June 30, 2004

Working Draft of Remaining 12 Steps of Responsible Compensation Practices

On CompensationStandardsConference.com, we have posted a working draft of the remaining 12 Steps of responsible compensation practices laid out in the May/June issue of The Corporate Counsel. These steps include some of our more controversial - and responsible - points. The working draft is accessible - like all the other valuable content on CompensationStandardsConference.com - by those that register for the October 20th major compensation conference.

One of these controversial points is the need to consider and modify past excessive grants of incentive compensation - how do you tell a CEO that she got paid too much and you need to now roll it back? Learn more in Step 10 in the working draft - as well as an excellent practice pointer that was just posted: "Taking from the King: The Mutual Need and Practical Tips for Rolling Back or Modifying Excessive CEO Compensation."

Siebel Systems as Poster Child? First Disclosure Controls Violation Alleged!

When I taught an Executive MBA corporate governance class at George Mason this spring, Siebel Systems was often used by the class as an example of "what not to do." In addition to having one of the first Reg FD violations, Siebel entered into a "governance by gunpoint" settlement with an institutional investor a year ago.

Yesterday, the SEC announced that it filed an action in the U.S. District Court for the Southern District of New York charging that Siebel Systems violated Regulation FD and a cease-and-desist order issued in November 2002 against the company for a Reg FD violation. The SEC charged the company's chief financial officer and former IR officer (who still works there in a different capacity) with aiding and abetting Siebel's violations.

In the first action on disclosure controls, the SEC also charged the company with violating Rule 13a-15, which requires issuers to maintain disclosure controls and procedures.

The SEC's complaint alleges that, a scant 6 months after the cease-and-desist order was issued, the CFO disclosed material nonpublic information during two private events he attended with the IR officer, a "one-on-one" meeting with an institutional investor and an invitation-only dinner hosted by a banker (and that at both the meeting and the dinner, the CFO made positive comments about the company's business activity levels and transaction pipeline that materially contrasted with negative public statements the company had recently made). The next day, the company's stock price rose and trading volume doubled the average.

June 29, 2004

CalPERS to Reconsider Bright Line Policy on Non-Audit Services

Yesterday, the WSJ reported that CalPERS, the biggest U.S. pension fund, is reconsidering its bright line voting policy that led to it voting against audit committee members at 83% of its portfolio companies this proxy season. This season's policy led CalPERS to withhold votes for any audit committee members at companies whose auditors performed any non-audit services, regardless of any other circumstances. CalPERS will consider changes at a trustee meeting in July.

CalPERS to Create First Exec Comp Focus List

CalPERS also announced that it would create its first focus list for companies that it believes pays excessive executive compensation beginning this Fall. CalPERS has established an annual focus list identifying non-performing companies for years and will continue to do so.

Getting Creative with Executive Compensation

My interview with Joe Bartlett on Getting Creative with Executive Compensation is a good example of the type of ideas that we have floating on CompensationStandardsConference.com.

Our Sites Are Back!

Yesterday, most of our websites went down for a few hours due to a server attack. They are back and we apologize for any inconvenience.

June 28, 2004

New US Sentencing Guidelines Under Fire

The new, updated US sentencing guidelines – which promise to force companies to make dramatic changes to their compliance programs over the next few months – came under fire after last Thursday’s U.S. Supreme Court 5-4 decision that invalidated a Washington state law as unconstitutional. The US Supreme Court’s ruling invalidates sentencing guidelines in at least 9 states.

Learn more about this development – as well as what you need to be doing now in the wake of the updated US sentencing guidelines - on our July 21st webcast - "How the New Sentencing Guidelines Impact You."

PCAOB Chairman Warns of Significant Issues at the Big 4

Late last week, PCAOB Chairman William McDonough testified on the Hill that the PCAOB identified "significant audit and accounting issues" in its preliminary inspections of the Big 4. While these initial inspections were more limited than the full inspections will be next year, McDonough said the PCAOB "learned a great deal about quality control in the largest firms."

Under Sarbanes-Oxley, the PCAOB will be inspecting the Big 4 annually and launched its inspection program in 2003 with "limited procedures" inspections of these firms. McDonough said the latest inspection reports have been made available to the Big 4, which now have 30 days to respond. Once the firms respond, the PCAOB will finalize its reports and deliver them to the SEC. While certain portions of the reports will be made public, Sarbanes-Oxley limits the PCAOB as it must keep any potential defects in a specific firm's quality-control system confidential, as long as the firm corrects the problems within 12 months.

Reasons Why Executives Should Want A Sound Compensation-Setting Process

Reflecting the nature of the task force submissions on CompensationStandardsConference.com (ie. in some cases, contrary to old ways of thinking), a number of the submissions have been submitted anonymously - including one regarding "Reasons Why Executives Should Want A Sound Compensation-Setting Process."

June 25, 2004

Praise Corp Fin - Free Comment Letters!

Yesterday, the SEC issued a press release stating that it would begin posting Corp Fin and IM comment letters and filer responses on its own website. No more FOIA requests - and no more using paid subscription services to dig these out.

This process will commence for any filings made after August 1st that are selected for review - and no correspondence will be posted until after 45 days of a completed review. Based on the language in the press release, it seems fair to expect that the Staff will now routinely seek Tandy letter representations.

And of course, confidential treatment requests are more important than ever. The SEC is interested in receiving "suggestions on how to make the transition and process work efficiently, and ask that any comments be provided promptly."

Understanding Obstruction of Justice

The successful prosecutions of Martha Stewart and Frank Quattrone highlight the increased risk corporate executives face from "obstruction of justice" and similar offenses - learn more in my interview with Michael Peregrine and Russell Hayman on Guide to Avoiding "Obstruction of Justice" Liability.

How to Understand the Benefits Provided by SERPs

And so begins my daily blogging about the unique resources about responsible compensation practices available on CompensationStandardsConference.com - my first is this practice pointer from Marian Tse of Goodwin Procter on How to Understand the Benefits Provided by SERPs.

June 24, 2004

Big Day for Internal Controls Guidance

Yesterday, the SEC and PCAOB issued interpretive guidance regarding internal controls. The SEC's guidance came in the form of 18 FAQs from the Office of Chief Accountant and Corp Fin. The PCAOB's guidance came in the form of 26 FAQs.

3-2 Commission Vote on Mutual Fund Reform

At yesterday's open Commission meeting - by a 3-2 vote - the SEC adopted mutual fund reforms now require that independent directors comprise 75% of mutual fund boards and the chair of such boards be independent. Commissioners Atkins and Glassman dissented - the same holdouts on shareholder access.

As pointed out by my good friend John Penn, although this result isn't surprising in light of all the chatter before the formal vote, the Commission's willingness to effectuate an action of such import based on a 3-2 vote may be bad news for those opposed to the shareholder access proposal. Perhaps to soothe the pain of the split vote, Chairman Donaldson pointed out during the meeting that since he took his post, the Commissioners had voted over 1,600 times and only 16 dissents had been registered.

More on the May/June Issue of The Corporate Counsel

As I blogged yesterday, we have posted a free version of the latest issue of The Corporate Counsel on CompensationStandardsConference.com that lays out the first 7 steps of a 12-step program to responsible compensation practices. We have received an amazing amount of feedback already (and keep those coming) and a few questions about when the next 5 steps will be available.

Those last five steps will be laid out in our September/October issue - but to satisfy those that can't wait, we intend to post a working draft on CompensationStandardsConference.com next week (but that working draft will only be available to those that register for our October 20th compensation conference, which also gives you access to all the resources on CompensationStandardsConference.com). Some of the remaining steps will require more backbone than the first seven to implement - and it still is a working draft...

June 23, 2004

A Special May/June Issue of The Corporate Counsel - Available for Free!

Due to our strong beliefs in the message contained in the just-published May/June issue of The Corporate Counsel, we have decided to post a free, electronic version of it on our new website, CompensationStandardsConference.com - complete with links that will take you directly to a wealth of important supporting materials, such as responsible practice pointers that have been submitted by members of our Task Force. This special issue provides a roadmap for compensation committee, laying out a 12-Step Program for responsible compensation practices.

Our Executive Compensation Task Force consists of over 80 of the top compensation lawyers and consultants – and these practice pointers have just started to roll in and many more will be posted in the coming days leading up to the Major 10/20 Compensation Conference, which is co-sponsored by the NASPP, The Corporate Counsel and The Corporate Executive.

Although the issue is posted in the publicly accessible section of CompensationStandardsConference.com - note that many of the links are to materials and memos that can only be accessed by those that sign up for the October 20 Major Compensation Conference – you can register to attend the live conference in San Francisco or you can register for webcast access to the conference. Either type of attendance will entitle you to access all of the “one-stop” resources on CompensationStandardsConference.com. (And we have special rates for those that are NASPP members or those at a firm/company that register more than one person).

You should note that in drafting this issue of The Corporate Counsel, some of our colleagues reviewed early drafts and thought that the standards we espouse are too high (but they all believed that the message still needed to be made). After careful consideration, we decided to stand by these standards – as we believe that high standards are absolutely necessary in the wake of so many past compensation excesses.(And early reactions to the issue support our decisions - one esteemed colleague called it our most crucial issue in 30 years.)

Part of our reasoning is that without high standards, Congress and regulators will implement standards that make ours look weak – just look at the non-qualified deferred compensation legislation that has already been passed by the House and the Senate (it would impose stringent standards on deferred comp arrangements that would result in ALL deferrals being immediately taxed and penalized if a single violation within the plan occurred). Note that this legislation is being extensively covered on both CompensationStandardsConference.com and Naspp.com.

SEC Proposes Section 16(b) Rulemaking

Yesterday, the SEC proposed amendments to Rules 16b-3 and 16b-7 to address the Third Circuit opinion in Levy v. Sterling Holding Company, LLC (Cert. denied by the Supreme Court). The SEC also proposed to amend Item 405 of Regulations S-K and S-B to harmonize it with recent changes in the Section 16 area (ie. shorter Form 4 due date, mandated electronic filing and web site posting of Section 16 reports).

Alan Dye will blog more about this important development in his Section16.net Blog.

June 22, 2004

Completed Survey on Blackout and Window Periods

We have wrapped up our survey on blackout and window period practices, with a healthy response of 159. Three-quarters have not changed their periods, while 15% expanded them and 8% reduced them. 10% intend to change their periods soon, while 21% are mulling it over (and 20% did it recently) - and 50% are comfortable with what they have. There also are stats on what types of blackout and window periods are currently being used - so check out the results!

New Survey on Disclosure Committees!

With "real-time" disclosure bearing down on us, I expect many companies will be rethinking the composition of their disclosure commmittees - answer 4 simple questions in our new survey on disclosure committees and we shall see if I am right or wrong...

Google Revises S-1 Again

I don't know why but I get a chuckle out of today's mainstream business press that theorizes on what type of Corp Fin comments led to Google filing an Amendment No. 2 to S-1, where it revised its risk factors and moved the founders' letter (regarding why its business is so unique) to the middle of the prospectus. My favorite risk factor essentially states retail investors don't know what they are doing and will be buying a majority of the shares issued in this IPO, so the stock price might tank afterwards...

Chairman Donaldson Speaks

Last week, SEC Chairman Donaldson gave a speech at the Directors College at Stanford Law School, where he spoke about various Commission initiatives and accomplishments, including the controversy over the shareholder access proposal.

June 21, 2004

SEC Approves PCAOB's Internal Controls Standard

Late last week, the SEC issued a release that approved PCAOB Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements.

In a related press release, the SEC said that guidance would be forthcoming from both the SEC and PCAOB staffs. The new Auditing Standard is effective for audits of fiscal years ending on or after Nov. 15, 2004 for accelerated filers - or July 15, 2005 for other companies.

SEC Chief Accountant Blunt on Contingency Fees

Last week, SEC Chief Accountant Donald Nicolaisen held a private meeting with the 7 largest auditors to reinforce the SEC’s position that accepting contingency fees for doing tax work for the companies they audit is not allowed - and he requested that the firms disclose any arrangements that may violate the rules to the client's audit committee.

Bloomberg also reported that Nicolaisen even told the firms they may face SEC enforcement investigations if they accept contingency fees from companies they also audit.

Governance for the Family-Owned Business

Family-owned businesses pose unique governance issues, as reflected in this interview with Jack Moore on Governance in a Family Business.

June 17, 2004

How to Handle Accidental Filing of Old NYSE Affirmation

I blogged on June 1st about NYSE's new forms of 303A affirmations. In case you file the unrevised form by accident, I have heard that the NYSE staff's position is that you do not need to re-file the 303A affirmations using the newest version of the form (as the revisions made no significant changes to the affirmation forms). Of course, this applies assuming you filed the 2nd generation version of 303A affirmations, as opposed to the old 1st generation affirmations that were not applicable at all for this year.

Withhold Votes Continue

Although a few weeks old, I would be remiss if I didn't note how Federated Department Stores registered the highest withhold vote levels for this proxy season. More than 61% of the votes cast were withheld from 4 directors at Federated's May 21 annual meeting. A noteworthy aspect of this record level is that there was no organized "vote-no" campaign.

The following excerpt from Stephen Deane of ISS analylzes why this happened: "So why the record number of withhold votes at Federated? True, the company has repeatedly ignored majority votes on shareholder resolutions calling for annual elections. But that hardly makes Federated unique.

Instead, the share ownership structure--which overwhelmingly comprises institutional investors--may well hold the key to understanding the vote results. According to one source who asked not to be identified, institutional investors own nearly 95 percent of Federated's shares, and the company's top 10 institutional investors alone hold 43 percent of the shares. And those institutional investors are precisely the ones most likely to withhold votes from directors who ignore majority votes."

June 16, 2004

Battle Over Option Expensing Continues on Hill

Yesterday, the House Financial Services Committee approved - by 45-13 - a bill that would restrict any FASB option expensing standard to options granted to a company's top five officers. The bill would also delay implementing any standard for a year, until completion of a study. The legislation is HR 3574, that was passed by the subcommittee in mid-May. This comes on the heels of the Financial Accounting Foundation issuing a statement opposing all legislative proposals desinged to curb FASB independence.

Although there still is a lot of lobbying activity on the Hill and this bill might get traction in the House, it doesn't appear that the Senate would go along with it. At this point, expensing is still a sound bet for next year.

SEC Addresses Proxy Advice Conflicts

In late May, the SEC's Division of Investment Management issued a no-action response that said mutual funds should be aware of potential conflicts of interest on the part of proxy-voting companies that provide advice on how to vote at annual meetings. The no-action response requires mutual funds to know who the advisers' clients are and how much they are being paid.

On its face, it appears that this position by IM could impact ISS - but ISS has posted a statement explaining how the SEC's guidance buttresses its position that the fact that a proxy advice firm provides services and receives compensation from issuers doesn't - by itself - impact the firm's independence.

Another Virtual Shareholders Meeting

It's been quite a few years since the last company held its annual shareholders meeting solely online - but ICU Medical did just that a few weeks ago, as described in its proxy statement.

Even though Delaware law has permitted electronic only meetings since 2000 - and Inforte was the first (and only, until ICU) company to do so right after Delaware changed its law - Delaware companies have been loath to go that route due to fear of shareholder wrath. Last year, Seibel Systems backed off plans to conduct an e-only meeting after shareholders saw the proxy materials filed by Seibel and complained.

Learn more about electronic only meetings from some FAQs that I wrote a while back on my old site.

June 15, 2004

Rule 10b5-1 Webcast Transcript is Up!

We have posted the transcript from our popular webcast, "The Latest on Evolving 10b5-1 Plan Practices."

Nasdaq's Two New FAQs

The Nasdaq has issued two new FAQs regarding continuing waivers of codes of conduct as follows:

1. Is disclosure required of a waiver to the Code of Conduct granted to an officer or director before the May 4, 2004 effective date for Marketplace Rule 4350(n)?

If the pre-existing waiver relates to a matter concluded before May 4, 2004, then disclosure is not required. If the waiver relates to a matter not concluded by such date or to an ongoing matter without a specific end-date, then disclosure is required, notwithstanding the fact that the waiver was granted prior to the effective date of the Rule. In view of the potential for company confusion as to the applicability of the disclosure requirement to pre-existing waivers, companies will be afforded up to June 15, 2004 to disclose waivers to officers and directors that preceded May 4, 2004.

2. What disclosure is required for a waiver to the Code of Conduct for an officer or director that extends beyond one year?

For ongoing matters or matters extending beyond one year, disclosure is required at least annually.

More on Shareholders' Agreements

Here is this month's installment of Carl's Corner features more commentary by Carl Schneider on Shareholders' Agreements.

June 14, 2004

Appeal of Staff Exclusion of Related-Party Transaction Proposal

As noted in this press release, the Service Employees International Union is appealing Corp Fin's exclusion of a shareholder proposal to the full Commission. The precatory proposal urged Crescent Real Estate Equities’s board to implement a comprehensive policy governing related party transactions between Crescent and any officer or director, which would require annual disclosure in a separate report to shareholders. Corp Fin had excluded the proposal as ordinary business under Rule 14a-8(i)(7).

Impact of Friday Holiday on Tender Offers?

A reader asked if the Presidential declaration of an unscheduled federal holiday is not a business day for purposes of the 20 business day period that tender offers must remain open, like Friday's memorial day for President Reagan. [In addition to the memorial day for President Reagan, the day before or after Christmas is sometimes declared to be a federal holiday by a Presidential executive order.]

It is my understanding that the SEC staff takes the position that if the offer is ongoing, you can still count the unscheduled Friday holiday in the 20 days. But you shouldn't have ended the offer or started it on Friday.

June 10, 2004

The Google Dutch Auction

One of the more fascinating stories of the year is Google's decision to forego traditional distribution methods for its IPO and utilize a Dutch Auction process instead. Learn more about Dutch Auctions from my interview with Maria Gabriela Bianchini on Google's Dutch Auction.

PCAOB Adopts Document Retention and Non-US Review Standards

At yesterday's meeting, the PCAOB adopted Auditing Standard No. 3 that require auditors to retain their records for seven years - and in sufficient detail so that an experienced auditor with no previous connection to the engagement could read them and understand clearly what work had been performed, who performed the work and why the auditor reached its conclusions.

In addition, the PCAOB adopted rules that call for the PCAOB to take into account the rigor and independence of non-US oversight groups when deciding how to review the work of non-US accountants who have audit clients with stock trading in U.S. markets. To date, 103 foreign audit firms in 42 countries have registered with the PCAOB, with nearly 250 more in the pipeline.

Executive Compensation Trends

You will soon be getting an earful from us on executive compensation in the next issue of The Corporate Counsel. But if you can't wait, I suggest you check out this IOMA webinar being held next Tuesday featuring Dick Wagner, an experienced compensation consultant who isn't afraid to speak his mind.

Dick just joined an executive compensation task force that I have been helping set up in connection with our October 20th major compensation conference. More about that later...

June 9, 2004

302 CEO/CFO Certifications in Amended Filings

It looks like Corp Fin's position on 302 certifications for amended filings has evolved a bit. Now, if an amended filing contains an amendment to the Reg. S-K Item 307 & 308 disclosure about the company's evaluation of disclosure controls and procedures and internal controls for financial reporting (and accordingly, the paragraph 4 certifications regarding controls and procedures are made), the CEO/CFO must also make the paragraph 5 certifications. In other words, paragraphs 4 and 5 go together when it comes to amended filings.

We have added a decision tree for 302 certifications in amended filings to our "CEO/CFO Certifications" Practice Area.

SEC Cleaning House Re: '34 Act Filers?

Yesterday, the SEC instituted two separate public administrative proceedings against 31 companies to determine whether to revoke the registration of their securities under the '34 Act (the SEC also temporarily suspended trading in the securities of 26 of these companies).

This really is not newsworthy, except that it's the first time that the SEC has brought this type of action. Even though the SEC appropriately is going after these shell companies to prevent market manipulation, I couldn't help but think how this will help reduce Corp Fin's review burden under Section 408 of Sarbanes-Oxley (i.e. each '34 Act filer must be reviewed once every 3 years), even though 31 companies is merely a drop in the bucket...

June 8, 2004

More Auditor Independence Woes for E&Y

Yesterday, Korn/Ferry International filed an 8-K reporting that it has been advised that the SEC staff is conducting an informal inquiry into independence issues arising out of payments made by Ernst & Young, the company's auditors, to a company affiliated with a former director of the company for marketing services.

The Wall Street Journal reports today that Best Buy and TeleTech Holdings also are subject to the same SEC inquiry, as the same consultant sits on their boards and also use E&Y as their auditor (but these two companies have not yet filed a 8-K regarding the investigation). The WSJ points out the major difference between this inquiry and the recent PeopleSoft one (which led to E&Y being barred from obtaining new public clients for 6 months) - this new investigation involves only $377,000 for the director's marketing consulting; the PeopleSoft matter involved $500 million.

Apparently the provision on auditor independence that the Staff is looking at is Rule 2-01(c)(3) of Regulation S-X. Rule 2-01(c) sets forth a non-exclusive specification of circumstances inconsistent with auditor independence:

"3. Business relationships. An accountant is not independent if, at any point during the audit and professional engagement period, the accounting firm or any covered person in the firm has any direct or material indirect business relationship with an audit client, or with persons associated with the audit client in a decision-making capacity, such as an audit client's officers, directors, or substantial stockholders. The relationships described in this paragraph do not include a relationship in which the accounting firm or covered person in the firm provides professional services to an audit client or is a consumer in the ordinary course of business."

According to the 8-K, E&Y conducted an internal review and confirmed its independence to Korn/Ferry - and based on that confirmation and its current knowledge, Korn/Ferry believes that E&Y's independence was not impaired. Thanks to eagle eye Mike Holliday for helping out on this one!

Disclosure about SalesForce.com's IPO Cooling Off Period

On May 25th, I blogged about how SalesForce.com's IPO was delayed due to gun-jumping concerns. The company has filed an amended S-1 with a risk factor related to this potential gun-jumping and we have added it to our laundry list of "Risk Factors Regarding Gun-Jumping" in our "Disclosure Samples & Analysis" Practice Area. So far, the cooling off period appears to be nearly 4 weeks and counting...but some of this period might be attributed to the company's own timetable for going to market.

No EDGAR on Friday

Out of respect for President Reagan, the SEC will be closed this Friday - and EDGAR will not be accepting filings.

June 7, 2004

More on the Berlin-Bremen Exchange

Dan Mahoney of Rogers & Theobald LLP reports that he has had success getting his clients delisted from the Berlin-Bremen Exchange after sending a communcation to Julia Hädicke at Berliner Freiverkehr. Her contact information is: (Aktien) AG - Kurfürstendamm 119 - 10711 Berlin / Phone: +49-30-890 21 143 - / Fax: +49-30-890 21 198 / email - jhaedicke@freiverkehr.de.

To find out if a company has been delisted - go to Yahoo-Finance and enter the company's ticker symbol and then ".be" after it, the listing on the Berlin-Bremen Exchange will come up. It will show whether they were dropped or not. Some are simply pending, so they display all zeroes.

Dan notes that the Berlin-Bremen Exchange is the same as the so-called "Unofficial Regulated Market", which is one of the three organized and regulated markets of the German exchanges (the other two are the Official ("Amtlicher Markt") and the Regulated ("Geregelter Markt") Markets). The Berlin-Bremen Exchange listing process is simple as an authorized broker merely needs to file an application for a permit with the administration of the exchange for trading the stocks.

For trading on this exchange, there are fewer requirements (egs. there are no annual fees and no publication and, of course, no consent requirement by the company) - because the stocks are already listed on other exchanges that have more extensive review criteria.

June 4, 2004

Enforcement's New "Wildcatting" Philosophy

Recently, the SEC's Enforcement Division has signaled a change in philosophy - from a reactive approach (i.e. investigations of individuals or companies were initiated after evidence of a possible violation surfaced) to "seeing around the corner."

In this interview with Bill Baker on the SEC Staff "Wildcatting" for Fraud, Bill - who recently left as an Associate Director in Enforcement to join Latham & Watkins - explains how Director Stephen Cutler has a desire to foster a cultural change within the enforcement program to encourage more risk taking when pursuing investigations where, at the outset, it is not clear that a securities violation has occurred. This also is known as "wildcatting."

Hats Off to Cecilia Blye!

Yesterday, Cecilia Blye was promoted to head Corp Fin's new Office of Global Security Risk. As Cecilia has been a staple in the Office of Chief Counsel for some time, many of you might have dealt with her over the years. She is an absolute sweetheart and I bet many staffers will be applying to serve under her experienced and steady hand.

June 3, 2004

Impact of Internal Controls on Outsourcing

Here is a pretty interesting interview with Chris Ford and Scott Stevenson on Impact of Internal Controls on Outsourcing. Not only is the topic timely, but the impact of 404 on outsourcing can be significant, particularly for more mature companies that have outsourced functions or processes that affect controls over financial reporting.

What is the Berlin-Bremen Stock Exchange? And Why is Your Company Listed There (Without Your Knowledge)?

Here is a question I answered yesterday on our Q&A Forum: "One of our smaller publicly held clients received notice that its shares have been listed for trading on the Berlin-Bremen stock exchange, without the company's prior knowledge, consent or authorization. From a quick search on the internet, it looks like this has happened to a number of other smaller publicly held companies and that the concern in that due to the unregulated nature of this exchange, a company's stock could be targeted for naked shorting. Has anyone had any experience with this issue and procedures with the de-listing process?"

For the answer, check out our Q&A Forum, which is available from a button at the top of the home page on TheCorporateCounsel.net (hint - this development is affecting hundreds, and perhaps, thousands of companies!)

June 2, 2004

Happy Birthday SEC!

On Thursday, the SEC celebrates its 70th birthday with a small party for members of the SEC Historical Society and current SEC staffers - join the Society now by making a small donation. As part of its 5th Annual Meeting on Thursday, the Society is offering this free webcast with Doris Kearns Goodwin, Pulitzer Prize-winning author, who will discuss Joseph P. Kennedy as the first SEC Chairman.

Some of you might have been at the SEC's 60th celebration at the National Building Mueseum a decade ago. Boy, that was some bash!

SEC Staffers in Need of a Shrink?

Thanks to Bruce Carton for digging out this gem - I gotta repeat his blog verbatim:

"Attention psychologists! You have just 9 more days to respond to the SEC's job posting seeking an in-house psychologist to help "improve employee attitudes and satisfaction related to employee retention, job satisfaction, burnout, conflict and stress."

The SEC's decision to hire a psychologist for its employees, discussed in this article by Judith Burns of the AP, was reportedly met with a steady stream of one-liners from former SEC officials, including:

Bill McLucas (former Director of the SEC's Division of Enforcement): "Just one? They should get a couple." McLucas also figured "it's going to take more than two years" to buck up morale at the federal securities agency. "This is a long-term job." McLucas also was quoted as saying said he'd like current Enforcement director Stephen Cutler to get the first appointment once the psychologist is on board so that "he can take out his hostilities with that person instead of my clients."

David Becker (former SEC General Counsel): "Working for the SEC in the current media climate is enough to drive anybody nuts." Becker also wondered if the SEC is "about to introduce the group hug as a regulatory technique."

Harvey Pitt (former SEC Chairman): "The SEC is a great place to work, but it is not for the faint of heart." Asked if the SEC is a very stressful place to work, he joked: "Certainly, if you're chairman."

Laura Unger (former acting SEC Chairman): Asked whether SEC employees would line up to talk to a psychologist, Unger said "I have this picture of Charlie Brown sitting at his window with a 'doctor is in' sign and nobody showing up."

Personally, I don't know what to make of this other than I predict that a lot of heated discussions with SEC staff are going to end with the following salvo by defense counsel: "I think you need to see the SEC shrink!"

June 1, 2004

NYSE Updates Its Affirmations

On May 25, the NYSE posted updated versions of its Section 303A Annual Written Affirmation, Interim Written Affirmation and Exhibit G (the updates are not yet marked on the NYSE's Corporate Governance page - but on the updated forms themselves, they say "Updated May 25, 2004" on the top of the forms).

These updated forms make clear that companies that list only preferred or debt securities don't have to file the annual CEO certification and that Exhibit G need not be filed by companies that have indicated on Exhibit D that they are exempt from Rule 10A-3 (regarding audit committees). Preferred and debt-only companies still have to file the annual company certification and must either comply with Item E on audit committees or explain their exemption on Exhibit D.

The updated affirmation form also adds business development companies and open-end management investment companies to the types of listed companies and changed the affirmation to apply to such companies. There may be other changes that I didn't notice.

The Latest on Evolving 10b5-1 Plan Practices

Join us tomorrow for an exciting webcast - The Latest on Evolving 10b5-1 Plan Practices - in which a growing number of panelists will explain how the 10b5-1 market has changed recently - and what you should do now to keep up with the market. Take a look at this all-star panel, including key representatives from three Wall Street firms:

- Sue Morgan, Partner, Perkins Coie LLP
- Sharon Hendricks, Shareholder, Heller Ehrman LLP
- Lou Rorimer, Partner, Jones Day
- Michael David, Executive Director, Executive Services Group, Morgan Stanley
- John Berton, Vice President and Associate General Counsel, Goldman Sachs
- Keith Schnaars, Director, Private Banking & Investments, Merrill Lynch
- Georgia Bullitt, Executive Director and Counsel, Morgan Stanley
- Jeff Mullen, Vice President, Structured Equity Solutions Group, Goldman Sachs

Try a no-risk trial now to TheCorporateCounsel.net to listen to this practical and timely program.