May 20, 2008

New Quick Survey: Earnings Guidance

General Electric’s recent high-profile failure to meet its own earnings guidance may well revive the debate over providing quarterly guidance. As noted in this piece, while some major companies such as Coca-Cola and Google have avoided the quarterly guidance game, the practice still remains entrenched.

In this new “Quick Survey on Earnings Guidance,” we ask about your company’s guidance practices. Please take a moment to complete the four questions.

Disclosing Beneficial Owners of Private Companies

A bill introduced in the Senate earlier this month by Senators Levin, Coleman and Obama would, if enacted, require disclosure about the beneficial ownership of private corporations and LLCs. S. 2956 would set, beginning in fiscal 2011, standards for state incorporation systems that would require the name and current address of each beneficial owner, and if the beneficial owner exercises control of over the corporation or LLC through another legal entity, the identity of the legal entity and each beneficial owner who will use that entity to exercise control over the corporation or LLC. This beneficial ownership information would need to be updated annually if the state requires an annual filing; however, if no annual filing is required, then the information would need to be updated whenever there is a change in beneficial ownership. Additional requirements would apply for any beneficial owner who is not a U.S. citizen or lawful permanent resident.

The legislation would define “beneficial owner” as “an individual who has a level of control over, or entitlement to, the funds or assets of a corporation or limited liability company that, as a practical matter, enables the individual, directly or indirectly, to control, manage, or direct the corporation or limited liability company.” The bill would specifically carve-out from the definition of corporation or LLC “any business concern that is an issuer of a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 781) or that is required to file reports under section 15(d) of that Act (15 U.S.C. 78o(d)), or any corporation or limited liability company formed by such a business concern.”

The text of S. 2956 notes that all countries in the EU require information about beneficial ownership of corporate entities, and that the U.S. has been criticized for the lack of information about the ownership of companies that could potentially be involved in terrorism, money laundering, fraud and other misconduct. The bill has been referred to the Committee on Homeland Security and Governmental Affairs.

This legislation appears to reflect some frustration with the states for not improving their corporate registration systems to capture ownership information, particularly for law enforcement purposes. The bill notes that a person forming a corporation or LLC typically provides a state with less information than is needed to obtain a bank account or a driver’s license!

Third Party Disclosure of Undisclosed SEC Investigations

Last summer, I blogged about varying practices as to when to disclose pending SEC inquiries or investigations of a company or its officers and directors. Various factors may be pushing the timing of disclosure forward, and one recent development may force some companies to make the disclosure sooner than they otherwise might have under the rules. is now offering free e-mail updates regarding companies that appear to have undisclosed enforcement activity, based on information derived from FOIA requests. As noted in this article from the Minneapolis-St. Paul Star Tribune, this new site was created by John Gavin, who started his SEC Insight service back in 2000 based on information derived through the FOIA process. Gavin sued the SEC in 2004 over the agency’s FOIA practices, namely the blanket denial of FOIA requests using the “Glomar response” (see Broc’s blog about this litigation from 2005).

– Dave Lynn