This recent WSJ article pointed out a significant decline in penalties levied by the SEC during the first half of 2017:
The SEC levied some $318 million in penalties during the first half of 2017, a search of federal court documents and all publicly available records on the agency’s website and data provided by Andrew Vollmer, a professor at the University of Virginia School of Law, showed. Last year, agency actions yielded $750 million in penalties during the same period, an agency spokesman said.
The article notes that fines & penalties imposed by other financial regulators were also down sharply. It cited a more business favorable climate under the Trump Administration & the winding down of financial crisis cases as contributing factors to a decline in SEC enforcement activity.
. . .Wait, Maybe Penalties Aren’t the Right Thing to Look At?
This CFO.com article by Labaton Sucharow’s Jordan Thomas says “not so fast.” The article claims that enforcement activity shows no signs of easing. Here’s an excerpt:
If the first half of the year was any indication, the SEC is on track to have another record year for enforcement activity in 2017. Looking at data compiled in our SEC Sanctions Database, which tracks a subset of enforcement actions that resulted in monetary sanctions exceeding $1 million, the agency shows no sign of easing its efforts to sanction bad actors.
The largest case thus far in 2017 was brought against Barclays, which agreed to pay $97 million in disgorgement and penalties for overcharging clients for mutual fund sales and advisory fees. Perhaps unsurprisingly, given where major financial firms are headquartered, cases were clustered regionally in the Northeast and West, with nearly half of all actions coming out of the Northeast. But actions coming from the South nearly doubled from last year and the Midwest saw a fivefold increase in the number of cases.
Also for the first half of 2017, more than 40% of cases we studied involved offering fraud. That’s almost double the number of offering fraud cases observed in the first halves of the last three years combined.
The article says that in light of this level of activity, the WSJ’s criticism of the SEC’s enforcement activity during 2017 is misplaced – and that it’s inappropriate to draw conclusions about the agency’s enforcement agenda by looking at 6 months of penalties in a vacuum.
Corp Fin Updates “Financial Reporting Manual”
On Friday, Corp Fin updated its “Financial Reporting Manual” to provide contact information for the Office of the Chief Accountant and to clarify guidance on the omission of financial information from draft & filed registration statements. The latter change adds references to the new CDIs on the same topic issued earlier this month.
Yesterday, the SEC issued this fee advisory that sets the filing fee rates for registration statements for 2018. Right now, the filing fee rate for Securities Act registration statements is $115.90 per million (the same rate applies under Sections 13(e) and 14(g)). Under the SEC’s new order, this rate will rise to $124.50 per million, a 7.4% increase. It could be worse – the current filing fee rate represented a 15% bump over fiscal 2016.
As noted in the SEC’s order, the new fees will go into effect on October 1st like the last five years (as mandated by Dodd-Frank) – which is a departure from years before that when the new rate didn’t become effective until five days after the date of enactment of the SEC’s appropriation for the new year – which often was delayed well beyond the October 1st start of the government’s fiscal year as Congress and the President battled over the government’s budget.
Revenue Recognition: Impact of New Standard on S-3 Financials
This Sidley memo addresses the potential need for some Form S-3 filers to retrospectively revise previously issued financials due to the adoption of the new GAAP revenue recognition standard. The memo addresses the impact of the full retrospective transition method on financial statement requirements in existing and newly filed S-3s, as well as how the timing of the new standard’s adoption could change that result.
Forward-Looking Statements: Does “We’re on Track” Qualify?
Over on “The Mentor Blog,” I recently blogged about a new case holding that you can’t insulate a non-forward looking statement by mixing it into a paragraph of forward-looking statements. Now, here comes this blog from Lyle Roberts about a recent case that illustrates how hard it can be to sort out forward-looking from non-forward looking statements in the first place.
At issue in the case was a remark that makes every securities lawyer cringe whenever it pops out of an executive’s mouth – a statement to the effect that a company is “on track” to meet performance expectations. Courts have reached different conclusions about whether or not this language is protected by the PSLRA safe harbor – and the blog notes a recent decision in which a California federal court said that it didn’t make the cut.
This excerpt summarizes the court’s opinion:
In Bielousov v. GoPro, (N.D. Cal. July 26, 2017), the court considered whether the CFO’s statement “We believe we’re still on track to make [GoPro’s financial guidance] as well” was a forward-looking statement covered by the PSLRA’s safe harbor. The court held that because the CFO included the phrase “we believe” in his statement, it was a statement of present opinion about “his and GoPro’s existing state of mind.” Accordingly, the PSLRA’s safe harbor did not apply and the statement should be examined under the Omnicare standard.
Last month, the House Financial Services Committee unanimously approved the “Improving Access to Capital Act” (H.R. 2864). The bill would eliminate the current provisions of Regulation A that prohibit its use by companies that are already subject to Exchange Act reporting requirements. This Duane Morris blog provides some background:
In implementing rules under the Jumpstart Our Business Startups (JOBS) Act in 2015, the SEC retained the historical restriction that only non-reporting companies could utilize Reg A. There was really no particular reason this could not have been changed.
Now that practitioners have witnessed the closing of well over 30 Reg A+ deals, three of which are now successfully trading on national exchanges, it would seem logical to expand the availability of Reg A+ to reporting companies. They would have a history of full disclosure, and could clearly benefit from utilizing a faster and cheaper option to raise money from the public.
The blog notes that the ability to use Reg A+ could prove particularly useful to reporting companies that don’t qualify to use Form S-3 for primary offerings.
Audit Committees: Proxy Disclosure Trends
In recent years, investors and other constituencies have called for greater disclosure in proxy statements about key audit committee activities – including more detail about decisions to retain independent auditors, auditor independence assessments, & risk oversight. This Deloitte study reviewed audit committee disclosures in 2017 proxy statements filed by the S&P 100.
Disclosures beyond those required by Item 407 of S-K have been trending upward in recent years, and the study says that trend continued – at a somewhat slower pace – in 2017. The most common areas of voluntary disclosure include the committee’s role & responsibilities, risk oversight, topics discussed by the audit committee, and oversight of financial reporting & the internal audit function.
This excerpt reviews the findings on audit committee disclosure of risk oversight:
The role of the board and its committees in overseeing risk continues to be a hot topic. 99% of the S&P 100 companies disclosed the role of the audit committee in overseeing risk. The level of responsibility assigned to the audit committee, however, differed from company to company.
Companies disclosed that the audit committee was responsible for overseeing risks associated with traditional areas such as financial reporting, internal controls, and compliance, and some noted that the audit committee’s role in risk oversight extended beyond these areas. 30% of the S&P 100 companies (versus 27% 2016) disclosed the audit committee’s role in overseeing cybersecurity risk.
Topics that drew the fewest disclosures among the S&P 100 included issues encountered during the audit, as well as matters relating to the committee’s role in determining auditor compensation. Also see this recent blog about a EY report on audit committee disclosures…
Board Diversity: The Pressure is Ratcheting Up
Over on our “Proxy Season Blog,” Liz recently noted State Street’s decision to vote against directors at approximately 400 companies that didn’t satisfy it with their efforts to improve board gender diversity – and we’ve previously blogged about BlackRock’s efforts to prod companies to make progress on the diversity front.
Now this Weil Gotshal blog says that it isn’t just institutional investors that are turning up the heat. As this excerpt points out, here come the politicians:
While these institutional investors are ratcheting up the pressure on public companies, certain members of the US Congress have been pushing the SEC for greater board diversity disclosure. In March, Representative Carolyn Maloney (D-NY) reintroduced her Gender Diversity in Corporate Leadership Act (H.R. 1611), modeled on policies in Canada and Australia, which would instruct the SEC to recommend strategies for increasing women’s representation on corporate boards, and require companies to report their gender diversity policies as well as the proportion of women on their board and in senior executive leadership.
In addition, 29 congressional Democrats have written a letter to SEC Chair Jay Clayton urging the SEC to require more disclosure about board diversity.
There have been a number of seven-figure awards under the SEC’s whistleblower program, so a recent $2.5 million award wouldn’t merit much attention – that is, if the recipient wasn’t an employee of a government law enforcement organization.
Typically, government law enforcement organization employees aren’t eligible to receive whistleblower awards – but as this Hogan Lovells memo notes, this award indicates the SEC Staff is inclined to read that limitation on eligibility narrowly:
The SEC indicated that although an employee of a law enforcement organization is not normally eligible as a whistleblower, there may be an exception when law enforcement is just one component of the agency’s purposes and the employee does not work for that component of the agency. According to the SEC, employees of law enforcement organizations—defined as organizations “having to do with the detection, investigation, or prosecution of potential violations of law”—are eligible for the award so long as they do not work for the “sub agency components that perform the law enforcement responsibilities.”
The memo points out that the ability of government employees to blow the whistle may complicate the relationship between companies & their regulators:
Personal gain could motivate a government employee to pass along information to the SEC in hopes of receiving an award, especially if the reward encourages competition among government employees to provide information to the SEC. Companies that regularly work and communicate with regulatory agencies should consider the risk of sharing information that could serve as evidence of securities violations, particularly if the likely sanctions could exceed $1 million, which is the threshold required to receive a whistleblower award.
The SEC Staff’s decision to read the law enforcement exclusion from eligibility narrowly also signals that the whistleblower program will continue to feature prominently in its enforcement efforts under the Trump Administration.
SRO Rulemaking: DC Circuit Decision May Slow SEC Action on Rule Proposals
A recent ruling from the DC Circuit may slow down the SRO rulemaking process by effectively raising the standard for SEC review of new rules. This Davis Polk memo explains:
The case, Susquehanna International Group, LLP, et al. v. SEC, decided on August 8, involved a petition by two options exchanges and two broker-dealers (“Petitioners”) for review of an SEC order approving a proposed change by the Options Clearing Corporation (“OCC”) to its rules. The proposed rule set out a plan to bolster its capital by restructuring its capital contribution requirements, fees, rebates and dividends. The proposal was filed by the OCC in 2015 and the SEC issued an order approving the proposal in February 2016.
In reviewing SRO rule changes, the court held that the SEC must undertake its own “reasoned analysis,” not take the SRO’s “word for it” that statutory standards are met, and that SEC approvals may be set aside as being “arbitrary and capricious” unless its determinations are supported by “substantial evidence.” The court reviewed the SEC’s discussion of various aspects of the OCC proposal and found the agency’s analysis concerning the satisfaction of statutory standards to have been insufficiently probing.
The SEC often relies on SRO statements about satisfaction of statutory standards in approving rule changes, and the Court’s insistence on a more probing analysis may slow a process that market participants complain is already too slow and cumbersome.
Links to Exhibits: Remember, Remember! The 1st of September. . .
Sorry for misappropriating & re-dating the famous verse about Guy Fawkes & the Gunpowder Plot – but I wanted to remind everybody that the new rules mandating links to Exhibits in SEC filings go into effect on September 1st. This Sidley blog has an overview of the requirements.
Broc blogged last week that it appears that Corp Fin has provided some informal guidance on how to link to very old exhibits. We continue to post memos in our “Exhibits” Practice Area.
Last week, Corp Fin issued updated guidance on processing procedures for draft registration statements. The new guidance clarifies how the IPO offering date will be determined & the ability of companies with registration statements on file to switch to the non-public review process for future amendments. Here’s the text of the new language:
The nonpublic review process is available for Securities Act registration statements prior to the issuer’s initial public offering date and for Securities Act registration statements within one year of the IPO. In identifying the initial public offering date, we will refer to Section 101(c) of the JOBS Act. The nonpublic review process is available for the initial registration of a class of securities under Exchange Act Section 12(b) on Form 10, 20-F or 40-F.
An issuer that has a registration statement on file and in process may switch to the nonpublic review process for future pre-effective amendments to its registration statement provided it is eligible to participate in the nonpublic review process and it agrees to publicly file its amended registration statement and all draft amendments in accordance with the time frame specified above.
Language was also added indicating that companies may submit eligibility questions to CFDraftPolicy@sec.gov. See this Gibson Dunn blog.
EGC Registration Statements: 3 New & Updated CDIs on Financial Info
At the same time, Corp Fin updated “FAST Act” CDI #1 addressing the financial information that ECGs may omit from draft & publicly-filed registration statements (new “Securities Act Forms” CDI 101.04 provides the same):
Question: What financial information may an Emerging Growth Company omit from its draft and publicly filed registration statements?
Answer: Under Section 71003 of the FAST Act, an Emerging Growth Company may omit from its filed registration statements annual and interim financial information that “relates to a historical period that the issuer reasonably believes will not be required to be included…at the time of the contemplated offering.” Interim financial information that will be included in a longer historical period relates to that period. Accordingly, interim financial information that will be included in a historical period that the issuer reasonably believes will be required to be included at the time of the contemplated offering may not be omitted from its filed registration statements. However, under staff policy, an Emerging Growth Company may omit from its draft registration statements interim financial information that it reasonably believes it will not be required to present separately at the time of the contemplated offering.
For example, consider a calendar year-end Emerging Growth Company that submits a draft registration statement in November 2017 and reasonably believes it will commence its offering in April 2018 when annual financial information for 2017 will be required. This issuer may omit from its draft registration statements its 2015 annual financial information and interim financial information related to 2016 and 2017. Assuming that this issuer were to first publicly file in April 2018 when its annual information for 2017 is required, it would not need to separately prepare or present interim information for 2016 and 2017. If this issuer were to file publicly in January 2018, it may omit its 2015 annual financial information, but it must include its 2016 and 2017 interim financial information in that January filing because that interim information relates to historical periods that will be included at the time of the public offering. See also Question 101.05 for guidance related to registration statements submitted or filed by non-EGCs.
New “Securities Act Forms” CDI 101.05 provides that non-EGCs may also omit annual & interim financial information that will not be required to be presented separately at the time of its first public filing.
Revenue Recognition: SEC Updates Guidance & Issues New SAB
On Friday, the SEC issued two interpretative releases & the Staff issued a Staff Accounting Bulletin updating guidance on revenue recognition – all related to FASB’s “ASC Topic 606 – Revenue from Contracts with Customers.” Here’s the press release (and Steve Quinlivan’s blog). This interpretive release addresses accounting for “bill and hold arrangements” – while the other release covers sales of vaccines to the federal government for certain stockpiling programs.
New SAB 116 is intended to bring existing guidance into conformity with ASC Topic 606.
The “Big News” first. We just calendared a webcast – “Non-GAAP Disclosures: Corp Fin Speaks“ – featuring Corp Fin’s Chief Accountant Mark Kronforst & Dave Lynn. They will discuss what companies are doing – and should be doing – in the wake of the first year’s worth of Corp Fin comment letters since last year’s CDIs.
Anyway, some may be inclined to grumble about how Corp Fin is scrutinizing the way companies use undefined non-GAAP terms, but I think most people would prefer that scrutiny to the NY US Attorney’s approach – sending a CFO to jail for using an undefined non-GAAP term in an allegedly fraudulent way.
Adjusted funds from operations – “AFFO” – is a widely used non-GAAP metric among REITs, but the Staff hasn’t provided any guidance on how it should be calculated. Last month, the former CFO of American Realty Capital Partners was convicted of fraud for the way in which his company used this metric – an outcome that this Forbes article says amounted to “rule-making for the SEC on materiality by criminal indictment and conviction.” Here’s an excerpt:
The SEC has not issued a specific rule or guidance as to how an issuer should calculate the AFFO metric. And, there is no regulatory guidance as to how Mr. Block should have made the reconciliation. There has been a lot of demand for the SEC to do more rule-making in this space. Possibly, this verdict will result in a louder cry for rule-making. Meanwhile, the verdict is a warning shot across the bow for corporate officers publishing and discussing non-GAAP metrics.
Regardless of the merits of this criticism, the case is a reminder that non-GAAP disclosures are subject to close scrutiny – and not just by the SEC. In the current environment, companies & officers should not expect to be cut a lot of slack by the SEC – or federal prosecutors – for “creativity” in how undefined non-GAAP metrics are used.
Non-GAAP: Corp Fin on “Free Cash Flow” Use
This recent MarketWatch article says that Corp Fin is scrutinizing companies’ use of “free cash flow” as a non-GAAP measure – and “has warned more than 20 companies in the last six months about their potential misuse use of the non-standard metric “free cash flow.”
Actually, this kind of warning from Corp Fin goes back far beyond the May 2016 CDIs, as that language dates back to June 2003 FAQs. We believe that the Staff has been issuing comments about how FCF is calculated for nearly 15 years with no change. The Staff did add a single – and obvious – sentence to that 2003 guidance, but it was not for a widespread problem. Corp Fin added: “Also, free cash flow is a liquidity measure that must not be presented on a per share basis.”
While free cash flow refers generally to operating cash flow less “cap ex,” it doesn’t have a standard definition. Despite that, it’s a metric that investors really like. As this Fredrikson & Byron blog points out, that combination of factors may be the reason for the Staff’s close watch on the way companies use it.
Non-GAAP: Corp Fin (Once) Said “Tone it Down”
In other non-GAAP news, in this article, the WSJ reported that Corp Fin told one major airline to tone down the praise of a non-GAAP measure. Here’s the Staff’s comment letter – which notes that the comment also applies to the company’s earnings releases. Here’s an excerpt from the WSJ article:
American Airlines Group removed certain “descriptive language” from its financials at the behest of the Securities and Exchange Commission, according to recently released correspondence. The regulator directed the airline to stop telling investors that numbers inconsistent with standard accounting were “more indicative” of company performance and “more comparable” to metrics reported by other major airlines. American Airlines, in an April 3 letter to the SEC, said it would drop the references from its future filings and replace them with language that describes adjusted measures as useful to investors.
Note that this clearly is not a trend – it would not surprise us at all if that was the only comment of its kind. The Staff did indeed say “tone it down” – but I’m not sure how much that matters if they did it once – or even a handful of times. We’re not hearing much in the way of a broad warning about this kind of thing when the Staff is out speaking.
Don’t forget to tune into our September 13th webcast – “Non-GAAP Disclosures: Corp Fin Speaks” – featuring Corp Fin’s Chief Accountant Mark Kronforst & Dave Lynn. They will discuss what companies are doing – and should be doing – in the wake of the first year’s worth of Corp Fin comment letters since last year’s CDIs.
Yesterday, I blogged about “initial coin offerings” – or ICOs – over on “The Mentor Blog.” The ink on that blog was barely dry when the SEC weighed in with its own thoughts – in the form of a Section 21(a) Report addressing the status of “digital assets” under the Securities Act.
Guess what? Despite claims that “coins” aren’t securities, the SEC sure thinks they can be. Here’s an excerpt from the SEC’s press release on the Report:
The SEC’s Report of Investigation found that tokens offered and sold by a “virtual” organization known as “The DAO” were securities and therefore subject to the federal securities laws. The Report confirms that issuers of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies. Those participating in unregistered offerings also may be liable for violations of the securities laws. Additionally, securities exchanges providing for trading in these securities must register unless they are exempt.”
Materiality: SEC’s Investor Advocate Tells FASB What It Thinks
I thought this recent letter from the SEC’s Office of the Investor Advocate on FASB’s proposal to change its definition of “materiality” was worth noting.
FASB proposes to conform its approach to financial statement materiality to the judicial definition of materiality that applies in other contexts. Right now, there’s a disconnect between the two standards. Instead of requiring that there be a “substantial likelihood” that information would be material, FASB’s Concept Statement No. 8 currently says information is material if “omitting it or misstating it could influence decisions” that users of financial statements make.
Business groups have applauded the proposed change, but many investor groups have panned it – and the Investor Advocate’s letter provides a fairly comprehensive overview of their objections. It also offers up a revised proposal that would have FASB return to its previous materiality definition – which was generally consistent with the legal concept of materiality – but heavily salt that definition with the “qualitative” considerations embodied in SAB 99.
Materiality: An Accounting Decision?
I can’t resist pointing to one section of the Investor Advocate’s letter to FASB that had me – and I think will have many other lawyers – rolling their eyes. Here’s one of the concerns investors have about the proposed change in FASB’s materiality standard:
The proposals would move decision-making on materiality from accountants to lawyers. The SEC’s Investor Advisory Committee, in a theme echoed by other investors, warned in its comment letter of the risk “that, by replacing the current, differentiated professional accounting standard with a case-law driven legal standard, close questions of judgment will ultimately devolve to lawyers rather than accountants.”
You’ve got to be kidding! If I had a dollar for every time an accountant said “well, it’s a materiality issue – and that’s a legal call,” I’d be sipping Margaritas on my private island beach. However, I do want to thank Investor Advocate for this comment – which I intend to laminate so I will be sure to have it to share with the next accountant who tries to artfully dodge the financial statement materiality bullet in this fashion.
Legislative efforts at governance & disclosure reform – such as the “Financial Choice Act” – have gotten a lot of attention this year. This Rivel Research study asked institutional investors what they thought of those efforts – and the short answer is “not much.”
North American & European institutional investors oppose major change in the US governance regulatory framework. Here are some of the study’s conclusions:
– Two-thirds (65%) believe a weakened SEC will have a negative effect on governance outcomes.
– A large plurality (43%) oppose efforts to pare back the Dodd-Frank Act. Only 18% support it. The rest are uncertain.
– There is widespread opposition (among two in three proxy voters) to rolling back the Act’s mandates for board diversity disclosure, political spending disclosure, & separation of Chair/CEO
– Even if Dodd-Frank is pared back, the vast majority of investors believe that companies should continue to honor/abide by the rules originally set forth within. In fact, many will be seeking expanded disclosure in many areas.
In the event that key governance & disclosure mandates are repealed, the study also says that companies should prepare for increased engagement – nearly half of the investors said they would ramp up their efforts to engage companies on governance matters. What’s more, 41% say they’ll be more inclined to support an activist if the rules are pared back.
Now that the House of Representatives has passed the Financial Choice Act, is Sarbanes-Oxley next on its “hit list”? This recent blog from Cooley’s Cydney Posner says a key part of it just might be. Here’s the intro:
What’s next for the House after taking on Dodd-Frank in the Financial CHOICE Act? Apparently, it’s time to revisit SOX. The Subcommittee on Capital Markets, Securities, and Investment of the House Financial Services Committee held a hearing earlier this week entitled “The Cost of Being a Public Company in Light of Sarbanes-Oxley and the Federalization of Corporate Governance.”
During the hearing, all subcommittee members continued bemoaning the decline in IPOs and in public companies, with the majority of the subcommittee attributing the decline largely to regulatory overload. A number of the witnesses trained their sights on, among other things, the internal control auditor attestation requirement of SOX 404(b). Is auditor attestation, for all but the very largest companies, about to hit the dust?
Whistleblowers: $61 Million Reasons to Drop a Dime!
Holy Cow! I guess this isn’t signed, sealed & delivered just yet, but the SEC Staff is apparently recommending a $61 million award to 2 whistleblowers who played a role in a $267 million settlement with J.P. Morgan. Here’s an excerpt from an AdvisorHub article:
Two whistleblowers whose outing of JPMorgan Chase’s bias toward selling wealth customers in-house funds led to the bank’s $267 million settlement with the government will receive payments equal to 23% of the award, according to a “preliminary determination” letter by SEC claim-review staffers.
The letter, a copy of which whistleblower Johnny Burris provided to AdvisorHub and other publications, recommends that the regulator pay one whistleblower 18% of the award, or $48.1 million, while a second receive 5%, or $13.1 million. The SEC by policy does not name whistleblower award recipients, and Burris would not confirm whether he was one of the successful claimants.
The requests of four other claimants for an award were denied because their information did not contribute to the SEC’s examinations, corollary investigations or significantly affect its enforcement action against JPMorgan, according to the letter. The award would far top the previous record of $30 million, which the SEC announced in September 2014.
Normally – as I have blogged many times (here’s one) – the SEC’s Reg Flex Agendas tend to be “aspirational.” But perhaps this time is different.
As part of a federal agency-wide reveal of the new Administration’s plans for rulemaking, the SEC posted the latest version of its Reg Flex Agenda last week. This agency coordination is the Administration’s “unified agency regulatory agenda.”
This Reg Flex Agenda is notable for what it omits – get a load of what’s not on the list:
– Pay-for-performance
– Clawbacks
– Hedging
– Universal proxy
– Clawbacks of incentive compensation at financial institutions
Does this mean that the SEC doesn’t intend to ever proceed with adopting any of the outstanding Dodd-Frank rules that are still in the proposal stage? We don’t know. As this Cooley blog notes, the Preamble indicates that it reflects “only the priorities of the Acting Chairman [Michael Piwowar], and [does] not necessarily reflect the view and priorities of any individual Commissioner.” Since the information in the Reg Flex Agenda was accurate as of March 29th – and SEC Chair Jay Clayton wasn’t confirmed until May – it’s unknown how Chair Clayton feels about all this.
But it might be a sign – because as noted in this article from “The Hill”: “OMB said agencies for the first time will post a list of “inactive” rules to notify the public of regulations that are still being reviewed or considered.” Hat tip to Scott Kimpel of Hunton & Williams for the heads up!
This all doesn’t impact the implementation of the pay ratio rule – because that rule was already adopted a few years ago. It just had a delayed effectiveness date. So it would never show up on a Reg Flex Agenda unless there was rulemaking to delay or repeal it…which there is not…
Pay Ratio Conference: Discounted Rate Ends This Friday
Last chance to register at a reduced rate for our comprehensive “Pay Ratio & Proxy Disclosure Conference.” The discount expires this Friday, July 28th. New Corp Fin Deputy Director Rob Evans will open the event.
It doesn’t matter whether you can make it to DC – because the October 17-18th Conference is available to watch online by video webcast, live on those specific days or by video archive at your convenience. And in addition to the October Conference, you gain access to three pre-conference webcasts. And a set of “Model Pay Ratio Disclosures” in both PDF & Word format.
The first webcast was last week & that 75-minute audio archive is available now – a transcript of that program is coming soon. The second webcast is on August 15th; the third webcast is September 27th.
Register Now – Discount Ends This Friday: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register by July 28th to take advantage of the 10% discount.
Exchange Act Filing Status: It’s That Time Again. . .
This Bass Berry blog reminds everybody that it’s time to check your filing status for 2018 Exchange Act reports:
While the determination of whether a company will qualify as an “accelerated filer” or “large accelerated filer” for 2018 will not take effect until the date your Form 10-K is filed for fiscal 2017 (or, if earlier, your 10-K due date), the determination of your public float is calculated as of the last business day of the most recently completed second fiscal quarter, or June 30 for companies with a calendar fiscal year.
It looks like investors used their votes to send a message to some directors during this year’s proxy season – and it wasn’t “keep up the good work.” This excerpt from a recent Bloomberg article explains:
Shareholders have withheld 20 percent or more of their votes for 102 directors at S&P 500 companies so far this year, the most in seven years, according to ISS Corporate Solutions, a consulting firm specializing in corporate governance. While largely symbolic, the votes at companies such as Wells Fargo and Exxon Mobil are recognized as signals of displeasure and put pressure on boards to engage.
“Institutional investors are becoming more actively involved in communicating displeasure through their votes,”said Peter Kimball, head of advisory and client services at the consulting firm, a unit of Institutional Shareholder Services. “Voting against directors at large-cap S&P 500 companies is a way for an institution to send a signal to other, smaller companies about the actions that they don’t like. That feedback trickles down.”
We’ve previously blogged about Blackrock & State Street’s increasing assertiveness when it comes to pushing for board action on their priorities – and their greater willingness to use their voting clout to send a message to boards that aren’t responsive. The results from this proxy season suggest that other institutions may be taking the same approach.
Boards: What Do Proxy Advisors Want in a New Director?
I’m trying not to take this personally, but according to this recent “Directors & Boards” article, I’m everything that proxy advisors don’t want when it comes to new director candidates – “male, pale & stale.” So who do proxy advisors want instead of me? Here’s the article’s answer:
If proxy advisors – the firms that provide public company research and guidance to large investors – were writing a personal ad for the perfect board director it would probably go a bit like this:
Looking for diverse director with integrity who enjoys face-to-face communication with investors.
That profile is based on new report from “The Conference Board” called “Just What is a Director’s Job?” The report was the product of a roundtable of more than 50 proxy advisors, including ISS & Glass Lewis. The description of the proxy advisors’ “dream date” highlights not merely the growing importance of board diversity, but also the central position that shareholder engagement plays in their views about what makes a good corporate director.
Secret Societies: The Illuminati, Knights Templar & “The Big Four”?
Pretty interesting stuff in this European Parliament group study on the “opacity” of the organizational structure of the Big Four accounting firms. According to the study, nobody knows how many offices the Big Four have, exactly where they’re located, how many people work for them, or how their ownership is structured. Why so secretive? The study says that the Big Four have their reasons:
We suggest that the structure adopted by the Big Four firms of accountants, which at one level suggests the existence of a globally integrated firm and at another suggests that they are actually made up of numerous separate legal entities that are not under common ownership but which are only bound by contractual arrangements to operate common standards under a common name, has been adopted because it:
– Reduces their regulatory cost and risk;
– Ring-fences their legal risk;
– Protects their clients from regulatory enquiries;
– Delivers opacity on the actual scale of their operations and the rewards flowing from them.
The study was released by a left-leaning group of members who serve on the European Parliament’s Panama Papers inquiry committee. Anyway, who knew that your mild-mannered independent registered public accounting firm was playing such an integral role in bringing about the “New World Order”?
