July 31, 2012

Congress Loves to Sham: Securities Law Legislation Before the Elections

Have you ever had a job where you had to look busy when your boss was around? But you really weren't. When I worked in the stock room at Sears as a kid, we thought we coined a term for that art - "shamming." We thought we coined the term, but it shows up in the dictionary!

Anyways, with the elections just ahead of us - and the good folks in Congress madly dialing for dollars - there are no less than five pieces of legislation being considered by the House of Representatives this week. One bill, HR 6161 - the ''Fostering Innovation Act'' - would gut SOX Section 404(b). This bill does not foster innovation in any way and is thus quite misleading with this title. In fact, if retail or drug companies selling to consumers use such misleading titles they would be charged, perhaps with fraud! Thanks to Lynn Turner for his help here!

Here are pieces that describe these - and other - recent legislative efforts:

- Jim Hamilton's "House Passes Regulatory Freeze Legislation that Also Imposes Added Rulemaking Duties on SEC, Including 404(b) Impact"

- Kevin LaCroix's "Two U.S. Senators Introduce Bill to Increase SEC Civil Penalty Authority"

- Bloomberg's "SEC May Require More Cyber Risk Disclosures Under Senate Bill"

- Jim Hamilton's "House Panel Hearings Reveal Support for Legislation Making PCAOB Proceedings Public"

Corp Fin Provides JOBS Act No-Action Relief for Bank Holding Companies

In the "Dodd-Frank Blog," Jill Radloff notes that Corp Fin has begun granting no-action relief to suspend '34 Act reporting obligations for bank holding companies as the Staff indicated they might under one of the JOBS Act FAQs.

More on our "Proxy Season Blog"

We continue to post new items regularly on our "Proxy Season 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:

- NYSE Director Steps Down After Majority Withhold Vote
- How Your Annual Shareholder Meeting May Be Covered: Social Media Style
- A Review of Corp Fin No-Action Rulings on E&S Proposals
- Big Fireworks at Wells Fargo Annual Shareholders Meeting
- Chesapeake: Poster Child For Poor Governance

- Broc Romanek

July 30, 2012

Sarbanes-Oxley Turns 10! You Ready to Party?

The celebration of full employment! At least for those of us with jobs. It was ten years ago today that Sarbanes-Oxley snuck up on us. Per the two polls I ran back in May:

- A majority (59%) believe that internal controls was the biggest long-term game-changer, followed by CEO/CFO certifications (27%); Section 16 reporting being cut to 2 business days (16%) and creation of the PCAOB (16%)

- Most people will celebrate by either silently crying in a bathroom stall; banging out an extra memo or watching a Downton Abbey rerun

And if you're a glutton for punishment, catch the SEC Historical Society's webcast today with former Senator Sarbanes and Rep. Oxley...or read this article about the anniversary...

A member emailed me this nugget: "I saw Mike Oxley on a talk show shortly after Sarbanes-Oxley became law. He was asked to mention some interesting questions posed of him since passage of the Act. He said that several people asked him when it was that he changed his first name to "Mike" from "Sarbanes." Pretty funny."

My NY Times Op-Ed on Sarbanes-Oxley

Pretty cool. I had op-ed piece entitled "A Good Step, But Miles to Go" in the NY Times last Wednesday that was part of a quartet of op-eds in this "Room for Debate" series. The other op-eds were penned by PCAOB Chair Jim Doty, former PCAOB Board Member Kayla Gillan and Michael Peregrine of McDermott Will & Emery. Lot of folks emailed me about my groovy old man picture... and more than one member noted that they missed our "Billy Broc" Oxley and Dave "The Animal" Sarbanes video skits.

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:

- A New Insider Trading Approach by the SEC?
- SEC's Novel Insider Trading Case: No Penalties If No Profit or Loss Avoidance
- Conflict Minerals: House Holds Hearing on Costs and Consequences
- FINRA's New COBRADesk Goes Live on June 4th: Existing Filings Don't Migrate
- California to Vote on Corporate Political Contributions Ban

- Broc Romanek

July 27, 2012

Deal Cube Tournament: The Pink Pig Enigma

This is the 2nd match of the 5th round - the battle among the Final Four! In an unbelievable turn of events, the two cubes in today's contest both made a last day push to move past their competitor in the Elite Eight. And the pink clear pig continues to roll even though it was seeded in the bottom half of the brackets before the tourney started. Lot of pig lovers out there! As noted in these rules (and keep sending more pics for the next tourney), please vote for one of the following two cubes below:

- Pink Clear Pig
- Toolbox

Auditing: The First Qualified Peer Review Report

Here's news from Lynn Turner: As noted in this "Going Concern" blog, Deloitte & Touche has once again been cited for lax auditing. Previously they were cited by the PCAOB. This second qualified report on the quality of their audits comes from one of their peers - E&Y - and the AICPA. As discussed in the blog, the shortcomings highlighted relate to their failure to properly implement a "principles-based approach" and over a lack of auditing of management's estimates. Auditing of estimates made by management is often of concern to investors because it is how management frequently manipulates and "manages" earnings. Furthermore, this supports the views of some at the PCAOB that auditors are "too close" to (ie. views) management as their client.

This is the very first qualified peer review report issued on a Big 4 firm, or one of their predecessors, since peer reviews began back in 1977. There have been well over 50 reports issued since then - and this is a first. To put it in perspective, not even Arthur Andersen who received a peer review report in 2001 after Enron and Worldcom imploded received a qualified report.

This raises a question as to what state boards of accountancy will do. They often require peer reviews and if a qualified report is issued, and no action is taken by the state board, then it raises the question of why require them in the first place. It also raises a question of what audit committees will do or what steps they will take to ensure quality audits are performed, especially with respect to auditing of management's estimates or if a firm uses a "principle based" auditing approach.

Here's something from the "Going Concern Blog" entitled "McGladrey's PCAOB Inspection Report Is Pretty Awful."

How Journalists Cover Governance

In this podcast, Ted Knutson of Thomson Reuters discusses the art of journalism, including:

- How do you get story ideas?
- How do you figure out who would be good people to talk to for a story?
- What have been the biggest types of surprises when researching a story?
- What is your favorite area to report on?

- Broc Romanek

July 26, 2012

Deal Cube Tournament: The Final Four; 1st Match

This is the 1st match of the 5th round - the battle among the Final Four! With two of the Final Four contestants consisting of beer taps, this community seems keen on winding down. As noted in these rules (and keep sending more pics for the next tourney), please vote for one of the following two cubes below:

- Milwaukee Brewers Beer Tap
- Black Jack Table

GAO Studies Delay in Conflict Minerals Rule

Recently, Steve Quinlivan blogged this in the "Dodd-Frank.com Blog":

The GAO has issued a report that examines among other things:

- Steps the SEC has taken toward issuing a conflict minerals disclosure rule; and
- Stakeholder-developed initiatives that may help covered companies comply with the anticipated rule.

The GAO concludes the continued delay in issuing a final rule has contributed to a lingering uncertainty among industry and other stakeholders who expect their actions to be guided by a final rule. Some of these industry and other stakeholders have engaged in the development of various initiatives that they hope may help covered companies comply with the anticipated rule, in part by helping foreign and domestic suppliers of those covered companies trace minerals in their supply chains. Without a final rule, it is unclear to what extent the initiatives currently being developed or implemented by industry and other stakeholders will achieve results consistent with those anticipated under the conflict minerals legislation. Moreover, in part because of the delay in the rule's issuance, many companies across the tin, tantalum, tungsten, and gold supply chains are reluctant to participate in or support the global and in-region initiatives currently being developed or implemented because they are uncertain whether or not the initiatives will align with the anticipated rule.

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:

- Does the SEC Allow One-on-One Meetings After Earnings Calls?
- Practicing Safe IR Presentations
- Cybersecurity Risk Disclosures: One Year After SEC Guidance
- Posted: Pair of FCPA and Anti-Bribery Flowcharts
- Wal-Mart: Independence and Internal Investigations
- SEC's Individual Cooperation Program Gets off the Ground
- And Even So Many More Board Trends That I Could Cry...
- Survey: D&O Insurance on the Rise

- Broc Romanek

July 25, 2012

Survey: How Many '12 Annual Meetings Had Disruptions? Over a Third for Large Companies

Although disruptions at annual meetings got a fair amount of press this proxy season - remember the "99% Power" movement? - including several blogs from me, I have not seen anyone capture actual stats of how prevalent they were. Surprising to me, this survey data that I just posted shows 18 of the Fortune 50 had protests. That is quite high - over 35%! This data was gathered based on media accounts of the protests, most of which were drawn from local newspapers. Links to those articles are included in the survey...

ISS Issues Survey for 2013 Policies

Here's news from Davis Polk's Ning Chiu:

ISS has issued its policy survey for 2013. The survey seeks input from institutional investors, issuers and other corporate governance participants, with 31 questions of relevance to the US market. After the survey closes on August 17th, ISS will publish its draft policies and seek public comments. Final policy changes will be released in November and apply beginning in February 2013. The survey is detailed, and the following summary includes some of the key areas that may be of concern for issuers.

Directors. The survey includes 3 questions which, if changed unfavorably, could cause substantially more negative recommendations for boards and directors. ISS has asked whether it should also include other significant directorships (private, non-profit, subsidiaries) as part of its overboarding policy and whether investors expect boards to implement a shareholder proposal that received a majority of votes cast in the previous year (currently, ISS will recommend against the entire board for failure to implement such a proposal that received a majority of votes cast in 2 out of 3 years). The survey also asks about combining the "insider" and "affiliated outsiders" into one category, which would equate an executive director with a director who has certain types of transactions with the company, possibly making it difficult for investors to apply judgment to individual situations.

Executive Compensation. The 10 questions that relate to executive compensation were more open-ended and there were no obvious indications of how the policies may change, as follows:

- Peer groups. ISS has stated it will change its peer group formulation. The survey asks whether ISS should use a company's peer group without exception, modify the group for size, create its own, or create its own but provide company's peers as an alternative. In addition, ISS asks a series of questions about what informs investors regarding a company's peers (for example, whether peers that the target company selected or ones that selected the target company should be illustrative).
- Performance metrics. Whether metrics other than total shareholder return should be used, and whether non-financial performance metrics should be evaluated, is being considered.
- Analyzing pay. The value of examining "granted," "realized" or "realizable" pay is questioned.
- "Problematic" pay. The survey asks about features of termination packages and change in control provisions that may be deemed "problematic," as well as pledging of company stock by directors and officers.

Shareholder Proposals. Only 3 questions pertain to policies on proposals: the importance of corporate lobbying, the features of proxy access proposals and the factors in evaluating recommendations for independent chair proposals. One possible favorable outcome is that the survey asks about the relevance of the TSR test as one of the factors for examining independent chair proposals. This has long been a sore point for many corporate issuers that otherwise meet all the criteria for receiving a favorable recommendation.

Podcast: Personal Use of Aircraft

In this CompensationStandards.com podcast, Ruth Wimer of McDermott, Will & Emery explains the latest on personal use of aircraft, including:

- Have companies changed their use of personal aircraft practices since the FAA final guidance on reimbursement in 2010?
- How typical is it for companies to have personal use of aircraft policies? What typically is in those policies? Who approves those policies - full board or compensation committee?
- What are common snafus when it comes to personal use of aircraft disclosures?

Did you catch this recent CFO.com article entitled "New Threat to Personal Use of Corporate Jets?"?

- Broc Romanek

July 24, 2012

Our New "Confidential Treatment Requests Handbook"

Spanking brand new. Posted in our "Confidential Treatment Requests" Practice Area, this comprehensive "Confidential Treatment Requests Handbook" provides a heap of practical guidance about how to navigate under Exchange Act Rule 24b-2, Securities Act Rule 406 and FOIA Rule 83. This one is a real gem - 48 pages of practical guidance...

Conference Notes: Corp Fin Staff Speaks

In our "Conference Notes" Practice Area, we have posted 4-pages of notes from the "SEC Update" panel - courtesy of Covington & Burling's Keir Gumbs - from the Society of Corporate Secretaries Annual Conference.

Having Backbone: Compensation Consultant Quits; What's the Board's Reaction?

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

Yesterday, Bloomberg ran this article entitled "Best Buy Pay Expert Said to Quit Over Retention Bonuses" about how compensation consultant Don Delves quit his engagement at Best Buy after the company awarded more than 100 managers retention bonuses without tying them to performance. Don has been a regular speaker at our annual responsible pay practices conference. I have not spoken to Don about this situation, but I can imagine quitting a client of Best Buy's magnitude is not an easy thing to do. One has to make a living.

But it appears Don felt this was the right thing to do. For years, I have been noting how some compensation consultants are standing up to boards - that they are not always the excessive pay facilitator that they sometimes are painted out to be. In fact, I have heard of CEOs who want less pay - but yet their boards give them more because that is what the faulty peer surveys indicate they should do. This is precisely how bad processes have gotten in the way of common sense.

At some point, boards really need to be held accountable. Too many directors think that more conversation in the boardroom means they have done a better job. But there continues to be just incremental change and not the widespread change in pay dynamics that is necessary to overcome decades of bad practices.

If more advisors show more backbone, it might wake up some of the remaining pay apologists out there who spend more time fighting change than being concerned about whether they are engaging in sound governance practices. [I'm still waiting to hear about a lawyer who quits an engagement rather than go along with a bad pay arrangement - all I ever hear about are comp consultants doing this.] And hopefully those advisors who show backbone will be rewarded by being retained by those boards that are truly interested in doing the right thing. Kudos to Don! Now we wait and see if Best Buy's board gets the message...

- Broc Romanek

July 23, 2012

Congress & Insider Trading: The STOCK Act's Loophole Swallows the Rule

I guess Congress is not satisfied that it's approval rating is down to single digits. As noted in this CNN article, the House Ethics Committee came up with a 14-page memo to interpret the STOCK Act differently than its Senate counterpart and found that spouses and children are exempt from the new law that had banned insider trading in Congress. The Office of Government Ethics, which oversees all federal executive branch employees, sided with the House.

So there you have it. A different standard for Congress compared to other federal employees. A group of ethics officials who have no understanding of beneficial ownership (guess they should have read our new "Beneficial Ownership Table Handbook"). And back to Square #1 in providing some integrity on the Hill. House Majority Leader Eric Cantor now claims that his office inadvertently created the loophole. Thanks to Martha Steinman, who's recently moved over to Hogan Lovells, for the heads up...

A Conflict Minerals Preview?

Here's information from Cooley's Cydney Posner: Someone at the WSJ apparently found a willing leaker with knowledge of the version of the conflict minerals rules currently being circulated among the SEC commissioners. The proposal is scheduled for a vote on August 22.

The WSJ characterized the draft as, contrary to some expectations (including my own), tougher than the original proposal: "Compared with the original proposal, a final draft circulated to SEC commissioners would outline a series of items for companies to review before they can assume their goods don't contain minerals from the area, people familiar with the document said. If adopted, the rule could create more costs for companies trying to determine whether they need to submit a 'conflict-minerals report' to the SEC....The draft tightens the standards for an independent audit that must be conducted on the report and would require top executives to sign off on the report, something companies believe could subject them to greater liability.

"Under the draft, the SEC would give companies a two-year transition period to determine if certain goods contain conflict minerals, one of several concessions sought by business groups. The details of the final rule could change ahead of next month's vote, but people familiar with the matter said they didn't expect major negotiations among the SEC's five commissioners."

As you may recall, the proposal has been subject to a lot of lobbying on both sides: nonprofits, corporations, legislators and even clergy. According to the article, the U.S. Chamber of Commerce is once again threatening to intercede: "in a July letter to the SEC, [the Chamber] warned the rule could be overturned by the courts if the agency doesn't fix certain flaws. The trade group's letter cast doubt on the SEC's roughly $71 million cost estimate for all U.S. public companies that need to comply with the rule and said the agency needs to include in its estimate the costs for corporate suppliers and vendors." Remember that that kind of argument was a winner for the Chamber in connection with proxy access.

Dodd-Frank Turns Two

Dodd-Frank celebrated it's second birthday over the weekend as noted in this Washington Post article. Meanwhile, the WaPo reports how the statute of limitations is approaching for cases relating to the financial crisis as we approach the five-year mark on that...

On Friday, the SEC delivered this report to Congress on decimalization as required by the JOBS Act.

Deal Cube Tournament: Elite Eight; 4th Match

This is the last match of the 4th round - the battle among the Elite Eight! Then on to the Final Four! As noted in these rules (and keep sending more pics for the next tourney), please vote for one of the following two cubes below:

- Pink Clear Pig
- Budweiser Tap


- Broc Romanek

July 20, 2012

The Meaning of a SEC Signature: Will the Real CEO Please Stand Up?

Who would ever think that signing a SEC filing would ever become an issue in a Presidential campaign? That's what has happened as Mitt Romney states that he wasn't actively managing Bain Capital during a period when he signed at least 6 filings, according to this Huffington Post article. As noted in this article by "The Nation," former SEC Chair Harvey Pitt has been leading the charge defending Romney - and this NY Times article tries to hash out the timeline of Romney's activities during the period in question. But the purpose of this blog isn't to wade into that debate. For one, I am not a '40 Act lawyer (I hear this type of thing is common in the '40 Act world - but I don't know if that's true nor if it's lawful just because others do it).

Rather, I mention it to make a comparison with the rules for public operating companies (ie. those that file Form 10-Qs and 10-Ks under the '34 Act) to those that apply to private equity funds. I think that it would be problematic if someone was listed as the CEO - for example, under Item 401 of Regulation S-K in a proxy statement or 10-K - but they weren't. A related - but perhaps distinct - issue relates to someone signing a '33 or '34 Act filing as a CEO when they really weren't acting in that capacity. Consider these issues in context of the era before CEO certifications - which didn't exist until '02 and Sarbanes-Oxley - what do you think would be the repercussions? Any regulatory response? What do you think the investor reaction would be? Shoot me an email and let me know what you think - I won't attribute any comments to you unless you provide permission.

If you enjoy "The Daily Show," you must check out Jon Stewart's take on this "retroactive retirement" situation from Monday's episode.

Our New "Audit Committee Disclosure Handbook"

Spanking brand new. Posted in our "Audit Committees" Practice Area, this comprehensive "Audit Committee Disclosure Handbook" provides a heap of practical guidance about Item 407 of Regulation S-K (as well as the NYSE and Nasdaq financial expertise requirements). This is a real gem - 35 pages of practical guidance...

Deal Cube Tournament: Elite Eight; 3rd Match

This is the third match of the 4th round - the battle among the Elite Eight! As noted in these rules (and keep sending more pics for the next tourney), please vote for one of the following two cubes below:

- Cereal Boxes in Bowl and Spoon
- Toolbox


- Broc Romanek

July 19, 2012

Does a CEO's Pregnancy Warrant Disclosure?

I know. This is low-hanging fruit for those in the disclosure business but the mass media is actively batting this question around in the wake of the revelation that Yahoo!'s new CEO is six months pregnant - but that fact wasn't disclosed when her hiring was announced. My take on this issue is in Francine McKenna's Forbes article. It's clearly not required to be disclosed - nor is voluntary disclosure something that is a sound practice. It's none of anyone's business - and it shouldn't be an issue for investors.

And on the employment law side of it, federal law prohibits sex discrimination (most states have comparable laws). So just like an employer should not ask a prospective hire about age or religion, companies should steer clear of asking about pregnancy. Thanks to Mike Cramer of Ogletree Deakins for his employment law expertise...

With the media's focus on new CEO Melissa Mayer, we haven't heard yet whether the folks at Yahoo! consider their say-on-pay to have technically passed, but either way the company's comp committee has some work to do given the voting results filed on Tuesday: Votes "For" = 50.12% of Votes "For" + "Against." But the company's proxy statement discloses that abstentions will be counted as a vote against - so votes "For" = 49.86% of Votes "For" + "Against" + "Abstain." Thanks to Karla Bos of ING for pointing this out!

JOBS Act: Under Fire

Lately, there have been a number of mass media articles critical of certain aspects of the JOBS Act. Here are a few:

- Reuters' "Bankers fear Jobs Act could spur scandals - study"

- BNA's "Two Old Brands -- Fender and Manchester United - Use JOBS Act to List as 'Emerging Growth Companies'"

- NY Times' "In Manchester United's I.P.O., a Preference for American Rules"

July-August Issue: Deal Lawyers Print Newsletter

This July-August issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:

- Proxy Access Proposals: 2012 Review & 2013 Outlook
- M&A Indemnification Provisions: What Drafters May Be Critically Missing
- Private Equity Clubs Today: Keeping It In The Family
- Boilerplate Matters: Severability Clauses

If you're not yet a subscriber, try a "Half-Price for Rest of '12" no-risk trial to get a non-blurred version of this issue on a complimentary basis.

Deal Cube Tournament: Elite Eight; 2nd Match

This is the second match of the 4th round - the battle among the Elite Eight! As noted in these rules (and keep sending more pics for the next tourney), please vote for one of the following two cubes below:

- Movie Projector & Ticket
- Black Jack Table


- Broc Romanek

July 18, 2012

Broadridge's 2012 Proxy Season Stats

Last week, Broadridge released its 2012 proxy season stats, including:

- Average quorum levels were 82.7% as shares voted with shareholders' instructions partially offset a decline in broker votes
- Over 95% of all of the shares voted through Broadridge were voted electronically through ProxyEdge, ProxyVote.com and automated voice response
- Over 60% of all mailings were either delivered through electronic platforms or consolidated, by specialized processing, into a single delivery or e-delivery for households and managed accounts, a 13% increase over last season
- Mobile voting grew to over 445,000 shareholders, a fourfold increase over last season

You gotta see this photographer's stuff...hilarious.

STA Study: Proxy Distribution Fees Going Up

As noted in this press release, the Securities Transfer Association released a study last week on proxy fees. This STA study evaluated 33 Broadridge invoices for proxy distribution services from 2010-2012. The STA then applied the proxy fee schedule proposed by the NYSE Proxy Fee Advisory Committee in May to these 33 invoices. The study concludes that this new proxy fee schedule will increase costs for issuers in several fee categories - with cost increases will be more dramatic for small cap and mid cap issuers.

Transcript: "Proxy Season Post-Mortem: The Latest Compensation Disclosures"

We have posted the transcript from the recent CompensationStandards.com webcast: "Proxy Season Post-Mortem: The Latest Compensation Disclosures."

Deal Cube Tournament: Elite Eight; 1st Match

This is the first match of the 4th round - the battle among the Elite Eight! As noted in these rules (and keep sending more pics for the next tourney), please vote for one of the following two cubes below:

- McDonald's Fries
- Milwaukee Brewers Beer Tap


- Broc Romanek

July 17, 2012

The Olympics in DC! What a Night!

I'm going off-script to blog about a personal experience. The USA Olympic Basketball teams played Brasil in exhibition games here in DC last night and it was magical. Not just because Lebron, Kobe, Durant, Chris Paul, etc. were on the same team. Nor because the President, First Lady, Malia and VP Biden sat just across the way from us. But because the crowd was in such a state of excitement that you could hardly sit still. I now "get" what it feels like to go to the Olympics in your home country. Here are a bunch of photos I snapped:

Brasil's National Anthem (they spell it "Brasil"; not "Brazil")

game brazil intro.jpg

Our Team's Introduction w/ Members of Military (everyone was screaming!)

game intro.jpg

The President & Vice President (place went wild when President arrived; chanting "USA"!)

game obama biden.jpg

Brasil's Women's Team Sat Right Behind Us (they played the game before; they cheered loudly in Portuguese)

game womens team.jpg

The President & First Lady on "Kiss Cam" (she had just arrived & they didn't know what to do; they had a "do-over" later in the game)

game kiss cam.jpg

From "The Daily Beast": Guess Michelle's not a fan of on-cue PDA. The First Lady rejected a kiss from President Obama at the Olympic basketball team tune-up game against Brazil Monday night. The couple was shown getting cozy on the Jumbotron during the first half of the game, but when the "kiss cam" video display prompted some smooching, Michelle failed to comply. The audience booed as the president appeared to lean in for a kiss, only to get Michelle shaking her head with a smile. Obama broke her down in the 4th quarter though, when the couple leaned in for a crowd-pleasing kiss. Maybe the campaign ran some numbers? Or maybe Michelle just likes to keep the romance alive by making the Commander-in-Chief work for his sugar. Either way, it was a confidence-boosting night for the U.S. men's team, with a 80-69 win against Brazil.

- Broc Romanek

July 16, 2012

SEC's Chief Accountant Publishes Final IFRS Work Plan Report

On Friday, the SEC's Office of Chief Accountant issued its final IFRS work plan report. Since the SEC has no timeframe now to decide whether to switch to IFRS - and since its a Presidential election year - it's truly uncertain when that decision will be made.

Sleeper Alert: CFTC's New Rule Might Force You to Get Special Board Approval for Interest-Rate Swaps

As Nate Endrud blogged last week, the CFTC has approved its final rule on the so-called "end-user exception" to Dodd-Frank's mandatory clearing requirement applicable to swaps required to be cleared (roughly, standardized swaps). Under the exception, as provided by the Act, a swap counterparty may elect not to clear a swap if the counterparty:

(i) Is not a "financial entity" (e.g., swap dealer, major swap participant, investment fund, bank, or pension plan);
(ii) Is using the swap to "hedge or mitigate commercial risk," as further defined; and
(iii) Provides certain information along with the swap to a swap data repository or the CFTC.

I don't think many companies realize they are going to need special board approval to deal with run-of-the-mill interest rate swaps - and this could be applicable before you know it.

Transcript: "How to Cope with the M&A Litigation Explosion"

We have posted the transcript for our recent DealLawyers.com webcast: "How to Cope with the M&A Litigation Explosion."

Society of Corporate Secretaries Annual Conference: Fun in DC

Back from this year's conference - in my hometown - and in keeping with last year's tradition of posting a picture illustrating some class, below are Martin Bischoff and Laurent Rouyres of Labrador at Friday's Newseum event (here are conference notes from Davis Polk's Ning Chiu):

labrodor.jpg

- Broc Romanek

July 13, 2012

Our New "Risk Factors Disclosure Handbook"

Spanking brand new. Posted in our "Risk Factors" Practice Area, this comprehensive "Risk Factors Disclosure Handbook" provides a heap of practical guidance about the disclosure obligations under Item 503(c) of Regulation S-K. This one is a real gem - 37 pages of practical guidance...

Corp Fin Updates Financial Reporting Manual (Again)

A few days ago, Corp Fin indicated that it has updated its Financial Reporting Manual for issues related to age of interim financial statements, use of pro forma information in MD&A, age of financial statements for smaller reporting companies, periods required for financial statements filed by Canadian issuers on Form 40-F, as well as other changes.

Insider Traders Beware! SEC Votes to Strengthen Trading Audit Trail

Yesterday, in a 3-2 vote, the SEC adopted a rule that directs the national securities exchanges and FINRA to establish a market-wide consolidated audit trail that will significantly enhance regulators' ability to monitor and analyze trading activity. This serves as a good reason to remind insiders of their obligations under the law and corporate insider trading policies.

Deal Cube Tournament: Sweet Sixteen; 4th Match

This is the last match of the 3rd round - the battle among the Sweet Sixteen! As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:

- Green Bay Packers Football Stuff
- Pink Clear Pig
- Budweiser Tap
- Forklift with Paper Roll


- Broc Romanek

July 12, 2012

Survey Results: Board Minutes & Auditors

We have posted the survey results regarding board minutes and auditors, repeated below:

1. When it comes to board minutes, our company
- Provides copies of board minutes to auditors upon request in electronic form only - 26.5%
- Provides copies of board minutes to auditors upon request in paper form only - 18.4%
- Provides copies of board minutes to auditors upon request in electronic and paper form - 20.4%
- Doesn't provide copies of board minutes to auditors - but we do allow inspection of minutes onsite - 34.7%
- Doesn't provide copies of board minutes to auditors - nor do we allow inspection of minutes onsite - 0.0%

2. Our auditors ask for copies or inspection of board minutes
- Each quarter - 93.9%
- Once a year - (2.0%
- On irregular basis - 4.1%
- They never ask for board minutes - 0.0%

Please take a moment to participate in this "Quick Survey on Insider Trading Policies: Pledges & Margin Accounts" (remember the recent attention on margin accounts used by insiders thanks to the Green Mountain Coffee chair's margin call) and "Quick Survey on Rule 10b-18 & Buybacks."

More on "The SEC Comment Process: What is a Bedbug Letter?"

When you blog, you can never guess which blogs will produce the most commentary. Surprising to me, this blog from long ago on bedbug letters resulted in numerous emails from members. And the types of responses were all over the lot.

For example, Francine McKenna (of re:theauditors fame) wondered why the SEC bothered with this type of letter when the Obama Administration was touting General Motors' IPO as a "win" for the bailout when the company has repeated material deficiencies in internal controls and multiple year adverse opinions on its controls. See this Bloomberg article and this Accounting Onion Blog.

Another member emailed me this:

This letter is a perfect example of government waste - as in, waste of words. Do you mean to tell me it takes three paragraphs and over one hundred words to say, in effect "This registration statement violates United States securities' laws and regulations. If you do not make the necessary revisions, we will request that the Enforcement Division take action against you."

For goodness sakes, do you mean to tell me that anyone in their right mind (other than a securities' lawyer) could consider that form letter anything other than unintelligible. Hello - "plain English" please! It is the kind of non-sensical correspondence like this bed-bug letter that results in bankers and accountants making fun of the lawyers on a deal.

And then David Westenberg of WilmerHale notes his book has the etymology of the term:

Occasionally, the staff finds that a Form S-1 is so poorly prepared or beset with such serious problems that it declines to provide comments until a remedial amendment is filed. In egregious cases, the staff may suggest that the company consider withdrawing the filing. The staff communicates this message in what is often termed a "bedbug letter."* Bedbug letters are generally provoked only by blatant noncompliance with applicable rules, such as filing a Form S-1 with incomplete or stale financial statements, or submitting a document that contravenes specific pre-filing staff guidance or instructions. If the company receives a bedbug letter, some soul-searching--and perhaps new counsel--may be appropriate.

*The phrase seemingly emanates from the apocryphal tale of an aggrieved customer in a fine hotel who complains about bedbugs and receives written assurances that the problem was a one-time occurrence; however, the response is inadvertently accompanied by instructions from the complaint's recipient to an assistant to send the customer "the standard bedbug letter." The application of this phrase to deficient SEC filings is, however, a mystery.

Deal Cube Tournament: Sweet Sixteen; 3rd Match

This is the 3rd match of the 3rd round - the battle among the Sweet Sixteen! As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:

- Cereal Boxes in Bowl and Spoon
- Toolbox
- Snapple Bottle (Lemon Iced Tea)
- Logging Truck


- Broc Romanek

July 11, 2012

How to Market Yourself 101

Most lawyers are horrible about marketing themselves. I'm not quite sure why that is, but it's a fact. But in this day and age of low job security - regardless if you're in a law firm or in-house - it is critical for you to network and get your name out there, even if you never care to become a rainmaker. Luckily, the online world allows you to network without leaving your office.

One person who "gets it" is Boris Feldman of Wilson Sonsini. I've been seeing his name for as long as I can remember. He has a site whose domain name is his own name (even if it's bare bones). And when he writes something, he lets those who report about such things know about it. Hence, his most recent piece - "Shareholder Litigation After the Fall of an Iron Curtain" - has showed up on about every corporate blog that I regularly read (egs. Keith Bishop's blog and Kevin LaCroix's blog). All Boris did is send me a brief email noting that he had written this article and shared its link - I imagine that's all he did with these other influencers.

So what can you do to enhance your profile? Shoot me an email. It doesn't have to be about an article you've written. It can be an interesting anecdote you've come across (or a fond financial printer memory). It can just ask what you can do to enhance your profile and I'll give you my ten cents. It's a new era and time for you to make some new virtual relationships. So go ahead and start making them. I love interacting with my community and look forward to hearing from you. And if you're attending the Society of Corporate Secretaries' Annual Conference this week, come on up and say hello...

Our New "MD&A Handbook"

Spanking brand new. Posted in our "MD&A" Practice Area, this comprehensive "MD&A Handbook" provides a heap of practical guidance about the disclosure obligations under Item 303 of Regulation S-K.

RIP Moxy Vote

Yesterday, Moxy Vote posted this explanation - mainly regulatory hurdles - of why it is shutting down...

Deal Cube Tournament: Sweet Sixteen; 2nd Match

This is the 2nd match of the 3rd round - the battle among the Sweet Sixteen! As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:

- Movie Projector & Ticket
- Black Jack Table
- "You Don't Bring a Knife to a Gunfight"
- Tipping Bucket


- Broc Romanek

July 10, 2012

FASB Decides To Not Change Loss Contingency Disclosure Requirements

Yesterday, as noted in Gibson Dunn's blog, the FASB - in a 5-2 vote - decided to remove modifying accounting for loss contingencies disclosure from its agenda after four years of controversy and comment. The majority of FASB members agreed that ASC 450's requirements are sufficient. Corp Fin's efforts to comment on litigation contingencies likely also had an impact on FASB's decision to take its proposal off the table (see the memos in our "Contingencies" Practice Area like this one). Here is the FASB meeting handout.

IFRS: SEC Staff Report Coming Soon - But Without Timetable

A long-awaited SEC Staff report on IFRS is expected sometime over the next few weeks - but without a recommendation on whether, how or when the United States should transition to IFRS, as noted in this Compliance Week article. One of the reasons for the vagueness is the probable need for the due process of a SEC rulemaking to go in that direction.

For those fascinated about how the US Supreme Court's decision on affordable health care was incorrectly reported initially by some in the mass media, check out this excellent detailed timeline put together by the SCOTUS Blog.

JOBS Act: GAO's New Study on Regulation A

Here's news from Steve Quinlivan's blog:

Concerned about the decline in the number of public offerings, the JOBS Act requires the SEC to amend Regulation A (or to adopt a new regulation) to raise the threshold for use of that registration exemption from $5 million to $50 million, and requires the GAO to study the impact of state securities laws on Regulation A offerings. The GAO has issued a report that examines:

- Trends in Regulation A filings,
- How states register Regulation A filings, and,
- Factors affecting the number of Regulation A filings and how the number of filings may change in the future.

The GAO provided a draft of the report to the SEC and the NASAA for their review and comment. Both provided technical comments, which the GAO incorporated as appropriate. In its letter, the NASAA concurred with the GAO's findings that multiple factors have affected use of Regulation A, and suggested that the primary reason for its limited use is the "mini-public offering" process that businesses must complete. Stakeholders with whom the GAO did not consistently cite any single factor as the primary reason for the limited use of Regulation A. As noted in the report, the NASAA stated that it will be working to develop model state registration requirements for the larger Regulation A offerings allowed under the JOBS Act, and NASAA suggested that further changes to federal securities laws, particularly Regulation A, should be withheld until states implement a new system to address the JOBS Act's changes. In considering any changes, the NASAA stressed the importance of balancing the needs of investors with the need to raise capital.

Deal Cube Tournament: Sweet Sixteen; 1st Match

This is the first match of the 3rd round - the battle among the Sweet Sixteen! As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:

- McDonald's Fries
- Milwaukee Brewers Beer Tap
- Louisville Slugger Baseball Bat
- Pill Bottle


- Broc Romanek

July 9, 2012

Working at the SEC: A Video

As noted on Corp Fin's "What's New" page, they are now hiring attorney and accountants. This is notable because it has felt like there has been a permanent hiring freeze.

Recently, I was cruising YouTube and found this polished 4-minute video posted by the SEC entitled "Work at the Securities and Exchange Commission." The video was uploaded in January 2009 but the thing is far older as it includes my friend Keir Gumbs and other folks that left the SEC long ago. It is among 50-plus videos posted by the SEC - most of the vids are opening remarks by SEC Chair Schapiro at open Commission meetings - and it is among the most popular of the SEC videos with over 3000 hits. The only other vids with sizable audiences are this one about a scheme targeting deaf investors and this video explaining what Investor.gov does.

Compare my own unpolished 5-minute video about "How to Get a Job at the SEC." That has over 1000 visits itself...

Working at the SEC: Alternative Work Arrangements

When I worked at the SEC, it was fairly rare for anyone to be approved to work on a part-time basis, much less on an "alternative" basis. Now, it is common within the government (and the private sector too) to have flexible work arrangements. This 88-page report from the SEC's Inspector General last year is instructive because it lays out and reviews the 8 different types of arrangements available.

Poll: Identify the SEC's Flexible Work Arrangements

To test your knowledge of flexible work arrangements, click on the arrangements below which you believe are used at the SEC. Some of the choices are fictitious:


- Broc Romanek

July 6, 2012

Business Roundtable Updates Its "Principles of Corporate Governance"

Last week, Business Roundtable issued an updated version of its "Principles of Corporate Governance." The BRT's principles were last updated in April 2010. Gibson Dunn's blog covers the five major changes since the last update.

Another PCAOB Roundtable on Auditor Independence and Auditor Rotation

Last week, the PCAOB held its second roundtable since the issuance of its mid-2011 concept release on auditor independence and auditor rotation. Here are the written statements from the panelists - and here are statements from Chair Jim Doty, Board Member Jeanette Franzel and Board Member Steven Harris.

More on our "Proxy Season Blog"

We continue to post new items regularly on our "Proxy Season 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:

- NYSE Director Steps Down After Majority Withhold Vote
- How Your Annual Shareholder Meeting May Be Covered: Social Media Style
- A Review of Corp Fin No-Action Rulings on E&S Proposals
- Big Fireworks at Wells Fargo Annual Shareholders Meeting
- Chesapeake: Poster Child For Poor Governance

- Broc Romanek

July 5, 2012

Iran Sanctions: Another Congressional Bill to Force Disclosure

Trying not to blog considering most of you are on vacation - and that we lost power here again! But there is always a lot going on. As noted in this excerpt from this SNR Denton memo (posted in our "National Security" Practice Area):

One of the key components of the new round of Iran sanctions legislation currently under consideration by the US Congress is a new US SEC disclosure obligation for SEC-registered "public" companies that are engaged, directly or indirectly through their affiliates, in certain Iran-related conduct. Section 501 of the House-passed bill (HR 1905) and Section 214 of the Senate-passed bill (S 2101) both would amend Section 13 of the Securities Exchange Act of 1934 ("Exchange Act") to require that SEC-registered public companies make certain disclosures regarding Iran in their annual and quarterly reports.

UK Government to Require Mandatory Greenhouse Gas Emissions Reporting

Speaking of new disclosures, as noted in Gibson Dunn's blog, the UK recently announced at that it will become the first country to require emissions data disclosure in companies' annual directors' reports. In comparison, the SEC issued an interpretive release early in 2010 providing guidance on existing US disclosure requirements as they apply to climate change matters.

More on "UK One Step Closer to Binding Say-on-Pay: On to Parliament"

Recently, I blogged about the UK's march towards binding say-on-pay. Now, as described in this Davis Polk blog, the UK has published a consultation paper focusing on the content of remuneration reports of UK-incorporated quoted companies that would disclose the compensation of directors, including executive directors. Read the blog for more...

- Broc Romanek

July 3, 2012

SEC Announces Intention of Adopting Corp Fin Rules - In Late August

Yesterday, the SEC posted a Sunshine Act notice that it will consider a trio of Corp Fin rulemakings at an open Commission meeting on Wednesday, August 22nd. The trio of rulemakings is: conflict minerals, resource extraction and the elimination of the prohibition against general solicitation under Regulation D - the first two being Dodd-Frank rulemakings and the last one under the JOBS Act. We are in the process of pushing back our "JOBS Act Update: Where Are We Now" webcast to a date in early September so that this development can be covered soon after it happens.

The SEC's announcement is more than 7 weeks in advance of the meeting, a much longer notice period than I can recall for any other open meeting. A single week is typical. Here are a few theories why the notice is so early:

- Stave off Congressional pressure? As noted in this WSJ article last week, 58 Congressfolk sent a letter to SEC Chair Schapiro asking why the SEC has missed the April 2011 deadline for the mining and resource extraction rulemakings. Perhaps because these rulemakings are among the most challenging rulemakings that the Staff has had to do in a long time, as the subjects are way outside the traditional securities laws. Interestingly, this notice comes out after Congress has gone on recess.

- Response to Oxfam America lawsuit that SEC wasn't rulemaking fast enough? As I blogged recently, an activist group has sued the SEC to compel it to act on the resource extraction rulemaking. Perhaps this was in response to the lawsuit to make it go away.

As for the Regulation D rulemaking, note that wording of Item 3 in the notice doesn't state that the SEC will consider whether "to propose" the rule. The wording of these descriptions are vetted carefully, so the absence of the term "propose" could imply an interim final rule, or perhaps something else. Recall that the JOBS Act called for this rulemaking to be finished within 90 days of the Act's passage - Chair Schapiro testified before a House subcommittee last week that the SEC would not make the July 4th deadline. That tight deadline was never realistic...

What is a "Sunshine Act Notice"?

Under the "Government in the Sunshine Act," the SEC - just like other federal regulatory agencies - must provide notice to the public before holding a Commission meeting. As noted in Section (e)(1), the notice must be announced at least one week before the meeting. There is no upper limit on the notice coming out sooner.

Note that in Section (e)(2) that the meeting date can be easily changed. A change in meeting date must be noticed too - but only as of the "earliest practicable time." So it could be possible for the SEC to push back the August 22nd meeting date for one - or more - of the three agenda items if need be...

SEC Updates "Implementation of Dodd-Frank Act Rulemaking Timeline" to "Pending Action"

Yesterday, the SEC cleaned up its "Implementing Dodd-Frank" Timeline by removing all of the predictions of when the rulemakings might take place. Instead, all of the outstanding Dodd-Frank rulemakings are simply under a caption labeled "Pending Action." This relieves the SEC from having to continuously update the timeline each time it misses a prediction...

Ode to Electricity

Seen on my wife's Facebook status in the wake of a painful, widespread power outage in hot DC:

"Dear Electricity, please come back. I know I took you for granted...just, you know, used you. I miss your wit and charm, your warm glow and how very cool you are...so cool."

- Broc Romanek

July 2, 2012

Melissa Gleespen's Latest Regulation FD Training Video

Melissa Gleespen of Owens Corning recently shared her latest Regulation FD animated training video. She notes: "We hold an Investor Day every 18 months. In preparation, we hold in-person training with the presenters and those who will interact with investors. Our CFO specified that for the training I should make 'one of those videos, a new one.' This video was well-received. It got lots of laughs, showed that I am human and stimulated a robust discussion. I think that if I should ever show up with a PowerPoint presentation, I will be shown the door. I encourage other lawyers to try making training movies, too. It costs ones of dollars and there is unsuspected comedy gold in the practice of law."

Here's a podcast that I taped with Melissa from a year ago, along with her earlier work...

By the way, for those of you tasked with training others in your company about Regulation FD, you will want to check out the sample Reg FD training presentation in our "Regulation FD" Practice Area...

Our New "Director & Executive Officers Legal Proceedings Disclosure Handbook"

Spanking brand new. Posted in our "Legal Proceedings Disclosure" Practice Area, this comprehensive "Director & Executive Officers Legal Proceedings Disclosure Handbook" provides a heap of practical guidance about the disclosure obligations under Item 401(f) of Regulation S-K.

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