November 18, 2005

A Few Highlights of the SEC’s 2005 Annual Report

On Wednesday, the SEC posted its 2005 Annual Report. Thumbing through this thing, here are some highlights (let me know if you spot some other nuggets):

1. A chart with milestones for significant rulemaking is on page 16 of the PDF (page 14 of the annual report)

2. Discussion of the causes of its unforeseen $48 million budget shortfall begins on page 21 of the PDF (page 19 of the annual report)

3. Discussion of the corrective actions to fix the SEC’s three remaining material weaknesses of its internal controls begins on page 23 of the PDF (page 21 of the annual report)

4. Staff turnover rate in ’05 was 7.5%, the highest level since ’01 (’04 had a 6.3% rate – but these levels tend to be much lower compared to a law firm)

5. Corp Fin’s gross costs were $125 million in ’05; up from $92 million in ’04

6. The number of foreign companies listing in the US and the dollar amount they raised jumped significantly compared to the past year, noted on page 41 of the PDF (page 39 of the annual report)

7. Corp Fin’s response time on comment letters is quicker and is less than 30 days as mentioned on page 44 of the PDF (page 42 of the annual report)

8. Corp Fin referred significantly more cases to the Enforcement Division, likely because the size of Corp Fin’s Office of Enforcement Liasion has grown itself and more filings are being review now that companies are required to be reviewed once during every three years, as noted on page 48 of the PDF (page 46 of the annual report)

Remember: Your PowerPoint Could Wind Up On The Web

Last Sunday’s NY Times ran Gretchen Morgenson’s column about Delphi’s controverial incentive and retention bonus arrangements, during which Gretchen singled out the lawyers and comp consultant’s involvement in the arrangements that have been made public by virtue of the company’s bankruptcy filing (although oddly she didn’t single out the board, which we all know should be held accountable first and foremost).

In the article, Gretchen specifically called out this Watson Wyatt 35-page PowerPoint presentation, which was filed as part of the company’s bankruptcy proceedings. The PowerPoint sets forth the proposed parachute arrangement proposal that ultimately was approved and implemented.

Knowing that this type of information could become publicly available – and spotlighted in the mainstream media – should serve as a cautionary tale to advisors who migth be second-guessed if they don’t provide their clients with some responsible alternatives as to compensation arrangements.

Debunking the Myths on “Going Dark”

Lots of interest in this upcoming – “Going Private and Going Dark.” As this article suggests, a surprising number of companies are “going dark” – and I believe that the article even understates how many companies have done so recently. During the webcast, the lawyers and a banker from the panel will debunk a bunch of the common myths regarding going dark.

If you can’t wait for the webcast, we have created a new “Going Dark” Practice Area, which has several articles about going dark – and a partial list of companies that has recently done so.