TheCorporateCounsel.net

Yesterday, the SEC issued a press release announcing its proposed budget for fiscal 2019.  Last fall, SEC Chair Jay Clayton told Congress that he’d seek more funding to boost cybersecurity and IT in the wake of disclosure that the Edgar system had been hacked – and he’s a man of his word.

The proposed budget represents a 3.5% increase over the agency’s 2018 request, and the bulk of the request for increased funding is directed at those areas. Here’s an excerpt:

In furtherance of the objectives of the SEC’s 2018–2020 Technology Strategic Plan, this request seeks an additional $45 million to restore funding for technology development, modernization, and enhancement projects. Together with the support of the SEC Reserve Fund, the FY 2019 request would allow the agency to continue implementing a number of multi-year technology initiatives.

Uplifting the agency’s cybersecurity program is a top priority. The FY 2019 request would support increased investment in tools, technologies, and services to protect the security of the agency’s network, systems, and sensitive data. Priorities for FY 2019 include maturation of controls through continuous diagnostics and monitoring, and further enhancements to firewall technologies. Another way the FY 2019 request helps reduce the agency’s cybersecurity risk profile is by enabling the funding of multi-year investments to transition legacy IT systems to modern platforms with improved embedded security features.

Additional funding is also being sought for the restoration of 100 positions (50 FTEs) across various SEC divisions. The SEC’s budget request assumes that it will continue to have access to its reserve fund – something that many Republican legislators & the Trump Administration have targeted for elimination.

Tax Reform: What’s It Mean for Loan Markets?

This Milbank memo takes a look at what tax reform might mean to the loan markets.  Here’s an excerpt of some of the memo’s preliminary conclusions:

The combination of a much lower corporate tax rate and the new limitations on the deductibility of interest may make debt financing a less tax advantageous form of financing for some U.S. taxpayers, although debt financing still has certain tax advantages over equity financing. Multi-national groups may rethink their financing structures now that the incentive to borrow in the United States rather than abroad due to much higher U.S. corporate rates has been reduced or eliminated.

As has been reported in the press, the change to corporate rates, the taxable deemed repatriation of deferred offshore earnings, the limitations on post-2017 NOLs and other provisions may result in significant financial accounting charges that will be reflected on financial balance sheets and earnings statements.

The memo also points out a variety of other potential issues. These include increased complexity in negotiating tax distribution provisions in loan documents due to the disparity between corporate and individual rates, and the potential need for multinational entities to reorganize their corporate structures in ways that may require them to renegotiate existing loan covenants.

Tomorrow’s Webcast: “The Top Compensation Consultants Speak”

Tune in tomorrow for the CompensationStandards.com webcast – “The Top Compensation Consultants Speak” – to hear Mike Kesner of Deloitte Consulting, Blair Jones of Semler Brossy and Ira Kay of Pay Governance “tell it like it is. . . and like it should be.” The jam-packed agenda includes:

1. Pay ratio – last minute items
2. The tax reform bill eliminates the 162(m) exemption – what impact will that have on executive pay design, structure and governance (e.g., salaries and positive discretion on incentive payouts)?
3. Calculation of existing performance awards under tax reform
4. Director pay is continuing to get additional attention from the proxy advisors and the plaintiff’s bar. What will this attention mean for how director pay is structured & administered?
5. Clawbacks aren’t just for restatements anymore. What is the latest thinking on applying clawbacks to a broader range of activities and a broader population?
6. Goal-setting and performance adjustments remain major discussion points at the C-suite level: what are some best practices that can be helpful in this regard?
7. Investors, the SEC and proxy advisors are all still looking for the best way to assess pay & performance? What is the best thinking about how companies can kick the tires around their own pay & performance?

– John Jenkins