Monthly Archives: December 2009

December 15, 2009

SEC Re-Opens Proxy Access Comment Period: What Does It Mean?

Yesterday, the SEC issued this press release to extend the comment period on its proxy access proposal for another 30 days. The original comment period ended on August 17th.

For the most part, the press release seems like a formality since the SEC had previously announced back in October that it didn’t intend to consider adopting final rules in this area until early next year. And the SEC regularly takes into consideration comment letters that come in after a comment deadline.

This action may mean absolutely nothing. Or maybe the SEC is being extra careful about meeting the dictates of the Administrative Procedures Act since litigation over this rulemaking has been threatened (and even stronger authority from Congress doesn’t help with the APA). Or perhaps it signals some increasing willingness to consider an “opt out” – the related formal extension release lists four specific comment letters it has received as items that the public may wish to comment upon (as well as the other 500-plus comment letters received so far).

Or maybe this will set the SEC back even further on their rulemaking timetable for proxy access (even with a short 30-day comment period) – since it takes the Staff time to process new comment letters – and this would delay the SEC’s consideration of these rules until legislation is passed providing stronger authority for their ability to rulemake in this area…

Proxy Access: Do You Need to Re-Submit Your Comment Letter?

For those that have already commented, you do not need to resubmit your comment letter – your existing letter is already on file and will be contemplated. However, the SEC is seeking comment on the letters already submitted – including the four noted in their extension notice – so if you feel strongly about this rulemaking, you may want to consider sending in new thoughts on those. But don’t just submit the same letter you already submitted – that won’t make you a fan of the Staff…

Factors to Consider Before Ordering a NOBO List

In this podcast, Rachel Posner of Georgeson digs into the intricacies of ordering a NOBO list, including analysis of the factors to consider when deciding whether to order one.

– Broc Romanek

December 14, 2009

House Passes “Wall Street Reform and Consumer Protection Act of 2009”

On Friday, the House of Representatives – by a vote of 223-202 – passed the “Wall Street Reform and Consumer Protection Act of 2009” (it appears that this will be referred to as the “Wall Street Reform Bill”). As I’ve blogged, this bill consolidates and revises numerous reform bills that have been introduced in the House this Fall (eg. Title I contains what was the Financial Stability and Improvement Act of 2009). As of the start of last week, there were 238 amendments offered to this bill.

I’m not convinced I’ve seen a final copy of the bill actually passed since so many amendments were at play. I believe its changed since this version that was floated heading into last week – but that old version is what is linked to from this press release announcing the passage of the bill. [I’ll blog if a newer version becomes available]. We will be posting memos analyzing the bill in our “Regulatory Reform” Practice Area.

Now, the House bill will have to be reconciled with any financial reform legislation that emerges from the Senate. Senator Dodd introduced a reform bill a few months ago – but his bill has encountered opposition and remains in the Senate Banking Committee. Senate action is expected early next year and I imagine some of the House bill’s provisions will not square with the Senate’s version…

FEI’s “Financial Reporting Blog” summarizes the accounting implications of this bill.

House Passes Internal Controls Relief for Smaller Companies

Among the numerous provisions of the House’s reform bill is the Adler-Garrett amendment, which is a permanent exemption for small issuers (those with less than $75 million in public float) from the outside auditor attestation requirements of Section 404 of Sarbanes-Oxley (and have the GAO and SEC study enlarging the exemption for companies with a public float up to $700 million). On Friday, the House voted 271-153 against an amendment offered by Rep. Paul Kanjorski to remove the smaller company exemption.

Politics As Usual: A Poll on the House Bill

I chuckled when I read this quote from Rep. Nancy Pelosi about the House’s action: “The legislation says very clearly to Wall Street: the party is over.” It’s clear that the bill will impact all of us in some way – it is quite comprehensive – but it’s a falsehood to say the party is over. Hasn’t she seen “Animal House”? Recall this quote from John Belushi’s Bluto: “Over? Did you say “over”? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Heck no!”

The Republicans issued this press release says this bill will destroy jobs and the economy. And see this press release from Rep. Barney Frank from before the House vote. The politics is at full throttle. But don’t take my word for it, participate in this anonymous poll and weigh in:

Online Surveys & Market Research

– Broc Romanek

December 11, 2009

E-Proxy & Proxy Contests

Continuing our proxy solicitor podcast series, in this podcast, Scott Winter of Innisfree provides some insight into how e-proxy intersects with proxy contests, including:

– Can you provide an overview of how notice & access works in a proxy contest?
– How common is notice & access in a proxy contest?
– Will the proposed amendments to the notice and access rules increase use of notice & access by dissidents?
– Should companies or dissidents utilize notice & access in a proxy contest?

The SEC’s E-Proxy Proposal: Comment Letter Fatigue Setting In?

With the deadline for comments on Corp Fin’s proposal to tweak e-proxy behind us, it may surprise you to learn that only two dozen of comments were submitted to the SEC, with the vast majority coming in after the deadline. [Based on the description of the items to be considered at Wednesday’s open Commission meeting, I don’t think this proposal will be acted upon then – although I guess it’s possible that this proposal falls within the term “other corporate governance matters.”]

Then again, it might not surprise you given there is so much other stuff going on – so the more “minor” proposals get buried. Even though we are in the early innings of reform in the wake of the financial crisis, folks might also be experiencing an early case of comment fatigue. I remember the same thing happened during the spate of SOX rulemaking in ’03 – by the end of several dozen proposals, folks had trouble commenting on the last half dozen of the proposals…

A Bunch of International Reforms

The wave of financial reforms sweeping this country is not unique; there are reforms taking place all over the world. Here is a sampling:

– In the UK, the final Walker Review recommendations were recently issued. This is a sweeping governance reform of the United Kingdom’s financial industry, including strengthening the role of non-executive directors and giving them new responsibilities to monitor risk and compensation.

– CalSTRS became the first US-based fund to endorse the United Kingdowm’s “best practices” code for investors that I blogged about last week. Notably, the Walker recommendations urge that this “Code on the Responsibilities of Institutional Investors” should be ratified by the UK’s Financial Reporting Council and become part of that country’s Stewardship Code.

– As noted in this article, the UK’s Financial Reporting Council has issued a set of proposals to reform the UK’s corporate governance regime. What was previously called “The Combined Code” will become “The UK Corporate Governance Code” – subject to what they call “consultation” – and will apply to all listed companies with a “Premium Listing” for fiscal years beginning June 29, 2010, regardless of the country of incorporation.

– India’s review of corporate governance prompted by the Satyam scandal is now expected to result in the issue of corporate governance guidelines by the end of December. Thanks to Jim McRitchie of for spotting this one (and the two directly above) for me.

– Broc Romanek

December 10, 2009

Us vs. Them: A Campaign Pitch

Even though I loathe lists generally, I’ll admit that I’ve become obsessed with the voting going on between the fine blogs that comprise the ABA Journal’s Blawg 100. As I blogged last week, our blog has made that list for the second year in a row – and this is the first year that the ABA Journal is putting the Blawg 100 head-to-head in a round of voting.

Well, we have felt the love and we currently stand in 1st place! We are just barely ahead of “Above the Law” (which has an advantage due to the ABA Journal’s design of its voting pages into separate categories – their blog is on the main voting page and ours is not. Many folks have emailed saying they couldn’t find ours in the list; our blog is in the “Practice Specific” category; their’s is in the default “News” category.)

Voting continues until the end of this month – so please vote if you can. It’s a tight race against some tough competition – so every vote counts. To help you navigate the ABA Journal’s voting framework, here are the three steps you should take:

1. Register to vote – it’s free (if you’re an ABA member, your ABA id/password won’t work for the ABA Journal’s site).

2. Take your User Name and password – you will create these when you register – and log-in. This may happen automatically when you click on the link within the email sent to you after you register.

3. Now vote in this “Practice Specific” category by scrolling down to the description of our blog – 2nd blog from the bottom – and clicking the “plus sign” in the box to the left of it (if you don’t see a “plus sign,” you’re not logged-in). If you can’t find our blog, you’re probably in the default “News” category. Click on over to the “Practice Specific” category to find ours…

If you’re having troubles, please shoot me an email and let me know. Thanks for the support!

A Campaign Video: Bringing It!

Enjoy this silly video seeking votes – it’s only 30-seconds long:

SEC to Adopt New Executive Compensation Rules Next Wednesday

Yesterday, the SEC issued a notice that it will hold an open Commission meeting next Wednesday, 12/16 to consider adoption of its executive compensation and other corporate governance proposals. It’s unknown at this time whether they will apply to the upcoming proxy season.

We’ll be covering these new rules in our January 27th webcast – “The Latest Developments: Your Upcoming Proxy Disclosures – What You Need to Do Now!” – featuring Mark Borges, Alan Dye, Dave Lynn and Ron Mueller. As all memberships expire at the end of this month, renew now or try a no-risk trial to catch this webcast.

– Broc Romanek

December 9, 2009

My SCOTUS Experience: The Full Monty

I attended the US Supreme Court’s oral arguments on Monday to hear the fate of the PCAOB argued in FEF and Beckstead & Watts v. PCAOB. It was my first time visiting the land’s highest court. For those that haven’t been, here are 10 take-aways:

1. Simply Wow; A Real Patriotic Experience – Having been to numerous Congressional hearings and other “official” DC meetings, nothing else compares. I could literally feel the history of the country in the room. And I was proud that we have such sharp minds on the bench, even though I don’t agree with all of the views expressed. A “must” for any lawyer, and really any US citizen.

2. How to Attend – I enjoyed the perks of my journalistic hat and obtained a press pass. But even though seating is limited, the main room holds 400-500 and many left after the PCAOB hearing – so it would have been easy to come in and hear the second case. Here is an explanation of how to get in. I saw a number of PCAOB and SEC Staffers in the audience – they got in the same way as the general public. I understand that the cafeteria is open to the public – and it smelled good!

3. Oyez, Oyez, Oyez – When the Justices come into the room – entering simultaneously from behind curtains like magic – they are not announced by their individual names. Instead, they are introduced as a group – followed by three chants of “Oyez’s” by the Court’s Marshall. “Oyez” is sort of an old English tradition. Here is a recording of what that sounds like. Silence by the audience is requested and observed, except for several occasions when something funny is said and there is laughter (ie. a live studio audience). At the conclusion, only one person forgot to observe the request to remain quiet and clapped.

4. Entry into the Supreme Court Bar – The first order of business is the swearing-in of new members of the exclusive Supreme Court Bar. Only those admitted to this bar are permitted to argue before SCOTUS. It’s a pretty small group that does – even though the admission process appears easy – you fill out a form with two sponsors, provide a certificate from your state bar and pay a fee. The problem is that the bar is so small that it’s hard to find two existing SCOTUS bar members to sponsor you. That’s one reason why nepotism happens frequently (although I imagine the practice of parents sponsoring their children is primarily ceremonial as the real SCOTUS bar is dominated by a much smaller subgroup as noted in this paper).

5. Questioning is Pointed – One of the reasons why a visit to hear oral arguments is interesting is that it’s action packed. The lawyers arguing their cases are frequently interrupted by the Justices. It’s not rude – it’s just that time is limited and this is the way it works. During the PCAOB arguments, each advocate didn’t get more than 60 seconds into their opening remarks before they got hit with their first question.

6. Fun Factoids – Very rarely during the 75-minute hearing (it went 15 minutes over) did the term “PCAOB” get mentioned – only 5 times. The PCAOB was often referred to as the “Accounting Board.” And “Sarbanes-Oxley” didn’t get mentioned at all. Don’t believe me? Check the transcript.

7. No Electronics – No electronics of any kind are allowed in the hearing room. Actually, very little of anything. I was allowed to bring in a pad and a pen since I was press. Four sketch artists were drawing to the left of me – probably commissioned by some of the lawyers presenting the arguments (my mom is an artist and has been commissioned to do so in the past).

8. Only One Woman on the Walls – As well known, the Supreme Court has been dominated by white men over its 200-year plus history. As a result, the portraits hanging on the walls reflect that history. With one exception (there could have been more, I didn’t do a comprehensive search), there is a portrait of “Mrs. Roger Taney.” Her own first name is inscribed in small letters underneath (ie. Anne). Poor woman is subjugated to her husband even in death.

9. Building Being Modernized – Although it was hard to tell, posted signs indicate that the Supreme Court building is being modernized for the first time since it was completed 75 years ago. It’s a tremendous building – beautiful through and through. Nice marble walls in the bathroom (Best public bathrooms in DC? The Mandarin Hotel by far).

10. Transcripts Available – Recently, the US Supreme Court began posting same day transcripts of oral arguments. Here is the transcript from the PCAOB case.

Bob Monks recently blogged about his experience of attending the SCOTUS’ Jones v. Harris oral arguments…

Chief Justice Roberts: Examines Intersection of PCAOB and Public Companies

As noted on page 38 of the transcript, Chief Justice Roberts asked several questions about the power of the PCAOB to compel a public company to respond to a PCAOB investigation. Solicitor General Lagan hedged her answer, but essentially said the PCAOB could go to the SEC to obtain a subpoena for this purpose. They were both off the mark a little bit here.

As I’ve been blogging for a long time (also see this blog – and this one which has model language you can put in your auditor engagement letter), the real issue is that a public company won’t even know when the PCAOB is reviewing its financials, work papers, etc. during an investigation because the PCAOB only directly interacts with auditors – not the auditor’s clients. That’s why it’s important for audit committees to insist a provision be inserted into their engagement letters with their auditors to be informed when the PCAOB is digging into their files.

Parsing the Oral Arguments: FEF and Beckstead & Watts v. PCAOB

A number of blogs have weighed in on the substance of the oral arguments made, including:

The Supremes and Sarbanes-Oxley…
Considerations of PCAOB
Sarbanes-Oxley and its devilish details
Donna Nagy on the PCAOB
Oral Argument in Free Enterprise Fund v. PCAOB

Compared to what is provided in those blogs, below is a more comprehensive summary regarding how the oral arguments played out – along with some analysis and conjecture – from a member that also attended the hearing:

Petitioners’ Argument

The Petitioners’, FEF and Beckstead & Watts, argued first. The good news for PCAOB was that the Petitioners’ lawyer, Michael Carvin, had a very tough time making all the points he wanted in the time allotted. (Each side gets 30 minutes.) Justices Breyer, Ginsberg, Scalia and Sotomayor peppered Carvin with so many questions- many of them quite tangential- that he struggled to get back on track. Carvin reserved some time for rebuttal and he closed well.

The argument and questioning focused on the Separation of Powers and Appointments’ Clause issues. The Separation of Powers argument centered whether the structure of the PCAOB allowed Congress to essentially strip the President of the power to effectively oversee an Executive Branch agency. Carvin’s Appointments Clause argument had two parts. First, he argued that the appointments violated the Appointments Clause because PCAOB members are “superior officers” that must be nominated by the President and confirmed by the Senate. Secondly, he argued that assuming they are “inferior officers,” they weren’t appointed by the “head” of a “department.”

The Appointments’ Clause arguments didn’t seem to gain much traction, but there was a good deal of discussion of separation of powers, particularly the President’s inability to directly remove PCAOB members at will.

Respondents’ Argument

US Solicitor General Elena Kagan argued the case for the United States, which previously intervened in the case. Jeff Lampkin argued the case for the PCAOB itself. Kagan and Lampkin had easier times getting through their arguments, but were asked pointed questions by Chief Justice Roberts and Justices Scalia, Alito and Kennedy. Kagan opened with a syllogism. She said: The President has sufficient authority over the SEC (per the case Humphrey’s Executor) and the SEC has sufficient authority over the PCAOB (per her reading of the Sarbanes-Oxley Act). Thus, the President has sufficient authority over the PCAOB. Justice Scalia immediately challenged this assertion and seemed to tip his hand that he thought the structure violated separation of powers doctrine. Chief Justice Roberts also hammered home the point that this would be an extension of Humphrey’s Executor and seemed unwilling to do that. Justices Alito made similar points. Kennedy also focused on the separation of powers issue, although his questions were more confusing. (He needs to be briefed up.)

Posture of the Justices

Judging from their questions/comments and from what I know of their judicial philosophies, I think the Justices Breyer, Ginsberg and Sotomayor are likely to back the PCAOB. I also think that Justice Stevens is also likely to rule in favor of the PCAOB, although he said virtually nothing during oral arguments. (He tried to get Carvin to concede that the PCAOB would be constitutional if the SEC could remove the PCAOB members for cause. Carvin did not concede that point.) I think Chief Justice Roberts and Justices Alito and Scalia will vote to deem the creation of the PCAOB unconstitutional because it violates the doctrine of separation of powers. Justice Kennedy had no questions for Carvin during his opening remarks, but had several for the Respondents’ counsels and for Carvin during his rebuttal. He seemed confused by the issues at times. Justice Thomas said nothing. Justices Kennedy and Thomas frequently seek to limit regulatory reach.


If I had to predict today, I think the PCAOB will lose 5-4. I think Chief Justice Roberts and Justices Alito, Kennedy, Scalia and Thomas will rule that the current structure of the PCAOB violates the separation of power doctrine. I think that Justices Breyer, Ginsberg, Sotomayor and Stevens will side with the PCAOB. Before hearing the arguments, I assumed that Roberts and Kennedy would be the deciding votes based solely on judicial temperament. I now think it all comes down to Kennedy.

Assuming the PCAOB loses, the case will be remanded for further proceedings consistent with the ruling. This means the parties will go back to the trial court for some procedural maneuvering. FEF may try to get an order shutting down the PCAOB immediately, but that is unlikely. Instead, the trial court judge will likely enter the judgment against the PCAOB but stay any order to dissolve it. This would allow Congress to act to try to cure the constitutional defect.

The Court is not expected to issue its opinion until May or June 2010. However, this timetable could make a fix (if necessary) more politically challenging, as it would be required as the congressional mid-term elections loom.

Poll: Which SCOTUS Justice Was Silent?

During these oral arguments, one Supreme Court Justice didn’t ask a single question. Take this anonymous poll to indicate who you think that was…

Online Surveys & Market Research

– Broc Romanek

December 8, 2009

“We’re So Sorry, Uncle…SIGTARP Kashkari”

I don’t know why, but sometimes a news story will remind me of a song. This fantastic lead – and lengthy – artlcle from Sunday’s Washington Post about how Neel Kashkari recently resigned as Special Inspector General of the TARP funds reminded me of this Paul McCartney song. Seven months ago, 35-year old Kashkari was tapped to serve as SIGTARP by then-Treasury Secretary Paulson, hired out of Goldman Sachs (but not “lured” out of there; Paulson didn’t know him – Kashkari sent his resume in cold!).

As the WaPo article explains in great detail, Kashkari and his wife have now moved about as far from DC as possible, living a simple life in a log cabin in Truckee, California in what he calls his “Anti-D.C. Sanctuary” (my brother-in-law used to work in Truckee’s hardware store; I’ve been there and its beautiful, just outside of Lake Tahoe). I don’t blame him. Once you see what goes on inside the Beltway – is it the same on Wall Street? – it makes you want to run and hide. And more often than not, Congress is the primary cause for bewilderment as so aptly reflected by this article excerpt:

Soon he was marking hearing dates on his calendar: “BEATING ON THE HILL.”

But don’t feel too bad for Kashkari. He’ll make a mint if he decides to write his own book (rather than just edit Paulson’s, which he is doing right now). So I would just chalk this up as a companion piece to my recent blog, “Can We Just Go Home Now Mommy?

Corp Fin Updates the “Financial Reporting Manual”

Coinciding with the annual AICPA Conference being held in DC right now, Corp Fin released an updated version of its Financial Reporting Manual yesterday (this Manual is formerly known as the “Accounting Training Manual”). In the past, this was updated every 5 years or so – now Corp Fin is attempting to update it quarterly. This is the third update this year. Technically, this is an internal Staff document – but the SEC makes it publicly available as a valuable informal resource.

The dozen and a half sections marked “updated 9/30” are the ones updated (even though they just came out now). Compared to what I blogged about recently, this update does not include the 25-years worth of content based on meeting with the “CAQ Regs” Committee. That is forthcoming…

Here are some notes from what happened yesterday at the AICPA conference from FEI’s “Financial Reporting Blog.”

Now Available: Fall Issue of Compensation Standards

We just dropped the Fall 2009 issue of the Compensation Standards print newsletter in the mail to subscribers. Subscribers can access it now as we have posted the issue online. It provides timely analysis of compensation action items that boards should be focused on now.

Act Now: Members of are entitled to a free copy of this newsletter. As all memberships expire at the end of December, you should renew now (or try a no-risk trial).

– Broc Romanek

December 7, 2009

Today at the US Supreme Court: The Battle Over the PCAOB

You would figure one of the benefits of living in the DC area is that I would have gotten a chance to see the Supreme Court live during oral argument. But it’s not easy to gain entrance. I’m happy to say that I’m heading down there this morning to watch the Supreme Court deliberate the future of the PCAOB (and possibly reshape other aspects of Sarbanes-Oxley too – see this Bloomberg article) when it considers Free Enterprise Fund v. PCAOB. I’ll be giving a full report on the SCOTUS experience later this week.

Meanwhile, take a gander at the numerous merit and amicus briefs filed in the case so far with SCOTUS. Also check out this amicus brief filed by nine members of the Council of Institutional Investors, CFA Institute and others (it was the first one filed in support of the PCAOB).

Last week, the PCAOB approved its a five-year budget and strategic plan this week, which is now subject to SEC approval. The PCAOB seeks a 16% increase in its 2010 budget, from $157.6 million to $183.3 million (raising the Staffing level to 636).

Tomorrow, as noted in the SCOTUS blog, the US Supreme Court will hear oral arguments regarding the Hollinger case (executive pay and fraud). And Kevin LaCroix notes that SCOTUS has granted certiorari in a “f-cubed” case.

Ask the Experts: Prepping for a Wild Proxy Season

We have posted the transcript for our recent webcast: “Ask the Experts: Prepping for a Wild Proxy Season.”

Ask the Experts: Schedule 13D and Schedule 13G Issues

With investors becoming more active – with many pursuing the same agenda – the issues implicating Schedule 13D and 13G have become more common and more complex. Join tomorrow for the webcast – “Ask the Experts: Schedule 13D and Schedule 13G Issues” – and hear from:

Dennis Garris, Partner, Alston & Bird LLP and former Chief, SEC’s Office of Mergers & Acquisitions
Jim Moloney, Partner, Gibson Dunn & Crutcher LLP and former Special Counsel, SEC’s Office of Mergers & Acquisitions
Chuck Nathan, Partner, Latham & Watkins LLP
David Sirignano, Partner, Morgan Lewis & Bockius LLP and former Chief, SEC’s Office of Mergers & Acquisitions

They will be answering this list of questions

Act Now: Renew your membership for 2010 as all memberships expire at the end of this month. Or try a no-risk trial for 2010 and catch this webcast for free.

– Broc Romanek

December 4, 2009

Latest Version: House Bill on Financial Reforms

We finally have the various pieces of the reform bills separately passed by the House Financial Services Committee rolled into one document, HR 4173 – “The Wall Street Reform & Consumer Protection Act of 2009” – as the Committee passed the last piece of it on Wednesday. Here is that 1279-page document that the House is expected to vote on next week. It is likely it will pass along party lines – the question is what amendments will occur before it is passed as noted in my blog from Monday…

Nasdaq Mandates 10-Minute Prior Notification of Material Information

Recently, the SEC approved a Nasdaq rule change to Rule 5250(b)(1) and IM-5250-1 so that Nasdaq-listed companies will be required – rather than merely urged – to provide Nasdaq with at least 10 minutes notification when releasing material information; the change to IM-5250-1 also ensures that Nasdaq’s rules are consistent with the SEC’s interpretive guidance on the use of company websites to satisfy public disclosure requirements (ie. softening language that web posting alone “will not” satisfy Regulation FD to “may not” satisfy). The rule changes become operative on December 7th.

More on “The Mentor Blog”

We continue to post new items daily on our new blog – “The Mentor Blog” – for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Suing Research Firms that Dissent
– The Buck Starts Here: GCs Should Advocate for Good Corporate Governance
– Only Interested in Transactional Law: The New Prospective Summer Associate Taboo?
– Nell Minow on “The New Fundamentals”
– Life Balance Issues for Executive Spouses

– Broc Romanek

December 3, 2009

SEC Approves NYSE Amendments to Corporate Governance Requirements

Right before Thanksgiving, the SEC approved the NYSE’s amendments to its corporate governance requirements contained in Section 303A of the NYSE Listed Company Manual. The amendments are effective January 1, 2010. We’ll be posting memos analyzing these new requirements in our “NYSE Guidance” Practice Area.

As noted by Mayer Brown, the rule changes include:

– Eliminating NYSE requirements that are similar to existing SEC requirements that are contained in Item 407 of Regulation S-K, and incorporating the applicable requirements of Item 407 into Section 303A of the NYSE Listed Company Manual. For example, replacing the reference to disclosure of categorical standards for independence with a reference to the disclosure requirements of Item 407(a) of Regulation S-K (which requires a description by specific category or type of transactions, relationships or arrangements that were considered in making an independence determination);

– Permitting more extensive use of a company’s web site, as opposed to a proxy statement or an annual report, to disclose, among other matters, the director chosen to preside at executive sessions and the method for interested parties to communicate directly with the presiding director or the non-management or independent directors as a group;

– Eliminating the requirement for a listed company to state in its proxy statement or annual report that corporate governance documents posted on its web site are available in print to any shareholder who requests them;

– Eliminating the requirement for a listed company to disclose in its annual report that its chief executive officer filed the certification regarding compliance with the NYSE’s corporate governance listing standards and that the company filed the chief executive officer and chief financial officer certifications required by the SEC;

– Requiring the chief executive officer to notify the NYSE in writing after any executive officer becomes aware of any non-compliance with NYSE corporate governance listing standards, even if not material;

– Allowing a listed company to hold regular executive sessions of independent directors as an alternative to executive sessions of non-management directors;

– Clarifying that a company must disclose a method for all interested parties, not just shareholders, to communicate their concerns to the presiding director or to the non-management or independent directors as a group;

– Requiring disclosure of a board’s determination, if applicable, that an audit committee member’s service on more than three public company audit committees would not impair that director’s ability to serve on the listed company’s audit committee, even if the company does not limit audit committee members to serving on three or fewer public company audit committees;

– Permitting disclosures to be incorporated by reference into a company’s proxy statement or annual report from another document filed with the SEC, if permitted by SEC rules; and

– Modifying transition periods for newly listed companies.

Getting Your Website Ready for XBRL

In this podcast, Diane Mueller of Just Systems explains how to get your investor relations’ website ready for XBRL, including:

– Which companies need to post their filings in XBRL filings on their IR web pages? And when?
– How exactly will companies need to display these XBRL filings on their IR web pages?
– Are there any examples of companies that have done this already?
– What should companies be doing to prepare for these new requirements?

Recently, the “XBRL Business Information Exchange Blog” noted that Citigroup had filed a model XBRL document.

The California Attorney General’s Pursuit of the Credit Rating Agencies

Last Monday, the SEC adopted rules regarding credit rating agencies – and proposed some rules too. Related to my blog on the Ohio Attorney General’s suit against the credit rating agencies, Keith Bishop of Allen Matkins sent me this information:

Back in September, the California Attorney General announced an investigation into the rating agencies “role in fueling the financial crisis.” The California AG asked the rating agencies to supply information to address the following questions:

– Whether the rating agencies failed to conduct adequate due diligence in the rating process;
– Whether the rating agencies gave high ratings to particular securities when they knew or had reason to know that high ratings were not warranted;
– Whether the rating agencies failed to comply with their own codes of conduct in rating certain securities;
– Whether the rating agencies profited from giving inaccurate ratings to particular securities;
– Whether the rating agencies made fraudulent representations concerning the quality or independence of their ratings;
– Whether the rating agencies compromised their standards and safeguards for profits;
– Whether the rating agencies’ statistical models captured the risk inherent in subprime and other risky assets and, if not, what was the rating agencies’ response; and
– Whether the rating agencies conspired with the companies whose products they rated to the detriment of investors.

Also, the California Office of Administrative Law has accepted my petition for a determination that CalPERS failed to comply with the California Administrative Procedure Act when it adopted guidelines for disclosure of placement agent arrangements. This triggers a public comment period that expires on January 11, 2010. If comments are submitted, copies must be sent simultaneously to CalPERS and me (as the petitioner). The commenter must certify to the OAL that it has sent these copies. Of course, I encourage those who have an interest in the subject to submit copies.

– Broc Romanek

December 2, 2009

We Made It Again! The ABA Journal’s Blawg 100!

We Made It Again! The ABA Journal’s Blawg 100!

Dave and I are excited that this blog made the ABA Journal’s Blawg 100 for the second year in a row. Patting ourselves on the back, I think it’s quite an achievement considering there are only 16 blogs that are in the “Practice Specific” category. Most of the other blogs in the Blawg 100 don’t get into the nitty gritty issues of actual practice. Thanks to the many of you that emailed the ABA Journal to get us this far (including Matt Dallett, who had a nice quote about our blog in this list of the 100 blawgs)…

To help you navigate the ABA Journal’s voting framework, here are the three steps you should take:

1. Register to vote – it’s free (if you’re an ABA member, your ABA id/password won’t work for the ABA Journal’s site).

2. Take your User Name and password – you will create these when you register – and log-in. This may happen automatically when you click on the link within the email sent to you after you register.

3. Now vote in this “Practice Specific” category by scrolling down to the description of our blog – 2nd blog from the bottom – and clicking the “plus sign” in the box to the left of it (if you don’t see a “plus sign,” you’re not logged-in). If you can’t find our blog, you’re probably in the default “News” category. Click on over to the “Practice Specific” category to find ours…

If you’re having troubles, please shoot me an email and let me know. Thanks for the support!

The Security at the SEC: A 20-Year Timeline

The madness of the so-called White House crashers got me thinking about how the security to gain entry into the SEC’s HQ has evolved over the years. When I first started at the SEC in ’88, visitors could freely come upstairs and bicycle messengers were routinely on our floor, delivering large packages filled with multiple copies of registration statements. I always wondered how they lugged those heavy boxes on their bikes.

Security essentially was perfunctory until a White House incident that led to huge concrete pylans being placed on the sidewalks along Pennsylvania Avenue, along with the contemporaneous invasion of Kuwait leading to the Gulf War circa ’90. At this time, the SEC began to require visitors to obtain a pass – and Corp Fin Staffers regularly were called from the main lobby to come down and meet bike messengers to receive packages. Given that we didn’t have voicemail at the time, this could be frustrating (as well as a welcome diversion).

The ’95 Oklahoma City bombing was followed by another increase in security effort. Screening became almost as tight as it is now post-9/11, with visitors all herded through a holding pen to the left of the Fifth Street entrance and the Sixth Street entrance closed to anyone other than Staff. In the “Visitor’s Office,” visitors would show identification to obtain a yellow pass (so long as they had an invitation from a Staffer to get upstairs). They then presented this pass to a guard by one of two separate elevator banks. Staffers who forgot their IDs had to go through this process to get upstairs too.

Once the SEC moved from 450 Fifth Street to Union Station a few years ago, the SEC installed even tighter security – the biggest change being the addition of a metal detector that visitors must pass through and only a single point of entry to go upstairs. It’s a bit scary to work in a federal building – so all of this security is certainly necessary.

Marty Dunn reminded me of this story: “Remember during the Breeden years when the security guards all went home and a senior Staffer came in early to find a number of men who appeared to be homeless wandering the halls? Chairman Breeden changed the security company that day and there was a little more scrutiny.

More on our “Proxy Season Blog”

With the proxy season now looming in many of our minds, we are posting new items regularly again on our “Proxy Season Blog” for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Disclose Agreements with Shareholders?
– Study: Activism Through the Shareholder Proposal Process
– Broker Nonvotes and Delaware Law
– More on “Impact of Elimination of Broker Nonvotes”
– An Interview with Morgan Stanley’s Ken Bertsch

– Broc Romanek