August 4, 2005
Cox’s First Day
Christopher Cox became the 28th Chairman of the SEC yesterday when he was sworn in by Federal Reserve Chairman Alan Greenspan. Since its inception in 1934, the SEC’s Chairs have been pretty evenly split between the two major political parties, with 15 Republicans versus 13 Democrats. Here’s a list of all past Chairmen and Commissioners.
Chairman Cox’s first official day is today. He is scheduled to address the Staff in the Commission’s auditorium at 10:30 eastern, which appears will be accessible to non-Staffers by webcast. I like the transparency already!
New Section 16 Adopting Release
The SEC took care of some Section 16 business yesterday, adopting amendments to Rules 16b-3 and 16b-7 in response to the Third Circuit’s ongoing Levy v. Sterling Holding Company case. For the background and current status of the Levy case, check out Alan Dye’s blogs on Section16.net – most recently in June 2005 and July 2005.
As you know, Rules 16b-3 and 16b-7 are exemptive rules, which provide that transactions that satisfy their conditions will not be subject to Section 16(b) short-swing profit recovery. The amendments clarify the regulatory conditions that must be present for the exemptions to apply – and do not represent substantive interpretive changes in the application of the rules.
Additionally, the SEC amended S-K Item 405 to delete the ability, on the part of the issuer, to presume that a Section 16 form it receives within three calendar days of the required filing date was filed with the SEC by the required filing date. The SEC thought that in light of the two-business day due date generally applicable to Form 4 and the requirements of mandatory EDGAR filing (and website posting), this presumption no longer is appropriate.
For more insight into this release and other updates on Section 16 – be sure to check out Section16.net.
Settlement Pipeline Grows
As Broc pointed out in his July 18th blog, class action settlements have soared over the last year. Yesterday, Time Warner said it had agreed to settle its class-action litigation with shareholders for $2.4 billion and Arthur Andersen agreed to pay $25 million to settle a lawsuit brought by investors over its role in the collapse of Global Crossing Ltd. On Tuesday, CIBC agreed to pay $2.4 billion to settle fraud claims by investors who lost money in Enron Corp.
But perhaps even more astounding than these settlements (if that’s possible) was when former Cendant vice chairman E. Kirk Shelton was sentenced yesterday to 10 years in prison and ordered to pay full restitution for his role in an accounting scandal in the amount of $3.27 billion. The $3.27 billion would cover what Cendant spent to settle shareholder litigation, pay its legal fees and conduct audits. The payment schedule will be $15 million by October 2005 and then monthly payments of $2,000 per month once he is out of prison. That will make him approximately 135,685 years old before the debt is paid off (excluding interest).