July 12, 2012

Survey Results: Board Minutes & Auditors

We have posted the survey results regarding board minutes and auditors, repeated below:

1. When it comes to board minutes, our company
– Provides copies of board minutes to auditors upon request in electronic form only – 26.5%
– Provides copies of board minutes to auditors upon request in paper form only – 18.4%
– Provides copies of board minutes to auditors upon request in electronic and paper form – 20.4%
– Doesn’t provide copies of board minutes to auditors – but we do allow inspection of minutes onsite – 34.7%
– Doesn’t provide copies of board minutes to auditors – nor do we allow inspection of minutes onsite – 0.0%

2. Our auditors ask for copies or inspection of board minutes
– Each quarter – 93.9%
– Once a year – (2.0%
– On irregular basis – 4.1%
– They never ask for board minutes – 0.0%

Please take a moment to participate in this “Quick Survey on Insider Trading Policies: Pledges & Margin Accounts” (remember the recent attention on margin accounts used by insiders thanks to the Green Mountain Coffee chair’s margin call) and “Quick Survey on Rule 10b-18 & Buybacks.”

More on “The SEC Comment Process: What is a Bedbug Letter?”

When you blog, you can never guess which blogs will produce the most commentary. Surprising to me, this blog from long ago on bedbug letters resulted in numerous emails from members. And the types of responses were all over the lot.

For example, Francine McKenna (of re:theauditors fame) wondered why the SEC bothered with this type of letter when the Obama Administration was touting General Motors’ IPO as a “win” for the bailout when the company has repeated material deficiencies in internal controls and multiple year adverse opinions on its controls. See this Bloomberg article and this Accounting Onion Blog.

Another member emailed me this:

This letter is a perfect example of government waste – as in, waste of words. Do you mean to tell me it takes three paragraphs and over one hundred words to say, in effect “This registration statement violates United States securities’ laws and regulations. If you do not make the necessary revisions, we will request that the Enforcement Division take action against you.”

For goodness sakes, do you mean to tell me that anyone in their right mind (other than a securities’ lawyer) could consider that form letter anything other than unintelligible. Hello – “plain English” please! It is the kind of non-sensical correspondence like this bed-bug letter that results in bankers and accountants making fun of the lawyers on a deal.

And then David Westenberg of WilmerHale notes his book has the etymology of the term:

Occasionally, the staff finds that a Form S-1 is so poorly prepared or beset with such serious problems that it declines to provide comments until a remedial amendment is filed. In egregious cases, the staff may suggest that the company consider withdrawing the filing. The staff communicates this message in what is often termed a “bedbug letter.”* Bedbug letters are generally provoked only by blatant noncompliance with applicable rules, such as filing a Form S-1 with incomplete or stale financial statements, or submitting a document that contravenes specific pre-filing staff guidance or instructions. If the company receives a bedbug letter, some soul-searching–and perhaps new counsel–may be appropriate.

*The phrase seemingly emanates from the apocryphal tale of an aggrieved customer in a fine hotel who complains about bedbugs and receives written assurances that the problem was a one-time occurrence; however, the response is inadvertently accompanied by instructions from the complaint’s recipient to an assistant to send the customer “the standard bedbug letter.” The application of this phrase to deficient SEC filings is, however, a mystery.

Deal Cube Tournament: Sweet Sixteen; 3rd Match

This is the 3rd match of the 3rd round – the battle among the Sweet Sixteen! As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:

Cereal Boxes in Bowl and Spoon
Snapple Bottle (Lemon Iced Tea)
Logging Truck

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– Broc Romanek