Reaction Paper to The Sec Article

Reaction Paper to The Sec Article ORDER NOW FOR CUSTOMIZED AND ORIGINAL ESSAY PAPERS ON Reaction Paper to The Sec Article Not to exceed 5 sheets of paper front and back (include footnotes of sources). The goal is to show me that you read the assignment. Please don’t write something about the general topic; but fail to show me that you actually read the assigned article. Reaction Paper to The Sec Article attachment_1 262 QUARTERLY REPORT The SEC and the Internet: Regulating the Web of Deceit By Lawrence J. Trautman and George P. Michaely, Jr.* I. Lawrence J. Trautman is a JD, Oklahoma City Univ. School of Law; MBA, The George Washington University; BA, The American University. Mr. Trautman is a past president of the New York and Metropolitan Washington/Baltimore Chapters of the National Association of Corporate Directors and of the Dallas Internet Society. George P. Michaely, Jr., a JD, BA, University of Notre Dame. Mr. Michaely was a former Chief Counsel to the Division of Corporation ?inance, U.S. Securities and Exchange Commission. He also taught advanced securities law at both The George Washington University School of Law and Georgetown University Law School. Remembering George Michaely by Lawrence J. Trautman,* Hon. Stanley Sporkin** and John A. Dudley*** This is a memorial tribute to George P. Michaely, Jr. (1926 ? 2014). After graduating from both the University of Notre Dame and its law school, he began his legal career, serving for approximately seven years as attorney in the Office of General Counsel of the SEC. He was then appointed Chief Counsel of the SEC’s Division of Corporation ?inance, where he served for approximately the next four years and was responsible for advising the SEC and the public concerning the interpretation of the statutory provisions and rules relating to the registration provisions of the Securities Act of 1933 and the reporting requirements of the Securities Exchange Act of 1934. George Michaely was a born educator. ?or five years he was a member of the adjunct faculty of The George Washington University. As a Professorial Lecturer on Law at the National Law Center, he taught a class on the federal securities laws. ?or ten years he was a member of the adjunct faculty of the Georgetown Law Center, where he taught (with Mickey Beach and Mauri Osheroff) a course focusing on the disclosure requirements of the federal securities laws relating to public and private offerings of securities, solicitations of proxies and tender offers. Again, as an educator, George served as a mentor and inspiration to many young securities attorneys. He was a man of remarkable talent, keen intellect and good humor, and his love for all people kept him in good stead with all he met. * ** B.A., The American University; M.B.A., The George Washington University; and J.D., Oklahoma City Univ. School of Law. Mr. Trautman is a past president of the New York and Metropolitan Washington/Baltimore Chapters of the National Association of Corporate Directors. A.B., Pennsylvania State University; LL.B. Yale Law School. Judge Sporkin served as: Director of the SEC’s (Continued in next column) The Internet has created challenges for regulators of financial markets unimagined over eighty years ago by drafters of the Securities and Exchange Acts.1 The recent explosion in Internet use has provided many benefits for investors and publicly-traded companies. Reaction Paper to The Sec Article The Internet has been a boon to entrepreneurs seeking to reach new markets and raise needed capital at minimal cost. Examples of the wealth of information available on demand and at little cost to the investing public includes: the reported financial results of issuers; press releases; research reports of securities analysts; product information; and easy and prompt access to information about corporate events. The SEC has provided guidelines that allow an issuing company to disseminate to its shareholders the required periodic reports (10-k, 10-q, 8-k, proxy statements, etc.).2 A series of new challenges face the regulators of our securities markets. Cyber-securities fraud has become a major threat to the evolution of the securities markets. A few of the creative tools available to today’s cybercriminals include: the relative ease of data theft; * The authors wish to extend particular thanks to the following for their assistance in the research and preparation of this article: Mauri L. Osheroff, former Associate Director (Regulatory Policy) of the Division of Corporation ?inance at the U.S. Securities and Exchange Commission; John Reed Stark, former Chief, Office of Internet Enforcement, U.S. Securities and Exchange Commission and Professor of the Georgetown University School of Law; Joan MacLeod Heminway, W.P. Toms Distinguished Professor of Law, The University of Tennessee College of Law; and Professors Norwood Beveridge and Alvin C. Harrell of the Oklahoma City University School of Law. All errors and omissions are our own. 1. Securities Act of 1933 [1933 Act] § 2(a)(1), 15 U.S.C. § 77b(a)(1); Securities Exchange Act of 1934 [1934 Act] § 3(a)(10), 15 U.S.C. § 78c(a)(10). 2. See Use of Electronic Media for Delivery Purposes, Securities Act Release No. 7233, 60 ?ed. Reg. 53458 (Oct. 6, 1995). (Continued from previous column) Division of Enforcement; General Counsel of the CIA; and United States District Court Judge for the District of Columbia. *** B.B.A (cum laude) University of Pittsburgh; J.D., Georgetown University. Mr. Dudley served for ten years at the SEC, first in the Office of General Counsel and as Associate Director of the SEC’s Mutual ?und Division. Introduction QUARTERLY REPORT the transfer of money in the blink-ofan-eye across borders; and stolen identities facilitating market manipulation.3 David S. Wall has observed that some have “questioned whether cybercrime is actually a category of crime in need of [a] new theory or whether it is better understood by existing theories.”4 Paul Schiff Berman has questioned whether “online regulation” is “really a discrete field worthy of a separately defined study? After all, mightn’t we just talk about a law and society approach to communication of all varieties and just treat online activity as one mode of interaction?”5 The most famous early skeptic, United States Court of Appeals Judge ?rank Easterbrook, provocatively argued that studying cyberlaw as a separate field would be no different from studying the “law of the horse” in the nineteenth century. As Easterbrook saw it, horses caused torts, horses were bought and sold, horses were stolen, but all that activity did not necessitate a unique field of study. Rather, he argued, general rules of tort, property, contract or criminal law could easily be applied to horses without the need to invent a new legal regime. Likewise, according to Easterbrook, we can apply general legal principles to online interaction without needing anything called “cyberlaw.”6 3. 4. 5. 6. Capital formation is the very lifeblood of job creation. The Internet has resulted in efficiencies, cost savings, and real productivity gains to all in the capital raising process. The Jumpstart Our Business Startups (JOBS) Act was enacted on April 5, 2012.7 The JOBS Act and associated changes to the securities laws are intended to facilitate the ability of smaller companies to raise needed capital. Reaction Paper to The Sec Article This article provides an update regarding: the growth and global availability of the Internet; an abbreviated overview of the law of electronic transactions; brief discussion of jurisdictional challenges to the prosecution of Internet fraud and wrongdoing; the JOBS Act; a brief history of the SEC’s incorporation of Internet technology into the financial reporting process; the evolving cyber-environment in which securities issuers must adapt to comply with regulatory requirements; and developing areas of cyberfraud. II. Growth and Widespread Availability of the Internet A. Role of ICANN and the Growth of the Internet According to the Internet Corporation for Assigned Names and Numbers (ICANN), “in 1998 there were an esti- See generally Lawrence J. Trautman & Kara Altenbaumer-Price, The Board’s Responsibility for Information Technology Governance, 28 J. Marshall J. Computer. & Info. L. 313 (2011), available at http://www.ssrn.com/ abstract=1947283; Lawrence J. Trautman, Virtual Currencies: Bitcoin & What Now After Liberty Reserve, Silk Road & Mt. Gox?, 20 Rich. J.L. & Tech. 13 (2014), available at http: //ssrn.com/abstract=239353; Lawrence J. Trautman, Managing Cyberthreat, 31 Santa Clara Computer & High Tech. L.J. ___ (2015), available at http: ssrn.com/abstract=2534119. David S. Wall, The Internet as a Conduit for Criminal Activity (Mar. 18, 2010), in IN?ORMATION TECHNOLOGY AND THE CRIMINAL JUSTICE SYSTEM 77 – 98 (Pattavina, A., ed. 2005), citing R. Jones, Review of Crime in the Digital Age, in P. Grabosky & R. Smith, 11 Int’l J. L. & Tech. 98 (2003), available at http: //www.ssrn.com/abstract=740626. Paul Schiff Berman, Law and Society Approaches to Cyberspace, in LAW AND SOCIETY APPROACHES TO CYBERSPCE, xiii (Ashgate Publishing 2007); Princeton Law and Public Affairs Working Paper No. 07-009, http://www.ssrn.com/ abstract=985349. Id. 7. Jumpstart Our Business Startups Act, Pub. L. No. 112-106, 126 Stat. 306 (2012) [JOBS Act] (consisting of seven titles, the Act includes several modifications to long-standing securities laws and regulations). 263 mated 30 million computers on the Internet and an estimated 70 million users.”8 By 2011, the Internet user population had grown to approximately 2 billion, with the number of servers on the Internet exceeding 500 million (not counting episodically connected laptops, personal digital assistants and other such devices).9 The introduction of new technologies (particularly Internet-enabled devices) continues at a rapid pace as the Domain Name System attempts to deal with the numerous technological challenges created by rampant growth in the user base (for example, the requirement imposed by the use of non-Latin character sets since the world’s languages are not exclusively expressible in one script).10 Rod Beckstrom, former ICANN President & CEO, has observed that “half of the Internet users today – a billion of them – are in Asia. Approximately 500 million, or 25%, are in China.”11 Beckstrom reported that “it is estimated that more than five billion additional people will connect to the Internet in the next twenty years. Most of the newcomers will not speak English.”12 Chart 1 illustrates: regional global population estimates as of June 30, 2014; Internet usage as of December 31, 2000 and latest estimates; percentage usage penetration; growth rate 2000- to mid2012; and users by regional percentage.13 8. INTERNET CORPORATION ?OR ASSIGNED NAMES AND NUMBERS, 2008 ANNUAL REPORT, AT 22. 9. Rod Beckstrom, President & CEO, Internet Corporation for Assigned Names and Numbers (ICANN), President’s Report, 40th ICANN International Meeting, Silicon Valley, San ?rancisco, California 2 (March 14, 2011), http://www.icann.org/ en/presentations/. 10. Id., See also Michael Palage, ICANN & Internet Governance: How Did We Get Here & Where are We Heading?, 16 Progress and ?reedom ?oundation Progress on Point Paper (Aug. 2009), http://ssrn.com/abstract=1431004. 11. Rod Beckstrom, President & Chief Exec. Officer, Internet Corporation for Assigned Names (ICANN), Remarks before the 40th Anniversary of USC Information Sciences Institute, at 14 (April 26, 2012), http://www.icann.org/en/news/presentations/ beckstrom-speech-usc-isi-26apr12-en.pdf. 12. Id. 13. Internet Usage Statistics, The Big Picture: World Internet Users and Population Statistics: June 30, 2014, Copyright ©2014, Miniwatts Marketing Group. Reaction Paper to The Sec Article All rights reserved worldwide. Used by permission., available at http://www.Internetworlds tats.com/stats.htm. 264 QUARTERLY REPORT Chart 1 The Internet Big Picture Chart 2 illustrates: Internet usage statistics for the Americas; Internet user statistics and population statistics for fifty countries and regions (North America, Central America, South America and the Caribbean, including 2014 population estimates for the Americas and the rest of the world); percentages of the world population; Internet usage as of June 30, 2014 and the latest estimates; percentages of usage penetration mid-2014; and ?acebook users as of December 31, 2012.14 14. Internet Usage Statistics for the Americas, North America, Central America, South America and the Caribbean, Copyright ©2014, Miniwatts Marketing Group. All rights reserved worldwide. Used by permission. Available at http: //www.Internetworldstats.com/stats2.htm. QUARTERLY REPORT 265 Chart 2 Internet User Statistics and Population Statistics for 51 Countries and Regions – North America, Central America, South America and the Caribbean Rod Beckstrom has observed that “ICANN and its governing bodies were created to keep the global Internet secure, stable and interoperable, and this is critical to ensure that the world stays connected. Its principle function is to coordinate the domain name system and Internet protocols and parameters, the backbone of the Internet.”15 Beckstrom reports that “users access about 100 billion web pages every day. Around twenty-five percent of the seven billion [persons] on this planet reach the Internet directly by computer, and even more through smart phones and other devices. These…activities in- 15. Rod Beckstrom, President & CEO, Internet Corporation for Assigned Names and Numbers (ICANN), Keynote Address, “ICANN and the Global Internet,” TUTED World Telecom Day, Izmir, Turkey (May 17, 2011), http://www.icann.org/ en/presentations/beckstrom-speech-izmir-turkey-17may11en.pdf. volve more than one trillion lookups in the domain name system…everyday.”16 B. ICANN as a Role Model for International Governance and Global Cooperation Officially created in early October 1998, ICANN has become an example of a new kind of international body that demonstrates a multi-stakeholder model of policy-making managed for the purpose of meeting the strategically important demands of global Internet growth and its importance in all aspects of society. The private sector, technical community, and governments are all accommodated in the ICANN policy development process. ICANN does not 16. Id. at 5. provide a frictionless or perfect process; nonetheless, ICANN has managed its decisions smoothly and adapted to the mission-critical demands rooted in the global adoption of the Internet. Under ICANN, cooperation and management of the Internet address space has become regionalized, with Regional Internet Registries.17 As a result of the staggering growth in the adoption of Internet-enabled devices, the increasing global penetration of Internet access is rapidly consuming the current limited available address space (IPv4), creating a need for much larger global address space (IPv6).18 Recent usage has expanded to include new devices with over three billion mobile units in use (roughly 17. See INTERNET CORPORATION ?OR ASSIGNED NAMES AND NUMBERS, supra note 8. 18. Id. at 23. 266 QUARTERLY REPORT fifteen percent of these are already Internet-enabled).19 Global growth in the rate of increase of the transmission of information and ideas continues. III. Reaction Paper to The Sec Article A. The Law of Electronic Transactions federal equivalent to state enactments of the UETA.25 Patterned heavily after the UETA, the ESIGN Act definitions are “basic” as a foundation to the understanding of this area of law: Electronic Signatures in Global and National Commerce Act (ESIGN) The Electronic Signatures in Global and National Commerce Act (ESIGN) was signed into law by President Clinton on June 30, 2000 and is the 19. Id. 20. See Barry M. Leiner, Vinton G. Cerf, David D. Clark, Robert E. Kahn, Leonard Kleinrock, Daniel C. Lynch, Jon Postel, Larry G. Roberts & Stephen Wolff, A Brief History of the Internet, Internet Society (ISOC), available at http://www.isoc.org/ Internet/history/brief.shtml. (last viewed March 26, 2014). 21. Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §§ 7001-7031 (2000) [E-SIGN Act]. 22. Unif. Electronics Transactions Act, §§ 1-21, 7A pt. 1 U.L.A. 211-299 (2002) [UETA]. 23. See UNI?ORM COMPUTER IN?ORMATION TRANSACTIONS ACT, available at http://www.law.upenn.edu/bll/archives/ulc/ucita/ 2002final.htm. 24. “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities. • “Record” means information that is inscribed on a tangible medium or stored in an electronic or other medium and is retrievable in perceivable form. • “Electronic signature” means an electronic sound, symbol or process attached to, or logically associated with, a record and extecuted or adopted by a person with the intent to sign the record. • “Electronic record” means a record created, generated, sent, communicated, received, or stored by electronic means. Introduction It is hard to believe that widespread availability of the Internet is still only about twenty-five years old.20 Accordingly, it is understandable that those laws pre-dating the Internet that required documents to be “signed” failed to contemplate commerce in the environment of cyberspace. To remedy this oversight, the following legislation serves as the foundation building-blocks of cyberspace e-commerce law: the Electronic Signatures in Global and National Commerce Act (ESIGN Act);21 the Uniform Electronics Transactions Act (UETA);22 and the Uniform Computer Information Transactions Act (UCITA).23 Together, these three laws govern “most (but not all — there are some significant exclusions) electronic contracting issues.”24 B. • Donald C. Lampe, The Uniform Electronic Transactions Act and Federal ESIGN Law: An Overview, 55 Consumer ?in. L.Q. Rep. 255 (2001). As noted infra at Part III.?., UCITA has not been widely enacted but nonetheless is influential as persuasive authority. 25. • “Information” means data, text, images, sounds, codes, computer programs, software, databases or the like. • “Agreement” (defined in the UETA but not ESIGN) means the bargain of the parties in fact as found in their language or inferred from other circumstances and from rules, regulations and procedures given the effect of agreements under laws applicable to a particular transaction. • “Contract” (defined in the UETA but not ESIGN) means the total legal obligation resulting from the parties’ agreement Id. as affected by the UETA and other applicable law. • “Transaction” under the UETA means an action or set of actions occurring between two or more persons relating to the conduct of business, commercial, or governmental affairs. Of significance to matters involving the SEC, the definition under ESIGN is somewhat broader and expressly includes ‘consumer’ affairs and lists (inclusively) sale, lease exchange or other disposition of personal property, services, and real property.26 Among the features common to the UETA and ESIGN, “use of the UETA and ESIGN [is] entirely voluntary… [and] a record or signature may not be excluded as evidence in a legal proceeding solely because it is in electronic form.27 However, due to its application to federal laws, ESIGN “creates the question of whether the ‘transaction’ is in ‘interstate commerce.” 28 C. Retention Requirements Although ESIGN is indifferent as to the specific technology employed, under section 101(e) all electronic disclosures that must be “in writing” are subject to the general requirement that all electronic contracts or records (required to be in writing) must be in a form capable of being retained and accurately reproduced for later reference by those persons entitled to retain a copy of the disclosure.29 26. See id. (citing ESIGN Act, supra note 21). 27. Id. at 256. 28. Id. (citing ESIGN §101(a)). 29. Id. QUARTERLY REPORT D. Uniform Electronic Transactions Act (UETA) The UETA was intended originally to be a new Article 2B of the Uniform Commercial Code (UCC) (governing transactions where computer information is the primary subj … Get a 10 % discount on an order above $ 100 Use the following coupon code : NURSING10