February 13, 2019

Shutdown Fallout: Just How Backed Up is the SEC?

Everybody knows that with the SEC operating with a skeleton crew for over a month, Corp Fin has a pretty deep hole to dig itself out of. This ‘Audit Analytics’ blog gives you a sense of just how far behind the shutdown has put the Staff. For example, here’s what the blog has to say about comment letters:

According to their Plan of Operations during Lapse in Appropriations, the Commission had an extremely limited number of staff members available to respond to emergency situations. There were 4,436 employees on-board prior to the shutdown, with roughly 110 expected to be retained because they were engaged in law enforcement activities and about 175 employees to be retained to protect life or property.

Having such a limited staff meant an even more limited scope of operations. While most SEC filings – annual, quarterly, and 8-Ks – continued as usual, there were two places, in particular, that were affected by the shutdown; namely, comment letters and IPOs. During the shutdown, the SEC staff did not review corporate filings and did not issue any comment letters. To help gain a sense of how many letters are typically processed during this time, we looked at the same period of the shutdown last year (December 21, 2017 to January 25th, 2018); there were over 300 comment letters dated during this time.

What about IPOs? The blog cites a WSJ article for the proposition that there were no IPOs this January, compared with 17 during the first month of last year.  According to this report from NBC News, the SEC had 40 IPOs in process at the time of the shutdown.

“Faster Than a Speeding Bullet”: 10b5-1 Legislation Flies Through House!

Remember last month, when Liz blogged about the introduction of bipartisan legislation that would require the SEC to study whether Rule 10b5-1 should be amended to add more procedural restrictions for trading plans?  According to this article from the Center for Executive Compensation, the bill has flown through the House & may be on the fast track in the Senate as well:

At the end of last week, the House of Representatives approved, on a 413-3 vote, a bipartisan bill which would require the SEC to conduct an in-depth study of 10b5-1 executive stock trading plans. (A Rule 10b5-1 stock trading plan allows an individual with access to material, nonpublic information to execute sales or purchases of company stock in accordance with a pre-determined schedule, creating an affirmative defense to potential violations of company rules or federal securities laws regarding insider trading.)

The bill now moves to the Senate, where it appears Democrats are eager to move the bill and are working to create the same bipartisan atmosphere as in the House. In the past, the Senate has staunchly refused to take up any bill that does not exhibit a strong path to bipartisan adoption – especially those addressing governance and compensation issues.

The article says that the House’s overwhelming approval of the bill puts it on a path which could lead to Senate action.  If the bill does pass, it won’t mean any changes in 10b5-1 right away, but the results of the study it would mandate could provide a blueprint for potential changes.

Transcript: “12 Tricks to Help You During Proxy Season”

We have posted the transcript for our recent webcast: “12 Tricks to Help You During Proxy Season.”

John Jenkins