Last week, the SEC brought an enforcement action in the perks/related-person/internal controls area – In the Matter of MusclePharm Corporation – about how a company paid the spa tab for its CEO and his spouse, etc. The CEO is an ex-NFL football player as noted in this Bloomberg article. Good tabloid stuff to read upon my return.
But buried in the enforcement action is a claim that we don’t often see that made my head spin:
Retention of Signature Pages for Commission Filings
23. MSLP failed to maintain signed signature pages for most of its filings with the Commission from 2010 through 2013 as required under Rule 302 of Regulation S-T. MSLP failed to receive or maintain any manually signed signature pages prior to December 2012. After December 2012, while MSLP had made over 23 Commission filings, MSLP only received or maintained original signature pages for all signatories on eight filings.
Holy cow! I bet quite a few people aren’t even aware of the requirement under Rule 302 of Regulation S-T to retain signature pages for five years. And I’m certain no one would expect the SEC’s Enforcement Division to care! In his Section16.net Blog, Alan Dye noted last week:
While the Rule 302 violation may never have been raised if the SEC hadn’t concluded that more serious violations occurred, the fact that the SEC considered the 302 violation to be worthy of a separate claim suggests that the SEC is serious about the rule’s record retention requirement. Compliance personnel should, therefore, make sure that they are keeping manually signed copies of insiders’ Section 16(a) reports and, equally important, are storing the copies in a way that allows for easy location and retrieval by both current and future employees.
Retaining Manually Signed Signature Pages: Four Issues to Consider
This SEC enforcement case might be opening a can of worms. I doubt that many have been keeping a manually-signed original signature pages – if what that means is a “signed in ink or pencil” original – for their SEC filings, particularly for Section 16 filings. For a Form 4, it’s just too easy for the attorney-in-fact to file electronically without signing anything. Here’s some fodder to consider:
1. We haven’t saved a signed copy for the past five years, what should we do?
2. Can a scanned image of the manually signed document satisfy the five-year retention requirement?
3. How about filings by the company (eg. 10-K or registration statement) where the director or officers faxes or emails in signature pages – does the company need to follow-up to obtain originals?
4. How about where the manual signature is captured electronically in the first place (e.g., from a tablet or some board portals)?
The Mary Jo “Dump Truck”
As noted in this blog, the group that had plastered the DC subway system with posters asking Mary Jo White to be fired as SEC Chair is now using a mobile billboard over the next three days as part of their campaign. Send me a pic if you spot it!
Tomorrow’s Webcast: “Whistleblowers – What Companies Are Doing Now”
Tune in tomorrow for the webcast – “Whistleblowers: What Companies Are Doing Now” – to hear the Chief of the SEC’s Office of the Whistleblower, Sean McKessy – as well as Goodwin Procter’s Jennifer Chunias, DLA Piper’s Deborah Meshulam and K&L Gates’ Shanda Hastings, as they explore the latest developments at the SEC – and the issues that companies should consider when adopting changes to their whistleblower policies and procedures.
– Broc Romanek