Lawyer Doug Cornelius is Chief Compliance Officer at Beacon Capital Partners, LLC, which is a real-estate private equity firm in Boston, Massachusetts. Cornelius not only covers compliance issues for his firm, but blogs about the complexities surrounding compliance to help others understand the issues.
These issues are legion. In this recent post of April 12, 2013, Cornelius highlights several articles that expose the tremendous risks involved in compliance. The Wall St. Journal article he cites begins, “The U.S. Securities and Exchange Commission is facing heightened judicial scrutiny over its practice of allowing companies to settle lawsuits without admitting or denying allegations, but Robert Khuzami, former head of the agency’s Division of Enforcement, defended the agency’s use of such settlements on Tuesday as an efficient enforcement tool.”
The reason for the companies’ refusal to admit or deny allegations is that they are between a rock and a hard place: assuming that some proof of the allegations exist, admitting guilt would expose them to civil lawsuits that would cost far more than SEC fines.
Then in this post of April 3, 2013, Cornelius discusses the hot water that Netflix chief Reed Hastings found himself in after boasting on his personal Facebook page that his company had provided over one billion hours of online viewing in the previous month (June of 2012). The hot water was due to the SEC regulation that companies may not provide company news privately ahead of general public announcements.
The SEC ultimately decided against pursuing enforcement actions against Hastings, but Cornelius was left shaking his head at the executive’s social-media denseness: “Personally, I thought Mr. Hastings made a bad decision in using his personal Facebook page to make a company announcement. The information had already been released, but in more technical releases. His personal Facebook page did have 200,000 friends who could see the news, but it was still gated and not available to the general public in a broad and non-exclusionary manner.”
What does this have to do with the Eye of Sauron? Cornelius thinks that it might be necessary as a supervisory toolfor compliance.
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