NHS trust fails in first ever appeal over ICO fine for data breach

Wednesday, 16 January 2013 12:18

http://www.localgovernmentlawyer.co.uk/index.php?option=com_content&view=article&id=12833%3Anhs-trust-fails-in-first-ever-appeal-over-ico-fine-for-data-breach&catid=174&Itemid=99   The First-tier Tribunal has rejected the first ever appeal against a monetary penalty imposed by the Information Commissioner for a breach of data protection laws. The Central London Community Healthcare NHS Trust (CLCH) had appealed a £90,000 monetary penalty notice served by the Information Commissioner in April 2012. James Reilly, chief executive of the trust, said: "We have received the verdict from the tribunal and are giving it serious consideration. We won't be commenting further until we have completed this consideration with our legal advisers." The ICO welcomed the ruling. David Smith, Deputy Commissioner and Director of Data Protection at the watchdog, said: "Monetary penalty notices are an important and effective tool for ensuring compliance. We do not take the decision to issue an organisation with a financial penalty lightly and will only consider this in response to serious data breaches that could cause substantial damage or distress to the individuals affected." The breach related to an arrangement the trust had in place where it faxed, each weekday evening, highly sensitive patient data relating to its palliative care unit to St John’s Hospice. CLCH used an agreed fax protocol for sending the inpatient lists, which were used to assist doctors providing out of hours care. This required the palliative care unit to telephone the hospice to check that the fax had been received. However, the person responsible for faxing the lists to the hospice had not received adequate training on the faxing process and had not been trained to receive management approval for any variation in the protocol. In March 2011 the administrator became aware that the list needed to be sent to an additional fax number at the hospice. However, the protocol was not updated with the extra number, nor was approval obtained from her manager. The administrator (or a stand-in) then sent the inpatient list on 45 separate occasions to a fax number which it had not been given by the hospice. The individual did check that the fax to the original number had been received but not the ones to the second number. The error came to light when a member of the public rang to say he had been receiving the lists, but had shredded them. The trust was subsequently unable to trace the caller and could not confirm precisely what had happened to the data. The trust voluntarily reported the breach to the Information Commissioner’s Office. After an investigation, the ICO fined the trust £90,000 on 27 April 2007 under its power in s. 55A of the Data Protection Act. The level of fine, it was subsequently revealed, was in the ‘serious’ band (£40-100,000) in the ICO’s framework for determining the appropriate amount for a penalty. The other bands are ‘very serious’ (more than £100,000 but less than £250,000) and ‘most serious’ (more than £250,000 up to the maximum of £500,000). CLCH, which had already conceded that a financial penalty was warranted but had asked the Information Commissioner to consider a lower penalty figure, appealed to the FTT. The case was heard over three days in December 2012. The Trust argued that the monetary penalty notice was not in accordance with the law. It also claimed that to the extent that the notice involved an exercise of discretion by the Information Commissioner, it ought to have exercised that discretion differently. CLCH put forward its case under nine headings, although one ground of appeal was withdrawn during the hearing. These were that: The Information Commissioner had – in determining that it was satisfied that a monetary penalty notice might be imposed – unlawfully and in breach of section 55(3A) of the DPA relied on matters that came to his attention as a result of a s. 51(7) ‘consensual’ assessment. The IC failed to take proper account of its own policy on imposing monetary penalties where a data controller voluntarily reports and incident. The IC exercised his decision wrongly in deciding that a monetary penalty was appropriate. In particular it was argued that the evidence did not explain on what basis the discretion to impose a penalty was exercised. The IC failed to take proper account of the mitigating features identified in the monetary penalty notice, including that the trust was a ‘first time offender’ as far as security breaches were concerned. The IC imposed a penalty despite an indication by the case officer early in the course of the investigation that he did not consider the case would be worth of a fine. There was no subsequent change in circumstances to justify the change of position. The IC’s change of position gave rise to an inference that the IC must have taken account of irrelevant considerations in deciding to impose a monetary penalty. (This was the ground that was withdrawn) The IC failed at any stage to explain the principles by reference to which he proposed to calculate the amount of the penalty, thereby depriving the trust of an opportunity to make meaningful representations on the issue. In setting the amount of the penalty, the ICO gave insufficient credit to the trust for the various mitigating features in the case. The trust had offered to pay £72,000 (the sum applicable under the early payment discount scheme) on the footing that this payment would be without prejudice to the right to appeal, and that the payment would be refunded by the ICO if the appeal succeeded. The ICO’s refusal to accept the offer had effectively put the trust to a choice between taking the benefit of the discount for prompt payment or exercising its right to appeal. The Tribunal rejected all of these grounds. Key elements of the ruling include: The FTT rejected the Information Commissioner’s submission that it should adopt a “narrow, essentially supervisory” approach to the discharge of the ICO’s functions. The tribunal has power to allow the appeal and/or substitute such other notice or decision as could have been served. Where the tribunal is asked to consider the amount of a penalty, the tribunal can increase as well as decrease the amount, as well as accept the Information Commissioner’s figure. If the tribunal was inclined to increase the penalty where the IC did not ask for a higher figure, then as a matter of procedural fairness, the data controller should be given the opportunity to be heard or make written representations before making a final decision. A voluntary notification of a serious breach does not preclude the Information Commissioner from investigating the breach with a view to issuing an MPN as well as taking other enforcement action. The ICO had not disregarded its own policy. The ICO’s Notification of Data Security Breaches to the Information Commissioner’s Office was not a statutory policy and if there was any tension between that and the statutory policy (MPN guidance), then the latter should be followed. In any event the tribunal did not consider that such tension was present in this case. From the evidence it was clear that the Information Commissioner had ensured that the various elements of s. 55A – there was a serious contravention, the contravention was of a kind likely to cause substantial damage or distress etc. – were met. The IC had taken full account of the facts and circumstances of the contravention and any representations made to him, as required by the MPN guidance. The trust’s mitigating features were features the tribunal found the IC could not give much weight. “In any case they are almost all post facto events and nothing about the wrongdoing”. The case officer had not committed the ICO to any position. On the balance of probabilities, he did not give any serious indication or assurance that there would be no fine or monetary penalty notice in the case which in any way excluded the watchdog from deciding to issue an MPN. Even if an indication had been given, this was at the beginning of the investigation and was based on an initial notification of the extent and seriousness of the breach and on the evidence could not be considered as a change of position. The tribunal was satisfied that the ICO had reached a figure within a range of reasonable figures it could have considered. Indeed, it seemed to the tribunal on the facts that in this case the IC could have taken a more penal approach to the amount in question. It was clear that the ICO did take all factors/features into account such as voluntary reporting of the incident, voluntary co-operation through the investigation and voluntary reporting the incident to the data subjects. The MPN was also clear and took into account the behavioural issues referred to by counsel for the trust. It could be argued that there was an insufficient approach to assessing the financial impact of the fine. However the trust was give the opportunity to challenge the approach. Its chief executive did not do this, nor did he make the case that a penalty of £90,000 would reduce service availability or other hardship. “So the IC cannot be criticised for not considering the matter further or appearing to give it increased weight for which no evidence is provided.” The tribunal noted that no evidence was provided as to the effect on service delivery of a penalty of this size. It also noted that the penalty was likely to be only a small percentage of turnover. The failure of the IC to accept the trust's early payment offer outside the basis of the MPN guidance did not seem to amount to an error of law and/or wrong exercise of discretion. “At most the MPN guidance is a quasi judicial obligation on the IC to provide a discount on specific terms. He did so in this case. The Trust chose not to accept the terms and it is its loss when an appeal fails.” A discount for early payment is offered under other regimes like parking and minor road traffic offences. However, the tribunal was not aware that an offender can reserve his position if he decides to appeal. For these reasons the tribunal was not prepared to restore the discount. The issues around the operation of the early payment scheme, where the payer gets a discount, are set to be looked at in another challenge to an ICO monetary penalty that is being brought by Scottish Borders Council. This case is expected to be heard in the Spring. The ICO's Smith also said about the ruling: "We follow a thorough process when reaching any decision. The Tribunal have recognised this and commended us on our approach. The ruling removes any doubt that we cannot take action when an organisation self-reports a serious data breach. While we do look favourably on organisations that contact us after a serious breach, and take this into account when setting the amount of any penalty, self-reporting a breach to the ICO cannot be seen ‘as a get out of jail free’ card." He added: "We are also pleased the Tribunal supported the early payment system we operate is in line with other regulatory bodies, confirming that organisations cannot have their cake and eat it by paying the discounted rate, while reserving the right to appeal.” Anya Proops of 11KBW was counsel for the Information Commissioner. Timothy Pitt-Payne QC, also of 11KBW, acted for the appellant NHS trust. Philip Hoult

Edible edifice: Building the offices of tomorrow

There's a lot of debate over what place the office might have in tomorrow's working landscape.

As technology makes flexible working easier, the maxim: "Work is not where you go, it's what you do," looks ever more realistic.

But one thing that might hurry the flight from the traditional office is the thought your canteen could be serving up meals grown on the walls of the building.

While you may have a sneaking suspicion the catering staff already do this, there is a real chance such delicacies will feature on the menu some time soon.

Intelligent buildings

This culinary delight was one of a number of concepts presented at a recent British Council for Offices conference, where delegates looked at the next generation of "intelligent" buildings.

"This is not just about automation, an igloo could be said to be an intelligent building," says Derek Clements-Croome, emeritus professor at the University of Reading.

"These buildings will respond to the needs of people, there will be an increased amount of personalisation - you will be in control of the environment and be able to tune it to your needs."

This means your office may look very different indeed in a few years.

Designers talk of digital walls, which have sensors embedded so you can interact with them.

Or, if you want the professor's technical explanation, "dye sensitised solar cells with titanium oxide layers on a surface with light absorbing dye molecules adsorbed on surface which can generate electricity".

These walls will build up a profile of you and change your working environment accordingly.

This could mean the lighting around your desk dims slightly when you arrive, or a pre-determined microclimate is created for your meeting.

Nano state

The technology that enables this interaction, known as "nano-coating", will basically turn your cold, unfeeling office into an expressive medium

It could mean the moment you enter the building your workspace starts preparing itself for your imminent arrival - even if you are hot-desking.

This is far from being science fiction, according to John Monaghan from Cisco, who is already pushing ahead with such technology.

"When someone walks in [our technology] can recognise who they are and then offer them the appropriate level of service," he says.

"It's about creating a seamless pleasant user experience."

And that's just on the inside.

The building industry is latching onto advances made by other industries like aviation to create innovations such as self-healing and self-cleaning materials.

Self-cleaning concrete, for example, uses titanium dioxide to break down unsightly pollution into its chemical constituents, which rain then washes off the walls.

A noted example is the Air France headquarters at Roissy-Charles de Gaulle International Airport near Paris, which has remained white despite all the attendant aviation pollution.

All of which brings us to why your meal options in the canteen might benefit from this evolving building technology.

Lunch time

Sean Affleck, from Make architects, is a big fan of "living facades".

He describes these as "vertical fields", where plants are grown up the walls, absorbing carbon dioxide (CO2) and releasing oxygen as they go.

This could help in the fight against global warming Mr Affleck says.

"Growing living facades could cool cities down like in a forest, where you find cool woodland glades because of all the evaporation going on around you," he says.

A similar option is harnessing the green power of algae.

"Algae is 200% better at absorbing CO2 and producing bio-mass than, say, oil seed rape," Mr Affleck says.

He envisages buildings wrapped in algae tubes, into which gaseous waste products from the building are pumped.

The algae, having done its cleansing work, would then be harvested for power.

One example where this is already happening is the Red Hawk power plant in Arizona, USA.

There carbon dioxide rich gases created during production are passed through tubes of algae, which take out 80% of the gas and release oxygen.

The algae is then recycled through biomass generators to create biodiesel.

But if we don't want to turn our offices into power plants, there are other applications.

Mr Affleck cites a project in Mumbai (Bombay), India, where a firm is turning algae grown on fences wrapped around the building into cosmetics.

And, returning to the culinary theme, you could also turn it into products like spirulina jam - perfect on your lunchtime pasta.

Pushing plant use even further, some suggest using their roots to fix buildings to the ground.

If that sounds ridiculous, proponents point out trees tend to survive earthquakes when offices do not.

Innovation barriers

Of course there are numerous barriers in the way to any of these advances, one of which is simply taking the plunge in the first place.

"A lot of the best ideas demand someone takes a big risk," says Andrew Hunter, technical services director at Skanska.

"They lose a lot of money and the rest of us pick up the pieces."

But there are major drivers that could mean these intelligent buildings are on the way.

The first is economics, as offices tend to be a company's second most expensive cost after staff.

Buildings that are automated and where systems effectively interact not only with you, but with each other as well, could ultimately be cheaper to run.

They will use less energy and water, and create less waste.

Meanwhile the more pleasant working environment they foster will encourage higher productivity.

Secondly, issues such as energy, water and waste management are key parts of companies' sustainability agendas.

They are likely to grow in importance as the threat of global resource shortages advances and environmental concerns build.

Innovative use of buildings could help head off such risks and make a positive contribution at the same time.

"We talk about being carbon neutral now, but if we look at buildings being power generators themselves in the future, suddenly we are thinking about being carbon positive," says Prof Clements-Froome.

The elephant in the conference room at the British Council for Offices remains the question of whether we will still be heading into the office at all in the future.

Unsurprisingly, the architects, designers and IT experts at the Intellibuild event seem unanimous in their disdain for the idea, citing the innate need for humans to congregate and engage with one another.

Although perhaps not over a bowl of algae spaghetti.

Source: http://www.bbc.co.uk/news/business-20965207
Last updated at 00:05 on 15 January 2013
By Michael Millar, Business reporter, BBC News

Hollywood goes political as election nears

http://www.reuters.com/article/newsOne/idUSTRE4941AR20081005

Hollywood goes political as election nears
Sun Oct 5, 2008 8:58am EDT

By Alex Dobuzinskis

LOS ANGELES (Reuters) - Hollywood is coming out this fall with a slew of political movies that hit all the hot-button topics as the tight U.S. presidential campaign nears its climax.

From religion to patriotism, gay rights and the presidency of George W. Bush, directors are wearing their political colors on their sleeves, using comedy, true stories and fantasy to send not-so-subtle messages to Americans preparing to choose between Democrat Barack Obama or Republican John McCain on November 4.

"There is a sense now that these political films can really be successful, and they're a genre aimed at one side of the political spectrum or the other," said Robert Thompson, professor of media and popular culture at Syracuse University.

Next week, controversial director Oliver Stone lands his satirical biopic "W." that attempts to deconstruct Bush's faith and marriage and the days leading up to the 2003 Iraq invasion.

Tom Ortenberg, executive producer of "W.", said filmmakers were mirroring society, even if the release date of the Stone movie could be seen as politically charged.

"We don't attempt to shape society, but we do reflect it," Ortenberg said. "The movie is an examination of how a man like George W. Bush became president, and frankly how anyone can become president."

Director David Zucker's farce "An American Carol" and talk show host Bill Maher's documentary that mocks faith "Religulous" opened on the same day in movie theaters last week.

Zucker, who made hit comedy movies "Airplane!" and the "Naked Gun" series, is a liberal-turned-conservative.

"An American Carol" is a fictional version of left-wing populist Michael Moore who in the movie comes around to loving America just like Scrooge learns to love Christmas.

"I don't think (Moore) does hate America," Zucker said. "I think we're taking dramatic license."

Moore himself released his latest documentary "Slacker Uprising" on the Internet for free last month. It was seen by 2 million viewers in the first three days.

Although the movie chronicles Moore's speaking tours of college campuses during the 2004 election, its Internet release came with a plea to young people to vote and "save this country from four more years of Republican rule."

With the debate over gay marriage heating up in California, trailers are running for the movie biopic "Milk." Sean Penn plays California's first openly gay elected official, Harvey Milk, who was assassinated in 1978 when the gay rights movement was in its infancy.

After last year's disappointing box office for a string of Iraq war themes movies, including "Rendition" and "In the Valley of Elah," it remains to be seen whether Americans will lap up the political fare with the same enthusiasm they are showing for the tight 2008 race to the White House.

But Thompson said it was encouraging nevertheless to see so many political movies hitting the screens.

"It's nice to know that you can go to your mall in your small city and see something other than helicopters blowing up and comic book people, or Julia Roberts falling in love.

"The fact that we're making good, viable films about our civic experience I think is a good thing," Thompson said.

Mat Mat Blog

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China fights hanky-panky

BEIJING (Reuters) - A Chinese city has taken its fight on corruption to the bedroom, ordering officials to own up to extramarital affairs in the hope of keeping public money out of the hands of mistresses, Xinhua news agency reported.

China has tried assorted checks and balances to curb corruption which has returned alongside market reforms after being virtually wiped out when the Communist Party swept to power in 1949.

"Nanjing, capital of east China's Jiangsu Province, issued a regulation in May requiring officials to report their extramarital affairs, with a belief that the stipulation could curb corruption," Xinhua said in an overnight report.

Some 95 percent of convicted corrupt officials in China had mistresses, it said without elaborating.

"In south China's economic-booming cities of Shenzhen, Guangzhou and Zhuhai, all the officials involved in the 102 corruption cases investigated in 1999 had mistresses," it said.

Legal scholars have criticised the Nanjing regulation, which also gives the government permission to interfere in outside relationships that affect "officials' family stability", for infringing on privacy and for being nearly impossible to enforce, the agency said.

"No one is willing to voluntarily speak out about their extramarital affairs," law researcher Mo Jihong was quoted as saying.

China's leaders have warned chronic corruption could topple the Communist Party, which has controlled the world's most populous nation for more than 50 years.

Almost 870,000 officials were indicted for corruption in 2004.

"Although arguments exist, one fact is undeniable," Xinhua said of the Nanjing regulation. "The Chinese government and academic society are being more innovative than ever before in the field of creating new ways to prevent and control corruption."

HK limits dollar to deter speculators

By Alexandra Harney in Hong Kong and Steve Johnson in London
Published: May 18 2005 18:09 | Last updated: May 18 2005 18:09

Hong Kong on Wednesday surprised financial markets by introducing a ceiling on its currency in an effort to discourage speculative investment into the territory.

The Hong Kong dollar, which has been pegged at HK$7.8 to the US dollar since 1983, will not be allowed to strengthen beyond HK$7.75 with immediate effect. It will also not be able to weaken below HK$7.85, a shift which will be achieved over the next five weeks.

Speculative flows into Hong Kong have risen sharply since late 2003 amid growing expectation that China, whose currency is pegged to the US dollar at Rmb8.28, would revalue. Investors who see the Hong Kong dollar as a proxy for the Chinese currency were expecting it to rise if the renminbi appreciated.

Joseph Yam, HKMA chief executive, said the move was aimed at sending a clear message to investors about how much Hong Kong's currency would be allowed to strengthen.

"You don't need to make use of the Hong Kong dollar as a speculative tool for betting" on appreciation of the renminbi, he said yesterday.

Until now, the Hong Kong Monetary Authority has intervened if the currency has fallen below HK$7.8 to the US dollar - known as a fixed convertibility "floor" - but has not set a "ceiling" above which it cannot rise.

Some analysts welcomed the move. "Hong Kong is simply tidying up its currency regime to deal with a scenario - strong speculation about an appreciation - that had not previously been a problem," Julian Jessop, chief international economist at Capital Economics in London, said.

But Derek Halpenny, senior currency economist at Bank of Tokyo-Mitsubishi, argued Hong Kong's decision could herald increased speculation as the market tests the limits of the new trading band.

"The credibility of the old fixing had been undermined, the market will now test the credibility of the new band," he said.

Jonathan Anderson, chief economist for Asia at UBS, also questioned whether speculators would be discouraged.

"We were expecting a move that was going to stem the problems. It's not clear that this really does that," he said.

Mr Yam denied the decision was related to China's plans for currency reform.

"I have no inside information on what the People's Bank of China [China's central bank] may or may not do," he said.

Mr Halpenny argued that the move suggested that Hong Kong does not believe China will revalue the renminbi soon, and thus felt compelled to take action itself.

Enoch Fung of Goldman Sachs said the move would lead to a faster than expected rise in Hong Kong interest rates.

The Hong Kong dollar initially fell on Wednesday to 7.809 to the dollar, before rallying to 7.795. The Japanese yen rose to Y107.11 against the dollar and Y135.39 against the euro in early New York trading amid speculation that Hong Kong's move may be a sign that China is set to follow suit.

Cisco Pushes a New Twist on Options

By GARY RIVLIN and FLOYD NORRIS

SAN FRANCISCO, May 11 - Adding a new twist to the continuing fight over the expensing of employee stock options, Cisco Systems is seeking regulatory approval for a novel financial instrument that could allow the company to assign a lower value to the stock options than under current valuation models.

A lower value for the options, which under new accounting rules will have to be recorded as expenses on Cisco's books starting this July, would reduce the impact expensing will have on Cisco's profits and could lead other companies to adopt something similar. The company said that if it employed a traditional valuation standard like the Black-Scholes model for expensing its stock options, its reported profits would fall by roughly 20 percent.

Options give employees the right to buy stock for as long as 10 years at a price set when the option is issued, and thus can become very valuable if the stock rises over that period.

Cisco's proposal is to create a market by selling new securities based on the employee options. By doing so, the company potentially could be changing the terms of the debate on expensing stock options. But details of the securities Cisco decides to sell, and the way it markets them, could prove crucial in determining how the approach works in practice.

The issue is important for Cisco because it grants options to all employees and because it will be one of the first companies to come under the new accounting rule that requires options to be expensed. That rule, adopted by the Financial Accounting Standards Board after a bitter debate, goes into effect on June 15 for fiscal years beginning after that date. Cisco's fiscal year begins July 31.

In its last fiscal year, Cisco granted 188 million options to employees. It disclosed that had it been forced to take the value of options as an expense, its net income would have fallen by 28 percent, to $3.2 billion.

The securities would be sold only to institutional investors. Cisco would sell new securities when it issued options to employees, and would then use them to value those options on its books.

Cisco confirmed the move after it was reported by Bloomberg News.

Cisco, the largest maker of equipment for directing traffic on the Internet, has been a leader among technology companies seeking relief from the rule from Congress and the Securities and Exchange Commission.

Some details of Cisco's proposal were disclosed Wednesday by two people who had been briefed on them and who asked not to be identified because details could still be changed.

They said the securities would be offered to a limited number of institutional investors, adding that the company believed that by limiting the prospective buyers, it might get a higher price because those investors would have an interest in putting in the time needed to analyze a new and complicated security. But it could also be argued that by limiting the number of investors, the company would be depressing the price.

That could be important because the company has two conflicting interests. As with any security it sells, it would benefit from getting the highest price. But Cisco would also benefit from a lower price if that allowed it to report higher profits.

Buyers of the new instruments, to be called employee stock option reference securities, or Esors, would not be able to transfer them, and would have options that would vest over five years. Both provisions mirror those in employee stock options.

Donald Nicolaisen, the S.E.C.'s chief accountant, said that he could not comment on Cisco's proposals. But in general, he said, "it certainly would be desirable to have a market value that could help validate the valuation models."

Last year Cisco, along with Qualcomm and Genentech, proposed an alternative valuation method intended to slash the value of options that the companies argued was simpler and more accurate.

The accounting standards body rejected their proposal. That proposal called for discounting the valuation for numerous reasons and drew criticism because it would have resulted in drastically lower valuations and therefore lower expenses, compared to the models endorsed by the accounting standards board.

"They've had plenty of time over the past couple of years, while this was all still being debated, to propose something like this," said Jack T. Ciesielski, editor of The Analyst's Accounting Observer. "And in fact they did propose something similar with their proposal last fall. That didn't work, so they're now trying a different route."

Cisco hired the investment bank Morgan Stanley to put together its proposed security, which could be used to set the price of the options of any company wanting to participate.

"We all wish there was a public market for stock options because then we'd have real evidence of what these things are worth," said John England, who runs the executive compensation practice inside the consulting firm Towers Perrin. "The idea is great but whether it can be pulled off is another issue."

There would also be provisions, which were not given in detail, barring the owners of the derivatives from hedging their positions. That mirrors a provision in employee stock options, but it could also serve to limit the number of potential investors if it constrained other trading strategies - selling the company's stock short or buying put options, for example - that would normally be available to institutions.

Perhaps the most controversial part of the proposal is that a buyer would not know how many options he would eventually have.

That is because the Esors would mirror the actual experience of employee options, which are canceled when employees leave Cisco, whether voluntarily or not. Last year, Cisco's annual report states, 52 million options were canceled.

A potential problem with that provision is that it could lead to understating the value of the derivatives. Employees who forfeit options when they leave voluntarily presumably do so because their new jobs offer sufficient compensation to offset the value of the forfeited options. But there is no similar compensation planned for Esors holders.

"I think one of the reasons the F.A.S.B. never picked a particular option-pricing model is because they were hoping that there would be advancements in ways to value these options," said Pat McConnell, an accounting analyst at Bear Stearns. "I think this is another step in that process."

Mr. Ciesielski, however, sees this as more of a step backward than forward. "If the S.E.C. were to give the green light to something like Cisco is proposing, it'd be nibbling away at the F.A.S.B. standard without public comment," he said.

The Cisco proposal is in some ways reminiscent of a plan Coca-Cola announced in 2002, when it said it would voluntarily take stock options as an expense. It then proposed to seek market valuation estimates from investment banks, with the possibility that banks would be forced to buy or sell based on their estimates. But that idea was later dropped because it was not in accord with the existing accounting rule, which gave companies the choice of whether or not to treat options as an expense.

The new accounting rule, however, specifies that market values, if available, can be used in valuing options.

Gary Rivlin reported from San Francisco for this article and Floyd Norris from Paris.