December 12, 2013

The SEC’s Reg Flex Agenda: What Does It Really Mean?

Earlier this year, I blogged how the SEC’s Reg Flex Agenda is aspirational and not really a good roadmap for upcoming rulemakings. Apparently, some folks didn’t get the memo and continue to make the Reg Flex Agenda a newsworthy item after being completely ignored for decades. So I wasn’t surprised that we never saw a political contribution disclosure proposal from the SEC this year after the hubbub starting in January that it was coming soon. Nor am I surprised that the topic was left out of the latest Reg Flex Agenda (and here’s the “long-term” action items) posted by the SEC last week.

Here’s some examples of folks thinking that the Reg Flex Agenda actually does amount to something: this Washington Post article on that omission – and here’s a blog about it from Prof. Lucian Bebchuk. And the NY Times Editorial Board has even weighed in.

I disagree. I believe that the omission has as much meaning as it’s inclusion in the last Reg Flex Agenda. Which is nada. At least the Washington Post partially recognized this fact, with this sentence buried in its recent article: “The agency is not precluded from acting on a matter, even if it’s not on the formal agenda.” But why even bother to write an article about the Reg Flex Agenda in the first place…

Study: A 12-Year Comparison of Going Concerns

In a recent study, Audit Analytics looked back over 12 years of going concerns and, among other things, found:

– Fiscal year end 2012 is estimated to receive 2,517 going concerns, a decrease of 127 from the year prior, but this decrease is smaller than the 228 companies that ended up filing terminations with the SEC after disclosing a going concern in 2011.

– It is estimated that 17.5% of auditor opinions filed for fiscal year end 2012 will contain a qualification regarding the company’s ability to continue as a going concern. During the 13 years under review, the highest percentage, 21.1%, occurred in 2008 and the lowest, 14.1%, occurred in 2000. The last 6 years represent the worst 6 percentages under review.

– New going concerns (filed for this year, but not the prior year) is estimated to be 543, which is low compare to most years, but 35 more companies than experienced the year prior.

– Fiscal year 2012 saw the fewest number of companies that improved well enough to shed its going concern status. A multi-year analysis of the going concerns allows for an identification of companies that filed a going concern one year but not the following year. This cessation can occur for one of two reasons: (1) the company files a subsequent clean audit opinion (subsequent improvement) or (2) the company fails to file audit opinions altogether (subsequent disappearance). A review of companies that experienced a subsequent improvement reveals that only 140 companies that filed a going concern in 2011 were able to file a clean audit opinion in 2012. This figure represents the lowest for any year analyzed, since 2000.

This Reuters article noting that 40% of audit committee members have social ties to CEOs at the same company is alarming. It’s based on this upcoming study.

A Record $2.46 Billion Post-Verdict Judgment In a Securities Lawsuit!

Kevin LaCroix blogs about Northern District of Illinois Judge Guzman entering a post-verdict judgment in the long-running Household International securities class action lawsuit consisting of principal damages of $1,476,490,844.21 and prejudgment interest of $986,408,772, for a total judgment amount of $2,462,899,616.21, along with post-judgment interest and taxable costs. Wow…

Kevin also blogs about “Shareholders Obtain $882 Million Default Judgment in Longtop Financial Securities Suit.” And this blog by Kevin is also good: “First the Regulatory Investigation, Then the Securities Suit.”

– Broc Romanek