November 14, 2018

Corp Fin Comments: Does “Public Availability” Mean Improved Disclosure?

This “Audit Analytics” blog discusses an intriguing new study that suggests the SEC’s decision to make Corp Fin comment letters publicly available may have resulted in improved disclosure by companies on the receiving end of those letters. Here’s an excerpt:

It was found that when comment letters are made public, company filings include longer narratives, have a lower chance of restatements, and there were less discretionary accruals in earnings announcements. Those factors provide a more complete picture of the company’s position, benefitting the company, the SEC, and investors or firms who are concerned with company performance.

Well, wadda ya know? They’re from the government, and they actually did help you. . .

GDPR Enforcement: More on “How Will It Work for US Companies?”

Europe’s GDPR has had an enormous impact on companies that do business in the EU, but as we blogged earlier this year, there’s a lot of uncertainty about potential consequences for non-compliance by  US companies that don’t have a major European presence. This Dorsey & Whitney memo reviews the recent experience of an enforcement proceeding involving a Canadian company, and this excerpt speculates on how US authorities might deal with a similar situation:

It remains unclear how GDPR enforcement would play out in the United States. The U.S. currently has no federal law similar to the GDPR. The Trump administration is discussing a U.S. version of the GDPR that would have provisions similar to provisions in the GDPR, but the passage of such a law is not imminent.

To the extent the U.S. enacts such a law, the U.S. might be incentivized to assist with GDPR investigations or enforcement against U.S. entities at least to the extent consistent with the terms of the U.S. law for purposes of encouraging reciprocal comity with the EU. However, given the Trump administration’s foreign policy stance, it is highly unlikely that the U.S. would assist in enforcing violations of any GDPR provisions that go beyond the U.S. law.

If the feds won’t play ball with the EU, there’s another possibility – state regulators. The memo notes that California recently enacted the California Consumer Privacy Act of 2018, which is similar in some respects to the GDPR – and says that it remains to be seen whether the state would assist EU regulators in a GDPR investigation “to encourage reciprocal comity with the EU in connection with enforcement of their respective data privacy laws.”

D&O Insurance: The Outlook

It’s renewal season for a lot of D&O policies – and this Woodruff Sawyer deck reviews market conditions, claims trends and coverage issues. Here’s an excerpt on pricing expectations for the primary layer of coverage:

As we head into 2019 it is increasingly rare that a company will see a year-over-year decrease in the premium paid for the primary layer. Instead, single-digit increases in premium on the primary layer are more and more common (with larger rate increases for companies with less favorable risk profiles). Companies with SIRs below those of their peers face the prospect of larger retentions, though sometimes in exchange for a flat-to-smaller premium increase.

While the market for the primary layer continues to tighten, the market for excess layers – including Side A – remains highly competitive. That competition has generally held premium increases in check, although even these markets are beginning to experience pricing pressure.

John Jenkins