Monthly Archives: June 2005

June 16, 2005

Use of In-House Opinions in Financings

Recently, I posed a question to advisory board: In your practice, do you find that your clients are comfortable with an opinion of only inside counsel for debt and equity financings? Or do they always feel the need to seek outside counsel opinions also?

The following interview is comprised of reasoned responses to these questions from eight board members. Thanks to the advisory board for all their help over the years!

SEC Delivers Off-Balance Sheet Report to Congress

Yesterday, the SEC issued one of its last deliverables under Sarbanes-Oxley, this 119-page Report on off-balance sheet arrangements. As required by Section 401(c) of SOX, the Report address two primary questions: the extent of off-balance sheet arrangements, including the use of special purpose entities, and whether current financial statements transparently reflect the economics of off-balance sheet arrangements.

In the Report, the SEC took an expansive approach to the scope and meaning of the term “off-balance sheet.” The SEC believes that significant progress has been made in the past few years – but that more can still be done for financial reporting of several types of off-balance sheet arrangements (and just like in the SEC Chief Accountant speech that I blogged about a few weeks ago, reduced complexity and more transparency is the mantra of the Report).

Here are several initiatives identified in the Report that would improve transparency:

– Discourage transactions and transaction structures primarily motivated by accounting and reporting concerns, rather than economics

– Expand the use of objectives-oriented standards, which would have the desirable effect of reducing complexity in accounting standards

– Improve the consistency and relevance of disclosures that supplement the basic financial statements

– Improve communication focus in financial reporting

A big part of this would be the FASB undertaking rulemaking for lease and pension accounting, because much of the liabilities from these hot button topics only make it into the footnotes of financial statements. In the Report, the SEC reviewed 200 filings and found 77% of them had operating leases, totaling $1.25 trillion, that resulted in footnote disclosure – and these same filings revealed another $535 billion in defined benefit plan liabilities that escaped the balance sheet.

SEC Database of Non-US Reporting Companies

On Tuesday, Corp Fin posted this useful list of companies registered and reporting in the US. The list can be spliced and diced four ways: alphabetical by name; by home country; by market; and by summary info. The SEC always compiles and posts this list, but this is the first time that archival data is available too – four years worth.

Save Elmo!

Congress has a bill gaining momentum that would eliminate funding for NPR and PBS, starting with “Sesame Street,” “Reading Rainbow,” and other commercial-free children’s shows. If approved, this would be the most severe cut in the history of public broadcasting. Please sign this petition to Congress to save NPR and PBS.

June 15, 2005

Disclaimers in the Wake of the SEC’s Titan Section 21 (a) Report

Buried in a recent Proskauer Rose memo on the SEC’s Titan Report is a reference to a filing that included a disclaimer about whether investors should rely on the reps and warranties in the attached agreement. The memo didn’t identify the filing – but it led me to conduct some sleuthing and I found this recent Form 8-K filed by with the following disclaimer:

“The description of the proposed Merger described in this report does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 to this report and incorporated herein by reference. The Merger Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about The Merger Agreement contains representations and warranties the parties thereto made to and solely for the benefit of each other. The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules that the parties have exchanged in connection with signing the Merger Agreement. Accordingly, investors and security holders should not rely on the representations and warranties as characterizations of the actual state of facts, since they were only made as of the date of the Merger Agreement and are modified in important part by the underlying disclosure schedules. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in’s public disclosures.”

And here is a disclaimer from the cover of a merger agreement filed as an appendix to the proxy statement/prospectus in this Form S-4 filed by Renaissance Learning:

“The merger agreement contains representations and warranties Renaissance and AlphaSmart made to each other. The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules that Renaissance and AlphaSmart have exchanged in connection with signing the merger agreement. While neither Renaissance nor AlphaSmart believe that the disclosure schedules contain information that the securities laws require to be publicly disclosed, the disclosure schedules do contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the attached merger agreement. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts, since they are modified by the underlying disclosure schedules. These disclosure schedules contain information that has been included in Renaissance or AlphaSmart’s prior public disclosures, as well as potential additional non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, which subsequent information may or may not be fully reflected in each of Renaissance or AlphaSmart’s public disclosures.”

Not sure if either of these are from the filing that Proskauer found as there likely other disclaimers out there, but there probably are not too many yet as Corp Fin Director Alan Beller and other Staffers have warned the bar not to include disclaimers in their SEC filings that are too broad or general – and practitioners are just starting to feel their way around in this area (see my April 5th guest entry on The Deal Guys’ Blog and OMA Chief Brian Breheny in the March webcast on Note that the disclaimer was included on an 8-K – and therefore it probably has not been reviewed by the SEC Staff.

NYSE’s Roundtable Recommendations on 404

In late May, the NYSE hosted a roundtable discussion for CFOs of its listed companies to develop practical recommendations that will better align the costs and benefits of Section 404. From the roundtable, four central themes emerged: allowance for use of management judgment, efficiency in the audit approach, recommendation for PCAOB process and procedure improvements, and timing of SEC reporting – as well as these specific recommendations that were ranked by the participants and sent to the PCAOB and SEC.

Hand-Deliveries and Pick-Ups for New SEC HQ

The SEC has posted instructions on how to make hand-deliveries to – and pick-ups from – the SEC’s HQ.

How to Navigate Tricky Confidential Treatment Requests

Don’t forget to tune in for tomorrow’s webcast – “How to Navigate Tricky Confidential Treatment Requests” – during which a pair of SEC Staffers, Corp Fin Deputy Director Shelley Parratt and Branch Chief Suzanne Hayes, and a group of practitioners that specialize in confidential treatment requests will deconstruct how to best prepare CT requests – which is an art more important than ever now that SEC comment letters and responses are posted on the SEC’s website.

June 14, 2005

Parsing the SEC’s Semi-Annual Regulatory Agenda

Published in the Federal Register in mid-May, it is always interesting to peruse the SEC’s semi-annual regulatory agenda. This agenda lays out what the SEC expects to produce in the way of rulemaking in the coming months.

Even though whether – and the date on which – the SEC actually follows through on the regulatory agenda is never certain, it is still worth reviewing what the SEC discloses. And of course, this particular agenda might be more fluid than normal due to the fact that an incoming new SEC Chair could change course on any number of these items.

Here are the Corp Fin related items listed on this agenda:

– Revisions to Accelerated Filer Definition – proposal (May 2005)
– Rule 14d-10 – proposal (June 2005)
– Securities Offering Reform – final action (July 2005)
– Proxy Disclosure Regarding Executive Compensation and Related Party Transactions – proposal (Sept 2005)
– Securities Holder Director Nominations – final action (Sept 2005)
– MD&A – Critical Accounting Policies – final action (Dec 2005)
– Registration of Securities Issued in Lock-Up Agreements – proposal (April 2006)
– Streamling Rule 144 – 2nd proposal (April 2006)

Thanks to Howard Dicker of Weil Gotshal for the reminder and his insight!

GAO Asks SEC to Better Monitor Staff Turnover for Conflicts

Last week, GAO released a mutual fund report that found that the SEC followed a consistent process for determining penalties and that it coordinated penalties and other sanctions with interested states – but also that the SEC could have better procedures for making referrals to criminal law enforcers, focusing on the fact that the Staff doesn’t document whether a criminal referral was made or why. [Nothing about referrals to the FDA, the subject of some criticism in this recent Boston Globe article.]

The report also was concerned with SEC Staff independence and that the SEC does not require departing staff to report where they plan to work when they leave (which apparently is the type of information gathered by other financial regulators to assess their staff compliance with federal laws regarding employment with regulated entities).

Carl Schneider on Shareholder Rights’ Agreements

The June installment of Carl’s Corner is posted – the last in a long series of monthly analyses on shareholder rights’ agreements from expert Carl Schneider (over a year’s worth!). Check them all out!

June 13, 2005

Analysis: Disney Case is About More Than CEO Succession

Last week, I blogged about how Chancellor Chandler denied Disney’s motion to dismiss in a lawsuit – Shamrock v. Iger – that challenges the company’s CEO succession process. Now, a trial is slated for August in the Delaware Chancery Court. In our “Disney’s CEO Succession Lawsuit” section, I have posted the novel opinion in this case, as well as the complaint and the motion to expedite the trial.

As this article notes, Stanley Gold and Roy Disney sued the company – seeking invalidation of this year’s board election – because they allege they would have run a competing slate, but for the fact that the company had previously disclosed that it would conduct a CEO search and consider external candidates. The board ultimately selected COO Robert Iger to succeed CEO Michael Eisner when he steps down later this year.

Here are some things to consider about this lawsuit and the court opinion:

1. How Did This Case Get Beyond Dismissal? – Based on the 20-page opinion, it looks like this was just a standard motion to dismiss decision – where Chancellor Chandler was reviewing the pleadings only, taking it all in the light most favorable to plaintiffs, as noted on page 10 of the court opinion.

The expedition of the case can be explained by the fact that validity of an election of directors is at issue. The court will almost always expedite this type of case, because it puts in question the authority of the sitting directors. So the expedited schedule is not unusual, and does not necessarily signal that the court has made a judgment that the case is significant or that the claims have merit beyond the motion to dismiss standard.

2. What is the Duty of Disclosure?– However, as John Olson recently noted to the ABA Corporate Governance Subcommittee, the opinion is quite interesting for its discussion of the “duty of disclosure” under Delaware law which, Chancellor Chandler notes, is not an independent fiduciary duty but rather “stems from, and is an application of, the general fiduciary duties of care and loyalty.” See note 30 on page 11 of the court opinion. There has been an ongoing debate as to whether the duty to disclose is a separate duty in Delaware – and the Chancellor indicates that it is not.

3. What’s Behind Curtain #3? – The Chancellor applied generic disclosure law in his opinion, but I am not aware of any precedent for this result. This theoretically could have broad ramifications for boards, as they could now be saddled with even greater responsibility to oversee what their companies disclose. As the SEC becomes more involved with regulating governance in the wake of Sarbanes-Oxley, some might view this as the Delaware judiciary inching its way into the SEC’s province of disclosure regulation (but I think this probably is a stretch).

4. How the Case Highlights CEO Succession Practices – This case also does implicate what constitutes good CEO succession practices (listen to last week’s webcast for some nice pointers in this area). Basically, the Chancellor has given plaintiffs the chance to show the company’s succession process was a sham intended to keep Roy Disney and Stanley Gold from running a competing slate. For starters, having an outgoing CEO involved in the interviews of the successor candidates in not a hot idea- see the “troubling seven facts” alleged by the plaintiffs, noted on page 8 of the court opinion.

5. Possible Intersection of the Duty to Update – Perhaps the most interesting item in the opinion is how far Chancellor Chandler seems willing to take the concept of a “duty to update” statements that were truthful when made. This could be chilling in terms of voluntary disclosures – why say anything not required if that gives you a duty to update?And who can even remember or track all statements made – and constantly evaluate whether need to be updated? This hopefully is an overstatement of concern about the opinion, but still something to keep an eye on.

6. A Slippery Slope Revealed? – Along the same lines, this lawsuit might encourage the plaintiffs’ bar to flyspeck proxies for statements that later turned out differently than what the proxy disclosed. For example, compensation committee reports could be fodder if the committee says it is committed to pay-for-performance, but the CEO nonetheless gets a raise after a down year (which happens more than it should!). But bear in mind that Disney is a relatively unique situation in which the plaintiffs had threatened a proxy fight and backed off in reliance on statements they now allege were intentionally false when made.

7. Potential Ramifications for Majority Vote Movement – The invalidation of a board election would be an overwhelming consequence (but possible for misleading proxy disclosure, as noted in footnote 37 of the court opinion). I personally think it very unlikely that the election would be invalidated based on these claims – and the Chancellor’s statements on pages 15-16 of the court opinion – but that is at least nominally what the plaintiffs are seeking. But just the spectre of this type of relief has to play some role in the ongoing debate over majority vote elections and shareholder access.

The Art of Private Equity M&A

On, tune in for tomorrow’s webcast, Tuesday, June 14th – “The Art of the Private Equity Deal” – to learn from leading outside counsel and a top private equity manager how these deal practices are evolving and how they differ from other public and private deals. This program will cover:

– Why are private equity funds engaged in so many deals? What type of edge do they have over public company acquirors?

– What do private equity funds look for in a potential target? How should targets react when a private equity fund approaches?

– What fundamentals of the M&A process are different when a private equity fund is the acquiror? How do negotiations differ?

– How to handle multiple LBO firms that are in the same deal (and analysis of the shareholder agreement issues that arise)?

Special Deal Now Available! No registration is necessary – and there is no cost – for members. So try a no-risk trial to today! And we just launched our half-price “Rest of 2005” rate – believe it or not, a license for a single user is only $100 and there are similar reduced rates for offices with more than one user!

Last Congressman to Serve as a SEC Commissioner?

In Friday’s Washington Post, this article noted that the last Congressman to serve as a SEC Commissioner was 40 years ago. In the 1960s, President Lyndon Johnson appointed former Rep. Hamer Budge (R-Idaho) at the urging of the Republican House leader after Budge lost a congressional race. A few years later, President Nixon promoted Budge as SEC Chair.

M&A Boot Camp Begins Today!

Also on, starting today, we are providing the first of these five programs over the summer as part of our “M&A Boot Camp”:

Starts Today! The Basics of M&A – Diligence, Structure and Beyond (6/13)
– Delaware Law Considerations (6/20)
– Disclosure Issues (7/11)
– Accounting Issues (7/18)
– Negotiating Tactics (7/25)

The “M&A Boot Camp” is for anyone new to M&A, as well as anyone that seeks a refresher on one or more of the areas that are integral to getting a deal done – perfect for summer associates, young associates or paralegals. Catch any of the following valuable programs either the day they are posted – or afterwards! Each program will run between a half hour and an hour – and is in a podcast format (in other words, there is no specific time for you to listen-in; just check it out anytime on the date indicated above).

Special Deal Now Available! No registration is necessary – and there is no cost – for members. So try a no-risk trial to today! And we just launched our half-price “Rest of 2005” rate – believe it or not, a license for a single user is only $100 and there are similar reduced rates for offices with more than one user!

June 10, 2005

More on Nasdaq Delisting Companies for Disclaimed 404 Attestations

A month ago, I blogged about Nasdaq seeking to delist companies that had filed disclaimed internal control attestations. Recently, Cray Supercomputers announced that the Nasdaq Listing Qualifications Department had reversed a prior determination that its 10-K was deficient and concluded that Cray was in compliance with all Nasdaq listing requirements. So Cray’s appeal was dismissed as moot.

As I understand it, the determination by the SEC and Nasdaq as to whether any particular company’s 10-K is deficient is very dependent on that company’s facts and circumstances – so it is difficult to draw guidance from the disposition of any particular situation. For the limited number of companies with disclaimed attestations that still face delisting procedures, the SEC and Nasdaq must have looked at their particular facts and circumstances to come to the conclusion that their 10-Ks were deficient.

After reviewing Cray’s Item 9A disclosures and the disclaimed attestation, I can see why the SEC and Nasdaq found no cause to delist Cray. Cray identifies eight material weaknesses -but notes the clean opinion on its financial statements. The disclaimed audit opinion resulted because, as Cray discloses, “management performed an incomplete review of financial applications and general computer controls and tax controls and did not perform a formalized entity-level risk assessment.”

Cray noted that several financial managers left during the 4th quarter of 2004 and 1st quarter of 2005: the CFO, financial reporting manager and head of the IT department. Although Cray hired an Operations Controller and Director of Internal Audit/Sarbanes-Oxley Compliance during those periods, I assume that the personnel transition made it difficult for Cray to perform the 404 testing procedures timely.

Here is a list of companies facing delisting by Nasdaq – for disclaimed attestation reasons as well as many others. The list describes the delisting rationale for each company – but note that for the companies with rationales described as a 404 problem, many of those companies didn’t file a 404 attestation at all. So this list doesn’t enable you to know how many – and which – companies have disclaimed attestation problems. Read the next item for more about the Nasdaq delisting procedures.

NYSE’s Codified Delisting Procedures for Delinquent SEC Filings (And a Battle Over Differing Procedures)

Last week, the SEC approved a NYSE rule change that codifies existing procedures for companies that fail to timely file their annual reports. Under these rules, a company that fails to timely file an annual report will receive a written notice from the NYSE – then, the company has five days to contact the NYSE and issue a press release disclosing the status of the filing.

If a company fails to file its annual report within 9 months, the NYSE can decide to suspend trading and commence delisting procedures (which the NYSE can decide to do at anytime, even before the 9 months have lapsed) – or allow the company’s securities to be traded for up to an additional 3 months. These new rules apply immediately.

Of particular interest are pages 5-6 of the SEC’s adopting release, which describe how these codified NYSE procedures differ from an outstanding Nasdaq proposal that would impose more stringent hearing procedures on Nasdaq-listed companies than those faced by NYSE companies. And pages 6-7 describe a NYSE rebuttal to a February 4th Nasdaq comment letter submitted on the NYSE’s procedures.

To understand more about this battle over the SRO’s potentially differing delisting procedures, here are some comment letters submitted on the Nasdaq proposal – in particular, you should note David Donohoe’s letter, who is former Chief Counsel of Nasdaq’s Office of Listing Qualification Hearings. Since the deadline for this proposal has been extended, it’s not too late for you to weigh in!

Adopting Release for Regulation NMS Posted

Yesterday, two months from the time that the Commission approved it (see my April 11th blog), the SEC finally posted the 523-page adopting release for Regulation NMS rules, as well as two amendments to the joint industry plans for disseminating market information. In addition to redesignating the national market system rules previously adopted under Section 11A of the ’34 Act, Regulation NMS includes new substantive rules that are designed to modernize and strengthen the regulatory structure of the US equity markets.

Interestingly, the release includes a lengthy “Response to Dissent” (see Section XII, pages 403-433 of the release) to respond to a 44-page dissent from Commissioners Glassman and Atkins. The effective date is 60 days after publication of the release in the Federal Register – but the compliance date for some aspects of the rules are delayed, as spelled out in Section VII of the release (see pages 305-307).

June 9, 2005

Analysis of Quarterly Internal Controls Disclosures

Item 308(c) of Regulation S-K requires disclosure of any change in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. One aspect of the 308(c) requirement that often is overlooked is that positive – as well as negative – changes should be disclosed.

However, a cursory review of recent 10-Qs reveals that there don’t appear to be many of these positive disclosures. So far, we have found six examples that are as close to positive as we could find: the first two relate to new software programs (Intuit and Barnes & Noble); the third is the result of a merger (Sears); the fourth appears to be corrections of weaknesses that were not identified as material weaknesses (Sbarro – they had the same disclosure in their 10-K); the fifth is not a material change, but a change that the company thought should be mentioned anyway (Newport); and the sixth is a result of a restatement, but the company didn’t disclose whether it was a material weakness problem (Origen Financial).

Learn more about the challenges of 308(c) disclosures in this interview with David Miller and Amy Seidel on Evaluating Internal Controls on a Quarterly Basis.

SEC Chair Donaldson’s Last Hurrah?

Reuters reports that the SEC will consider the adoption of ’33 Act reform on June 29th – one day before Chairman Donaldson departs the SEC. The SEC has not yet announced whether – or when – an open Commission meeting is scheduled for consideration of this blockbuster reform.

A Development for “Existing Directors” Change-in-Control Triggers

In late April, Vice Chancellor Noble of the Delaware Court of Chancery rejected a fiduciary breach lawsuit in California Public Employees’ Retirement System v. Coulter, which alleged that an existing director change of control trigger impermissibly granted unauthorized distinctive voting powers to the directors who approved the change-in-control agreements. Learn more about the meaning of this case in this interview with Eric Keller on “Existing Directors” Change-in-Control Triggers – and you can read the court opinion too.

9/11 and the Securities Industry

Today is the SEC Historical Society’s Annual Meeting and they are hosting a webcast featuring Harvey Pitt and others for “Crisis and Resolve: The SEC and the Securities Industry Remember September 11, 2001.” You can also share your own remembrances of 9/11 and its aftermath with the Society. These remembrances will be kept in their “Papers” section. A noble effort and cause!

June 8, 2005

More on Blackout Periods

As evident from our blackout/window period survey last year, blackout periods is a topic that folks love to benchmark (see last year’s results). So I just posted another survey on these periods with five questions – please go to the top of home page and take this new survey, which addresses:

– Does your company ever impose a “blanket blackout period” for all or a large group of employees?

– How does your company’s insider trading policy define those employees subject to a blackout period?

– Does your company allow employees (that are subject to blackout) to gift stock to a charitable, educational or similar institution during a blackout period?

– Does your company allow employees (that are subject to blackout) to gift stock to a family member during a blackout period?

– Are your company’s outside directors covered by blackout or window periods and preclearance requirements?

How to Search the SEC Comment Letter Database

The SEC has posted these instructions on how to search the comment letter database. I think the instructions are likely to be tweaked as the database is honed – and don’t forget to listen to next Thursday’s webcast – “How to Navigate Tricky Confidential Treatment Requests” – to hear SEC Corp Fin Deputy Director Shelley Parratt speak about searching the database and related issues.

Award-Winning Blog?

Okay, as we head into the waning days of a close contest, my blog is tied for first place in the “Favorite Practice Area Blog” category. If ya like reading this thing, go ahead and do me a “solid” and vote for the blog. To do so, you will have to first join (at no cost) TechnoLawyer – and then you should send an email to (cut and paste this addressee) with this message in the body: “For #5 Favorite Practice Area Blog – I vote for Blog.”

If you can’t bear the thought of joining another free site, send the email anyways and perhaps they will count the vote out of the kindness of their heart. [Note that I have belonged to TechnoLawyer for quite a while and very rarely receive emails from them – so joining shouldn’t hurt your inbox.] Voting ends at the end of this Friday!

Q&A on Option Expensing

FAS 123(R) requires companies to recognize compensation expense for all forms of stock compensation, including stock options. Even with the SEC’s delay, the effective date will be here before you know it, yet many practice-related questions remain unanswered.

To help prepare for the transition, here is a panel of experienced practitioners to answer your questions on the standard on tomorrow’s NASPP webcast: “Q&A on FAS 123(R).” You can submit questions in advance for Paula Todd of Towers Perrin and Reginald Oakley of the FASB to answer.

June 7, 2005

Internal Controls? Nay, Disclosure Controls…

Regarding my blog last week on 404 disclosure examples, a member of our advisory board weighed in to note that the RCN Corp. disclosure technically was not an internal controls issue, but rather a “disclosure controls” issue. This member noted a concern that some companies have gotten so absorbed with 404/internal controls that they have forgotten about disclosure controls.

She noted that it was particularly interesting that RCN’s inability to obtain financial data was listed as a failure of their “disclosure controls”, but it actually doesn’t appear to be classified as a “material weakness” in internal controls. RCN did disclose two material weaknesses in internal controls (i.e. lease accounting and general ledger reconciliation), but they were not related to their inability to get timely financial data for equity investments.

This conclusion is interesting because there have been a lot of questions about how disclosure controls and internal controls differ – and whether a disclosure control failure suggests a per se deficiency in internal controls. It is possible that this was identified a “significant deficiency” in internal controls, which wouldn’t have required disclosure or resulted in an adverse 404 opinion.

Impact of the Arthur Andersen Decision

Many experts are saying the recent US Supreme Court decision regarding the Arthur Andersen indictment should be a real bellringer that echos far beyond the case itself. In this podcast, John Savarese, a Partner of Wachtell, Lipton, analyzes the importance of this decision, including:

– Why did the Supreme Court reverse the Andersen decision?

– What does this mean for document retention practices?

– How should companies fine tune their retention programs in light of this decision?

– Will auditors and other professional service providers continue to be “deep pockets” in the wake of the decision?

Disney CEO Succession Case Headed Towards Trial

Don’t forget tomorrow’s webcast, Wednesday, June 8th – “Managing D&O Departures and Arrivals” – with an added 15 minutes because there is so much ground to cover. This could be the most practical webcast of the year, dealing with a wide range of issues for you to consider each time a officer/director joins or departs the company.

And in light of the fact that the Delaware Chancery Court just allowed the lawsuit filed by Roy Disney over The Disney Company’s CEO succession process to proceed to trial – as noted in this article – it seems like a good time to learn about the nuances of CEO succession! That topic will be covered during the webcast by panelists that have been through many successions.

June 6, 2005

Last Word on SEC HQ’s New Address (I Hope)

Astute members were quick to comment on my blog from Friday by noting that the SEC’s Public Reference Room has moved to Station Place (and that all other parts of the SEC relevant to the public have indeed moved). These members were told to use the new address for all purposes – and that is indeed the case, even though the Filing Desk’s address is purportedly the old address according to this web page – that page just hasn’t been updated yet. But this other web page has been updated, as it indicates that the Public Reference Room has moved to the new building.

At this point, it does make sense to disclose the new address in prospectuses and other filings – despite the existing Item 101(e) language that includes the old HQ address – since the Public Reference Room and Filing Desk have moved.

Impact of Flowserve on Investor Relations’ Officers

In this podcast, Mary Beth Kissane, a lawyer who is a long-time investor relations’ advisor and head of NIRI’s NY chapter, analyzes how the IRO profession is reacting to the SEC’s Regulation FD enforcement action against Flowserve, including:

– Were she surprised by the SEC’s censure of the IRO in Flowserve?

– What is the overall reaction of IROs to Flowserve?

– What role should IROs play during private one-on-ones? During investor conferences?

– What role should IROs play on disclosure committees?

– Does she see a trend towards greater empowerment/change in duties of IROs coming in the wake of Flowserve?

Software Licensing Issues in M&A

In this podcast, Dan Bricklin schooled me in software licensing issues in M&A, something that I didn’t know much about. It was quite interesting as Dan explains:

– What are the new software licensing copyright issues that companies should be aware of?
– Why is Open Source an issue? Is this new?
– What is GPL? Who determines the meanings of the terms of the GPL?
– What should be in a corporate software license policy?
– How do you get developers to follow these policies?
– How should the legal department work with developers?

The SEC’s Chief Accountant Speaks

Last Wednesday, SEC Chief Accountant Don Nicolaisen gave this speech on reducing complexity in financials, during which he indicated that a study in the off-balance-sheet area is coming soon (as required by Sarbanes-Oxley) – and provided his views on the latest 404 guidance the Staff provided a few weeks back.

June 3, 2005

Chris Cox Nominated to be Next SEC Chair

Yesterday, President Bush nominated Congressman Christopher Cox – a former securities lawyer at Latham & Watkins – to be the new Chairman of the SEC. Senate confirmation is still required. Here is the White House press release with the remarks of President Bush and Representative Cox.

A number of members asked me yesterday if Chairman Donaldson was asked to resign by President Bush, as Donaldson consistently sided with the two Democratic Commissioners in 3-2 Commission votes and there has been widespread criticism by many over the costs of implementing internal controls (plus the recent SEC budget crisis didn’t help). Your guess is as good as mine – but the Commission is supposed to be an independent agency and I would hope the President wouldn’t meddle in the SEC’s affairs.

As far as I can tell, this is the first appointment of a sitting member of Congress to the Commission. Here is a Forbes article painting the incoming Chair as pro-business; here is an article from Bloomberg that provides a number of differing opinions on the appointment. The front pages of the NY Times and WSJ also have detailed profiles of the incoming Chair and much commentary about what others think.

More on the SEC’s New HQ Address

Earlier this week, I blogged about the SEC’s new address – but this was for purposes of sending courtesy copies to the SEC Staff. Pursuant to Item 101(e)(2), it is still a specific disclosure item that companies must include the following in various SEC periodic reports and registration statements:

“That the public may read and copy any materials you file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW., Washington, DC 20549. State that the public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. If you are an electronic filer, state that the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC and state the address of that site (”

Since the rule still refers to the old address and the SEC hasn’t issued an alert or changed the rule formally, I believe issuers should go ahead and keep using the old address for this and other purposes. There are several examples of companies (at least 40 filings) that have included the new address in filings made in the last couple weeks, but a quick and random review of twenty S-3 filings made yesterday showed that only 1 out of 20 used the new address, while 19 still listed the old address (thanks to Amy Seidel for this data!).

Even though Corp Fin has moved to the new building, other offices still haven’t moved – although the move is now being accelerated in an effort to save money in light of the SEC’s budget crisis.

SEC and DOL Jointly Issue “Tips” for Plan Fiduciaries

The Department of Labor and SEC have jointly published tips to assist fiduciaries of employee benefit plans in reviewing conflicts of interest of pension consultants: “Selecting and Monitoring Pension Consultants: Tips for Plan Fiduciaries.” The tips are questions for plan fiduciaries to ask pension consultants, developed by the DOL and SEC “to assist plan fiduciaries in evaluating the objectivity of the recommendations provided, or to be provided, by a pension consultant.” Also, some guidance is provided following each question.

Bob Woodward on “Deep Throat”

Maybe it’s my “inside-the-beltway” outlook on life, but I was fascinated with this four-page article in the Washington Post yesterday by Bob Woodward, in which he explains – in nitty-gritty detail – how he came to know Mark Felt and the events that led to the series of Washington Post articles that brought down President Nixon.