In this podcast, Dave Lynn and Marty Dunn engage in a lively discussion of the latest developments in securities laws, corporate governance, and pop culture. Topics include:

– Analysis of Form S-3 and Form S-8 eligibility
– Alternative pay measures for the 2013 proxy season
– Favorite holiday gifts

Saw the first mentions of a rumor that Enforcement Director Rob Khuzami would soon be leaving the SEC last night. And now most of the major media outlets are reporting the same – including the WSJ and Bloomberg. If he does indeed leave, that would mean three Director departures out of the four major Divisions within a few short weeks (and remember that the SEC is working with an “Acting” Chief Accountant – and the IM Director turned over just six months ago)! Here is the ten cents that I recently blogged about whether all these senior Staff departures are normal after an election…

The Fiscal Cliff: How Many at the SEC Will Be Furloughed?

Hopefully this will be my last blog of this year – trying a blog vacation next week – and with the fiscal cliff looming, the federal agencies are gearing up for the consequences. Furloughs galore. See this Washington Post article and this Government Executive piece.

– Broc Romanek

Last Sunday, the New York Times Magazine included this comparison of the Securities & Exchange Commission and the Southeastern Conference, one of the major collegiate sports conferences:

Hat tip to Dan Pliskin for reminding me about it!

First Attempt to Kill the Shareholder Proposal Rule? Early 1943

In the wake of my blog wishing a happy 70th birthday to Rule 14a-8, a member sent this fascinating New York Times article dated January 24, 1943, providing details of a Senate bill designed to kill the new shareholder proposal rule – the one that had just been adopted the month before! It seeks to revoke the SEC’s power to regulate proxies during wartime – with an amendment sought that all regulations prescribed by the SEC after November 1, 1942 be wiped out. Things were more radical back then that I thought…

ISS’ ExecComp Analytics

In this CompensationStandards.com podcast, Mark Brockway of ISS Corporate Services discusses the latest developments related to ISS’ executive compensation analytic services, ExecComp Analytics, including:

– What is ExecComp Analytics?
– What was your goal in creating it?
– Any surprises so far since it went live?

– Broc Romanek

It’s starting to become an annual tradition – blogging about the world’s largest holiday disclaimer (here is the one from last year). Cary Klafter of Intel again shares what I imagine has to be the world’s largest holiday disclaimer, running for 15 pages, nearly double last year’s beast. And don’t forget Manatt’s funny holiday card with disclaimers…

PCAOB’s New Staff Audit Practice Alert: Professional Skepticism in Audits

A few weeks ago, the PCAOB published a Staff Audit Practice Alert #10 to remind auditors of their requirement to exercise professional skepticism throughout their audits. On its face, the fact that the PCAOB published an alert to tell auditors to do their job speaks volumes. It begs the question – why aren’t auditors already skeptical? I’m not convinced issuing an alert will do much by itself…

Meanwhile, the SEC issued this order on Monday approving the PCAOB’s Auditing Standard No. 16, Communications with Audit Committees (see this Gibson Dunn blog and Morrison & Foerster blog on impact on EGCs). And the SEC posted this report to Congress on assigned credit ratings yesterday.

PCAOB Brings Case on Audit Documentation

David Smyth notes this interesting enforcement case from the PCAOB that focused on process, not substance…

Note this interesting speech from the SEC’s Chief Economist, Craig Lewis, entitled “Risk Modeling at the SEC: The Accounting Quality Model.”

– Broc Romanek

Cooley’s Cydney Posner gives us this news brief (and here’s a Davis Polk blog on this):

Nasdaq has just filed an amendment to its proposed rules relating to compensation committee independence and consultants. The change addresses a troublesome timing problem with the original proposal.

Proposed Rule 5605(d)(3) states that a compensation committee must have the specific responsibilities and authority necessary to comply with Rule 10C-1(b)(2), (3) and (4)(i)-(vi) under the Exchange Act relating to the retention, compensation, oversight and funding of compensation consultants, legal counsel and other compensation advisers, and is required to consider the six independence factors enumerated in Rule 10C-1(b)(4) before selecting, or receiving advice from, these advisers. Originally, these provisions – that is, requiring that the committee be granted the specific authority and responsibility referenced in Rule 5605(d)(3) — were to have become immediately effective upon approval of the Nasdaq proposal by the SEC, creating some implementation and coordination problems. Under the amended proposal, Rule 5605(d)(3) will become effective on July 1, 2013; by that date, the committee’s authority and responsibility under Rule 5605(d)(3) must be reflected in the committee charter, resolutions or other board action, as permitted by state law. (Ultimately, the authority and responsibility under Rule 5605(d)(3) must be included in the charter in accordance with the regular transition schedule for these rules.) In addition, under the amendment, Nasdaq proposes that companies comply with the remaining provisions of the amended listing rules by the earlier of (1) their first annual meeting after January 15, 2014 or (2) October 31, 2014. This revision is consistent with the NYSE proposal.

Also notable in the amendment is the express deletion of the word “independent” prior to “legal counsel” to make clear that only in-house counsel are excluded from the requirement to consider independence. In addition, the original proposal discussed the committee’s need to consider the six independence factors in “making an independence determination” regarding compensation consultants, legal counsel and other advisers. In the amendment, the concept of an “independence determination” has been deleted, with the reference now only to the need to consider the six factors before selecting, or receiving advice from, these advisers. The deletion may have been intended to emphasize that the committee “is not required to retain an independent compensation adviser.” The addition of the phrase “receiving advice from” makes clear that the analysis cannot be avoided simply by not “selecting” an advisor.

The amendment also proposes changes to the phase-in schedule for companies ceasing to be Smaller Reporting Companies, allowing these companies six months, in lieu of the originally proposed 30 days, to certify that they have adopted a formal compensation committee charter. These companies will also be permitted, under the amendment, to phase in fully compliant compensation committees.

The proposed form of compensation committee certification is now attached to the amendment to the proposal. The certification will be due 30 days after the final implementation deadline applicable to the company.

Meanwhile, Ning Chiu of Davis Polk analyzes the 15 comment letters submitted on the Nasdaq’s and NYSE’s proposals in this blog…

Lona Nallengara Tapped as Acting Corp Fin Director

Yesterday, the SEC announced that Lona Nallengara has been named as Corp Fin’s Acting Director, replacing Meredith Cross until a permanent Director is found. In addition, John Ramsay was named Acting Director of the Division of Trading and Markets.

Happy Birthday to the SEC’s Shareholder Proposal Rule!

The precursor to today’s Rule 14a-8 was adopted 70 years ago today…

Board Oversight of Compliance

In this podcast, Jeff Kaplan of Kaplan & Walker explains the latest developments in how boards oversee compliance programs, including:

– What are the important legal drivers for board oversight of compliance programs?
– Can you provide an overview of board oversight of compliance programs – meaning what sort of information they should receive?
– Can you describe more about what you called the operational type of information?
– Is there the same type of variation in what you called the case-specific type of information that a board gets?
– How does a company make all this happen? Is the starting point with governance documentation?

– Broc Romanek

Here’s how this article entitled “How the SEC Almost Shut Down Wall Street” begins:

Sensitive, confidential information belonging to major U.S. stock exchanges was at risk of being hacked, according to a new Reuters report. Securities and Exchange Commission Interim Inspector General Jon Rymer wrote in a 43-page report that some SEC staffers had used unprotected government computers at a Black Hat convention this year. This convention attracts hundreds of hacking experts who bring seemingly impenetrable devices with them to see if they can be cracked, says Adam Levin, chairman and cofounder of Credit.com. The SEC said the government-issued computers were not hacked and no unauthorized breach of data occured. According to Reuters, the SEC employees attending the conference had logged into the unencrypted computers through public wireless networks.

The Inspector General said the employees, who had worked in the SEC’s Trading and Markets division, were no longer at the federal agency. The SEC has been warning Wall Street firms and and market exchanges to beef up their cyber security efforts. But the government computers brought to the Black Hat convention did not have basic virus protection programs installed and the employees had neglected to encrypt the devices, Reuters reports.

And this Reuters article notes that the NYSE has hired former Homeland Security Secretary Michael Chertoff to make sure sensitive exchange data was not breached after securities regulators left their computers unencrypted.

Here’s an interesting op-ed from Covington & Burling’s David Kornblau entitled “Regulate U.S. Markets Like the Nuclear Industry.”

Building FCPA Compliance Programs

In this podcast, Greg Dickinson of Hiperos discusses the latest developments in FCPA compliance, including:

– What does Hiperos do?
– How does your platform allow companies to facilitate forming their FCPA compliance programs?
– Any surprises in creating that platform?
– What do you see in 2013 as far as DOJ enforcement of the FCPA is concerned?
– What about the regulatory environment in general?

Heard Peter Coyote talk about the plight of wrongly imprisoned Leonard Peltier and it’s sad that this country still can’t get it right when it comes to freedom. Please sign this petition for clemency as he is in poor health and already served 37 years for something he didn’t do…

FCPA Regulators Speak on Newly Released FCPA Guidance

Here are notes from Morrison & Foerster from a recent conference where SEC and DOJ Staffers spoke about the new joint FCPA guidance (and here is Morgan Lewis’ memo on the same topic)…

– Broc Romanek

Back in May, I blogged about the madness in the SEC’s Inspector General’s Office. The David Kotz and David Weber show. A soap opera at the SEC like this comes along only once every few generations!

The latest is that former Assistant Inspector General Weber has filed a $20 million lawsuit alleging he was fired for being a whistleblower. And the complaint is full of juicy details (which may – or may not – be true). Here are some articles on this development:

– Rolling Stone’s “SEC Rocked By Lurid Sex-and-Corruption Lawsuit”

– Business Insider’s “SEC Whistleblower Suit: Sex, Lies, Stupidity, Oh My!!”

– Courthouse News Service’s “Former Top Official Files Scorching Complaint Against SEC”

– Huffington Post’s “David Weber Lawsuit: Ex-SEC Investigator Accused Of Wanting To Carry A Gun At Work, Suing For $20 Million”

– Bloomberg’s “SEC Sued by Fired Investigator Who Alleged Ethical Lapses”

– ThomsonReuter’s “A cautionary tale for whistle-blowers, from the SEC’s own ranks”

As a U. of Michigan grad, I’m very excited about their hoops team this year – particularly our Canadian freshman Nik Stauskas. Here is a video of what he did for Thanksgiving. Unbelievable talent and dedication…

PCAOB Issues Report on the State of Internal Controls

A few days ago, the PCAOB released a report summarizing observations from its inspections of audits performed by the 8 largest public accounting firms of their clients’ internal control over financial reporting in 2010. As noted in this blog by the FEI, there is a concern over the increasing rate of deficiencies – up to 22% in ’11 from 15% in ’10.

Looking for something different for the new year? Learn about the “Lowell Milken Institute Law Teaching Fellowship” opportunity at UCLA School of Law.

Iran Sanction Related Disclosures

In this podcast, Abram Ellis of Simpson Thacher & Bartlett explains the latest developments relating to Iran sanctions and disclosure, including

– How do the recent changes to the U.S.’s economic sanctions related to Iran implicates disclosures?
– What does it mean when you say an issuer must report the activities of affiliates? What’s included in that?
– What types of activities need to be disclosed?
– How detailed do the disclosures need to be?
– Anything else we should know about the disclosure requirements?

– Broc Romanek

In this podcast, Dave Lynn and Marty Dunn engage in a lively discussion of the latest developments in securities laws, corporate governance, and pop culture. Topics include:

– Changes at the SEC
– Reflections on a “business day”
– Which is better: 450 5th Street versus 100 F Street?
– Which is better: Original Elvis or Comeback Elvis?

Congressional Committee Changes & the Impact on the SEC

This Reuters article discusses changes in the leadership of the Senate Banking Committee and House Financial Services Committee, the top oversight committees for the SEC. Senator Michael Crapo will now be the ranking Republican on the Senate Banking Committee, with Senator Tim Johnson (D-SD) remaining at the Chair. Newly elected Elizabeth Warren (D-Mass) will join that committee (here is a recent interview with her).

Representative Jeb Hensarling (R-Texas) will take over as Chair of the House Financial Services Committee (taking over for Spencer Bachus) with Maxine Waters (D-Cal) who will be the ranking Democrat on that committee…

The Legacy of SEC Chair Mary Schapiro

Tomorrow is SEC Chair Mary Schapiro’s last day and much has been – and will be – written about her legacy. There are a collection of articles about this linked from this Cooley new brief. And here is a brief interview conducted with Mary.

Personally, I will always be amazed at how long a career she has had in public service at the very top. Don’t forget she first became a SEC Commissioner at age 33! And she was the first woman to serve as the SEC Chair. In between, she served a variety of high-ranking roles at other agencies (including the head of FINRA) – all under the administrations of different political parties. I would be surprised if someone else ever matched Mary’s leadership record of public service in the securities law field…

– Broc Romanek

Pretty interesting video featuring Naval Ravikant, co-maintainer of AngelList, describing his efforts to come to DC and change how the JOBS Act was put together. According to Naval, all it takes is calling in a hundred favors – and approach the task like a start-up. There was an online petition with 5000 signatories from the VC world that was used to influence Congress – “using technology as a weapon in this cause.” Fascinating background. He does laugh about the misnomer “Jobs” Act, which was not his doing…

Here are two interesting items:
– Gus Schmidt’s “Did the JOBS Act unintentionally change the statutory private offering exemption?”
– Reuter’s “Investor advocates press SEC to finish “bad actor” rule“

Whole Lotta JOBS Act Activity…

With Led Zeppelin being in DC recently to be honored at the Kennedy Center, I have to throw in some reference. Anyways, here are recent JOBS Act items:

1. As noted in this Cooley news brief, two SEC commissioners, Luis Aguilar and Elisse Walter, have advocated that “more safeguards for investors should be considered before a rule lifting the ban on general advertising for private offerings is adopted. Here is Commissioner Walter’s speech on the topic. Here is a Gibson Dunn blog about what Elisse’s promotion might mean for the future of this rulemaking – and here’s a summary of the comment letters from McGuireWoods.

2. This article claims that Chair Schapiro dragged her feet on the general solicitation rule so it wasn’t adopted on her watch. But the reality is that the interim proposed rule did not meet the test the courts have prescribed for an interim final rule and would likely not have stood up in court. As is often the case in the bizarro world we live in, the people pushing for its quick adoption are the same people who have criticized the SEC for not doing enough cost-benefit analysis on rules viewed as being investor friendly.

3. Some IPOs appear to be avoiding the JOBS Act stigma as noted in this WSJ article entitled “Some Firms Shun Looser IPO Rules.”

4. Check out this blog entitled “Crunching the numbers on EGC shells.”

5. The Treasury Department has been participating in JOBS Act roundtables around the country – but there has been zero press about them as they are closed to journalists. Why the need for secrecy?

In this recent speech, SEC Commissioner Aguilar bemoans the recent finding that only 17% of Americans trust the market. This is a much bigger problem for Corporate American than they realize and ties into the numerous accounting scandals, pay-for-no-performance stories and other governance bombshells that occur on a daily basis. No buyers mean that sooner or later, stock prices start going down…

Our New “Voting Requirements & Results Disclosure Handbook”

Spanking brand new. Posted in our “Form 8-K” Practice Area, this comprehensive “Voting Requirements & Results Disclosure Handbook” provides a heap of practical guidance about how to navigate Items 6 & 21 of Schedule 14A and Item 5.07 of Form 8-K. This one is a real gem – 33 pages of practical guidance…

– Broc Romanek

One of my favorite topics is “usability” when drafting disclosure, whether it be for a paper document or for something posted online. I first wrote about the topic of usability for online documents in this article a dozen years ago. For many of us, drafting disclosure is our profession. We are the experts. And understanding how our disclosure is best consumed is something we should know a lot about.

Now I have written a checklist to help you get a better grasp on the process of writing more usable documents, with some great input from Jared Brandman of Coca-Cola (Coke has done some great things lately, from its online proxy statement to a revamped IR web page).

Proxy Drafting & Usability

In this podcast, Iain Poole of Labrador discusses how to best draft a proxy statement, including:

– How do you determine the ideal type of disclosure layout for a proxy statement?
– What trends are you seeing in proxy presentation?
– What about the ideal format for usability online?

FINRA’s New Rule 5123 FAQs & User Guide

From this blog by Blank Rome’s Melissa Murawsky:

FINRA recently released FAQs and a user guide related to Rule 5123 filings. As discussed in more detail in the June/July issue of Up To Date, Rule 5123 requires, subject to certain exceptions, FINRA member firms that sell securities in certain private placements to submit a notice filing with FINRA. Such notice filing shall include a copy of any private placement memorandum, term sheet or other offering document, including any materially amended versions thereof, used in connection with such sale. Members that do not employ offering documents must indicate to FINRA that no such documents were used in connection with the applicable offering. Submissions must be made within 15 calendar days of the first sale.

The FAQs answer practical questions regarding filing requirements, such as: how members file a notice with FINRA, whether third parties can file offering documents on behalf of a member, and when does the 15-day period commence for filing with FINRA. In addition, the FAQs address matters relating to exemptions form Rule 5123. The FAQs also provide contact information at FINRA for members who have general inquiries and questions regarding Rule 5123. The user guide gives members step by step instructions regarding how to access the private placement filing system and how to make a Rule 5123 filing.

– Broc Romanek