I’m going off-script to blog about a personal experience. The USA Olympic Basketball teams played Brasil in exhibition games here in DC last night and it was magical. Not just because Lebron, Kobe, Durant, Chris Paul, etc. were on the same team. Nor because the President, First Lady, Malia and VP Biden sat just across the way from us. But because the crowd was in such a state of excitement that you could hardly sit still. I now “get” what it feels like to go to the Olympics in your home country. Here are a bunch of photos I snapped:
Brasil’s National Anthem (they spell it “Brasil”; not “Brazil”)
Our Team’s Introduction w/ Members of Military (everyone was screaming!)
The President & Vice President (place went wild when President arrived; chanting “USA”!)
Brasil’s Women’s Team Sat Right Behind Us (they played the game before; they cheered loudly in Portuguese)
The President & First Lady on “Kiss Cam” (she had just arrived & they didn’t know what to do; they had a “do-over” later in the game)
From “The Daily Beast“: Guess Michelle’s not a fan of on-cue PDA. The First Lady rejected a kiss from President Obama at the Olympic basketball team tune-up game against Brazil Monday night. The couple was shown getting cozy on the Jumbotron during the first half of the game, but when the “kiss cam” video display prompted some smooching, Michelle failed to comply. The audience booed as the president appeared to lean in for a kiss, only to get Michelle shaking her head with a smile. Obama broke her down in the 4th quarter though, when the couple leaned in for a crowd-pleasing kiss. Maybe the campaign ran some numbers? Or maybe Michelle just likes to keep the romance alive by making the Commander-in-Chief work for his sugar. Either way, it was a confidence-boosting night for the U.S. men’s team, with a 80-69 win against Brazil.
On Friday, the SEC’s Office of Chief Accountant issued its final IFRS work plan report. Since the SEC has no timeframe now to decide whether to switch to IFRS – and since its a Presidential election year – it’s truly uncertain when that decision will be made.
Sleeper Alert: CFTC’s New Rule Might Force You to Get Special Board Approval for Interest-Rate Swaps
As Nate Endrud blogged last week, the CFTC has approved its final rule on the so-called “end-user exception” to Dodd-Frank’s mandatory clearing requirement applicable to swaps required to be cleared (roughly, standardized swaps). Under the exception, as provided by the Act, a swap counterparty may elect not to clear a swap if the counterparty:
(i) Is not a “financial entity” (e.g., swap dealer, major swap participant, investment fund, bank, or pension plan);
(ii) Is using the swap to “hedge or mitigate commercial risk,” as further defined; and
(iii) Provides certain information along with the swap to a swap data repository or the CFTC.
I don’t think many companies realize they are going to need special board approval to deal with run-of-the-mill interest rate swaps – and this could be applicable before you know it.
Transcript: “How to Cope with the M&A Litigation Explosion”
We have posted the transcript for our recent DealLawyers.com webcast: “How to Cope with the M&A Litigation Explosion.”
Society of Corporate Secretaries Annual Conference: Fun in DC
Back from this year’s conference – in my hometown – and in keeping with last year’s tradition of posting a picture illustrating some class, below are Martin Bischoff and Laurent Rouyres of Labrador at Friday’s Newseum event (here are conference notes from Davis Polk’s Ning Chiu):
Corp Fin Updates Financial Reporting Manual (Again)
A few days ago, Corp Fin indicated that it has updated its Financial Reporting Manual for issues related to age of interim financial statements, use of pro forma information in MD&A, age of financial statements for smaller reporting companies, periods required for financial statements filed by Canadian issuers on Form 40-F, as well as other changes.
Insider Traders Beware! SEC Votes to Strengthen Trading Audit Trail
Yesterday, in a 3-2 vote, the SEC adopted a rule that directs the national securities exchanges and FINRA to establish a market-wide consolidated audit trail that will significantly enhance regulators’ ability to monitor and analyze trading activity. This serves as a good reason to remind insiders of their obligations under the law and corporate insider trading policies.
Deal Cube Tournament: Sweet Sixteen; 4th Match
This is the last 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:
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%
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:
Most lawyers are horrible about marketing themselves. I’m not quite sure why that is, but it’s a fact. But in this day and age of low job security – regardless if you’re in a law firm or in-house – it is critical for you to network and get your name out there, even if you never care to become a rainmaker. Luckily, the online world allows you to network without leaving your office.
One person who “gets it” is Boris Feldman of Wilson Sonsini. I’ve been seeing his name for as long as I can remember. He has a site whose domain name is his own name (even if it’s bare bones). And when he writes something, he lets those who report about such things know about it. Hence, his most recent piece – “Shareholder Litigation After the Fall of an Iron Curtain” – has showed up on about every corporate blog that I regularly read (egs. Keith Bishop’s blog and Kevin LaCroix’s blog). All Boris did is send me a brief email noting that he had written this article and shared its link – I imagine that’s all he did with these other influencers.
So what can you do to enhance your profile? Shoot me an email. It doesn’t have to be about an article you’ve written. It can be an interesting anecdote you’ve come across (or a fond financial printer memory). It can just ask what you can do to enhance your profile and I’ll give you my ten cents. It’s a new era and time for you to make some new virtual relationships. So go ahead and start making them. I love interacting with my community and look forward to hearing from you. And if you’re attending the Society of Corporate Secretaries’ Annual Conference this week, come on up and say hello…
Our New “MD&A Handbook”
Spanking brand new. Posted in our “MD&A” Practice Area, this comprehensive “MD&A Handbook” provides a heap of practical guidance about the disclosure obligations under Item 303 of Regulation S-K.
RIP Moxy Vote
Yesterday, Moxy Vote posted this explanation – mainly regulatory hurdles – of why it is shutting down…
Deal Cube Tournament: Sweet Sixteen; 2nd Match
This is the 2nd 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:
Yesterday, as noted in Gibson Dunn’s blog, the FASB – in a 5-2 vote – decided to remove modifying accounting for loss contingencies disclosure from its agenda after four years of controversy and comment. The majority of FASB members agreed that ASC 450’s requirements are sufficient. Corp Fin’s efforts to comment on litigation contingencies likely also had an impact on FASB’s decision to take its proposal off the table (see the memos in our “Contingencies” Practice Area like this one). Here is the FASB meeting handout.
IFRS: SEC Staff Report Coming Soon – But Without Timetable
A long-awaited SEC Staff report on IFRS is expected sometime over the next few weeks – but without a recommendation on whether, how or when the United States should transition to IFRS, as noted in this Compliance Week article. One of the reasons for the vagueness is the probable need for the due process of a SEC rulemaking to go in that direction.
For those fascinated about how the US Supreme Court’s decision on affordable health care was incorrectly reported initially by some in the mass media, check out this excellent detailed timeline put together by the SCOTUS Blog.
Concerned about the decline in the number of public offerings, the JOBS Act requires the SEC to amend Regulation A (or to adopt a new regulation) to raise the threshold for use of that registration exemption from $5 million to $50 million, and requires the GAO to study the impact of state securities laws on Regulation A offerings. The GAO has issued a report that examines:
– Trends in Regulation A filings,
– How states register Regulation A filings, and,
– Factors affecting the number of Regulation A filings and how the number of filings may change in the future.
The GAO provided a draft of the report to the SEC and the NASAA for their review and comment. Both provided technical comments, which the GAO incorporated as appropriate. In its letter, the NASAA concurred with the GAO’s findings that multiple factors have affected use of Regulation A, and suggested that the primary reason for its limited use is the “mini-public offering” process that businesses must complete. Stakeholders with whom the GAO did not consistently cite any single factor as the primary reason for the limited use of Regulation A. As noted in the report, the NASAA stated that it will be working to develop model state registration requirements for the larger Regulation A offerings allowed under the JOBS Act, and NASAA suggested that further changes to federal securities laws, particularly Regulation A, should be withheld until states implement a new system to address the JOBS Act’s changes. In considering any changes, the NASAA stressed the importance of balancing the needs of investors with the need to raise capital.
Deal Cube Tournament: Sweet Sixteen; 1st Match
This is the first 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:
As noted on Corp Fin’s “What’s New” page, they are now hiring attorney and accountants. This is notable because it has felt like there has been a permanent hiring freeze.
Recently, I was cruising YouTube and found this polished 4-minute video posted by the SEC entitled “Work at the Securities and Exchange Commission.” The video was uploaded in January 2009 but the thing is far older as it includes my friend Keir Gumbs and other folks that left the SEC long ago. It is among 50-plus videos posted by the SEC – most of the vids are opening remarks by SEC Chair Schapiro at open Commission meetings – and it is among the most popular of the SEC videos with over 3000 hits. The only other vids with sizable audiences are this one about a scheme targeting deaf investors and this video explaining what Investor.gov does.
Compare my own unpolished 5-minute video about “How to Get a Job at the SEC.” That has over 1000 visits itself…
Working at the SEC: Alternative Work Arrangements
When I worked at the SEC, it was fairly rare for anyone to be approved to work on a part-time basis, much less on an “alternative” basis. Now, it is common within the government (and the private sector too) to have flexible work arrangements. This 88-page report from the SEC’s Inspector General last year is instructive because it lays out and reviews the 8 different types of arrangements available.
Poll: Identify the SEC’s Flexible Work Arrangements
To test your knowledge of flexible work arrangements, click on the arrangements below which you believe are used at the SEC. Some of the choices are fictitious:
We continue to post new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net 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:
– NYSE Director Steps Down After Majority Withhold Vote
– How Your Annual Shareholder Meeting May Be Covered: Social Media Style
– A Review of Corp Fin No-Action Rulings on E&S Proposals
– Big Fireworks at Wells Fargo Annual Shareholders Meeting
– Chesapeake: Poster Child For Poor Governance
One of the key components of the new round of Iran sanctions legislation currently under consideration by the US Congress is a new US SEC disclosure obligation for SEC-registered “public” companies that are engaged, directly or indirectly through their affiliates, in certain Iran-related conduct. Section 501 of the House-passed bill (HR 1905) and Section 214 of the Senate-passed bill (S 2101) both would amend Section 13 of the Securities Exchange Act of 1934 (“Exchange Act”) to require that SEC-registered public companies make certain disclosures regarding Iran in their annual and quarterly reports.
UK Government to Require Mandatory Greenhouse Gas Emissions Reporting
Speaking of new disclosures, as noted in Gibson Dunn’s blog, the UK recently announced at that it will become the first country to require emissions data disclosure in companies’ annual directors’ reports. In comparison, the SEC issued an interpretive release early in 2010 providing guidance on existing US disclosure requirements as they apply to climate change matters.
More on “UK One Step Closer to Binding Say-on-Pay: On to Parliament”
Recently, I blogged about the UK’s march towards binding say-on-pay. Now, as described in this Davis Polk blog, the UK has published a consultation paper focusing on the content of remuneration reports of UK-incorporated quoted companies that would disclose the compensation of directors, including executive directors. Read the blog for more…
Yesterday, the SEC posted a Sunshine Act notice that it will consider a trio of Corp Fin rulemakings at an open Commission meeting on Wednesday, August 22nd. The trio of rulemakings is: conflict minerals, resource extraction and the elimination of the prohibition against general solicitation under Regulation D – the first two being Dodd-Frank rulemakings and the last one under the JOBS Act. We are in the process of pushing back our “JOBS Act Update: Where Are We Now” webcast to a date in early September so that this development can be covered soon after it happens.
The SEC’s announcement is more than 7 weeks in advance of the meeting, a much longer notice period than I can recall for any other open meeting. A single week is typical. Here are a few theories why the notice is so early:
– Stave off Congressional pressure? As noted in this WSJ article last week, 58 Congressfolk sent a letter to SEC Chair Schapiro asking why the SEC has missed the April 2011 deadline for the mining and resource extraction rulemakings. Perhaps because these rulemakings are among the most challenging rulemakings that the Staff has had to do in a long time, as the subjects are way outside the traditional securities laws. Interestingly, this notice comes out after Congress has gone on recess.
– Response to Oxfam America lawsuit that SEC wasn’t rulemaking fast enough? As I blogged recently, an activist group has sued the SEC to compel it to act on the resource extraction rulemaking. Perhaps this was in response to the lawsuit to make it go away.
As for the Regulation D rulemaking, note that wording of Item 3 in the notice doesn’t state that the SEC will consider whether “to propose” the rule. The wording of these descriptions are vetted carefully, so the absence of the term “propose” could imply an interim final rule, or perhaps something else. Recall that the JOBS Act called for this rulemaking to be finished within 90 days of the Act’s passage – Chair Schapiro testified before a House subcommittee last week that the SEC would not make the July 4th deadline. That tight deadline was never realistic…
What is a “Sunshine Act Notice”?
Under the “Government in the Sunshine Act,” the SEC – just like other federal regulatory agencies – must provide notice to the public before holding a Commission meeting. As noted in Section (e)(1), the notice must be announced at least one week before the meeting. There is no upper limit on the notice coming out sooner.
Note that in Section (e)(2) that the meeting date can be easily changed. A change in meeting date must be noticed too – but only as of the “earliest practicable time.” So it could be possible for the SEC to push back the August 22nd meeting date for one – or more – of the three agenda items if need be…
SEC Updates “Implementation of Dodd-Frank Act Rulemaking Timeline” to “Pending Action”
Yesterday, the SEC cleaned up its “Implementing Dodd-Frank” Timeline by removing all of the predictions of when the rulemakings might take place. Instead, all of the outstanding Dodd-Frank rulemakings are simply under a caption labeled “Pending Action.” This relieves the SEC from having to continuously update the timeline each time it misses a prediction…
Ode to Electricity
Seen on my wife’s Facebook status in the wake of a painful, widespread power outage in hot DC:
“Dear Electricity, please come back. I know I took you for granted…just, you know, used you. I miss your wit and charm, your warm glow and how very cool you are…so cool.”