August 4, 2010

Dodd-Frank: What is the “Sleeper”?

With so many provisions in Dodd-Frank, it is understandable if a number of “sleepers” arise. But perhaps they won’t since many of us are looking for them – and if they’re found, they aren’t “sleepers” by definition, right? I guess it depends on your definition of “sleeper.”

My definition of the terms mean that the provision applies to many companies, not just a few. As a result, something like this nice find of an Investment Company Act issue in this Pillsbury memo doesn’t really apply to our community since most of us don’t deal with hedge funds investing in exchange traded funds.

The new Congo disclosure requirement in Section 1502 – “whether company products contain minerals from Congo or neighboring countries and if so, what steps those companies are taking to track the source of the minerals” – isn’t much of a sleeper since most companies won’t be required to make this type of disclosure; plus it has been written upon plenty (see these memos). Even the Washington Post has written an article about it.

My guess is that something will be overlooked somewhat at first; much the same way that Section 404 – “internal controls” – was overlooked when Sarbanes-Oxley was enacted. I’m curious to hear your thoughts on what the sleepers of Dodd-Frank are…shoot me an email.

Dodd-Frank: A FOIA Flap Over the SEC’s Exemption

Over the past week, a debate has grown over Section 9291 of Dodd-Frank. That provision provides an exemption for the SEC from FOIA relating to information obtained during “surveillance, risk assessments, or other regulatory and oversight activities.” The debate started when a Fox News article expressed concerns about the potential for overbroad application. Since then, the SEC has responded with letters to Congress, as noted in this Washington Post blog, and this statement:

The new provision applies to information obtained through examinations or derived from that information. We are expanding our examination program’s surveillance and risk assessment efforts in order to provide more sophisticated and effective Wall Street oversight. The success of these efforts depends on our abilty to obtain documents and other information from brokers, investment advisers and other registrants. The new legislation makes certain that we can obtain documents from registrants for risk assessment and surveillance under similar conditions that already exist by law for our examinations. Because registrants insist on confidential treatment of their documents, this new provision also removes an opportunity for brokers, investment advisers and other registrants to refuse to cooperate with our examination document requests.

As noted in the WaPo blog, the SEC has sought this exemption for some time, so that those it regulates would be more receptive to providing information the SEC wanted access to, such as emails. We’ll see if the clamor for tweaking this provision to limit this new exemption will continue as one member emailed me: “It is reasonable as a law enforcement agency that the SEC keeps documents and evidence gathered in a law enforcement and prosecution case confidential until a case is closed, to ensure fairness to the case and defendant. However, in the case of examination and inspection reports, it seems that keeping such reports “dark” and non-public, after the exam has been completed, has led to bad behavior on the part of regulators and those regulated which in turn has not served the public well.”

Hotties of Investor Relations

For something light-hearted, check out Dick Johnson’s recent blog on his “IR Cafe,” discussing a recent Dealbreaker piece that lists attractive women in the IR world…

– Broc Romanek