February 12, 2018

Mandatory Arbitration: Clayton’s “Not Anxious” to Give ‘Thumbs Up’

This article quotes SEC Chair Jay Clayton as saying that he’s “not anxious” to pursue a rule that would allow companies to adopt bylaws compelling their shareholders to arbitrate securities claims. As we’ve previously blogged, it’s been suggested that such a move is under consideration by the SEC – but as we’ve also blogged, the idea has attracted heat from investor groups.

So, these comments suggest that this idea is likely dead, right? Not so fast. With a hot potato issue like this, we all probably read too much into prior reports suggesting that the SEC was ready to act, and we’re probably reading too much into his remarks now.

After all, those comments were in response to the customary “beating about the head and shoulders” that Senator Elizabeth Warren administers to every financial regulator who testifies in front of the Senate banking committee. Sen. Warren demanded a “yes or no” answer on whether the Chair would support “eliminating class actions” – and his response beyond the “not anxious to see a change” sound-bite fell far short of that. Here’s an excerpt:

“”If this issue were to come up before the agency, it would take a long time for it to be decided, because it would be the subject of a great deal of debate. In terms of where we can do better, this is not an area that is on my list of where we could do better.”

This FedNet video captures Jay Clayton’s full testimony before the committee. The exchange with Sen. Warren begins at the 55:25 mark. The Senator didn’t get the yes or no answer she was looking for – instead, she got one that seemed to say “I’m not prepared to die on this hill, but I’m not going to let myself be pinned down either.”

Insider Trading: It’s Worse Than You Think?

Here’s a cheery item from “The Economist” – according to three recent studies, insider trading is running rampant on Wall Street. Here’s the intro:

Insider-trading prosecutions have netted plenty of small fry. But many grumble that the big fish swim off unharmed. That nagging fear has some new academic backing, from three studies. One argues that well-connected insiders profited even from the financial crisis. The others go further still, suggesting the entire share-trading system is rigged.

Nice. I sometimes think that John Calvin may have been on to something with that “total depravity” stuff.

Tax Reform: An Accounting Disclosure Primer

As Broc blogged last week, some investors are finding company disclosures about the effects of tax reform to be a jumbled mess.  While the complaints so far have surrounded disclosure in earnings releases, it’s not likely to get any easier for companies or investors when it comes time to spell things out in SEC filings.  That’s why this BDO memo detailing the accounting & financial statement disclosures associated with the new tax law is a handy resource.

John Jenkins