Members still ask me if I plan to resurrect the “Proxy Disclosure Award Contest” that I ran a few years back. If you recall, I allowed the community to vote for the winners rather than selecting the winners myself.
I don’t have plans to run another contest. But I’m game to pick a “proxy disclosure award” winner this year – because I have heard a number of institutional investors rave about Allstate’s proxy statement. It indeed is awesome. Congrats to Deborah Koenen & her team!
Here’s some of the notables:
– Board Refreshment – Allstate focused on board refreshment disclosures, showing that the board is continuously engaged in succession planning – including data about the number of directors considered and added in the past five years. The additional information adds insight into board activities & appears to validate its processes.
– Lead Independent Director – Allstate provided detail regarding the profile sought to serve as the board’s lead director, as well as biographical detail regarding the director currently in the role (including notable highlights from her tenure).
– Board Highlights – A visual flow chart makes clear significant strategic, governance & compensation developments overseen by the board over the last five years.
– Management Succession – Allstate provided an overview of the board’s management succession oversight responsibilities & annual practices – showing a proactive board that prioritizes long-term organizational stability & prepares for multiple leadership transition scenarios.
– Corporate Responsibility – The proxy statement highlighted the board’s oversight of the company’s corporate responsibility initiatives, pointed out recent achievements – and provided a line of sight through to the most recent CSR report.
– Insights into Board Committees – Allstate presented a double-page overview of its board committees, including quotes from committee chairs and lead director. Love how the “New” tags highlight recent developments.
Tomorrow’s Webcast: “12 Strange Things in the Securities Laws”
Tune in tomorrow for the webcast – “12 Strange Things in the Securities Laws” – to hear Fenwick & West’s Dawn Belt, TheCorporateCounsel.net’s John Jenkins, Manatt Phelps’ Ben Orlanski and Faegre Baker Daniels’ Amy Seidel tackle the practical solutions to bizarre & illogical things that happen in your daily practice. Or once in a blue moon…
Corp Fin: NFL Fan Clubs as “Securities”
I find this blog by Bryan Pilko interesting because I processed a similar no-action letter when I was in Corp Fin’s Office of Chief Counsel twenty years ago. Think it was the Green Bay Packers no-action letter (11/13/97). Anyway, this no-action response to the LA Fan Club allows LA Rams fans (a NFL team) to buy memberships in the fan club without the Staff considering it to be a Section 5 violation…
For those registered for the upcoming “Pay Ratio & Proxy Disclosure Conference,” tune in on July 20th for the first in a series of three monthly webcasts that serve as a pre-conference: “Pay Ratio Workshop: What You Need to Do Now.” When you go to the webcast page on July 20th, you will be able to download a set of “Annotated Model Pay Ratio Disclosures” in both PDF & Word format. The second webcast is on August 15th.
The speakers for the July 20th webcast are:
– Mark Borges, Principal, Compensia
– Mike Kesner, Principal-in-Charge, Human Capital Advisory Services, Deloitte Consulting LLP
– Dave Lynn, Editor, CompensationStandards.com and Partner, Jenner & Block LLP
– Maia Gez, Of Counsel, Gibson Dunn & Crutcher LLP
The speakers for the August 15th webcast are:
– Mark Borges, Principal, Compensia
– Keith Higgins, Partner, Ropes & Gray LLP
– Scott Spector, Partner, Fenwick & West LLP
Register Now – 10% Discount Ends July 28th: 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.
“Human Capital Management” Disclosure: A SEC Rulemaking Petition
As noted in this press release, a group of institutional investors with $2.8 trillion in assets – that is “trillion” with a “T” – has filed this rulemaking petition with the SEC that includes 9 categories of disclosures about human capital management. The driving force behind this is that companies are now only required to disclose their employee headcount – yet a large body of evidence links investments in human capital to better corporate performance…
By the way, as John has blogged before, Delaware has now passed legislation that will allow shares to be traded on a blockchain…
Transcript: “Proxy Season Post-Mortem – The Latest Compensation Disclosures”
We’ve posted the transcript for the CompensationStandards.com webcast: “Proxy Season Post-Mortem – The Latest Compensation Disclosures.”
Back in May, I blogged about 7 early adopters of the SEC’s new “link to exhibits” rule. I blogged that these companies had experimented by including links to their exhibits voluntarily – without the benefit of an updated Edgar Filer Manual.
Last Thursday, the SEC posted this adopting release about an updated Edgar Filer Manual. However, the updated Manual itself is not yet posted (the currently posted Manual was last updated in March). Perhaps it will be posted when this adopting release is published in the Federal Register? Regardless, it will be out soon. Hat tip to Goodwin Procter’s John Newell for alerting us to this development.
The adopting release doesn’t hint at the degree of instructive detail that the updated Manual will ultimately provide. Will it provide a detailed roadmap of what the SEC expects? Or will it state that companies have wide latitude as to how they provide links? We’ll know the answer when the updated Manual is posted.
Here’s what the adopting release says about all this on page 3:
Effective September 1, 2017, large accelerated and accelerated filers filing Forms S-1, S- 3, S-4, S-8, S-11, F-1, F-3, F-4, F-10, SF-1, and SF-3 under the Securities Act and Forms 10, 10- K, 10-Q, 8-K, 20-F, and 10-D under the Exchange Act will be required to submit these forms in HTML and include a hyperlink to each exhibit listed in the exhibit index of these filings, including exhibits that are incorporated by reference. Instructions for hyperlinking to an exhibit submitted with a previous submission, or an exhibit that is being filed concurrently with the submission, have been included in Chapter 5 of Volume II of the EDGAR Filer Manual. Instructions for using HTML Styles to indicate the location of the Exhibit Links and the Summary Section have also been included in Chapter 5 of Volume II of the EDGAR Filer Manual.
GE Creates Internal Yelp-Like Resource for Lawyers
Interesting article about how GE has created an internal Yelp-like resource to manage the 200 outside law firms it deals with. Not sure it will really used much by GE’s 800 in-house lawyers, but probably will be used by procurement – and that’s who everybody is increasingly answering to these days…
Controlling Audit Fees: “How-To Guide”
Here’s something from Dan Goelzer of Baker & McKenzie: As discussed in the December 2016 Update, the Financial Executives Research Foundation (FERF), the research affiliate of Financial Executives International (FEI), found, in its 2015 survey of audit fees, that the median SEC filer audit fee rose 1.6 percent in 2015. However, the largest public companies – large accelerated filers – enjoyed a 3.8 percent decrease in fees. FERF and Workiva, a provider of business data and control solutions, have followed up on the audit fee survey with a report on how companies can reduce audit fees or limit fee increases. The new report – “Mitigating Increases in Audit Fees” – is based on interviews with financial statement preparers and auditors.
The FERF recommendations fall into six categories:
1. Rethink the business and centralize business processes. “Audit fees are often related directly to the size and complexity of the business, so if any parts of the business are sold or discontinued, audit fees should decline in proportion. However, reducing audit fees for a company with a newly simplified structure often requires negotiation with the external auditor.” The report also notes that FERF’s annual audit fee survey has consistently found that companies with centralized operations average significantly lower audit fees than decentralized companies.
2. Align key controls with key risks. “Public Company Accounting Oversight Board (PCAOB) inspections have encouraged auditors to spend more time reviewing management controls during the annual audit, prompting registrants to align key controls with the most relevant risks.” In this respect, one of the auditors interviewed observed:
“Audits are a function of the amount of time that it takes to do the audit. If there are fewer key controls that need to be tested, the audit fees could possibly go down. However, there is a balance that needs to be struck, because the opposite could also be true. We think it is really important that the company and the external auditor align their control structure and do some upfront planning, because if the company and the external auditor both agree on the key controls that are in place and can be tested, there is a real opportunity for efficiency.”
3. Document internal controls. “Reviewing the documentation of internal controls, which can be time-consuming, has become a key part of the audit. If the client has very light or poorly organized documentation, or hasn’t thought through all the branches in a process, attestation becomes difficult for the auditor — and more costly for the registrant.”
4. Consider outsourcing internal audit. “A Big Four audit firm may be able to rely on the internal audit work of a regional firm with a significantly lower hourly rate.” Outsourcing internal audit to a firm in which the auditor has confidence should increase the extent to which the auditor is willing to rely on that firm’s work, rather than duplicating its testing. However, as the report notes, the effectiveness of this strategy also depends on the independence of the firm that performs the internal audit function.
5. Communicate with the auditor. “Good communication should be continual through the process, not limited to the start or end of the audit.” For example, in a case discussed in the report, the controller asked the auditor what the company could do to make the audit more efficient. The auditor responded with suggestions for analytics that could be prepared by the company’s staff, for review by the auditor, as a way of reducing audit hours. Another suggestion involved early communication to reach agreement on risk assessment.
6. Evaluate the latest technology. “External auditors and internal auditors are both using data analytics technology to increase audit quality, work smarter and potentially reduce costs. Technology can be used to detect and identify all exceptions, anomalies and outliers, rather than just those found within a sample.” One of the auditor interviewees suggested that–
“reports should generated [by the company’s IT system] in a way that the system retains a lot of audit evidence or evidence that the company might anticipate an external auditor would look for. * * * For example, the tracing and vouching to source documents, whether they’re invoices generated internally by the company or documents or evidence that is retained by a third party, such as a proof of delivery or a cash receipt.”
Comment: Because of their responsibility for the relationship with the outside auditor, audit committees may find the FERF publication a useful reference. The strength of the FERF approach is that it suggests ways in which the cost of the audit can be reduced with out compromising quality. Fee reduction demands which merely encourage the auditor to reduce audit hours run the risk of increasing the probability the audit will fail to detect a material misstatement or internal control weakness – either of which is likely to result in costs and embarrassment for the company and the audit committee out of proportion to any audit fee savings. Conversely, audit committees may want to probe more deeply into the reasons for fee reductions that are not based on the kinds of approaches outlined in the FERF guide.
Given that its the 20th anniversary of when the SEC delivered this report to Congress about the impact of technology on the securities law, I thought it would be a good time to explain how I became the main “Internet” guru in Corp Fin back in late ’90s. The story involves reviewing the first CD-ROM prospectus as told in this 6-minute podcast.
If you search the term “script” in this amended registration statement for Ameritrade’s 1997 IPO, you will see video was included in a CD-ROM that was attached to the paper prospectus. The CD-ROM was considered part of the prospectus – and the script was appended at the end of the printed prospectus.
I have pictures of the print prospectus & CD-ROM on my fairly lame Pinterest page – and Ameritrade recently posted the video itself! The video features numerous members of senior managers and explains how the company operates. Love the use of the Netscape browser! [Here’s my blog about my video regarding “how to file video on Edgar.”]
As noted in this blog, you might recall David Westenberg telling us that the 1st multimedia prospectus was the 1985 IPO of Kurzweil Music Systems – the printed prospectus was polybagged with an audiocassette. This was before the SEC had guidance on what to do with multimedia, so there were no lessons learned…
1997 Congressional Report: Impact of the Internet on the Securities Laws
Let me briefly explain that report to Congress about the impact of technology on the securities law. It was mandated as part of NSMIA. With Meredith Cross & Mauri Osheroff reviewing my work, I wrote the section relating to the Internet and public companies.
At the time, I printed off hundreds of pages of screen shots involving the first time that a pioneering company did something online. The firsts! I literally knew everything going on with public companies online – because there wasn’t all that much happening. In 1997, even large major companies were building their own websites for the very first time.
The Internet was so new that when I eventually landed at RR Donnelley as a marketing & sales guy (after a stint in-house at Lockheed Martin) – and sold them a website called “RealCorporateLawyer.com.” My title had the term “Internet” in it because that was so novel!
Broc & John: Impact of Technology on Securities Laws
In this 6-minute podcast that John & I taped a while back, we discuss the impact of technology on the securities laws & old dogs.
This podcast is also posted as part of my “Big Legal Minds” podcast series. Remember that these podcasts are also available on iTunes or Google Play (use the “My Podcasts” app on your iPhone and search for “Big Legal Minds”; you can subscribe to the feed so that any new podcast automatically downloads…
I’m sad to note that Bill Carter passed away last week. Bill served in Corp Fin for 30 years, most of them in the Office of Chief Counsel. Perhaps most notable is that Bill was primarily responsible for hiring several generations of Corp Fin Staffers over many years – including me.
Along with Bill Morley, Bill conducted the first – and often only – interviews with possible candidates. I remember my interview – right out of law school – vividly. Those two were cool customers. I had no idea how I fared in the interview. Little did I know that having gone to the University of Maryland Law School made me a “shoo in.”
I was with a bunch of former Staffers last week when we found out about Bill. We all had our Bill stories. For example, Bill apparently wanted to be a veterinarian. Bill was a real class act. When he announced his retirement in the late ’90s, I was working in OCC with Bill – and I tried to set him up with my mom. Bill was precisely the kind of guy that you wanted as your stepfather. Here’s how you can made donations to the American Cancer Society on Bill’s behalf.
SEC Chair Lists His Agenda Priorities
Recently, SEC Chair Jay Clayton testified on the SEC’s fiscal 2018 budget before the Senate Appropriations Subcommittee and listed his priorities. Here’s an excerpt from this Weil Gotshal blog on the topic (also see this Bass Berry blog):
Chair Clayton’s testimony revealed three main concentration areas for fiscal 2018: facilitating capital formation with an emphasis on small business growth; protecting investors through enforcement; and leveraging technology to achieve the SEC’s goals. The Chair indicated the SEC would be improving efficiency through automation, streamlining internal processes and utilizing data throughout the agency. Improvements in efficiency will be necessary to do more with less because the budget calls for small reductions in full time equivalent headcount in most areas (e.g., Enforcement down from budgeted FTE in 2017 of 1362 to 1329; Corporation Finance from 465 to 453, and Office of Compliance Inspections and Examinations (OCIE) from 1083 to 1055).
Transcript: “Public Company Carve-Outs – The Nuggets”
We have posted the transcript of our recent DealLawyers.com webcast: “Public Company Carve-Outs – The Nuggets.”
On Friday, John blogged about Corp Fin’s big announcement that it would extend eligibility for confidential review of draft registration statements to all IPOs – not just emerging growth companies as permitted under the JOBS Act. Since then, Corp Fin has issued these 18 FAQs to flesh out its new position, which commences July 10th…
We have posted the July issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!
Dazzling Sights of a Conference
Taking my own advice about “how to maximize your conference experience,” here’s the 10 new people I met during this year’s ‘Society for Corporate Governance’ conference:
Yesterday, Corp Fin announced that it would extend eligibility for confidential review of draft registration statements to all IPO issuers – not just emerging growth companies as permitted under the JOBS Act. In addition to IPOs, the initial filing of a registration statement for follow-on offerings within 12 months after an IPO will also be eligible for confidential review. Companies registering securities for the first time under the Exchange Act will also have the ability to have their registration statements reviewed confidentially, such as spin transactions. This new position commences July 10th.
The press release accompanying the announcement notes that permitting all new issuers to do so “will provide companies with more flexibility to plan their offering.” Corp Fin says that this initiative is part of its “ongoing efforts to facilitate capital formation.” The position should create a significant movement towards more draft filings going into the SEC. We’ll see how many offerings make it to market this year – but this is a big change in the review process that should create some momentum. We understand more position changes can be expected as facilitating the offering process is a priority for Chair Jay Clayton and Corp Fin Director Bill Hinman.
Happy 241st Birthday, America! I hope everybody has a great holiday & celebrates in style – personally, I’m planning to follow the bird’s lead.
We romanticize our nation’s founding, but in doing so, we sometimes forget what a roll of the dice it was. During a time that’s high in partisan invective and low in common decency, that’s not a bad thing to keep in mind.
The 4th of July gives us a good reason to pause for a moment & remember that, in the end, we’re all in this thing together. As Ben Franklin put it when the Declaration of Independence was signed – “We must, indeed, all hang together, or most assuredly, we shall all hang separately.”
This Skadden memo discusses Stadnick v. Vivint Solar, a recent 2nd Circuit decision addressing when financial information about an incomplete quarter needs to be disclosed in a prospectus.
Most courts that have confronted this issue have followed the 1st Circuit’s 1996 decision in Shaw v. Digital Equipment, and require disclosure when the information suggests that the quarter will be an “extreme departure” from prior results. But as this excerpt notes, the 2nd Circuit took a different approach:
The Second Circuit declined to adopt Shaw’s “extreme departure” standard, adhering instead to the materiality test it articulated in DeMaria v. Andersen, 318 F.3d 170 (2d Cir. 2003). Under DeMaria, a duty to disclose interim financial information arises “if a reasonable investor would view the omission as ‘significantly alter[ing] the ‘total mix’ of information made available.’”
Instead, the Second Circuit analyzed the omissions holistically in light of the total mix of available information. The Second Circuit concluded that when viewed in the context of the registration statement’s extensive disclosures on Vivint’s six prior quarters and unique business, Vivint’s third quarter results were consistent with past performance and “the successful implementation of its business model.”
The 2nd Circuit also rejected plaintiff’s argument that the company’s failure to address certain regulatory risks in its MD&A violated Item 303’s “known trends” disclosure requirement. In doing so, it pointed to the company’s risk factor disclosure, which in the Court’s view provided investors with ample warning of the regulatory issues in question.
Securities Act Claims: Do States Still Have Jurisdiction?
I recently blogged about the growth in Section 11 lawsuits in state courts – with California, in particular, emerging as a favorite venue for these actions. Now this Shearman & Sterling blog reports that the Acting Solicitor General is asking the US Supreme Court to review whether state courts still have jurisdiction over these suits:
On May 23, 2017, the Acting Solicitor General filed a brief on behalf of the United States as amicus curiae urging the Supreme Court to grant the petition for a writ of certiorari in Cyan v. Beaver County Employees Retirement Fund, No. 15-1439, to resolve confusion in lower courts as to whether the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) divests state courts of jurisdiction over cases that allege only claims under the Securities Act of 1933.
The issue has been a significant one. California state courts in particular have become a forum of choice for plaintiffs asserting claims under the Securities Act, and procedural bars on interlocutory review of decisions denying motions to dismiss or remand have precluded significant appellate review.
The Supreme Court had invited the government to weigh-in last fall. The Acting Solicitor General’s brief urged the Supreme Court to hold that SLUSA doesn’t divests state courts of jurisdiction – but renders Securities Act cases removable to federal court.
The Supreme Court granted cert earlier this week. Check out this ‘D&O Diary’ blog for more details on the case.
The blog points out that there are some pretty interesting provisions in the legislation, including a section forbidding a federal court from certifiying a class action in which the named plaintiff is “a present or former client” of class counsel. As this excerpt notes, that’s pretty radical stuff:
As skeptical as we may be about some of the securities class action lawsuits brought against public companies, it’s very unusual to take the position that plaintiffs cannot choose counsel they’ve worked with in the past to represent them.
It’s particularly unusual given that institutional investors and others are not naïve entities unable to protect their own interests. Many of the plaintiffs being represented in securities class action litigation are large, sophisticated institutional investors.
This McGuire Woods blog says that this statute faces fairly long odds – it has a long list of opponents & PredictGov gives it only a 21% chance of passing. But the last time Republicans controlled the White House & both branches of Congress saw the most recent round of reforms enacted – so the time may be ripe for this kind of legislation.
Earlier this month, the SEC’s Division of Enforcement entered a cease & desist order against the former CEO & CFO of UTi Worldwide, a multinational freight forwarding company. The proceeding involved alleged failures to comply with S-K Item 303’s requirement to disclose in the MD&A section any “known trends and uncertainties” that are “reasonably likely” to impact a company’s liquidity.
UTi experienced delays in billing resulting from a new operating system. This resulted in a hit to cash flow, and came at a time when the company was also struggling to comply with its debt covenants. The 10-Q for the relevant period didn’t address the billing problems and their cash flow impact. When UTi subsequently disclosed that it blew its debt covenants due to liquidity issues resulting from the billing problems, its stock cratered – and Enforcement came knocking.
This Cleary Gottlieb blog reviews the proceeding & the “known trends” requirement. Here’s an excerpt discussing the SEC’s views about when known trends disclosure is required:
Regulation S-K Item 303 requires the “disclosure of a trend, demand, commitment, event or uncertainty…unless a company is able to conclude either that it is not reasonably likely that the trend, uncertainty or other event will occur or come to fruition, or that a material effect on the company’s liquidity, capital resources or results of operations is not reasonably likely to occur.” As the SEC noted in the Order, the “reasonably likely” standard is a lower standard than “more likely than not.”
What the SEC did not discuss, but what is equally important for companies that need to comply with the disclosure requirements to understand, is the probability floor for when this forward-looking disclosure is required. The good news is that the “reasonably likely” standard is a higher probability threshold than if a material effect is “reasonably possible” (which is the standard for the disclosure of contingent liabilities under ASC 450, Contingencies, and which would require disclosure in the event the likelihood of a “material effect is higher than remote”.
This Drinker Biddle blog notes that the case is the most recent example of the SEC’s increasing willingness to bring financial reporting & accounting actions that aren’t premised on financial statement materiality, and don’t involve fraud-based allegations.
Enforcement: SEC Stakes a Claim to Anti-Money Laundering Violations
This Ballard Spahr memo reviews recent cases where the SEC has used a new enforcement tool – the Bank Secrecy Act & its anti-money laundering (AML) regulations – against financial institutions. While violations of these actions has traditionally been addressed by other regulators, this excerpt says that the SEC appears ready to flex its muscle more frequently in this area:
This most recent complaint filed by the SEC is not an isolated event, but rather part of a trend. Earlier this year, another broker dealer was charged in a similar civil enforcement action with failing to file SARs. These enforcement actions – and others – are consistent with the public pronouncements of the former SEC Enforcement Director, who has stated that the SEC Broker Dealer Task Force must “pursue standalone BSA violations to send a clear message about the need for compliance.”
The memo compares the SEC’s decision to stake a claim in the AML arena to its decision to pursue FCPA cases – a statute that historically had been addressed by other agencies, but where the SEC now has an established role.
FCPA: Many Derivative Actions Filed, But Few Make the Cut
Over on the ‘D&O Diary,’ Kevin LaCroix recently blogged about the fate of many derivative actions that follow on the heels of the announcement of an FCPA violation. Qualcomm announced a high-profile FCPA settlement with the SEC in March 2016, and a derivative action was filed shortly thereafter in Delaware Chancery Court. This case, like most other FCPA-based derivative claims, didn’t make the cut:
As I have observed in the past (for example), while plaintiffs’ lawyers frequently are quick to file follow-on civil suits in the wake of an FCPA investigation or enforcement action, in many instances these suits are unsuccessful as the suits often fail to clear the initial pleading hurdles. As was the case here, a frequent basis on which these suits are dismissed is the failure to establish demand futility. To be sure, there are FCPA follow-on actions that survive motions to dismiss (as discussed for example), but in many other instances the cases do not survive.
The blog notes that despite their poor track record, plaintiffs keep trying – which since the underlying FCPA cases are often based on significant misconduct, isn’t really surprising.
Twitter is so 2016. At our recent “Women’s 100 Conference,” one forward-thinking company said their IR team prefers live Q&A via “Sli.do” – an audience interaction platform that lets you crowd-source & filter questions in real time. Some companies are also considering holding live meetings on Facebook & Periscope – if they can get comfortable with Reg FD. Learn more about social media & Reg FD in our newly updated “Regulation FD Handbook“…
Risk Oversight: Social Media & Your Brand
One challenge of a social media crisis is that everyone – customers, shareholders, employees, directors – sees & reacts to it simultaneously. This Deloitte memo outlines how boards can be more nimble by preparing in advance for this risk. Here’s an excerpt:
Board members who understand the brand and reputational risks posed by social media and make an effort to understand how brands are positioning themselves can better help their organizations prepare and respond to brand-threatening incidents. Board members can ask questions like these to help senior executives clarify brand positioning and mitigate potential damage on social media:
1. Is our messaging on social media platforms consistent with our core values?
2. Do we have the data and analytics to show that our actions on social media live up to our brand promise?
3. Which tools are we using to monitor our social media channels and conversations about the brand? How are we using the insights to inform our strategy and mitigate risk?
4. Is there a crisis management plan or playbook for a social media incident?
5. Have we developed and communicated the appropriate social media policies to our employees and if so, how are they monitored and reinforced?
SCOTUS: Whistleblower Case Is a “Go”!
Yesterday, the US Supreme Court agreed to review a Ninth Circuit opinion – Somers v. Digital Realty Trust – to consider whether employees who report misconduct internally within their companies (and not to the SEC) are entitled to anti-retaliation protections as “whistleblowers.” Here’s the news from this WSJ article by Andrew Ackerman:
The announcement is welcome news for corporate defendants that have lamented the broad way in which the SEC and some federal courts have interpreted the 2010 Dodd-Frank financial-overhaul law, which is ambiguous about whether employees who make only internal corporate reports of securities fraud are protected under federal law.
The Dodd-Frank law included a number of provisions aimed at encouraging people to speak out about alleged wrongdoing at their employers. Those included new incentives, such as giving tipsters a portion of the penalties imposed on firms if they report misconduct to the SEC. It also included new penalties for employers seen as discouraging the reporting of misconduct—so-called anti-retaliation provisions.
Monday’s case narrowly focuses on whether such anti-retaliation provisions apply to people who report misconduct to their employers, but not to the SEC. The high court will consider the matter in the fall of 2017 when it meets for its next term, giving the justices a platform to potentially narrow the scope of protection in this area.
Two circuit courts have held internal reporting is protected under the Dodd-Frank Act, and one circuit court has found the protections apply only when misconduct is reported to the SEC.
The SCOTUS decision is expected by the end of next June.
