Fordham Law Professor Reidenberg: Bloomberg Scandal Has Wider Implications

Friday, 17 May 2013 09:56 AM

By Dan Weil and David Nelson

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The controversy surrounding Bloomberg reporters' utilization of information about its subscribers' terminal usage has privacy implications beyond just Bloomberg and its subscribers, says Fordham University law professor Joel Reidenberg.

"Information is power and having access to that knowledge is very, very important for companies, but it's not just Bloomberg," he tells Newsmax TV in an exclusive interview.

"When you think about the kind of transaction records for our online activities that are available in multiple different places on the Internet, take the case of [an] investment bank."

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An investment banker might be examining a company as a potential takeover target, Reidenberg says. "If that company were to look at Internet server log records, it might see a spike in visitors from an investment bank," he explains.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

"And if all of a sudden they see a lot of activity coming from an investment bank, the company should be very suspicious that something is happening with respect to the company that might be in play." Thus, the investment bank has lost its privacy in this instance.

So is it about everyone spying on everyone else? "It's possible," Reidenberg says. "Now, the extent to which it is being done we don't really know, but I think the Bloomberg case really illustrates the risk for companies that they may be divulging corporate intelligence unwittingly, they may be putting themselves in a position for corporate spying unwittingly."

While many look at what Bloomberg did and don't think it is right, the company doesn't appear to have broken the law. But, "for Bloomberg it is a huge issue in terms of the trust of its clients, because the data about how Bloomberg terminal users are using the services is very sensitive information for these financial firms," he suggests.

"So, the notion that Bloomberg is going to be monitoring that and sharing the usage with journalists breaches the trust that the financial service clients had with Bloomberg as a data service."

As for the law, "the statutory regime in the United States does not prohibit what Bloomberg did," Reidenberg maintains. "When you look at the Bloomberg service agreements, the agreement for access to Bloomberg's services over the web explicitly states that they will share this information across Bloomberg affiliates."

Bloomberg users likely aren't reading their service-agreement documents very closely, Reidenberg says.

"I've seen a very old Bloomberg service agreement that is still in force," he says.

"That contract simply says that Bloomberg has the right to audit and monitor. So, it doesn't really speak to sharing the information, but it clearly gives Bloomberg the right to take a look at what their clients are doing. Clearly the lawyers for the financial services firms didn't think through the privacy and security implications for third-party surveillance of what their brokers and what their analysts were looking at."

The old service agreement he saw was with a New York municipality's treasurer's office. The agreements Reidenberg cited where sharing is explicitly permitted are Bloomberg's standard subscriptions.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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