December 30, 2008

SEC Updates Oil and Gas Disclosure Requirements

Yesterday, the SEC announced that it had approved changes to the disclosure requirements applicable to oil and gas companies. The Commission’s approval of these rule changes is the culmination of a long running project in Corp Fin to update the antiquated oil and gas disclosure requirements specified in Regulation S-K, S-X and Industry Guide 2. The SEC’s announcement indicates that an adopting release is forthcoming.

Noticeably absent from the announcement of the rule revisions is any indication that somehow the changes are tied to resolving the financial crisis – such proclamations have become a fixture in recent SEC announcements, orders, releases and open meeting statements. It is somehow comforting to know that, with projects such as this, life goes on in the world of adopting rule changes that are simply trying to improve disclosure for investors.

Treasury Throws GMAC a Lifeline

Last night, the Treasury Department announced the completion of a $5 billion cash infusion into GMAC, with up to another $1 billion to be loaned to GM so that it can participate in a GMAC rights offering. GMAC is struggling through the process of converting to a bank holding company, which will ultimately allow the auto finance company to access more funds through the Federal Reserve system. The GMAC funding is under the newly minted Automotive Industry Finance Program, as opposed to the Capital Purchase Program used for allocating government funds to banks. (It is just me or are all of these programs starting to sound like something coming out of the Politburo?)

Like the financing for the auto companies themselves, the GMAC financing reflects tougher executive compensation provisions than those imposed in the Capital Purchase Program’s bank financings. Not only is GMAC obligated to comply in all respects with Section 111(b) of the Emergency Economic Stabilization Act, the Term Sheet for the deal specifies that GMAC:

1. Shall not pay or accrue any bonus or incentive compensation to Senior Employees (i.e., the 25 most highly compensated employees including the Senior Officers), unless approved by Treasury;

2. Shall not adopt or maintain any compensation plan that would encourage manipulation of its reported earnings to enhance the compensation of any of its employees; and

3. Shall maintain all suspensions and other restrictions of contributions to benefit plans that are in place or initiated as of the closing date.

The Treasury also maintains the ability to claw back any bonuses or other compensation, including golden parachutes, paid to any Senior Employees in violation of any of the restrictions specified in the Term Sheet.

For more analysis of the executive compensation restrictions under the Automotive Industry Financing Program, check out this excellent blog by Mark Borges on If you don’t have a subscription to, please try a No Risk Trial for 2009. If you have a subscription, be sure to renew today so you can maintain your access to Mark’s blog and all of the other resources on in the critical months ahead.

Capital Purchase Program Progress

Speaking of the Capital Purchase Program, over the last couple of weeks Treasury has indicated that it has closed $4.7 billion of investments in 92 local banks. If you want to see where all of the $162 billion invested to date through the CPP has gone, check out these Transaction Reports. I think that the Treasury should upgrade these spreadsheets into a full blown prospectus, since what this is starting to look like is a big government-owned financial institutions mutual fund.

– Dave Lynn