Monthly Archives: March 2013

March 14, 2013

Answering Your Conflict Minerals Questions

We continue to post oodles of resources in our “Conflict Minerals” Practice Area, but I thought it was worth highlighting these FAQs from Scott Kimpel and Brian Hager of Hunton & Williams since they address issues that I keep hearing about:

Why do the final rules leave so many terms undefined and create so many interpretive issues?

We believe a number of factors contributed to the tone and structure of the final rules. As a threshold matter, the final rules involve a diverse array of issues such as human rights, international relations, global politics, supply chain management, chemistry, metallurgy and manufacturing technology. These topics are far afield from the agency’s core experience and historical role as a securities regulator, and placed the Commissioners and agency Staff on a steep learning curve.

Second, though hundreds of commenters provided input and many multi-stakeholder groups were formed, commenters reached little consensus on many of the key issues. In the absence of consensus, the Commission was left having to make difficult choices on a topic in which it has little historical familiarity, and many of the underlying concepts of the rules defy easy explanation or simple definition.

Third, given the broad scope of the rules and their impact throughout the global supply chain, it simply was not possible or feasible to address every hypothetical situation involving every industry affected. Fourth, we believe the Commission sought to take a principles-based approach, rather than a rules-based one, to many of the interpretive questions so that over time industry and market practices would gain acceptance.

Finally, given the large number of human rights groups and other nongovernmental organizations that are closely monitoring issues concerning labor and supply chain issues generally, as well as the conflict minerals issue more specifically, we believe the Commission sought to use the influence of these groups to help shape emerging industry practices and to act as a counterbalance, were certain companies or industries to stray too far from emerging best practices.

Will the Commission or the Staff issue any further interpretive guidance?

The release accompanying the final conflict minerals disclosure rules is 356 pages in length. Some SEC officials initially stated that while the SEC has received numerous questions and requests for clarification regarding the final rules, the SEC Staff did not have any plans to issue additional guidance (e.g., FAQs) because the release accompanying the final rules provides extensive guidance to reporting companies.

Conversely, at an industry conference in November 2012, two senior officers from the SEC’s Division of Corporation Finance suggested that some guidance might indeed be forthcoming. Nevertheless, recent turnover in senior staff at the SEC and the nomination of a new SEC chairman call into question the imminence of any guidance from either the Commission or the Staff. Because the Commission chose to remain silent on many key issues, we question whether the Staff would be in a position to reopen issues when the Commission itself did not reach consensus on them.

Ultimately, the Staff’s guidance must have some legal basis, and it could be difficult to find that basis when the Commission has made a policy choice in favor of a principles-, as opposed to rules-, based approach on many of these issues. In the absence of further official clarification or direction on these questions, reporting companies should closely observe their peers and industry groups to keep abreast of any consensus or industry standards that begin to develop.

What about packaging?

The lack of a definition of “product” in the rules raises several related questions, including whether a product’s packaging is considered part of the product and, therefore, whether it is covered by the rule. As an example, if a reporting company sells a food product in a tin can, but the food product itself does not contain a conflict mineral, should the tin can be considered in the company’s conflict minerals analysis?

The SEC has not issued any guidance on this topic, and the adopting release for the final rule does not discuss packaging. Some commentators draw an analogy to the SEC’s exclusion of merely ornamental conflict minerals (e.g., gold embellishment) as not “necessary to the functionality” of certain products; however, others believe that a blanket exclusion of packaging would be too broad and could potentially undercut Congressional intent.

Unless the SEC issues further guidance, or an industry standard develops, reporting companies will be forced to rely on the facts and circumstances of a product and its packaging and make their own determinations. The critical question is whether the packaging is necessary to the functionality or production of the product. For example, if the tin in the can is necessary to prevent spoilage, then an argument could be made that the packaging is an integral part of the product. On the other hand, the availability of alternative packaging that does not include conflict minerals could also factor into the analysis.

Another consideration is whether the packaging itself has any intrinsic value. For example, disposable packaging presumably has little or no value, contrasted with a commemorative gold box that presumably does. A potential offshoot of this uncertainty is that reporting companies are likely to explore ways to replace conflict minerals in packaging (as well as in their core products).

How will the rules be enforced?

The SEC has not announced any particular enforcement program, and it is not yet clear how much of a priority the Staff will place on reviewing filings in 2014, but by analogy we can draw from the experiences surrounding other new disclosure regimes that have been implemented in recent years. In the absence of official guidance from the Commission or the Staff, it would not be uncommon for Commissioners or senior staffers to give speeches and presentations at industry events laying out their preferences and expectations for a new set of rules.

After the first wave of filings, it is possible that examiners in the Division of Corporation Finance could issue individual comment letters to specific registrants, or the Division as a whole may issue more comprehensive disclosure guidance highlighting best practices or areas where large numbers of registrants appear to have missed the mark. Given the two- and four-year transition periods contained in the final rules, the Staff’s process of providing feedback may occur more gradually than other recent amendments to public company disclosure rules, such as the rules on Compensation Discussion & Analysis, in which the Staff was very active in providing specific comments and publicizing its more general reactions after the first reporting cycle.

In all but cases involving egregious violations of the rules, we would not expect the Division of Corporation Finance to make a large number of enforcement referrals to the Division of Enforcement in the short to medium term. Over the longer term, it is possible that the Division of Enforcement will seek to bring enforcement cases against registrants that are perceived as materially flaunting the rules. As part of the Division of Enforcement’s recent reorganization, a special unit focusing exclusively on the Foreign Corrupt Practices Act has been formed.

This unit has been steadily improving working relationships with foreign regulators and developing increasingly sophisticated techniques for investigating transnational violations of the securities laws. These relationships and techniques would be readily transferable to future investigations of cases involving the conflict minerals rules. Outside of SEC enforcement, a private right of action exists under Section 18 of the Exchange Act for shareholders who perceive irregularities in the filed reports, and we should expect the advocacy and NGO community to also be very outspoken in publicly highlighting perceived violations of the rules.

After JOBS Act, Confidential Filers Rise

Last month, this WSJ article noted that nearly 75% of the companies that filed IPO registration statements between last April and the end of ’12 were deemed to be emerging growth companies. And 60% of these EGCs filed their registration statements through the EGC confidential process…

Meanwhile, Gunster’s David Scileppi blogs “SEC curtails JOBS Act broker registration exemption in recent FAQs“…

The Court Where Securities Law Rules Go to Die

Here is an interesting article about the US Court of Appeals for the DC Circuit, noting that no new judge have been appointed since 2006 due to Senate gridlock. There are 3 or 4 vacancies and if President Obama can get his two current nominees confirmed, Srikanth Srinivasan and Caitlin Halligan, the balance of power could be altered. Here is Sandra Day O’Connor’s take on one of the nominations…

– Broc Romanek

March 13, 2013

SEC Chair Nominee White’s Confirmation Hearing: The Testimony

Scott Kimpel of Hunton & Williams gives us this news: Yesterday, the Senate Banking Committee held its confirmation hearing of Mary Jo White to be the next SEC Chair. In her written testimony, Ms. White noted her frequent interaction with – and strong admiration of – the SEC during her tenure as US Attorney for the Southern District of New York. She touched on several themes:

– The Commission has a tripartite mission (protect investors; maintain fair, orderly and efficient capital markets; facilitate capital formation), but the three component parts should not be viewed as in conflict with each other.
– Our markets are continuously evolving, and the Commission must remain vigilant to monitor the markets .
– She pledged to complete, “in as timely and smart a way as possible,” the rulemaking requirements of the Dodd-Frank Act and the JOBS Act.
– Ms. White noted the importance of rigorous economic analysis in rulemaking and promised to continue the efforts of the Commission to ensure that the agency performs robust analysis in connection with rulemaking without undermining its ability to protect investors.
– The Commission’s enforcement program will continue to be a priority, promising to be “bold and unrelenting” and twice committing to be “aggressive” in pursuing wrongdoers.
– Noting the unique issues raised by computerized and algorithmic trading, she pledged to ensure the SEC stays abreast of issues concerning high-speed trading and alternative trading venues such as dark pools and continues to build the capability to “see around the corner and anticipate issues.”
– She also left open other areas of possible focus, but made passing reference to a number of contemporary topics such as further reform of money market mutual funds, uniform fiduciary standard for broker-dealers and investment advisers, increased attention on credit rating agencies and making public company disclosures “more meaningful and understandable.”

How Contentious Was Mary Jo White’s Hearing?

And here’s more news from Scott Kimpel: During her opening remarks to the Committee, Ms. White repeated many of these themes, often reading directly from her written testimony. Flanked by her husband, John White, and Tim Henseler, the SEC’s Acting Director of the Office of Legislative & Intergovernmental Affairs, Ms. White did not face harsh questioning and appeared to have the support of most, if not all, the Committee members in attendance. (As an aside, the SEC’s OLIA has been heavily involved in preparing Ms. White for her confirmation, a service they perform for all nominated commissioners. In advance of a confirmation hearing, OLIA typically seeks to obtain the actual questions to be asked at the hearing, or at least a general direction for them, from Congressional staff, who usually oblige.)

Senators from both sides of the aisle were complimentary of Ms. White and praised her career both in government and private practice. The Senators visited a number of issues with Ms. White:

– As to her potential conflicts of interest given her and her husband’s broad legal practices, Ms. White assured the Committee that she would appropriately manage actual and potential conflicts of interest with the help of the SEC’s ethics counsel. As a practical matter, her partnership at Debevoise will impact her ability to participate in certain enforcement cases where the firm or her prior clients (clients she devoted substantial attention to, not all clients of the firm) are across the table from the SEC. But she should not face significant limitations on her ability to participate in rulemakings. Nor, as Ms. White noted, is her recusal list “out of the ordinary” in size when compared to other commissioner nominees.
– On the topic of rulemakings, Ms. White repeatedly pledged to act quickly to clear the log jam of backlogged Dodd-Frank and JOBS Act rulemakings, giving due care to thoughtful cost-benefit analysis in the process.
– Though she was hesitant to commit to any particular timetables or details for specific rulemakings, several Senators obtained soft assurances that Ms. White would pay special attention to initiatives concerning further reform of money market funds, a uniform fiduciary standard for broker-dealers and investment advisers, executive compensation disclosure under Dodd-Frank, the Volcker rule, conflicts of interest for credit rating agencies, crowdfunding and so-called Regulation A+ under the JOBS Act, and the possibility of a pilot program for smaller public companies seeking to trade at minimum increments larger than one penny to permit broader bid-ask spreads as a means for creating greater interest in emerging growth stocks.
– As to enforcement, Ms. White reiterated that a strong program would also be a priority, that she would “proceed quite vigorously” and that no institution is “too big to charge”.
– On questioning about the so-called revolving door between government and the private sector, Ms. White reconfirmed that she does not necessarily embrace the policy views of her private clients, and will be an advocate for the retail investor.

Ms. White appears to have broad support in the Senate and she is not expected to face any difficulty in being confirmed if her nomination moves from the Committee to the full Senate. No definitive timing as to when the Committee might vote on her nomination or when full Senate confirmation might then occur has been announced.

Elisse Walter, the current SEC chairman, has not announced her plans if Ms. White is confirmed. Chairman Walter’s term ended in June 2012 and she may holdover until December 2013. Commissioner Paredes is the next Commissioner whose term expires, in June 2013. He likewise has not announced next plans, but several candidates are rumored to be in the running for his seat (a Republican one) as well as Ms. Walter’s (a Democratic one).

Broc’s aside: I’m not surprised that Mary Jo didn’t get badgered over Wall Street ties despite a slew of media articles in the days leading up to the hearing about the topic, such as this NY Times article and this blog. This Washington Post article called it right. By the way, did you see that outgoing SEC Chair Mary Schapiro has joined GE’s board…

How Did the Consumer Financial Protection Bureau Hearing Go?

And here’s more news from Scott Kimpel: The Committee simultaneously held its confirmation hearing yesterday on Richard Cordray to be Director of the Consumer Financial Protection Bureau. Mr. Cordray faced some more difficult questioning and the entire Bureau is the subject of a complicated debate about its mission and structure. But again, Senators from both sides of the aisle were personally complimentary of Mr. Cordray. It is unclear if Mr. Cordray’s parallel nomination will have any impact on the timing of Ms. White’s confirmation.

Broc’s aside: Here is a Huffington Post blog entitled “Elizabeth Warren Blasts Senate Republicans For Holding Up CFPB Nomination.”

March-April Issue: Deal Lawyers Print Newsletter

This March-April issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:

– Checklist: Deal Confidentiality Pledges & Reminders
– Be Careful What You Wish For: When Drafting Indemnification Clauses, You May Get Exactly (and Only) What You Ask For
– Divisional Acquisitions: A Clean Break?
– “Short Slate” Rules: A Recap
– Crown Jewels: Restoring the Luster to Creative Deal Lock-Ups?

If you’re not yet a subscriber, try a 2013 no-risk trial to get a non-blurred version of this issue on a complimentary basis.

– Broc Romanek

March 12, 2013

More on “Senator Shelby Introduces Dodd-Frank ‘Roll Back’ Bills”

Last week, I blogged that Senator Richard Shelby (R-AL) has introduced two new Dodd-Frank bills, one of which would stop any Dodd-Frank rulemaking in its tracks. After the bills were introduced, as noted in this blog, Senate Banking Committee Chair Tim Johnson (D-SD) said it did not appear that Shelby’s bills were sufficiently bipartisan to merit committee consideration.

So you have one GOP Senator trying to stop all Dodd-Frank rulemaking. And now you have a group of House Republications berating the SEC for not moving fast enough on JOBS Act rulemaking. As noted in this article, this letter to the SEC criticizes the agency for considering rulemaking about political contributions disclosures when some of the JOBS Act deadlines have not yet been met. And this blog from Jim Hamilton says there is bi-partisan House legislation coming that would impose a deadline on the SEC to adopt the Reg A provisions of the JOBS Act.

Meanwhile, this National Journal article tries to explain “What’s Behind the Endless Delays on New Rules for Wall Street?” And finally this Washington Monthly article will finish the job and demoralize you about how our government really works (you’ve seen some of this movie before: Sen. Shelby working behind the scenes to kill a law in the regulatory process)…

The SEC Plans to Launch an XBRL RoboCop!

Recently, this Financial Times article described how the SEC plans to activate within the next nine months a new software program designed to analyze XBRL tags for unusual accounting practices. Here’s a blog on the topic…

Not-So-Happy Anniversary, XBRL

In this article, details how four years of XBRL have resulted in limited use by investors and analysts, as evidenced by this recent study. And here’s a piece about how little financial executives think about XBRL…

– Broc Romanek

March 11, 2013

The PCAOB & Auditor Failures to Remediate

Last week, the PCAOB issued a rare rebuke to a Big Four auditor as PricewaterhouseCoopers was faulted for failing to promptly address quality control problems in audits occurring in 2007 and 2008. The rebuke came after the PCAOB had reviewed the remediation efforts of PwC in response to the nonpublic portions of the Board’s March 2009 and August 2010 inspection reports. Learn more in this GoingConcern blog, WSJ article and Reuters article.

And as recently blogged, this comes on the heels of another PCAOB report on US auditors’ performance, in which the the Board found a reduced rate of “significant audit performance deficiencies” compared to its last review in 2007. However, the PCAOB did note that problems persist with almost half of the audit firms inspected having at least one “significant audit performance deficiency.” The PCAOB called out small firms and big firms alike in its report. Here’s a list of auditors that failed to address quality control criticisms satisfactorily.

Here are some thoughts from Lynn Turner on the PwC inspection report:

The PCAOB Inspection reports are critical of PwC audit partners for not supervising those staff doing the vast majority of the work. In one instance cited below, it notes the partner only spent 2% of the hours put in on the audit. That is a significant issue that would affect audit quality and the credibility of the audit report.

A few years ago, the PCAOB proposed that investors be told the name of the audit partner, as is done in Europe and other parts of the world. This could be done either through the partner signing the report, as is the typical custom, or having the auditors name be disclosed as some have proposed.

Investors are asked to vote on and ratify the auditor as part of the proxy voting process for many companies. Yet today, the PCAOB continues to withhold from investors, the name of the companies whose audits the PCAOB inspection reports call into question, those audits of questionable quality and credibility, and which have not been done in accordance with professional standards. The PCAOB has also failed to act on the proposal to provide investors with transparency as to who the audit partner is. As a result, despite all the criticism leveled by the PCAOB against PwC in today’s report, investors are left totally unable to discern which of these audits they should be concerned about, when voting on the auditor ratification. The PCAOB is simply forcing investors to “fly blind” on that vote.

While SOX does prohibit the PCAOB from disclosing certain information on an auditor that arises as a result of an inspection, it does not prohibit in any fashion the PCAOB from disclosing the name of the Company. And it would not prohibit the disclosure of the names of these partners who perform poorly if the PCAOB were the Board ever to act on its own proposal. Rather, a majority of the PCAOB board members have decided to act in a manner that reduces transparency with respect to audit quality for investors.

Francine McKenna on Audit Industry Developments

In this podcast, Francine McKenna of re:theauditors delves into some of the latest audit industry developments, including:

– Why should audit committees care about PCAOB inspection reports?
– How can the audit committee learn more about a PCAOB inspection report? Should they ask the auditor? The PCAOB?
– In what instances can a PCAOB inspection report be used in litigation against the auditor by the client or shareholder plaintiffs?
– Is it the audit committee’s responsibility or the auditor’s to make sure the firm is independent? What if the auditor uses its member firms all over the world to complete the audit? What can happen if the audit firm is not independent?
– What role does an external auditor play when there’s a corporate investigation? Can the auditor be hired to perform an investigation of fraud or illegal acts? Should the auditor be hired to perform a corporate investigation? Advantages and disadvantages?

As an aside, here’s a Bloomberg article critical of the nonprosecution agreement over illegal tax shelters that the DOJ just reached with Ernst & Young.

And Janice Brunner & Ning Chiu note in this Davis Polk blog: “The New York City Bar Association Financial Reporting Committee has asked the NYSE to consider revising its rules regarding the extent to which audit committees shoulder the burden for risk management oversight. NYSE requires audit committees to discuss policies with respect to risk assessment and risk management. Commentary to these rules indicates that the audit committee is not required to be the sole body responsible for risk assessment and management, but it must discuss guidelines and policies to govern the process by which this activity is undertaken.

The Financial Reporting Committee letter expressed concern that the NYSE rules not only call upon audit committees to assume oversight responsibility for risks beyond those associated with financial reporting, but also that the level of responsibility the committees must undertake is unfortunately ambiguous. The letter argues that audit committees are already burdened with their existing duties and also do not possess particular expertise in broader subjects of risk management that may expand to operational and environmental risk, for example. The letter suggests perhaps a more useful approach would be to vest in the entire board the responsibilities for the allocation of risk management oversight instead. “

Webcast: “What the Top Compensation Consultants Are NOW Telling Compensation Committees”

Tune in tomorrow for the webcast – “What the Top Compensation Consultants Are NOW Telling Compensation Committees” – to hear Mike Kesner of Deloitte Consulting, Jan Koors of Pearl Meyer & Partners, Blair Jones of Semler Brossy and Eric Marquardt of Pay Governance “tell it like it is. . . and like it should be.” The topics include:

– What is ISS QuickScore & How Relates to SOP
– Weaknesses in ISS’ Pay-for-Performance Assessments
– How ISS Overvalues Options
– The Use of Peer Groups
– How to Demonstrate Pay-for-Performance Alignment
– Severance and Pay-for-Performance
– Fighting ISS Recommendations
– Moving Away From a Relative TSR Program
– Clawbacks

– Broc Romanek

March 8, 2013

Can I Say “Wow” Twice? Wow, Wow! The Swiss Do It

I’ve been following the Swiss saga pretty closely – but now that the people have spoken and passed new laws last Sunday, I’m still amazed and all I can say is “wow.” Here’s a slew of articles about the Switzerland development so you can read what happened for yourself:

WSJ’s “Swiss Back Executive-Pay Controls”
BBC’s “Will new rules on executive pay damage Swiss business?
NY Times’ “Swiss Voters Approve a Plan to Severely Limit Executive Compensation”
The Telegraph’s “Switzerland backs curbs on executive pay”
Reuter’s “Swiss pay curbs find support in Germany, France”
Bloomberg’s “Swiss Limits on Executive Pay: Less Than Meets the Eye
Bloomberg’s “Swiss Pay Curbs Leave Government to Struggle With Details”’s “Fueled by public ire, alone against the world
Huffington Post’s “Swiss Voters Approve ‘Rip-Off Initiative,’ Putting Tough Limits On Executive Pay
Forbes’ “With Help From Novartis, Switzerland Moves On C-Suite Ripoffs

Nasdaq Proposes Listed Companies Have Internal Audit Function

Here’s news from Leonard Street’s Steve Quinlivan’s blog: The SEC has published for comment Nasdaq’s rule proposal that Nasdaq listed companies have an internal audit function. The rule proposal is as follows:

“Each Company must establish and maintain an internal audit function to provide management and the audit committee with ongoing assessments of the Company’s risk management processes and system of internal control. The Company may choose to outsource this function to a third party service provider other than its independent auditor. The audit committee must meet periodically with the internal auditors (or other personnel responsible for this function) and assist the Board in its oversight of the performance of this function. The audit committee should also discuss with the outside auditor the responsibilities, budget and staffing of the internal audit function.

A Company listed on Nasdaq on or before June 30, 2013, must establish an internal audit function by no later than December 31, 2013. A Company listed after June 30, 2013, must establish an internal audit function prior to listing.”

In its rule filing, Nasdaq notes the NYSE, in Listed Company Manual Section 303A.07(c), has a similar requirement.

Here’s a blog from Duane Morris’ Oliver Rust too on the subject…

Nasdaq Creates New Private Market for Unlisted Securities

As noted in this blog by Gunster’s Robert White, Nasdaq has entered into a joint venture with SharesPost to provide a “private” market for unlisted securities…

A member pointed out that Frontline recently ran this “Untouchables” episode that investigates why Wall Street’s leaders have escaped prosecution for any fraud related to the sale of bad mortgages.

– Broc Romanek

March 7, 2013

Posted: Notes from “SEC Speaks”

Thanks to Stephanie Bignon, Nishchay Maskay & Keir Gumbs of Covington & Burling, we have posted notes from PLI’s recent SEC Speaks conference about the Corp Fin and Enforcement panels – in addition to other sets of notes from this conference – in our “Conference Notes” Practice Area.

New Iran Disclosures: Over 60 Companies So Far

Over the past few weeks, over 60 companies have disclosed activities involving Iran or certain so-called bad actors. As noted in this memo, it appears from these recent disclosures that multinational issuers with worldwide operations across multiple affiliates have undertaken significant time and expense in collecting data about potentially reportable activities that issuers have never before been required to publicly disclose – including transactions with customers, vendors, and other business partners.

FINRA Plans to Revise QIB Standards on Debt Securities

As noted in this memo, FINRA has proposed changing the markup rule so that it applies to QIBs.

– Broc Romanek

March 6, 2013

Senator Shelby Introduces Dodd-Frank “Roll Back” Bills

Yesterday, Senator Richard Shelby (R-AL) introduced two Dodd-Frank bills. One bill is labeled a technical corrections bill but it includes exemptive authority for Section 953 – ie. pay versus performance and pay disparity – so that the SEC could adopt a rule exempting “small issuers” (see Section 11.3.c).

The other bill is called the “Financial Regulatory Responsibility Act of 2013” (guess “Even More JOBS Act” was already taken; Shelby introduced a similar bill in 2011). Based on a quick read (and a big hat tip to Lynn Turner for his analysis!), it appears to impose such stringent cost-benefit hurdles that I doubt any rulemaking would ever get off the ground. Remember that GAO recently reported that over half of the required rulemaking under Dodd-Frank has yet to be conducted.

Under Section 3, the bill requires a complete an extensive cost-benefit analysis – before an agency can even propose a rule! Normally, conducting a cost-benefit analysis is part of the proposal process and during that process, the agencies asks for input from the public and those affected, as to what the costs and benefits would be from the proposed rule. In addition, the bill requires agencies to compare quantified benefits with quantified costs – and if quantified costs outweigh the quantified benefits, the bill in essence stops the proposal before it is proposed. Bear in mind that the benefits of legislation often cannot be readily quantified.

The bill also requires agencies to provide all of its data & analysis to the public so that they can perform the cost-benefit analysis themselves (Section 5). And under Section 8, it makes challenges easier to bring in the US Court of Appeals for the DC District (which is the court that has been quite unfriendly to the SEC over the past decade). Plus it makes it harder for agencies to withstand such challenges (ie. if an agency is found to have not complied with this law, the rule is overturned unless the agency provides “clear and convincing evidence that vacating the rule would result in irreparable harm”). I believe this overturns decades of legal precedent about how agency rules are judicially reviewed.

The bill requires the SEC to adopt similar cost-benefit tests for agencies under its oversight, such as the PCAOB (Section 11). The bill also requires agencies to examine rules five years after adoption to see if they are achieving desired results (Section 6). A Chief Economists Council is established under Section 9.

How do you read Section 7? I believe it requires the SEC to develop a plan one year from adoption of this law – and then every five years thereafter – “to modify, streamline, expand, or repeal existing regulations so as to make the regulatory program of the agency more effective or less burdensome in achieving the regulatory objectives.” Wow! All of its laws? Not just the Dodd-Frank ones? Let me know if you read that Section differently.

Here is Senator Shelby’s press release, noting various GOP co-sponsors and the support of the Chamber of Commerce…

Personally, I like to be straight-forward and honest. If you want to stop Dodd-Frank in its tracks, do it – but don’t call it something else. But unfortunately, that is not the Congressional way. Not surprisingly, the mass media has overlooked this bill completely so far. I can only find this The Hill article, whose title infers that these bills just “tweak” Dodd-Frank.

SEC Chair Nominee Mary Jo White: Senate Confirmation Hearing Set for Tuesday

The Senate Banking Committee has set its confirmation hearing for SEC Chair Nominee Mary Jo White for next Tuesday, March 12th at 10 am. Not sure the hearing would have drawn that much attention on its own. But given that the nominee for the head of the Bureau of the Consumer Financial Protection Bureau – Richard Cordray – will also be considered at the same hearing, it could turn ugly since that new agency has been a lightning rod on the Hill. I’m sure that Senator Shelby’s bill will be mentioned…

33% Early Bird Discount Expires on Friday: Our Pair of Popular Executive Pay Conferences

Last chance to take advantage of the 33% early bird discount for our popular conferences – “Tackling Your 2014 Compensation Disclosures: The Proxy Disclosure Conference” & “Say-on-Pay Workshop: 10th Annual Executive Compensation Conference” – to be held September 23-24th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas for the Conferences.

Early Bird Rates – Act by This Friday, March 8th: Act now for the early bird discount rate (both of the Conferences are bundled together with a single price). So register by end of this Friday to take advantage of the 33% discount.

– Broc Romanek

March 5, 2013

Supreme Court Delivers Two Securities Law Decisions in Single Week!

Last week, the Supreme Court delivered two decisions impacting the securities law. Even one in a term is rare. Some say that securities defendants won one and lost one. Others say differently (for eg. see this blog by Lane Powell’s Doug Greene). We have been posting dozens of memos on both Gabelli v. SEC and Amgen v. Connecticut Retirement Plans and Trust Funds in our “Securities Litigation” Practice Area.

The Gabelli court found that five-year statute of limitations period for federal enforcement actions seeking civil penalties begins to run “when the fraud is complete,” not when it is discovered by the government (unlike the standard for private plaintiffs). And the Amgen court found that plaintiffs don’t need to establish that allegedly false statements were material to the market before they can gain class certification.

Growing Use of ATM Offerings & Block Trades

Recently, this Reuters article noted how the growing use of at-the-market offerings and block trades are impacting the earnings of investment banks.

I have to mention that my good friend Lou Rorimer recently had his father featured in this NY Times article. Lou’s father was part of an allied military unit that was responsible for protecting artworks during WWII and then later recovering the ones that the Nazis stole. They were dubbed the “Monuments Men” – the story is being made into a movie starring George Clooney, Matt Damon, Daniel Craig, Kate Blanchett, Bill Murray, Jean Dujardin, Lord Grantham (er, Huge Bonneville) and John Goodman, due out this Christmas!

“Occupy the SEC” Sues to Hasten Volcker Rules

As noted in this Reuters article, a subset of the “Occupy Wall Street” movement has sued to push for adoption of the Volcker rules. I haven’t heard if the Occupy movement will be going to any annual meetings this year. Let me know if you hear something…

Webcast: “Growing Controversies Over Company Valuations Under Delaware Law”

Tune in tomorrow for the webcast – “Growing Controversies Over Company Valuations Under Delaware Law” – to hear Kevin Miller of Alston & Bird, Jennifer Muller of Houlihan Lokey and Kevin Shannon of Potter Anderson discuss whether – despite case law to the contrary – fair value (in appraisal) and fair price (under entire fairness) shouldn’t be viewed as identical. Please print off these two sets of Course Materials in advance – fair value and control premiums.

– Broc Romanek

March 4, 2013

Preparing for Your Annual Meeting? We Have 15 Checklists for You

Last year, we gave you comprehensive Handbooks. This year? We have practical checklists for you! For the nitty gritty of the annual meeting itself, we have 15! Great tools to go with tomorrow’s webcast

A few days ago, Warren Buffett released his annual letter to shareholders. Here’s a “D&O Diary blog” and Huffington Post blog about it…

Webcast: “Conduct of the Annual Meeting”

Tune in tomorrow for the webcast – “Conduct of the Annual Meeting” – to hear Carl Hagberg of The Shareholder Service Optimizer, Grace Holmes of Cameron International; Susan Permut of EMC; John Saia of McKesson and Dannette Smith of UnitedHealth Group explain how they handle the many challenges of running an annual shareholders meeting.

Two Reappointed to PCAOB Board

On Friday, the SEC announced that PCAOB Board members Steven Harris and Jay Hanson have been reappointed for five-year terms.

– Broc Romanek

March 1, 2013

Sequester This! Corp Fin Lays Off 20%!

Made you look. Blame it on an early April Fools joke? The truth is that Corp Fin is not laying off anyone.

But the sequester is real. Living in DC, I know quite a few folks that have already received furlough letters from federal agencies. No word yet if the SEC will be doing so too – but my guess is it’s just a matter of time. The budget cuts are real & deep. And that’s on top of the massive government cuts that have taken place since ’07, the most since WWII.

Anyways, Congress is off on its normal 3-day weekend, just a week after its 10-day winter break. And they sure don’t seem to care much about that looming government-wide shutdown coming up on March 27th…

Diversity: The Boardroom Mystique

A must-read piece by Lucy Marcus about how little we’ve progressed with board diversity – with some great commentary on why we need to get there for business reasons. Piggybacks on the 50th anniversary of the publication of Betty Friedan’s “The Feminine Mystique”…

SEC Staff Updates XBRL FAQs

Yesterday, Risk Fin posted updated XBRL FAQs. It looks like the new and updated FAQs have a note next to them.

By the way, the Lowell Milken Institute for Business Law & Policy at UCLA Law School is looking for a new Executive Director…

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– Broc Romanek