Securities Law Prof Blog

Karmel on Systemic Risk Regulation

The Controversy Over Systemic Risk Regulation, by Roberta S. Karmel, Brooklyn Law School, was recently posted on SSRN.  Here is the abstract:

There is widespread support for a systemic risk regulator, in the United States and in Europe, but little agreement on which existing or new organization(s) should assume the task of regulating against systemic risk, the authority such a regulator should have, or the work such a regulator should undertake. In general, the debate about enhanced systemic risk regulation has been about whether central banks or other regulators should be required to assess systemic risk or such an assessment should be the job of others; whether a systemic risk regulator should also be a prudential regulator; and whether the regulator that assesses systemic risk should also have the authority to mandate changes in the financial markets or by financial institutions when dangers to the markets emerge. Much of this debate has been in the form of turf warfare between central banks and other regulators, and therefore the discussions have been less enlightened than one would have hoped given the magnitude of the problems uncovered during the financial meltdown of 2008.

The author believes that any systemic risk regulator should be an independent agency without responsibilities that would conflict with its duties to examine and make recommendations with regard to systemic risks. Accordingly, the author recommends the creation of a new agency, independent of the Executive and Congressional Branches, which could investigate and analyze systemic risks and make recommendations to the President, Congress or individual regulatory agencies, including the Fed, for action. Given the complex structure of the European Union (“EU”), it would seem that a systemic risk regulator for Europe would similarly have to be an advisory body within the framework of the EU. The EU Commission has proposed such a regulator.

This paper discusses what systemic risk is and the various proposals that have been made for a systemic risk regulator in the United States. Also discussed are the conflicts of interest between assessing systemic risk and acting as a prudential regulator. The consideration of similar issues in Europe are also addressed.

Pritchard on Populist Retribution

Populist Retribution and International Competition in Financial Services Regulation, by Adam C. Pritchard
University of Michigan Law School, was recently posted on SSRN.  Here is the abstract:

 
This essay compares the current effort to reform financial services regulation with the regulatory initiatives that come out of the Great Depression. Unlike the 1930s, policymakers today must account for the impact of regulatory competition in crafting responses to the financial crisis. The available evidence suggests that jurisdictional competition is no match for the forces of populist retribution in modern democratic states.

Brummer on International Financial Law

How International Financial Law Works (and How it Doesn't), by Chris Brummer, Georgetown University Law Center, was recently posted on SSRN.  Here is the abstract:

The “Great Recession” has given way to a dizzying array of international agreements aimed at strengthening the prudential oversight and supervision of market participants. How these international financial rules operate is, however, deeply misunderstood. Theorists of international law view international financial rules as merely coordinating mechanisms in light of their informal “soft law” quality. Yet these scholars ignore the often steep distributional implications of financial rules that may favor some countries over others and thus fail to explain why soft law would be employed where losers to agreements can strategically defect from their commitments. Meanwhile, political scientists, though aware of the distributional dynamics of financial rule-making, rarely, if ever, examine international law as a category distinct from international politics. Law is instead cast as an inert, dependent variable of power, as opposed to an independent factor that can inform the behavior of regulators and market participants.

This Article presents an alternative theory for understanding the purpose, operation and limitations of international financial law. It posits that international financial regulation, though formally “soft,” is a unique species of cross-border cooperation bolstered by reputational, market and institutional mechanisms that have been largely overlooked by theorists. As a result, it is more coercive than classical theories of international law predict. The Article notes, however, that these disciplinary mechanisms are hampered by a range of structural flaws that erode the “compliance pull” of global financial standards. In response to these shortcomings, the Article proposes a modest blueprint for regulatory reform that eschews more drastic (and impractical) calls for a global financial regulator and instead aims to leverage transparency in ways that more effectively force national authorities to internalize the costs of their regulatory decision-making.

Fox et alia on Short Selling and the News

Short Selling and the News: A Preliminary Report on an Empirical Study, by Merritt B. Fox, Columbia University - Law School, Lawrence R. Glosten, Columbia Business School - Department of Finance & Economics, and Paul C. Tetlock, Columbia Business School, was recently posted on SSRN.  Here is the abstract:

This paper examines the so far unexplored relationship between short selling and news. It starts with a theoretical analysis of short selling’s potentially beneficial and harmful effects, a brief history of its regulation and a review of the existing empirical literature. The study that follows uses daily NYSE short sale trading data representing a total of 2.3 million firm days and a measure negativity of firm news based on a content analysis of the Dow Jones Newswires. One major finding is that on trading days when there is an abnormally high level of short selling, there is a heightened level of negative news about the issuer in the non-trading hours that follow. A second finding is that where an issuer is the subject of negative news in the non-trading hours between one trading day and the next, the share price reaction when trading resumes is less pronounced where there has been an abnormally high level of short selling the day before. An analysis of our findings suggests that three news related types of short selling - traders who sell short after obtaining confidential information that an issuer is about to make a negative announcement, traders who sell short and then spread false stories, and traders who, by collecting and analyzing publicly available data, detect that an issuer’s share price exceeds its fundamental value, sell short and then truthfully spread their conclusions - are, in the aggregate, significant relative to the total amount of short selling in the market. This aggregate significance appears to come at least in part from the true and false news spreading types of short selling, not just from short selling based on confidential information concerning an impending corporate announcement.

Davis on the SEC & Foreign Companies

The SEC and Foreign Companies – A Balance of Competing Interests, by Kenneth B. Davis Jr., University of Wisconsin Law School, was recently posted on SSRN.  Here is the absract:

Foreign private issuers sell their securities to US investors principally in one of three ways – a public offering registered in the US under the 1933 Act, sales to US qualified institutional buyers under Rule 144A, and offshore transactions within the requirements of Regulation S. US investors also have access to foreign securities through the domestic and international trading markets. The first part of this article examines the evolution, regulation and current importance of each of these investment settings. The inherent mobility of capital, coupled with the dramatic growth of international capital markets over the last two and a half decades, have substantially expanded the opportunity for issuers, financial intermediaries, and investors to shift their activities from jurisdiction to jurisdiction in search of regulatory advantage. This necessarily complicates the task of securities regulators, both in the US and abroad. To identify and evaluate the principal issues that the SEC will likely face in the years ahead, the second part of the article separately considers the (often conflicting) interests of the three U.S. groups with the biggest stakes in the outcome of this process – issuers, investors and the financial services industry.

SEC Expands Insider Trading Charges Against Rajaratnam and Kumar

The United States District Court for the Southern District of New York has authorized the SEC to file a Second Amended Complaint ("SAC"), containing new allegations of insider trading in the securities of two additional companies by Raj Rajaratnam ("Rajaratnam") and Anil Kumar ("Kumar"). The insider trading now alleged in the Commission's enforcement action cumulatively generated more than $52 million in illicit trading profits or losses avoided. The SAC also alleges details of an illicit payment scheme between Rajaratnam and Kumar, in which Rajaratnam paid Kumar for material non-public information that Rajaratnam then used to trade on behalf of his hedge fund, Galleon Management, LP ("Galleon"), generating almost $20 million in illicit profits. From 2003 to October 2009, Rajaratnam paid Kumar $1.75 to $2 million for inside information, and Kumar reinvested some of those funds in a nominee account at Galleon, earning, together with the profits on such reinvestments, a combined total of roughly $2.6 million for his participation in the scheme.

The SEC's initial Complaint, filed on October 16, 2009, alleged that six individuals, including Rajaratnam and Kumar, and two hedge funds, engaged in widespread and repeated insider trading that generated over $25 million in profits. Rajaratnam is the founder and a Managing General Partner of Galleon, a New York hedge fund which at the time had billions of dollars under management. When the complaint was filed, Kumar, a friend of Rajaratnam's and a Galleon investor, was a director at the global consulting firm McKinsey & Co. ("McKinsey"). The Commission's complaint alleged that Rajaratnam unlawfully traded based on inside information involving eight different companies. It further alleged that Kumar acquired material non-public information while working as a McKinsey consultant and passed that information to Rajaratnam, who traded on it. The complaint charged Rajaratnam and Kumar with violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Rajaratnam with violations of Section 17(a) of the Securities Act. On November 5, 2009, the SEC filed a First Amended Complaint charging an additional ten individuals and four entities with illegal insider trading that generated nearly $8 million more in unlawful profits.

President Obama Sets Up Advisory Council on Financial Capability

Just in case anyone had any lingering hope that meaningful consumer and investor protection would result from the 2008 financial meltdown, read this and weep:

Today President Barack Obama signed an executive order regarding the President’s Advisory Council on Financial Capability.

According to a posting on the TheWhiteHouseSpin.com (I can't find an official executive order):
 
    The Council will provide advice to President Obama on promoting and enhancing financial literacy and financial capability among the American people.

    The White House said, "This effort is important to help keep America competitive and to assist the American people in understanding and addressing financial matters, which contributes to our national financial stability." 

Isn't this what the SEC's Investor Advisory Committee is supposed to do? 

According to an article in Investment News, the Council, under the auspices of the Treasury Dept., "will support financial products and services deemed beneficial to consumers."  It will not have any regulatory powers that the proposed Consumer Financial Products Agency would have and leads me to suspect that the reports that the CFPA -- one of the few innovative pro-consumer protection initiatives in the "financial reform" legislation -- has been ditched in face of intense industry lobbying are true.

InvNews, CFPA lite? Obama sets up new financial products council
 
   

FINRA Funds Four Law School Clinics to Help Investors

The Financial Industry Regulatory Authority (FINRA) Investor Education Foundation today announced $1 million in grants to launch four law school clinics that will provide legal help to underserved investors involved in securities disputes. These start-up grants will help fill the gap in legal representation for investors with small claims who do not have the financial resources to obtain legal counsel. The Foundation awarded $250,000 each to:

• Florida International University College of Law, Miami, Florida;
• Howard University School of Law, Washington, D.C.;
• Pepperdine University School of Law, Malibu, California; and
• Suffolk University Law School, Boston, Massachusetts.

The FINRA Foundation chose these law schools because they are well-positioned to launch and maintain clinics that will allow supervised law students to take on securities disputes. As a condition of the grant, each law school was required to demonstrate institutional support of the clinic beyond the three-year grant program and provide investor education and outreach in their community. Students who participate in these clinics will not receive compensation, but will benefit from serving the public interest, earning course credit and gaining experience representing clients in actual cases.

SEC Approves Interpretive Guidance on Climate Change Disclosures

The SEC today voted to provide public companies with interpretive guidance on existing SEC disclosure requirements as they apply to business or legal developments relating to the issue of climate change.  The interpretive release approved today provides guidance on certain existing disclosure rules that may require a company to disclose the impact that business or legal developments related to climate change may have on its business. The relevant rules cover a company's risk factors, business description, legal proceedings, and management discussion and analysis.

Specifically, the SEC's interpretative guidance highlights the following areas as examples of where climate change may trigger disclosure requirements:

Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.

Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.

Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.

Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.

SEC Adopts New Rules for Money Market Funds

At its open meeting today the SEC adopted new rules designed to strengthen the regulatory requirements governing money market funds.  These changes result from the financial crisis and the weaknesses revealed by the Reserve Primary Fund's "breaking the buck" in September 2008. The SEC's new rules are intended to increase the resilience of money market funds to economic stresses and reduce the risks of runs on the funds by tightening the maturity and credit quality standards and imposing new liquidity requirements.

Improved Liquidity: The new rules require money market funds to have a minimum percentage of their assets in highly liquid securities so that those assets can be readily converted to cash to pay redeeming shareholders. Currently, there are no minimum liquidity mandates.

• Daily Requirement: For all taxable money market funds, at least 10 percent of assets must be in cash, U.S. Treasury securities, or securities that convert into cash (e.g., mature) within one day.
• Weekly Requirement: For all money market funds, at least 30 percent of assets must be in cash, U.S. Treasury securities, certain other government securities with remaining maturities of 60 days or less, or securities that convert into cash within one week.

The rules would further restrict the ability of money market funds to purchase illiquid securities by:

• Restricting money market funds from purchasing illiquid securities if, after the purchase, more than 5 percent of the fund's portfolio will be illiquid securities (rather than the current limit of 10 percent).
• Redefining as "illiquid" any security that cannot be sold or disposed of within seven days at carrying value.

Higher Credit Quality: The new rules place new limits on a money market fund's ability to acquire lower quality (Second Tier) securities. They do this by:

• Restricting a fund from investing more than 3 percent of its assets in Second Tier securities (rather than the current limit of 5 percent).
• Restricting a fund from investing more than ½ of 1 percent of its assets in Second Tier securities issued by any single issuer (rather than the current limit of the greater of 1 percent or $1 million).
• Restricting a fund from buying Second Tier securities that mature in more than 45 days (rather than the current limit of 397 days).

Shorter Maturity Limits: The new rules shorten the average maturity limits for money market funds, which helps to limit the exposure of funds to certain risks such as sudden interest rate movements. They do this by:

• Restricting the maximum "weighted average life" maturity of a fund's portfolio to 120 days. Currently, there is no such limit. The effect of the restriction is to limit the ability of the fund to invest in long-term floating rate securities.
• Restricting the maximum weighted average maturity of a fund's portfolio to 60 days. The current limit is 90 days.

"Know Your Investor" Procedures: The new rules require funds to hold sufficiently liquid securities to meet foreseeable redemptions. Currently, there are no such requirements. In order to meet this new requirement, funds would need to develop procedures to identify investors whose redemption requests may pose risks for funds. As part of these procedures, funds would need to anticipate the likelihood of large redemptions.

Periodic Stress Tests: The new rules require fund managers to examine the fund's ability to maintain a stable net asset value per share in the event of shocks - such as interest rate changes, higher redemptions, and changes in credit quality of the portfolio. Previously, there were no stress test requirements.

Nationally Recognized Statistical Rating Organizations (NRSROs): The new rules continue to limit a money market fund's investment in rated securities to those securities rated in the top two rating categories (or unrated securities of comparable quality). At the same time, the new rules also continue to require money market funds to perform an independent credit analysis of every security purchased. As such, the credit rating serves as a screen on credit quality, but can never be the sole factor in determining whether a security is appropriate for a money market fund.

In addition, the new rules improve the way that funds evaluate securities ratings provided by NRSROs:

• Require funds to designate each year at least four NRSROs whose ratings the fund's board considers to be reliable. This permits a fund to disregard ratings by NRSROs that the fund has not designated, for purposes of satisfying the minimum rating requirements, while promoting competition among NRSROs.
• Eliminate the current requirement that funds invest only in those asset backed securities that have been rated by an NRSRO.

Repurchase Agreements: The new rules strengthen the requirements for allowing a money market fund to "look through" the repurchase issuer to the underlying collateral securities for diversification purposes:

• Collateral must be cash items or government securities (as opposed to the current requirement of highly rated securities).
• The fund must evaluate the creditworthiness of the repurchase counterparty.

 Enhancing Disclosure of Portfolio Securities

• Monthly Web Site Posting: The new rules require money market funds each month to post on their Web sites their portfolio holdings. Currently, there is no Web site posting requirement. Portfolio information must be maintained on the fund's Web site for no less than six months after posting.
• Monthly Reporting: The new rules also require money market funds each month to report to the Commission detailed portfolio schedules in a format that can be used to create an interactive database through which the Commission can better oversee the activities of money market funds. The information reported to the Commission would be available to the public 60 days later. This information would include a money market fund's "shadow" NAV, or the mark-to-market value of the fund's net assets, rather than the stable $1.00 NAV at which shareholder transactions occur. Currently a money market fund's "shadow" NAV is reported twice a year with a 60-day lag.

Improving Money Market Fund Operations

• Processing of Transactions: The new rules require money market funds and their administrators to be able to process purchases and redemptions electronically at a price other than $1.00 per share. This requirement facilitates share redemptions if a fund were to break the buck.
• Suspension of Redemptions: The new rules permit a money market fund's board of directors to suspend redemptions if the fund is about to break the buck and decides to liquidate the fund (currently the board must request an order from the SEC to suspend redemptions). In the event of a threatened run on the fund, this allows for an orderly liquidation of the portfolio. The fund is now required to notify the Commission prior to relying on this rule.
• Purchases by Affiliates: The new rules expand the ability of affiliates of money market funds to purchase distressed assets from funds in order to protect a fund from losses. Currently, an affiliate cannot purchase securities from the fund before a ratings downgrade or a default of the securities - unless it receives individual approval. The rule change permits such purchases without the need for approval under conditions that protect the fund from transactions that disadvantage the fund. The fund must notify the Commission when it relies on this rule.

Geithner Testifies Before House on AIG Bailout

Here is Treasury Secretary Geithner's Written Testimony before the House Committee
on Oversight and Government Reform today.

Weinstein Calls for Reform of Financial Services Industry in Sentencing Broker

While Judge Rakoff is a close second, Judge Jack Weinstein remains the most refreshingly blunt, "tell it like he sees it" trial judge in the Second Circuit.  The Jan. 22, 2010 sentencing statement(Download Butler3) in U.S. v. Butler illustrates this.  Eric Butler was convicted of three counts of securities and wire fraud for his role in a $ 1 billion auction rate securities fraud.  In sentencing him to five years imprisonment and a $5 million fine, Judge Weinstein took the occasion to castigate "the pernicious and pervasive culture of corruption in the financial services industry."  He goes on to say:

The blame for this condition is shared not only by individual defendants like Butler, but also by the institutions that employ them, those who carelessly invest, and those who fail to regulate.  Supervision is seriously negligent; greed and short-term gain are so enormous that fraud and arrogant disregard of others' rights and of ethics almost encourage criminal activities such as defendant's.

Besides elaborating on these themes, Judge Weinstein identifies the need "to reconsider how compensation is calculated and investment products are marketed by the financial industry" and concludes that:

Systemic reform is needed; mere '[c]ompetition in product and capital markets can't be counted on to solve the problem."  (quoting from the dissent from denial of reh'g en banc in Jones v. Harris Assoc.)

University of Cincinnati March 5 Symposium on Globalization

The Globalization of Securities Regulation: Competition or Coordination? is the topic of the 23rd Annual Symposium of the Corporate Law Center at the University of Cincinnati College of Law, which will be held on March 5, 2010.  Confirmed speakers include:  William Bratton (GW), Steven Davidoff (Conn.), Frederick Tung (Emory), Hannah Buxbaum (Indiana-Bloomington), James Fanto (Brooklyn), Eric Pan (Cardozo), Robert Ahdieh (Emory), Andrea Corcoran (Align International), Chris Brummer (GW), Eric Chaffee (Dayton).  Please see the brochure(Download Corplaw2010brochureFINAL) for additional information.

Massachusetts Securities Division Alleges Ameriprise Subsidiary Failed to Disclose Risks in Private Placements

The Massachusetts Securities Division brought an administrative action against Securities America, Inc., a subsidiary of Ameriprise Financial, alleging that from 2003-2008 the broker-dealer, acting as placement agent for Reg D offerings on behalf of Medical Capital Holdings Inc., failed to disclose material risks in connection with sales of approximately $697 million of promissory notes issued by SPCs owned by Medical Capital.  Since August 2008 Medical Capital has defaulted on all its outstanding note obligations.  The Division alleges that the firm's due diligence analyst specifically and repeatedly requested disclosure of the heightened risks.

SEC Proposes Amendments to Rule 10b-18

The SEC proposes amendments to Rule 10b-18 under the Securities Exchange Act of 1934, which provides issuers with a “safe harbor” from liability for manipulation when they repurchase their common stock in the market in accordance with the Rule’s manner, timing, price, and volume conditions. The proposed amendments are intended to clarify and modernize the safe harbor provisions in light of market developments since Rule 10b-18’s adoption in 1982.

SEC Agenda for Jan. 27 Open Meeting

SEC Open Meeting Agenda, January 27, 2010

Item 1: Money Market Fund Reform
Office:  Division of Investment Management
The Commission will consider a recommendation to adopt new rules, rule amendments, and a new form under the Investment Company Act of 1940 governing money market funds, to increase the protection of investors, improve fund operations, and enhance fund disclosures.

Item 2: Commission Guidance Regarding Disclosure Related to Climate Change
Office:  Division of Corporation Finance
The Commission will consider a recommendation to publish an interpretive release to provide guidance to public companies regarding the Commission's current disclosure requirements concerning matters relating to climate change.

SEC Brings Stop Order Proceeding Against Tsukuda-America

On Jan. 26, 2010 the SEC instituted a rare "stop-order" proceeding under Securities Act section 8(d) to stop sales of securities of Tsukuda-America Inc. pursuant to a Form S-1 registration statement declared effective April 14, 2009.  According to the complaint, the registration statement contains a false representation that Weinberg & Co. audited the financial statements and signed a consent to the inclusion of the audit report in the registration statement.

SEC Settles Two Cases Alleging Illegal Short Selling in Advance of Secondary Offerings

The SEC separately charged two California investment advisory firms for engaging in improper short selling of securities in advance of their participation in a company's secondary offering. These mark the first cases filed under the SEC's amended Rule 105 of Regulation M, which is designed to prohibit manipulative short selling ahead of follow-on securities offerings, known as "shorting into the deal." The revised rule generally prohibits the purchase of offering shares by any person who sold short the same securities within five business days before the pricing of the offering.

In one case, the SEC charged Los Angeles-based AGB Partners LLC and its principals Gregory A. Bied and Andrew J. Goldberger, finding that they netted thousands of dollars in improper profits by shorting in advance of their purchase of stock in a secondary offering. In the other case, the SEC charged Los Angeles-based Palmyra Capital Advisors LLC, finding that the firm violated short selling rules and improperly profited in three of its managed hedge funds. Both firms have agreed to settle the SEC's charges.

In settling the SEC's charges without admitting or denying the Commission's findings, AGB Partners, Bied and Goldberger consented to be censured and pay more than $50,000 in disgorgement and penalties. Palmyra Capital consented to be censured and pay more than $330,000 in disgorgement and penalties.

Defendant in SEC Action Goes to Jail for Failing to Surrender Bon Jovi Tickets

A federal judge today ordered Minneapolis-area resident Trevor G. Cook jailed for failing to surrender more than $35 million in assets as a result of the Securities and Exchange Commission's fraud charges and asset freeze against him.  The SEC filed a motion last month in U.S. District Court for the District of Minnesota, alleging that Cook had violated the court's order freezing all of his assets. In a court hearing that concluded today, Chief Judge Michael J. Davis found Cook in civil contempt and U.S. Marshals escorted Cook from the courtroom to jail. Chief Judge Davis ordered Cook incarcerated until he, among other things, surrenders $27 million located in offshore accounts, a BMW and two Lexus automobiles, a submarine, a houseboat, a collection of expensive watches, a collection of Faberge eggs, Bon Jovi concert tickets, and $670,000 in cash.

The SEC obtained the asset freeze on Nov. 23, 2009, when the Commission charged Cook, nationally syndicated radio host Patrick J. "Pat" Kiley, and four companies they controlled in an alleged $190 million foreign currency trading scheme. According to the SEC's complaint in the case, Cook and Kiley pooled investors' funds in bank and trading accounts in the names of entities they controlled. The foreign currency trading they did conduct resulted in millions of dollars in losses, and they misused approximately half of investor funds to make Ponzi-like payments to earlier investors and pay for Cook's gambling losses and the purchase of the historic Van Dusen Mansion in Minneapolis.

FINRA Issues Guidance on Blogs and Social Networking

FINRA issued Regulatory Notice 10-06, Guidance on Blogs and Social Networking Web Sites.  Here is the executive summary:

Americans are increasingly using social media Web sites, such as blogs and social networking sites, for business and personal communications. Firms have asked FINRA staff how the FINRA rules governing communications with the public apply to social media sites that are sponsored by a firm or its registered representatives. This Notice provides guidance to firms regarding these issues.

The notice emphasizes that each firm must develop its own policies and procedures — in the context of its own particular business model and compliance and supervisory programs — designed to ensure that the firm and its personnel are complying with all applicable regulatory requirements when using social networking sites. Some technology providers are developing systems that are intended to enable firms to retain records of communications made through social networking sites. As the Notice states, however, "FINRA does not endorse any particular technology to keep such records, nor are we certain that adequate technology currently exists."