May 3, 2018

More on “Who Administers Political Spending Policies?”

On the “Mentor Blog,” I recently blogged about the top of “who administers political spending policies?” – and I posted five examples. Following up on that, we have now posted a “Quick Survey on Political Spending Oversight.” Thanks to Teco Energy’s David Schwartz for the idea!

In addition, a member posted this query in our “Q&A Forum” (#9416): “Enjoyed the “Mentor Blog” on this topic a few days ago. How does the board ensure it doesn’t find itself in an embarrassing situation, like some companies have—where contributions have been made to candidates who end up supporting positions that are in conflict with the company’s mission?” John provided this simple answer:

If you’re worried about that, don’t give. If you trust a politician not to betray you, you deserve what you get.

Don’t forget to participate in this “Quick Survey on Whistleblower Policies & Procedures“…

Accounting Class Actions Rise to Unprecedented Level

Here are the highlights from this recent “Accounting Class Action Settlements” study from Cornerstone Research:

– Industrial sector spiked: The Industrial sector saw 22 percent of traditional accounting case filings in 2017, double the historical average. The Disclosure Dollar Loss (DDL) for accounting case filings in this sector was the largest among all sectors for the first time in the last 10 years.
– Restatements declined: For the third consecutive year, the number of traditional accounting case filings involving restatements declined. The number of 2017 restatement cases was 35 percent lower than the historical average; restatement case DDL was 49 percent lower than the historical average. 
– No auditor defendants named: There were no auditor defendants named in traditional accounting case filings during 2017—the first year that has happened since enactment of the Private Securities Litigation Reform Act of 1995 (PSLRA).
– Total settlement value declined: The total settlement value attributable to accounting cases was the lowest since 1999, with only two accounting-related settlements reaching $100 million or more.
– Larger defendant firms observed as settlement size shrinks: Despite smaller settlement sizes, issuer defendants involved in accounting settlements were the largest observed over the past five years.
– Restatement cases garnered higher settlements: Cases involving financial statement restatements settled for substantially higher amounts than non-accounting cases.

Auditor Independence: SEC Proposes “Debtor-Creditor” Changes

Yesterday, the SEC issued this 71-page proposing release to amend its auditor independence rules to refocus the analysis that must be conducted to determine whether an auditor is independent when the auditor has a lending relationship with certain shareholders of its client at any time during an audit or professional engagement period.

The proposed amendments would focus the analysis solely on beneficial ownership rather than on both record & beneficial ownership; replace the existing 10% bright-line shareholder ownership test with a “significant influence” test; (3) add a “known through reasonable inquiry” standard with respect to identifying beneficial owners of the client’s equity securities; and (4) amend the definition of “audit client” for a fund under audit to exclude funds that otherwise would be considered affiliates of the client. See more in this Cooley blog

Broc Romanek