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Agreements you'll see when selling or buying alarm accounts � brokers agreement / comment on how secure are central stations using the cloud July 10, 2018

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE

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Agreements you'll see when selling or buying alarm accounts – brokers agreement / comment on how secure are central stations using the cloud
July 10, 2018
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Agreements you'll see when selling or buying alarm accounts – brokers agreement  
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          This is the second article in the series on what agreements you should expect to see when engaged in the buying or selling of alarm accounts. Today I’ll discuss the agreement with the broker.
          Too often clients come to me after they have signed the broker agreement. It’s too late to do much about it then. Brokers in the alarm industry are, for the most part, hard working professionals who know the alarm business and have a roster of potential buyers ready to buy accounts.  Brokers usually represent Sellers, but they are obviously close with their buyer contacts.  Brokers charge commissions based on the sales price at time of the closing, and these commissions can be from 5 to 8% or more of the purchase price.
          The broker agreement will have a term, generally 90 days to one year.  But the broker will be entitled to a commission on any potential buyer introduced during the term of the agreement even if that buyer doesn’t show interest until well after the term of the broker agreement has expired.  It's important to define when the broker is the procuring agent of a potential buyer; in other words, when is the broker entitled to a commission on a buyer that comes to the table after the broker agreement has expired but during the tail period.  Is it enough that the broker mentioned the buyer's name, or sent the buyer a Non-Disclosure Agreement?  The answer depends on how the broker's agreement reads, and the terms are negotiable.  Some of these “tails” run 3 or more years.  You need to be careful when changing brokers because the second or third or whatever broker that comes along may have a provision that entitles the broker to a commission on any buyer.  You could end up with two commissions.  Change brokers enough and you could end up with several commissions.
          You’ll need to keep an eye on the term of the agreement and the term of the tail. You will need to know if the broker is getting an exclusive right to sell, exclusive agency or open listing. You will need to know how the commission is calculated and when it’s to be paid.  You should know what is expected of the broker while marketing the company and after the buyer is found.  What role will the broker play during due diligence, if any?  
          Unlike a lawyer who is bound by confidentiality, the broker agreement should have provisions requiring confidentiality.  The broker should not be providing you with a Non-Disclosure Agreement to be used by potential buyers.  The broker is not a lawyer and no matter how knowledgeable the broker is, he or she is not a lawyer. If the broker lets you know that he or she knows more than the attorney, then you just have the wrong attorney; simple as that.  If the broker doesn’t say that but acts like that, then you may have the wrong attorney or the wrong broker, or both.  
          A broker's agreement can have all the fine print any other agreement has, and you need to be careful when you read and sign the agreement.  It should be reviewed by an attorney and you should understand each provision.  You are not required to sign the agreement without revisions to better reflect what you want to agree to.  Understanding under what circumstances the broker has earned the commission is a good start. 
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comment on how secure are central stations using the cloud from article on July 2, 2018  
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Ken, 
      You misunderstood the application for the cloud question.        The question surrounds the concept of panel manufactures developing tools around using a cloud infrastructure to program and maintain panel information. The overall trend is to abandon using desktop applications like Honeywell’s Compass, DMP’s Remote Link, DSC’s DLS just to name a few and then transition them into cloud based applications that each one has developed.
      I don’t think anyone can argue that using these applications is somehow harder to use so the real concern is and will continue to be security and the risks around them especially since this literally represents the keys to the castle including not only the user codes but also the ability to change programming and remote control the systems in the field.
      All of this presents a conundrum for the industry, having desktop software sitting on typically very vulnerable networks inside unsecure office spaces with almost always poor software user maintenance vs taking this to a whole new level with it out there for hackers to try to exploit 24x7. Pro’s and Con’s for both methods are present.
      Clearly the trend is to move these tools into SAS (Software as a Service) application as there are significant benefits for all involved, the bigger question is do we as an industry need to develop standards around these tools that would help keep not only the data secure but also how it can affect the panels in the field, after all we are in the security business and are here to protect life and property.
Morgan Hertel, VP of Technology and Innovation
Rapid Response Monitoring
877-553-4531
www.rrms.com
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Response
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      I think I addressed the issue. Do you feel more comfortable knowing that your central station has all its data on its own servers, in its offices, or off-premises in someone else's server, "in the cloud". At the end of the line someone has to have a server where the data is stored. 
      It could be that "cloud" based applications have better security than whatever is maintained at someone's office, but cloud based systems have been hacked too. Where there is a will there is a way and securing subscriber data and system information is most likely going to be an on-going issue.
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com