Here’s something I blogged yesterday on CompensationStandards.com: After market close on Friday, Goldman Sachs announced via an Item 8.01 8-K that in light of the ongoing 1MDB investigation, its compensation committee might reduce bonuses to current – and former – senior executives. The board is wise to leave themselves some room, since they’ll likely face shareholder scrutiny for the alleged fraud and all of its fallout. For last year’s annual equity awards, the board added a new forfeiture provision. The 8-K doesn’t go into detail about what types of harm – e.g. strictly financial v. reputational – would result in forfeiture, but simply says:
This provision will provide the Committee with the flexibility to reduce the size of the award prior to payment and/or forfeit the underlying transfer-restricted shares (which transfer restrictions release approximately five years after the grant date) if it is later determined that the results of the 1MDB proceedings would have impacted the Committee’s 2018 year-end compensation decisions for any of these individuals.
For former executives, Goldman’s comp committee decided to defer determinations about LTIP awards that otherwise would’ve paid out in January, since the 1MDB investigation relates to events that occurred during the performance period. This WSJ article reports that the forfeiture wouldn’t apply to former exec Gary Cohn, who was paid out in lump sum when he joined the Trump Administration.
So these aren’t true “clawbacks” – they’re potential forfeitures of unpaid amounts, which are much easier for a company to administer. Remember that a few years ago in a different kind of scandal, Wells Fargo started off with forfeitures – and eventually also clawed back pay.
More on “First IPO Without Delaying Amendment?”
During the final stretch of last month’s government shutdown, I blogged that Gossamer Bio was prepared to go public without final sign-off from the SEC. Now, that company has announced that it’s reverting to a traditional IPO. The company has restored the delaying amendment language on an amended Form S-1 and will ask the SEC to accelerate effectiveness. Since it’s already set the offering price, there’s not much upside to waiting to sell the shares.
Audit Fees: New Standards Cause Modest Increase
This “Audit Fee Survey” from ferf & Workiva reports that audit fees rose by about 2.5% last year – mostly due to implementing the new revenue recognition and lease standards, but also because of M&A activity and more stringent PCAOB inspections. However, auditors remained open to negotiation due to the competitive marketplace and automation. The median fee for accelerated filers was $415k – compared to nearly $7 million for large accelerated filers…and this Fenwick & West study notes that average fees were $22.2 million for S&P 100 companies.
Meanwhile, Audit Analytics reported that non-audit fees represented about 10% of total fees paid by accelerated filers to their external auditors in 2017 – way down from 38% of the pie in 2002, which caused concern that these services were impacting auditor independence.
Here’s something I wrote last week on CompensationStandards.com: I recently blogged about the pros & cons of disclosing your “equal pay audit.” There aren’t many US companies doing this…yet. But Citigroup is one of the trailblazers. Last year, similar to the stats in Intuit’s proxy (hat tip Lois Yurow), Citi announced on its website the results of a “pay inequality” analysis – the difference in pay of women & men and US minorities & non-minorities, as adjusted for job function, level and geography. And it’s made some pay adjustments based on the findings.
More recently, Citi announced on its website its unadjusted “pay gap” for women and US minorities – i.e. the difference in median total compensation. Citi agreed to publish the stats in response to a “gender pay equity” proposal from Arjuna Capital – who then withdrew the proposal. Here’s an excerpt from Arjuna’s announcement about what comes next:
Citi’s analysis shows that the median pay for women globally at Citibank is 71 percent of the median for men, and the median pay for US minorities is 93 percent of the median for non-minorities. Citi’s goal is to increase representation at the Assistant Vice President through Managing Director levels to at least 40 percent for women globally and 8 percent for black employees in the US by the end of 2021.
Alongside the median pay disclosure, Citi updated last year’s “equal pay for equal work” analysis to extend across its global operations, reporting that when adusting for job function, level, and geography women globally are paid on average 99% of what men are paid, and no statistically significant difference between what US minorities and non-minorities are paid at Citi. Citi also made pay adjustments following this year’s compensation review.
Borrowing for Buybacks: Is the Heyday Over?
This Bloomberg article reports that, after peaking in 2017, debt-financed buybacks are now at the lowest level since 2009. And although that’s partly because cash is abundant, this ‘Think Advisor’ article says that bondholders and ratings agencies are also starting to take issue with using debt proceeds for that purpose. Here’s an excerpt:
Already, U.S. companies are curtailing the amount of bonds sold to buy back their own stock by a third in 2018, based on a Bloomberg data search of transactions detailing use of proceeds. In Europe, where it’s more unusual for companies to borrow to redeem stock and profitability has recovered more slowly, issuance is running at an eight-year low.
It all points to a reversal of the type of shareholder-friendly activity that propelled the S&P 500 to dizzying peaks this year. Companies need to shore up their leverage before an economic downturn hits, as well as court lenders they may need down the road. And as interest rates grind even higher, treasurers are likely to think even harder about borrowing to enrich shareholders.
…[T] the drop in borrowing volumes is illustrative of a growing trend: Corporate America is facing a wake-up call as once-acquiescent bondholders balk at funding rewards to equity owners. After CVS Health Corp. closed a $70 billion deal to buy health insurer Aetna Inc. on Nov. 28, Moody’s Investors Service downgraded its credit rating and laid out its prescriptions for balance-sheet repair: “We expect the company to cut all share repurchases and use free cash flow to reduce debt.”
Tomorrow’s Webcast: “Conflict Minerals – Tackling Your Next Form SD”
Tune in tomorrow for the webcast — “Conflict Minerals: Tackling Your Next Form SD” — to hear our own Dave Lynn of Morrison & Foerster, Ropes & Gray’s Michael Littenberg, Elm Sustainability Partners’ Lawrence Heim and Deloitte’s Christine Robinson discuss what you should now be considering as you prepare your Form SD for 2018.
Speculation’s been mounting about whether Nasdaq will approve listing applications from companies that want to raise capital during the shutdown – I blogged yesterday that they might be warming up to IPOs under limited circumstances. In response, the exchange has now issued five FAQs to explain how they’ll handle new listings – as well as the shutdown’s impact on currently-listed companies.
For IPOs and OTC-traded ’33 Act registrations, Nasdaq is more open to listing companies that substantially completed the comment process before the shutdown began – and suggests that companies in that position call the Listing Qualifications Staff to discuss the situation. At this time, Nasdaq remains reluctant to list companies that are just starting the IPO process…but they don’t entirely close the door on that possibility.
Here’s a video from Dave & Marty about the shutdown…
Delaware’s Sustainability Certification: First Filer
Last summer, John blogged about Delaware’s new “Transparency and Sustainability Standards Act” – a voluntary certification program (or as John calls it, “the corporate equivalent of buying a Subaru”). Now, the first company is trying it out – a Euronext-traded company called “DSM” (also known as “Royal DSM”). Here’s the integrated annual report that’s posted to the state’s certification page.
The NYSE’s Annual Compliance Letter
The NYSE has sent its “annual compliance letter” to remind listed companies of their obligations. There aren’t any new rules this year – but the letter highlights that the NYSE’s “Timely Alert/Material News Policy” now requires companies to provide notice to the Exchange at least 10 minutes before making any public announcement about a dividend or stock distribution, even outside of trading hours.
Transcript: “How Boards Should Handle Politics as a Governance Risk”
We have posted the transcript for our recent webcast: “How Boards Should Handle Politics as a Governance Risk.”
It’s hard to imagine the government shutdown continuing for another 19 days – but this amended Form S-1 filed yesterday by Gossamer Bio does just that. Just like Corp Fin’s shutdown FAQ #5 instructs, the cover page sets the proposed offering price and says:
This registration statement shall hereafter become effective in accordance with the provisions of Section 8(a) of the Securities Act of 1933.
For those playing along at home, that means the effective date is scheduled for February 12th. The registration statement also includes this risk factor:
As a result of the shutdown of the federal government, we have determined to rely on Section 8(a) of the Securities Act to cause the registration statement of which this prospectus forms a part to become effective automatically. Our reliance on Section 8(a) could result in a number of adverse consequences, including the potential for a need for us to file a post-effective amendment and distribute an updated prospectus to investors, or a stop order issued preventing use of the registration statement, and a corresponding substantial stock price decline, litigation, reputational harm or other negative results.
The registration statement of which this prospectus forms a part is expected to become automatically effective by operation of Section 8(a) of the Securities Act on the 20th calendar day after the most recent amendment of the registration statement filed with the SEC, in lieu of the SEC declaring the registration statement effective following the completion of its review. Although our reliance on Section 8(a) does not relieve us and other parties from the responsibility for the adequacy and accuracy of the disclosure set forth in the registration statement and for ensuring that the registration statement complies with applicable requirements, use of Section 8(a) poses a risk that, after the date of this prospectus, we may be required to file a post-effective amendment to the registration statement and distribute an updated prospectus to investors, or otherwise abandon this offering, if changes to the information in this prospectus are required, or if a stop order under Section 8(d) of the Securities Act prevents continued use of the registration statement. These or similar events could cause the trading price of our common stock to decline substantially, result in securities class action or other litigation, and subject us to significant monetary damages, reputational harm and other negative results.
I blogged yesterday that Nasdaq wasn’t eager to allow listings for companies whose registration statements haven’t gone through full SEC review, and that was a barrier to going public right now even though the SEC is allowing companies to file registration statements without the delaying amendment. And while I continue to think that “eager” would be an overstatement, the WSJ later reported that the exchange is warming up to the workaround – especially for the handful of companies that have worked through pre-shutdown SEC comments. So, Gossamer and the other trailblazers are (cautiously) moving forward. No doubt they’re also considering how to pivot if the SEC returns to its full strength within the next couple weeks.
Last week, two of the world’s largest asset managers gave their annual “heads up” to companies about this year’s engagement priorities. This NYT write-up describes how BlackRock CEO Larry Fink exhorts CEOs to be “leaders in a divided world” – while Bloomberg’s Matt Levine wonders if Larry Fink is now the late-capitalist version of “president of the world.” But a takeaway for us governance people is that the leadership suggestions have a human capital tone – helping workers prepare for jobs of the future, as well as retirement.
BlackRock’s Investment Stewardship engagement priorities for 2019 are: governance, including your company’s approach to board diversity; corporate strategy and capital allocation; compensation that promotes long-termism; environmental risks and opportunities; and human capital management. These priorities reflect our commitment to engaging around issues that influence a company’s prospects not over the next quarter, but over the long horizons that our clients are planning for.
In these engagements, we do not focus on your day-to-day operations, but instead seek to understand your strategy for achieving long-term growth. … [W]e seek to understand how a company’s purpose informs its strategy and culture to underpin sustainable financial performance. Details on our approach to engaging on these issues can be found at BlackRock.com/purpose.
State Street’s Letter: “Culture Eats Strategy for Breakfast”
Not inconsistent with BlackRock’s asks, last week on our “Proxy Season Blog” I wrote that pension funds want to know about your culture. According to their annual letter, that topic is also pretty important to State Street. SSGA has created a framework to help boards align culture & strategy (see page 6) – and they’ll be asking these questions during engagements:
– Can the director(s) articulate the current corporate culture?
– What does the board value about the current culture? What does it see as strengths? How can the corporate culture improve?
– How is senior management influencing or effecting change in the corporate culture?
A few weeks ago, Broc blogged about how a government shutdown was gonna really disrupt the processing of no-action requests related to shareholder proposals if the shutdown went much longer. Now that the conjecture has become reality, we just fielded this question in our “Q&A Forum” (#9722):
We submitted a no-action request to the Staff to exclude a shareholder proposal made under Rule 14a-8 during the shutdown but obviously haven’t heard anything. Seems like we will be forced to include it as our date for providing the proponent our Statement in Opposition and eventual filing are coming up in a week or two. Any other thoughts, reasons we can exclude the proposal even if we don’t hear from the SEC?
My response was:
You might have seen this recent Reuters article – and this WSJ article. Here’s a quote from Ron Mueller in the WSJ article: “If the shutdown continues even after a company needs to send out its proxy statement to shareholders, the company could include proposals in the statements but not make them subject to a vote, saying it is awaiting a determination from the SEC, Mr. Mueller said. A company also can negotiate with shareholders who made a proposal, striking a deal that results in it withdrawing the SEC application and removing the proposal from the proxy in exchange for concessions.”
And Broc added:
This sure is interesting stuff since it’s novel. On page 41 of our “Shareholder Proposals Handbook,” there’s a section about exclusion without Staff relief. I talk about the risk of an SEC enforcement action – but I don’t know how high that risk would really be in these circumstances. Of course, it will depend on how strong your argument is that a proposal is excludable under one – or more – of the exclusion bases in Rule 14a-8. So I imagine companies might do some hard thinking and see how comfortable they are about exclusion without the no-action relief…
Removing the Delaying Amendment: Nasdaq Gets Nervous
As the shutdown drags on, we’ve blogged several times that removing the delaying amendment is really the only way to go effective with a registration statement right now. But that’s a big deviation from standard practice – and this WSJ article reports that (not surprisingly) it’s making banks & exchanges nervous. Here’s an excerpt:
But the Nasdaq Stock Market, where both companies are aiming to list, has balked at firms using the method over worries that such deals could be vulnerable to regulatory or legal challenge later on, according to people familiar with the matter. Still, the exchange hasn’t ruled it out in certain cases, one of the people said. Some bankers have also been wary of such deals.
Proceeding without Corp Fin’s signoff could carry substantive risk, some bankers and lawyers say. If the IPO disclosures given to investors are later shown to have shortcomings, plaintiffs’ lawyers could pounce and point to the unusual way the deals were done.
Another downside to the automatic route is companies would need to price their stock at least 20 days in advance of trading, whereas in a traditional IPO the price is set the day before trading begins. Bankers worry the price might become stale as economic crosswinds or other factors could affect demand for the offering.
Against my better judgment, I read some of the comments on that WSJ article. Here’s a taste:
Capitalists do not need government bureaucrats to raise capital. Abolish the SEC and let markets work.
Point taken that companies have been moving away from traditional IPOs – and this Matt Levine blog imagines a functioning world in which the SEC is accidentally no longer involved in that process…
How the Shutdown Impacts the SEC’s Enforcement Program
Check out this piece from John Reed Stark about how the government shutdown impacts the SEC’s enforcement program…
Tune in today for the webcast — “12 Tricks to Help You During Proxy Season” — to hear Aon’s Karla Bos, Intel’s Irving Gomez, Gibson Dunn’s Beth Ising and Microsoft’s Peter Kraus share practical advice on how to enhance your proxy season efforts without sacrificing your sanity. The agenda includes:
1. Organize & Draft Your Proxy In the Way That Makes Sense This Year
2. When Developing Your Engagement Strategy, Consider the SEC’s “Rules of Engagement”
3. Keep a Hard Copy of Your Proxy on Your Desk for Note-Taking
4. “Tell It Like It Is” – And Don’t Save “Board Responsiveness” for Low Vote Results
5. Negotiating PR Aspects of Shareholder Proposal Withdrawals
6. Three “Forget-Me-Nots” When Presenting Shareholder Proposals (And Your Response) in the Proxy
7. Capitalize on Your 10-K
8. Get Outside Help, But Don’t Outsource to Excess
9. Use Graphics & Formatting in a Productive Way
10. Proxy Review: Use Fresh Eyes, Particularly for Quality Assurance
11. Watch Those Shareholder Proposal & Nomination Deadlines
12. Call the Experts to Assist with Shareholder Proposals
13. Engage, But Don’t Count on It to “Carry the Day”
14. Shareholder Engagement: Develop Relationships Before You Need Them
Insider Trading: House Bill Targets 10b5-1 Plans
Last week, the House Committee on Financial Services re-introduced a bill on a bipartisan basis – the “Promoting Transparent Standards for Corporate Insiders Act” – which would require the SEC to study whether Rule 10b5-1 should be amended to add more procedural restrictions for trading plans. The potential amendments would:
– Limit the ability of companies & insiders to adopt a trading plan to a time when the company or insider is permitted to buy or sell securities during issuer-adopted trading windows
– Limit the ability of companies and insiders to adopt multiple trading plans
– Establish a mandatory delay between the adoption of a trading plan and the execution of the first trade under the plan (and if so, whether the delay should be the same for plans adopted during versus outside a trading window, and whether any exceptions to a delay are appropriate)
– Limit the frequency with which companies and insiders may modify or cancel trading plans
– Require companies and insiders to file trading plan adoptions, amendments, terminations and transactions with the SEC
– Require boards of companies to adopt policies covering trading plans, periodically monitor trading plan transactions and ensure that company policies discuss trading plan use in the context of hedging policies and stock ownership guidelines
SEC Commissioner Nominee: Stalled Due to Shutdown
Since Kara Stein’s holdover term expired last month, we’re once again down to four Commissioners. Broc’s blogged about nomination delays becoming more common – and it looks like this go-round will follow suit. As this WSJ article reports, the government shutdown is taking the blame this year. Here’s an excerpt:
Mr. Schumer recommended [several months ago] the White House nominate former SEC staffer Allison Lee to fill a vacancy on the commission left by the recent departure of Kara Stein, the people familiar with the matter said. Ms. Lee, who formerly served as an aide to Ms. Stein, also worked as an attorney in the SEC’s enforcement division for over a decade before retiring from the commission last January, according to her profile on LinkedIn.
Some Democrats also are worried the White House is purposely slow-walking liberal nominees to the positions, particularly Ms. Lee, whose name has been pending with the Trump administration for several months. Republican policy makers maintain the shutdown has stretched staff thin within the executive branch [straining its ability to do background checks and other necessary paperwork].
We blogged several weeks ago about a scheduled open Commission meeting to consider a “request for comment” on the nature & content of quarterly reports & earnings releases. That meeting was cancelled due to President George H.W. Bush’s funeral. Yesterday, the SEC posted this Sunshine Act notice for the rescheduled meeting, to be held next Wednesday – December 19th. And at this meeting, the SEC will also consider adopting the long-pending hedging rules – as required by Section 955 of Dodd-Frank…
“Human Rights” Due Diligence
A growing number of investors are starting to ask companies how they manage human rights risks – but it’s a difficult thing to get your arms around. A recent report from the “UN Working Group on Business & Human Rights” says that the best thing to do is to just get started with the four-step diligence process (as outlined in this “Executive Summary”).
This 27-page annex provides a deeper dive on tools & resources, based on “lessons learned” from early adopters. Here’s an excerpt:
Enterprises should begin to consider the risks of adverse human rights impacts associated with the sector (or sectors) in which the enterprise is operating. For instance, the extractive sector must consider the human rights in communities affected by their projects, the garment sector must consider supply chain labour practices, and the information technology sector must consider the human rights affected when privacy is not adequately protected.
These examples are only some of the risks that are obvious in these sectors. Sector risks will be associated by the nature of the products and production processes as well as with the way the sector is organized. Some risks are common to almost all sectors. As part of the identification process, the enterprise should go through the list of internationally-recognized human rights.
Trading Suspensions: The Shareholder Perspective
This MarketWatch article looks at the consequences that shareholders face when a company’s stock is suspended or delisted – and follows the journey of one company, along with its shareholders and plaintiffs’ lawyers. Here’s the intro (and find more guidance on this topic in our “Delistings/Trading Suspensions” Practice Area):
You’re a thrill seeker, trading in highflying cannabis and crypto stocks, but you think you can get out any time. Suddenly there’s news of an unexpected trading stop or suspension and delisting by an exchange or by the Securities and Exchange Commission. Is all lost?
Unfortunately, according to the SEC, that may be the case. If there’s no exchange to trade that hot stock, the shares may become worthless, the SEC warns in an Investor Bulletin about the consequences of trading suspensions.
Earlier this year, Broc blogged about Bank of America’s campaign to increase retail voting – they were donating $1 to Habitat for Humanity for every shareholder account that votes and also featuring online director interviews. This issue of Carl Hagberg’s “Shareholder Service Optimizer” reports that the effort was a resounding success – a 41% increase in voters (on top of an 8% increase last year) and over $900k donated. And importantly, a 4% increase in pro-management votes – this can make a big difference, especially for say-on-pay. Here’s how BofA maximized its results:
– First and foremost is the marketing truism that to get results you need to “repeat, repeat and repeat” your message.
– Equally important, you need to position your messages prominently – so they will be noticed right off the bat. BofA did a masterful job of this last year with its inaugural “Special Olympics” campaign. And this year, the message was even more prominently and frequently displayed. It was the very first – and very attention-getting – thing that shareholders saw when they received & opened the proxy package.
– Of course, the message needs to be a compelling one. Here, BofA hit a bases-loaded home run by choosing excellent and non-controversial charities last year & this year.
– Most compelling, however, were the attention-getting numbers: BofA was able to report that $650,000 had been donated to the Special Olympics last year – and that, we think, was a major motivating factor behind the huge number of new people who got on the bandwagon this year. (Next year, a $1 million goal will keep voters on the ranch – and will generate a lot more new participation, we feel certain.)
Carl also notes that BofA worked to increase the always hard-to-get “Employee Plan” votes. Not only did they post an educational video and email voting reminders, but they created a single “landing platform” for all employee plan accounts. The platform allowed employees to vote all of their positions through a single set of voting actions.
Mobile-Friendly Director Interviews: Another Vote-Getter
Another article from Carl Hagberg’s “Shareholder Service Optimizer” also speculates that BofA’s online director interviews contributed to the company’s massive increase in retail voting. The link was appended to all of the e-deliveries & employee outreach materials – and was posted on the voting sites.
Carl’s hypothesis is borne out by the fact that the “Meet the Board” feature is the most-visited content page for mobile-friendly proxies at EZOnlineDocuments. We’ve blogged before about EZOnline’s work – and Carl notes that he was “absolutely bowled-over” by a recent product demo. Here’s more:
Particularly for retail investors, having an interactive, web- and mobile-friendly proxy statement makes it easier to read, search and actually digest the content – better than anything else we have seen. We urge you to visit www.ezonlinedocuments.com and to zero-in on the “Clients” tab for a quick and easy-to-absorb look at how it works for clients like Coca-Cola, Mastercard, Xcel Energy and others.
Transcript: “This Is It! M&A Nuggets”
We have posted the transcript for the recent DealLawyers.com webcast: “This Is It! M&A Nuggets.”
In connection with yesterday’s AICPA conference, SEC Chief Accountant Wes Bricker provided this statement on financial reporting & auditing issues that he’s been discussing with SEC Chair Jay Clayton and others. As you’d expect, a lot of the statement is aimed toward auditors – e.g. what they should be doing to improve quality. But the statement also emphasizes the role of companies in the financial reporting process – with plenty of recommendations for audit committees and management:
– Internal controls – particularly where there are close calls as to a significant deficiency or material weakness, audit committees should pay extra attention to the adequacy of & basis for the company’s ICFR assessment, and seek training if necessary (citing this enforcement action). It’s vital to focus not just on actual misstatements but also whether it’s reasonably possible that a material misstatement won’t be prevented or detected in a timely manner.
Also remember that it’s the company’s responsibility to develop, maintain & assess ICFR – and that the thresholds for auditor attestation don’t change these requirements (it’s not obvious whether this remark is intended to foreshadow a change to the attestation requirement, which was discussed as a future possibility when the SEC increased the smaller reporting company threshold and in today’s Senate testimony by SEC Chair Jay Clayton). This blog from Cooley’s Cydney Posner reports that several members of the OCA Staff also discussed internal controls issues at yesterday’s AICPA Conference – with tips on how to assess controls and how to adequately disclose a material weakness.
– CAMs – conduct a “dry run” so that the auditors & audit committee can discuss issues. It’s also important to understand that CAMs aren’t intended to duplicate management’s MD&A disclosure of critical accounting estimates.
– Continuing education for audit committees – audit committee members must have time, commitment and experience to do the job well. Just possessing financial literacy may not be enough to understand the financial reporting requirements fully or to challenge senior management on major, complex decisions. Audit committees must stay abreast of these issues through adequate, tailored, and ongoing education.
– Audit committee agendas – must be balanced toward understanding accounting, ICFR and reporting requirements. For example, as business, technology, accounting, and reporting requirements change, it is crucial that the audit committee understand management’s approach for designing and maintaining effective internal controls.
– Voluntary disclosure – OCA Staff encourages audit committees for listed public companies of all sizes to communicate how the listing requirements related to the “appointment, compensation, and oversight of the work of any registered public accounting firm. . .” are carried out, especially among smaller companies. There are positive disclosure trends among S&P 1500 companies when it comes to disclosing considerations in appointing the audit firm, fee negotiations and evaluations – but there are opportunities for more progress among mid- and small-cap companies.
– Company processes to ensure auditor independence – emphasizing the role of companies to promote compliance by regularly monitoring corporate structural changes or other operational events that may result in new affiliates or business relationships and timely communicating these changes to the auditor, as well as evaluating the sufficiency of these monitoring processes & practices. Also note that the OCA Staff is assessing comments on the auditor independence “loan” rule – final rulemaking is expected in 2019.
– Auditor communications – to enhance oversight, audit committees should consider requesting additional voluntary information from the auditor to understand their level of investment in quality control functions, the connection of technology to audit quality and how audit firm performance compares to others.
– New GAAP standards – continue to focus on implementing & refining compliance with new standards on revenue recognition, leases & current expected credit losses
“Accredited Investor” Verification: SEC Enforcement is Watching
Last week, the SEC issued a cease-and-desist order against CoinAlpha Advisors for a Reg D offering gone wrong – which shows that Enforcement will take issue with relying on self-completed questionnaires to verify accredited investor status under Rule 506(c). Here’s an excerpt from Steve Quinlivan’s blog:
The SEC alleged CoinAlpha did not have pre-existing substantive relationships with nine of the fund’s investors and engaged in a general solicitation of public interest in the securities offering through CoinAlpha’s website, which was generally accessible without password protection. Additionally, CoinAlpha engaged in general solicitation through blog postings, and media interviews and digital asset and blockchain conferences, accessible both via live attendance and through the Internet. Despite collecting accredited investor questionnaires and representations from investors certifying to their accredited investor status, Respondent did not take reasonable steps to verify that investors in the Fund were accredited investors.
During the subsequent SEC investigation, CoinAlpha retained a third party who determined that all 22 investors were accredited investors.
The SEC found CoinAlpha engaged in an unregistered public offering. CoinAlpha did not admit or deny the SEC’s findings.
– What led you to write “The Governance Revolution”?
– What are the most important messages in the book?
– When it comes to some of the hazards of the board process, what is “The State Dinner” all about?
– What about “Bullying”?
– What has been the biggest surprise for you in reaction to the book?
Mock me all you want, but before I had kids I was a fanatic for live music of all genres – and watching Snoop Dogg in the pouring rain at an “indie” rap festival stands out as one of the most memorable performances I’ve seen. And since one of my other hobbies is cooking, my worlds collided when I read this Bloomberg article about Snoop’s new 192-page cookbook – “From Crook to Cook.”
Apparently, the compilation has all the (cannabis-free) edibles you need for a solid Thanksgiving…and lots more. Snoop is probably picking up some of Martha Stewart’s cooking game, now that they have an (Emmy-nominated!?) VH1 show together – but no doubt his creations have some special twists. If anyone out there actually buys this book and tries a recipe, please let me know how it is. I’m already intrigued by this concept for sweet potato pie, as described by Bloomberg:
“These days everyone is into pumpkin spice, but I skip the pumpkin—sweet potato pie is a real ’hood staple and Broadus family favorite. [Pop-culture fact: Snoop was born Calvin Cordozar Broadus.] A little orange makes the sweet potato flavor stronger, and that’s what you’re here for, right?”
