August 26, 2016

Disclosure Effectiveness: Item 400 Series “Proposal”

Yesterday, as the latest in Corp Fin’s disclosure effectiveness project, the SEC posted an 8-page “request for comment” on the disclosure requirements in Subpart 400 of Regulation S-K. The scant press release named three topics in particular – management, certain security holders & corporate governance – but it didn’t use the buzz word of Item 402’s executive compensation (probably because the title of Subpart 400 in S-K is “management, certain security holders & corporate governance”).

Item 402 is indeed open for comment! In fact, Item 402 was already open for comment as the SEC made clear in the S-K concept release that it welcomed comments on all aspects of S-K (even though that release focused on business & financial information). Some from the SEC have been saying that Item 402 is a lower priority for the disclosure effectiveness project.

Maybe if enough folks request changes in the 402 area, the SEC will propose something there – but I doubt it given the magnitude of that undertaking & the fact that Item 402 got its last overhaul a mere decade ago (which is why Item 402 is a lower priority for this project). The “request for comment” notes that the comments received will assist the SEC in “carrying out the study of Regulation S-K required by Section 72003(a) of the FAST Act” – that’s probably why the SEC decided to issue this “request for comment” on top of the earlier S-K concept release (as Ning Chiu explains in her blog).

As Broc has blogged before, we have no idea why this is a “request for comment” – and not a “concept release” – but given the short length of the “request for comment,” the difference must allow the SEC to avoid the regulatory trappings of a full-blown concept release.

By the way, the SEC also extended the comment period for the resource extraction/mining disclosures rulemaking a few days ago – the extended comment period ends on September 26th…

Using “Behavioral Ethics” in Compliance Programs

The “Conflict of Interest Blog” provides this roundup of recent articles addressing the use of the emerging field of “behavioral ethics” in corporate compliance programs.  Behavioral ethics focuses on how people actually behave when confronted with an ethical dilemma, in order to understand why they so often act in a manner contrary to their best intentions. (Take a look at this Harvard Magazine article for a more in-depth discussion of what behavioral ethics is all about).

According to this blog– from Philip Morris’s Chief Compliance Officer – incorporating insights from behavioral ethics into compliance programs makes them more effective:

Leading behavioral ethics researchers, including Ann Tenbrunsel of Notre Dame and Linda Trevino of Penn State, have shown that concepts such as leader and peer influence, ethical fading, and blind spots have practical implications for compliance programs.  This research has firmly established that compliance programs with communications, training and controls informed by behavioral ethics learnings are more successful in reducing the likelihood of misconduct and increasing the likelihood of whistle-blowing behaviors.

Transcript: “How to Apply Legal Project Management to Deals”

We have posted the transcript for our recent webcast: “How to Apply Legal Project Management to Deals.”

John Jenkins