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The SEC’s Office of Inspector General has been busy, issuing no fewer than four reports this week (even though some are dated March). The most important one is “Audit of Full Disclosure Program’s Staff Interpretive Guidance Process,” given that it is a topic frequently criticized by SEC Commissioner Atkins and something that is a lifeblood for many of us.

Here are my “Top Notables” about this 18-page report (listed in order of where they are mentioned in the report):

1. It took the Inspector General’s office 10 months to draft its report. (pg. 2)

2. The report states that most interpretive guidance comes from four groups of the Staff (Corp Fin’s Office of Chief Counsel and Office of Chief Accoutant and two offices in the SEC’s Office of Chief Accountant). I’m stumped why the report doesn’t include three of Corp Fin’s other specialized offices, which provide plenty of guidance: Office of Mergers & Acquistions; Office of International Corporation Finance and Office of Edgar and Information Analysis. (pg. 3)

3. Corp Fin as a whole answered 32,500 phone calls during 2005 – ouch! (pg. 4)

4. The report notes that Corp Fin’s Office of Chief Accountant provided advice on 340 referrals to Enforcement during 2005 – but oddly doesn’t mention Corp Fin’s Office of Enforcement Liaison, whose main function is to provide advice to Enforcement. (pg. 4)

5. Corp Fin/OCA runs its SABs through the Commissioner’s legal counselsors typically. The Inspector General recommends that the Office of General Counsel look into compliance with the Administrative Procedures Act relating to the processes involved in the SEC issuing SABs, as well as interpretive guidance from the Staff generally. In my view, this is the report’s bombshell as it has the potential to really gum up the works. (pg. 4-5)

6. Corp Fin doesn’t post shareholder proposal no-action responses on its website due to resource limits; it is recommended that Corp Fin post these responses. (pg. 5)

7. The Inspector General is looking for confirmation that Corp Fin’s Shareholder Proposal Task Force does indeed take mailing deadlines into consideration when processing no-action requests. I haven’t heard any company complain about Corp Fin not being conscientious of this need. (pg. 7)

8. Corp Fin issues comments on non-shareholder proposal no-action letters within 30 days of filing – its stated goal – about 50% of the time. (pg. 7)

9. Corp Fin may be updating its 25-year old interpretive release on how to submit no-action letters, including the format they should take. (pg. 11)

10. The report includes esoteric commentary about “uploading” internal documents. This is a process that commenced near the end of my last tour of duty in Corp Fin and luckily I never had to upload a single document. (pgs. 11-12)

The SEC’s IG also issued these reports on Enforcement Peformance Management and Backlog of FOIA Requests for Comment Letters. Before these, the last Inspector General report involving Corp Fin was issued last summer; it dealt with continuous surveillance of larger companies and lifted the curtain a little bit on Corp Fin’s screening process.

Resume Indiscretions Possible at the SEC?

Another new report from the SEC’s Inspector General deals with verification of bar memberships. Not only is it interesting that the SEC hasn’t been verifying bar memberships in light of the highly publicized cases of resume indiscretions in the news lately, it’s interesting because – not so long ago – it was a big deal for a SEC lawyer to pass a bar.

During my first tour of duty in Corp Fin, the SEC didn’t have the luxury of so many lateral hires like it does now. Back in the “day,” most new lawyers came right out of law school. Our new jobs weren’t “official” until we passed the bar and when you did, you were promoted from “law clerk” to “lawyer.” There was a one-year probation period during which you had to pass the bar; so if you failed the bar twice, your probation period will likely have run and you were booted out of the SEC!

The IG’s report does note that lawyers fresh out of school do indeed still have their bars checked; it’s the horde of lateral hires that apparently have not been verified. I’m surprised the SEC fell down on this because it’s pretty easy these days to go online to a state bar website and verify membership. If there was one area I could see falling through the cracks, it would be verifying that Staffers remain members of the bar (eg. someone doesn’t pay their bar dues). It’s easy to forget about – or ignore – state bar requirements.

No mention in the report about whether the SEC checks the CPA licenses of the accountants…

The NYSE Speaks: Latest Developments and Interpretations

We have posted a copy of the transcript from our popular webcast: “The NYSE Speaks: Latest Developments and Interpretations.”