The Real Cost of Cybercrime

Cybercrime Has Become Unavoidable

Cybercrime Has Become A Fact of Business Life

What’s the cost of a data breach per record accessed? A mere $150 on average. But when extrapolated out to the number of record breaches at a typical company or government agency that gets victimized, the average company loss figure soars to a staggering $4 million. That average cost, of course, won’t apply to a cyber attack at a small mom-and-pop operation nor even to most mid-sized companies. But when major retailers, credit card companies, and health-care providers are factored in, the damage per hit is indeed in the millions. Experts predict that even the average $4 million loss figure will skyrocket to $150 million per data breach by the year 2020. Now CTOs are coming under scrutiny by their directors who have begun to ask, “What are we paying for?”

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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.”

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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.

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LEAVING LIBOR

Seeking a Benchmark that Can't Be Manipulated

Seeking a Benchmark that Can’t be Manipulated

In 1986, the British Bankers’ Association (BBA) created the London Interbank Offered Rate (LIBOR) in response to the need for a reliable, unified benchmark rate for calculating loans between British banks. It soon developed into one of the primary global interest rate benchmarks for debt instruments ranging from government bonds to home mortgages, credit cards, student loans and many others. Based on a basket of five currencies—the U.S. dollar, the Euro, the Pound Sterling, Swiss Franc and Japanese Yen—LIBOR was relied upon by U.S. financial institutions for rating trillions of dollars’ worth of debt. But a little more than two years after the catastrophic LIBOR rate-fixing scandal broke, U.S. regulators are poised to leave LIBOR in favor of an alternative benchmark. Figuring out how to set the interest rate for $160 trillion in U.S. financial products and debt is no simple task.

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EU Reverts to the Guillotine—to Stymie Bank Withdrawals

This Guillotine Cuts Off Bank Withdrawls

This Guillotine Cuts Off Bank Withdrawls

On the 10th of October 1789, Dr. Guillotin (original spelling without the e) proposed to the French Assembly that the penal code be revised to provide that capital punishment executions be carried out not by torture or by hanging from the gallows but by simple decapitation. Thus, the guillotine became the standard instrument for death penalty cases, not only in France, but throughout Europe. Fast forward 227 years later, and European officials are once again mulling over use of the guillotine throughout Europe—but this time as a tool to stop a run on failed banks.

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Crowdfunding Portals: A New Anti-Money Laundering Target

Is Crowdfunding Under Fire?

Is Crowdfunding Under Fire?

The Financial Crimes Enforcement Network (FinCEN) is a Treasury Department bureau that collects and analyzes data about financial transactions in an effort to combat both domestic and international money laundering. It is one of the primary enforcement agencies of the Bank Secrecy Act (BSA), which is America’s principal anti-money laundering (AML) statute. Although FinCEN’s BSA authority was initially employed for tracking underworld money laundering, terrorist financing, and other financial crimes conducted via banks and similar money services businesses, it has gradually been expanded in scope and definition to regulate additional nonconventional investment sources. FinCEN is now poised to go after investment crowdfunding portals for SAR compliance.

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SEC Revises Rules for Jobs Act Thresholds

The SEC Has Made it Easier for Start-ups to Access Funding

The SEC Has Made it Easier for Start-ups to Access Funding

In 2012, the Jumpstart Our Business Startups Act (JOBS Act) was signed into law in order to, among other things, encourage the funding of small businesses by easing various securities regulations. Included in the legislation were various directives to the Securities and Exchange Commission (SEC) to revise some of its rules in order to implement the act. In early May, the SEC announced formal approval of revisions to its rules related to the thresholds for registration, termination of registration, and suspension of reporting under Section 12(g) of the Exchange Act.

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Are Financial Markets’ Trading Scandals Inevitable?

Are Trading Scandals Inevitable?

Are Trading Scandals Inevitable?

In 1995, Nick Leeson, a trader for the world’s second oldest merchant bank, Baring’s Bank, brought about the collapse of the 230-year-old financial institution by engaging in highly speculative derivatives trades that cost the bank $1.3 billion in losses. The crash, deemed the granddaddy of trader misconduct at the time, was hardly an isolated event but rather a harbinger of greater trading scandals to come. In the twenty-one years since Mr. Leeson’s notorious trading fiasco, six other major trading scandals have been prosecuted with defendants being convicted either by plea bargains or trial. The $14 billion in losses over the past two decades ranged from a “paltry” $456 million to a whopping $7.2 billion. All of which, of course, raises the question: are trading scandals part and parcel of the financial markets game?

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FINRA Cautions on Investor Powers of Attorney

FINRA Helps Protect Investors' Money

FINRA Helps Protect Investors’ Money

The Financial Industry Regulatory Authority (FINRA) is the nongovernmental watchdog group authorized by Congress to maintain financial markets’ integrity and protection of investors via the enforcement of rules for the fair and honest operation of the securities industry in the United States. Recently, FINRA addressed the issue of powers of attorney given to financial advisors or to an investor’s family member and offered its tips and warnings regarding how investors can protect themselves while utilizing such powers of attorney.

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New Rule 37 (E): ESI in the Courtroom

Courts are figuring out when to impose ESI sanctions

Courts are figuring out when to impose ESI sanctions

On December 1, 2015, Rule 37(e), the new Federal Rule of Civil Procedure, became part of federal litigation law in order to address the problem of disparate circuit court rulings regarding the failure of a party to preserve electronically stored information (ESI). Despite the intent to homogenize ESI rulings, decisions handed down during the past three months seem to suggest that the courts are still grappling with the proper application of the new rule.

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