S.E.C. Member’s Role in Failed Mutual Fund Reform

The following is an excerpt from an article in 

The New York Times
Monday, August 27, 2012

S.E.C. Member’s Role in Failed Mutual Fund Reform

By NATHANIEL POPPER

Luis A. Aguilar, one of five members of the Securities and Exchange Commission, is generally known as one of its strongest advocates for tougher oversight of the securities industry. In public statements this year, he has pushed his S.E.C. colleagues to be more aggressive, contending that the commission was not protecting investors assiduously enough.

But last week, Mr. Aguilar derailed one of the most significant current efforts to tighten regulations on the financial industry. His opposition to a proposal put forward by the S.E.C. chairwoman, Mary L. Schapiro, which was intended to improve the safety and soundness of a popular investment, money market mutual funds, put Mr. Aguilar in lock step with the powerful and aggressive mutual fund industry in which he worked as a lawyer from 1994 to 2002. Mr. Aguilar’s decision to oppose Ms. Schapiro’s plan last week became the third and deciding S.E.C. vote against the proposal.

His public criticisms of the approach taken by Ms. Schapiro closely echo those made by the industry in its fierce lobbying effort to scuttle a regulatory plan that had won support from nearly every top financial regulator, including the Federal Reserve chairman, Ben S. Bernanke, and Treasury Secretary Timothy F. Geithner.

It is not uncommon, of course, for regulators to side with the industries they oversee. But Mr. Aguilar has been adamant that he is not against prudent reform. He has said instead that he wants to be sure regulators have enough information before they move forward with new rules.

Behind the scenes, though, Mr. Aguilar had not requested that additional information, according to people briefed on his actions in recent months.

In his statement outlining his opposition to Ms. Schapiro’s plan, for instance, he said “there are larger macro questions and concerns about the cash management industry as a whole” that needed to be studied before the S.E.C. could move forward with efforts to improve money market funds. Mr. Aguilar did not mention the need for further study to Ms. Schapiro until two days before he went public with his opposition last week, commission officials said.

Possible changes to money market funds have been discussed within the agency for over a year, and Ms. Schapiro distributed the 414-page proposal in June to the four other members of the commission, including Mr. Aguilar. During that time, S.E.C. staff members made numerous overtures to Mr. Aguilar to address any concerns he might have had about the proposal, but most were rebuffed, the people said. On the other hand, Mr. Aguilar met with mutual fund companies 11 times this year as the proposal was being developed, according to S.E.C. records.

For more, visit www.nytimes.com.

For Buckyballs Toys, Child Safety Is a Growing Issue

The following is an excerpt from an article in 

The New York Times
Friday, August 17, 2012

For Buckyballs Toys, Child Safety Is a Growing Issue

By ANDREW MARTIN

Three years ago, two pals from Brooklyn came up with the idea of creating a desktop toy out of powerful magnets. Their creation, Buckyballs, became an instant hit. And by this year, the two — Craig Zucker and Jake Bronstein — had expected annual sales to reach about $25 million.

But their business plan has hit a major, unanticipated snag.

Buckyballs are made from rare-earth elements, which makes them much more powerful than most magnets — and potentially more dangerous when ingested. Though the product is marketed to adults and festooned with warning labels, regulators have moved to stop sales because children keep swallowing Buckyballs and similar products made by others.

An administrative complaint filed last month by the Consumer Product Safety Commission seeks to require the company — officially called Maxfield & Oberton Holdings — to tell the public about the problem and offer customers a refund. The safety commission also asked 12 other manufacturers of rare-earth magnets to voluntarily recall their products and stop sales; 11 have complied.

Besides Buckyballs, Zen Magnets, a small company in Denver, refused. Last week, the safety commission filed an administrative complaint against Zen Magnets too.“The labeling, the warnings, the packaging does not work,” Scott Wolfson, spokesman for the safety agency, said of the products. “You have young children who come into a room and get their hands on a loose magnet or two.”

The action involving Buckyballs and Zen Magnets is unusual because the safety commission rarely files an administrative complaint, which is essentially a request for a mandatory recall. The last one, filed 11 years ago, was against Daisy Manufacturing, which makes BB guns. In Buckyballs’ case, a hearing will be scheduled before an administrative law judge, who will decide whether to grant the safety commission’s request.

In the meantime, Mr. Zucker has started an aggressive public campaign to win support for Buckyballs. Using the cheeky slogan “Save Our Balls,” his company has taken out newspaper ads in Washington, directed at President Obama and lawmakers, and stoked a campaign on social media Web sites like Facebook and Twitter.

In doing so, Mr. Zucker has found enthusiastic support from those who believe the Obama administration has pushed regulation too far.

For more, visit www.nytimes.com.

Government and advertisers have different ideas about 'Do Not Track' - The Hill's Hillicon Valley

The Obama administration and the technology industry have touted the creation of a "Do Not Track" button to help consumers protect their privacy online, but the government and advertisers are not on the same page about what the button will do.

The Federal Trade Commission first proposed a Do Not Track button in 2010. The concept is modeled on the agency's popular "Do Not Call" list, which allows consumers to opt out of receiving telemarketing calls.

FTC Chairman Jon Leibowitz urged Web companies to voluntarily set up a system for users to opt out of online tracking and warned that legislation could be necessary if they failed to act.

Last month, all of the major Web browsers promised to create a Do Not Track feature, and the Digital Advertising Alliance, a coalition of advertising trade groups, said that by the end of the year, they would stop displaying targeted ads to users who had selected the feature in their browsers.

The commitment was announced as part of the White House's unveiling of its "Privacy Bill of Rights" – a set of principles about how companies should handle users' personal data.

Leibowitz praised the companies for "stepping up" to his challenge and said the feature would ensure "consumers have greater choice and control over how they are tracked online."

But Mike Zaneis, general counsel of the Interactive Advertising Bureau, a member of the Digital Advertising Alliance, said the name "Do Not Track" is a "complete misnomer."

For more, click the link below:

Government and advertisers have different ideas about 'Do Not Track' - The Hill's Hillicon Valley

F.T.C. Seeks Privacy Legislation

Excerpt from an article in

The New York Times

Tuesday, March 27, 2012

F.T.C. Seeks Privacy Legislation

By TANZINA VEGA and EDWARD WYATT

The government’s chief consumer protection agency said on Monday that it intended to take direct aim at the vast industry that has grown up around the buying and selling of information about American consumers.

The agency, the Federal Trade Commission, called on Congress to enact legislation regulating so-called data brokers, which compile and trade a wide range of personal and financial data about millions of consumers from online and offline sources. The legislation would give consumers access to information collected about them and allow them to correct and update such data.

The agency also sent a cautionary signal to technology and advertising companies regarding a “Do Not Track” mechanism that allows consumers to opt out of having their online behavior monitored and shared. It warned that if companies did not voluntarily provide a satisfactory Do Not Track option, it would support additional laws that mandate it.

The recommendations, part of a sweeping set of guidelines in an F.T.C. report on Monday, represent the government’s latest move to address the issue of consumer privacy.

On one side of the debate are data brokers like Experian and Acxiom, which collect and sell information, and the huge ecosystem of technology and online advertising companies — including Google, Microsoft and Facebook — that target consumers based on their personal preferences.

On the other side are consumer groups and privacy advocates that are concerned about the volume of data being collected and how little control consumers have over that information.

The government’s Do Not Track efforts are likely to collide with the desire of companies to continue the lucrative business of collecting, using and sharing information about the people who use their services. Although these businesses say they support limits on using this information, they generally still want to be able to collect it.

Conflict Minerals

Excerpt from an article in

The New York Times

Tuesday, March 20, 2012

Use of ‘Conflict Minerals’ Gets More Scrutiny

By EDWARD WYATT

WASHINGTON — An iPhone can do a lot of things. But can it arm Congolese rebels?

That is the question being debated by a battalion of lobbyists from electronics makers, mining companies and international aid organizations that has descended on the Securities and Exchange Commission in recent months seeking to influence the drafting of a Dodd-Frank regulation that has nothing to do with the financial crisis.

Tacked onto the end of that encyclopedic digest of financial reform is an odd provision. It requires publicly traded companies whose products use certain minerals commonly mined in strife-torn areas of Central Africa to report to shareholders and the S.E.C. whether their mineral supply comes from the Democratic Republic of Congo.

The measure is aimed at cutting off the brutal militia groups that have often taken over the mining and sale of so-called conflict minerals to finance their military aims. Just about every company affected by the law says they support it, but many business groups have also been pushing aggressively to put wiggle room in the restrictions, calling for lengthy phase-in periods, exemptions for minimal use of the minerals and loose definitions of what types of uses are covered.

Nearly every consumer product that includes electronic parts uses a derivative of one of the four minerals: columbite-tantalite, which when refined is used in palm-size cellphones and giant turbines; cassiterite, an important source of the tin used in coffee cans and circuit boards; wolframite, used to produce tungsten for light bulbs and machine tools; and gold, commonly used as an electronic conductor (and, of course, jewelry).

Given their broad application, the minerals have been a primary target of humanitarian groups concerned about genocide, sexual violence, child soldiers and other issues that have been common outgrowths of conflicts in Central Africa.

A Renewed Multilateral Effort to Protect East European Banks

Excerpt from an article in

The New York Times

Thursday, March 15, 2012

A Renewed Multilateral Effort to Protect East European Banks

By JACK EWING FRANKFURT — A group of officials and bankers who helped prevent Eastern Europe from being thrown into the financial crisis in 2009 has reconvened, seeking to avoid a credit squeeze and economic downturn caused by problems at parent banks in Western Europe.

The International Monetary Fund, European Commission, World Bank and other institutions this week formally revived an effort known as the Vienna Initiative, which three years ago succeeded in preventing panicked West European banks from draining capital from their subsidiaries in Eastern Europe.

Vienna Initiative 2.0, as it has been named, is concentrating on ensuring that national regulators do not work at cross purposes, inadvertently provoking a flight of capital as banks respond to pressure to reduce risk.

The first Vienna Initiative “was based on voluntary commitment by banks,” said Otilia Simkova, an analyst at the consulting firm Eurasia Group in London. “Now it seems everything is focusing on regulators.”

Banks in the euro area supply 80 percent of the foreign lending in emerging Europe, which includes countries like Poland and Hungary as well as Turkey. That means problems among euro area banks can quickly spread east.

In fact, West European banks drained $35 billion from the region in the third quarter of 2011, according to figures published this week by the Bank for International Settlements in Basel, Switzerland.

A shortage of credit would undercut economic growth at a time when countries like Romania are still recovering from the last crisis.

And the Privacy Gaps Just Keep On Coming

Excerpt from an article in The New York Times
Monday, February 20, 2012

And the Privacy Gaps Just Keep On Coming 

By NICK BILTON

SAN FRANCISCO -- Another week. Another privacy debacle.

This time, Apple is to blame. Yes, the company that has promoted itself as more private and secure than the other guys, with its stringent app approval process, has actually been handing out people's address books as if they were sausage samples on a toothpick at the supermarket.

Next week there will be another privacy slip. And again the week after. Like the movie "Groundhog Day," where the day repeats itself. Where the day repeats itself. Where the day repeats ... you get the point.

It might be Google, Amazon, Sony, Facebook or Apple, again. Or perhaps a small Silicon Valley start-up in such a rush to get its product out in the face of competition that it will focus more on designing the icon of its app, than ensuring users' privacy.

Imagine if a bank paid more attention to the color of the carpet in its lobby than the type of safe it uses to store its customers' valuables. No one would want to store anything there, that's for sure.

During the time it took to write this column, yet another privacy violation was reported. The Wall Street Journal said Friday that Google and other advertising companies bypassed privacy settings in Apple's Safari browser in order to track people's online behavior; three legislators called on the Federal Trade Commission to investigate. Google said it immediately moved to address the concerns.

Whose fault is all of this? We can't just point fingers at the companies that make iPhones, apps, social networking services and Web sites - although there are a lot of fingers that can be aimed in their direction. We're all somewhat to blame.

Loss of Wireless Dream Caps Falcone's Fall From Grace

Excerpt from an article in The New York Times
Thursday, February 16, 2012

Loss of Wireless Dream Caps Philip Falcone's Fast Fall From Grace 

By AZAM AHMED

It was as ambitious a bet as any hedge fund manager could imagine: building a wireless network from scratch to compete with the likes of AT&T and Verizon.

But the dream has come crashing down to earth for Philip A. Falcone, the investor whose multibillion-dollar wager has been all but halted by the Federal Communications Commission. The agency, which initially blessed Mr. Falcone's plans for a 4G network, changed course late Tuesday after an adviser determined the signal would interfere with GPS systems.

The decision could spell disaster not just for LightSquared, the upstart venture, but also for Mr. Falcone's career as a money manager. He paid billions of dollars to launch a satellite into orbit and map out a forest of cellphone towers dense enough to service the nation.

Now, after more than a year in Washington's cross hairs, the crown jewel of Mr. Falcone's efforts - representing some 60 percent of his main hedge fund - is in peril.

"They're done because of how politicized the situation is," said Jonathan Chaplin, a telecommunications analyst with Credit Suisse. "If this were being worked out by engineers, the nature of the debate would be very different."

Mr. Falcone struck a confident note in responding to questions via e-mail on Wednesday. He says he has no plans to sell the spectrum assets of LightSquared and is not planning to file for bankruptcy.

"It's only one chapter," he wrote.

Yet analysts say that Mr. Falcone is left with few options, all unpromising.