TheCorporateCounsel.net

I love being human. I am sometimes wrong, that’s for sure. And by reading this follow-up to one of my blogs by David Smyth about “Does SEC Enforcement Treat Bigger Companies Differently?,” I can honestly say that I was wrong. I am not as close to the SEC enforcement process as David and his arguments that their might be some bite to the study by Jonas Heese makes sense on its face. Here’s an excerpt from David’s blog (and here’s another blog about this study):

I have two thoughts about Heese’s claims. As Vincent Vega once said, “That’s a bold statement.” The facts are the facts, and if the SEC is less likely to beat up on labor-intensive firms, that tendency must be attributable to something. But I am extremely skeptical that it is related to presidential election years or the locations of corporate headquarters relative to the districts of senior congressmen. Believe me, Senators and Members of Congress who serve on the SEC’s oversight committees can be quite overbearing and can distract from the Enforcement Division’s mission. But the vast majority of those distractions come in the form of low-value information requests that are tedious and hard to respond to. As for outside pressure not to investigate a particular person or company, though, while the SEC’s record isn’t perfect, my experience was that the Commission was pretty insulated.

But . . . investigating cases and seeing them through to the end is hard. And if the SEC is looking at a particular set of facts that requires the agency to rely on strained interpretations of the laws and regulations under its jurisdiction, it’s easier to bring those cases against defendants who are not as well funded and less likely to mount serious defenses. If a large hedge fund and a smaller defendant are engaged in similar conduct the SEC finds questionable, that smaller defendant is a softer target. I honestly hate to say it. And I never write publicly about the matters in which I serve as defense counsel. But I have seen – and am currently seeing – intense focus by the Enforcement Division in areas where the SEC’s authority is quite weak, but the costs of litigating are financially and emotionally prohibitive. This is obviously a purely anecdotal “analysis”, but it’s not nothing either. I suspect Heese is actually onto something with his facts but has latched onto simplistic causes that may not match up.

Meanwhile, in this blog, Kevin LaCroix tackles the issue of D&O coverage for when the SEC issues a subpoena – and whether that constitutes a claim.

In the News: Politician Criticism of Buybacks

Last year, I blogged about a flurry of articles in the media criticizing the zany pace of buybacks (and last month, I blogged about BlackRock’s letters to CEOs about them). As noted in this article, the topic is now becoming a political hot potato as Senator Tammy Baldwin has sent this letter to the SEC “about the adequacy of the SEC’s rules governing repurchases on the open market.” In addition, SEC Commissioner Stein delivered this speech, noting that the SEC should be evaluating whether action in this area is warranted…

Activism & Buybacks: Seeking Board Seats to Apply Pressure

This DealBook article describes how a former Goldman banker who was placed in General Motors by the Obama Administration as part of the bailout has now put himself up for a seat on the GM board, as part of a campaign from four hedge funds to persuade the company to buy back at least $8 billion worth of shares by next year. This Form 8-K from GM files a “Notice of Director Nomination.” Also see this blog – entitled “At GM, The Year’s Most Interesting Activist Project” – from “The Activist Investor”…

– Broc Romanek