August 5, 2015|
We Can Do Better: Protecting the Right to Control Privileged Information
Hedge funds have made their name (and grown their net asset values) by operating on the leading edge of financial technology. They find their competitive edge through unanticipated strategies, unique perspectives on liquid asset classes, and other approaches that help them optimize their absolute returns. For me, that’s what makes it such an interesting market to follow.
Paul Singer of Elliott Management Corporation attracted my attention when he announced that he had “learned the identities of certain individuals who breached their confidentiality obligations.” These individuals had legitimately received Elliott’s quarterly investor letter, and then shared the contents with unauthorized recipients. The letter also stated that his firm would be seeking damages from the individuals who shared the letter, in the name of protecting the information and their investors. The full story was reported by Juliet Chung in the Wall Street Journal.
This is an excellent example of the challenges that companies face when trying to balance the need for open dialogue with their customers and the requirement to tightly control confidential information. These quarterly letters and partner communications contain rich strategic analysis and pointed market analysis. For a hedge fund like Elliott Management, the positions they are taking and their rationale are a key part of their investment strategy.
The challenge these firms and other Wall Street institutions are facing can be summed up with a quick internet search. Sharing services like Scribd, personal cloud storage, and real-time communications tools make the dissemination of these once-private communications free and uncontrolled. In the name of transparency, sites like MarketFolly.com collect and republish these letters for the world to see. I believe that firms like Elliott Management have the right to control the distribution of their intellectual property.
Beyond traditional measures of limiting distribution or using harder-to-scale channels like the telephone, fund managers should not only have the ability to share information, but uphold control over how and where that data travels. They need tools that let them confidently share important information.
“We will continue to take measures to protect the confidentiality of our information. [Elliott Management]… takes seriously the protection of such information for the benefit of all our investors.”
SEC filings are required and public (and serve the common good), but these investor-only communications can and should be controlled by their creators. At Vera, we’re already helping our financial services customers control access to their confidential information in a way that balances accessibility, investor transparency, and security.
Your company’s privileged information should stay that way, and you should be in control of how it’s shared, when it’s published, and who can see it.