Morgan Stanley Fined in UK Over WhatsApp Use

Morgan Stanley Fined by U.K. Energy Market Regulator Over WhatsApp Uses

Morgan Stanley agreed to pay 5.41 million British pounds, equivalent to about $6.82 million, to the U.K.’s energy markets regulator to settle an investigation over its traders’ use of banned messaging apps that breached requirements to retain written communications.

The fine, announced Wednesday, was the first ever issued in the U.K. for record-keeping requirements related to the trading of wholesale energy products, according to the regulator, the Office of Gas and Electricity Markets, known as Ofgem.

Morgan Stanley admitted that between 2018 and 2020, its wholesale energy traders discussed energy market transactions on encrypted messaging app WhatsApp using their privately owned phones.

Private Funds Exhale Over SEC Rule Despite Big Compliance Costs

The SEC adopted, by a 3-2 vote Wednesday, regulations aimed at increasing transparency in the multi-trillion-dollar private fund industry. But the agency eased—and in some cases abandoned—some of the most contentious parts of its initial proposal.

The SEC dropped a plan that would’ve exposed more fund managers to legal liability for mistakes, while softening its approach on side letters that give some investors special treatment. The final rule also permits various fund activities that would’ve been prohibited under the prior proposal, as long as they’re disclosed to investors.

Buyers of Bored Ape NFTs sue after digital apes turn out to be bad investment

The Sotheby’s auction house has been named as a defendant in a lawsuit filed by investors who regret buying Bored Ape Yacht Club NFTs that sold for highly inflated prices during the NFT craze in 2021. A Sotheby’s auction duped investors by giving the Bored Ape NFTs “an air of legitimacy… to generate investors’ interest and hype around the Bored Ape brand,” the class-action lawsuit claims.

The boost to Bored Ape NFT prices provided by the auction “was rooted in deception,” said the lawsuit filed in US District Court for the Central District of California. It wasn’t revealed at the time of the auction that the buyer was the now-disgraced FTX, the lawsuit said.

Payouts expected from Elon Musk’s SEC settlement

Investors who lost money when Elon Musk tweeted about taking his electric car company Tesla private may soon collect from a $42.3 million fund set up when Musk settled federal securities fraud charges.

In a Wednesday night court filing, the U.S. Securities and Exchange Commission said 3,350 eligible claimants will share in a $41.53 million payout, recouping 51.7% of their losses. Other sums will be held back for fees, taxes and expenses.

The “fair fund” was created under a settlement arising from Musk’s August 2018 tweet that he had “funding secured” for a Tesla buyout at a premium.

He did not, and many investors lost money during the resulting volatility in Tesla’s stock price.

Five Compliance Tips for Companies Using App-Based Messaging

The Securities and Exchange Commission and the Commodities Futures Trading Commission recently fined 11 financial firms a total of $549 million for practices related to app-based messaging use, including by senior executives.

The SEC cited “widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications.” The CFTC said each of four companies it investigated “failed to stop its employees, including those at senior levels, from communicating both internally and externally using unapproved communication methods, including messages sent via personal text or WhatsApp.”

How can you make sure your colleagues communicate effectively while meeting regulatory and legal obligations? Consider the five tips below.

Deepfake Video Phone Calls Could Be a Dangerous AI-Powered Scam

Cybercriminals are constantly searching for new ways to trick people. One of the more recent additions to their arsenal was voice simulation software. In 2019 the chief executive officer of a British energy provider transferred €220,000 ($249,000) to a scammer after he received a call from what sounded like the head of the unit’s German parent company asking him to wire money to a Hungarian supplier. The voice was generated using artificial intelligence, says Rüdiger Kirsch, a fraud expert at Euler Hermes, the energy company’s insurer. (The insurer declined to identify the client but says it paid out the claim.)

Some cybersecurity experts have long feared what a hacker might be able to do with AI in video—create a convincing version of, say, a corporate executive who really wants to know your password. AI software is now capable of doing this practically in real time, meaning a hacker could pretend to be your boss on a Zoom call.

Do Rule 10b5-1 Plans Still Make Sense for Insiders?

The conditions that the SEC has now added to Rule 10b5-1 plans, including the cooling-off period, the limitation on overlapping plans and the single trade limitation, have undoubtedly complicated the use of Rule 10b5-1 plans. The additional transparency around the use of Rule 10b5-1 plans raises their profile in a company’s SEC filings. There are some types of transactions that we historically relied on Rule 10b5-1 for that do not really work anymore, because of the imposition of a cooling off period and overlapping plan conditions. The SEC is now on record, in the adopting release and proposing release for the Rule 10b5-1 rule amendments, citing the negative academic studies and press about Rule 10b5-1 plans.

By all accounts, I think Rule 10b5-1 is a survivor, despite all of these headwinds. In my practice, insiders are still utilizing Rule 10b5-1 plans for the same types of planned transactions that they implemented before the amendments. While companies may be less likely to actually mandate the use of Rule 10b5-1 plans, they are also not actively discouraging the use of such plans. Brokers have integrated the rule requirements into their standard Rule 10b5-1 plans, and generally those changes have been accepted….

Crypto Is Dead? Or Is That Just ‘Fud’?

It’s been an awful year for the cryptocurrency industry. Corporate bankruptcies, criminal charges, a slew of government lawsuits.

But true believers have a simple response to all the predictions of crypto’s demise: They dismiss them as “FUD.”

Here’s what that means.

FTX, BlockFi Customer Details Compromised Due to Kroll Data Hack

Customer data of bankrupt crypto exchange FTX and lender BlockFi have been compromised due to a hack of Kroll, a third party agent that manages creditor claims on behalf of bankrupt companies.

Crypto account passwords and other sensitive data weren’t affected, but customers were warned to be on the lookout for scammers impersonating parties in the bankruptcy.