TheCorporateCounsel.net

September 6, 2018

Insider Trading: NFL Player Takes “Brownsing” to Next Level

As a Cleveland Browns fan, I thought I’d seen it all over the course of the past two decades – a veritable “12 Days of Christmas” of incompetence & hilarity:

Over the past 19 seasons, my Brownies gave to me . . .hundreds of beer bottles rainin’. . . 29 QBs startin’. . . big playoff lead a-blowin’. . . 9 head coaches coachin’ . . . Mike Holmgren flounderin’ . . . homeless guy a-draftin’. . . Josh Gordon smokin’ . . .  Johhhnny  Foootbaall . . . zero games a-winnin’ . . . angry fans paradin’ . . .Hue Jackson swimmin’. . . & Dwayne Rudd’s helmet in a pear tree . . .

The Browns have been so dependably inept for so long that they’ve lent their name to a new word to describe staggeringly incompetent behavior – “Brownsing.”  So, I guess I shouldn’t have been completely surprised when the SEC announced that (now former) Browns LB Mychal Kendricks had been charged with insider trading.  But as jaded as I am about my favorite team, this was something new:

The SEC alleges that after meeting at a party, Mychal Kendricks began receiving illegal tips from Damilare Sonoiki, an analyst at an investment bank who had access to confidential, nonpublic information about upcoming corporate mergers. Kendricks allegedly made $1.2 million in illegal profits by purchasing securities in companies that were soon to be acquired and then selling his positions after the deals were publicly announced, in one instance generating a nearly 400 percent return on his investment in just two weeks.

In return for $1.2 million in alleged profits, Kendricks lost a $3.5 million payday from the Browns, will undoubtedly face a significant civil penalty from the SEC, and – because the US Attorney’s Office in Philly has also brought criminal charges – potentially faces up to a year in prison.  Yes, this is some next-level Brownsing for sure.

Kendricks isn’t the first NFL player to get on the wrong side of the securities laws.  Former NY Giants DB Will Allen pled guilty last year to charges brought in connection with his role in an investment scheme targeting athletes. In 1999, Hall of Fame QB Fran Tarkenton consented to an injunction against future violations of the securities laws, including Rule 10b-5, for his role in an alleged fraud scheme.

Materiality Definition: FASB Goes Back to SAB 99

We’ve previously blogged about FASB’s controversial efforts to amend the definition of “materiality” for purposes of financial statement disclosure. At the end of August, FASB amended Accounting Concepts Statement No. 8 to address materiality.

This recent blog from Cydney Posner says that with the amendment, FASB has hopped into Marty McFly’s DeLorean & traveled about a decade back in time. Here’s the intro:

In 2015, FASB sent a number of stakeholders into a tizzy when it issued two exposure drafts, part of its disclosure framework project, intended to “clarify the concept of materiality.” After hearing from any number of preparers, practitioners and other commenters, FASB has now reversed course.

According to FASB, the “main amendment” in Amendments to Statement of Financial Accounting Concepts No. 8, issued at the end of August, “reinstates the definition of materiality that was in FASB Concepts Statement No. 2, Qualitative Characteristics of Accounting Information, which was superseded in 2010.” In other words, it’s back to SAB 99.

Elad Roisman Confirmed as SEC Commissioner

Yesterday, the Senate confirmed former Senate Banking Committee staffer Elad Roisman to serve as an SEC Commissioner.  Once he is sworn in, his appointment means that the SEC will finally have a full slate of 5 Commissioners – at least for now. Commissioner Kara Stein is expected to leave her post at year end.

While media reports indicate that President Trump is likely to nominate Commissioner Stein’s former aide Alison Lee to fill Kara’s upcoming vacancy, that hasn’t happened yet. CNN Congressional Correspondent Phil Mattingly tweeted that it was interesting that Commissioner Roisman’s nomination was not paired with a nominee recommended by the Democrats, as often has been the case..

John Jenkins