Yesterday, Tyson Foods filed its 10-K and made this disclosure in the “Legal Proceedings” section regarding a proposed settlement with the SEC by the company and former chairman Don Tyson, under which they would pay a combined $1.7 million in civil penalties to settle a SEC complaint that they didn’t fully disclose benefits Mr. Tyson received while serving as chairman:
“In March 2004, the Company was advised that the SEC had commenced a formal, non-public investigation concerning the Company’s disclosures of executive perquisites. In August 2004, the Company announced that it had received notice that the staff of the SEC intended to recommend that the SEC bring a civil enforcement action against the Company and that it was considering seeking a monetary penalty. The notice alleged that the Company’s proxy statements for fiscal years 1997 through 2003 had failed to comply with SEC regulations with respect to the disclosure and description of perquisites totaling approximately $1.7 million provided to Don Tyson, former Senior Chairman of the Company, and that the Company had failed to maintain an adequate system of internal controls regarding the personal use of Company assets and the disclosure of perquisites and personal benefits. The SEC staff also advised the Company it was considering recommending that the SEC bring administrative cease-and-desist actions against two Company non-executive employees for allegedly causing these failures. In addition, Don Tyson received notice the staff intended to recommend that the SEC bring a similar civil enforcement action against him. The Company was subsequently advised that the SEC staff had withdrawn its proposed recommendations with respect to the two employees, and that it intended to recommend that the SEC seek monetary penalties against the Company and Don Tyson.
In December 2004, following discussions with the staff regarding resolution of this matter, the Company and Don Tyson proposed that the Company, without admitting or denying wrongdoing, would pay a civil penalty of $1.5 million and
consent to the entry of an administrative cease and desist order and that Don Tyson, also without admitting or denying wrongdoing, would pay a civil penalty of $200,000 and consent to the entry of an administrative cease and desist order. These settlement proposals are subject to mutual agreement on the language of the order. The SEC staff has agreed to recommend both of these offers of settlement to the SEC. The proposed settlements and the proposed order are subject to final approval by the SEC.”
Learn what you need to know about perk disclosures – including 8-K disclosures – during the January 13th webcast on CompensationStandards.com – “What NOW Needs to Be Disclosed in the Proxy Statement.”
Deadline Extended Until December 31st!
Our HQ has been getting a lot of frantic calls from members wanting to take advantage of the Romeo & Dye Section 16 Treatise special offer that ended yesterday (probably because a flyer was included with the just-mailed issue of The Corporate Executive). So we have extended the special offer until the end of the year! We have also extended the special “Catch-Up” offer for CompensationStandards.com!
SEC Chair Donaldson in the News
Inside the Beltway, there has been a lot of conjecture about the remaining length of SEC Chairman Donaldson’s tenure. Today, the Washington Post notes: “The White House publicly stated its support for Securities and Exchange Commission Chairman William H. Donaldson, whose ouster has been sought by business groups seeking less enforcement of corporate governance rules. The Wall Street Journal reported that the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Wholesalers-Distributors have been lobbying against Donaldson. But White House spokesman Scott McClellan told reporters that “the president appreciates the job Chairman Donaldson is doing.” McClellan added, “He has been someone who has worked hard to help us crack down on corporate wrongdoing.”
In another Washington Post story today, Chairman Donaldson settles a lawsuit: “Securities and Exchange Commission Chairman William H. Donaldson has reached a settlement of a lawsuit accusing him, Aetna and current Aetna Chairman John Rowe of hiding accounting misstatements when Donaldson led the company from February 2000 to April 2001, court records indicate. A lawyer for Donaldson, Rowe and Aetna, investor lawyers and an Aetna spokesman did not return telephone calls seeking comment. An SEC spokesman had no immediate comment.”
SEC Approves New Asset-Backed Regulations
Here are some notes from Thatcher Profitt on yesterday’s SEC approval of the new asset-backed securities registration framework: “On Wednesday, December 15th, the SEC at its open meeting approved the final version of the long anticipated Regulation AB, which for the first time will provide a comprehensive set of federal securities regulations for ABS. The full text of the final release is not yet available, but should be posted on the SEC’s website within a few days. It is said to be about 500 pages long.
In a live webcast of the open meeting, a number of important statements were made about the final rule by SEC Commissioners and staff members. Generally, the final rule incorporates all of the principal components of the proposal in the areas of registration, Exchange Act reporting, assessment of compliance, disclosure, and offering period communications. The comments made at the open meeting and the length of the final version indicate that much of the detailed provisions of the proposal were retained in the final version.
Based solely on the webcast, there have been a number of important changes made to the final version of Regulation AB in response to comment letters, which are summarized below.
Assessment of compliance with the minimum servicing criteria contained in the rule may be provided by multiple parties. In other words, instead of a single assessment of compliance by the responsible party covering all servicing functions (including loan level servicing, cash flows and bond administration), the responsible party may obtain and file separate assessments of compliance from unrelated companies that performed parts of the servicing functions. The responsible party would have to certify that it obtained assessments of compliance from all relevant parties. Furthermore, the SEC indicated that the final rules will lessen the need to obtain information from third parties for reporting purposes.
In addition, significant relief will be provided on the issue of compliance with Exchange Act reporting as it affects eligibility for the use of Form S-3. Eligibility will be linked to compliance with required Exchange Act reporting by all trusts formed by the depositor, or by affiliated depositors, and backed by the same asset class. The SEC does not want to link eligibility to the performance of trusts formed by non-affiliated sponsors.
Regarding transition rules, there will be a 12-month delayed effective date for all purposes. In addition, there will be more detailed phase-in rules for existing and future shelf registration statements, which were not described. Moreover, all existing ABS transactions will be permanently grandfathered so that they can continue to report under the old rules, even after the 12 month delayed effective date. However, the question of on or prior to what date an “existing” transaction must have been issued in order to get the benefit of this grandfathering provision, was not addressed.
Another very important change is that the SEC will permit required static pool data to be disclosed on a website. Static pool data so disclosed will be deemed to be part of the registration statement and will have Section 11 liability, but will not have to be filed on EDGAR or included in the prospectus. The website must be unrestricted and meet certain record-keeping requirements. This is a very important change conceptually for the SEC, which never before has permitted information required to be included in the registration statement to be incorporated from a website. The SEC was willing to make this concession in light of the substantial benefits of website delivery for this type of information. It was also indicated that relief would be granted during a transition period with respect to historic static pool data that cannot be provided without unreasonable effort or expense. Other details of the required static pool content were not discussed. The SEC also mentioned that it ultimately wants issuers to be able to file this data on EDGAR after required modifications to EDGAR have been made (and for that reason included a sunset provision), but that this should not dissuade the market from pursuing technological innovations in the area of data delivery.
Other important changes were made in the disclosure area. The thresholds for required disclosure about unaffiliated servicers and significant obligors were raised from 10% to 20%. Also, for derivatives that may be used in ABS transactions (including interest rate caps and swaps), for purposes of determining whether the derivatives counterparties reach the disclosure threshold, the derivative will be valued based upon the “maximum probable exposure” of the counterparty, rather than the maximum amount that could be payable under the terms of the contract.
It was also indicated that a number of revisions were made at the detail level in response to comments regarding required disclosure items and reportable events. There will also be some further clarification that the specified disclosure items are not required to be included where they would not be material.
It did not appear that there were any significant changes to the definition of “asset backed securities”. Synthetic, credit linked, index linked and managed structures will still fall outside Regulation AB, but the SEC hopes to address those types of transactions initially on a case-by-case basis, and perhaps in future rulemaking. The final release asks for comments on these matters.
The final Regulation AB will not make any change in liability for the information provided to the investor at the time of the investment decision. That issue is covered more generally in the Securities Offering Reform proposal. If the latter proposal does not go forward, this issue may be revisited in the ABS context at a future date.”