December 9, 2010

What Financial Crisis? The SEC Has to Fight For Its Budget Per Usual

Unfortunately, Congress eliminated a SEC self-funding provision from Dodd-Frank during the reconciliation process, as noted in this blog. As I’ve said before, I don’t understand how people expect the SEC to be truly independent if they have to constantly bow to political pressures, of which there are more lately than ever before. Note that the SEC has revised it’s “Dodd-Frank Implementation Timeline” to delay creating all the new Offices that Dodd-Frank requires – and here is the SEC’s detailed justification for this year’s budget request.

Given all the nonsense in Congress these days, I guess we shouldn’t be surprised to hear this latest news from Lynn Turner: Recently, the Consumer Federation of America and Americans for Financial Reform sent letters urging Congress to provide funding to the SEC and CFTC in amounts that will enable them to do their jobs (neither letter is posted online; but see this blog). In the past, Congress has provided insufficient funding for technology acquisitions, market specialists, and other tools necessary to do their job. Congress has also failed then to oversee the agencies and ensure they are getting their job done.

Congress is once again debating whether or not to fund these agencies adequately. This comes after Congress in the Dodd-Frank legislation required these agencies to carry out hundreds of rule makings, dozens of in-depth surveys and reports, and create new Divisions and Offices within the agencies. Yet some in Congress are now suggesting that while telling the SEC and CFTC they must implement the legislation, they must do it without any further resources.

There is at least one draft continuing resolution (CR) that shows an increase to $244 million in funding for the CFTC and no increased funding for the SEC. However, the House may do a full-year continuing resolution with funding for CFTC and SEC at the higher levels approved by appropriators – $285 million for CFTC and $1.3 billion for SEC. The Senate may come back with a part-year CR that includes no added funding for either agency. You may recall it was in the Senate that Senators Durbin and Inouye killed self-funding during the Dodd-Frank negotiations that would have alleviated this recurring annual problem and provided funding sufficient for the regulators to do their jobs.

As the one letter aptly says: “There is widespread agreement that our recent financial collapse was caused in part because regulators who had the authority to rein in bad practices did not do so. But just as regulators need the will to regulate, they also need sufficient funding so that their respective agencies can operate effectively and efficiently. It is not enough for Congress to increase the authority and responsibilities of these agencies without giving them the funding they need to fulfill those responsibilities. We therefore strongly urge Congress, as it finalizes its 2011 spending plans, to include the $286 million for the CFTC and $1.3 billion for the SEC included in Senate appropriations bills.”

“Smaller Reporting Companies”: A Surprising Number

In addition to breaking the news over the past few days about how the first batch of proxy statements filed with recommendations for “say-when-on-pay” looks, Mark Borges also blogged this gem recently on’s “Proxy Disclosure Blog“:

A couple weeks ago, I participated in a panel on disclosure issues for smaller reporting companies at the ABA Business section Fall meeting in Washington D.C. Gerry LaPorte, the Chief of the Office of Small Business Policy in the SEC’s Division of Corporation Finance, was one of my co-panelists. Of the many interesting items that Gerry discussed, one statistic really caught me and the rest of the panel offguard.

This statistic involves the number of companies that self-identify as a “smaller reporting company,” For the period from October 1, 2009 through September 30, 2010 (the Commission’s latest fiscal year for which data is available), the number of entities filing annual reports on Form 10-K fell into the following categories:

– Smaller reporting companies – 4,353 (48%)
– Non-accelerated filers – 1,184 (13%)
– Accelerated filers – 1,800 (20%)
– Large accelerated filers – 1,479 (17%)
– Other – 98 (1%)

Total Companies – 8,914 (100%)

This total does not include foreign private issuers, registered investment companies, registered employee benefit plans (which file on Form 11-K), and asset-backed issuers, which take the total of SEC-registered entities up to the “13,000” total which we often refer to when talking about the number of companies registered with the Commission.

I had no idea that nearly 50% of the entities that file Forms 10-K are smaller reporting companies. While these entities represent a sizeable number of the filings made on EDGAR, they make up significantly less than 10% of the total U.S. market capitalization. At least I now know why it’s sometimes difficult to find proxy statements with a full-blown executive compensation disclosure section (particularly during the “off-peak” months).

Joint Ventures in India

In this podcast, Steven Goldberg of Baker Hostetler discusses Scripps Networks Interactive joint venture with New Delhi Television, including:

– Can you briefly describe the background of the deal?
– Did any unique issues arise in connection with this joint venture?
– What pointers do you have for companies when approaching a joint venture?

– Broc Romanek