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Enron Mail |
The exciting cocktail of credit derivatives and Enron Online raises
significant novel legal risks for Enron. As most of you will by now know, probably the most significant risk would arise in a situation where Enron has confidential information about a reference entity and wrongfully uses that information in pricing the credit derivative on that entity. This could well result in legal proceeding against Enron. In practice, an allegation of misuse of confidential information can be very difficult indeed to defend without adequate procedures in place to safeguard that information. In fact, Enron's credit trading will, as you know, rely strictly on publicly available financial information and will not involve the use of confidential information, unless the reference entity has specifically consented. Nevertheless, to avoid the appearance of impropriety, we are taking additional steps to consider confidentiality agreements we have in place with potential reference entities before deciding whether or not we will quote prices on such entities. Against this background is the ever-present risk of "insider dealing". This crime - which in the UK carries a maximum prison sentence of 7 years and an unlimited fine - is committed where a person (or member of their family etc) deals in the securities (shares, bonds or derivatives on them) of a listed company on the basis of unpublished (confidential) price-sensitive information. We do not expect at this time to deal in publicly traded bonds as part of EnronCredit.com, but insider dealing is relevant to the conduct of Enron staff and could affect other parts of our business. In addition, SFA rules in the UK require the safeguarding of confidential information, the misuse of which is a serious disciplinary matter. In order to ensure the success of this new business and that confidential information is not misused either by Enron or its staff, we are now introducing important new policies and procedures in Europe and in the US. These procedures have been drawn up specifically for your credit trading group by lawyers in London, Houston and New York and are attached. Please familiarise yourself, and any future member of the group, with these procedures. Once you have read and understood the attached procedures each one of you is required to confirm this to me in writing (or by note mail). Please note that similar procedures have been distributed to the key business heads in Europe who may have confidential information about reference entities (similar procedures are being disrtibuted to US business heads). This requires them to safeguard confidential information and to abide by the Restriced List procedure described below. Nevertheless, you should treat your group as being within a Chinese Wall and see it as your personal responsibility not to solicit or accept from anyone in Enron information about reference entities which may be confidential. Thank you for your co-operation in implementing these important new procedures. I look forward to receiving your confirmation mentioned above (which is also described in the procedures). Best regards Paul
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