The Economist asks a straight-forward question about a new relatively contract technology: If smart contracts can be made to work, how automated should business ultimately become?

The article discusses the history of smart contracts since the term was coined in 1994, through the recent debacle of Ethereum’s “Decentralised Autonomous Organisations” venture capital fund that was hacked to the tune of $50 million.

“So far, IT has mainly replaced paper processes,”the article says. “Smart contracts mean a different order of automation: economic transactions are put on auto-pilot. True believers want them to do away entirely with intermediaries, from banks to governments. But they should be careful what they wish for. If smart contracts spread widely, you would take away much of the flexibility that smooths the economy’s functioning. Real-world institutions can adjust when things go wrong. For many years to come, and perhaps for ever, human institutions, flawed though they are, will be a smarter bet than relentless, bug-ridden code.”

Read the article.

The U.S. watchdog for consumer finances unveiled on Thursday a proposal to toughen regulation of the multibillion-dollar debt collection industry, with a focus on keeping agencies from pushing people to pay debts they do not owe, informing borrowers of their rights and cutting down on calls to debtors, according to a Reuters report.

Industry advocates expressed concerns about the costs of complying with the suggested requirements, which they warned could be passed on to borrowers or force some of the thousands of small collection firms to shutter. “Those pushing for consumer rights said the proposal left major holes in borrower protections and did not go far enough,” wrote Reuters’ Lisa Lambert.

She also reported that the proposal covers third-party collectors and debt-buyers. The CFPB will address first-party collectors and creditors, such as banks with their own collection departments, in the future.

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Cincinnati-based Fifth Third Bancorp has reportedly fired its general counsel, Heather Russell Koenig, over what the bank called “a personal matter,” reports the Cincinnati Business Courier. She was the bank’s chief legal officer and corporate secretary.

In a statement, the bank said: “A personal matter has been brought to our attention that Fifth Third believes represents a conflict of interest. To resolve this, we have determined that the best course of action was a separation. Heather is a very qualified lawyer, and this matter had nothing to do with any of the legal work done by Heather during her tenure at Fifth Third.”

She previously worked at Bank of New York Mellon, Bank of America and Skadden, Arps in its Washington and London offices, reports Erin Caproni.

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Gibson, Dunn & Crutcher has posted an on-demand webinar discussing the rise of the U.S. Consumer Financial Protection Bureau (CFPB) enforcement efforts, the expansion in the scope of industries targeted and the level of penalties imposed, and the targeting of financial products that the CFPB has deemed cybersecurity risks.

On its website, the firm says the webinar covers challenges the CFPB raises for compliance professionals and in-house litigation counsel.

Panelists experienced in bank regulatory, white collar defense and investigations, securities litigation and investigations, and cybersecurity discuss these and other developments at the CFPB as well as approaches for navigating this uncertain regulatory and legal landscape.

Watch the on-demand webinar.

Bloomberg Law is reporting that JPMorgan Chase & Co. is expected to settle later this year with the U.S. Justice Department and Securities and Exchange Commission to end a three-year probe into whether it inappropriately hired the children of Chinese decision-makers to win business, according to people familiar with the matter.

The deal could cost JPMorgan about $200 million in the settlements over its hiring practices, according to one of the sources.

“At issue in the inquiry is whether the bank hired relatives of influential Chinese officials or executives of state-run enterprises to help obtain business or even as a reward, and whether that ran afoul of the Foreign Corrupt Practices Act of 1977, which makes it illegal to provide pay or benefits to a foreign government official,” explain Bloomberg’s Matt Robinson and Keri Geiger. “The law also specifies what records must be kept to ensure compliance.”

Read the article.

The Financial Industry Regulatory Authority fined Prudential Annuities Distributors $950,000 on Tuesday for failing to prevent the fraudulent withdrawal of nearly $1.3 million from an elderly annuity holder’s account by her financial officer, according to a Reuters report.

Financial sales assistant Travis Wetzel was convicted of wire fraud and money laundering in 2015 and sentenced to 42 months in prison for forging annuity withdrawal requests on his 82-year-old client’s account.

“In its decision, FINRA said Prudential’s internal systems flagged 114 fraudulent withdrawals — up to five a month — that Wetzel made between July 2010 and September 2012 to wire money from the client’s account to one in his wife’s name,” reports Elizabeth Dilts.

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Practical Law will present a complimentary webinar Tuesday, July 26, 1-2:30 p.m. EDT, on evolving cybersecurity issues for banks.

In a release, the company said cybersecurity poses important and time-sensitive challenges to banks and will continue to do so into the foreseeable future. In addition to regulatory and compliance risks, cybersecurity also poses litigation and reputational risks. Bank counsel need to be at the forefront of cybersecurity to ensure that their bank’s directors, management, and employees are aware of the challenges and the measures that need to be taken.

Speakers will be Heath Tarbert and William White of Allen & Overy and Jeremy Estabrooks of Practical Law.

Topics will include:

• What cybersecurity entails and the types of cyber threats facing banks.
• Federal laws and regulations addressing cybersecurity.
• Federal regulatory guidance and resources.
• State laws and regulations addressing cybersecurity.
• What cybersecurity issues bank counsel should currently be thinking about.

A brief Q&A session will follow.

Register for the webinar.

Onex Corporation and Baring Private Equity Asia have announced their affiliated private equity funds have agreed to acquire the Intellectual Property & Science business (IP&S) from Thomson Reuters, for $3.55 billion. IP&S owns a collection of leading subscription-based businesses that provide a diverse customer base with access to scientific literature, patent, trademark, pharmaceutical and other curated content. The transaction is expected to close later this year subject to customary closing conditions and regulatory approvals.

Latham & Watkins LLP advised Onex and Baring Asia on the transaction with an M&A team led by Washington, D.C. partner Paul Sheridan and Chicago partner Shaun Hartley. Advice was also provided on benefits and compensation matters by Washington, D.C. partner Adam Kestenbaum; on tax matters by New York partner Lisa Watts; on intellectual property matters by New York partner Steven Betensky and Washington D.C. counsel Kieran Dickinson; on real estate matters by New York partner Dara Denberg; on senior secured bank financing matters by Washington, D.C. partner Jeffrey Chenard; on bond financing matters by Washington, D.C. partners Rachel Sheridan and Shagufa Hossain; on antitrust matters by Washington, D.C. partner Marc Williamson and Brussels partner Sven Völcker; and on other corporate matters by Boston partner William Schwab.

In a release, the company said IP&S provides comprehensive intellectual property and scientific information, decision support tools and services that enable academia, corporations, governments and the legal community to discover, protect and commercialize content, ideas and brands that are important to them. Its portfolio includes Web of Science, Thomson CompuMark, Thomson Innovation, MarkMonitor, Cortellis and Thomson IP Manager. Headquartered in Philadelphia, IP&S employs approximately 4,100 people across more than 75 offices in over 40 countries.

The release continues:

“IP&S is a diversified portfolio of high-quality, well-positioned businesses providing proprietary, curated content through products and services that are entrenched in their customers’ day-to-day activities,” said Kosty Gilis, a Managing Director with Onex. “We are delighted to have the opportunity to acquire the company and partner with management and Baring Asia to enhance IP&S’ operations and support its growth in the years to come.”

“We look forward to partnering with IP&S management and Onex to support the development of the company globally, particularly in Asia where we see a differentiated growth opportunity,” said Jean Eric Salata, Founder and Chief Executive of Baring Asia. “Already an established leader in China and across the region, we believe the outlook for the business is underpinned by an increasing shift towards more knowledge driven economies and a continued emphasis on research and development.”

“We are pleased to announce the agreement today to sell our Intellectual Property & Science business to Onex and Baring Asia,” said Jim Smith, President and Chief Executive Officer of Thomson Reuters. “With the completion of this divestiture, Thomson Reuters will be even more focused on operating at the intersection of global commerce and regulation.”

The transaction is expected to be funded with an equity investment of approximately $1.6 billion for 100% ownership of IP&S. Onex’ portion of the equity investment (approximately $1.2 billion) will be made by Onex Partners IV and certain limited partners as co-investors, including Onex.

Latham & Watkins LLP is serving as legal advisor to Onex and Baring Asia on the transaction.

About Onex 
Onex is one of the oldest and most successful private equity firms. Through its Onex Partners and ONCAP private equity funds, Onex acquires and builds high-quality businesses in partnership with talented management teams. At Onex Credit, Onex manages and invests in leveraged loans, collateralized loan obligations and other credit securities. The Company has approximately $23 billion of assets under management, including $6 billion of Onex proprietary capital, in private equity and credit securities. With offices in Toronto, New York, New Jersey and London, Onex invests its capital through its two investing platforms and is the largest limited partner in each of its private equity funds.

Onex’ businesses have assets of $36 billion, generate annual revenues of $23 billion and employ approximately 145,000 people worldwide. Onex shares trade on the Toronto Stock Exchange under the stock symbol OCX. For more information on Onex, visit its website at www.onex.com. The Company’s security filings can also be accessed at www.sedar.com.

About Baring Private Equity Asia
Baring Private Equity Asia is one of the largest and most established independent alternative asset management firms in Asia, with a total committed capital of over $10 billion. The firm runs a pan-Asian investment program, sponsoring management buyouts and providing growth capital to companies for expansion or acquisitions, as well as a pan-Asian real estate private equity investment program. The firm has been investing in Asia since its formation in 1997 and has over 125 employees located across seven Asian offices in Hong Kong, Shanghai, Beijing, Mumbai, Singapore, Jakarta, and Tokyo. Baring Asia currently has over 35 portfolio companies active across Asia with a total of 150,000 employees and sales of approximately $31 billion in 2015. For more information, please visit www.bpeasia.com.

U.S. securities regulators have accused a KPMG partner and two other individuals of insider trading on tips about three pending corporate mergers on which the accounting firm was providing advice, Reuters is reporting.

The U.S. Securities and Exchange Commission filed the suit in federal court in Atlanta, claiming KPMG tax partner Thomas Avent of passed tips to his stockbroker, Raymond Pirrello, writes Nate Raymond. The SEC says Pirrello told a friend, Lawrence Penna, who with his family made more than $111,000 trading on the information.

The report says KPMG said on Friday that it was “deeply troubled” by the allegations and had placed Avent, a 63-year-old Atlanta resident, on administrative leave.

Read the article.

Reuters is reporting that the U.S. Internal Revenue Service said Facebook Inc. may have understated the value of intellectual property it transferred to Ireland by “billions of dollars,” unfairly cutting its tax bill in the process, according to court papers.

A Justice Department lawsuit filed in federal court in San Francisco seeks to enforce IRS summonses served on Facebook and to force the company to produce various documents as part of the probe, report Nate Raymond and Tom Bergin.

“The tax authority is examining whether Facebook understated its U.S. income by selling rights to an Irish subsidiary too cheaply,” according to the report. “Doing so could boost taxable profits in Ireland, which has a corporate tax rate of 12.5 percent, and reduce taxable income in the United States which has a rate of at least 35 percent.”

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Reuters is reporting that the FBI in New York City has undisclosed probes into about 30 suspected insider trading schemes, in a sign investigators remain focused on building cases despite a court ruling that could curtail such prosecutions.

Nate Raymond writes that the investigations come amid a resurgence of insider trading cases, with prosecutors in Manhattan charging 11 people so far in 2016, up from just four in 2015.

“The probes follow a 2014 ruling by the 2nd U.S. Circuit Court of Appeals that authorities have said could allow some individuals to avoid prosecution and that has already led to charges being dropped or reversed for 14 defendants,” the report says.

Read the article.

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A federal appeals court has overturned a historic antitrust settlement between retailers and Visa and MasterCard, reviving more than a decade of legal battles over processing fees, according to a report in The New York Times.

“The United States Court of Appeals in Manhattan said that the lawyers represented retailers with competing interests in the settlement, which was once valued at $7.25 billion, one of the largest in antitrust history,” wrote Rachel Abrams. “The judges pushed the suit back to a lower court.”

In a 2005 lawsuit, retailers accused credit card providers of scheming to fix the price of processing fees, the money the card companies charge retailers for each transaction, and a settlement was reached in 2012. But the court in Manhattan found that merchants had been “inadequately” represented in the settlement.

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With U.S. crude almost doubling in price since February and natural gas gaining about 38 percent just since May 26, stakeholders in at least three bankrupt energy companies are contending that corporate assets have risen so much in value that they deserve a bigger payout, reports Bloomberg News.

The news service, citing a letter by its reporter, says that “Sabine Oil & Gas Corp.’s unsecured creditors and note holders of Forest Oil Co., which merged with Sabine in 2014, filed a report last week seeking a jump in recoveries. Shareholders of bankrupt driller Penn Virginia Corp. questioned current valuations, while Ultra Petroleum Corp. shareholders, who are the first to be wiped out in a bankruptcy, said earlier this month that they are “very likely ‘in the money.’”

Sabine creditors creditors are claiming the company is ignoring the recent increase in oil and gas prices to inflate the amount paid to the secured lenders at the expense of junior ones.

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Reuters is reporting that former Countrywide Financial Corp CEO Angelo Mozilo and other executives will not face a U.S. Justice Department lawsuit for defrauding investors in mortgage-backed securities issued before the 2008 financial crisis, people familiar with the matter said on Friday.

The sources said the Justice Department told Mozilo and the others that they would not be the subject of a civil fraud case related to their roles at the mortgage lender in the run-up to the crisis, the sources said.

“Countrywide, at one time the nation’s top mortgage company, collapsed under the weight of soured loans and was acquired for about $4 billion by Bank of America Corp in July 2008,” wrote Reuters reporter Nate Raymond.

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On June 17 the Austin Court of Appeals unanimously ruled in favor of Beck Redden‘s clients Statoil ASA and Fargo Acquisition, Inc., vacating a class certification order, the law firm reported.

The case, Brigham Exploration Co. et al. v. Boytim et al., involves Statoil’s 2011 acquisition of Brigham Exploration Company, the firm said in a release. Immediately following the announcement of the acquisition, a group of Brigham shareholders filed a purported class action, alleging claims for breach of fiduciary duty against Brigham’s board of directors and aiding and abetting that breach against Statoil, Fargo, and Brigham.

Beck Redden represents Statoil and Fargo in the litigation, led by partner Fields Alexander and associate Chris Cowan, and handled the second appeal of the class certification order. Appellate briefs were filed by appellate partner Russell Post with the assistance of Cowan and associate Parth Gejji.

After hearing oral argument by Post and lawyers for the Brigham defendants, the appellate court vacated the class certification on the ground that the class was not sufficiently defined because it included numerous shareholders who lacked standing, according to the release.

The case has been remanded for further proceedings in the trial court.

An article written by Raymond Patella and Michael Viscount of Fox Rothschild LLP outlines a handful of popular credit enhancements oil and gas companies may use to minimize their risk or exposure to a counterparty that they believe may be having financial difficulties.

“There are many different types of credit enhancements depending on the parties’ leverages, cash flow, size and risk. All of these factors should be considered to arrive at an enhancement best tailored to address the concerns of specific circumstances,” they explain.

The cover such topics as tighter payment terms, consignment, security interest, security deposit, credit insurance, guaranties, and setoff.

Read the article.

Recognizing that the incentive for long-term investment is broken, leading institutional investors are developing a new paradigm for corporate governance that prioritizes sustainable value over short-termism, integrates long-term corporate strategy with substantive corporate governance and requires transparency as to director involvement, according to an article by Martin Lipton of Wachtell, Lipton, Rosen & Katz.

The article is posted on the Harvard Law School Forum on Corporate Governance and Financial Regulation.

He wrote that he believes the new paradigm can reduce or even eliminate the outsourcing of corporate governance and portfolio oversight to ISS and activist hedge funds.

Among the topics he covers in the article are: Make the case for long-term investments, reinvesting in the business for growth and pursuing R&D and Innovation; Explain why the right mix of directors is in the boardroom; Articulate the link between compensation design and corporate strategy; Discuss how board practices and board culture support independent oversight.

Read the article.

In today’s business environment, bank officers are heavily recruited by competitors, and these competitors offer opportunities for promotion and higher salaries and benefits, write Amber M. Rogers and Alan J. Marcuis for Hunton & Williams.

If a bank doesn’t have a contract with its officers, it must consider the legal ramifications of an officer departing to work for a competitor when an agreement is not in place.

“Having an employment agreement with an officer and other key employees is advisable, as it is the easiest way to protect the bank’s interest when an officer departs,” the authors explain. “With proper planning and preparation, any financial institution can proactively prevent the disruptive event and potential loss of business that can be caused by the announcement of an officer’s resignation.”

Read the article.

Reuters is reporting that Morgan Stanley has agreed to pay a $1 million fine to settle U.S. Securities and Exchange Commission civil charges that security lapses at the Wall Street bank enabled a former financial adviser to tap into its computers and take client data home, the regulator said.

“The settlement resolves allegations related to Galen Marsh’s unauthorized transfers from 2011 to 2014 of data from about 730,000 accounts to his home computer in New Jersey, some of which was hacked by third parties and offered for sale online,” reports Jonathan Stempel for Reuters.

“According to the SEC, Morgan Stanley violated a federal regulation known as the Safeguards Rule by failing to properly protect customer data, allowing Marsh to access names, addresses, phone numbers, and account holdings and balances,” the report says.

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A blog post on the Cooley M&A site discusses the “option to acquire” structure, which addresses both the needs of a target company to develop a product or business on the one hand and the desire by a buyer to identify growth opportunities on the other.

“In an option to acquire transaction, the buyer agrees to pay the target an option fee in exchange for the exclusive option to acquire the target for a fixed price during an option period subject to certain conditions and agreements that are set forth in a fully negotiated and executed acquisition agreement,” the post explains. “As part of the arrangement, the parties may also enter into a collaboration agreement covering certain development activities of the target during the option period, with the achievement of the developments functioning as milestones to the buyer’s ability to exercise its option to buy. The collaboration agreement is usually separate from the option and acquisition agreement. Sometimes, the specific terms of the option may also be set forth in a standalone option agreement that is separate from the acquisition agreement.”

While options to acquire are fairly common in the medical device and life sciences industries, the option also provides attractive opportunities for funds and companies in other industries as well, as a way to get an inside track on new technology, the firm writes.

Read the article.