August 12, 2008

Midyear Corp Fin Update

Yesterday, at the ABA meeting in New York, John White provided his mid-year update on Corp Fin’s 2008 activities and priorities. There is no doubt from his speech that Corp Fin will remain very busy well into 2009, with projects spanning a wide range of topics. Here is the complete text of the speech, which includes details on all of Corp Fin’s big projects and comments on the shareholder proposal season.

With respect to accounting and financial reporting, Corp Fin will be working to implement some of the final recommendations of the Advisory Committee on Improvements to Financial Reporting. With the guidance on use of company websites already done, the Staff is working on Commission-level guidance concerning other issues raised by the Committee, such as materiality and the correction of errors. In addition, the Committee’s recommendation to require an executive summary in Exchange Act reports is under serious consideration, given how such an approach could tie into the SEC’s website guidance, the 21st century disclosure initiative, and XBRL. IFRS continues to be a high priority, with a recommendation expected soon on the anticipated roadmap for IFRS implementation, which will ultimately be in the form of some Commission action. Finally, accounting guidance from Corp Fin’s Chief Accountant’s Office – in a format that is comparable to the new Compliance and Disclosure Interpretations – is expected by the end of the summer.

On the international front, the Staff is considering the comments received on the proposals dealing with foreign issuer registration and reporting, as well as the cross-border tender offer rules.

Obviously XBRL remains on the front burner, and John indicated a high likelihood of completion of the first steps in implementing XBRL. The Staff is considering all of the comments (76 comment letters have been submitted so far), including those comments seeking to delay the effective dates.

In terms of other projects, John noted that the much-anticipated Regulation D amendments are still on his list, and that he hopes to see something coming out on those proposals. The proposals dealing with NRSRO references in SEC rules will clearly get done this year in John’s view, given the urgency associated with those proposals. John also indicated that there is a Commission-wide effort to look at adjusting dollar amount thresholds in the SEC’s rules for inflation, both now and in the future. (See the July-August issue of The Corporate Counsel for a discussion of how the SEC backed off of a proposed inflation adjustment provision in the smaller reporting company rules.) On the e-proxy front, the Staff has been monitoring all of the issues that have come to light with the first year of implementation, and is considering ways to address them. John indicated a preference to do some sort of clean-up rulemaking this Fall to have in place for next proxy season – but if that timing does not work out, then something would be done next year.

In terms of longer-term projects, John referenced the 21st century disclosure initiative, which he described as a refinement of integrated disclosure while factoring in current technology. The goal for this project remains to have blueprint developed by the end of this year, followed by the formation of an advisory committee. Further, the Staff intends to take up a project looking at beneficial ownership reporting.

Apparently among the things not on the list of priorities are (1) the previously discussed possibility of voluntary filer guidance, and (2) any effort to address the uncertainty created by the three federal district courts that have dismissed Section 5 actions against investors that shorted PIPE shares.

Lawyers in the Crosshairs in Subprime Cases?

More from the ABA Meeting this past weekend: In a panel discussion of SEC Enforcement activities, the possibility was raised that lawyers could be targeted for their role in the subprime fiasco. This article from the ABA Journal notes:

“This time the Securities and Exchange Commission may be the plaintiff in civil complaints that target lawyers for their role advising lenders and securitizing loans for sale to investors.

Reid Muoio, assistant director of the SEC’s division of enforcement, isn’t foreclosing the possibility. While private securities plaintiffs aren’t permitted to bring aiding and abetting claims, the SEC has congressional authorization to do so.

‘It can be expected that if we can identify problems, we will then ask, Where were the lawyers?’ he said in an interview after the discussion. A typical aiding-and-abetting scenario might be a law firm that aids misrepresentation in a prospectus for a mortgage-backed security, he said. He cautioned that he was speaking for himself and not the SEC.

During the panel discussion, Muoio said the SEC has opened 48 investigations in the subprime mortgage mess and assigned more than 100 lawyers to the cases. The possibility of aiding-and-abetting actions – against lawyers and others – won’t be considered until the probes are further along, he said.”

Corruption or Compliance: Ernst & Young’s Global Fraud Survey

The DOJ and SEC have significantly stepped up FCPA enforcement efforts, focusing attention on the fact that corruption remains pervasive around the world. In this podcast, Brian Loughman discusses Ernst & Young’s 10th Global Fraud Survey, which focuses on anti-corruption efforts and compliance, including:

– What is the background of E&Y’s Global Fraud Survey?
– What were the major findings of this year’s Survey?
– Were any findings surprising?
– What advice do you have for companies in light of the Survey findings?

– Dave Lynn