House Financial Services Committee Endorses Shareholder Votes on Political Spending

On Monday, I blogged about how a movement towards shareholder approval of political spending was gathering steam. Yesterday, as Ted Allen blogged in ISS's Insight Blog, the House Financial Services Committee approved a bill introduced by Rep. Michael Capuano - by a vote of 35-28 - that would require companies to obtain investor approval before spending more than $50,000 per year in general corporate funds on political activities. We'll see if this goes anywhere...

Survey Results: Director Education/Orientation

We have posted the results from our recent survey regarding director education & orientation, repeated below:

1. Does your board require directors to obtain continuous education:
- Yes - 15.2%
- Not anymore, we removed the requirement over the past year - 6.1%
- Never did require it - 78.8%

2. If you answered "not anymore" or "never" above, does your board encourage directors to obtain continuous education:
- Yes - 77.8%
- No - 14.8%
- Not yet, but it's under consideration - 7.4%

3. Do any of your directors obtain - or will obtain during the next year - continuous education by:
- Third-party director colleges - 46.9%
- Third-party education provided in-house (i.e. the teachers come to the boardroom) - 40.6%
- Other educational opportunities (e.gs. in-house training in the boardroom, "homework," plant visits) - 71.9%
- Doubt they will obtain any director education over the next year - 15.6%

4. If your directors obtain continuous education, are the topics covered:
- More business/operational in nature - 23.3%
- More legal/governance/ethics in nature - 76.7%

5. Does your company have a director orientation program for new directors:
- Yes - 72.7%
- No - 27.3%

6. Does the board require new directors to participate in the company's director orientation program:
- Yes - 69.7%
- No - 30.3%

Please take our new "Quick Survey on Rule 10b5-1 Plan Practices."

More on "The Mentor Blog"

We continue to post new items daily on our blog - "The Mentor Blog" - for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

- What is Corporate Access Worth? Cost Estimates to Reach Company Reps
- Judge Rakoff Addresses Stanford Directors' College
- NASAA: The Long-Awaited "One-Stop Filing" System for Rule 506 Notice Filings
- SEC Cops Don't Need Guns, Badges on Their Beat
- CEO Succession Study: Fewer CEOs Are Being Forced Out

- Broc Romanek

Say-on-Pay Solicitation Playbook: Practical Guidance on Strategies and More

I just finished writing a special July-August issue of The Corporate Counsel entitled "Say-on-Pay Solicitation Playbook: Practical Guidance on Strategies and More." You will need this issue to help you prepare for mandatory say-on-pay. It includes analysis on:

- A Wake-Up Call: The Big Three
- The Drill Down: Why Did Shareholders Reject Motorola, Occidental and KeyCorp?
- The Cry for Shareholder Engagement: What is "Shareholder Engagement"?
- The Roadmap: How (and When) to Engage Effectively
- Overcoming Reg FD Concerns about Engagement
- Peeking Under the ISS Hood
- How Proxy Advisors & Major Institutions (& Employees) Vote on Pay
- The Roadmap: "When" and "How" to Hire a Proxy Solicitor
- The Preliminary Vote Count Looks Close: What Can You Do?
- Confidential Voting Policies: Proper Implementation
- How to Calculate Voting Result Percentages: Read Your Bylaws (and Compare with Your Proxy)
- The Importance of Making Your Compensation Disclosure "Usable"
- How to Gear Up for Mandatory Say-on-Pay

Act Now: To have this issue sent to you, try a "Half-Price for Rest of '10 no-risk trial today.

Dodd-Frank: Why There Might Be So Many Technical Issues

The excerpt below from a Gibson Dunn email does a nice job of explaining how the process leading to the passage of Dodd-Frank may have created more implementation issues compared to a "normal" bill:

As we move into the implementation phase of this legislation, one point to bear in mind is how many technical -- and not so technical -- issues and problems we will discover in this 2,300 page bill. One reason for the likely surfeit of problems, ironically, is the manner in which the conference on the bill was conducted. Normally, the vast majority of the work done in conference is accomplished behind closed doors, with staff toiling over language and checking each-other's work.

The conference on the Dodd-Frank bill, in contrast, was open and televised, and the "work" was done by members, on the fly, with little time or ability for anyone to check their work. In a sense, the conference was much like a committee mark-up, where amendments are added through a process that is often loosely-structured due to the expectation that problems can be cleaned up on the floor or in conference. When a conference is conducted in this manner, you create a remarkably transparent process, but there is little or no opportunity after the fact to clean up errors and identify unintended consequences prior to enactment. And Congress was using live ammunition.

Another consequence of the transparent, free-flowing conference process was that more issues than one might normally expect were committed to regulatory discretion. In the absence of quick consensus, decisions on thorny issues were deferred for regulatory consideration. It has been oft noted that nearly 250 regulations and 70 studies are required by the Act.

Two results of the conference logically follow. First, agencies will grapple with hundreds of thorny issues that Congress could not or chose not to decide and also attempt to clean up and rationally interpret errors or ambiguities in the legislative text through regulations. Second, Congress (and Chairmen Frank and Dodd indicated as much during conference deliberations) is likely to take up a technical corrections bill some time in the coming year. Of course, if that bill comes up in 2011, it will do so without Senator Dodd, who is retiring.

Dodd-Frank: A Look Behind the Scenes of How It Got Passed

This recent Washington Post article tells the story about how key lieutenants behind scenes ensured passage of Dodd-Frank. It's worth reading...

- Broc Romanek

SEC Offers "Comment Letter" Field Day - But Also Limits Staff Meetings

Yesterday, SEC Chair Schapiro announced that the SEC would go the extra yard ahead of its blistering rulemaking schedule and start accepting comments on its various projects right away through this Dodd-Frank comment page. The comment letter page is broken up by the Titles in the new legislation, with 31 separate areas for comment, including a section under Title IX which covers the governance and executive compensation provisions. Each rulemaking will have its own comment period as usual - and as required by the Administrative Procedures Act - but this "field day" may help to shorten the comment periods and get rules in place before next year's proxy season.

Perhaps even more important is the SEC's "newly-established best practices when holding meetings with interested parties," which include:

- Staff will try to meet with any interested parties seeking a meeting. When the number of requests exceeds availability, the staff will seek out parties with varying viewpoints. Staff may have to limit the number of meetings with similarly situated parties and will limit multiple meetings with the same party.

- Staff will reach out as necessary to solicit views from affected stakeholders who do not appear to be fully represented by the developing public record on a particular issue.

- Staff will ask those who request meetings to provide, prior to the meeting, an agenda of intended topics for discussion. After the meeting, the agenda will become part of the public record.

- Meeting participants will be encouraged to submit written comments to the public file, so that all interested parties have the opportunity to review and consider the views expressed.

Given the level of rulemaking the Staff has on its plate, time management is of the essence and these "best practices" should help curtail wasteful meetings where the same points are made over and over again (and problems are identified but no solutions are proposed).

It will be interesting to see if this transparency works to reduce the number of requests for meetings given the mass media's recent fascination with "who is lobbying the regulators." The NY Times ran this front-page article today on the topic.

Corp Fin Extends Its New CDIs to the Asset-Backed Market

Yesterday, Corp Fin reissued a bunch of the CDIs that were issued last week to update them to include their applicability to the asset-backed market reflecting the Ford Motor Credit no-action letter that was issued later in the day after the interps first came out.

Here's how badly I need a vacation - and gives you a window into the journalism process over here. I first became aware of this change when I saw that the new CDIs showed up in Corp Fin's "Outdated or Superseded Compliance and Disclosure Interpretations." Yes, confusing - but what makes me chuckle is that I kept humming Roberta Flack's "Killing Me Softly"...vacation coming up soon...

Webcast: What You Should Be Doing Now

Ahead of our package of two full-day Conferences on the executive pay provisions of the Act - coming up in less than two months, catch tomorrow's special pre-conference webcast to help you start taking the actions you need to be taking now. Dave Lynn, Mark Borges and Mike Kesner headline this webcast: "The New Pay Legislation: Action Items."

Only Conference Attendees: If you are not yet registered for the Conferences (either the package of the "5th Annual Proxy Disclosure & 7th Annual Executive Compensation Conference" - or the "18th Annual NASPP Conference"), register now so you won't miss this critical webcast!

- Broc Romanek

Action Items: Summer Issue of Compensation Standards

Anticipating the passage of the Dodd-Frank Act, Dave Lynn just put the finishing touches on a special "Summer 2010" issue of Compensation Standards that lays out a number of action items that you should be considering now to comply with the new executive compensation provisions in the Act. This print newsletter is a part of a CompensationStandards.com membership; try a "Rest of '10 for Half-Price" no-risk trial to gain immediate access to this issue.

Even More Guidance: Ahead of our package of two full-day Conferences on the executive pay provisions of the Act - coming up in just two months - we have just announced a special July 29th pre-conference webcast to help you start taking the actions you need to be taking now. Dave Lynn, Mark Borges and Mike Kesner headline this webcast: "The New Pay Legislation: Action Items."

If you are not yet registered for the Conferences (either the package of the "5th Annual Proxy Disclosure & 7th Annual Executive Compensation Conference" - or the "18th Annual NASPP Conference"), register now so you won't miss this critical webcast!

And don't forget Mark Borges' "Proxy Disclosure Blog" on CompensationStandards.com, where Mark has been posting analysis daily about the new executive pay provisions of Dodd-Frank.

Governance Rating Merger of Equals: The Corporate Library & GMI

Last Thursday, The Corporate Library and GovernanceMetrics announced they had suddenly merged. Neither of the entity's products or services (or names) will change - as noted in these FAQs - even their principal places of business will continue to be separate, New York City for GMI and Portland, Maine for TCL. TCL's CEO Richard Bennett becomes CEO of the combined entity; GMI's CEO Howard Sherman becomes the Executive Director.

Definition of "Securities": SEC Staff Believes "Life Settlements" Included

Last week, the SEC's Life Settlements Task Force (a "cross-Divisional" body created a year ago) released this report recommending that life settlements be clearly defined as "securities," including recommending that the Commission itself should:

- Consider recommending to Congress that it amend the definition of security under the federal securities laws to include life settlements as securities
- Instruct the Staff to continue to monitor that legal standards of conduct are being met by brokers and providers
- Instruct the Staff to monitor for the development of a life settlement securitization market
- Encourage Congress and state legislators to consider more significant and consistent regulation of life expectancy underwriters

- Broc Romanek

Corp Fin Issues a New "Accredited Investor" CDI

On Friday, Corp Fin issued a new CDI 179.01 (as well as an identical CDI 255.47) regarding the situation where mortgage indebtedness may exceed the value of a primary residence (you may recall that the withdrawn CDI on Thursday also related to accredited investors due to a conflict with Section 413(a) of Dodd-Frank). The new CDI reads:

Question: Under Section 413(a) of the Dodd-Frank Act, the net worth standard for an accredited investor, as set forth in Securities Act Rules 215 and 501(a)(5), is adjusted to delete from the calculation of net worth the "value of the primary residence" of the investor. How should the "value of the primary residence" be determined for purposes of calculating an investor's net worth?

Answer: Section 413(a) of the Dodd-Frank Act does not define the term "value," nor does it address the treatment of mortgage and other indebtedness secured by the residence for purposes of the net worth calculation. As required by Section 413(a) of the Dodd-Frank Act, the Commission will issue amendments to its rules to conform them to the adjustment to the accredited investor net worth standard made by the Act.

However, Section 413(a) provides that the adjustment is effective upon enactment of the Act. When determining net worth for purposes of Securities Act Rules 215 and 501(a)(5), the value of the person's primary residence must be excluded. Pending implementation of the changes to the Commission's rules required by the Act, the related amount of indebtedness secured by the primary residence up to its fair market value may also be excluded. Indebtedness secured by the residence in excess of the value of the home should be considered a liability and deducted from the investor's net worth. [July 23, 2010]

One member emailed me wondering whether, as part of the subscription agreement, folks are going to start requiring home appraisals to determine fair market value? And Joe Wallin in his "Startup Company Blog" poses another question that has arisen with the new accredited investor definition (his second query is addressed in the new CDI)...

80% of Pay Unmerited: Feinberg's Final Bankers Compensation Report

Everybody is kung fu fighting. Quirky I know, but I couldn't shake that song in my head as I read this NY Times' front-page article on Friday about Special Master Ken Feinberg's report about how 17 financial companies paid a total of $1.58 billion in executive compensation during the heart of the economic crisis. I probably should have been singing "Rich Girl" instead. Looking at the Special Master's web page, I guess this is all there is - a 3-page report.

For the most part, Feinberg didn't "name names" and his power is fairly limited since 11 of the 17 companies have repaid their TARP funds. Feinberg had conference calls with each of the companies over the past few weeks to lay out his proposals about how their compensation structures could be "fixed" - but as this WSJ article notes: "None of the firms contacted Friday said they would adopt the proposal on its face, with most saying they needed to study it, receive more detail or declining to comment. Others pointed out that they have already instituted similar procedures designed to claw back undue compensation."

You Want More Change? How About Shareholder Approval of Political Contributions?

This morning, I posted a blog on our "Proxy Season Blog" about new state bills that would require shareholder approval of political contributions, as well as some Congressional efforts in this area.

The heat is rising here as the House Financial Services Committee will meet in open session tomorrow (and possibly subsequent days) to consider, among other things, H.R. 4790, the "Shareholder Protection Act of 2010." This bill was introduced in the House on March 9th. This bill would require shareholder approval, disclosure and board approval of political contributions. This type of bill has gotten floated regularly over the past decade - but some real legislative movement is more probably post-Citizens United...

- Broc Romanek

Dodd-Frank: Corp Fin Adds Six CDIs (& Withdraws One Too)

Yesterday, Corp Fin added six new '33 Act CDIs to address the repeal of Rule 436(g) situation that I blogged about yesterday. The new CDIs essentially apply to the corporate debt market and are consistent with the white paper released by ten major firms yesterday, as they address the circumstances where rating agency consents are - and are not - required (ie. required for registration statements and prospectuses; not required for free writing and in certain MD&A liquidity discussions).

The new CDIs are:

- 198.08 (grandfathered debt registration statements)
- 233.04
- 233.05
- 233.06
- 233.07
- 233.08

In addition, now-former CDI 255.13 was withdrawn, as it provided that an investor may include the estimated fair market value of their principal residence as an asset for purposes of Rule 501(a)(5). The withdrawal was necessary to be consistent with Section 413(a) of Dodd-Frank.

Dodd-Frank: Corp Fin's No-Action Relief for the Asset-Backed Market

Early yesterday, Corp Fin Director Meredith Cross issued this statement regarding relief for the asset-backed market:

The SEC has been reviewing the interaction between the requirements for registered asset-backed securities offerings provided in "Regulation AB" and the requirement that issuers now obtain credit rating agency's experts consent for use in filings, as is the case with other 'experts.'

Within the next day, the Division of Corporation Finance expects to issue a 'no action' letter allowing issuers for a period of 6 months to omit credit ratings from registration statements filed under Regulation AB. Although there are currently few issuers in the registered asset-backed securities market, we understand from some issuers that they cannot currently obtain credit rating agency consent to include the credit ratings in these 'Reg AB' filings. This action will provide issuers, rating agencies and other market participants with a transition period in order to implement changes to comply with the new statutory requirement while still conducting registered ABS offerings.

As is more fully explained in interpretations issued by the Division of Corporation Finance today, the current rules for corporate debt issuances differ in this respect - and we believe that the corporate debt market has not been, and should not under current rules be, meaningfully affected by the statutory change.

Corp Fin did better than the "next day" and issued the no-action relief yesterday to Ford Motor Credit Company. By the terms of this no-action letter, "the Division will not recommend enforcement action to the Commission if an asset-backed issuer as defined in Item 1101 of Regulation AB omits the ratings disclosure required by Item 1103(a)(9) and 1120 of Regulation AB from a prospectus that is part of a registration statement relating to an offering of asset-backed securities." The Staff's position expires for offerings commencing with an initial bona fide offer on or after January 24, 2011.

Photo: Devastation After the 3.6 Earthquake in DC

If you haven't heard, I awoke last Thursday at 5 am, experiencing the first earthquake in my life - here in DC! Below is a scene of the damage caused in the area that has been making the rounds; warning, it is pretty graphic:

- Broc Romanek

Dodd-Frank Signed: Let the Unintended Consequences Begin

Yesterday, President Obama signed the Dodd-Frank Act into law (signed, sealed & delivered). And the first major unintended consequence took place as the coming repeal of Rule 436(g) wreaked havoc on the US debt market (the repeal takes effect today).

Rule 436(g) allows the use of credit ratings from NRSROs without a consent (technically, it provides an exemption from the consent requirement). This repeal could be a disaster for debt, preferred securities and asset-backed offerings. For example, this hurts asset-backed deals since Regulation AB requires disclosure of ratings if the offering is conditioned upon a rating - as all are - and the rating agencies have all said they will not furnish consents for the time being. So this could mean that all ABS deals will need to be done on a Rule 144A basis for now.

Fortunately, the news is less grim outside the ABS space. Late yesterday, ten major firms signed this "White Paper" (sent along by Davis Polk) which sets forth approaches - after consulting the Corp Fin Staff - that they believe are appropriate when using NRSRO ratings in offerings of debt and preferred securities. Under the approaches in the white paper, there should not be significant disruptions in the non-ABS debt and preferred stock markets. More to come on this...

Dodd-Frank: What Does the "Enactment Date" Mean?

Unlike the Sarbanes-Oxley Act, which snuck up on the corporate community in comparison (see my blog on that), numerous firms sent out emails yesterday to note the event. For example, Mayer Brown gives us this meaning of the "enactment date":

The Act's "date of enactment" - which is the key date for determining dozens of delayed effective dates and deadlines under the Act - is Wednesday, July 21, 2010. The Act generally takes effect on Thursday, July 22, except that many provisions will not take effect for a year or more and many will require implementing regulations to be issued.

And Weil Gotshal gives us this "big picture":

Today, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, making this package of financial regulatory reforms the largest such initiative in scope and depth since the New Deal. The legislation includes 15 major parts with 14 stand-alone statutes and numerous amendments to the current array of banking, securities, derivatives, and consumer finance laws. The legislation will significantly restructure the regulatory framework for the US financial system, with broad and deep implications for the financial services industry where the crisis started; however, its impact will be felt well beyond the financial sector. Aspects of the legislation have the potential to affect all public companies by extending federal regulation of corporate governance. In addition, some of the provisions will affect the US operations of foreign companies as well as global transactions involving US-based businesses, assets, and financial instruments.

We've got loads of scorecards, charts and memos in our "Dodd-Frank Act" Practice Area - and adding dozens each day...

Poll Results: What is Dodd-Frank's Nickname?

The fun is just beginning with this new legislation and I'm already going batty. For example, I'm walking around throwing new colloquialisms such as "What in the Dodd-Frank?" and "Where in the Dodd-Frank do you think you're going?" Anyways, below are the results from my recent poll about what you thought the acronym for the Dodd-Frank Act should be:

- Drunk Act - 12%
- Donk Act - 17%
- Dork Act - 19%
- Frodd Act - 24%
- Re-Sox - 8%
- DFA - 16%
- Doddy-Frankie Goes to Hollywood Act - 9%
- What me worry? - 11%

My hunch is folks will just call it "Dodd-Frank." But you never know...

- Broc Romanek

Dodd-Frank: Clarifying the "Accredited Investor" Definition

Even before Dodd-Frank is signed into law, a number of issues have arisen about how to interpret the statute. One area where members have sent in a variety of questions is Section 413 and the new definition of "accredited investor." Alan Parness of Cadwalader reports on the first Staff oral guidance regarding this new test:

For those of you who may still be puzzled by the change to the net worth standard for accredited investors effected by Section 413 of the Dodd-Frank Act, Gerry Laporte, Chief of the Office of Small Business Policy of the SEC's Division of Corporation Finance, has confirmed that it is the Staff's view that the exclusion of a primary residence from an investor's net worth for purposes of the accredited investor test in Rule 501(a)(5) of SEC Reg. D (as well as for purposes of the identical test in Rule 215(e) under the 1933 Act) will be effective upon enactment of the law.

There is no transition period, nor is grandfathering permitted by Section 413, and, accordingly, issuers relying on the definition of "accredited investor" in Regulation D or in Rule 215 in order to effect sales to accredited investors after enactment, should revise their disclosure and subscription documents in anticipation that the Act will be signed into law within the next several days.

FASB Releases Proposal on Disclosure of Certain Loss Contingencies

Yesterday, the FASB released an Exposure Draft regarding its proposal related to disclosure of loss contingencies (ie. former FAS 5; now known as "ASC Topic 450"). As noted in this blog, this project has been on a fast-track - but the Exposure Draft is out a few months later than expected. There is a 30-day comment period - pretty short for such a controversial topic, but the FASB already has heard a lot of commentary about this hot potato.

For public companies, the standards would be effective for fiscal years ending after December 15, 2010 and interim and annual periods for subsequent fiscal years. Also, nonpublic companies would not be required to provide tabular reconciliations of accrued loss contingencies. Note that nonpublic companies are covered by the proposed loss contingencies standards, but the standards would not be effective for them until the first annual period beginning after December 15, 2010 and interim periods of fiscal years after the first annual period (would not be required to provide tabular reconciliations of accrued loss contingencies).

Overcoming the Challenges: Integration Issues & Merger of Equal Issues

Tune in tomorrow for the DealLawyers.com webcast - "Overcoming the Challenges: Integration Issues & Merger of Equal Issues" - to hear Wally Bardenwerper of Towers Watson, Chris Cain of Foley & Lardner, Stephen Glover of Gibson Dunn and Jessica Kosmowski of Deloitte Consulting discuss how to overcome the challenges of deal integration as well as factors you should consider when negotiating a merger of equals to ease the transition afterwards. Please print off these course materials in advance.

Cool Old-Timey Video: Having grown up in Chicago, I dig this video from 1948 showing the city at its best...

- Broc Romanek

Survey Results: Annual Meeting Conduct

We have posted the results from our recent survey regarding annual meeting conduct, repeated below:

1. To attend our annual meeting, our company:
- Requires pre-registration by shareholders - 5.9%
- Encourages pre-registration by shareholders but it's not required - 13.2%
- Requires shareholders to bring an entry pass that was included in the proxy materials (along with ID) - 5.9%
- Encourages shareholders to bring an entry pass but it's not required - 11.8%
- Will allow any shareholder to attend if they bring proof of ownership - 57.4%
- Will allow anyone to attend even if they don't have proof of ownership - 33.8%

2. During our annual meeting, our company:
- We hand out rules of conduct that limit each shareholder's time to no more than 2 minutes - 20.9%
- We hand out rules of conduct that limit each shareholder's time to no more than 3 minutes - 26.9%
- We hand out rules of conduct that limit each shareholder's time to no more than 5 minutes - 4.5%
- We announce a policy that limits each shareholder's time to no more than 2 minutes (but rules are not handed out) - 7.5%
- We announce a policy that limit each shareholder's time to no more than 3 minutes (but rules are not handed out) - 3.0%
- We announce a policy that limit each shareholder's time to no more than 5 minutes (but rules are not handed out) - 0%
- There is no limit on how long a shareholder can talk (subject to the inherent authority of the Chair to cut off discussion at any time) - 37.3%

3. For our annual meeting, our company:
- Provides an audio webcast of the physical meeting, including posting an archive - 25.0%
- Provides an audio webcast of the physical meeting, but does not post an archive - 7.4%
- Has provided an audio webcast of the physical meeting in the past, but discontinued that practice - 1.5%
- Is considering providing an audio webcast of the physical meeting but haven't decided yet - 4.4%
- Provides a video webcast of the physical meeting (or is considering doing so) - 1.5%
- Does not provide an audio nor a video webcast of the physical meeting - 60.3%

4. At our annual meeting, our company:
- Announces the preliminary results of the vote on each matter (unless special circumstances arise such as a very close vote) - 92.7%
- Doesn't announce the preliminary results of the vote on each matter - 7.4%

Please take our new "Quick Survey on More on Compensation Committees and Compensation Consultants."

Size Doesn't Matter: SEC Targets Small, Newly Formed Public Companies in Their Crusade

The title of this McGuire Woods memo grabbed me, highlighting how the SEC's new Foreign Corrupt Practices Act unit has made clear that newly public companies doing business overseas will be held to the same compliance standards as larger and more established public companies.

But this is just the tip of the iceberg as the SEC's Enforcement Division has been implementing its new series of initiatives over the past six months, as illustrated in this Gibson Dunn memo. Perhaps best reflecting the SEC's newfound willingness to be tough on fraudsters is this recent speech from SEC Commissioner Luis Aguilar about his desire for more D&O bars.

More on "The Mentor Blog"

We continue to post new items daily on our blog - "The Mentor Blog" - for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

- An Open Issue in Europe: Confidentiality of Communications with In-House Lawyers
- Survey: What Keeps Your Board Up at Night?
- Vendors Lacking In Experience: The White Paper
- Security Risks with Digital Copiers, Etc.
- SEC Enforcement Action Demonstrates Potential Risks of "Flash" Reporting

- Broc Romanek

Corp Fin: Big Changes Afoot

With a year under her belt, Corp Fin Director Meredith Cross announced a flurry of changes on Friday. For starters, these three new offices within Corp Fin are being created, as noted in this press release:

- Office of Capital Market Trends - A brand new office that will review new securities products and capital markets trends and develop recommendations for changes to the securities offerings rules.

- Office of Structured Finance - The reviews of asset-backed filing are being pulled out of Max Webb's AD group and placed into this new unit; this office will also handle policy issues related to ABS.

- Office of Financial Services - Another brand new office that will review filings from investment banks, investment advisors and the largest banks through more continuous and direct interaction with them and by working with other Divisions within the SEC - this new office likely will be more accounting-focused than a typical operations group. Todd Schiffman's AD group will continue to review filings made by smaller financial institutions.

In addition, Paula Dubberly was promoted to Deputy Director (Policy and Capital Markets). Paula will oversee the top two new offices noted above, as well as continue to oversee the Office of Rulemaking. With many rulemakings coming up in a short period of time under the Dodd-Frank Act, it's gonna be busy down there...

Recently, SEC Chair Schapiro delivered a speech that included remarks about "revising risk disclosure requirements" and then "possibly changing filing formats so that basic information can be more easily digested by investors and updated by companies." So it's possible that the new Office of Capital Markets will be working towards a dramatic restructuring of the SEC's disclosure and filing requirements, a challenging project that has been discussed for quite some time in Corp Fin - but hasn't gotten much headway due to all the other regulatory demands that the past decade has laid at the SEC's feet.

Now Available: The "Final" Dodd-Frank Act

As I blogged last week, the Dodd-Frank Act was somewhat of a moving target even after conference reconciliation was completed. It appears that this may be the final version of the Act, although note that the Table of Contents doesn't always conform to the text of the Act. Also now available is the printed version of the Act's Conference Report, with a "Joint Explanatory Statement of the Committee of Conference" that begins on page 865.

Webcast: Exploring the New World of Web Disclosure

Tune in tomorrow for our webcast - "Exploring the New World of Web Disclosure" - to hear Bill Haney of Thomson Reuters, Dominic Jones of IR Web Report, Mike Marron of Expedia and Demo Skalkotos of Nasdaq OMX discuss how companies are evolving their use of the Web and social media, including the recent announcements from Thomson Reuters and Nasdaq OMX to offer "web disclosure" platforms for their IR web page clients. Please print these course materials before the program.

- Broc Romanek

US Senate Passes the Dodd-Frank Act: What You Need to Do Now

Yesterday, as noted in this NY Times article, the US Senate voted 60-39 passing the conference report version of the Dodd-Frank Act. Three Republicans voted for the legislation, which was supported by all but one of the Senate Democrats. In our "Dodd-Frank Act" Practice Area, we continue to post numerous memos on the various provisions of the Act - including this condensed 605-page version of the Act itself (no easy feat given that it's a 75% reduction - can't help but think of George's "shrinkage" episode from Seinfeld).

What to Do Now: Ahead of our package of two full-day Conferences on the executive pay provisions of the Act - coming up in just two months - we have just announced a special July 29th pre-conference webcast to help you start taking the actions you need to be taking now. Dave Lynn, Mark Borges and Mike Kesner headline this webcast: "The New Pay Legislation: Action Items." If you are not yet registered for the Conferences (either the package of the "5th Annual Proxy Disclosure & 7th Annual Executive Compensation Conference" - or the "18th Annual NASPP Conference"), register now so you won't miss this critical webcast!

Updated: Corp Fin Financial Reporting Manual

Last week, Corp Fin posted an updated "Financial Reporting Manual," with changes made for issues related to Regulation S-X Rule 3-01, Rule 3-05, and Article 11, as well as general partner financial statements, and other changes.

Humor in the Goldman Sachs Settlement

A humorous moment before yesterday's Goldman settlement news conference down at the SEC, which was available via webcast: During the sound check - which could be heard online (but the video feed wasn't on yet) - the dude doing the soundcheck said "won't everyone be surprised when they hear the press conference is for another set of new proxy rules." I laughed my tail off. A joke that only us Corp Fin types could understand.

Anyways, here is Kevin LaCroix's analysis of the Goldman settlement, including noting that the "record" nature of what Goldman paid is about semantics and context (ie. largest-ever penalty paid by a Wall Street firm).

For a little more Friday humor, check out this video on the European financial crisis.

- Broc Romanek

The SEC's "Proxy Plumbing" Concept Release: It's Out

Yesterday, after an open Commission meeting, the SEC issued this 150-page concept release (double-spaced) regarding proxy mechanics, etc. Here's the related press release - and Chair Schapiro's opening statement. There is a 90-day comment period - and we should expect a large number of comments on a wide variety of topics given the complexity of some of the issues. The existing voting framework is a labyrinth that is difficult to untangle - so there is much work to be done. For a refresher about what a concept release really is, see my blog from last week...

Director Resignations as a Risk Factor

As happens more often than you would think in the blogosphere, Nell Minow beat me to the punch in blogging about an interesting new article. Below is what Nell blogged in The Corporate Library Blog:

Kevin LaCroix has an important piece in his D&O Diary Blog on unexpected director resignations as a leading indicator of risk. It "increases the probability of a securities class action lawsuit filing by 31 percent to 35 percent, with the likelihood increasing as firm size increases; if a company's stock and accounting performance were poor in the prior year' and if the firm raised relatively more external financing in the prior year." According to a copyrighted March 2010 paper titled "The Dark Side of Outside Directors: Do They Quit When They Are Needed Most?" by Rüdiger Fahlenbrach of the Ecole Polytechnique Fédérale de Lausanne, Angie Low of the Nanyang Technological University and René Stultz of Ohio State University:

Among other things, a company with a surprise outside director departure has a "significantly higher likelihood of being named in a federal class action securities fraud lawsuit." The study's authors call this risk of future adverse events following a director's departure the "dark side of outside directors."...[O]utside directors have "incentives to leave when they anticipate that the firm on whose board they sit will perform poorly and/or disclose adverse information."

"At a minimum," LaCroix concludes, "the authors' analysis suggests a potentially important new underwriting criterion."

Social and Environmental Shareholder Proposals

In this podcast, Michael Passoff of As You Sow discusses the organization's "2010 Proxy Preview" as well as the current trends in social and environmental shareholder proposals, including:

- Why was the proxy preview written?
- What were the major social and environmental shareholder proposals this year?
- Any surprises in the votes so far this year?
- Do you have any recommendations for companies that receive a social or environmental shareholder proposal?

- Broc Romanek

FAA Proposes Changes to Airplane Use Regulations: Disclosure Impact to Follow?

Here is something I blogged yesterday on CompensationStandards.com's "The Advisors' Blog":

Published in the Federal Register last week, the FAA recently issued a proposal to revise its broad prohibition on pro rata reimbursement for the cost of owning, operating and maintaining a company plane when used for routine personal travel by executive officers under certain conditions. I'm far from being a FAA expert - but I believe this change, if approved, would permit greater flexibility for companies to seek and accept reimbursement from executives for their personal use of the corporate jet.

Given the affinity for private plane use - and officer distaste for disclosure about this practice - my bet is that executives would jump at the opportunity to do this, particularly if the money that executives paid was "replaced" in some way. The upshot is we may well see fewer perk disclosures for personal plane use in the not-so-distant future...

Here are other entries from "The Advisors' Blog" over the last week - sign up to get these pushed out to you daily on the left side of the blog:

- Executive Compensation: Someone's Doing It Right
- Study Update: Long-Term Incentive Trends from '08-'10
- Principles for Tying Equity Compensation to Long-Term Performance
- A "Wall Street Pay" Microblog
- CEO Pay For All Company Sizes

Privacy Gaffes: Massachusetts Securities Division Joins the Party

There are so many privacy breaches these days that they are too innumerable to count. Now, the Massachusetts Securities Division joins the list as noted in this news from Alan Parness of Cadwalader:

While the exact nature of what occurred is somewhat obfuscated by a heading titled "Important Information in connection with the recent notice to Massachusetts Registered Broker-Dealer Agents and Investment Adviser Representatives" on the MA Securities Division's website, apparently the Division, in response to a FOIA-type request from an Internet-based investment adviser compliance service company, sent the company a CD-ROM with the residential addresses and social security numbers of all broker-dealer agents and investment adviser representatives registered with the Division. Here's the full notice concerning this gaffe from the Division's website.

As you will note, the Division is not volunteering to pay for credit monitoring, presumably based on the written assurances received from the service company that the CD-ROM was returned to the Division and that no files were retained. While I have no reason to disbelieve the service company, and I don't pretend to be an expert on the MA security breach law, query whether the state would be so forgiving or understanding if a registered broker-dealer or investment adviser committed a similar blunder with its records concerning clients in MA, and received similar assurances from the recipient of those records? In this regard, note that the MA security breach law - Mass. Gen. Laws ch. 93H - is not administered by the Division, but by the state's Office of Consumer Affairs and Business Regulation and the state Attorney General; here's the OCABR's rules under ch. 93H (which conveniently exclude as a "person" subject to filing security breach reports under the law any agency, etc., of the state).

You may also want to peruse this Boston Globe article, including the reader comments which follow the article as some are amusing.

PCAOB Proposes New Auditing Standard Regarding Confirmation

Yesterday, the PCAOB proposed an audit standard regarding Confirmation that is drafted to strengthen the requirements under the existing standard, AU sec. 330, including more explicitly incorporate consideration of the risk of material misstatement due to error or fraud into the selection, design, and performance of confirmation procedures. Here is the proposing release.

- Broc Romanek

What the Dodd-Frank Act Means for the Regulators? 243 Rulemakings and 67 Studies

Congress is back from vacation. As noted this article, the Senate is close to getting the 60 votes needed to get past a potential Republican filibuster and get the Dodd-Frank Act to President Obama for enactment. For every day there is a delay, it will be that much harder for the SEC to adopt rules timely ahead of the 2011 proxy season.

How much rulemaking can we expect? According to the nifty chart on page ii of this Davis Polk summary of the Dodd-Frank Act (a memo that preceded this WSJ article), a total of 11 regulators are committed to make 243 rulemakings, 67 studies and 22 new periodic reports under the Act. The SEC itself will be required to conduct 95 of those rulemakings, 17 studies and 5 new periodic reports. Ouch...

We continue to post oodles of Dodd-Frank memos in our "Dodd-Frank Act" Practice Area, including these slides from Davis Polk.

One member astutely observed how changes were being made to the Dodd-Frank Act when Congress was last in session two weeks ago - in the midst of which, the House passed the Act. The member posed the question - which version of the Act did the House actually vote upon? And if there were subsequent changes to the Act, will the House need to vote again? I don't know the answers to these - anyone out there know?

Webcast: Evolving Insider Trading Policy and 10b5-1 Plan Practices

Tune in tomorrow for the webcast - "Evolving Insider Trading Policy and 10b5-1 Plan Practices" - to hear Alan Dye of Hogan Lovells LLP and Section16.net, Dave Lynn of TheCorporateCounsel.net and Morrison & Foerster, Sue Morgan of Perkins Coie and Ron Mueller of Gibson Dunn discuss the nuts and bolts of the latest developments related to insider trading policies and Rule 10b5-1 plans practices and procedures.

PCAOB Staff Alert: Work of Other Auditors or Engaging Outside Assistants

Yesterday, the PCAOB issued Staff Audit Practice Alert #6 prompted by observations from PCAOB inspections that some US-based firms issuing audit reports based on work performed by others outside the US are not properly applying PCAOB standards.

Two examples in the PCAOB's Alert relate to Chinese issuers, which is notable given that I hear that Chinese companies registered in the Caribbean are the single largest group of foreign companies piling into the US capital markets lately. The Alert raises a question as to how regulators (SEC, PCAOB or state boards of accountancy) can discipline auditors in situations such as those described the Alert given the difficulty of asserting jurisdictions in these cross-border scenarios...

- Broc Romanek

Survey Results: Code of Ethics and the Board

Below are the results from a recent survey we conducted on the topic of code of ethics and the board:

1. Which board committee typically reviews (and approves) your company's Code of Ethics policy:
- Corporate Governance committee - 57.9%
- Audit committee - 31.6%
- Compensation committee - 0.0%
- Compliance committee - 0.0%
- Other board committee - 2.6%
- No board committee - 7.9%

2. Which board committee "enforces" (or handles complaints related to) the business conduct provisions of your company's Code of Ethics such as confidentiality, use of corporate assets, etc.:
- Corporate Governance committee - 31.6%
- Audit committee - 68.4%
- Compensation committee - 0.0%
- Compliance committee - 0.0%
- Other board committee - 2.6%
- No board committee - 0.0%

3. Our company has a separate Code of Ethics - one for our senior financial officers and a separate one for all our employees:
- Yes, they are separate - 16.2%
- No, there is only one Code that applies to both senior financial officers and all employees - 83.8%

4. Our company has a separate Code of Ethics - one for our Board of Directors and a separate one for our employees:
- Yes, they are separate - 13.2%
- No, there is only one Code that applies to both directors and employees - 86.8%

5. When it comes to the Code of Ethics that applies to our directors, our Board:
- Is required to sit through actual ethics training - 18.4%
- Is offered an ethics training class if they wish to sit through it - 15.8%
- Just gets copies of the Board's Code of Ethics - 65.8%

Please take our new "Quick Survey on Director Education & Orientation."

Is the PCAOB a Good Cop or Big Flop?

Yesterday, I was surprised to see this lengthy article in the Washington Post analyzing the PCAOB's tenure so far. My surprise had more to do with a mainstream newspaper choosing this topic than what was in the piece. The article itself is pretty comprehensive and hits most of the marks (one item it doesn't cover enough is how much the PCAOB is beholden to the SEC and how that may hamstring how it operates).

Speaking of marks, in the article, Lynn Turner is quoted as giving the PCAOB a "B" for inspections, a "D-plus" for standard setting and an "F" for enforcement. When the PCAOB was born, I was concerned that the PCAOB would overly extend the SEC's enforcement capabilities and efforts. Here is an excerpt from the WaPo article on what has actually transpired:

In the realm of enforcement, the PCAOB shares powers with the SEC and was intended to bolster the SEC's policing efforts. But Turner, the former SEC official, said the board may have the opposite effect. Because PCAOB investigations unfold in secret, audit firms "are much better off if the action is brought by the PCAOB where it can be kept under wraps, slowed down and dragged out without anyone knowing anything whatsoever about it," Turner said by e-mail. The board's acting chairman made a similar point in recent testimony, saying the law gives auditors "an incentive to litigate, rather than settle, in order to delay any adverse publicity."

So far, the board has issued 31 disciplinary orders, some of which send mixed messages. After the chairman of a computer services company in India confessed to inflating profits for several years and overstating a cash balance by $1 billion, two auditors affiliated with PricewaterhouseCoopers allegedly failed to cooperate with a PCAOB investigation. The board disbarred the auditors in March, about a year after it first sought their testimony.

In 2009, the board disciplined a former Deloitte & Touche auditor for misconduct that allegedly took place more than five years earlier. In another case, a BDO Seidman auditor was disbarred for allegedly backdating records to make it appear that an audit was done properly and for directing a subordinate to do the same. The auditor has since left the firm. Two years after disciplining him, the board reinstated his right to audit public companies. Carcello, the Tennessee professor, said the outcome of some cases left him wondering: "What does it take to be disbarred for life?"

Poll: Do Folks Still Refer to the PCAOB as "Peekaboo"?

As I blogged about back in 2003, the PCAOB strongly dislikes being referred to as "Peekaboo." When I heard that way back then, I assumed the nickname died a quick death and I have only heard the PCAOB referred to as such on rare occasion. Thus, I was surprised that the WaPo's article used the term in its subtitle. Participate in this anonymous poll and let us know what you call the PCAOB:

EU Parliament Adopts Amendments to Its Prospectus Directive

Recently, the European Union Parliament passed a resolution adopting a EU Commission proposal to amend the Prospectus Directive (2003/71/EC) with certain modifications. The EU Commission had started a public comment period (called a "consultation") over a year ago and issued its proposal in September. The new Prospectus Directive attempts to simplify the disclosure requirements, provide clearer exemptions and ensure that adequate information is provided to retail investors. We have posted memos regarding this development in our "European Law" Practice Area.

True Story: Former SEC Lawyer Claims He's LeBron's Dad, Sues

I had to work LeBron somehow into this blog after last night's ridiculous TV special to announce where he would play next year (long-suffering Wizards fans like me have come to dislike LeBron for his unprofessional theatrics during playoff games; I didn't watch the "made-for-TV" event). As noted in this AmLaw article, a former SEC attorney has sued LeBron and his mother because he claims he's LeBron James' father. The plaintiff accuses James's mother of engaging in a scheme with her son and their attorneys to cover up the identity of James's real father - as a 2007 paternity test came back negative with a "0 percent probability of paternity," as noted in this BusinessWeek article.

This is not the typical paternity suit, where a deadbeat dad is sued for child support; this is the opposite when an alleged deadbeat dad sues for recognition as the father of a celebrity. Two things to note about the plaintiff: he was 29 and LeBron's mom was 15 when they allegedly had the tryst; and he agreed to resign from the SEC in '02 when he was paid $230,000 to drop a second EEO complaint against the agency after working there for 19 years.

And in answer to the question I have been emailed a dozen times: no, I don't know the plaintiff. He worked in the Division of Investment Management and although I knew folks in IM, I never heard of this guy before.

SEC Adopts "Pay-to-Play" Rules

Last week, the SEC adopted new pay-to-play rules in an effort to curtail the corrupting influence of this type of practice by investment advisers; here's the adopting release. In his new blog covering California law developments, Keith Bishop covers some California specific issues related to the new rules.

- Broc Romanek

Shocker! More Companies Holding Virtual-Only Shareholder Meetings

Well, it's really not that shocking given the huge cost (and time) savings and the fact that most of the companies holding virtual-only meetings are pretty small. But it's shocking to me as I thought I was keeping pretty good tabs on what is happening in this space since it's a topic I have written about for over a decade.

I just dug out a good half-dozen companies that have conducted all-virtual annual meetings this year that I didn't know about (thus, in addition to these that I blogged about a few months ago) from inspecting this list from Broadridge. Recall that Broadridge itself held a virtual annual meeting last year, as noted in my blog here.

Note that Broadridge's list doesn't break out "all virtual" from "hybrid" meetings. There is a huge difference between these types of meetings as some shareholders have been fighting against companies holding "all virtual" meetings since there is no opportunity to confront management and the board in person. In comparison, hybrid meetings combine the in person experience while providing opportunity for meeting input online - the best of all worlds for shareholders who may not be able to travel. I have broken out which companies have done all virtual amidst these "FAQs on Electronic Stockholders' Meetings" (it's the 5th FAQ in Section A).

Note that Gary Lutin's "The Shareholder Forum" will hold a roundtable on the topic on Tuesday in NYC. And remember to tune in for our webcast coming up in September - "Holding the Virtual Annual Meeting: Factors to Consider and Practice Pointers" - featuring panelists whose companies have tested the virtual waters recently...

Also, check out Dominic Jones' most recent blog - "Advisory News Releases Catching On" - a topic we will cover soon during our webcast: "Exploring the New World of Web Disclosure." And this morning, Dominic gives us the math about how Google's recent advisory release increased web referrals by 88%...

SEC to Consider "Proxy Plumbing" Concept Release Next Week

Next Wednesday, the SEC is holding an open Commission meeting to vote on issuing its long-awaited "proxy plumbing" concept release. It sounds like the concept release will have hundreds of questions in it for folks to ponder and comment on.

For the newbies out there: a concept release sometimes is used as the first step towards proposing rules. It is relatively rarely used (eg. just two of them in '09 and only one so far in '10 - see the SEC's "Concept Release" page) as a vehicle to draw in input before rules are even drafted since it takes a long time between soliciting comment on a concept, then soliciting comment on a proposal and then finally adopting final rules. So concept releases are primarily used just for broad areas of important change - that will eventually lead to one or more major rulemakings - that can afford to have a timeline of a few years...

Lawyers Transitioning to New Non-Firm Opportunities

In this podcast, Kate Neville of Neville Career Consulting - a former corporate & securities lawyer - provides some insight into how lawyers can change their lot in life, including:

- How can attorneys who are out of work or unhappy in life transfer their skill-sets to positions outside of law firms? To other professions?
- What type of resources are available to attorneys thinking about making a career move to work outside of a firm?
- What can lawyers thinking about this do to help decide if such a change is for them and determine which options to pursue?

- Broc Romanek

A Post-Textron Opinion: IRS Denied Access to Documents Held by Auditor

Stan Keller of Edwards Angell Palmer & Dodge and Tom White of Wilmer Hale note:

Recently, the DC Court of Appeals issued a decision upholding the District Court's decision denying the IRS access to three documents relating to the tax treatment of two partnerships owned by Dow Chemical that were in the possession of Dow's auditor, Deloitte. Two of the documents were a memorandum prepared by a Dow in-house accountant and attorney and a tax opinion prepared by Dow's outside counsel, both of which were furnished to Deloitte in connection with the audit to verify the adequacy of the tax contingency reserve for the transactions. The Court found that these documents were attorney work product entitled to protection, as conceded by the government, and that the protection was not waived by the documents being furnished to Deloitte.

This is the first Court of Appeals decision holding that disclosure to independent auditors did not waive work product protection. The Court found that the auditor is not a potential adversary or conduit to an adversary and Dow had a reasonable expectation that Deloitte would maintain the confidentiality of the documents, relying on professional standards requiring auditors not to disclose confidential client information.

The third document was a memorandum prepared by Deloitte that summarized a meeting with Dow officials and outside counsel to discuss potential litigation over the transactions. The Court held that this memorandum could be work product protected, notwithstanding that it was prepared by the auditor, because it reflected the thoughts and opinions of counsel with respect to anticipated litigation.

The Court rejected the government's argument that the memorandum could not be work product because it was prepared in conncection with the annual audit, adopting the generally prevailing "because of" anticipated litigation test and rejecting the "primary motivating purpose" test of the Fifth Circuit and both distinguishing the First Circuit Textron decision as based on the particular documents at issue (ordinary tax workpapers) and rejecting Textron to the extent it adopted a more stringent "prepared for use in possible litigation" test as suggested by the dissent in Textron. Because the evidentiary record was insufficient to establish that all the information in the Deloitte memorandum was work product protected, the Court remanded to the District Court to review the memorandum in camera.

The decision is also notable because the Court clearly distinguishes the Supreme Court's decision in Arthur Young as relating solely to whether there is accountant's work product protection and not to whether attorney work product protected information continues to be protected in the hands of the accountant. The court notes the importance of preserving this protection because "independent auditors have significant leverage over companies" since "[a]n auditor can essentially compel disclosure by refusing to provide an unqualified opinion otherwise" and waiver under these circumstances "might discourage companies from seeking legal advice and candidly disclosing that information to independent auditors."

Nasdaq Speaks '10: Latest Developments and Interpretations

We have posted the transcript for our popular webcast: "Nasdaq Speaks '10: Latest Developments and Interpretations."

Poll: What Dodd-Frank Means to Me Personally?

Although the Dodd-Frank Act certainly will mean a sea change in behavior for certain folks, it may not mean much for everyone in our community at the end of the day. Take a moment to indicate what you predict the Act means for you in this anonymous poll:

- Broc Romanek

FASB & IASB Issue Joint Proposal on Revenue Recognition

Recently, the FASB and IASB issued a joint proposed standard for a new approach to revenue recognition that would align the financial reporting of revenue from contracts with customers and related costs and create a single standard for IFRSs and GAAP that would be applied across various industries and capital markets. As noted in this joint press release, the comment period ends October 22nd, with a goal of adopting a new standard by June 2011.

As noted in FEI's "Financial Reporting Blog" last week, the FASB and IASB announced the release of a "Staff Draft" of their upcoming Exposure Draft of significant proposed changes to financial statements, as part of the Financial Statement Project.

Accounting Convergence: FASB & IASB Update Their Progress

At the same time, the FASB and IASB issued a progress report on their convergence project, which provides details of their modified strategy to converge US GAAP and IFRS by prioritizing certain joint projects and extending the targeted completion dates for some projects beyond June 2011 into the second half of the year. We continue to post memos on this project in our "IFRS" Practice Area.

I'm loving the "Back to the Future" snafu where tweetheads went wild yesterday with thoughts of hoverboards. As noted in this blog, yesterday's calendar date - July 5, 2010 - was alleged to be the target entered by Dr Emmett "Doc" Brown into the DeLorean time machine. But alas, it is not true. Slackers...

More on "The Mentor Blog"

We continue to post new items daily on our blog - "The Mentor Blog" - for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

- Study: Twitter Reduces Bid-Ask Spreads
- CalPERS Won't Issue a Focus List After Successful Engagement
- Drafting Standing Delegations of Authority from the Board: Factors to Consider
- PIPEs: Canadian Survey
- A Self-Funded SEC: Making the Case

- Broc Romanek

Third Time Not a Charm: Senate Fails Again to Move Carried Interest Legislation

Here is news from Weil Gotshal:

On June 24th, the Senate failed for a third time to pass a procedural vote which would have sent the proposed carried interest legislation (H.R. 4213) to the Senate for a full vote on the bill. Senate Majority Leader Harry Reid (D-Nev.) has announced that the Senate is moving on to other matters. Although no further action is currently pending in the Senate on the proposed carried interest legislation, it is possible (and perhaps likely) that the legislation will be re-introduced into the Senate in the not too distant future.

NYSE Regulation Transfers Its Regulatory Authority to FINRA

Effective June 14th, NYSE Regulation transferred its market surveillance and enforcement functions to FINRA. In NYSE Regulation Information Memo 10-26, the NYSE provides guidance on the effect of the transfer on existing subjects of NYSE Regulation investigations and parties to disciplinary proceedings before the NYSE Hearing Board.

"Standing Committee" Approves Major Changes to Bankruptcy Disclosure Rule

Here is news, as excerpted from this Davis Polk memo:

On June 15th, significant amendments to Bankruptcy Rule 2019, which governs the disclosure of claims and interests held by members of certain representative entities and the parties they represent in Chapter 11 cases, cleared an important hurdle when the amendments were approved by the Committee on Rules of Practice and Procedure of the Judicial Conference, commonly known as the Standing Committee. The proposed changes to Rule 2019 ("Proposed Rule 2019") considerably expand the scope of disclosure required, broaden the types of economic interests that must be disclosed (to include, among other things, derivatives) and clarify which groups, committees and other entities must publicly disclose those economic interests in order to actively participate in a bankruptcy case. The Standing Committee will present Proposed Rule 2019 to the full Judicial Conference for consideration at its September 2010 meeting. If the Judicial Conference approves the changes, it will then present Proposed Rule 2019 to the Supreme Court, which will meet in April 2011 to consider the amendments, and finally, absent a Congressional veto, the proposed changes will become effective on December 1, 2011.

- Broc Romanek

The Dodd-Frank Act: A Moving Target? Not Yet a Done Deal

As I blogged as an aside yesterday, the House-Senate conferees have already made some changes to the "final" bill and are now on "final" version #3 - with the changes perhaps not yet done as it's clear that the President's July 4th deadline for reform legislation is not going to be met even though the House passed the bill yesterday by a count of 237-192 (see this NY Times article). The Senate doesn't have the 60 votes to overcome a filibuster, so the bill may not pass until mid-July according to this Bloomberg article.

It's chaos out there. For example, newly-minted Senator Scott Brown seems to be see-sawing on whether to vote for the bill (as noted in this Huffington Post blog and this Business Insider piece). The story about who will - and won't - vote for the reform bill changes by the hour and likely will continue to do so...

Federal Regulatory Agencies Jointly Issue Final Guidance on Sound Incentive Compensation Policies

A few members have emailed me asking why I haven't blogged about the issuance of final guidance on sound incentive compensation policies, jointly put out by the OCC, OTS and FDIC last week. Actually, I did blog about it right the guidance came out on CompensationStandards.com's "The Advisors' Blog" - on which there are items blogged related to executive pay daily. Here are some other recent blog titles:

- CEO Pay For All Company Sizes
- New SEC Interpretation Raises Accounting and Disclosure Issues for Performance Share Awards Subject to Discretion
- You Can't Buy a Ferrari with Grant Date Fair Value
- SEC Secures Victory in Clawback Case
- Executive Pay and Risk

Our July Eminders is Posted!

We have posted the July issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!

- Broc Romanek