Week 6 IRAC Brief: Case Study
WEEK 6 IRAC Brief
Law/531
November 17, 2014
Explanation This paper will explain regulatory compliance requirements for business situations for both domestic and international businesses. It will also evaluate legal risks associated with domestic and international business activity and explain how this can be applied in a business managerial setting. The two cases chosen deal with Facebook and suits that have happened domestically and internationally to show and explain the difference between international and domestic laws.
Case 1: International Max Schrems a law student and Austrian citizen launched a class action lawsuit against Facebooks Ireland Headquarters, alleging that Facebook violated the European data protection law and …show more content…
knowingly participated in the NSA Prisim program.
Case
On July 31, 2014 Max Schrems filed a class action law suit against Facebook Ireland alleging the social media network violated European privacy protection laws and partook in the NSA’s Prisim program, which collects data on individuals by utilizing stored internet data (Best, 2014).
The suit was first filed in the Commercial Court of Vienna Austria, which was rejected and transferred to Vienna’s Regional Court based on a procedural decision (Essers, 2014). On August 21, 2014 Vienna’s Regional Court accepted to hear the class action suit and gave Facebook four weeks to respond to the allegations. On September 26, 2014 Facebook petitioned the court to extend the four week response time due to court documents received were in German and no one in the company spoke German. Therefore, Facebook exercised their right to request all legal documents be translated in English and request an extension to respond.
Issue
Did Facebook breach the European data protection law? Max Schrems has filed a class action suit and advised anyone outside the US and Canada can join. The suit is asking for € 500 for each member and sanctions to be placed on Facebook Ireland for breaches such as; failing to get “ effective consent” for using data, implementing a legally invalid data use policy, using big data to monitor users, and tracking users online outside of Facebook via “like” buttons (Facebook, 2014). …show more content…
Rule This case is still ongoing. With the acceptance of this case, Facebook was required to respond to the suit and given a limited amount of time to do so. While Facebook used its rights to request an extension because all of documents were in German, so they requested these documents to be translated and Facebook given enough time to fully go over the allegations being made against them. The request for an extension was granted as it was found that no one in the company actually knew German and that Facebook had sound grounds in requesting the translation of documents.
Analysis
Facebook was hit with an international class action privacy lawsuit and an Austrian privacy activist opened a broad class action lawsuit against Facebook Ireland for the breaching of the European data protection law (Clark, 2014). The breaches is as follows: failure to get efficient permission for using the data, implementing legal invalid data, tracking the users online outside of Facebook via “Like”, using large data in order to keep an eye on the users, failure to make Graph Search opt-in, unlawful passing of the user’s data to the outer apps, and the participation in NSA’s Prism program in which is basically designed to pull out personal data from the public’s internet use (Clark, 2014). Schrems is levying the attack of charges against Facebook for failing to the Irish regulators to take what he sees as adequate action. This case has been ongoing for three years and there is still no decision, but even though he or she usually promises a judgment to be made next month or sooner there is still no binding outcome from the complaints and the reason for the setback is still unclear and Europe vs. Facebook has not been privy to Face book’s own submission to regulator (Clark, 2014)
Conclusion
Facebook Ireland has a legal obligation to safeguard the privacy of its member’s shared personal data and should not be allowed to hide behind its US Facebook parent company’s laws. The class action lawsuit illustrates the total disregard for the EU’s Data Protection Laws and the privacy of European citizens
Case 2: Domestic
Shareholders of social network giant Facebook, filed a derivative class action alleging that Facebook had failed its fiduciary responsibility to its investors. Shareholders contend that Facebook violated the Securities Act of 1933 and the Securities Exchange Act of 1934 following events stemming from the introduction of its initial public offering (IPO) (Stempel, 2014). Investors claim that Facebook withheld pertinent information on the financial standing of the company.
Case
On October 4, 2012 a class action derivative suit was filed in the US District Court for the Southern District Court of New York in Manhattan claiming that Facebook misrepresented the company’s financial stance as a result of the induction of Facebooks May, 2012 IPO (Stempel, 2014). In February 2012 Facebook complied with filing S -1 Registration Statement in preparation of its initial public offering (IPO) in accordance with the Securities Exchange Commission (SEC) (Whoriskey & Hilzenrath, 2012). Facebook amended its Registration Statements on several occasions and on May 16, 2012 Facebook filed its final S-1A Registration Statement, which is not required to reflect future financial projections according to SEC (Willkie, Farr & Gallagher LLP, 2013). Communication of Facebooks value was communicated to large investors, however smaller investors were not given same communication, which evokes a selective dissemination issue. On February 13, 2013 the case of derivative action was dismissed (Willkie, Farr & Gallagher LLP, 2013)
Issue
Did Facebook provide material misrepresentation that could and did mislead investors in their current and future revenues? Facebook declines the allegations and states “this suit lacks merit” (Zuckerburg 2014). Investors claim that Facebook negligently concealed material information from the IPO registration statement. Investors are seeking damages that resulted from them selling or holding onto the shares as they fell below the IPO price, with the bottom price of $17.55 on September 4, 2012 (Zuckerburg 2014).
Rule
This case was dismissed for many reasons. While the court allowed for the plaintiffs to replead their case within 20 days, they would have to change the way in which they were filing the suit (Willkie, 2013). Some of the reasons that the case was dismissed is because the plaintiffs were stating that an IPO registration statement was not presented to the board, while these types of reports have never been a required document in this specific kind of meeting before so to try and file suit for not having this report has no grounds (Willkie, 2013). The court also found that dismissal was necessary because the plaintiffs did not bring forth any evidence to support their allegations (Willkie, 2013). Analysis
The Chief Executive Mark Zuckerberg of the Facebook Inc. as well as many of other banks are faced with a lawsuit in which lay blame on the social media company of misleading their investors about “health before its $16 billion initial public offering, a federal judge said” (Stempel, 2013). Facebook feel as though the lawsuit lacks good points and the investor’s claims that Facebook without due care and attention hid material information from its IPO registration report and that it provided to its underwriters analyst. They fail underneath the IPO price of 17.55 in September and sought damages in which resulted from them having sold or held on to his or her shares. As many as 40 defendants ended up being sued, including the Chief Operating Officer Sheryl Sandberg of the Facebook Company. The judge did issue a judgment in which the investors can pursue a claim that point the finger at NASDAQ OMX Group of concealing technology issues that led to the complexity in processing the trades on Facebook’s first day of trading (Stampel, 2013).
Conclusion
Facebooks Shareholders class action derivative suit failed to demonstrate Facebook breached its fiduciary responsibility. According to the Securities Exchange Commission (SEC) Facebook is not required to reflect future financial projections on the company’s Registration Statement for its IPO because it could deter Facebooks ability to raise money.
5.1
Regulatory compliance requirements for business situations are laws, regulations, guidelines, and specifications that are relevant to the business. If the business does not comply it can result with legal punishment, including federal fines (Regulatory Compliance 2014). An act that would need to be followed is the Sarbanes- Oxley Act (SOX) (Regulatory Compliance 2014).
Regulatory compliance requirements for business situations internationally, depends on the location that one is conducting their business. Different locations have different regulations from other countries. For example in the UK companies with premium listing of equity shares are required under the listing rules to report how they have applies the combined code in their annual report and accounts. This code is similar to Sarbanes- Oxley Act in the United States (Wikipedia 2014). Even though they may be similar it would be best for the company to review and familiarize themselves with the rules and acts when they are international.
6.1
The legal risk that is linked with domestic business activity is when the cost of an investment rise and fall because of a change in the currency exchange rates as well as domestic currency appreciating against a foreign currency and earnings and because of the nature of the exchange rates becomes difficult to shield this type of risk and that usually hurt the sales as well as the revenues (Sargeant).
The legal risk that is linked with international business activities basically stems from the changeability of foreign, authorized and regulatory systems (Nicholson, 2014). The most important risk that is linked with the international business is foreign exchange and political risk in which these types of risk may make it hard to keep up constant, as well as trustworthy revenue (Sargeant).
Management Setting When looking at domestic and international laws from a management setting and/or standpoint it is important to understand the difference. This is because when you are creating or expanding a business you first have to follow domestic laws, that is until you take the company international, then not only do you have to follow domestic laws, but international laws, and the domestic laws of the new country you have expanded into.
References
Best, J. (2014, August). Facebook forced to respond to privacy complaints of 25,000 Europeans. Retrieved from http://www.zdnet.com/facebook-forced-to-respond-to-privacy-complaints-of-25000-europeans-7000032840/
Clark, L. (2014, August). Facebook hit with international class action privacy suit. Retrieved from http://www.wired.co.uk/news/archive/2014-08/01/facebook-class-action-lawsuit
Essers, L.
(2014, August). Austrian court rejects Facebook class action privacy suit, refers to another court. Retrieved from http://www.pcworld.com/article/2463120/austrian-court-rejects-facebook-class-action-privacy-suit-refers-it-to-another-court.html
Facebook hit with international class action privacy suit. (2014) Retrieved from http://www.wired.co.uk/news/archive/2014-08/01/facebook-class-action-lawsuit
Nicholson, (2014). Legal Risks in International Investment. Retrieved from http://www.ehow.com/list_5914112_legal-Risks-international-investme nt.html Sargeant. What Risk do Organizations face when engaging in International Finance Activities? Retrieved From http://www.investopedia.com/ask/answers/06/international finance risks.asp
Regulatory Compliance. (2014). Retrieved from http://searchcompliance.techtarget.com/definition/regulatory-compliance
Regulatory Compliance. (2014). Retrieved from http://en.wikipedia.org/wiki/Regulatory_compliance
Stempel, J. (2014, December). Facebook, Zuckerberg, banks must face IPO lawsuit,judge. Retrieved from http://www.reuters.com/article/2013/12/18/us-facebook-ipo-lawsuit-idUSBRE9BH0VD20131218
Whoriskey, P., & Hilzenrath, D. (2012, May). Investors sue Facebook, advisers as scrutiny of IPO hype intensifies. Retrieved from
http://www.washingtonpost.com/business/economy/2012/05/23/gJQAmYfnlU_story.html
Willkie, Farr & Gallagher LLP. (2013, February). Firm assists Facebook in major IPO related litigation victory. Retrieved from http://www.willkie.com/news/2013/02/firm-assists-facebook-in-major-ipo-related-litig
Zuckerberg, banks must face IPO lawsuit: judge. (2014). Retrieved from http://www.reuters.com/article/2013/12/18/us-facebook-ipo-lawsuit-idUSBRE9BH0VD20131218
Law/531
November 17, 2014
Explanation This paper will explain regulatory compliance requirements for business situations for both domestic and international businesses. It will also evaluate legal risks associated with domestic and international business activity and explain how this can be applied in a business managerial setting. The two cases chosen deal with Facebook and suits that have happened domestically and internationally to show and explain the difference between international and domestic laws.
Case 1: International Max Schrems a law student and Austrian citizen launched a class action lawsuit against Facebooks Ireland Headquarters, alleging that Facebook violated the European data protection law and …show more content…
knowingly participated in the NSA Prisim program.
Case
On July 31, 2014 Max Schrems filed a class action law suit against Facebook Ireland alleging the social media network violated European privacy protection laws and partook in the NSA’s Prisim program, which collects data on individuals by utilizing stored internet data (Best, 2014).
The suit was first filed in the Commercial Court of Vienna Austria, which was rejected and transferred to Vienna’s Regional Court based on a procedural decision (Essers, 2014). On August 21, 2014 Vienna’s Regional Court accepted to hear the class action suit and gave Facebook four weeks to respond to the allegations. On September 26, 2014 Facebook petitioned the court to extend the four week response time due to court documents received were in German and no one in the company spoke German. Therefore, Facebook exercised their right to request all legal documents be translated in English and request an extension to respond.
Issue
Did Facebook breach the European data protection law? Max Schrems has filed a class action suit and advised anyone outside the US and Canada can join. The suit is asking for € 500 for each member and sanctions to be placed on Facebook Ireland for breaches such as; failing to get “ effective consent” for using data, implementing a legally invalid data use policy, using big data to monitor users, and tracking users online outside of Facebook via “like” buttons (Facebook, 2014). …show more content…
Rule This case is still ongoing. With the acceptance of this case, Facebook was required to respond to the suit and given a limited amount of time to do so. While Facebook used its rights to request an extension because all of documents were in German, so they requested these documents to be translated and Facebook given enough time to fully go over the allegations being made against them. The request for an extension was granted as it was found that no one in the company actually knew German and that Facebook had sound grounds in requesting the translation of documents.
Analysis
Facebook was hit with an international class action privacy lawsuit and an Austrian privacy activist opened a broad class action lawsuit against Facebook Ireland for the breaching of the European data protection law (Clark, 2014). The breaches is as follows: failure to get efficient permission for using the data, implementing legal invalid data, tracking the users online outside of Facebook via “Like”, using large data in order to keep an eye on the users, failure to make Graph Search opt-in, unlawful passing of the user’s data to the outer apps, and the participation in NSA’s Prism program in which is basically designed to pull out personal data from the public’s internet use (Clark, 2014). Schrems is levying the attack of charges against Facebook for failing to the Irish regulators to take what he sees as adequate action. This case has been ongoing for three years and there is still no decision, but even though he or she usually promises a judgment to be made next month or sooner there is still no binding outcome from the complaints and the reason for the setback is still unclear and Europe vs. Facebook has not been privy to Face book’s own submission to regulator (Clark, 2014)
Conclusion
Facebook Ireland has a legal obligation to safeguard the privacy of its member’s shared personal data and should not be allowed to hide behind its US Facebook parent company’s laws. The class action lawsuit illustrates the total disregard for the EU’s Data Protection Laws and the privacy of European citizens
Case 2: Domestic
Shareholders of social network giant Facebook, filed a derivative class action alleging that Facebook had failed its fiduciary responsibility to its investors. Shareholders contend that Facebook violated the Securities Act of 1933 and the Securities Exchange Act of 1934 following events stemming from the introduction of its initial public offering (IPO) (Stempel, 2014). Investors claim that Facebook withheld pertinent information on the financial standing of the company.
Case
On October 4, 2012 a class action derivative suit was filed in the US District Court for the Southern District Court of New York in Manhattan claiming that Facebook misrepresented the company’s financial stance as a result of the induction of Facebooks May, 2012 IPO (Stempel, 2014). In February 2012 Facebook complied with filing S -1 Registration Statement in preparation of its initial public offering (IPO) in accordance with the Securities Exchange Commission (SEC) (Whoriskey & Hilzenrath, 2012). Facebook amended its Registration Statements on several occasions and on May 16, 2012 Facebook filed its final S-1A Registration Statement, which is not required to reflect future financial projections according to SEC (Willkie, Farr & Gallagher LLP, 2013). Communication of Facebooks value was communicated to large investors, however smaller investors were not given same communication, which evokes a selective dissemination issue. On February 13, 2013 the case of derivative action was dismissed (Willkie, Farr & Gallagher LLP, 2013)
Issue
Did Facebook provide material misrepresentation that could and did mislead investors in their current and future revenues? Facebook declines the allegations and states “this suit lacks merit” (Zuckerburg 2014). Investors claim that Facebook negligently concealed material information from the IPO registration statement. Investors are seeking damages that resulted from them selling or holding onto the shares as they fell below the IPO price, with the bottom price of $17.55 on September 4, 2012 (Zuckerburg 2014).
Rule
This case was dismissed for many reasons. While the court allowed for the plaintiffs to replead their case within 20 days, they would have to change the way in which they were filing the suit (Willkie, 2013). Some of the reasons that the case was dismissed is because the plaintiffs were stating that an IPO registration statement was not presented to the board, while these types of reports have never been a required document in this specific kind of meeting before so to try and file suit for not having this report has no grounds (Willkie, 2013). The court also found that dismissal was necessary because the plaintiffs did not bring forth any evidence to support their allegations (Willkie, 2013). Analysis
The Chief Executive Mark Zuckerberg of the Facebook Inc. as well as many of other banks are faced with a lawsuit in which lay blame on the social media company of misleading their investors about “health before its $16 billion initial public offering, a federal judge said” (Stempel, 2013). Facebook feel as though the lawsuit lacks good points and the investor’s claims that Facebook without due care and attention hid material information from its IPO registration report and that it provided to its underwriters analyst. They fail underneath the IPO price of 17.55 in September and sought damages in which resulted from them having sold or held on to his or her shares. As many as 40 defendants ended up being sued, including the Chief Operating Officer Sheryl Sandberg of the Facebook Company. The judge did issue a judgment in which the investors can pursue a claim that point the finger at NASDAQ OMX Group of concealing technology issues that led to the complexity in processing the trades on Facebook’s first day of trading (Stampel, 2013).
Conclusion
Facebooks Shareholders class action derivative suit failed to demonstrate Facebook breached its fiduciary responsibility. According to the Securities Exchange Commission (SEC) Facebook is not required to reflect future financial projections on the company’s Registration Statement for its IPO because it could deter Facebooks ability to raise money.
5.1
Regulatory compliance requirements for business situations are laws, regulations, guidelines, and specifications that are relevant to the business. If the business does not comply it can result with legal punishment, including federal fines (Regulatory Compliance 2014). An act that would need to be followed is the Sarbanes- Oxley Act (SOX) (Regulatory Compliance 2014).
Regulatory compliance requirements for business situations internationally, depends on the location that one is conducting their business. Different locations have different regulations from other countries. For example in the UK companies with premium listing of equity shares are required under the listing rules to report how they have applies the combined code in their annual report and accounts. This code is similar to Sarbanes- Oxley Act in the United States (Wikipedia 2014). Even though they may be similar it would be best for the company to review and familiarize themselves with the rules and acts when they are international.
6.1
The legal risk that is linked with domestic business activity is when the cost of an investment rise and fall because of a change in the currency exchange rates as well as domestic currency appreciating against a foreign currency and earnings and because of the nature of the exchange rates becomes difficult to shield this type of risk and that usually hurt the sales as well as the revenues (Sargeant).
The legal risk that is linked with international business activities basically stems from the changeability of foreign, authorized and regulatory systems (Nicholson, 2014). The most important risk that is linked with the international business is foreign exchange and political risk in which these types of risk may make it hard to keep up constant, as well as trustworthy revenue (Sargeant).
Management Setting When looking at domestic and international laws from a management setting and/or standpoint it is important to understand the difference. This is because when you are creating or expanding a business you first have to follow domestic laws, that is until you take the company international, then not only do you have to follow domestic laws, but international laws, and the domestic laws of the new country you have expanded into.
References
Best, J. (2014, August). Facebook forced to respond to privacy complaints of 25,000 Europeans. Retrieved from http://www.zdnet.com/facebook-forced-to-respond-to-privacy-complaints-of-25000-europeans-7000032840/
Clark, L. (2014, August). Facebook hit with international class action privacy suit. Retrieved from http://www.wired.co.uk/news/archive/2014-08/01/facebook-class-action-lawsuit
Essers, L.
(2014, August). Austrian court rejects Facebook class action privacy suit, refers to another court. Retrieved from http://www.pcworld.com/article/2463120/austrian-court-rejects-facebook-class-action-privacy-suit-refers-it-to-another-court.html
Facebook hit with international class action privacy suit. (2014) Retrieved from http://www.wired.co.uk/news/archive/2014-08/01/facebook-class-action-lawsuit
Nicholson, (2014). Legal Risks in International Investment. Retrieved from http://www.ehow.com/list_5914112_legal-Risks-international-investme nt.html Sargeant. What Risk do Organizations face when engaging in International Finance Activities? Retrieved From http://www.investopedia.com/ask/answers/06/international finance risks.asp
Regulatory Compliance. (2014). Retrieved from http://searchcompliance.techtarget.com/definition/regulatory-compliance
Regulatory Compliance. (2014). Retrieved from http://en.wikipedia.org/wiki/Regulatory_compliance
Stempel, J. (2014, December). Facebook, Zuckerberg, banks must face IPO lawsuit,judge. Retrieved from http://www.reuters.com/article/2013/12/18/us-facebook-ipo-lawsuit-idUSBRE9BH0VD20131218
Whoriskey, P., & Hilzenrath, D. (2012, May). Investors sue Facebook, advisers as scrutiny of IPO hype intensifies. Retrieved from
http://www.washingtonpost.com/business/economy/2012/05/23/gJQAmYfnlU_story.html
Willkie, Farr & Gallagher LLP. (2013, February). Firm assists Facebook in major IPO related litigation victory. Retrieved from http://www.willkie.com/news/2013/02/firm-assists-facebook-in-major-ipo-related-litig
Zuckerberg, banks must face IPO lawsuit: judge. (2014). Retrieved from http://www.reuters.com/article/2013/12/18/us-facebook-ipo-lawsuit-idUSBRE9BH0VD20131218