How California and EU Data Protection Laws Impact Your New York Business

By: John McClung

Data privacy is one of the most important business and cultural issues of the 21st century. Universal access to all kinds of personal information is now at unprecedented levels due to the instant communication provided by smartphones and the internet. As a result, identity theft, fraudulent credit card charges, and solicitation from businesses based on consumer spending habits have risen dramatically. Technology and cybersecurity entrepreneurs have scrambled to find ways to make online accounts and transactions more secure, and lawmakers are now following suit. So what does this mean for your business?

In May 2018, the EU’s General Data Protection Regulation (GDPR) went into effect. Created to protect an individual’s online information and simplify the rules for international business, the GDPR imposes tough rules for securing personal data of private individuals, enforces strict penalties for non-compliance, and redefined the way many U.S. companies operating overseas conducted business. This past January, California’s own data privacy law, the California Consumer Privacy Act (CCPA), took effect, borrowing some elements from the GDPR and bringing the U.S. closer to its EU counterparts. It is also the nation’s first statewide data privacy law.

Even if your New York business doesn’t interact with California residents, the CCPA will still affect you. Due to California’s population size as well as their economic and political importance, the CCPA will effectively become the nationwide standard for all U.S. businesses, at least until a federal law for data privacy is passed. Washington lawmakers are looking at California’s new legislation as they consider such a proposal, as setting a single legal standard for data privacy would be more efficient and cheaper for businesses and cybersecurity firms to implement in the long run.

And for those New York businesses that do business with California residents, the impact is more immediate. Those businesses must now, among other requirements, disclose what personal data has been collected and delete the data or stop selling it to outside sources if the customer requests. The CCPA, and the GDPR before it, have also legally broadened the definition of “personal information” to include any information which can “directly or indirectly” identify a person. This includes such things as biometric data, browsing history, employment and education data, consumer preferences, psychological trends, preferences, aptitudes, and other data which can be used to create a profile of the individual.

The CCPA applies to all companies that supply or serve California residents and: (1) have at least $25 million in annual revenue, or (2) have personal data on at least 50,000 people, or (3) collect more than half their revenue through the sale of personal data. Companies don’t have to be based in California or the U.S., or even have a physical presence in California, to be subject to CCPA regulations under the law.

Many New York businesses that operate in California also operate in Europe and have already had to make changes to comply with the GDPR. However, many New York firms, especially smaller firms that don’t operate overseas, have not. To comply with both the GDPR and CCPA, New York businesses should make sure their entire executive team is on board with new data privacy regulations. Businesses should designate one person within the company to ensure that all obligations under the law are being met. Operational implementation is key, and third-party vendors should be thoroughly researched before they are hired. Additionally, annual data protection training should be mandatory for all employees and be built into new-hire training.

An additional suggestion is to use encrypted emails and email accounts. Emails with end-to-end encryption meet the GDPR data protection-by-design standards and implementing zero-access encryption through your email provider means that the provider doesn’t have access to your email content while also limiting vulnerability and liability from any potential data breaches.

When examining your firm’s data collection policy, it is important to keep in mind your client obligations under the GDPR and CCPA, while at the same time understanding that not all businesses operate the same way and may not require the same level of restructuring. Here at Sasserath & Zoraian, LLP for instance, we have always taken client privacy and security very seriously, and unless required by a court-ordered subpoena, all client information remains confidential.

Please contact our team with any questions you may have.

Risks and Rewards of Investing in Biotech Hedge Funds

By John Zoraian

In the last two decades, the U.S. biotech sector has grown to become one of the stock market’s top performing sectors. Due to its rapid growth and potential for high rate of return, there has been a recent wave of investor interest in biotechnology and biotech hedge funds. Many new investors in the biotech sector are excited for fast-growing investment funds capable of generating double- and triple-digit returns. Yet other investors remain wary, stating the high risks, potential for massive loses and the lackluster performance of the average hedge fund in current years as deciding negative factors.

So, what exactly are the risks and rewards of biotechnology-focused hedge funds, and should you be interested?

Biotechnology, broadly speaking, is any technological application that makes or modifies products or processes using biological systems. Currently, there are over 500 biotech companies in the U.S., making it the world’s hub for innovation in the biotechnology field; however, only approximately 20 of these 500 are turning a profit. This is due to the uncertain nature of the biotech sector. High overhead costs, long periods of research and testing, plus the uncertainty of final regulatory approval by the FDA (Food and Drug Administration) mean that, in terms of stock market valuations, it’s very difficult for investors to predict with any certainty which biotech companies will strike it big and which will fall by the wayside.

For the biotech industry, while politicians and the political climate have some impact on drug pricing, due to “high intra-industry variance,” biotech stock prices chiefly rise and fall based on a drug passing or failing its clinical trials. This makes the biotech sector extremely volatile and unpredictable at best for most investors and uninvestable, at worst, for others. However, therein lies the opportunity for those willing to bear the risk.

Yet some hedge fund veterans, like Joseph Edelman who founded Perceptive Advisors and its flagship hedge fund, Perceptive Life Sciences Fund, back in 1999, have struck big by specializing in small- and mid-cap biotech companies. Since inception, the fund has generated annualized gains of 30% net of fees, with an astounding 41% net gain realized in 2017. Edelman has thrived in the most volatile sector of the stock market by being highly diversified with the companies he backs; avoiding big pharmaceutical companies, insurance conglomerates and hospital chains, instead backing small companies whose fate typically hinges on a single drug passing or failing the clinical trials – a high-risk strategy that returns big rewards if successful; by maintaining risk tolerance and timing his purchase of stocks accurately between Phase 1 clinical trials and, often, Phase 3 clinical trials; and understanding the major innovations currently taking place in the biotech field.  His unique background, which includes a degree in psychology from UC, San Diego, and a father who was a professor of biochemistry and later chair of the molecular chemistry and biophysics department at Columbia University certainly helped develop his industry acumen.

Edelman says of his own strategy that careful research into the companies he selects, taken together with the ability to understand and psychologically analyze corporate events within the biotech sector, is the driving factor behind his alpha generation.

This correlates with what researchers have found when studying rate of returns within the biotech sector. It is healthcare specific hedge funds, those with background knowledge of biotech or those specifically focused on the health care and biotech sectors, which statistically have the most success in accurately predicting which drugs and companies will succeed and which will fail.

If you are interested in learning more about biotech focused hedge funds, or hedge funds in general, please contact our team.

Expatriates and Taxes: Four Things to Keep in Mind Before Filing

By Alan Sasserath and Michael O’Brien

Working abroad is an opportunity many adventurous Americans find glamorous and exciting, with the chance to live and explore a foreign country often viewed like a working vacation. Taxes have to be filed, work has to be done, and meetings must be attended, but everything feels a bit more enjoyable than back in the States

Americans who live and work overseas are colloquially known as expatriates. For tax purposes, expatriates, or expats, are generally defined as U.S. citizens or resident aliens who temporarily, or for an extended period of time, reside in a foreign country. Expatriates who voluntarily give up their U.S. citizenship or greencard status are much less common and are subject to special rules. For an expatriate on foreign work assignment, the question of yearly taxes – what to file, where to file, and what can be excluded or deducted due to living abroad – can be one of the most complicated and stressful parts of living abroad. But it doesn’t have to be. Continue reading “Expatriates and Taxes: Four Things to Keep in Mind Before Filing”