Monthly Archives: September 2014

September 16, 2014

Poll Results: How Are You Responding to Your SDX Shareholder Engagement Letter?

Last month, I ran a poll in this blog to address the query about how companies were responding to the SDX engagement letter. Here are the results:

– Responded indicating have adopted shareholder-director engagement policy – 0%
– Responded indicating will consider adopting shareholder-director engagement policy – 0%
– Responded saying ‘thanks for the letter’ – 17%
– Decided not to respond at all – 32%
– Undecided; intend to discuss at board meeting what to do – 26%
– Undecided; might not even share with the board – 25%

Please take a moment to participate on this “Quick Survey on Earnings Releases and Earnings Calls” – and this “Quick Survey on Whistleblower Policies & Procedures.”

SEC’s First Ombudsman: Retail Investors Get a Complaint Department

Recently, the SEC hired its 1st Ombudsman – Tracey McNeil – who will report to the head of the Office of the Investor Advocate. Dodd-Frank created this position as the ombudsman will act as a confidential liaison in resolving problems that retail investors may have with the SEC or self-regulatory organizations.

Meanwhile, the SEC created a new “Office of Risk Assessment” within Risk Fin – the new office will coordinate the data-driven risk assessment tools across the agency, like the ones that recently supported Enforcement’s Section 16 initiative…

Cap’n Cashbags: The “Real” ALS Ice Bucket Challenge

Cap’n Cashbags – a CEO – doesn’t try to avoid the ALS Ice Bucket Challenge in this trailer for the full feature film (here’s his 1st attempt):

– Broc Romanek

September 15, 2014

Webcast: “Cybersecurity – Working the Calm Before the Storm”

Tune in tomorrow for the webcast — “Cybersecurity: Working the Calm Before the Storm“— to hear Weil Gotshal’s Paul Ferrillo, Hogan Lovells’ Harriet Pearson and Dave Lynn of and Morrison & Foerster analyze a host of issues that you need to consider now — before you have a security breach.

Then come back and join us next Monday, September 22nd for the webcast — “Cybersecurity Role-Play: What to Do & Who Does What, When” – to hear the FBI’s Leo Taddeo and Cleary Gottlieb’s Louise Parent, Craig Brod, Richard Kreindler, Pam Marcogliese and Jonathan Kolodner role-play a variety of possible cybersecurity scenarios that could happen to you.

Study: 52% of Banks Don’t Disclose Cyber Risk Factors

Given what I’ve read recently about attempted – and successful – cybersecurity breaches at banks, I was surprised to see this study from LogixData that analyzed the disclosures of 575 banks and found that 303 (52%) of them had absolutely no mention of anything related to cyber security. Here’s a report with the 56 largest banks that had the risk factors.

The Rise of Foreign Issuer IPOs

In this blog, Ze’-ev Eiger of Morrison & Foerster explains the reasons for a comeback in IPOs in the United States by foreign issuers…

– Broc Romanek

September 12, 2014

CII: Investors Seek Proxy Disclosure of Board Evaluation Process

As noted in this blog by Davis Polk’s Ning Chiu, CII has issued this report about “Best Disclosures of Board Evaluation Process.” Based on a survey of CII members, investors want disclosure of the board evaluation process (but not the actual evaluation results themselves).

Exemplars of disclosure about the mechanics of the evaluation process include Potash, Agrium and General Electric – while the report points to BHP Billiton, Dunelm and Randstad Holding (all non-US companies) for “particularly effective” disclosures of the most recent board evaluations.

Shareholder Proposals: Different Outcomes for Political Contribution Proposals

Last week, I narrowly missed the hubbub outside the SEC’s DC headquarters as protestors gathered in support of the petition asking the SEC to require political contribution disclosures (I was down there for other reasons) – the group now has a website: “” It’s still a hot topic. The protest celebrated the 2011 rulemaking petition that now has over 1 million supporters. Wow!

Here’s news from this blog by Davis Polk’s Ning Chiu:

The SEC staff recently disagreed with Procter & Gamble’s no-action letter, which sought to exclude a shareholder proposal on ordinary business grounds, although a similar proposal sent to Johnson & Johnson was allowed to be kept out of its proxy statement this past February.

Both proposals requested reports to shareholders explaining the congruency between the companies’ stated “corporate values” and the company’s political contributions, with “justifications for…exceptions” for those contributions which may appear to be misaligned with the values. While the SEC staff did not explain their reasoning in the P&G decision, the different results seem to lie in the focus of the examples used to demonstrate the alleged incongruency.

The J&J proposal questioned the company’s public commitment to the Patient Protection and Affordable Care Act (ACA), since, according to the proponent, 30% of the company’s political contributions were directed at legislators who voted against ACA and related regulations, or to politicians who favored legislation to prohibit the enforcement of ACA. In that case, the SEC staff stated that the proposal was directed toward specific political contributions that relate to the operation of the business, not general political activities, and therefore permitted the company to exclude the proposal.

Procter & Gamble’s shareholder proposal focused on two different issues. The proposal criticized making donations to politicians who voted to deregulate greenhouse gasses as contrary to the company’s stated goal toward environmental sustainability. In addition, the proposal also questioned the company’s support of candidates who voted against hate crimes legislation or who disfavored same sex marriage, which the proponent claimed is at odds with the company’s stated nondiscrimination policy.

In a letter, the proponent’s attorney distinguished the P&G proposal, noting that in the J&J proposal the focus was on a single issue, the ACA, which was of direct relevance to J&J’s business because the company is a “healthcare industry stakeholder.” According to the attorney, the examples of legislation used in the P&G proposal, however, are “general public policy issues” and not aimed at legislation that directly affected the company.

Chamber: ISS Survey Lacks Empirical Research Linking Policies to Enhanced Shareholder Value

In a letter to ISS – responding to the current ISS policy survey – the Chamber of Commerce disputes the survey results gather by ISS about investment advisors who rely exclusively on ISS voting recommendations. Meanwhile, SEC Commissioner Gallagher has taken the unusual step of writing a report for publication outside the agency’s walls – this report on proxy advisors published by the Washington Legal Foundation…

– Broc Romanek

September 11, 2014

Wow! SEC Launches “Section 16 & Schedule 13D” Enforcement Inititative

Yesterday, as noted in Alan Dye’s blog on, the SEC announced a major enforcement initiative in which it has brought enforcement actions against 28 insiders (directors, officers and 10% owners) for failing to file timely Section 16(a) reports and Schedules 13D and 13G. Twenty-seven of the 28 have agreed to settled – and it appears that many (if not all) agreed to pay civil money penalties (totaling $2.6 million!).

In addition, 6 companies settled allegations that they failed to disclose their insiders’ Section 16(a) violations as required by Item 405 of Regulation S-K. As noted in this Reuters article, it’s the 1st time that the SEC has systemically targeted insiders & companies for beneficial ownership reporting violations – Alan will report more in his blog after he reads all of the individual orders.

This could mean a new era of enforcement of beneficial ownership requirements. I read one of the settlements that penalized the company and the SEC said that the company’s employees were negligent in not timely filing the reports for the insiders…

Speaking of Big Fines: $2.8 Million in Attorney Fees!

Over on “The Advisors Blog” on last week, I blogged how Abercrombie recently settled one of the proxy disclosure lawsuits. It’s a “governance by gunpoint” settlement – with a $2.78 million payout in attorneys’ fees…

Just Announced! “Alan Dye’s Section 16 Hands-On Training Workshop”

One of the most frequent requests heard by Alan is “can you recommend a Section 16 training class for beginners?” Until now, the answer is “there is none.” But no more! On January 9th, Alan & I are holding a Section 16 training workshop in DC: “Alan Dye’s Section 16 Hands-On Training Workshop.” Since this is a workshop, there is limited seating – so you should act now if you are among those that need it. The agenda is posted – and includes sessions on these topics:

– The Basics
– Nuts & Bolts: Understanding Forms 3, 4 and 5
– How to Obtain Reporting Guidance & Support
– 10 Most Common Types of Filings
– Overcoming Your Fears of Complex Filings
– Navigating EDGAR & Other Filing Issues
– Establishing Filing Compliance Programs
– Yikes! What to Do If There’s a Filing Error: Corrections & Disclosure
– The In-House Perspective

– Broc Romanek

September 10, 2014

Conflict Minerals: Commerce Department Publishes List (A Year Late)

The excerpts from the two blogs below best describe this year-late list of “all known conflict mineral processing facilities worldwide” from the Commerce Department. The list is required by Dodd-Frank’s Section 1502(d)(3)(C) – but it does “not indicate whether a specific facility processes minerals that are used to finance conflict in the Democratic Republic of the Congo or an adjoining country. We do not have the ability to distinguish such facilities.”

From Stinson Leonard Street’s Steve Quinlivan blog:

But the provision of the Dodd-Frank Act that requires this list is entitled “Report on Private Sector Auditing” and it looks like Commerce hasn’t begun to tackle that responsibility. Annually, beginning 30 months after passage of the Dodd-Frank Act, Commerce is required to submit a report to Congressional subcommittees that includes: “An assessment of the accuracy of the independent private sector audits and other due diligence processes described under the conflict minerals provisions. Recommendations for the processes used to carry out such audits, including ways to (i) improve the accuracy of such audits and (ii) establish standards of best practices.”

I know only one or two or a very few issuers submitted private sector audits with the first round of required conflict minerals filing. Perhaps Commerce has concluded it’s not worth the effort to make the evaluations or maybe the evaluation is underway. Since the standards for the audits have been published, Commerce certainty could provide recommendations as to the processes used to carry out the audits and establish standards of best practices.

From Cooley’s Cydney Posner blog:

The disclosure by Commerce may be helpful for issuers in a couple of ways. The list of smelters and refiners produced by Commerce may actually be useful for issuers in their conflict minerals compliance efforts because it compares and reconciles information about smelters and refiners from a number of sources. Moreover, the admission of the challenges faced by Commerce (with all of its resources) highlights and legitimizes the difficulty that issuers have faced in trying to comply with the conflict minerals rules. We can only hope that the acknowledgement by Commerce of its inability to distinguish which facilities are used to finance conflict in the DRC will encourage the SEC to be a bit indulgent in the conduct of whatever type of review-and-comment process it may undertake for conflict minerals reporting and perhaps lead to some constructive and practical guidance or even revisions of the rules, where necessary.

Also check out this piece by Elm Consulting entitled “Conflict Minerals Math: When 1/11 Equals 100%“…

XBRL: Errors Not Caught By Software

This blog from FEI Daily provides some cautionary tales about XBRL and software used to find errors…

Last Chance — Our Pair of Popular Executive Pay Conferences

With just two weeks to go, folks are rushing to join their 2000 other colleagues to be part of our “Annual Proxy Disclosure Conference” on September 29th-30th. Registrations for our popular pair of conferences (combined for one price)—in Las Vegas and via video webcast — are strong and for good reason. Act now!

The full agendas for the Conferences are posted — but the panels include:

– Keith Higgins Speaks: The Latest from the SEC
– Top Compensation Consultants: Survivor Edition
– Preparing for Pay Ratio Disclosures: How to Gather the Data
– Pay Ratio: What the Compensation Committee Needs to Do Now
– Case Studies: How to Draft Pay Ratio Disclosures
– Pay Ratio: Pointers from In-House
– Navigating ISS & Glass Lewis
– How to Improve Pay-for-Performance Disclosure
– Peer Group Disclosures: The In-House Perspective
– Creating Effective Clawbacks (and Disclosures)
– Pledging & Hedging Disclosures
– The Executive Summary
– Dealing with the Complexities of Perks
– The Art of Communication
– The Big Kahuna: Your Burning Questions Answered
– The SEC All-Stars
– Hot Topics: 50 Practical Nuggets in 75 Minutes

– Broc Romanek

September 9, 2014

Which Factors Influence Board Leadership Structure (& How)?

This recently published Korn Ferry/NACD board leadership survey of the S&P 500 and S&P 400 is particularly noteworthy because it delves into a number of important topics aside from merely identifying leadership structure types and trends.

Survey results include:

  • Continued trend toward separation of the CEO and board chair roles – which reflects almost equally increases in independent and non-independent chairs
  • Smaller companies are more likely to separate the CEO/chair roles than larger companies.
  • Larger companies that separate the roles are more likely to later recombine them.
  • About 50% of companies changed their leadership structure upon a succession event (i.e., new CEO or chair).
  • A slight majority of companies experiencing a succession event chose a combined rather than separated structure.
  • With the exception of founders stepping aside, separating the roles is more likely when an unexpected resignation or crisis (as opposed to a planned succession) triggers the succession event.
  • Planned successions involving founders are more likely to result in separating rather than combining the roles.
  • 40% of succession events in 2012 included some sort of transition – such as the former CEO/chair remaining as chair for some time period after the new CEO was in place.
  • Certain industries (some characterized by having more founder-chairs) like IT tend to separate the roles at a much higher rate than other industries.

Based on the findings, the survey reaffirms that there is no “right” board leadership structure; rather, each company needs to determine for itself the most appropriate structure based on its particular facts and circumstances – which evolve over time. See more surveys, memos and other helpful resources in our “Board Leadership” Practice Area.

Enhancing CEO Succession: Directors Mentoring Executives

This recent Heidrick & Struggles article discusses how pairing directors with high-potential internal CEO succession candidates in formal mentoring relationships – well in advance of planned succession events – can reduce risks associated with CEO successsion, and motivate and improve company performance. Mentoring allows directors to gain an in-depth understanding of candidates’ leadership potential – not just past performance, which isn’t sufficient to predict future success.

So-called “soft skills” such as self-awareness and empathy, which are detectable by directors over the course of the mentoring relationship and which most CEO candidates lack, are described as the key differentiators between candidates that can succeed as CEOs vs. those that fail. The article also discusses a form of mentoring program implemented by Frontier Communications (see this 2010 WSJ article), and describes how companies can set up their own program.

This is certainly not the first article to tout the benefits of directors serving as mentors for potential CEO successor candidates. Among others, this report by The Conference Board (discussing the findings of a survey that focused on how well directors know senior executives positioned to succeed to the CEO) recommended that – while CEOs are ultimately responsible for mentoring and developing their direct reports, the board still play an active role by, e.g., serving as informal mentors or advisors, noting:

“It is important for directors to move beyond interacting with executives “when circumstances warrant” (as is commonly reported). Developing true insight into the professional quality and personal character of an executive requires dedicated time and effort.”

Contrary to the recommendation, however, the survey found that only a small percentage (7%) of companies currently assign a director to serve as a mentor for their senior executives.

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for 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:

– Auditor Engagement Letters: No Company Intervention in Auditor-Directed Work
– PCAOB Roundtable: Mixed Views of Proposed Changes to Auditor’s Report
– Perceived Board Effectiveness Linked to How Board Allocates its Time
– FINRA: Pre-IPO Selling Procedures Need to Be Adequately Supervised
– Board Trends at the S&P 1500

– by Randi Val Morrison

September 8, 2014

Smaller Boards: Bigger Returns

According to this WSJ article, a recent study by GMI Ratings found that – among companies with a market cap of at least $10 billion, those with smaller boards produced substantially better shareholder returns over a 3-year period than companies with the largest boards. According to the reporter, the study isn’t being made publicly available, so it’s difficult to draw conclusions outside the confines of what’s presented there.

However, as noted in a LinkedIn discussion on this topic, other research (for example, see “Higher Market Valuation of Companies with a Small Board of Directors” and “Larger Board Size and Decreasing Firm Value in Small Firms”) has previously identified an association between smaller boards and higher market valuation for companies of all sizes. And those of us who have worked with various boards ranging in size from 7 to 13 or more members can personally speak to the many attributes associated with smaller boards compared to larger ones.

But there are some downsides to smaller boards as well. Here’s an excerpt addressing some of the upsides and downsides of smaller and larger boards from our Board Size checklist posted in our “Board Composition” Practice Area on

Smaller Board

  • More opportunities for all directors to actively participate and be engaged in board deliberations
  • Greater flexibility and ease in scheduling meetings, setting agendas, distributing materials, communicating on impromptu basis
  • Individual directors more likely to assume responsibility rather than deferring to others – more likely to be a greater sense of ownership & accountability than with a larger board
  • More likely to accommodate detailed materials & discussions
  • Easier and less costly for company personnel to manage, coordinate, facilitate
  • Directors know each other better, increasing likelihood of cohesive board with feeling of common purpose and more productive working relationships
  • Greater workload burden on individual directors may diminish effectiveness – time commitment required may exceed time available on a per person basis
  • May have difficulty effectively staffing committees – particularly with continued additional regulatory-imposed responsibilities that increase committee work load & time commitment
  • More likely lacks diversity of experiences and perspectives characteristic of larger boards
  • Easier to reach consensus
  • Meetings tend to be much more informal


Larger Board

  • Can inhibit effective and equal opportunities for participation by individual directors
  • Larger boards tend to exhibit less questioning than smaller boards
  • Can interfere with effective functioning by limiting opportunities for meetings (due to conflicting schedules), necessitating formal procedures for communications, impeding collective input, discussion and consensus, etc.
  • Can more easily accommodate multiple committees effectively staffed
  • Conducive to more board work being delegated to committees (thus enabling active participation by individual directors that may be absent at the board level) – as opposed to remaining at full board level
  • Workload can be better allocated among larger number of directors regardless of committee structure
  • Can accommodate greater diversity in a traditional – as well as a broader – sense, thus allowing for broader range of viewpoints and ideas, which can lead to more thorough and thoughtful consideration of matters
  • More likely that few members will consistently dominate discussion while more reserved members fade into the background (consensus more likely achieved via a herd mentality)
  • At least some individual directors more likely to defer to others – not assume responsibility, accountability
  • Meetings tend to be much more formal out of necessity

Importantly, as noted in the LinkedIn discussion, even if there is an association between board size and shareholder returns, clearly board size is but one of many factors relevant to company performance – so this new study (and any other study) should be viewed in that context.

Study: Academic Directors Yield Better Corporate Governance & Company Performance

This interesting academic paper, “Professors in the Boardroom and Their Impact on Corporate Governance and Firm Performance,” describes the results of a study about the impact of having academic directors on the board. According to the paper, about 40% of the S&P 1,500 had at least one professor on their boards during 1998 – 2011, and for companies with academics on their boards, over 14% of their outside directors are academics. The findings certainly should make boards take a closer look at the academic director candidate pool as one of many great sources for quality candidates.

Noteworthy findings include:

– Companies more likely to have academic directors:

  • Larger companies
  • More research-intensive companies
  • Those situated more closely geographically to universities
  • Larger boards
  • More independent boards
  • Boards with more female directors
  • Boards with older directors
  • Companies where CEO has greater equity stake
  • High-tech and financial companies


– Presence and percentage of academic directors on the board positively impacts company performance

  • As measured by Tobin’s Q (market value/book value)
  • As measured by ROA (net income before extraordinary items & discontinued operations/book value of assets)


– Academic directors score higher than other outside directors on certain governance indicators:

  • They are more likely to attend board meetings
  • They hold more committee memberships
  • They are more likely to sit on monitoring-related committees (e.g., auditing, corporate governance)


– Academic directors strengthen the board’s oversight of management

  • They are associated with significantly lower cash-based CEO compensation, but not equity-based compensation
  • They are associated with a closer relationship between CEO forced turnover and company performance


– Academic directors strengthen the board’s advising & monitoring roles

  • Companies are less likely to manage earnings through discretionary accruals
  • Companies are less likely to be the subject of SEC investigations
  • Company stock prices reflect more company-specific information
  • Presence of academic directors is significantly and positively associated with acquisition performance
  • Companies are more innovative as reflected by the number of patents & patent citations

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for 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:

– PSLRA: Ineffective Motions to Dismiss
– Top Ten List of D&O Coverage Questions for Directors
– Bylaws Mandatory Arbitration Clauses Gaining Ground
– Survey: Board Tenure & Governance
– Weighing Pros & Cons of a Dual-Class Share Structure

– by Randi Val Morrison

September 5, 2014

Applying Fair Data Breach Standards to the Board

This recent Corporate Board Member article about ISS’s sought-after ouster of the majority of Target’s directors due to the company’s data breach made several points worth highlighting.

As background, the article notes Target’s praise-worthy corporate governance platform, and informs that while ISS recommended shareholders withhold votes from most of Target’s directors (those who served on the audit and corporate responsibility committees), Glass-Lewis took a different approach – indicating that there wasn’t sufficient evidence available to conclude that the data breach resulted from the board’s negligence. Along those lines, see Donna Dabney’s (The Conference Board) earlier blog where she methodically set forth the then-publicly available information about the board’s cybersecurity oversight practices – concluding that ISS’s recommendation was unfounded. Ultimately, Target’s shareholders elected all of the director nominees.

Among the article’s key points are:

– Should directors, especially those whose performance of fiduciary duties is via adherence to good governance practices, be held responsible for all risks that might occur under their watch?

– What is the proper standard of fairness for holding directors responsible for cyber breaches?

– No organization can ensure absolute data/cyber-security – Target won’t be (now, more appropriately, hasn’t been) the only good company to suffer a large data brach.

– If directors will be automatically presumed negligent in the context of large data breaches – particularly in the context of otherwise good governance practices, what are the implications of that standard on director candidates’ willingness to serve on corporate boards?

–  The article concludes that we must find a fairer way to review board performance. If we don’t, the negative consequences will be worse than the proposed remedy (i.e., ousting directors whose tenure includes a big breach)

The article indicates that “ISS is right to investigate what happened on Target’s board and to get a feel for how the board handles its fiduciary duties. If it comes out that a board was negligent and isn’t governance sensitive, then let the chips fall where they may.” The only thing I would add is that – but for circumstances where all of the pertinent facts about the board’s cybersecurity oversight are publicly available, I can’t see how ISS or any other outside third party would ever be positioned to “investigate” and fairly evaluate a board’s conduct to determine whether a data breach was due to board negligence. Fortunately, it appears that the majority of Target’s shareholders held a similiar view.

Board Cybersecurity Oversight Duties Grounded in In Re Caremark

This recent Gibson Dunn article addresses the standards that govern the board’s fiduciary duties to monitor and minimize cybersecurity risk based on In re Caremark and its progeny, and identifies certain steps boards should take to ensure compliance with their risk management oversight responsibilities.

See our heaps of additional memos and other resources about this topic in our “Cybersecurity” Practice Area.

It’s Mailed: 2015 Edition of Romanek’s “Proxy Season Disclosure Treatise”

Broc Romanek has wrapped up the 2015 Edition of the definitive guidance on the proxy season – Romanek’s “Proxy Season Disclosure Treatise & Reporting Guide” – and it’s been mailed to those that pre-ordered. You will want to order now so that you can get your copy as soon as you can. With over 1450 pages – spanning 32 chapters – you will need this practical guidance for the challenges ahead.

– by Randi Val Morrison

September 4, 2014

Poll: Conflict Minerals Due Diligence Ahead of Next Year?

A member recently asked “Have companies started their due diligence on conflict minerals for 2014? If so, what kind of due diligence are they doing?” I thought it might be early for this (but this Elm Consulting note indicates otherwise) – but decided to run this poll to find out for sure:

survey solutions

Meanwhile, as noted in this Davis Polk blog, Amnesty International recently filed for a rehearing of the conflicts minerals case in the wake of the ruling in American Meat, the 1st Amendment ruling that Dave blogged about. And this blog by Steve Quinlivan states that NAM has been ordered to respond to the SEC’s petition for an en banc rehearing. Also check out these industry-specific recaps of conflict mineral reporting from Deloitte…

Debate: Safe Harbors v. Principles-Based Determinations

Here’s a guest blog by Stan Keller of Edwards Wildman:

Recently, Professor Jay Brown wrote an article criticizing Corp Fin for expanding and weakening the safe harbor for verifying accredited investor status based on income under Rule 506(c)(2)(ii)(A) when it issued CDI 260.35 in response to the situation where the relevant IRS forms are not yet available at the time of verification. He argues that the guidance dispenses with the need for an IRS form, fails to recognize that filing dates of tax returns can be manipulated, eliminates the need for a document filed under the penalties of perjury and fails to indicate what an examination of IRS documents for earlier years needs to show.

I responded with a comment to Professor Brown’s article but because it was unlikely to be seen I am repeating it here. In a nutshell, Professor Brown is reading the notes but not listening to the music. He is failing to distinguish between the safe harbor and the principles-based approach to verification, which still has to be reasonable based on all the facts and circumstances. Corp Fin in fact preserved the integrity of the safe harbor by requiring strict compliance with its requirements, but at the same time it helpfully recognized that it is appropriate to use the principles-based approach even when all the requirements for the safe harbor are not met. Rather than criticism, Corp Fin should be applauded for providing this guidance.

“Accredited Investor” Definition: One Associate’s View

Just got this note from a member about this article on CNBC:

I’ve always thought it was quite odd that as an associate attorney, I am hired by clients to do private placements for them, draft their offering documents, and keep them in compliance with Reg.D, but the SEC basically says that none of that matters, and that I shouldn’t be able to invest in a private company as easily as someone with a high net worth or annual income unless the company provides me with disclosure at a level that is cost-prohibitive to most companies.

– Broc Romanek

September 3, 2014

SEC Commissioner Aguilar: Enforcement Settlement As “Wrist Slap”

Recently, I’ve blogged about how the SEC Commissioners increasingly seem to be at odds with each other. It doesn’t seem like that trend will turn anytime soon as this NY Times article highlights last week’s unusual dissent from Commissioner Aguilar in an enforcement case. It is rare for a Commissioner to publicly issue a dissenting statement in an enforcement action.

In the dissent, Aguilar described a settlement with the former CFO of Affiliated Computer Services as “a wrist slap at best.” The case against the company was for financial fraud – and compensation was clawed back from the company’s former executives. Interestingly, this is one of the companies charged with options backdating a while back…

Whistleblowers: SEC Gives Internal Auditor $300K Award

Last week, the SEC awarded more than $300k to an internal auditor, the 1st time that the SEC has granted an award for a whistleblower with an audit or compliance function within a company.

Meanwhile, Steve Quinlivan reports about how the SEC is fighting off phony whistleblower submissions…

Spotlight on Vote Counting: Our 10 Question Checklist

Last week, we mailed the August-September Issue of The Corporate Counsel that includes pieces on:

– A Spotlight on Vote Counting: Our 10 Question Checklist
– The Latest on Shareholder Proposal Litigation
– Staff Discusses Shareholder Proposal Trends at 2014 Stakeholder Meeting
– Rule 144 and Shell Companies—Back on Our Wish List
– Rule 506(c) Verification—Recent Guidance from the Staff and from SIFMA

Act Now: Get this issue rushed to when you try a “Rest of ’14 for Free” No-Risk Trial today.

– Broc Romanek