Rimon Law Blog

If you watch an hour of television on any given day of the week, you will likely witness a barrage of commercials from lawyers. They seem to dominate the commercial landscape, especially on local television stations, in just about every corner of the country. Why do they do this? Because, when you practice law on Main Street U.S.A., you are in still competition.

Those lawyers that limit themselves to finding clients only in their own backyard are typically coming from traditional firms. Such firms still exist, but attorneys today are beginning to see a brighter, easier route to finding new clients. Many are taking their services online and are beginning to provide e-lawyering services. E-lawyering is the practice of a skilled and qualified lawyer who takes their practice online and provides a virtual law firm service.

Virtual law firms are becoming increasingly popular because many lawyers are finding it advantageous to abandon the idea of only offering those ‘on Main Street’ services. Why be limited to clients who live in your city, when you can have the entire state at your disposal? These lawyers get to provide the same quality services, yet save on commute times and costs, and the high overhead of maintaining a traditional law firm, among other benefits.

The public is benefiting from virtual law firms, as well. E-lawyers provide a chance at legal services that many clients would not otherwise be able to afford. With more affordable prices for the same high-quality services, people can get the services they need without the hassle of paying high hourly fees. Plus, it’s more convenient for the clients, as well, as they can usually conduct their business when it fits into their schedule.

Whether lawyers are looking to find a new way to marry their current skills with where technology is taking the legal field, or whether they are intrigued by the idea of skipping a commute to work, the reasons many lawyers are going virtual are as varied as the lawyers themselves. Either way, it’s a win-win situation for the attorneys and the public alike.

Posted on The Internet Law Advisor Blog November 16, 2009 – By William Galkin, Esq.

Summary: The Federal Trade Commission (FTC) has issued revised Guides Concerning the Use of Endorsements and Testimonials in Advertising(Guides) which will take effect on December 1, 2009. The main purposes of the revisions are (1) to update the application of the Guides to new media and (2) to rescind a safe harbor that previously allowed ads stating positive results experienced by consumers, even though such results could not necessarily be expected by the average consumer, provided the statement “Results not typical” was included in the ad. Now the actual typical results need to be stated in the ad.

While the Guides only represent the FTC’s interpretation of the law and are not binding, the Guides are not difficult to comply with – and I guaranty that you don’t want to be on the receiving end of an FTC action.

Purpose: The primary purpose of the Guides is to require disclosure when an person giving an endorsement for a product or service is in some manner being compensated by the advertiser for the endorsement. In other words, it is deceptive for a paid endorsement to appear as if it is an independent and objective opinion. For example, if a mother-consumer is paid $1,000 for saying that she prefers a certain diaper, the viewing public needs to know this fact.

New Media Changes the Game: Since 1980, when the FTC first issued the Guides, communication broadcasting has, of course, dramatically changed with the advent of the Internet. Now, everyone can broadcast their opinion to the world through personal websites, blogs, discussion forums, social networks, and by means not yet contemplated (until announced in the next month or so). These various Internet communication forms shall be referred to in this article as “New Media Forms.” The Guides have been revised to address New Media Forms, because the there are now many types of communications that are really ads, but don’t necessarily appear to be ads.

Endorsements: Since the Guides deal with endorsements, the first step is to determine whether an opinion or review is an endorsement. According to the Guides, “an endorsement isany advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser.” Following are some examples in the Guides which will clarify this issue. (I have modified these examples somewhat and added my own commentary for clarification):

Example: A tennis star writes on her Facebook page about laser surgery she received from XYZ clinic. She states that the surgery helped her game, and she is compensated by XYZ clinic for making such statements. This needs to be disclosed, because in the context of a Facebook page, the public will not assume that this is a paid endorsement.

Example: A college student has a popular blog where he reviews video games. A video game manufacturer provides him with a free game system to review. He needs to disclose that the game system was provided to him for free, because this is the type of compensation that could influence his review. On the other hand, David Pogue who reviews technology gadgets for The New York Times would not have to reveal that he receives products for free (if in fact this is the case), because the public would assume that this is the case in the context of being an employee of the newspaper.

Example: A woman who has a personal blog receives a free sample of dog food in the mail because the local store recognizes that she regularly shops there. When she reviews this dog food on her blog she does not have to disclose that she received the food for free, because the store did not send it to her for this purpose and there is no expectation on her part to receive continued free samples.

Example: In a discussion forum on music download technology, one of the participants is an employee of a company that has such products and the employee has been promoting these products in the forum. The employee would need to disclose this fact, otherwise his posts would be deceptive, because they would appear to be independent objective opinions.

Veracity of Endorsements: Believe it or not – the opinion stated in an endorsement has to be true in all respects. Itmust reflect the honest opinions, findings, beliefs, or experience of the endorser. Furthermore, the endorsement of an expert or celebrity may be used only so long as the advertiser has good reason to believe that the endorser continues to maintain the view presented. Therefore, there must be some periodic effort by the advertiser to verify that the endorser’s views have not changed. When you hear on the radio or see an ad where a celebrity claims to use a particular product. Have you ever wondered whether she or he really does? Well, the Guides say that they must actually use the product at the time of the endorsement and the endorsement can continue to run only as long as the advertiser does not have any reason to question whether the product is still being used. In the online environment, when endorsements are being made in multiple venues, and are often being made independent of ongoing advertiser supervision, and may be transmitted and archived on sites for long periods, the advertiser must implement some system to verify that the endorsement is still valid.

Advertiser Responsibility. It’s important to note that advertisers are responsible (read: liable) for false or unsubstantiated statements made through endorsements – even if these statements were not advised or encouraged by the advertiser. For example, a skin care manufacturer, through its marketing agent, distributes free samples to bloggers known to review such products. A blogger makes a claim (e.g., the product cures eczema) that the advertiser does not make about the product. If this claim is not true, then the advertiser, as well as the blogger, would be responsible for this false claim.

Important: According to the Guides, the advertiser must actually ensure that its bloggers and other New Media Form hosts are notified and trained so as to be able to comply with the truthfulness, substantiation and disclosure requirements set forth in the Guides. If the advertiser identifies violations in the endorsements, the advertiser must take action to correct the violations. This is a fairly high standard of responsibility placed on advertisers.

Goodbye to “Typical Results” Safe Harbor: If the advertiser does not have substantiation that the endorser’s experience is representative of what consumers will generally achieve, the ad must now clearly and conspicuously disclose the generally expected performance in the depicted circumstances, and the advertiser must possess and rely on adequate substantiation for that representation. Stating that “Results are not typical” will no longer protect the advertiser from FTC claims of false or deceptive advertising.Nonetheless, the FTC has not ruled out the possibility that a strong disclaimer of typicality could be effective in the context of a particular ad. Although the FTC would have the burden of proof in a law enforcement action, the FTC notes that an advertiser possessing reliable empirical testing demonstrating that the net impression of its ad with such a disclaimer is non-deceptive will avoid the risk of the initiation of such an action in the first instance.

Bottomline:

1. Endorsements appearing in New Media Forms require disclosure of compensation or other benefits received or expected to be received from the advertiser. Compensation does not have to be money, and can be any benefit that would be reasonably expected to influence the opinion or product/service review.

1. Advertisers are required to notify New Media Form endorsers of their obligations regarding disclosures as to compensation and truthfulness in the endorsement content. Advertisers must also monitor the New Media Forms for compliance and take action if there is non-compliance. Therefore, advertisers should have written procedures in place that are followed when utilizing endorsements through New Media Forms. The existence of and compliance with these procedures will be important if ever defending against an FTC action.

1. The FTC claims that it did not issue the revised Guideswith the objective of suing bloggers. However, the FTC did not say that it would not sue bloggers. Therefore, compliance by bloggers with these Guides is the best advice.

1. Consumer claims of results from use of products or services must be those that can be expected by the average consumer of the product or service, otherwise the result that can be commonly expected must be disclosed. Saying “Results are not typical” will no longer protect an advertiser from claims of deceptive advertising.

Dow Jones VentureSource is one of the most popular nationwide venture capital date reports in the United States. VentureSources published its latest data on the development of venture capital investments in the third quarter of 2009. Below are some overviews observed by VentureSource.

- With 616 venture deals and $5.1 billion invested, Q3 is a 6% drop over Q2;
- IT investment barely outpaces health care;
- Web2.0 investments surpassed the software sector for first time on record;
- Medical device investments nearly match biopharmaceuticals;
- Corporations investing instead of acquiring, commitments to VC-backed firms surpasses 2008 total;
- $5 million median deal size on par with Q1&Q2, but still lowest since 1999.

It is undeniable that the investments and fundraising by venture capitalists remained at low levels in 3Q’2009, but there is room for optimism as the economy is picking up slowly and Nasdaq continued to improve. In addition, with regard to the largest U.S. deals overall in 3Q’2009, eight deals are conducted in California, such as Facebook, Tesla Motors, and Pacific Biosciences of California, etc.

Did you know that, according to the U.S. Census Bureau, over 5 million Americans are now working from home? It’s true! And, what’s more, that number is likely to increase because of the current state of the economy, as people are increasingly looking to become self-employed. It is no different for those in the legal field. Gone are the days of working 60 hours or more per week at a law firm. Today, virtual law firm opportunities are giving attorneys the chance to be their own boss and to do it from the comfort of their own home.

As technology leads the way, welcoming a share of the American work force in more and more career fields, the legal field is not immune. E-lawyering has been increasing in popularity because people are finding that it simply makes sense. The consumer gets high-quality legal services that they might not have been able to afford from a traditional law firm, and the attorneys get to provide their services to a greater number of people, while reducing their own overhead in the process.

Lawyers looking to take their career in a more relaxed direction may want to consider e-lawyering. Working from home provides benefits and tax advantages, and may just be the new direction that they seek. It is especially ideal for those who are self-starters, since they can then work when it’s more convenient for them, using technology to facilitate their business.

Today, places like Rimon Law Group, a virtual law firm, are successfully providing high-quality legal work provided by a team of highly accomplished lawyers. They provide a variety of services focusing on business transactions.

Whether you are a new lawyer looking to gain some experience and build a client base, or a mom who wants to put her law degree to use while staying at home with her kids, many opportunities are available today for those who consider e-lawyering. Virtual law firms are the next step forward in the legal field, and technology is leading the way.

1. What is a hedge fund?

The name “hedge fund” suggests that a hedge fund is a fund that by some strategy seeks to protect the value of the assets of the fund against market downswings and other forms of loss.  Early on in the history of hedge funds, this may have been true.  Today, however, the term “hedge fund” is used more loosely and is held to encompass just about any form of investment vehicle for any type of investment.  The critical factor distinguishing a hedge fund from, e.g., a mutual fund or a private equity fund, is that a hedge fund is both unregulated and unlimited in what strategies it can use and investments it can make.

2. What can you do with a hedge fund?

So long as you make adequate disclosure to investors on what you are going to do, there is virtually no limit on what you can do with a hedge fund.  Some managers operate hedge funds just like mutual funds where they take positions in stocks or bonds and either trade or hold them for investment.  Other managers invest in a combination of stocks, bonds, futures, options and other derivatives.  Some managers invest in commodities, while others in property.  Some managers develop or acquire sophisticated algorithms and other programs which manage and trade the fund in an automated manner.  Other managers take a hands-on approach.  No other type of investment vehicle allows as much flexibility as a hedge fund.

3. How do you form and what documents are required for a hedge fund?

A typical hedge fund formation includes creating a limited partnership, which is otherwise referred to as the “fund”.  Investors subscribe for limited partnership interests and, if accepted, become limited partners. The fund’s managing partner is typically a limited liability company that was created specifically for participating in the fund and that is owned and controlled by the fund’s sponsor.  The managing partner will either manage the fund itself or contract the management to an outside company usually referred to as an investment manager.  The fund will open a bank account to accept subscription monies and cash positions and a brokerage, commodity or other type of account to effect transactions (the nature of which depends on the fund’s strategy).

To document the foregoing, a lawyer would form and open the limited partnership, the managing partner limited liability company and, if required, the investment manager entity.  The lawyer would also draft, among other things, a private placement memorandum, a limited liability partnership agreement and a subscription agreement.  If the manager elects to vary the terms and conditions of subscription to one or more investors, then various side letter agreements will also have to be prepared.  Depending on the sophistication of the fund’s trading, a prime brokerage agreement may also be required.

4.Fund Formation Issues

Typical principal issues confronting a fund manager who is embarking or about to embark on opening a new fund include:

• Minimum investment
• Capital contribution period
• Lock-up period/withdrawal restrictions
• Fees – management, performance, hurdle, high watermark, etc.
• Asset valuation practice
• Expenses
• Onshore vs. offshore/jurisdiction

5. What makes a hedge fund exempt from registration?

Sections 3(c)(1) and 3(c)(7) under the Investment Company Act of 1940 provide a safe harbor exemption for funds that limit the number of and have minimum net worth requirements for investors.  Should a hedge fund for any reason become subject to registration requirements, the resulting financial and reporting burden would not only cost the fund millions of dollars on an annual basis, but would necessitate the devotion of substantial management time and resource to compliance.  Accordingly, virtually all funds structure themselves in a way designed to avoid registration.

6. What makes a hedge fund manager exempt from registration?

Not only are funds themselves subject to registration requirements under US securities laws, but managers are also subject to registration, the rules and requirements of which are embodied in the Investment Advisers Act of 1940.  Section 203(b)(3) of such act, however, rescues managers from the onerous and expensive compliance burden of registration by exempting from registration any manager with less than 15 clients over a 12 month period.  The U.S. Securities and Exchange Commission agrees that, for purposes of complying with Section 203(b)(3), a manager counts the fund, not the number of investors, as its client so that, e.g., one fund with 250 investors still counts as only one client.

7. How does a hedge fund operate?

Once a fund is open and in operation, the manager will have as much latitude to operate as the fund’s strategy provides.  The fund’s strategy will have been agreed and disclosed to investors in the private placement memorandum.  So long as the manager makes the required reports and (hopefully) distributions to investors in a timely manner, the manager will be able to focus on and implement its business plan.  The amount of interaction a fund manager will have with its auditors, prime broker, administrator, lawyers, consultants and other third-parties depends on the strategy of the fund.

Let’s face it – technology has done a lot to change how we live our lives and how we conduct business. Today, we go online to do everything from conducting business to reading the latest news, and even locating long-lost friends. One of the latest trends to go online is the legal business. E-lawyering, as it is referred to, is quickly catching on and looks to be where the future of legal services is headed.

E-lawyering makes sense, and the public realizes it. They are used to paying their bills online and doing a wide variety of other things there that never before seemed possible. So the idea of having a virtual law firm at your service is not only smart – it is the most cost-effective way to go.

The advantages that e-lawyers offer to their clientele range from cost savings to convenience. Rimon Law Group and other virtual law firms offer services that also provide the benefit of providing world-class attorneys, more efficiency in the work being conducted, and a green business model. After all, less driving on the part of both you and the attorneys adds up to fewer carbon emission and savings in gasoline usage, which is better for the planet.

These virtual law firms set out to be the “…first real alternative for complex legal work.” Simplification of the entire legal process is just one of the benefits that surround what is often, to the majority of the public, a mysterious and largely misunderstood world.

Two areas where many people are still leery, when it comes to hiring an e-lawyer, are confidentiality and security. This concern is addressed right up front by virtual law firms by handling primary communications over secure HTTP, providing clients with the highest industry-standard protection available on the web – probably more secure than the paper trails left behind by traditional law firms.

Several of these virtual law firms address the concerns and needs of the public by noting that they offer low-cost legal forms and attorney reviews to each client. By providing the same high-quality lawyers, they are demonstrating just how they have simplified the process of obtaining good legal help, while making it more affordable.

There is no doubt that e-lawyers, who are entering the arena with a wide variety of experience, are here to stay. We have only seen the tip of the iceberg in this field, at this point. As people increasingly realize that they can get quality legal services online, more and more of them will no doubt go that route.