Your New Year's Resolution

Bebchuk v. Lipton

Recently, Directorship ran this interesting article on the debate between Marty Lipton and Lucian Bebchuk on the role of shareholders in corporations.

Marty also recently addressed the "Mergers, Acquisitions, and Split-Ups" course at Harvard Law School regarding "The Future of M&A." The "Harvard Law School Corporate Governance Blog" has a link to this multiple hour address.

Our January Eminders is Posted!

We have posted the January issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!

SEC GC's Brian Cartwright on "Deretailization"

A while back, the SEC's General Counsel Brian Cartwright delivered this speech on "The Future of Securities Regulation." The speech provides an interesting look on how we might see the markets and regulation evolve in the future. Below is a speech summary from Robert Jackson of the "Harvard Law School Corporate Governance Blog":

The speech emphasizes what Brian calls “deretailization,” or the dwindling presence of retail investors in securities markets. Retail investors, who once owned more than 90% of publicly traded equity, now own less than 30%. Moreover, retail investors do not trade some assets at all, including the billions of dollars annually raised in 144A debt offerings. (Some institutions have recently moved to raise equity in 144A offerings as well.) And private equity and hedge funds, which frequently take publicly traded firms private, generally exclude retail investors altogether.

Over the last twenty years, Brian explains, these asset classes have come to dominate capital markets, and retail investing–once the focus of much regulatory behavior–is no longer central to modern securities markets. Instead, individual investors now choose among intermediaries competing for their funds–with the intermediaries, rather than the individual, directly participating in the capital markets.

In light of these trends, the speech argues, regulators should focus their efforts on ensuring that individuals have the necessary tools to choose among intermediaries. That kind of regulation, Brian explains, might ensure that individuals understand that a mutual fund’s past performance may not repeat itself; that additional disclosure allows investors to calculate an actively managed fund’s alpha, or market-adjusted performance; and that investors are able to evaluate a fund’s market-adjusted performance against the fund’s expenses.

- Broc Romanek

SEC (Finally) Launches its XBRL Viewer for Executive Pay

After a six-month delay, the SEC launched its online tool that allows comparisons of executive pay among the 500 largest US companies. This project was initially conceived by the SEC as a way of addressing the criticisms of last year's "December surprise" rulemaking by creating summary compensation tables that use the grant date fair value rather than the expensed amount for equity awards. Given that, it seems only fitting that the viewer was launched just before this Christmas. Here is the related press release.

Take a moment to check out how it works. Technologically, it appears to work just fine - but I worry about investors and analysts looking at numbers without the benefits of footnotes, CD&A and other narrative that puts the numbers in contexts. Please send me your own reactions (they will be kept confidential).

CEO Pay Continues to Rise

Based on proxy data filed this year, the median year-on-year increase in CEO pay was just under 13%, according to the 5th annual survey (paid subscription) of CEO compensation by The Corporate Library. The survey shows a median increase in Total Compensation of 12.64% as compared to an increase of 15.98 percent in last year’s survey. Pay rises in the S&P 500 were far higher than those for their peers in smaller companies, with the median increase topping 23%, and median total pay over $8.8 million. Here is a Chicago Tribune article about the survey.

SEC's Registration Filing Fees Finally Set for '07-'08

As noted in this press release/fee rate advisory #6 issued yesterday, President Bush signed the appropriations bill that includes funding for the SEC on December 26th. As a result, effective December 31st, the Section 6(b) fee rate applicable to the registration of securities increases to $39.30 per million dollars from the existing rate of $30.70 per million dollars. Get those registration statements filed today or pay more on Monday!

- Broc Romanek

SEC Enforcement (and Corp Fin) Stats for the Past Year

Recently, the SEC released its 2007 Performance and Accountability Report, as well as its 2007 Selected SEC and Market Data. Here is a statement on enforcement statistics from Chairman Cox. All provide a wealth of information about the SEC's activities during the past fiscal year (which ended on September 30th).

Here are some stats from the reports relating to the Enforcement Division:

- Total of 776 investigations initiated and 656 enforcement actions taken (involving a total of 1449 respondents or defendants; 33% of the actions related to reporting and disclosure); an increase of 14% from prior year (which is the first increase in 4 years, mainly due to 24 backdating cases and 39 cases against unregistered auditors)

- Obtained orders requiring disgorgement of illegal profits of $1.1 billion and another $507 million in penalties; a decrease from the $3 billion collected during each of past few years

- Total of indictments, informations or contempts in 144 cases; number of criminal cases has decreased during past two years after run-up in '02-'05

- Total of 125 director & officer bars

- 682 referrals to Enforcement from Corp Fin; up over 30% from prior year

Here are a few Corp Fin related stats:

- 25.5 days to issue comments; down from 26.2 days in '06

- 802 million searches on EDGAR; up from 531 million in '06

- 77 new foreign private issuers registered with the SEC; 60 did so in '06

SEC Changes Enforcement Policy on Closed Investigations

Last month, it was reported (eg. Reuters article) that under a new policy adopted by the SEC six months ago, the SEC will notify those under investigation when enforcement staff have decided to close the investigation. Here are some thoughts from Russ Ryan of King & Spalding, who is a former Assistant Director of the SEC's Division of Enforcement:

1. A GAO report from August talked about this new policy in some context. Russ says he was "quite a bit surprised" to learn that 13% of the SEC's open investigations - which would mean nearly 500 investigations - are more than 10 years old. He suspects, however that "very few of these investigations are really still active in any way."

2. Russ thinks this is a "very good development for companies, investment firms, and the securities bar - and investors too. This has been a long standing concern of many defense lawyers and companies under investigation, particularly those that have publicly disclosed an SEC investigation and want to assure their shareholders that it is no longer a concern for the company. It now appears that the SEC staff will promptly notify companies when the investigation has been closed, so companies will no longer have to wait in fear of the unknown when an investigation appears to be over but they dare not call the staff and risk triggering renewed interest."

3. From what Russ has seen and heard, the new policy is not being applied retroactively (i.e., if the case was already closed a year ago, "you're not going to get a notice about it now unless you ask for it"). The Staff appears to be applying the policy only on a going-forward basis

Two GAO Reports on SEC Enforcement Matters

Earlier this week, at the request of Senator Charles Grassley, the Government Accountability Office released a report that examines the SEC's oversight of the financial markets. The request stemned from Sen. Grassley's concern that the SEC may have given preferential treatment to John Mack, head of Morgan Stanley, when the SEC investigated possible insider trading at Pequot Capital Management. The report is critical about how the SEC handles referrals from the NASD and NYSE.

This report follows another GAO report from September (here is a summary) regarding the SEC's management of its enforcement caseload. This report concluded that the SEC needs to tighten its enforcement management procedures and increase the speed with which it distributes Fair Funds to investors.

- Broc Romanek

SEC Issues Year-End Stock Option Expensing Guidance

On Friday, the SEC issued Staff Accounting Bulletin No. 110 regarding option expensing guidance. As explained in this press release, SAB 110 provides guidance on the use of a "simplified" method (as discussed in SAB No. 107, issued back in March) in developing an estimate of expected term of "plain vanilla" options in accordance with FAS 123(R). In particular, the Staff indicated in SAB 107 that it will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term.

At the time SAB 107 was issued, the Staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the Staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The Staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the Staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007.

A New Section 16 Litigation Strategy

Alan Dye has written about this new-fangled Section 16(b) litigation strategy in a couple of recent issues of Section 16 Updates, but it's worth noting again as told in this Seatle Times article. The plaintiffs' bar will continue to be enterprising...

Why Are You Working This Week?

We'll be experimenting with these Web Polls over the next few weeks:

Direct Registration: Trap for the Unwary

From Lorelei Cisne of Arnall Golden Gregory: DTC has been telling issuers that in order for their securities to be considered "DRS eligible," the transfer agent for the issue must send DTC a letter requesting that the securities be added to their list of eligible securities. What has not been so clear perhaps, is that if that is all the transfer agent does, the issue will not only be marked as eligible - but it will be actually enrolled into the program (i.e., from brokers' point of view, they can use the system to request uncertificated shares). If an issuer wishes to be eligible but not participate - as allowed by the NYSE - the transfer agent must specifically say so in its letter to the DTC.

Now, that's not the whole story because there still will not be any uncertificated issuances unless the transfer agent actually honors the request and establishes direct registration accounts. However, if the transfer agent bounces the request, my understanding is that the requester is going to incur a charge without receiving their securities. But at least there won't be any unauthorized issuances.

However, I am aware of at least one instance in which due to confusion over this terminology, a transfer agent enrolled a company in DRS when it was not supposed to. I am still not sure whether any direct registration accounts were established - i.e., whether any uncertificated shares were issued - but I suspect that they were.

It's hard to believe that a transfer agent would go to such lengths without more formal documentation, etc., from the issuer, but it's beginning to look like that may have happened, in which case -- this is a real trap for the unwary!

What's Happening in Asia

Thanks to Liza Mark of Dorsey & Whitney, we just posted 20 pages of notes from the recent "Asia Capital Markets Forum 2007" in our "Conference Notes" Practice Area.

10 Effective Ways to Remember Names

As I get older, its become challenging to remember names, particularly since I don't get out much these days. AccountingWeb.com has this list of "10 Effective ways to remember names" - but I'm not sure it will do me much good...here's to good karma over the holidays:

- Broc Romanek

Fear & Loathing for Transactional Lawyers?

In a story that we will cover more after the holidays, the SEC charged an outside lawyer for a client's fraud on Tuesday, as noted in this press release. The following NY Times article fleshes out this story:

"Federal prosecutors charged the former outside counsel for the bankrupt commodities brokerage firm Refco on Tuesday with fraud tied to the eventual collapse of the commodities and futures brokerage. Joseph P. Collins, 57, of the law firm Mayer Brown, faces 11 counts including securities fraud, wire fraud and filing false statements with federal regulators. Separately, the Securities and Exchange Commission filed a civil suit against Mr. Collins on Tuesday.

'Mr. Collins’s role in this fraud was vital,' Michael J. Garcia, the United States attorney for the Southern District of New York, said at a news conference. It is rare for outside counsel to be charged for fraud supposedly committed by their clients; not even Enron’s outside lawyers faced criminal charges. 'Joe Collins is an innocent victim of the Refco fraud,' Mr. Collins’s lawyer, William Schwartz, said in a statement. 'This indictment should send a chill down the spine of every transactional lawyer who believes he or she is representing an honest client.'

But Mr. Garcia said that the charges did not signal a new trend of prosecuting outside lawyers. 'The vast majority of outside counsel is law-abiding,' he said. The announcement is the latest twist in the two-year-old fraud case, which arose in the wake of Refco’s demise. Once one of the world’s largest commodities brokerage firms, Refco went public in 2005, only to begin crumbling two months later after it disclosed that Philip R. Bennett, then its chief executive, had hidden $430 million in loans owed to the company.

Prosecutors say that Mr. Collins, who oversaw Mayer Brown’s work for Refco from the mid-1990s to 2005, supervised the structuring of transactions in which Refco temporarily shuffled debt to related companies and third parties. Those loans were reversed shortly after Refco’s quarterly periods ended.

Mr. Collins also drafted documents that misrepresented that debt to Thomas H. Lee Partners, the private equity firm that bought a stake in the company in 2004, and to the S.E.C. before Refco went public, according to the complaint. Mr. Bennett, who has pleaded not guilty to fraud charges, is scheduled to go on trial next year. Others facing criminal charges include Robert C. Trosten, Refco’s former chief financial officer, and Tone N. Grant, the firm’s former president.

Mayer Brown, based in Chicago and formerly known as Mayer, Brown, Rowe & Maw, said in a statement that Mr. Collins was on leave and that the firm was cooperating with federal authorities. It is facing lawsuits by trusts representing Refco’s creditors. 'Our review of the evidence available to us shows that the firm acted in a professional, competent and ethical manner in its work on behalf of Refco,' Mayer Brown said in its statement."

Section 409A: Still Busy Despite Postponement

December is no doubt turning out much better than it might have been had the IRS not decided to postpone the deadlines for adopting Section 409A changes until the end of '08. But even with postponement of the deadlines, there is still much that needs to be done with compensation plans now - and in the coming months - under Section 409A.

In this CompensationStandards.com podcast, Mike Melbinger of Winston & Strawn discusses the postponement of the deadlines for adopting Section 409A changes until December 31, 2008, as well as the latest developments with 409A implementation, including:

- How has the IRS’s 409A delay impacted the timing of plan changes?
- What is the most helpful aspect of the postponement?
- Given the postponement of the deadline for making 409A changes, what do employers need to look out for now and into 2008?
- Are companies making other plan changes unrelated to 409A as long as they are revisiting their plans, and what types of plan changes do see the most?

Posted: Form S-3 and Simplified Reporting Adopting Releases

Yesterday, the SEC posted the adopting release for its Form S-3 reform - and the adopting release for smaller business reporting relief.

- Broc Romanek

The SEC's "Non-Working" Day: Monday

We've received questions from a number of members related to the SEC's declaration of Monday (Christmas Eve) as a "non-working day," during which the EDGAR system will not be operational. Under the SEC's rules, Form 8-Ks and other filings otherwise due on Monday are not due until the next business day, which is Wednesday.

The other common query is whether December 24 will be considered a "business day" for purposes of the 4-business day deadline? Since it's a government-wide non working day, than I don't think the SEC can treat it as a business day for 8-K purposes, similar to the mourning day for Gerald Ford earlier this year.

Proposed: A Major FASB Reorg

Yesterday, the Financial Accounting Foundation (the body that decides who will set accounting rules in the US) proposed an overhaul aimed at enabling the FASB to act faster while increasing the power of its chairman, Bob Herz. The proposals would reduce the size of the FASB to five members from seven (three members are stepping down soon) - and give the chairman the power to decide whether to place issues on the board’s agenda (it now takes a board vote to place an item on the agenda). The proposals would also involve changes in how the foundation’s trustees were chosen and would strengthen it to provide more oversight to the two accounting boards it oversees.

I am told that this is a precursor to ultimately merging the FASB and the IASB, shifting the US funding from the FASB to the IASB, and raising the question then as to who would be the next chairman of the IASB...

The SEC's Squabble over PCAOB's Board Member Salaries

Yesterday, during an open Commission meeting to approve the PCAOB's budget, Commissioner Paul Atkins objected to the salaries of the five PCAOB Board Members and dissented (here is the meeting archive and the order approving the budget; here is a statement from Commissioner Atkins). Below is an excerpt from FEI's "Financial Reporting Blog" (which recently was nicely restyled):

"As a matter of policy, the board salaries are disproportionately high,' said Atkins, adding the rate of increase is higher than comparable rates. Although agreeing with PCAOB's decision to de-couple use of FASB board salaries as a 'benchmark' rate, Atkins showed some slides at the meeting demonstrating why he thought PCAOB board salaries were still too high.

Atkins' slides compared the $515,000 PCAOB board member's salary (other than the chair) to that of the President of the United States, the Supreme Court Chief Justice, and CEO level salaries, showing it was higher than most all of those (if not all). He also stated the salary of the Chairman of the PCAOB exceeded that of the SEC commissioners, combined.

'We have not found difficulty finding and retaining board candidates,' Atkins said of the PCAOB board. He added "The level of [PCAOB] board salaries is out of synch with other prominent indviduals of integrity,' who serve in prestigous government and private sector positions.

Commissioner Kathleen Casey also took the PCAOB to task over the level and rate of its salary increases, but she voted in favor of the budget."

This is not a new bone of contention for the SEC. Board member salaries outsize the SEC's Commissioner salaries by a magnitude of roughly 3x because when Congress adopted Section 101 of Sarbanes-Oxley - which established the PCAOB - it specified that the Board Member salaries should be set based on what was being paid in the private sector (and placed the SEC in the role of pay-setter; probably not a good idea in hindsight). This provision was designed to ensure that the PCAOB could attract and retain qualified people - and the most plausible benchmark is the level of a salary for an 'above average' partner from one of the Big 4.

- Broc Romanek

Disclosing Your Airplane Perks: “Incremental Cost”

There is still much confusion over what to include when computing the aggregate incremental cost for personal use of corporate aircraft. Proxy disclosures from this past season revealed that many issuers are significantly understating the incremental cost of the use of corporate aircraft, for example by failing to include dead-head costs and the loss of corporate tax deductions.

In the Advance Copy of our January-February 2008 Issue of The Corporate Executive, we provide a model disclosure that shows everything that needs to be included – and disclosed – regarding the aggregate incremental cost of airplane perks. We think many companies will be using this disclosure in the coming year – which will hopefully help provide consistency and help issuers avoid charges of “hiding the ball” on this sensitive issue.

Here is where you can access this Advance Copy now (you will need to renew for '08 to receive it). Note that we will be mailing this issue to ’08 subscribers early in January. Feel free to let me or Dave know if you have any thoughts on the model disclosures in the Advance Copy. If you are not yet a subscriber, we encourage you to take advantage of a no-risk trial, which will give you immediate access to this important issue.

An Evelyn Y. Davis Sighting

Yesterday's Washington Post ran this pretty humorous article about Evelyn Y. Davis at the Fannie Mae annual meeting (first meeting for the company in three years). It's good to hear that Fannie Mae's CEO gave Evelyn her normal deference to avoid (more of) a scene. Here is an excerpt from the article:

"She lectured the gathering on the price of her clothes (she never pays retail) and her marital history. That's 'Mrs. Davis,' she said, correcting chairman Stephen B. Ashley when he addressed her as 'Miss Davis.' 'I've had four husbands,' she said. 'Some women, particularly those who are jealous of me, can't even get one.'

With the velvet fist of a boss dismissing an underling, Davis urged Mudd to take a walk. 'I'm sorry, Dan. I know you tried, but you're just not working out.' In fact, Davis urged all the directors to resign -- all except for former FBI director Louis Freeh, whom she praised lavishly and championed for the job of chief executive. 'If anybody can do it, Louis can do it,' she said."

Federal Judge Tells SEC Lawyer “Sit Down, Shut Up”

Tis the end of the year and I'm doing some clean up to showcase gems that I had meant to blog about long ago. Here is one from October posted by Peter Lattman in his WSJ Blog (Dave blogged about this PIPEs case back then too):

"Judge Graham Mullen dismissed part of an SEC civil lawsuit alleging that a former executive at Friedman Billings Ramsey engaged in illegal conduct related to a securities offering. The claim alleged that John Mangan Jr. committed a so-called Section 5 violation involving a Pipe, or private investment in public equity. Representing Mangan: George Covington of King & Spalding in Charlotte and James Wyatt at Wyatt & Blake. Said Wyatt to the Observer: “We firmly believe (the case) will be resolved in his favor because we believe he has done absolutely nothing wrong.”

While the case is interesting — especially for those of you obsessed with the controversy surrounding Pipes and naked short selling — what’s interesting to us is this excerpt from the transcript of the oral argument on Mangan’s motion to dismiss.

Judge Mullen: Naked shorts are not legal, are they?

SEC lawyer Amy Greer: No. No, they’re just very risky, Your Honor.

SEC lawyer Catherine Pappas: And Your Honor –

Judge Mullen: They’re not illegal; they’re just risky.

Greer: Correct. Naked short sales are not illegal; they’re just risky, Your Honor.

Judge Mullen: Why in the world don’t you all make them illegal? Don’t you understand what happens in the market when you allow naked short selling to attack companies? I mean, do you understand that?

Greer: Your Honor, I think that that’s an issue for the United States Congress. I appreciate your concern –

Judge Mullen: Well –

Greer: — and I –

Judge Mullen: — the answer to my question is, yeah, I understand it or, no, I don’t.

Greer: I do understand your –

Judge Mullen: Do not try — okay.

Greer: I do understand, Your Honor.

Judge Mullen: Thank you for understanding it.

Covington: Your Honor, one thing –

Judge Mullen: Excuse the interruption.

Covington: No, sir.

Judge Mullen: Sit down, shut up, let the man talk. I’m not going to let him introduce (sic) you. Last warning.

Pappas: I’m sorry?

Judge Mullen: Sit down –

Pappas: Yeah, I got that.

Judge Mullen: — shut up, let the man talk. Last warning.

Pappas: Okay.

Judge Mullen: Understood?

Pappas: Okay.

Judge Mullen: Excellent.

Covington: With all due respect, Your Honor –

Judge: And you don’t interrupt her when she’s talking.

Covington: Yes, sir.

Judge: Proceed.

- Broc Romanek

Better Late Than Never: Corp Fin Wrapping Up '33 Act Reform

On Friday, the SEC issued a proposing release to amend Form S-11 - a relatively unknown registration statement outside of the real estate industry - to facilitate the ability of those registrants to incorporate by reference.

One of the shortest proposals I have ever seen, this proposal is identical to amendments to Forms S-1 (and F-1) adopted by the SEC several years ago in the '33 Act reform. I would imagine that no one will bother to comment other than perhaps "what took you so long."

Enforcement Director Linda Thomsen on Rule 10b5-1 Plans

Back in October, the SEC's Enforcement Director Linda Chatman Thomsen opened up the NASPP conference with an important speech on Rule 10b5-1 plans. The SEC posted the text of her speech on Friday (a video archive of the speech is still available as part of our "Hot Topics/The Corporate Counsel Speaks" Conference, as well as a follow-up panel on 10b5-1 plans featuring Linda, Alan Dye and Ron Mueller). In our "Rule 10b5-1 Plans" Practice Area, we have a number of memos on enforcement interest in these plans.

Aflac Pushes Up First “Say on Pay” Vote to 2008

Aflac has bumped its advisory vote on executive pay to next year, instead of 2009. Aflac originally planned to wait until shareholders had 3 years of compensation disclosure under the SEC's new rules, but the company has concluded that two years of disclosure would be sufficient according to this press release. The company's next annual meeting will be held in May 2008.

So far, Verizon Communications is the only other US company that has agreed to hold an advisory vote on pay, which will be held in 2009. Verizon took this step after a "say on pay" shareholder proposal won majority support at the company’s annual meeting in May - according to this RiskMetrics report, seven other companies have received a majority vote, so we might see more "volunteers" soon.

Rightsizing Compliance Programs for Smaller Companies

We have posted the transcript for the webcast: "Rightsizing Compliance Programs for Smaller Companies."

- Broc Romanek

Corp Fin Sends Letters to Issuers Regarding Off-Balance Sheet Entities

In light of the meltdown in mortgage markets and the resulting liquidity issues, the Corp Fin Staff has recently sent letters to those public companies that have identified investments in structured investment vehicles, conduits and collateralized debt obligations. The Staff has now posted an illustrative letter, suggesting possible disclosure for upcoming annual reports. The letter focuses on the Management’s Discussion & Analysis disclosure required under Item 303(a)(4) of Regulation S-K regarding off-balance sheet arrangements, disclosure that may be necessary under Item 303 regarding critical accounting policies for consolidation and variable interest entities, and the MD&A requirement to discuss trends or uncertainties that may be reasonably expected to have a material favorable or unfavorable impact on income from operations, liquidity and capital resources.

The Staff is calling for very detailed disclosure about the assets held by off-balance sheet entities, including ratings, material write-downs or downgrades, maximum limits on losses for first-loss noteholders, and any variable interests held in off-balance sheet entities. Further, the Staff’s comments focus on funding issues – in particular the forms of funding, difficulties faced in financing and obligations under liquidity facilities – as well as efforts on the part of issuers to bail out their off-balance sheet entities. The letter also seeks disclosure of the risks that off-balance sheet entities could be consolidated and the amount of any material loss that the issuer would expect to realize as a result of material off-balance sheet entities.

These risks are all too real for many firms - as noted in an article from this morning's Wall Street Journal, Citigroup is bailing out seven struggling structured investment vehicles, bringing $49 billion onto its balance sheet and further depleting the bank's capital. Scary stuff.

One obvious question is: will disclosure in the 10-K or 20-F about these issues be too late? Current disclosure may be necessary as developments unfold, based on the various items of Section 2 of Form 8-K, and, beyond that, issuers facing these problems really need to keep the markets informed so the problems don’t get any worse.

FCPA Enforcement Going Strong in 2007

Yesterday, the SEC announced yet another Foreign Corrupt Practices Act case, in which Robert W. Philip - the former Chairman and CEO of Schnitzer Steel - was charged with approving illegal cash payments and other gifts to officials at steel mills owned by the Chinese government. Phillip agreed to pay $250,000 to settle these latest SEC charges. Schnitzer Steel had previously paid $7.7 million in disgorgement to settle related SEC charges and $7.5 million in penalties to settle related criminal charges brought by the DOJ.

As noted in this recent memo from Dechert LLP, 2007 has been the most active year in the history of FCPA enforcement. Along with the increased number of cases have come enhanced penalties, with two of the largest penalties ever levied in FCPA cases announced earlier this year. The memo notes that at the American Conference Institute’s 18th National Conference on the Foreign Corrupt Practices Act in November, officials from the SEC and the DOJ indicated that FCPA enforcement activity will continue to intensify. Another notable trend is that the government is increasing its emphasis on charging individuals, with more such cases expected before the end of this year. Further, the SEC is increasingly seeking disgorgement in these matters, which can potentially include the entire gross revenue from a contract obtained through corrupt practices.

The Dechert memo also notes that more resources are being directed toward FCPA matters, with the DOJ recently assigning several FBI agents to work exclusively on FCPA cases – while at the same time ramping up training for field agents. According to the DOJ and SEC officials, industry-wide investigations are also likely if corrupt practices are found to be common in certain industries.

The government’s FCPA enforcement efforts also got a boost from a recent Fifth Circuit decision in the case of United States v. Kay, where the court upheld FCPA convictions even though the defendants argued that the statute was so vague that the defendants could not have been reasonably aware of the potential for engaging in illegal conduct when they were acting in accordance with prevailing business practices, and the payments were made for the purpose of retaining business in the particular country.

For more on the latest FCPA developments and to see some sample FCPA policies, check out our “Foreign Corrupt Practices Act” Practice Area.

What’s The Hub?

The SEC’s FCPA enforcement efforts may now be aided by access to the “Hub.” At a recent SEC Enforcement Division roundtable, Chairman Cox announced the launch of the Hub, a new electronic platform that is supposed to facilitate collaboration among the Enforcement Staff. The Hub is supposed to help the Staff manage their caseloads and provide access to other existing systems for tracking inquiries, investigations and testimony. The system was rolled out in all of the regional offices, with SEC headquarters being the last to implement it.

While collaboration can certainly be an issue among the 11 regional offices spread across the country, it can even be a problem within the SEC’s headquarters – upon moving to their new building, Staff members in the Divisions (including Enforcement) were dispersed throughout the building under an ill-conceived “stacking” approach.

- Dave Lynn

Model CD&A Disclosure: Stock Ownership Requirements

As Broc noted in the blog last week, we posted an Advance Copy of our January-February 2008 Issue of The Corporate Executive to provide timely guidance for those currently drafting their CD&As. While many of the topics addressed in this issue relate to specific areas of concern raised by the Staff in its executive compensation review program, some of the model disclosures deal with areas where more analysis is necessary in your proxy statement even if not raised in the Staff’s review.

One of these areas is the discussion and analysis of stock ownership requirements, where compensation consultants are now expressing concerns that companies need to reassess their ownership guidelines because they are now too low, often dating back to a time when the value of equity grants was not as high and most equity awards were in the form of stock options. Our model disclosure highlights how a company might describe the compensation committee’s analysis (and adjustment) of the company’s stock ownership requirements.

Here is where you can access this Advance Copy now (you will need to renew for '08 to receive it). Note that we will be mailing this issue to ’08 subscribers early in January. Feel free to let me or Broc know if you have any thoughts on the model disclosures in the Advance Copy. If you are not yet a subscriber, we encourage you to take advantage of a no-risk trial, which will give you immediate access to this important issue.

Changed Rule 144: Effective February 15th - Practical Guidance Coming

Yesterday, the SEC posted a conforming version of its Rule 144 adopting release to match what was just published in the Federal Register. Since the release has now been published, the effective date for the new rule is February 15th. The revised holding periods and other amendments are applicable to securities acquired before or after February 15th.

And since the new rule takes effect further out than expected, we have bumped back the date of our webconference - "New Rule 144: Everything You Need to Know - And Do NOW" - to Wednesday, January 30th. The conference will be archived in case that date doesn't work for you.

Jesse Brill, Bob Barron and Alan Dye are busy working on the Key Conference Materials, which will provide the specific procedures, new memos, legends, representation letters, etc. that you will need to protect yourself. Some members have posted questions about the rule changes in our "Rule 144 Q&A Forum" and those will be answered during the conference.

Act Now: Protect your company (and your key executives and clients) and take advantage of reduced rates for those of you that use the TheCorporateCounsel.net and The Corporate Counsel by registering online or via this order form.

Yet Another SOX 404 Delay in the Works

In testimony before the House Committee on Small Business yesterday, Chairman Cox stated that he intends to propose that the SEC authorize a further one-year delay in implementation of the Section 404(b) audit requirement for non-accelerated filers. Without the delay, those issuers would have to comply with the audit requirement for fiscal years ending after December 15, 2008. Cox said that the delay is necessary so the Staff of the Office of Economic Analysis can complete a survey of the costs and benefits associated with implementing Section 404 requirements, which is expected to consist of a web-based survey and in-depth interviews with a subset of issuers.

I suspect that no delay for management’s assessment is warranted now that issuers have this "Section 404 Guide for Small Business." The very happy people on the cover of this guide don’t seem to have a care in the world. They have obviously embraced the SEC's new slogan for 404: "It doesn't have to be a chore."

- Dave Lynn

SEC Opens Up the Shelf: Some Good News and Bad News

At yesterday’s open meeting, the SEC adopted changes to Form S-3 that will allow eligible listed companies below $75 million in public float to register primary shelf offerings on Form S-3, provided that they do not sell more than the equivalent of one-third of their public float in primary offerings during any period of 12 calendar months. Here is the press release and Staff’s statement describing the changes to Form S-3 and Form F-3. The effective date for these amendments will be 30 days after their publication in the Federal Register.

The SEC raised the proposed 12-month offering limitation of 20 percent of public float to one-third of public float, reflecting commenters' concerns that imposing a 20 percent cap on the amount of securities that could be sold over 12 months would prevent smaller issuers from satisfying their capital needs. Unfortunately for many potential issuers, along with the higher cap comes a new condition that eligible issuers must have at least one class of common equity securities listed and registered on a national securities exchange. As originally proposed, eligible smaller companies traded on the OTC Bulletin Board or the Pink Sheets would have been able to conduct limited primary shelf offerings off of Form S-3.

In making its recommendation to the Commission on this point, the Staff noted that the addition of the exchange-listing requirement was necessary “because the stock exchanges’ listing rules and procedures, as well as other requirements, provide an additional measure of protection for investors by providing listed status to issuers with sufficient public float, investor base, and trading interest to evidence that the market for the issuer's security has the depth and liquidity necessary to maintain fair and orderly markets.” The imposition of the exchange-listing requirement will substantially narrow the group of issuers that will eligible for expanded shelf-eligibility from approximately 4,900 issuers (as noted in the proposing release) to 1,400 issuers (as noted in yesterday’s press release). As a result, non-listed smaller issuers will likely continue accessing capital through PIPEs and equity lines.

At the same meeting, the SEC adopted electronic filing for Form D, along with some changes to the information requirements for Form D. As noted in the Staff's statement, the Form D amendments will not be effective until September 15, 2008, and then electronic filing will be on a voluntary basis until March 16, 2009.

The SEC also voted yesterday to issue a concept release on oil and gas disclosure requirements. Here is the press release and the Staff’s statement regarding that concept release.

XBRL: Closer to Reality

Last week, the SEC announced that it was soliciting public comment on the XBRL taxonomy developed to date, as well as instructions on how to prepare financial statements using XBRL. The taxonomy is said cover “every U.S. GAAP accounting concept — virtually every fact that a company might want to report on its financial statements and in its footnotes.”

The "taxonomy review tool" is publicly available from XBRL US and the public comment period ends on April 4, 2008. Get started early if you are interested – it takes some effort to just get set up to use the taxonomy review tool, and then there is quite a lot of information to review.

Casey and SEC Staff Speak at the AICPA Conference

Commissioner Casey and members of the SEC Staff covered a lot of ground on the accounting, auditing and internal control fronts at the 35th Annual AICPA National Conference in Washington earlier this week. Commissioner Casey noted in her speech that she would like to examine more data about costs before implementing the audit requirement for internal controls of non-accelerated filers (and that issue will likely be covered today in more detail by Chairman Cox when he testifies before the House Small Business Committee). The other topics covered by the Staff at the AICPA Conference were:

- Market Instruments Used For FAS 123R Measurement by Mark Barrysmith
- Financial Instrument Topics by Ashley Carpenter
- Guidance on Evaluating Internal Controls by Josh Jones
- International Audit Quality Initiatives by Len Jui
- Software Revenue Recognition and Fair Value by Sandie Kim
- IFRS Financial Statements by Katrina Kimpel
- “Considering Audit Regulation Under SOX” by Zoe-Vonna Palmrose
- Litigation Settlements; FIN 45; and SFAS 141 by Eric West

- Dave Lynn

Now That’s a Clawback: SOX Section 304 in Action

Last week, the SEC announced the largest settlement to date in an options backdating case, which included the first use by the SEC of the “clawback” provision under Section 304 of the Sarbanes-Oxley Act. The $468 million settlement was with William W. McGuire, M.D., the former Chief Executive Officer and Chairman of the Board of UnitedHealth Group. The SEC alleged that over a 12-year period, McGuire had caused UnitedHealth to grant backdated options to him and other UnitedHealth officers and employees.

Section 304 of the Sarbanes-Oxley Act provides that if an issuer is required to restate its financials as a result of misconduct, the Chief Executive Officer and Chief Financial Officer must reimburse the issuer for bonuses or other incentive-based or equity-based compensation and trading profits received or realized in the 12 months after the financial information was first publicly issued or filed with the SEC. Section 304 was enacted in response to concerns that in many instances management was benefiting from misstated financial statements resulting from some form of misconduct.

There has been some confusion as to how exactly Section 304 is to operate. The provision itself does not specify an enforcement mechanism, which caused some to wonder whether it was the SEC or the issuer (either directly or through derivative action) that is authorized to seek relief. Further, in a number of cases, private litigants have asserted that they have a private right of action to recover on behalf of the company under Section 304, which the federal courts have generally rejected. Questions have also been raised about specific language of the provision, including whether the requirement that the restatement arise “as a result of misconduct” refers to misconduct by the particular CEO or CFO against whom a Section 304 action is being brought, by the issuer generally or by others.

Under the terms of the SEC’s settlement with McGuire, he is to pay $12.7 million in disgorgement (including interest) and a $7 million civil penalty, and he will reimburse UnitedHealth for all incentive- and equity-based compensation he received from 2003 through 2006, totaling approximately $448 million in cash bonuses, profits from the exercise and sale of UnitedHealth stock and unexercised UnitedHealth options. McGuire’s disgorgement and Section 304 reimbursement will be satisfied by his return of over $600 million in cash and options to the company in resolution of employment claims and shareholder derivative suits filed against McGuire. That has got to hurt.

Now that Section 304 has been used successfully in the McGuire settlement, it is likely to be showing up in many more Enforcement cases involving restatements. I know that recovery of compensation under Section 304 is being sought in at least one other options backdating case against the former CEO and CFO of Mercury Interactive.

For more on clawback provisions generally, take a look at our “Clawback Provisions” Practice Area on CompensationStandards.com.

PCAOB Enforcement Ramps Up

The PCAOB announced that it settled an enforcement proceeding against Deloitte & Touche and one of its former audit partners for violations of interim auditing standards in connection with D&T’s 2003 audit of Ligand Pharmaceuticals. Under the terms of the settlement, D&T must pay a $1 million civil penalty and will undertake certain documentation practices relating to quality control policies and procedures that the firm has implemented.

As noted in this Washington Post article, “[w]hile the PCAOB has taken action against 10 accounting firms during its lifespan, yesterday’s case marks the first among the industry’s biggest players as well as the first financial penalty. Christopher M. Cutler, who has worked at the Securities and Exchange Commission and the audit board, said the Deloitte case is a milestone. ‘It shows that the PCAOB's Enforcement Division is fully mature and also that we should expect to see within a short period of time additional cases against not only other Big Four firms, but against the so-called second four firms as well,’ Cutler said.”

FASB to Codify GAAP

Recently, the FASB announced that it plans to release its FASB Accounting Standards Codification in late 2007 or early 2008. The codification, which will be subject to a one-year comment or "verification" period, will reorganize thousands of authoritative U.S. accounting pronouncements issued by multiple standard-setters, including those of the FASB, the American Institute of Certified Public Accountants (AICPA), and the Emerging Issues Task Force (EITF) into a single source with a consistent structure. Once approved by the FASB, the codification will become the single source of authoritative U.S. GAAP, and will supersede existing FASB, AICPA, EITF and related literature. Also to be included is relevant SEC guidance.

- Dave Lynn

Waxman Holds Hearing on Compensation Consultant Conflicts

Last week, Representative Henry Waxman (D-CA), Chairman of the House Committee on Oversight and Government Reform, convened a hearing on the topic of conflicts of interest among compensation consultants. As Broc noted in the blog earlier this year, Waxman had sent letters to a number of compensation consultants seeking information about potential conflicts.

The report released by the Committee’s Majority Staff indicates that over 100 large publicly traded companies hired compensation consultants with “substantial conflicts of interest” in 2006. Further, the Majority Staff reports that over two-thirds of the Fortune 250 companies that hired compensation consultants with conflicts of interest did not disclose the conflicts in their SEC filings (even though no such disclosure requirement exists), and in 30 instances a compensation consultant was identified as independent while being paid to provide other services to the company. The data also shows that consultants were paid nearly 11 times more for providing other services than they were paid for providing executive compensation advice. Finally, the report indicates that there “appears to be” a correlation between the extent of a consultant’s conflict of interest and the level of CEO compensation.

At the hearing, James Reda, Managing Director of James F. Reda & Associates (who submitted this comment letter on the SEC's 2006 executive compensation amendments calling for disclosure about compensation consultant independence), recommended to the Committee that all fees paid to compensation consultants be disclosed. Representative Waxman echoed this sentiment, indicating that companies should be willing to disclose the full scope of compensation consultant relationships when the consultant is recommending executive pay.

For more information about compensation consultant issues, be sure to check out the “Compensation Consultant” Practice Area on CompensationStandards.com.

The Corporate Library Reports on Compensation Consultants

As further evidence that compensation consultants can’t seem to stay out of the spotlight these days, The Corporate Library released a study finding that companies using compensation consultants tend to pay higher CEO compensation, and such compensation levels do not necessarily relate to increased shareholder returns.

In this CompensationStandards.com podcast, Alexandra Higgins of The Corporate Library discusses her recent report on "The Effect of Compensation Consultants: A Study of Market Share and Compensation Policy Advice," including:

- Why did The Corporate Library conduct this study? What type of data was collected?
- What were the study's findings regarding boards that used compensation consultants and those that didn't?
- How about the study's findings regarding use of consultants and shareholder returns?
- How did the study's findings vary depending on which consultant was used?

Annual Reports: How to Create Them for an Online World

We have posted a copy of the transcript from our recent webcast: "Annual Reports: How to Create Them for an Online World."

- Dave Lynn

Our Model CD&A Disclosures

Yesterday, we posted an Advance Copy of our January-February 2008 Issue of The Corporate Executive because we know that so many of you are grappling with drafting your CD&A disclosures now. Drafting model disclosures is no easy task - and everyone obviously has to customize for their own circumstances - but David Lynn and Jesse Brill worked hard to put together these examples of “best practice” CD&A disclosures to help you get a head start on what the SEC Staff will be looking for in your CD&As next year.

We will be mailing the issue to ’08 subscribers early in January, perhaps with a few tweaks to the advance copy - so please send any thoughts you might have on what we drafted to Dave or myself. Here is where you can access this Advance Copy now (you will need to renew for '08 to receive it).

Note that Dave will be writing the lead piece in each issue of The Corporate Executive this coming year. If you are not yet a subscriber, we encourage you to take advantage of a no-risk trial, which will give you immediate access to this important issue.

Posted: SEC's Adopting Releases for Shareholder Access and Rule 144

Yesterday, the SEC posted the adopting release for shareholder access - and the adopting release for Rule 144/145. Don't forget to register now for our upcoming Conference: "New Rule 144: Everything You Need to Know – And Do NOW."

Pro or Troll #3: SEC Comment Letter Process

With many of the executive compensation comment letters likely to be posted by Corp Fin on Edgar sometime in the next month or so, it's a good time to test your knowledge about the SEC comment letter process. Thanks to David Mittelman of Reed Smith - who served as a Corp Fin Branch Chief until last year - we have posted our 3rd quiz in a series: "Pro or Troll #3: SEC Comment Letter Process."

- Broc Romanek

News from the Front Lines: First Hand E-Proxy Experience

In this podcast, Maria Pizzoli, Assistant General Counsel of Sun Microsystems, discusses how e-proxy went for Sun the first time around, including:

- Why did Sun decide to adopt the Notice and Access model?
- What were the company’s major concerns about adopting the Notice and Access model?
- Did Sun adopt the model with respect to 100% of your stockholders or did it follow a hybrid approach?
- Were there any follow-up mailings?
- Did you send out a press release or add language to your website to explain the Notice and Access model?
- How many requests for printed materials did the company receive and was this in keeping with your expectations?
- What was the quorum attained at Sun’s meeting? How did it compare with prior years?
- How did you handle the web site posting of your proxy materials?
- How did the company’s investors react to your adoption of the Notice and Access model? Did you receive complaints?
- What were the biggest surprises you encountered with adopting the Notice and Access model?

Kicking the Tires: The Year-End Governance Check

In this podcast, Kris Veaco of the Veaco Group runs down some governance action items to consider for year-end, including:

- What were your responsibilities at McKesson?
- What does the Veaco Group do?
- What is an example of what you can do for a company?
- What are some year-end corporate governance tips that our listeners should consider?

The FASB/IASB Convergence Begins: New FAS Nos. 141(R) and 160

As I blogged yesterday on DealLawyers.com, the FASB issued FAS No. 141(R), Business Combinations (as well as FAS No. 160 regarding noncontrolling interests in consolidated financials). Here is an excerpt from the FASB's press release:

"The new standards represent the completion of the FASB’s first major joint project with the International Accounting Standards Board (IASB), as well as a significant convergence milestone,” states FASB member G. Michael Crooch. “These standards and the counterpart standards issued by the IASB will improve reporting while eliminating a source of some of the most significant and pervasive differences between International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP).” The IASB plans to issue its counterpart standards IFRS 3 (revised), Business Combinations, and IAS 27 (as revised in 2007), Consolidated and Separate Financial Statements, early next year.

Statement 141(R) improves reporting by creating greater consistency in the accounting and financial reporting of business combinations, resulting in more complete, comparable, and relevant information for investors and other users of financial statements. To achieve this goal, the new standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination.

Statement 141(R) also will reduce the complexity of existing GAAP. The newly issued standard includes both core principles and pertinent application guidance, eliminating the need for numerous EITF issues and other interpretative guidance."

- Broc Romanek

Backdating: Delaware Court Orders Production of All Special Committee Communications With Counsel

Yesterday, the SEC sued Maxim Integrated Products (and its CEO and CFO) for filing false financial information by improperly backdating options. The CEO agreed to pay $800k; the company didn't pay a fine. Meanwhile, a second Brocade backdating case went to jury. And there's more to report...

The following analysis is from Travis Laster: Now, there is a third important decision from Chancellor Chandler in the Maxim option backdating case: Ryan v. Gifford, C.A. No. 2213 (Nov. 30, 2007). It comes in the guise of a discovery decision, but it has major implications for special committee practice. [We have posted this opinion, as well as the other ones from this case, in our "Backdated Options" Practice Area on CompensationStandards.com.]

1. Holding: Waiver of Privilege - In the most significant of several holdings, the Chancellor ruled that a Special Committee created by the Maxim board to investigate concerns about stock option backdating waived the attorney client privilege as to all of the communications between the Special Committee and its lawyers and therefore had to produce all communications relating to the investigation and report. The waiver arose because the Special Committee and its counsel made a presentation to the full board regarding the outcome of the investigation at which the individual board members who were alleged to have been involved in the option scheme and their counsel were present.

According to the Chancellor, "The presentation of the report constitutes a waiver of privilege because the client, the Special Committee, disclosed its communications concerning the investigation and final report to third parties - the individual director defendants and [their counsel] Quinn Emmanuel - whose interests are not common with the client, precluding application of the common interest exception to protect the disclosed communications. ...The Special Committee was formed to investigate wrongdoing and in response to litigation in which certain directors were named as individual defendants. This describes a relationship more akin to one adversarial in nature." (page 7). The Court found that the waiver as to the presentation of the report was a "partial waiver" which "operates as a complete waiver for all communications regarding this subject matter." (pages 6-7).

The Chancellor also held that in the absence of a waiver, the materials would be ordered produced under the "good cause" exception to the attorney client privilege - also known as the Garner doctrine - which can be invoked in stockholder litigation against fiduciaries.

As a result, the Chancellor ordered Maxim to produce "all communications between [Special Committee counsel] and the Special Committee and [Special Committee counsel] and Maxim." This included all of the communications that occurred "during the course of the investigation" and during the board presentations.

The Special Committee asserted work product doctrine as to notes of witness interviews, arguing that they necessarily contained attorney mental impressions. The Chancellor ordered these documents provided to the Court for in camera inspection.

Although the application of Garner to these facts is consistent with Delaware precedent, the waiver rationale appears novel. There is considerable tension between the ruling and typical special committee practice, in which committees frequently render a final report and make a presentation to the full board. Historically such a report and presentation have not resulted in a complete privilege waiver. Instead, there has been case-by-case analysis under Zapata as to what materials a plaintiff can obtain, with special committees largely being able to maintain the attorney-client privilege. In footnote 2, the Chancellor notes that the Maxim committee was not a special litigation committee and implies that the privilege analysis might have been different for a formal SLC, citing Moore Business Forms v. Cordant Holdings Corp.

Moore Business Forms, however, contemplated a special committee that would negotiate with and oversee litigation against a major stockholder; it did not involve a traditional special litigation committee. It is thus not clear that a meaningful distinction with respect to the privilege can be drawn between formal special litigation committees and other board committees, or that Ryan's holding can readily be cabined from extending to other committee contexts.

2. Risk of No Privilege Going Forward - In the aftermath of Ryan, there is a significant risk that the attorney-client privilege will not be available for a special committee and its counsel when conducting an internal investigation, particularly in the area of stock option backdating, if the special committee chooses to give a report and presentation to the full board with named defendants in attendance. Excluding named defendants and their counsel from the presentation of the report would provide a basis to distinguish Ryan and avoid waiver, but such a course may not be practical. Future committees and their counsel may also attempt to document clearly that they are not intending to waive any privilege and to distinguish between the Committee's substantive report and mid-investigation communications.

There is support in Delaware law, primarily in the takeover context, for permitting discovery into what a board was told by counsel but barring discovery into underlying lawyer communications. Given the broad waiver rationale in Ryan, it is not clear how such an approach would fare. It does seem likely, however, that future decisions will cabin the expansive scope of the waiver ruling.

3. Producing in Native File Format - In a second noteworthy holding, the Chancellor ordered Maxim to produce documents in native file format, with original metadata. This is the first Delaware Chancery opinion to address native format and metadata issues. The Chancellor held that "metadata may be especially relevant in a case such as this where the integrity of dates entered facially on documents authorizing the award of stock options is at the heart of the dispute." (page 3). The Chancellor also noted that the Special Committee and its advisors had analyzed the metadata as part of their investigation. The opinion also addresses a handful of other issues, mainly involving discovery and claims by the company that production of certain documents would be burdensome.

Tips for 10-Ks and Proxy Statements

Getting quite a few questions from members seeking firm memos about the upcoming proxy season. In addition to our own checklist, these proxy season checklists from law firms are in the "Proxy Season" Practice Area, near the top.

In addition, I recently posted the latest annual update of Alan Kailer's chapter regarding preparation of the executive compensation tables. And don't forget our popular contest which has a host of 10-K tips: "The Main Event: Vote for Your Favorite Practice."

Couple of SEC Doings

Next Tuesday, the SEC will hold an open Commission meeting to adopt its Form D and S-3 proposals, as well as approve the PCAOB's budget and issue an oil & gas concept release.

Then, next Tursday and the following Monday, the SEC will hold IFRS roundtables. The SEC also has posted the adopting release regarding the '34 Act registration exemption for employee options.

The Latest on Fairness Opinions

With new rules from FINRA impacting fairness opinion practices (and a host of new cases addressing management conflicts), the dynamics – and processes – of preparing fairness opinions have been changing. Join these experts tomorrow on DealLawyers.com as they explore the latest trends and developments in this webcast: "The Latest on Fairness Opinions" (print out these "Course Materials" in advance):

- Kevin Miller, Partner, Alston & Bird LLP
- Dan Schleifman, Managing Director and Chairman of the Investment Banking Committee – Advisory, Credit Suisse Securities (USA) LLC
- Ben Buettell, Managing Director and Co-Head Fairness Opinion Practice, Houlihan Lokey Howard & Zukin
- Denise Cerasani, Partner, Dewey & LeBoeuf LLP

This program will cover:

- Recently approved FINRA Rule 2290 – what impact will it have on fairness opinion practices?
- Fairness Opinions: Their Uses and Abuses - How should (and do) boards use fairness opinions?
- What are the implications of recent case law developments regarding investment banking conflicts, including the disclosure of fees (Caremark) and discovery regarding material relationships (Orstman)
- What are the latest issues raised by SEC Staff comments regarding fairness opinion disclosure

- Broc Romanek

Don't Forget to Update Your Time & Responsibility Schedule!

A while back, I began warning folks that they need to update their time & responsibility this year for e-proxy; we have now posted a newly updated "Sample Time & Responsibility Schedule" (which is posted in our "Annual Stockholders' Meeting" Practice Area). In this podcast, John Newell of Goodwin Procter discusses how to update your Time & Responsibility Schedule, including:

- What changes should companies make to their timetable?
- What areas should companies be particularly mindful of this year? In other words, what are the areas where companies often find that they miss a deadline?

Treasury/IRS Issue Notice Allowing 409A Corrections

Yesterday, the Treasury and IRS jointly issued this notice allowing 409A corrections. I know this transitional guidance is something that many had been waiting on...

Key Executive Compensation Takeaways from Our Conferences

The Nov-Dec 2007 issue of The Corporate Executive – which has just been sent to the printer - includes important analysis and guidance regarding fixes companies will need to make to their compensation practices and disclosures next year – and much more. We have posted this blurred issue so that non-subscribers can get a sense of it before trying a 2008 no-risk trial, under which you can get this issue and the rest of 2007 for free. The issue includes pieces on:

- Key Executive Compensation Takeaways from Our Conferences
- Google's Transferable Stock Options—Follow-Up
- ESOARS—Staff Reaffirms Use to Value Options Under 123(R) (But, Other Accounting Uncertainties)
- The New Requirement to File a Section 6039 Return with the IRS—For 2007?
- Does Anyone Really Care About the FAS 123(R) Earnings Charge? Deep Thoughts II (and Some Shallow Ones, Too)
- The New Rule 144 Amendments—Our Upcoming Video Conference

- Broc Romanek

Updating D&O Questionnaires

A number of members e-mailed me after my recent blog about D&O questionnaires to point out a few items that I had missed (eg. Nasdaq's independence threshold has risen). In this podcast, Craig Mordock of Morrison & Foerster discusses areas where D&O questionnaires may need to be updated for this proxy season, including:

- What changes do you recommend that companies make to their D&O questionnaires for the '08 proxy season?
- What areas of D&O questionnaires often need tweaking each year?
- What processes of reviewing D&O questionnaires before they are sent to D&Os might need a change?
- How about the process of reviewing the responses received from D&Os?

2nd Round: Corp Fin Compensation Disclosure Comments

I'm hearing from some members that the second round of comments emanating out of Corp Fin's executive compensation disclosure review project are starting to trickle out. Quite a few of the 350 companies that were initially sent comment letters are likely to receive notification from the Staff that their review is complete and that there are no further comments.

For these companies, the 45 calendar day (or more if the Staff decides to take longer) countdown begins until the Staff makes the company's responses (as well as the comments they received) public. You may recall the Staff confirmed this 45 day or greater timeline in the Staff's Report on compensation disclosures.

Rightsizing Compliance Programs for Smaller Companies

Tune in for tomorrow's webcast - "Rightsizing Compliance Programs for Smaller Companies" - to learn how to master the challenges (ie. resource, culture and other) of developing and implementing compliance programs for small companies. The program also will review emerging best practices and recent legal developments relating to compliance programs for businesses of all size. Please print these Course Materials in advance.

Also note this NASPP webcast tomorrow: "1st Annual NASPP Webcast on Tax Reporting."

Our December Eminders is Posted!

We have posted the December issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!

- Broc Romanek