The SEC's New PCAOB Appointment Procedures: Time for New Board Members?
It was way back in June that the constitutionality of the SEC's oversight over the PCAOB was upheld by the US Supreme Court. As I noted in this blog, the Sarbanes-Oxley fix dictated by SCOTUS was that the SEC can remove PCAOB board members at will going forward.
While the SEC waited for the outcome of that decision, the openings on the PCAOB board piled up. That was understandable given the uncertainty over the outcome and it may have been difficult to find a qualified candidate. But time has passed since certainty has been restored. Today, there are three openings - although two of them are filled by board members whose terms have expired (Bill Gradison and Charley Niemeier's terms ended one and two years ago, respectively). Dan Goelzer has been Acting Chair since July 31, 2009.
On Monday, the SEC issued these written procedures for appointment of a member or chair of the PCAOB. These procedures are actually a little abbreviated from the procedures announced during Chair Cox's term - so I doubt their development was a roadblock to filling board slots. Maybe now with the mid-term elections behind us, there will be some movement on this important task...
Dodd-Frank: SEC Proposes New Whistleblower Bounty Program
Yesterday, at an open Commission meeting, to propose a new whistleblower program as required by Dodd-Frank. The proposing release is already available - comments are due by December 17th. Here is the press release - and here's SEC Chair Schapiro's opening remarks.
The SEC found the development of these rules especially challenging because of the potential for unintended consequences (e.g., the possibility that the rules would undermine internal corporate compliance programs - how about those developed under SOX-- or that the SEC would be inundated with spurious or other leads that are not "high quality," requiring the limited enforcement staff to triage tips.) As a result, the rules attempt to provide balance. For example, the rules propose that, among the criteria for determining the amount of an award, the SEC would take into account whether the matter was first reported internally; however, internal reporting would not be a predicate to making a whistleblower claim. Does this mean that companies will now offer their own financial incentives? Will there be a new wave of lawyers making their livings from these procedures, as with Section 16 and Prop 65?
New York Court of Appeals: Declines to Expand Outside Advisor Liability
A few weeks ago, the New York Court of Appeals ruled on certified questions in two cases: Kirschner v. KPMG (certified by the United States Court of Appeals for the Second Circuit) and Teachers' Retirement System of Louisiana v. PricewaterhouseCoopers (certified by the Delaware Supreme Court). In the decision, the Court strengthened the in pari delicto defense, which is available to third-party professionals - including accountants or attorneys - who are accused by companies of colluding with, or negligently failing to detect the wrongdoing of, the company's own management. We are posting memos on the decision in our "Auditor Liability" Practice Area.
- Broc Romanek