Category Archives: Investor relations

Equifax and SEC Hacks

A lot in the news of late about the hacks at Equifax and the SEC.

“SEC Discloses Edgar Corporate Filing System Was Hacked in 2016,” The Wall Street Journal, September 21, 2017 A1.

“Equifax Hackers Spied for Months,” The Wall Street Journal, September 21, 2017 A1.

“Equifax Board Weighs Clawbacks,” The Wall Street Journal, September 30, 2017 B3.  How many years’ compensation will be affected?

“Equifax Lawyer in Hot Seat,” The Wall Street Journal, October 2, 2017 A1.  Chief legal officer probed for clearing stock sales after executives knew, but no one else did, about the hack.

“Equifax Ex-CEO Lays Out Lapses,” The Wall Street Journal, October 3, 2017 B1.  Staffers blamed for not reacting to public warning.

“Lawmakers Slam the Ex-CEO Of Equifax,” The Wall Street Journal, October 4, 2017 B1.  He and others “weren’t aware of the significance of the company’s data breach ….” “[A]n employee failed to notify other staff to patch the software ….”  For want of a nail ….

“Senators Rap Credit-Reporting Model,” The Wall Street Journal, October 5, 2017 B1.  “[W]hy consumers shouldn’t have power over the data [credit companies] collect on them”?

“Lawmaker Asks SEC To Delay Trade Log,” The Wall Street Journal, October 5, 2017 B12.  Head of House Financial Services Committee pressures SEC to delay release of trading database following hack of SEC systems. Can you have too much information?

“Equifax Timeline Criticized,” The Wall Street Journal, October 6, 2017 B10.  How long did Equifax sit on news of the hack before alerting the Board, the market and the Feds?  Is five weeks too long?  Executives selling stock in that window will be investigated.  Three weeks before he informed the Board.

“After Breach, SSN Reliance Is Criticized,” The Wall Street Journal, October 7, 2017 A4.  One reaction to the Equifax hack is a move to find a replacement for Social Security Numbers.

“Index Firm Flagged Equifax for Security,” The Wall Street Journal, October 7, 2017 B9.  Company warned about Equifax data security flaws in August 2016.

“Equifax Probes Possible New Breach,” The Wall Street Journal, October 13, 2017 B1.  A code installed on Equifax’s website by a vendor “serve[s] ‘malicious content’ to consumers.”  Just when you thought ti was safe to go back in the water again.

“GOP Bill Would Boost Checks on Credit Firms,” The Wall Street Journal, October 13, 2017 B10.  The horse having left the barn, the government wants to exercise more oversight.

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Disclosure

“A Hot Startup Misled Advertisers,” The Wall Street Journal, October 13, 2017 A1.  Outcome Health apparently misled advertisers as to how many units their ads were appearing on.  The investigation continues.

How would your employees react if ask to provide inflated numbers to potential customers?  How would your investors react after a story appears on page one, above the fold?  Probably reflects in the valuation of the company.  And what about your company’s extensive political contacts?

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Silence as information?

I normally cite to The Wall Street Journal.  But occasionally I come across something elsewhere worthy of note.  One of my sources is the Business Law Prof Blog.  There was a post there today titled “Omissions Liability: Tempest in a Teapot or Gathering Storm?

At issue, can there be Rule 10b-5 liability (dealing with securities fraud) for not saying something, when you had knowledge and something akin to a duty to disclose.  There’s a Supreme Court case (Leidos, Inc. v. Indiana Public Retirement System) pending that may resolve the issue.

Is a corporation’s failure to say something in itself information, and if so, is that silence itself information that must be governed in order to be compliant?  How do you manage/govern silence?

 

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Suits against management

“Jumio Estate Sues Ex-Chiefs Over Financial Statements,” The Wall Street Journal, September 6, 2017 B5.  Bankruptcy estate sues former company executives for “‘dramatically incorrect’ revenue statements.”  CEO, COO, and General Counsel  accused of inflating numbers to lure investors.

Good to see former executives (rather than just shareholders) having to pay for their alleged misdeeds.

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Lawsuits as a management technique

“Shareholders Sue More Frequently,” The Wall Street Journal, August 22, 2017 B1.  Study show shareholders (or class action lawyers) are litigating more when their company is sued, alleging false and misleading statements by management.  One-hundred thirty-one suits in fist six months of 2017.

So, when communicating to the market or shareholders, make sure everything will stand the test of time.  Is it accurate?  Is it complete?

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Are you being manipulated?

“CEO’s Simple Trick on Earnings Calls: Saying ‘I,’ ‘We’ and ‘Us’,” The Wall Street Journal, August 7, 2017 R1.  Do CEOs control their use of “I” and “us” to manipulate your response?  If they are doing this, who else is massaging their language to influence you?

Are you a critical listener?  Does the content of the information delivery affect your reception?  Do people other than CEOs do this?

There are people who make a living teaching others how to do this.  Sometimes for crisis response, sometimes for news broadcasts.

Is this information governance?  Is someone controlling how you get information?

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Outsider, beware

“Infosys CEO Leaves In Row With Founder,” The Wall Street Journal, August 19, 2017 B3.  Gibson Dunn had been investigating some internal improprieties.  The former CEO, who was hired by Infosys from outside the company,  will stay on as executive vice chairman.  He is replaced by a long-time Infosys employee.

Seems a bit of a mixed message.  The founder of the company, who left 3 years ago, complains about operations under the new (and now former) CEO, but the former CEO sticks around on the Board.  Who’s really in charge?  Change is hard.

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