The SEC is expanding its team policing the crypto space by adding enforcement staff to its Crypto Assets and Cyber Unit. We previously noted that regulatory focus on new technologies in the decentralized finance space and further developments on the application of securities laws to digital assets were two of
How to Respond to the SolarWinds “Orion” Supply Chain Attack
As reported last week, it appears that a state-sponsored security hack has resulted in a major security compromise in widely-used software offered by a company called SolarWinds. The compromised software, known as Orion, is enterprise network management software that helps organizations manage their networks, servers and networked devices. The software
A Timely Reason to Review Procedures for Risk Assessments and Vendor Contracts in Light of the SolarWinds Attack
As reported last week, a state-sponsored hacker may have breached multiple U.S. government networks through a widely-used software product offered by SolarWinds. The compromised product helps organizations manage their networks, servers and networked devices. The product is not only used by government agencies, but is widely used in both the
WSJ Article on Geolocation Data Highlights Risks for Fund Managers
On Friday, the WSJ published an article detailing how companies are monetizing smartphone location data by selling it to hedge fund clients. The data vendor featured in the WSJ article obtains geolocation data from about 1,000 apps that fund managers use to predict trends involving public companies. However, as we’ve noted, the use of alternative data collection for investment research purposes may give rise to a host of potential issues under relevant laws.
Chairman Clayton Asks Lawyers to Knock it Off with the Unregistered Coin Offerings
In his recent remarks at the Securities Regulation Institute, SEC Chairman Jay Clayton had some stern words for market professionals, especially lawyers, involved in initial coin offerings (ICOs). He expressed concern that lawyers in the space “can do better” in their role as gatekeepers to the securities markets, particularly in advising clients whether the “coin” being offered is a security requiring registration.
SEC Speaks on Initial Coin Offerings: Tokens May Be Securities
Initial Coin Offerings (“ICOs”) are generating attention from both investors and the SEC. Investors’ interest is indicated by the more than $1.2 billion that ICOs reportedly have raised so far this year. Meanwhile, the SEC has recently asserted its authority in the space, releasing a report stating that digital tokens
Best Practices for Fund Managers to Mitigate Big Data and Web Scraping Risks
Proskauer partners Jeff Neuburger, Robert Leonard, Josh Newville and Jonathan Richman recently invited hedge fund executives to discuss the complex regulatory and compliance issues raised by the use of alternative data. Jeff, Robert and Josh also contributed an article to the Hedge Fund Law Report on Best Practices for Private Fund Advisers to Manage the Risks of Big Data and Web Scraping.
Fund managers have been capitalizing on methods to refine and analyze big data to assist investment decisions. What types of alternative data are being used to gain new insights? Sources include: e-commerce receipts and credit-card transaction data; sensors from internet-connected machines or smart devices; and online data collected via “screen scraping” (or “web scraping” or “spidering”).
Yet alternative data does not come without risks. For example, data collected as a result of web scraping may be considered material nonpublic information (MNPI). If that data were collected in a manner considered deceptive, then trading on that information might implicate the anti-fraud provisions of the securities laws. Circumventing security protocols or disguising a scraper’s identity on a site (where required), among other behaviors, could be viewed as misrepresentations or “deceptive devices” under Section 10(b) of the Securities Exchange Act.d