December 18, 2008

Obama Expected to Nominate Mary Schapiro as Next SEC Chair

Yesterday, it was widely reported that President-elect Obama intends to nominate Mary Schapiro as the next SEC Chair. If indeed nominated and confirmed by the Senate, Mary would be the first female SEC Chair. Mary’s background in regulatory service can’t be matched – SEC Commissioner at the age of 33, former head of the CFTC and she currently serves as the head of FINRA (with this move, she will be taking a huge pay cut – from $2 million to $158k). Not surprising, she was on the short list.

Here are some media articles about this development:

Wall Street Journal

NY Times

Washington Post


SEC Mandates XBRL – and Its Website Goes “IDEA”

Yesterday, the SEC adopted mandatory XBRL as expected. Here is Corp Fin’s statement – and here is a video of Chairman Cox’s opening remarks. The proposed transition schedule got pushed back by six months, so that the first wave of companies required to use XBRL — those with over $5 billion in worldwide market cap — will be required to file XBRL for their first quarterly (or annual report for 20-F/40-F filers) for fiscal periods ending on – or after – June 15, 2009. About 500 companies will be in this first wave.

A year later, accelerated companies will be in the second wave (ie. first report after June 15, 2010) – and in two years, smaller companies and foreign companies that use IFRS will comprise the third wave (ie. first report after June 15, 2011).

The vote was 4-1 since Commissioner Aguilar dissented, on the grounds that sheltering companies when they first begin using XBRL from some liability is unacceptable. As adopted, machine readable XBRL data will not be subject to antifraud claims – ie. considered “furnished” – so long as the mistake was made with good faith. And as proposed, the human viewable stuff will be considered “filed” (traditional financial statements will still be required to be filed with the SEC and continue to be subject to the “normal” liability provisions). In a change from what was proposed, the limited liability provisions for XBRL will be phased-out over a two-year period for each company, with a blanket termination for all companies on October 31, 2014.

Until we see the adopting release and learn the nitty-gritty details, you can learn more about yesterday’s meeting from FEI’s “Financial Reporting Blog” and the “IR Web Report.” Be careful what you read – particularly from XBRL vendors – as I’m already seeing misinformation about what happened at the meeting.

And the SEC has launched “IDEA,” which is intended to eventually replace Edgar. Do a company search on the SEC’s site and see how different it looks…

CSX Settles Section 16(b) Litigation Over Total Return Swaps

As noted in this Form 8-K filed yesterday by CSX Corporation, the company has settled its Section 16 lawsuit that involved issues related to two hedge funds being deemed beneficial owners, for purposes of Section 13(d), due to underlying cash-settled total return swaps they had entered into (Alan Dye covered this case recently in his “ Blog“). The settlement is subject to approval by the US District Court – SDNY. If approved, CSX will receive $10 million from TCI and $1 million from 3G – and attorney’s fees and costs of up to $550,000, which will be paid from the settlement proceeds.

Alan Dye and Peter Romeo are wrapping up the next issue of “Section 16 Updates,” which will provide practical analysis of this decision’s implications. As all subscriptions are on a calendar-year basis, please renew your subscription to the “Romeo & Dye Section 16 Annual Service” to receive this newsletter when it’s hot off the presses…

– Broc Romanek