Representation on Boards, Catalyst, Inc., 2007). In response to the report, numerous private and public companies drafted initiatives to increase the number of women directors on their boards and to increase visible board diversity in general. But nine years later, progress in achieving those goals has been slow, and the “good ol’ boy” stereotype of corporate governance stubbornly persists as reality. Recent legislative resolutions and government agency policy declarations seek to kick-start a serious new effort to diversify corporate boards.

Continue reading