TheCorporateCounsel.net Blog |
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Friday, December 12, 2003
Impact of SEC's "Late Fund Trading" Proposal on 401(k) Plans Yesterday, the SEC issued its proposing release regarding amendments to the mutual fund pricing rules to prevent late trading in fund shares. The proposed rules would require that all purchase and redemption orders be received by the fund (or a single transfer agent designated by the fund or registered clearing agency) no later than the time at which the fund prices its securities, typically 4 pm. This change would have an impact on the operation of 401(k) plans. The proposal states that administrators of defined contribution employee pension plans - such as 401(K) plans - have informed the SEC that they likely will be unable to process any purchase or redemption requests the same day they are made. Another issue that operating companies have to consider is market timing through trading in 401(k) investment options by plan participants. For example, it has recently been reported that some employees have been engaging in market timing in the Federal Reserve's employee thirft plan, and that the Fed has issued two letters to participants and imposed a restriction on rapid trading. Possible measures to restrict market timing in plans (e.g., redemption fees or trading restrictions) have to be reviewed for possible ERISA issues. Thanks to our roving reporter, Mike Holliday, for the information above! Scrushy Looking to Overturn SOX According to a brief story on AccountingWeb.com, Richard Scrushy's lawyers said yesterday that part of Scrushy's defense in his criminal fraud case is "overturning SOX" (there is no further elaboration in the story). Scrushy, former CEO of Healthsouth, is alleged to have signed false 906 certifications. What kind of name is "Scrushy" anyways... Thursday, December 11, 2003
Yikes! Nasdaq Flips Back to Original Position on Effective Date This one is a moving target. I hear from a reader that the Nasdaq staff is now going back to its original position that proxy statement disclosure in proxy statements sent to stockholders for annual meetings held on - or after - January 15th should include the newly adopted disclosure from the new governance standards. So we are back to a split in opinion between the NYSE and Nasdaq - as we noted in our December issue of E-Minders. The maddening part is that nothing in writing has come from the Nasdaq staff on this very important topic - and its not the type of topic for which one should submit an interpretive request and pay the Nasdaq staff $2k (as now required under Rule 4550). As an aside, did you notice that Nasdaq has advertising at the bottom of its "Legal & Compliance" page? Sorta diminishes the feeling that you are dealing with a regulator... Don't forget today's webcast on "The New Governance Listing Standards" during which inhouse counsel will discuss how they are implementing the new standards (and not rehashing what those new standards are). New Executive Compensation Guidance Today, the National Association of Corporate Directors is coming out with a Blue Ribbon Commission Report on Executive Compensation and the Role of the Compensation Committee. As evident from how often I cite the NACD "BRCs" in the FAQs on GreatGovernance.com, I hold them in high regard as they are among the finest corporate governance publications out there. Based on an article in today's WSJ, this BRC proposes ways to constrain exec pay, including recommending that comp committees hire their own comp consultants and that committees should hire consultants not used by management for other assignments (as well as that companies should provide disclosure if the committees do hire someone that does work for management). Other ideas are crackdowns on severance pay; "pay-for-performance" packages that are triggered after-the-fact; and incentive pay for weak performance. Perhaps the most interesting is the advice to consider alternatives to CEO contracts. I will blog more after I get a chance to obtain and read this new BRC. Wednesday, December 10, 2003
More Sample Governance Documents We are starting to hit our stride by posting more sample governance documents in our "Sample Library," which is located in the bottom left side of our home page. During the past week, we have added new compensation committee evaluations and governance committee evaluations as well as new board evaluations and a board matrix. In addition, we have posted new audit committee evaluations (now, there are 9 of them) - and we have a new audit committee financial expert questionnaire (which makes a total of 3). In addition to today's webcast on "The New MD&A" (to which we just added Richard Harrison, President of GSI - which runs LiveEdgar - to the panel), don't forget tomorrow's webcast on "The New Governance Listing Standards" - which will be full of practical guidance from in-house counsel that have already grappled with implementing many of the new standards. The panel includes: Peggy Foran of Pfizer; Jim Gunderson of Schlumberger; Cary Klafter of Intel; and Tina Van Dam of Dow Chemical. Mulling the Security of the SEC's Website Today, the Washington Post ran an article about how most federal agencies flunked (again - 4th year in row) a test regarding the relative security of their computer networks and other online threats. Seven agencies received an "F" including the Justice Department, which is charged with prosecuting many cases involving hacking and other forms of cyber-crime. The test is administered by the House Government Reform subcommittee on technology. The SEC was not mentioned in the article and I couldn't find any more information from this subcommittee's webpage about the most recent scorecard. However, I have no reason to believe that the SEC's systems are not secure. In the hacker community, it has been a challenge to attempt to access the Edgar database for some time - just to prove it can be accomplished - and there have been no successes that I am aware of. Still, the thought of it can drive you mad - if someone accessed your recently filed 10-K and subtracted a few zeroes from net income... Tuesday, December 09, 2003
SEC Comment Letters Online: The Big Chill? Last week, GSI Online—sponsor of the LIVEDGAR database—rolled out a new product that consists of public access to SEC staff comment letters. The database appears to be comprised of hundreds - if not thousands of - letters that GSI has obtained through a massive FOIA request and includes requests for correspondence between the SEC staff and a wide range of companies (including companies that were part of the SEC’s Fortune 500 review project). This includes public access to both SEC comment letters and the responses. For TheCorporateCounsel.net members, we have posted an interview with Thad Malik and Bill Tolbert of Jenner & Block on SEC Comment Letters in the Public Domain - including information about what Alan Beller said at this weekend's ABA meeting on this topic regarding confidentiality requests and more. We also have started posting law firm memos on this topic in E.18 of our "Sarbanes-Oxley Law Firm Memos." While SEC comment letters have always been subject to FOIA requests, this facilitated ability to access - and word-search - them may well chill communications between the SEC staff and the corporate community. And Milberg Weiss certainly won't be opposed to such a development... Sample MD&As Although it was against my nature - due to my training on the SEC staff to never endorse specific disclosure - we have posted samples of specific MD&As that we thought were pretty good in certain areas (we included brief notes about what we thought were good about them). This was part of another update of the checklist in our "Proxy Season Resource Center" during which we have added several dozen more factors to consider in drafting a MD&A. This is all in preparation for tomorrow's webcast on "The New MD&A". Tune in to hear Stacey Geer of BellSouth; Karl Groskaufmanis of Fried Frank and Ron Mueller of Gibson, Dunn. AMEX Governance Listing Standards Approved Better late than never, the SEC has approved the final AMEX governance listing standards (note that this SEC release is on our site, but not the SEC's site yet). Monday, December 08, 2003
Nasdaq Does Not Change Tune - Final Word (I hope) Over the weekend, the ABA Federal Regulation of Securities Subcommittee held a meeting - and someone reportedly told the audience that it will now interpret the effective date of its new governance listing standards so that applicable disclosures will not be required in documents before the date on which the company must comply with the amended listing standards - for calendar year companies, their first annual meeting after January 15, 2004 (i.e. disclosures not required in proxy statements because they are filed and delivered before the annual meeting - website disclosures required to be up as of the annual meeting date). This is the position that the NYSE staff took several weeks ago. This was counter to what we heard Nasdaq was saying before - that proxy statement disclosure in proxy statements sent to stockholders for annual meetings held on - or after - January 15th should include the newly adopted disclosure. We reported this former split in opinion between the NYSE and Nasdaq in our December issue of E-Minders. Now, on December 10, the Nasdaq has stated that its sticking by its original position as stated in E-Minders above - so the split between Nasdaq and NYSE remains and Nasdaq companies will have to provide these disclosures in the upcoming proxy statements. Director Education and Orientation For TheCorporateCounsel.net members, we have launched a "Director Education/Orientation Portal" which includes a sample checklist for director orientation and a list of links to all of the third-party director colleges. More to come in this area. Don't forget to vote in our current survey on director education and orientation. So far, the twenty responses have been interesting... |
