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?
This article quotes SEC Chair Jay Clayton as saying that he’s “not anxious” to pursue a rule that would allow companies to adopt bylaws compelling their shareholders to arbitrate securities claims. As we’ve previously blogged, it’s been suggested that such a move is under consideration by the SEC – but as we’ve also blogged, the idea has attracted heat from investor groups.
So, these comments suggest that this idea is likely dead, right? Not so fast. With a hot potato issue like this, we all probably read too much into prior reports suggesting that the SEC was ready to act, and we’re probably reading too much into his remarks now.
After all, those comments were in response to the customary “beating about the head and shoulders” that Senator Elizabeth Warren administers to every financial regulator who testifies in front of the Senate banking committee. Sen. Warren demanded a “yes or no” answer on whether the Chair would support “eliminating class actions” – and his response beyond the “not anxious to see a change” sound-bite fell far short of that. Here’s an excerpt:
“”If this issue were to come up before the agency, it would take a long time for it to be decided, because it would be the subject of a great deal of debate. In terms of where we can do better, this is not an area that is on my list of where we could do better.”
This FedNet video captures Jay Clayton’s full testimony before the committee. The exchange with Sen. Warren begins at the 55:25 mark. The Senator didn’t get the yes or no answer she was looking for – instead, she got one that seemed to say “I’m not prepared to die on this hill, but I’m not going to let myself be pinned down either.”
Insider Trading: It’s Worse Than You Think?
Here’s a cheery item from “The Economist” – according to threerecentstudies, insider trading is running rampant on Wall Street. Here’s the intro:
Insider-trading prosecutions have netted plenty of small fry. But many grumble that the big fish swim off unharmed. That nagging fear has some new academic backing, from three studies. One argues that well-connected insiders profited even from the financial crisis. The others go further still, suggesting the entire share-trading system is rigged.
Nice. I sometimes think that John Calvin may have been on to something with that “total depravity” stuff.
Tax Reform: An Accounting Disclosure Primer
As Broc blogged last week, some investors are finding company disclosures about the effects of tax reform to be a jumbled mess. While the complaints so far have surrounded disclosure in earnings releases, it’s not likely to get any easier for companies or investors when it comes time to spell things out in SEC filings. That’s why this BDO memo detailing the accounting & financial statement disclosures associated with the new tax law is a handy resource.
This Bloomberg article says that the SEC may be open to revisiting the permissibility of bylaws requiring investors to arbitrate their claims against public companies. Here’s an excerpt:
The SEC in its long history has never allowed companies to sell shares in initial public offerings while also letting them ban investors from seeking big financial damages through class-action lawsuits. That’s because the agency has considered the right to sue a crucial shareholder protection against fraud and other securities violations.
But as President Donald Trump’s pro-business agenda sweeps through Washington, the SEC is laying the groundwork for a possible policy shift, said three people familiar with the matter. The agency, according to two of the people, has privately signaled that it’s open to at least considering whether companies should be able to force investors to settle disputes through arbitration, an often closed-door process that can limit the bad publicity and high legal costs triggered by litigation.
The SEC’s willingness to take up the issue is apparently based on its desire to encourage more companies to take the IPO plunge. As I blogged last year, at least one Commissioner is on record as being open to permitting mandatory arbitration bylaws.
The article suggests that any action by the SEC to allow mandatory arbitration would be a “big gift” to companies – but as Broc pointed out in this blog, others say that companies should be careful what they wish for…
Activism: Glass Lewis Says “Hey, Don’t Blame Us!”
Some companies have grumbled that proxy advisors – like ISS and Glass Lewis – are fueling activism by generally supporting insurgent nominees in activist campaigns. This Glass Lewis blog pleads “not guilty”:
This perception isn’t borne out by the overall numbers. We’d caution against reading too much into the data, since the yearly sample of contested meetings is both too small to be free of significant variance, and too big to reflect the particular combination of parties and moving parts that makes each contest unique. That said, Glass Lewis’ support for contests dropped from 40% in 2016 to 32% in 2017, and has historically stayed within that range. Nor has Glass Lewis’ approach to contested meetings changed in a way that would result in increased activist support; our methodologies, our case-by-case approach and our team have remained consistent.
Glass Lewis suggests that the perception that proxy advisors are all-in for activists is fueled by the changing nature of the activism. Larger activists have a lot of capital, sophisticated strategies & a long-term approach, and that’s allowed them to hunt larger game & win proxy advisor support in some cases:
This combination of long-term goals, sophisticated tactics and significant investment has allowed activists to pursue larger, more established companies that perhaps were not previously at risk of a shareholder campaign. As well known companies are targeted, the contests themselves are generating more headlines; and with campaign strategies getting more and more refined, Glass Lewis supported some, but not all, of the highest profile dissidents in 2017 — for example, at Arconic, Cypress Semiconductor and P&G.
There were also a number of large contests where we supported management (General Motors, Buffalo Wild Wings and Ardent Leisure), and as noted above Glass Lewis’ overall support for 2017 contests was at the lower end of the historical range; nonetheless, the combination of high profile contests, and sophisticated campaigns, may explain a perception of increased overall dissident support.
Securities Litigation: You Can Get Into Trouble Without Saying a Word…
Did you know that most securities litigation involves alleged material omissions, not misstatements? Me either. This recent Katten Muchin article reviews the legal landscape for omissions claims and offers tips to directors on how to reduce their company’s risk of being on the receiving end of such a claim.
I am still trying to wrap my head around last week’s allegations against KPMG’s former partners & employees involving the misappropriation of PCAOB inspection data. “Shocking” doesn’t seem to be too strong a word here.
This case doesn’t involve ambiguous conduct that might just raise some eyebrows about the “revolving door.” No, this time, the revolving door smacked us right in the mouth. As the SEC’s Co-Head of Enforcement Steve Peikin put it, what’s alleged to have gone down here was equivalent to “stealing the exam.”
The SEC’s press release and the DOJ’s indictment make for some tough reading. In a separate statement, SEC Chair Jay Clayton went to great lengths to reassure the market that the scandal didn’t implicate the reliability of KPMG’s audits. As this MarketWatch.com article points out, some prominent commenters aren’t so sure:
Former SEC Chief Accountant Lynn Turner is not convinced KPMG’s audits should still be relied upon. “This episode raises a serious question about the culture of the KPMG firm. Under the circumstances, how can the SEC expect investors to trust KPMG’s audits?” asked Turner.
The MarketWatch article says that the indictment suggests 5 other KPMG partners and an outside consultant “either knew – or chose to ignore – the illegal source of the information.” That isn’t very reassuring either.
How Did KPMG Dodge the Bullet?
Since a number of pretty senior people were implicated in this situation, some have asked why KPMG wasn’t indicted? The pains that SEC Chair Clayton took to reassure the market about the continued reliability of KPMG’s audits hints at one likely reason – the collateral damage that can result from charges against a major accounting firm.
Another reason KPMG may dodge the criminal bullet here is the way it handled the situation once it was brought to management’s attention by a whistleblower. As detailed in this NYT DealBook article from last April, KPMG promptly retained outside counsel to investigate the matter, fired the individuals involved, self-reported, and cooperated with regulators.
Given KPMG’s previous legal troubles, it probably didn’t take the firm’s lawyers long to conclude that it was dealing with a potentially existential threat – and had no alternative but aggressive efforts to cooperate with authorities.
Tomorrow’s Webcast: “Audit Committees in Action – The Latest Developments”
Tune in tomorrow for the webcast – “Audit Committees in Action: The Latest Developments” to hear E&Y’s Josh Jones, Deloitte’s Consuelo Hitchcock, and Gibson Dunn’s Mike Scanlon discuss how to cope with the ever-growing demands on audit committees – including those arising out of the new revenue recognition standards and a host of other SEC, FASB & PCAOB requirements.
Virtual-only annual meetings seem to be gaining traction – as Broc blogged last summer, despite opposition from a number of prominent investor groups, the number of companies going virtual-only increased significantly in 2017. However, this Bloomberg article says that some big companies are having second thoughts about the virtual-only approach:
Railroad operator Union Pacific Corp. will revert to an in-person annual meeting this year, after its 2017 virtual-only gathering drew a shareholder rebuke and a proposal to end the practice, a company lawyer told the Securities and Exchange Commission in a letter dated Monday. ConocoPhillips is also backpedaling after investors objected to the oil producer’s online meeting last year.
“A virtual-only meeting is a totally disembodied event online — there’s no exchange or opportunity for investors to look the board in the eye,” said Tim Smith, a director at Boston-based Walden Asset Management who worked with shareholders of ConocoPhillips and Comcast Corp. opposed to virtual-only meetings.
The article points out that some investors prefer the hybrid meeting approach – where shareholders can attend in-person or online. However, according to Broadridge, only 1-in-5 virtual meetings last year adopted the hybrid approach.
White Collar: Antitrust Cops Say “No Poach” Prosecutions On the Way
Last fall, I blogged about the DOJ’s reminder that it intended to prosecute “no poaching” & wage fixing agreements between companies. Now, this Ropes & Gray memo says that the DOJ plans to make good on that promise. Here’s the intro:
Speaking at an antitrust conference on January 19, 2018, Makan Delrahim, the Assistant Attorney General for the Antitrust Division, stated that over the next few months DOJ will be announcing indictments charging criminal antitrust violations relating to no-poach agreements. DOJ’s position is that these agreements, under which companies agree not to hire each other’s employees, restrain competition in the market for employees and may constitute per se violations of the antitrust laws.
Delrahim’s announcement follows joint DOJ/FTC guidance issued in October 2016, which alerted companies that parties to no-poach agreements would be subject, not just to civil antitrust liability, but also potentially to criminal investigation and sanction. Delrahim also highlighted the extent to which the prior guidance had put companies on notice of the federal antitrust agencies’ approach to no-poach agreements.
Transcript: “Pat McGurn’s Forecast for 2018 Proxy Season”
We have posted the transcript for our recent popular webcast: “Pat McGurn’s Forecast for 2018 Proxy Season.”
Since we nearly gave many of you a pre-Christmas coronary by raising the topic of tax reform’s impact on deferred tax assets, you’re probably not thrilled to see another blog from me on income statement hits resulting from the new tax legislation. Sorry about that, but it’s got to be done.
So, anyway, here it goes – it turns out that whatever benefits tax reform may ultimately have, this “Audit Analytics” blog says it’s resulting in pretty eye-popping charges to some companies’ bottom lines:
Under GAAP, tax assets and liabilities are required to be re-measured during the period in which the new tax legislation is enacted. In some cases, if the impact is expected to be material, companies are also required to disclose estimated impact through 8-K filings. So far, at least 36 companies made such a disclosure, reducing the net income by a total of at least $50 billion. Eight of these 36 companies disclosed write-downs that exceeded $1 billion. Interestingly, two out of 36 companies have large deferred tax liability positions, so the effect is expected to be positive.
Citigroup’s the leader in the clubhouse with a staggering $20 billion estimated charge – and 6 of the other 7 companies taking whacks exceeding $1 billion are also financial institutions. The charges won’t all result from valuation allowances for deferred tax assets – the one-time repatriation tax on foreign cash will also represent a big hit for some companies.
How big is this going to get? The blog points to this MarketWatch article, which estimates that the 15 companies with the largest deferred tax asset balances may have to write down nearly $75 billion.
Tax Reform: First Batch of Disclosures Is “In”!
In this blog, Steve Quinlivan notes the disclosures made by companies with fiscal quarters ended 12/31/17, but not fiscal-year ends that show the effects of the tax legislation in recently filed Form 10-Qs in accordance with SAB 118. Some may find these disclosures as a useful starting point for drafting Form 10-K disclosures…
As we blogged on several occasions last year, the issue of concurrent state jurisdiction over Securities Act claims is very much a live one, with the Supreme Court expected to weigh in on it later this term. However, it seems fair to say that state courts – particularly California state courts – have seen a booming business in Section 11 lawsuits in recent years.
In response, a number of IPO companies have adopted bylaws making federal courts the exclusive forum for Securities Act litigation – but this recent blog from Davis Polk’s Ning Chiu notes that this practice has recently been challenged in a declaratory judgment action filed in the Delaware Chancery Court. The lawsuit targets three companies – Snap, Roku & Stitch Fix – that have similar choice of forum bylaws. The plaintiff claims these bylaws don’t pass muster under Delaware law:
Plaintiff argues that the purpose of the forum provision is to regulate choice of venue in actions that do not assert internal corporate claims governed by Delaware law, or in the alternative, if claims under the Securities Act are internal corporate claims, then these forum provisions are inconsistent with the DGCL. The DGCL provides that, with respect to internal corporate claims, “no provision of the certificate of incorporation … may prohibit bringing such claims in the courts of this State.”
Ning points out that several California state courts have already invalidated this type of choice of forum bylaw. The D&O Diary has posted a copy of the declaratory judgment complaint in the Delaware action.
Enforcement: Assessing the Fallout from Kokesh
This Cleary blog looks at what’s transpired in the six months following the Supreme Court’s Kokesh decision – which said that SEC disgorgement claims were subject to a 5-year limitations period & may have raised questions about the agency’s authority to seek disgorgement in the first place.
So far, the SEC has been successful in fighting off claims directly challenging its authority to seek disgorgement, but the blog notes that the news hasn’t all been good for the SEC. A number of courts have been willing to at least acknowledge questions surrounding the SEC’s disgorgement authority, and other equitable remedies have come under fire because of Kokesh – including such enforcement mainstays as “obey-the-law” injunctions & industry bars.
And then, there’s the $15 billion question:
Most of the cases addressing Kokesh have involved SEC defendants arguing that the case limits the regulator’s use of disgorgement prospectively. However, this past fall private plaintiffs launched a much more aggressive salvo in the form of a class action arguing that certain historical awards are also at issue. Jalbert v. SEC, 17-cv-12103 (D. MA. Oct. 26, 2017), ECF. 1. The Jalbert plaintiffs argue that—because (1) the SEC can only collect penalties when specifically authorized by statute and (2) Kokesh held that disgorgement, which is not specifically authorized by statute, is a penalty—the SEC must return $14.9 billion in disgorgement that it has collected over the past six years.
Audit Committees: 3rd Party Risk Oversight
As part of their increasing emphasis on enterprise risk management, companies are paying closer attention to the risks posed to their business by vendors and other 3rd parties with whom they deal. This recent memo from the Audit Committee Leadership Network addresses the audit committee’s oversight role in addressing 3rd party risks.
Here’s an excerpt discussing some of the issues associated with outsourcing arrangements:
Outsourcing also opens the door to third‐party risk. Information technology, customer service, call centers, and human resources functions like benefits processing are not traditionally defined as part of the supply chain, but as these jobs and functions are outsourced, they become sources of third‐party risk, much like suppliers or distributors. In addition, shared technologies, such as cloud data storage, are necessitating new kinds of third‐party arrangements, with attendant risks.
Companies will frequently join forces to serve each other’s customers more effectively or to reach new customers. Examples of such arrangements include contracted ventures with marketing and cobranding partners and engagements with fee‐based service providers. When these arrangements require sharing sensitive data, they become a source of risk.
Specific risks associated with 3rd parties include cybersecurity risks, operational risks, & reputational risks. The memo discusses various approaches that companies take to managing 3rd party risks, as well as the methods used by boards to assess those risks.
Okay, so the United States of America is (mostly) closed for business – again. Here’s where the SEC stands, according to this announcement that it posted to its website on Friday:
Should there be a federal government shutdown after January 19, the SEC will remain open for a limited number of days, fully staffed and focused on the agency’s mission. Any changes to the SEC’s operational status will be announced here. In the event that the SEC does shut down, we will pursue the agency’s plan for operating during a shutdown. As that plan contemplates, we are currently making preparations for a potential shutdown with a focus on the market integrity and investor protection components of our mission.
So the SEC is open “as usual” for now. We don’t know how long is a “limited number of days” – but that doesn’t sound like a lot. As we blogged on Friday, once the SEC’s operations plan is implemented, there’s not much you’re going to be able to do other than make your Edgar filings. Check out this Cleary memo for more information on the shutdown’s implications for businesses dealing with the SEC & other federal agencies.
This is becoming Uncle Sam’s version of the movie “Groundhog Day” – only absent the laughs. . . Feel like a stroll down memory lane? Here is Broc’s very first shutdown blog from 2011.
Form 10-K: Technical Tips
For a lot of companies, it’s that time of year again – time to get to work on the Form 10-K. For those of you who find yourself in that position, this Gibson Dunn blog has some technical tips to keep in mind. Here’s an excerpt discussing the changes to the cover page, and noting that for some reason the revised form still isn’t on the SEC’s website:
As discussed in our blog post, in April 2017, the SEC adopted technical amendments to conform certain rules and forms to self-executing provisions of the Jumpstart Our Business Startups Act related to emerging growth companies (“EGCs”). The amendments modified the cover page of Form 10-K, along with the cover pages of various other forms including Form 10-Q, to include two additional checkboxes.
The first checkbox allows the company to indicate whether it is an EGC. The second checkbox allows the company to make an irrevocable election not to use the extended transition period for complying with new or revised accounting standards. The PDF of Form 10-K included in the SEC’s official forms list still does not reflect these revisions, so companies will need to look to the adopting release (or to their recently filed Forms 10-Q) to see how the 10-K cover page should be revised.
Corp Fin Reviewers: Tough Graders Lead to Better Reporting
This new study says that who you draw as the Corp Fin reviewer for your filings matters quite a bit – and that tough graders translate into better financial reporting. Here’s the abstract:
Using a sample of SEC comment letters, we show that SEC reviewers’ idiosyncratic style plays an economically and statistically significant role in explaining the cross-sectional variation in filing review outcomes, even after holding firm and disclosure attributes constant. We also show that the reviewer style is persistent across firms and time. Finally, we find that reviewers with a stricter style are associated with improved financial reporting quality. These findings suggest that individual SEC reviewers have significant influence on the SEC filing review process.
I’ll try to keep this in mind the next time I hit Amendment No. 5. . .
Congress is scrambling to avoid a government shutdown by the end of today – but the SEC’s contingency plans appear to be already in place. The SEC posted its “operations plan” for a government shutdown early last month.
As of right now, that plan is not featured on the SEC’s home page – nor is there word about how registration statements on the verge of being accelerated will be handled. The plan covers a total shutdown, not a partial shutdown if the SEC still has some funds available – which is what happened back in 2013 (also see this blog from back then).
There’s been no announcement as to potential timing – but if the SEC implements its plan, about 300 of the SEC’s 4600 staffers would keep on working. Edgar would remain operational, but it appears that most core Corp Fin operations would stop – including registration statement reviews. More to come…
Shareholder Proposals: “Lap Dog” Is In!
Here’s the intro from this blog by Cooley’s Cydney Posner: “From here on out, I guess you can count on seeing your directors described as “lap dogs” in some shareholder proposals or, more accurately, nascent or possible lap dogs. (That helps, doesn’t it?) That’s because, in three separate shareholder proposals submitted to The Boeing Company by three beneficial owners (all working through John Chevedden), the SEC refused to allow the company to exclude portions of the supporting statements that suggested that some of the company’s directors might be “lap dogs.”
Transcript: “The Latest – Your Upcoming Pay Ratio, Tax Reform & Proxy Disclosures”
We have posted the transcript for our recent CompensationStandards.com webcast: “The Latest: Your Upcoming Pay Ratio, Tax Reform & Proxy Disclosures.”
Earlier this week, BlackRock’s CEO Larry Fink sent his “annual letter to CEOs” of companies in BlackRock’s portfolio. This one’s pretty extraordinary – it makes it clear that as far as BlackRock’s concerned, from now on, doing well isn’t good enough:
Society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. Indeed, the public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.
Fink’s letter goes on to say that BlackRock intends to focus on whether companies are serving a social purpose in its engagement efforts. BlackRock expects each of the companies in which it invests to develop a strategic framework for long-term value creation – and that strategic framework must go beyond financial performance:
Your company’s strategy must articulate a path to achieve financial performance. To sustain that performance, however, you must also understand the societal impact of your business as well as the ways that broad, structural trends – from slow wage growth to rising automation to climate change – affect your potential for growth.
These comments are accompanied by a reminder that since BlackRock can’t dispose of shares in its index funds, “our responsibility to engage and vote is more important than ever.”
BlackRock’s new stance is sparking controversy – CNBC reports that investor Sam Zell called its action “extraordinarily hypocritical” and asked whether America was ready to have BlackRock “control the New York Stock Exchange.” Controversial or not, when the world’s biggest fund manager speaks, companies don’t have much choice but to listen.
Here’s a WSJ article, Davis Polk blog – and a Wachtell Lipton memo. Meanwhile, BlackRock hopes to increase the size of its “Investor Stewardship” team globally to over 60 by the end of 2020…
ICOs: “Mama Don’t Take My KodakCoin Awaaay . . .”
So, now Kodak is getting into the cryptocurrency business – because, well, why not? Unlike most of these coin deals, I can actually understand the concept behind this one. Here’s an excerpt from Kodak’s press release:
Utilizing blockchain technology, the KODAKOne platform will create an encrypted, digital ledger of rights ownership for photographers to register both new and archive work that they can then license within the platform. With KODAKCoin, participating photographers are invited to take part in a new economy for photography, receive payment for licensing their work immediately upon sale, and for both professional and amateur photographers, sell their work confidently on a secure blockchain platform.
Kodak is doing this deal on the up & up – it’s structured as a Rule 506(c) private placement, so there’s no attempt to make an end run around the federal securities laws.
Rochester’s my home town, and I’d dearly love to see our fallen giant hit this one out of the park. Unfortunately, while I was kind of intrigued by the concept, the reaction to Kodak’s announcement has been decidedly mixed. Naturally, the stock market loved it because Kodak used the magic word “blockchain” in its announcement – but other observers have been more skeptical. For instance, this article by Bloomberg’s Matt Levine says that there’s a lot less to KodakCoin than meets the eye. Here’s an excerpt:
Look: Kodak wants to run a web crawler and a central database of photographs. You don’t need to do that on the blockchain. It also wants to run a marketplace to match buyers and sellers of photographs. Again you don’t need to do that on the blockchain. You certainly don’t need your own currency to do that; lots of markets — the stock market, the supermarket, the existing market for photographic licensing — run on dollars, and what is convenient about dollars is that if you get dollars for licensing your photographs you can spend them at the supermarket.
The FT Alphaville blog was even more direct – and cutting – in its reaction to Kodak’s announcement:
Listen, a bunch of you out there have obviously programmed your algos to buy any stock that looks sideways at the words ‘blockchain’ or ‘cryptocurrency’. Please, stop it.
More on Our “Proxy Season Blog”
We continue to post new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– More on “D&O Questionnaires: How to Address Board Diversity?”
– NYC Comptroller’s Office Counts on Active Shareholder Engagement
– A Checklist for Voluntary Filers
– The Acceleration of “Social Good” Campaigns?
– Shareholder Proposals: Companies Seek to Exclude Images
