I started the Deep Dive with Dave podcast last year as a successor to the Dave & Marty Radio Show podcast that Marty Dunn and I had done on and off over the past decade. Much like the Dave & Marty Radio Show, the Deep Dive with Dave podcast covers topics that I believe are of most interest to our members, bringing you the practical advice that everyone expects from TheCorporateCounsel.net and our related publications. I have hosted a few workshops on topics such as risk factors and confidential treatment, and covered the implementation of several of the rulemakings that the SEC completed in 2020. I would love to hear from you about topics that you would like to be covered on the Deep Dive with Dave podcast – send me an email or give me a call with your suggestions.
As Liz mentioned last week, John Jenkins and I take a deep dive into the latest issue of The Corporate Counsel in this new episode of the Deep Dive with Dave podcast.
I am excited to return to the blog here on TheCorporateCounsel.net! When I left the SEC and became an Editor on TheCorporateCounsel.net over 14 years ago, I recognized the importance of this blog, TheCorporateCounsel.net and our other websites and publications to all of our members who practice in the areas corporate law, securities law and corporate governance. While for the past several years I have focused my attention on The Corporate Counsel and The Corporate Executive newsletters, I have missed the chance for more frequent interaction with our members through this blog. It is great to be back, and I look forward to bringing you the latest developments in upcoming posts.
On Friday, SEC Chair Gensler issued a statement highlighting disclosure concerns with China-based companies, prompted by recent actions taken by the government of the People’s Republic of China. In particular, Gensler noted a concern that U.S. investors may not fully understand the risks associated with the typical public offering structure in which China-based companies that are not allowed to have foreign ownership raise capital in the U.S. through variable interest entities (VIEs). In light of these concerns, Gensler announced that he has asked the Staff to request additional disclosure from offshore companies associated with China-based operating companies:
I have asked staff to ensure that these issuers prominently and clearly disclose:
That investors are not buying shares of a China-based operating company but instead are buying shares of a shell company issuer that maintains service agreements with the associated operating company. Thus, the business description of the issuer should clearly distinguish the description of the shell company’s management services from the description of the China-based operating company;
That the China-based operating company, the shell company issuer, and investors face uncertainty about future actions by the government of China that could significantly affect the operating company’s financial performance and the enforceability of the contractual arrangements; and
Detailed financial information, including quantitative metrics, so that investors can understand the financial relationship between the VIE and the issuer.
Gensler has also asked to the Staff to ensure that all China-based operating companies seeking to register securities with the SEC disclose whether the operating company and the issuer, when applicable, received or were denied permission from Chinese authorities to list on U.S. exchanges, the risks that such approval could be denied or rescinded and a duty to disclose if approval was rescinded. Further, the Staff is directed to seek disclosure that the Holding Foreign Companies Accountable Act, which requires that the PCAOB be permitted to inspect the issuer’s public accounting firm within three years, may result in the delisting of the operating company in the future if the PCAOB is unable to inspect the firm. For more about the Holding Foreign Companies Accountable Act, check out our China practice area.
The Staff will now be conducting targeted additional reviews of filings for companies with significant China-based operations.
Earlier this week, I asked my first-grader what sport he’d want to compete in if he could be an Olympian. When he responded that he wants to do whatever earns money so that he could buy video games, I feared the Games had lost their luster. But the very next day, our faithful correspondent Nina Flax sent in her latest “list” – and it’s heartening to see that the event is still imparting plenty of inspiration and self-reflection. From Nina:
I must admit that I do not remember my first Olympics exposure as a child (though I do very fondly remember my first viewings of Cool Runnings and Miracle). A few days into the Olympics, I thought I might share some of what I love about the Olympics more generally.
1. The Games are Inspiring. Seeing the culmination of all of the hard work put in by these athletes, and the amazing display of expertise is simply inspiring. (Side note: Yes, for those of you who have read some of the previous lists, I sometimes cry because I am so inspired.)
2. They also provide a reality check. Some people are just born with natural talents. I do not feel bad that I was not able to become an Olympic figure skater, and I will not feel bad as a parent if my child does not become an Olympic volleyball player (let’s be honest, I’m 5’1” and my husband is 5’10”). (Also a side note: Yes, I will feel like a failure if my child does not love reading.)
3. I appreciate the importance of personal interests. See item 1 above. These athletes grew into their sports out of personal interest – and that interest has helped define who they are in different moments. It is also refreshing to hear the stores about athletes who take breaks because of a falling out of love, and sometimes find their way back to joy in their sports. On a more personal/achievable note, our own game during the opening ceremony was to call my dad for the entire parade of athletes. Otro Papa – have you been to this place? Otro Papa – what about this other place? (My son speaks Spanish, and when he was first starting to speak and we were explaining that his abuelo was also a father just like his Papa was a father, it stuck that my parents are “other” mom and “other” dad. We think it’s cute.) We listed every single country/territory/represented area to see how many he has visited, and then we looked up which officially recognized countries do not have representatives at the games to add those. He has been to most, and he did not start traveling until later in life. His personal passion has driven joy and years to his life. Even if you are not an Olympian, there are ways personal interests can enrich and “purpose-fy” your life. Appreciating the personal interests of others and the impact of those interests on their lives also inspires me. Which is a nice reinforcing loop.
4. I always learn something new. Like about the pictograms! I had no idea that they were first introduced when Japan hosted the Games in 1964. Genius. If you haven’t watched this part of the opening ceremony, you should (and also the drones!).
My night-time work productivity and sleep will admittedly likely decrease this week and next as I continue to watch recaps and replays. Like watching the replay of the US vs. Sweden women’s soccer game – where my son routed for Sweden because he liked the color of their shirts. Which I was okay with – because I kept pointing out how the US kept playing and trying their hardest to the very end, and how they would need to move on from this loss because they had more games to play and could not let one setback get in their way. Great don’t-give-up, learn-but-don’t-beat-yourself-up moment. Or watching the recap of the women’s gymnastics qualifiers – and appreciating that even women like Simone Biles have off days, and that does not make her any less spectacular. We are all human. I hope everyone is able to enjoy and appreciate the reasons they love the Olympics as well!
Between news of salary wars, breathless recruiter messages and celebratory LinkedIn announcements, you’ve probably gathered that it’s a hot job market – and congrats to all of our readers who are taking this moment to advance and/or “right-size” their careers! This Think Advisor article says that the SEC hasn’t been immune from the attrition that many of us are facing. It also suggests that the aggressive enforcement environment that I blogged about earlier this week could also be contributing to turnover, at least in that particular Division.
According to the article, the reason for that is two-fold. First, departures are common in times of transition & leadership changes – and there have been a lot of changes at the Commission this year. Second, the Enforcement Division’s initiatives are creating high demand for litigators, which means firms are trying to recruit Staffers. Ironically, that means that the very initiatives that are creating this demand could leave the Staff short-staffed on its cases.
As we all know, SEC Chair Gary Gensler also has an ambitious agenda. That means he not only plans to fill open roles, but also wants to add even more hard workers to the SEC’s roster – in Enforcement and elsewhere. Here’s an excerpt from the article:
Gensler is potentially counting on adding more Staff that will get behind his vision of a watchdog with sharper teeth. In his FY 2022 budget request, Gensler asked for nine additional positions in the enforcement division and in total wants to raise staff from its current 1,316 to 1,330.
In testimony in front of a House appropriations subcommittee on May 26, Gensler said enforcement in 2020 had 6% fewer staff on board than it did in 2016.
Don’t forget to check out our free “Jobs Board” if you’re hiring or looking…and let us know if it helps you find a match!
If your company is subject to the CCPA, your compliance efforts are probably about to get more complicated. Here’s the intro from this Hogan Lovells memo:
On July 19, California’s recently appointed Attorney General, Rob Bonta, announced the launch of an interactive tool to aid consumers with drafting notices of non-compliance for businesses who fail to publish the “Do Not Sell My Personal Information” link (DNS link) required by the California Consumer Privacy Act (CCPA).
According to the AG, the consumer notice “may trigger” the 30-day cure period businesses enjoy before becoming subject to enforcement actions for non-compliance. Questions remain about use of resident-led notices of non-compliance, including whether this novel approach satisfies CCPA notice requirements or whether it may foster spamming and other abuses.
Most of you who read this blog, subscribe to our sites, or even just follow the “who’s who” of securities law are very familiar with our long-time Senior Editor Dave Lynn. I’m thrilled to say that you’ll be seeing more of his name right here in the coming weeks!
Dave will be rejoining our blogging lineup for the time being and will be imparting the wisdom he’s accumulated from his years as a Partner at Morrison & Foerster – and before that, as Corp Fin’s Chief Counsel (among other SEC roles). When Dave was at the SEC, he led the rulemaking team that revised the executive compensation & related party disclosure rules, provided interpretive advice, formulated policy decisions, and published CDIs.
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Lynn blogged recently that smaller companies are less likely to use Big Four audit firms. For an even more detailed breakdown of audit firm market share based on filer status, take a look at this recent Audit Analytics blog. Here’s an excerpt:
– Large Accelerated Filers: EY audits almost 30%, and the Big Four collectively audit almost 91% of this market
– Accelerated Filers: the Big Four, together with Grant Thornton and BDO, audit over 72% of these filers
– Non-Accelerated Filers: the Big Four and Marcum account for 57.5% of this market
– Smaller Reporting Companies: BF Borgers, M&K CPAs, Boyle CPA, Prager Metis, RBSM, Turner Stone & Company and Baker Tilly collectively audit 25% of this market, the remaining 77% is audited by 177 other firms
The July-August issue of “The Corporate Counsel” newsletter is in the mail. It’s also available now online to members of TheCorporateCounsel.net who subscribe to the electronic format – an option that many people are taking advantage of in the “remote work” environment (subscribe here to be “in the know”). The issue includes articles on:
– Universal Proxy: Takeaways From the Reopened Comment Process
– Can It Wait Until the Next 10-Q?
Dave & John also have been doing a series of “Deep Dive with Dave” podcasts addressing the topics we’ve covered in recent issues. We’ll be posting one for this issue soon. Be sure to check it out on our “Podcasts” page!
