Chinese wall
A Chinese wall or ethical wall is an information barrier protocol within an organization designed to prevent exchange of information or communication that could lead to conflicts of interest. For example, a Chinese wall may be established to separate people who make investments from those who are privy to confidential information that could improperly influence the investment decisions. Firms are generally required by law to safeguard insider information and ensure that improper trading does not occur.[1]
Etymology
Bryan Garner's Dictionary of Modern Legal Usage states that the metaphor title "derives of course from the Great Wall of China",[2] although an alternative explanation links the idea to the screen walls of Chinese internal architecture.[3]
The term was popularized in the
A leading note on the subject published in 1980 in the University of Pennsylvania Law Review titled "The Chinese Wall Defense to Law-Firm Disqualification" perpetuated the use of the term.[5][6]
Objections to the term Chinese wall
There have been disputes about the use of the term for some decades, particularly in the legal and banking sectors. The term can be seen both as culturally insensitive and an inappropriate reflection on Chinese culture and trade, which are now extensively integrated into the global market.[citation needed]
In
Alternative terms
Alternative phrases include "screen",
"Screen", or the verb "to screen", is the preferred term of the
Usage in specific industries
Finance
This section needs additional citations for verification. (December 2020) |
A Chinese wall is commonly employed in
The "wall" is thrown up to prevent leaks of corporate inside information, which could influence the advice given to clients making investments, and allow staff to take advantage of facts that are not yet known to the general public.[15][16]
The phrase "over the wall" is used by
Ethics walls are also used in the
Journalism
The term is used in
Separately, the term can refer to a separation between a publication's news and opinions arms.[20]
Insurance
The term is used in property and casualty insurance to describe the separation of claim handling where both parties to a claim (e.g. an airport and an airline) have insurance policies with the same insurer. The claim handling process needs to be segregated within the organisation to avoid a conflict of interest.
This also occurs when there is an unidentified or uninsured motorist involved in an auto collision. In this case, two loss adjusters will take on the claim - one representing the insured party and another representing the uninsured or unidentified motorist. While they both represent the same policy, they both must investigate and negotiate to determine fault and what if anything is covered under the policy. In this case, a Chinese wall is erected between the two adjusters.
Law
Chinese walls may be used in
Government procurement
Chinese or ethical walls may be required where a company which already has a contract with a public body intends to bid for a new contract, in circumstances where the public body concerned wishes to maintain a fair competitive procedure and avoid or minimise the advantage which the existing contractor may have over other potential bidders. In some cases UK public sector terms of contract require the establishment of "ethical wall arrangements" approved by the customer as a pre-condition for involvement in the procurement process for additional goods and services or for a successor contract.[23]
Computer science
In computer science, the concept of a Chinese wall is used by both the operating system for computer security and the US judicial system for protection against copyright infringement. In computer security it concerns the software stability of the operating system. The same concept is involved in an important business matter concerning the licensing of each of a computer's many software and hardware components.
Any hardware component that requires direct software interaction will have a license for itself and a license for its software "driver" running in the operating system. Reverse engineering software is a part of computer science that can involve writing a driver for a piece of hardware in order to enable it to work in an operating system unsupported by the manufacturer of the hardware, or to add functionality or increase the performance of its operations (not provided by the manufacturer) in the supported operating system, or to restore the usage of a piece of computer hardware for which the driver has disappeared altogether. A reverse engineered driver offers access to development, by persons outside the company that manufactured it, of the general hardware usage.
Reverse engineering
There is a case-law mechanism called "clean room design" that is employed to avoid copyright infringement when reverse engineering a proprietary driver.
It involves two separate engineering groups separated by a Chinese wall. One group works with the hardware to reverse engineer what must be the original algorithms and only documents their findings. The other group writes the code, based only on that documentation. Once the new code begins to function with tests on the hardware, it is able to be refined and developed over time.
This method insulates the new code from the old code, so that the reverse engineering is less likely to be considered by a jury as a
Computer security
The basic model used to provide both
See also
- Brewer and Nash model
- Conflict of interest
- Glass–Steagall Act
- Global Settlement
- Insider trading
- Mad Men: "Chinese Wall"
References
- ^ a b Frier, Sarah (9 October 2014). "Goldman Sachs Turns to Digital Surveillance to Catch Rogue Bankers". Bloomberg Businessweek. Archived from the original on 2014-10-20. Retrieved 2014-10-17.
- ISBN 978-0-19-514236-5. Retrieved 15 January 2021., italics added
- ^ Readers’ editor: Is the term “Chinese wall” racist?, published 30 January 2014, accessed 15 January 2021
- ^ Investopedia. "The Chinese Wall Protects Against Conflicts Of Interest". Archived from the original on 2012-01-19. Retrieved 13 February 2012.
- ^ "The Chinese Wall Defense to Law-Firm Disqualification" (1980) 128 University of Pennsylvania Law Review. 677
- ^ a b Peat, Marwick, Mitchell & Co. v. Superior Court Archived 2014-10-17 at the Wayback Machine, 200 Cal.App.3d 272, 293–294, 245 Cal.Rptr. 873, 887–888 (1988)
- JAMS. Archivedfrom the original on 2014-10-21. Retrieved 17 October 2014.
- ^ David Hricik (June 8, 2005). "Chinese Walls: Racist?". Legal Ethics Forum. Archived from the original on 2014-10-20. Retrieved 2014-10-17.
- ^ See Martin v. MacDonald Estate (Gray) [1991] 1 WWR 705 at 715, as per Sopinka J.
- ^ a b "Model Rules of Professional Conduct" Archived 2010-12-04 at the Wayback Machine
- ^ "HALT - Lawyer Accountability". Archived from the original on 2010-10-30. Retrieved 2010-03-24.
- ^ "{title}" (PDF). Archived from the original (PDF) on 2010-06-13. Retrieved 2010-03-24.
- ISBN 978-1-59031-663-4. Retrieved 6 August 2012.
- ^ American Bar Association Standing Committee on Ethics and Professional Responsibility, Informal Opinion 88-1526: BNA Lawyers' Manual on Professional Conduct 901:318, adopted 22 June 1988, quoted in Connecticut Superior Court, Rivera v Chicago Pneumatic Tool Company, No. 516364, 5 August 1991, accessed 16 January 2021
- ^ "Chinese Wall Definition" (Archived 2009-10-26 at the Wayback Machine), Investopedia.
- ^ Luyendijk, Joris (3 February 2012), "Equity finance banker: 'Don't underestimate the Japanese banks'", The Guardian, London, archived from the original on 2013-08-02, retrieved 7 February 2012 see Australian case ASIC v Citigroup Global Markets Australia Pty Ltd [2007] FCA 963, Federal Court (Australia)
- ^ Belfiore, Michael (24 March 2022). "The Marketing/Editorial Firewall Explained". Robot Lotus. Retrieved 8 January 2023.
- ISBN 9781452233130.
- ^ Santo, Alysia (30 September 2011). "Ensuring Independence". Columbia Journalism Review. Retrieved 8 January 2023.
- .
- ^ Solicitors Regulation Authority. "Rule 3: Conflict of interests". SRA guidelines rule 3. Archived from the original on 2011-02-24. Retrieved 2011-03-23.
- ^ McMullan, James M. "How to Avoid Conflicts". Americanbar.org. Archived from the original on 2015-06-20. Retrieved 2015-04-09.
- ^ "Agreement between Buying Solutions and Banner Business Services Limited for the provision of Office Supplies (Product Grouping 1) (redacted)". Buying Solutions, a trading fund of the Cabinet Office. 2011. section N. Archived from the original on 21 January 2021. Retrieved 16 January 2021.
- ^ Schwartz, Mathew (2001-11-12). "Reverse-Engineering". Computerworld. Archived from the original on 2013-06-24. Retrieved 2013-06-23.
To protect against charges of having simply (and illegally) copied IBM's BIOS, Phoenix reverse-engineered it using what's called a 'clean room,' or 'Chinese wall,' approach. First, a team of engineers studied the IBM BIOS—about 8KB of code—and described everything it did as completely as possible without using or referencing any actual code. Then Phoenix brought in a second team of programmers who had no prior knowledge of the IBM BIOS and had never seen its code. Working only from the first team's functional specifications, the second team wrote a new BIOS that operated as specified.
- ^ Hogle, Sean (2008-10-23). "Clean Room Defeats Software Infringement Claim in U.S. Federal Court". Archived from the original on 2014-10-21. Retrieved 2013-05-23.
[...] dirty room reverse engineering should be done in conjunction with clean room development by using two physically and electronically isolated teams where one team does dirty room reverse engineering and the other does clean room development. If a dirty room team exists, the clean room engineers can write a description of the portion of the specification that needs elaboration or clarification. The dirty room engineers then use that request to create additional functional specifications or tests.