When I was on my social media speaking tour last year, I talked quite a bit about two new services that were changing the way that investors received and shared information. These two services really are game-changers and show how social media is changing the investment world just as much as any other industry.
The first is StockTwits, which is an online financial community that enables investors to share their market insights, ideas, charts and news in real time in a Twitter-like manner. In other words, StockTwits takes the chaos out of Twitter by organizing tweets by company (the filter is the dollar sign in front of a company’s stock symbol – tweets that do this are then included in a company’s message stream on StockTwits and Twitter, as well as other social networks and financial websites); here are instructions on how to try it out.
After four years in operation, StockTwits really has taken off with well over 150,000 investors of all types using the platform (this recent article explains more). Remember that time is money – and studies have shown that news travels faster through online platforms than through the news wires (see this article for example).
Here are three examples of the growing power of StockTwits:
1. StockTwits has partnered with mainstream media channels to distribute news, including Yahoo Finance, Bloomberg, CNN Money, Reuters and others, as well as social media platforms including Twitter, Facebook and LinkedIn.
2. Starting last summer, investor relations departments at a number of public companies began managing and utilizing their “official” profile and ticker pages on StockTwits to create a verifiable presence on the platform. In other words, companies can distribute their own messages on StockTwits and investors reading them know they truly are from the company. Since this is where a company’s shareholders (and potential shareholders) are gathering online, these companies smartly have gone to where the action is to participate, which can be as simple as tweeting links to SEC filings and press releases as they come out.
3. As reflected on this StockTwits page, investors can choose to “follow” the analysis provided by specific analysts that they like. In this way, StockTwits facilitates whom investors choose to obtain their information to make investment decisions.
MarketBrief is the second service that is changing the way investors consume information – and it was only launched last August. As explained in this article, MarketBrief’s computers take SEC filings as they are made and converts them into tweets. That is, they cram the essence of the SEC filing into 140 characters in about a second. Mind-blowing. And as noted in this announcement, these two have teamed up so MarketBrief’s summaries flow through StockTwits.
For those out there that aren’t tech-savvy, it is not hard to learn the basics of what is happening here and it’s important that you do because these are not like the Yahoo message boards of the ’90s. These are much more powerful and reliance on them by sophisticated (and large) investors will only grow…
Introducing AnalytixInsight
Recently, I was trying the free beta for the AnalytixInsight service and came away amazed about what technology can do these days. Among other interesting things, its computers can crunch numbers and other publicly available information (click on the “Fundamental Analysis” tab) and put together a lengthy report that is akin to an analyst’s research report.
In this podcast, John Ballow of AnalytixInsight discusses his AnalytixInsight service and what it can do, including:
– What is the AnalytixInsight service?
– How would public companies use this service?
– How does these tools relate to say-on-pay?
– How can companies dispute content that they view as erroneous?
The recent discussion of the CEO of WebMediaBrands highlighted the importance of thoughtful social media policies. But before you conclude that those policies are the domain of just the securities and IP/IT lawyers, you need to consider the NLRB’s view on social media as recently expressed in a report by the NLRB’s general counsel.
In the NLRB’s view, there are significant limitations on companies’ ability to constrain communications that relate to “concerted action,” and it takes a very broad view of the different types of statements that might be concerted action. As a result, social media policies that are absolute in their prohibitions – e.g., a prohibition on employees publicly discussing financial results, a perfectly reasonable prohibition from a securities lawyer’s perspective – could run afoul of the NLRB’s views.
For instance, a company may or may not be able to prohibit an employee’s posting on his or her Facebook page, even if the posting precedes any other public announcement by the company, that “The company made $152 million last quarter and can afford to pay us more.” In reality, this is an extreme example and probably could be constrained somewhat, but the boundary line is not far from it. As a result, companies need to factor in not just Reg. FD and other securities laws when they consider their social media policies, but also the NLRB’s views.
Last month, I blogged about Apache suing John Chevedden in the District Court for the Southern District of Texas for the second time in three years, using this a court-mandated exclusion route rather than the traditional Corp Fin no-action request one. As was the case when Apache won its case two years ago, the company contested whether John Chevedden satisfies the proof of ownership requirements imposed by the rule.
On Monday, the court entered into this final judgment in favor of Apache again – but this time around, it was based on a settlement between Apache and Chevedden. It appears that Chevedden threw in the towel early – possibly to save his resources for his appeal of last year’s District Court decision against him in his litigation with KBR regarding similar proof of ownership issues. That case is being appealed in the Court of Appeals for the Fifth Circuit. All of the Apache proceedings are posted in our “Shareholder Proposals” Practice Area.
Webcast: “The Dynamics of Disclosure Claims”
Tune in tomorrow for the DealLawyers.com webcast – “The Dynamics of Disclosure Claims” – to hear Kevin Miller of Alston & Bird, Blake Rohrbacher of Richards Layton and Steven Haas of Hunton & Williams discuss how the dynamics of disclosure claims – including the procedural posture and risk/reward analysis of a potential appeal by defendants – are causing outside counsel to transaction participants to recommend increasingly detailed disclosure of such information in merger proxies and notices of appraisal rights. Please print off these course materials in advance.
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– NACD’s New Blue Ribbon Commission Report on Lead Directors
– Corp Fin Allows Exclusion of GE Auditor Rotation Proposal
– SEC Republishes Revised FINRA Proposal to Require the Filing of Private Placements
– Sentencing Commission Acts on Dodd-Frank
– Q&A with Governance Expert Bob Monks
Yesterday, Corp Fin issued new ’34 Act CDI 169.07 to provide clarity about how companies should be listing their say-on-pay proposals on proxy cards and voting instruction forms. The CDI lists four examples that the Staff believes is consistent with Rule 14a-21 – and one example that the Staff believes is not consistent (ie. “To hold an advisory vote on executive compensation”). I believe many companies are going to need to make a tweak to their proxy cards and VIFs as they used the “inconsistent” language last year…
I’m not sure what to make of this NY Post article noting that a whistleblower – someone at an unnamed proxy solicitor – is claiming that a mid-level employee in ISS’s Boston office has been exchanging confidential voting data for gifts or cash from solicitors. Allegedly, the whistleblower has complained to the SEC – but whomever it is wouldn’t respond to questions from the NY Post reporter. We’ll see if this develops or is an urban myth. Among the odd things, it seems like the information could be valuable to arbitragers in a merger vote, but really not worth that much to companies (and their agents). Here’s today’s WSJ article on the topic…
Section 12(g): Corp Fin Grants Global No-Action Relief for RSUs at Pre-IPO Companies
Yesterday, Corp Fin granted this no-action relief to Fenwick & West regarding the use of restricted stock units for employees at pre-IPO companies under certain conditions without the company needing to register the securities under Section 12(g) of the ’34 Act (generally, the conditions are similar to those in Rule 12h-1(f) for options). By granting the letter to a law firm – and not a specific company – this no-action letter serves as broad relief for those pre-IPO companies hoping not to be forced to go public before they are ready, a hot topic as it has even attracted attention on Capitol Hill where proposed legislation is afoot to raise the 12(g) thresholds, etc. Previously, Corp Fin had been granting relief in this area on a case-by-case basis (egs. Twitter, Facebook – see this blog).
Webcast: “Transaction Insurance as a M&A Strategic Tool”
Tune in tomorrow for the DealLawyers.com webcast – “Transaction Insurance as a M&A Strategic Tool” – to hear Keith Flaum of Dewey & LeBoeuf, Mark Thierfelder of Dechert and Craig Schiappo of Marsh’s Private Equity and M&A Services Group discuss how the use of insurance in deals is gaining popularity as a tool to bridge the gap on one of the most fundamental deal issues in any M&A transaction: the potential post-closing erosion of value. Please print off these course materials in advance.
Due to my high visibility I guess, I often am asked all types of statistic queries. That’s why I was excited to see this issue of the “Accounting News Report” that includes these stats:
– Big Four firms hold 43.5% of all public company clients (there were 8903 public company clients)
– Nine firms audit more than 50% of all public company clients
– Ernst & Young audits the most with 1177
– Analyzing the # of clients per category: E&Y led the accelerated filer category; PwC led the large accelerated filer category; Deloitte led the non-accelerated filer category; and BDO USA led the small reporting company category.
– Big Four hold a dominant share, no less than 67% in each of three categories (large accelerated filers, accelerated filers and non-accelerated filers) – but they hold only 7.2% in smaller company category
– 103 firms that comprise leading auditors hold 84.7% of all public company clients
– Median number of public company clients for 103 leading auditors is 25
An Interview with the PCAOB’s Jim Doty
A while back, the Journal of Accountancy published this interesting interview with new PCAOB Chair Jim Doty. This excerpt says it all regarding what to expect during his tenure (ie. change):
He said the greatest surprise he’s encountered in his new role is “the heightened self-awareness [auditors] have that the world is changing.” “I don’t see any firm that I have looked at and met with or heard from that doesn’t appreciate that, in fact, they’re in the middle of a process that can’t be reversed.”
Note that last week, the PCAOB settled a disciplinary order censuring Ernst & Young for the largest civil penalty it has ever imposed – $2 million, sanctioning four of its current and former partners for violating it rules and standards.
Survey Results: Big 8 Auditors – and a New Survey about the “Little Eight”
Last year, I ran a poll to see how many old-timers out there could name what used to be known as the Big 8 auditors. For the most part, members answered correctly although some were tripped up by “Arthur Siskel & Ebert.” As noted in Wikipedia, the Big 8 died back in 1987 and consisted of:
1. Arthur Andersen
2. Arthur Young & Co.
3. Coopers & Lybrand (originally Lybrand, Ross Bros., & Montgomery)
4. Ernst & Whinney (until 1979, Ernst & Ernst in the US and Whinney Murray in the UK)
5. Deloitte Haskins & Sells (until 1978 Haskins & Sells in the US and Deloitte & Co. in the UK)
6. Peat Marwick Mitchell (later Peat Marwick, then KPMG)
7. Price Waterhouse
8. Touche Ross
The concentration of auditors in a Big 4 doesn’t appear to be on the PCAOB’s plate at this time, with its recent concept release tackling so many other issues. I do note that, in 2008, the report of the US Treasury Committee on the Auditing Profession did discuss competition problems and issues within the profession, with a call for certain changes. And last year, as noted in this Bloomberg article, the Big Four were reported to be facing a probe by the UK’s antitrust regulator.
Anyways, a member threw down a more difficult challenge than naming the Big 8. She wants you to name the “Little Eight” that existed at the time of the “Big Eight.” Shoot me an email with your answers…
I’ve written repeatedly how absurd it is for a so-called independent federal agency – like the SEC – to be subject to the very real political pressures and whims of Congress. And the political pressures faced by the SEC have only grown since the passage of Dodd-Frank a mere two years ago. You may recall that the Senate’s version of Dodd-Frank envisioned a self-funded SEC – a concept to be lost during the House-Senate conferencing leading up to the bill’s enactment (if I recall, House conferees had accepted self-funding but some Senators stripped it from the final bill). Dodd-Frank also was supposed to dramatically bolster the SEC’s resources, a notion that was quickly buried after it became law.
So what to do with the front-page article in the Washington Post today that Rep. Spencer Bachus (R-Ala.), Chair of the House Financial Services committee – the one that oversees the SEC – is being investigated for insider trading by the Office of Congressional Ethics? The case is the first of its kind involving a member of Congress. Although I wouldn’t hold your breath given that the OCE’s powers are limited (egs. can’t compel cooperation with an investigation nor does it have subpoena powers).
But the bigger picture is how can there still be justification to allow Congress to continue playing games with the SEC’s budget when it’s supposed to be operating as an independent agency? A lot of fingers continue to be pointed at the SEC for regulatory failures. But one of the causes for the SEC’s failures rests with those at the top – Congress. More than just a few on the Hill want the SEC to fail, doing their utmost to be a thorn in the agency’s side. Doing the work urged by well-heeled lobbyists. Until this problem is fixed, the SEC will always be faced with strong headwinds in their work to keep the markets safe for investors. Riddle me that, Batman!
House Passes Watered-Down STOCK Act
Yesterday, the House of Representatives passed its version of the STOCK Act in a nearly unanimous vote. However, as noted in this Washington Post article, the House version of this Act omits a few key provisions that the Senate passed last week (S 2038). The differences will be resolved in conference over the next few weeks.
Although the House version of the STOCK Act bars members of Congress from trading on material non-public information like the Senate version, it doesn’t include the provision – pushed by Sen. Chuck Grassley – which would require those in the “political intelligence” world to register as lobbyists under the Lobbyist Disclosure Act. In DC, there are a growing number of specialized political intelligence agencies that collect and sell information about upcoming legislation and regulatory developments to hedge funds, private equity, etc.
The House version would merely require a study into this practice rather than require lobbyist registration. Not surprisingly, those pushing for the study alternative – including Rep. Eric Cantor and House Speaker John Boehner – are among the largest recipients of contributions from hedge and private equity funds, etc. as noted in this spreadsheet from Maplight.org. Check out this NY Times article from a few days ago about how these GOP House members claim their revisions to the Senate bill would “strengthen” it…
Corp Fin’s Common Financial Reporting Issues for Smaller Companies
Yesterday, Corp Fin posted these slides that detail the latest common financial reporting issues for smaller companies. The slides were part of a presentation for a small business forum hosted by the PCAOB in December.
Here’s news from Steven Haas of Hunton & Williams (also see this blog from Francis Pileggi): In recent days, shareholders have filed several class action complaints in Delaware (here’s a sample complaint posted in our “Exclusive Forum Bylaws” Practice Area; there are 9 filed so far). The litigation will require Delaware courts to review a bylaw that would increase Delaware’s market share of corporate litigation. A ruling upholding these bylaws would likely cause numerous other corporations to adopt them.
An exclusive forum provision typically provides as follows:
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article __.
These provisions gained traction, particularly for IPO companies, ever since Vice Chancellor Laster suggested in a 2010 opinion that they would be enforceable (see In re Revlon S’holders Litig., 990 A.2d 940 (Del. Ch. 2010)). Claudia Allen of Neal Gerber recently updated her study detailing that, as of December 31st, 195 Delaware corporations have adopted or proposed exclusive forum charter or bylaw provisions. Although a California court refused to enforce Oracle’s exclusive forum bylaw last year, this is the first time the issue has been squarely presented to the Delaware courts. Steven Davidoff (aka The Deal Professor) previously offered his thoughts on the issue.
Large Trader Reporting Rules Update: No Annual Form 13H Required This Year
Here’s news from Skadden Arps: Exchange Act Rule 13h-1(b), which went into effect on October 3, 2011, requires persons defined as “large traders” to file a Form 13H with the SEC on the following timetable:
– promptly after first effecting aggregate transactions, or after effecting aggregate transactions subsequent to becoming an inactive large trader, equal to or greater than the identifying activity levels in Rule 13h-1;
– within 45 days after the end of each full calendar year; and
– promptly following the end of a calendar quarter in the event that any of the information contained in a Form 13H filing become inaccurate for any reason.
Large traders were required to file their first Form 13H on or before December 1, 2011.
We have confirmed with the SEC staff that it is interpreting the annual reporting requirements in Rule 13h-1(b) not to apply to 2011 since the new rules were not in effect for a “full calendar year.” As a result, large traders will not be required to file an annual Form 13H on or before February 14, 2012.
The large trader rules also include provisions applicable to registered broker-dealers, including requirements to maintain records in connection with transactions by large traders, monitor customer accounts for activity that may trigger the large trader reporting requirements and report large trader transaction information to the SEC upon request through the Electronic Blue Sheets (EBS) system. Although these broker-dealer requirements were expected to go into effect on April 30, 2012, it is our understanding that the SEC staff is considering requests to extend the compliance date for these requirements.
Here’s A Metric on the Facebook IPO You Won’t See Anywhere Else
Last week, Facebook’s filing of a Form S-1 for its IPO was all the rage – and as I blogged, the level of traffic to the SEC’s site seemed to bring Edgar to its knees. Chris Hitt hints on Blog Mosaic just how much traffic there actually was…
I never thought I’d host a program involving election law but boards increasingly are being called on to oversee the corporate political contribution process – and thus many in our community are now required to learn some new “tricks.” Tune in tomorrow for the webcast – “The Exploding World of Political Contributions” – to hear Ken Gross of Skadden Arps and Doug Chia of Johnson & Johnson discuss how companies should rethink their political contribution policies and procedures so they don’t violate pay-to-play or other laws or run afoul of what their major shareholders demand from them (the webcast won’t parse efforts to rein in Citizens United, such as this California initiative). Please print these course materials in advance.
By the way, you might want to check out this article by the Center for Political Accountability entitled – “Dangerous Terrain: How to Manage Corporate Political Spending in a Risky New Environment” – which looks at the dramatic change in campaign spending through the lens of corporate governance and Watergate and the heightened risks that companies face.
Three States to Require Insurers to Disclose Climate Change Response Plans; Covers 90% of Insurers
As noted in this NY Times article, insurance commissioners in California, New York and Washington State now will require that companies disclose how they intend to respond to the risks their businesses and customers face from increasingly severe storms and wildfires, rising sea levels and other consequences of climate change. The disclosure will be made in the form of a National Association of Insurance Commissioners survey ( I think this is what the survey will look like). I believe these are the first three states to mandate this type of disclosure (state NAICs started collecting voluntary disclosure surveys in 2009 (here’s Ceres’ latest summary of what insurers have voluntarily disclosed), but this is the first time it has been mandated).
Between these three states, about 90% of the insurance industry in the US market will be covered, as these states made it mandatory for any insurance company doing business in those states (if they do $300 million worth of business nationwide); not just those domiciled in those states. This effort builds upon the SEC’s climate change guidance from early 2010.
New US Exchange: “It’s Better Than A Magic Lantern Show”
A while back, Keith Bishop posted this blog explaining who’s the third largest securities exchange operator in the United States and where is it located. The exchange operator is called BATS and it is based outside of Kansas City. BATS is derived from an initialization of Better Alternative Trading System.
Just ahead of becoming the first major company with a proxy access shareholder proposal in its proxy materials, Hewlett-Packard filed its proxy statement on Friday without the proposal as it negotiated the withdraw of the shareholder proposal instead. Here is a WSJ article explaining that the company agreed to put up a proxy access bylaw for a vote at the 2013 annual meeting at the access threshold previously adopted by the SEC (3% ownership for 3 years), though nominations would be limited to 20% of the board:
In a major victory for activists, Hewlett-Packard Co. agreed to a step that could give investors more power to oust its board members. The Palo Alto, Calif., technology giant will give its stockholders the chance to approve so-called proxy access through a bylaw vote at its 2013 annual meeting. If the measure passes, investors who own at least 3% of H-P shares for at least three years would be allowed to nominate up to 20% of the company’s directors, the company said. The vote would be binding, meaning H-P would be bound by the results. Currently, proxies only list directors that the company nominated.
Activist shareholders have been trying to get proxy access for some time. In the case of H-P, Amalgamated Bank’s LongView Fund, which owns around 400,000 shares of H-P, was expected to succeed at bringing such a nonbinding proposal to a vote at H-P’s 2012 annual meeting, which takes place in March. But a proposal wasn’t included in H-P’s proxy materials, which were filed Friday.
Instead, an H-P spokesman said in a statement that the company had already reached a deal with Amalgamated Bank. Under the agreement, H-P has “agreed to put a board-recommended proxy access proposal to a vote at our 2013 annual meeting of stockholders,” he said, noting that the company “is committed to good corporate governance and open and frequent communication with its stockholders.”
A spokesman for Amalgamated Bank said it withdrew its proposal after H-P agreed to present a proxy-access proposal in 2013. H-P’s move represents “a recognition by a significant company that proxy access has potential merit and number two, that the shareholder resolution probably would have passed without management support,” said Charles Elson, head of the Weinberg Center for Corporate Governance at University of Delaware’s business school. Proponents say proxy access should improve returns by forcing boards to be more responsive to shareholders. Without proxy access, investors keen to shake up boards must wage costly campaigns and foot the bill for distributing their own ballots.
Last year, the Securities and Exchange Commission decided not to appeal a federal court ruling throwing out an agency rule that broadly required proxy access at U.S. companies. The agency put the rule on hold in August after business groups sued to overturn it. H-P’s board has come under scrutiny several times in recent years for issues including a spying scandal and its ousting of a popular chief executive. Last year, a shareholder watchdog criticized the involvement of its then-CEO Leo Apotheker in the selection of five new board members. The 3% ownership bar is a high one, however, as only four H-P shareholders own that much of the technology company, according to filings.
Back in December, I blogged about how SIFMA and the International Swaps and Derivatives Association filed a complaint in US District Court for DC to challenge the CFTC’s new rule that seeks to curb excessive speculation (like proxy access, this rule was approved 3-2 by the CFTC Commissioners). The groups had petitioned the higher US Court of Appeals for the DC Circuit to hear the case – which is the court that ruled against the SEC in the proxy access lawsuit filed by the Business Roundtable and US Chamber of Commerce. And like that lawsuit, this one claims the CFTC didn’t conduct a proper cost-benefit analysis. In his “Dodd-Frank.com Blog,” Steve Quinlivan notes that the US Court of Appeals for the District of Columbia Circuit recently dismissed the petition for review.
In this report issued a few weeks ago, the SEC’s Inspector General provided its latest review of Dodd-Frank rulemaking’s cost-benefit analysis.
More on “Is Corp Fin Too Lenient with Waiver Letters?”
Last week, I blogged a note from an anonymous member – which I had received before the NY Times made front-page news of its own thoughts – about Corp Fin’s practice of considering waiver requests for being an “ineligible issuer” under Rule 405.
I received a number of emails from members who stated that their experience with the Staff has been contrary to what the anonymous member wrote. They noted they had submitted a request to Corp Fin and struck out – as a result, they thought the Staff was pretty miserly in granting these requests. So I the NY Times’ article perhaps was driven by the often erroneous perception that regulators are in the back pocket of Wall Street. I don’t think this perception is necessarily fair, but “it is what it is” in this post-financial crisis era…
On Friday, the SEC announced that it had replaced outgoing PCAOB board member Dan Goelzer (the last remaining “founding” board member) with Jeanette Franzel, who currently “leads all aspects of GAO’s financial audit oversight of the U.S. federal government.” The SEC’s press release included welcomes from Chair Schapiro and Chief Accountant Kroeker. But in the first of its kind, as noted in this Reuters article, SEC Commissioner Luis Aguilar issued the following separate dissent:
Today, the Commission has failed to fulfill its legal obligation. It has appointed a member to the Public Company Accounting Oversight Board (“PCAOB”) who has no demonstrable record of investor advocacy. Thus, the Commission has failed to satisfy its basic statutory mandate to appoint an individual who, among other factors, has “a demonstrated commitment to the interests of investors. Accordingly, I do not support and must respectfully dissent for the reasons outlined below.
Congress established the PCAOB in response to scandalous audit failures, like Enron and WorldCom, that cost investors billions. In doing so, Congress entrusted this Commission with the significant responsibility of appointing the members of the PCAOB. In exercising this responsibility, the Commission is required to abide by the statutory criteria to appoint individuals “who have a demonstrated commitment to the interests of investors.”
My objection to this appointment is based on the fact that the Commission must appoint individuals who have “demonstrated commitment to the interests of investors.” This is not the case here. Although the appointee is an experienced government auditor, and I appreciate her years of service, there is nothing in the evidentiary record that reflects a commitment to the interests of investors, or a history of advocacy for investor rights. I believe the Commission is bound to appoint an individual whose actions, public statements, and reputation demonstrate a clear and steadfast advocacy of the rights and interests of investors.
In reaching this decision, I considered many factors in the evidentiary record, including the professional biographies of each of the finalists for this position, my own interviews with the candidates, and the candidates’ published writings and remarks. I also considered the many letters received by the Commission from investors, respected members of the accounting profession and academic community, members of Congress, and others who supported the appointment of an investor advocate.
I also reviewed comment letters previously submitted to the PCAOB by the finalists for this position. In that connection, I was struck that not once in any of the four letters signed by today’s appointee, discussing topics such as the engagement quality review and risk assessment, was there any mention of the interests of investors. In fact, the word “investor” was not mentioned.
This appointment is being made at a critical time for the PCAOB. There is much at stake. The recent financial crisis exposed an auditing process that continues to be seriously flawed. In response, the Board has embarked on various projects to enhance the relevance, credibility and transparency of audits, including important initiatives on auditor independence, audit transparency, and the auditor reporting model. The success of these projects will require a Board fully committed to investors as the owners of public companies, the providers of capital, and the primary beneficiaries of financial statements.
I believe that the Commission has failed to meet its obligation to appoint an individual with “a demonstrated commitment to the interests of investors. Unfortunately, as a result, I am forced to dissent.
Carlyle Drops Forced-Arbitration Clause In IPO
After heavy criticism – as noted in this WSJ article – the Carlyle Group abandoned a plan to ban shareholders from filing class-action lawsuits, a plan that could have delayed the private-equity firm’s IPO. Here is my blog from two weeks ago noting the criticism.
More on our “Proxy Season Blog”
We continue to post new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– A Closer Look at Proxy Access Proposals
– Should Annual Meetings Be Held Less Often?
– A Tipping Point for Social and Environmental Issues?
– Survey on Shareholder Proposals
– 2011 Proxy Season Review: United Kingdom
A few months ago, I received this from an anonymous member:
You may have seen the recent article in the NY Times regarding how firms continue to make promises in settlements to the SEC and when those promises are broken, nothing happens. For me, this story triggered another topic that I think goes largely unnoticed, waiver letters for being an “ineligible issuer” under Rule 405. Under the Staff’s WKSI waiver standard, it seems like it’s not difficult to convince Corp Fin to take a position that grants leniency to a company that settles with the SEC for violating anti-fraud provisions of the securities laws (especially for failing to disclosure material information) such as this JPMorgan waiver letter. I think this stuff flies under the radar – even though publicly posted on the SEC’s website – because the benefits of waivers are not apparent to many that are not securities lawyers.
I appreciate the adverse implications of not granting waiver letters in these situations because eligibility to be in the market is necessary for many of their offered products. But this just begs the question, what’s the point of having an ineligible issuer rule if issuers know that it is not enforced anyway?
Well, this no longer is an obscure topic just for securities lawyers as the NY Times today ran this front-page article entitled “SEC Is Avoiding Tough Sanctions for Large Banks.” The article cites a bunch of waiver stats over the past decade. Here is an excerpt with a quote from Corp Fin Director Meredith Cross:
“The purpose of taking away this simplified path to capital is to protect investors, not to punish a company,” said Meredith B. Cross, the S.E.C.’s corporation finance director, referring to the fast-track offering privilege. “You’re not seeing the times that waivers aren’t being granted, because the companies don’t ask when they know the answer will be no.”
Wisconsin Judge Approves SEC Settlement Without Changes
As noted in this NY Times article, a Wisconsin judge who raised some of the same questions posed by Judge Jed Rakoff in the proposed SEC-Citigroup settlement six weeks ago has decided to bless the SEC’s settlement with Koss Corporation after all – a nice victory for the SEC (this Wisconsin case was first noted in this blog of mine). The SEC was able to keep its proposed terms but agreed to redraft its settlement to more explicitly spell out all of the remedial actions required of Koss. It will be interesting to see how the SEC fares with Judge Rakoff…
More on “The Mentor Blog”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Dodd-Frank: Revised Whistleblower Policies
– Top 10 Whistleblower Decisions of 2011
– Should/Must Corporate Minutes Be Signed?
– Conflicts of Interest: Serving on Another Company’s Board
– More on “Ringing the NYSE’s Bell”
