Just in time for today’s Conference – “Tackling Your 2008 Compensation Disclosures: The 2nd Annual Proxy Disclosure Conference” – Corp Fin has released its Executive Compensation Disclosure Report (here is the related press release). During his keynote, Corp Fin Director John White will discuss this new Report, as well as all the panels during today’s Conference (and the panels throughout the next few days of Conferencing also will be analyzing this latest Staff guidance). Hey man, this is “hot off the press”!
It’s not too late to register (or upgrade your Confernce license to add more people; you can do so online through a form available on this site’s home page) – and even if you can’t watch it live, each panel’s video will be archived several hours after its shown live. Register Now!
How to Attend Today’s Conference Online
Come to the home page of either TheCorporateCounsel.net or CompensationStandards.com and click the prominent link that says “Enter the Conference.” Watch the Conference live by clicking a video link that will be on the Conference page that matches the type of player installed on your computer (ie. Windows Media Player or RealPlayer) and the speed of the connection that you have.
Here’s an agenda for today’s Conference; note that times are Pacific/West coast. Panels will be archived several hours after they are shown live.
For Those Watching by Video Webcast (and Want CLE Credit)…
All three of our Conferences have been accredited in nearly every state which requires barred lawyers to earn CLE credit. The exception being one state where our application is pending (Kansas) and two states that don’t recognize our online CLE (Delaware and Pennsylvania). In our FAQs, there is a complete list of CLE credit hours available via web attendance for each Conference.
However, there are two “catches” to earn CLE credit via web attendance:
1. Need to Watch Live – Nearly every state requires “live” – and not “archived” – attendance, which can be a pain for those on the East Coast as the Conferences are on a West Coast schedule (but partial CLE credit can be earned for many states as noted below).
2. Need to Click Periodic Pop-Up Boxes – To comply with the verification requirements of many of the state bars, we have built a system which requires those seeking CLE credit to click on a periodic prompt as they watch. These prompts – in the form of “pop-up boxs” – will occur every 10-15 minutes and last about a minute. By clicking each pop-up box you see, you have proved to your state bar that you attended (yes, this is annoying – complain to them, not us). Each pop-up box will be prominent and will say “You must click me.” Keep clicking each one you see; don’t stop after just clicking one.
Exception to the Two Catches Above: If you are in a self-study state, you can spare yourself from the hassle of watching with the “periodic prompt” – read yesterday’s blog to learn more.
A few other items to note:
– Register for CLE Every Day – If you want CLE credit for web attendance, when you first enter the conference page on the day of the conference and click on one of the video feed links; from there, you must click the prominent link in the red box entitled “How to Earn CLE Credit for Web Attendance” and follow the steps. You will need to do this each day if you watch more than one Conference.
– Earn Partial CLE Credit – If you can only watch a portion of the Conference, you can still earn CLE credit for the amount of time watched (assuming you click on the prompts as noted above and your state bar allow for this; most state bars do); this is particularly relevant for those on the East Coast.
– Limits on Group Watching – You must click the periodic prompts yourself so you can prove to the state bar that you indeed attended (so you can’t earn CLE by sitting in a conference room unless you have your computer with you; unless you are in a “self study” state as noted above).
– CLE Certificate Mailed Out Next Month – If you followed our online CLE system, we will be mailing a CLE certificate to you – but it’s gonna take us a while to get those out (at least a few weeks).
– Pending States – If you seek CLE credit for Kansas where our application is pending, you should sign-in for the prompt system in case they approve the Conference.
Here are a set of FAQs about earning CLE credit for web attendance.
Complete Set of Printable Course Materials Posted
You are now able to obtain – and print out – the course materials related to our three Conferences; on the Conference pages linked to below, there is a complete printable set of materials for each Conference if you look for the link in the upper right corner that has that title. Note that you will need your Conference ID and password to access the course materials (in many cases, your ID and password for TheCorporateCounsel.net or CompensationStandards.com will work if you have registered; if not, your Conference ID and password were e-mailed to you earlier this week).
If you’re watching online, obtain the Course Materials for the your Conference(s) either here – or directly at these links (if you’ll be in San Fran, a set will be handed out to you):
– “Tackling Your 2008 Compensation Disclosures: The 2nd Annual Proxy Disclosure Conference” (to be held Tuesday, 10/9)
– “Hot Topics and Practical Guidance Conference: The Corporate Counsel Speaks” (to be held Wednesday, 10/10)
– “4th Annual Executive Compensation Conference” (to be held Thursday, 10/11)
For Those Coming to San Fran…
All three of the Conferences will be held at the San Francisco Marriott, which is at 55 4th Street (here is the hotel’s phone number if you get lost: (415) 896-1600 /(888) 575- 8934). Once you reach the hotel, you will want to check in to receive your badge, etc. – and if you are early enough, there is a continental breakfast available. This master agenda lists check-in and breakfast times for all three Conferences.
If you haven’t registered yet, but do plan to attend in San Fran – note that our HQ can’t accept registrations after 5 pm Pacific today. However, walk-in registration can be done at the SF Marriott – and bring a check or credit card. (Note: registrations for web attendance still can be done online at any time.)
Our new online CLE tracking system is causing a little confusion. So let me try to clarify a few things. We built the time-stamp system in response to the requirements of many state bars that require that we track whether or not a lawyer is actually watching the Conference.
However, we are aware some state bars only require self-reporting, so that lawyers in those states only need to attest that they attended a CLE program. If you are seeking CLE for one of those states (and you are certain of it, eg. Minnesota), you may skip our tracking system and save yourself a hassle. (This also means that you can watch in a group because you don’t have to click prompts from your own computer.) In other words, when you click a video feed for a Conference this week, you wouldn’t click the button that says “Earn CLE Here” and not fill out the CLE application.
If you fall under these circumstances – and still want a CLE Certificate – simply send an email next week (when we’re back in the office) with your contact information, state bars and bar numbers. If you are registered for the Conference, we can accommodate you as we have in the past.
On Friday, Glass Lewis was sold by its Chinese parent to the Ontario Teachers’ Pension Plan, one of Glass Lewis’ clients, for $46 million (here is the press release). With $106 billion in net assets, this investor is one of Canada’s largest and most aggressive institutional investors and shareholder rights advocates (the investor helped created a Canadian investor group dedicated to improving corporate governance). This is a pretty interesting development: I wonder if a change in ownership alone can help Glass Lewis grow (as well as allegations that conflicts may arise if an activist investor owns a proxy advisor).
Its been reported that RiskMetrics Group (which owns what used to be known as ISS) dropped out of the running to buy Glass Lewis shortly after it filed its Form S-1 to go public last month. Right before it filed the IPO registration statement, RiskMetrics announced a new company structure and brand framework under which ISS became a division and officially took the RiskMetrics name.
SEC Comments: Financials Prepared for International Financial Reporting Standards
It looks like Corp Fin continues to maintain links to comment letters it has issued to foreign private issuers containing financial statements prepared for the first time on the basis of International Financial Reporting Standards (commonly referred to as “IFRS”). The Staff also is posting links to the company’s correspondence. Scroll down on this Corp Fin page to see these links.
VP Cheney’s ’04 Testimony to the SEC’s Enforcement Division
Last week, it was revealed that Vice President Dick Cheney gave testimony to the Enforcment Division back in 2004, as part of the Staff’s investigation of Halliburton (where Cheney used to serve as CEO) over the accounting of cost overruns on several big projects back in ’98. The Staff’s investigation is now closed after the company settled with the SEC two days after Cheney’s testimony, paying a $7.5 million fine.
According to this WSJ article, Cheney didn’t recall being told that Halliburton had booked millions of dollars in construction cost overruns as income, saying that the company’s CFO was “probably” the person “whose general area of responsibility this fell into.” Yeah, probably. And the CEO shouldn’t care about that type of thing…
The SEC released Mr. Cheney’s testimony under a Freedom of Information Act request filed by Dow Jones Newswires. I’d like to post a copy of the testimony, but that might take some doing. Let me know if you see a copy.
Last week, the SEC Staff revised its FAQs on Management’s Report on Internal Control over Financial Reporting. These FAQs were originally jointed issued by Corp Fin and the Office of Chief Accountant in late ’04. [Admittedly, this development snuck by us – it never showed up on Corp Fin’s “What’s New” page, etc. We are redoubling our investigative efforts and promise it will never happen again.]
The Staff eliminated twelve FAQs it believed were no longer relevant or necessary or that were addressed by the SEC’s recent interpretive guidance on management reports. The Staff also added four new FAQs pertaining to foreign private issuers.
Courtesy of Cleary Gottlieb, here is some analysis of the new foreign private issuer FAQs (as well as a blacklined copy of the overhauled FAQs, which is posted in our “Internal Controls” Practice Area):
– Scope of ICFR Evaluation Should be Based on Primary Financial Statements (New FAQ 12) – Management of an FPI that files home country accounts with a US GAAP reconciliation should plan and scope its ICFR evaluation based on the primary financial statements (i.e., home country GAAP). However, the evaluation should consider controls related to the preparation of the US GAAP reconciliation.
– Reference to “Interim Financial Statements” in Material Weakness Definition Does Not Apply to FPIs (New FAQ 13) – Since home country requirements vary significantly and there are no uniform requirements requiring FPIs to file periodic interim financial statements, the reference to “interim financial statements” in the definition of material weakness does not apply to FPIs (unless they are filing on domestic forms).
– Treatment of Entities for ICFR Evaluation Purposes Should Track Treatment in Primary Financial Statements (New FAQ 14) – If an entity is treated differently under primary GAAP (i.e., home country GAAP) than it is in the US GAAP reconciliation (e.g., consolidated in the home country accounts but equity method under US GAAP), the ICFR evaluation should be based on how the entity is treated in the primary financial statements.
– Scope Limitation Permitted for Certain Proportionately Consolidated Entities (New FAQ 15) – Some FPIs are required under home country GAAP to account for certain entities on a proportionate consolidation basis. Management’s ICFR report ordinarily should include all consolidated entities, even if they are consolidated on a proportionate basis. However, in cases where the company does not have the right or authority to evaluate internal controls of the proportionately consolidated entity and lacks the access necessary in practice to make that evaluation, the proportionately consolidated entity’s internal controls may be excluded from the scope of management’s assessment. (Management must still evaluate controls over the recording of amounts relating to the proportionately consolidated entity in the company’s consolidated financial statements). The FAQ specifies certain disclosure that must be provided regarding the exclusion of the internal controls of these entities from the scope of the ICFR assessment.
The remaining FAQs are substantially the same and have been renumbered as a result of the elimination of the 12 old FAQs.
Many of those attending the NASPP Conference next week have registered for a free ticket to a “Chicago” concert on Tuesday, October 9th. The concert is jointly sponsored by the NASPP and Fidelity Investments. Here are some logistics:
Attendees can pick up their tickets to the concert at Fidelity’s registration desk at the San Francisco Marriott until 6:45 pm on Tuesday, October 9th (the day of the concert). After 6:45, Fidelity will have a satellite registration desk at the San Francisco Concourse Exhibition Center (which is the site of the concert) and attendees can pick up their tickets there.
There will be shuttle service from the Marriott to the San Francisco Concourse Exhibition Center. Buses will begin departing from the Marriott after the reception in the Exhibit Hall ends (starting at 7:00 pm). It’s not walking distance, you will need to take a shuttle bus.
Advance registration for the concert is now closed – but attendees can still register at the Conference; remember that only full NASPP Conference attendees are eligible – here are the eligibility requirements. If you didn’t register in advance and show up at the concert site, you will need to prove that you are a NASPP Conference attendee to register there. You can do this by checking in for the NASPP Conference and picking up your Conference badge or by bringing the confirmation that you received when you registered for the NASPP Conference.
You are now able to obtain – and print out – the course materials related to our three Conferences. Note that you will need your Conference ID and password to access the course materials (in many cases, your ID and password for TheCorporateCounsel.net or CompensationStandards.com will work if you have registered; if not, your Conference ID and password were e-mailed to you earlier this week).
If you’re watching online, obtain the Course Materials for the your Conference(s) either here – or directly at these links (if you’ll be in San Fran, a set will be handed out to you):
Instructions for Those Watching Online: Come to the home page on the day of the Conference and click the prominent link that will be posted that day. Watch the Conference live by clicking a video link that will be on the Conference page that matches the type of player installed on your computer (ie. Windows Media Player or RealPlayer) and the speed of the connection that you have. Panels will be archived several hours after they are shown live.
For Those Watching by Video Webcast (and Want CLE Credit)…
All three of our Conferences have been accredited in nearly every state which requires barred lawyers to earn CLE credit. The exception being one state where our application is pending (Kansas) and two states that don’t recognize our online CLE (Delaware and Pennsylvania). In our FAQs, there is a complete list of CLE credit hours available via web attendance for each Conference.
However, there are two “catches” to earn CLE credit via web attendance:
1. Need to Watch Live – Nearly every state requires “live” – and not “archived” – attendance, which can be a pain for those on the East Coast as the Conferences are on a West Coast schedule (but partial CLE credit can be earned as noted below).
2. Need to Click Periodic Pop-Up Boxes – To comply with the verification requirements of many of the state bars, we have built a system which requires those seeking CLE credit to click on a periodic prompt as they watch. These prompts – in the form of “pop-up boxs” – will occur every 10-15 minutes and last about a minute. By clicking each pop-up box you see, you have proved to your state bar that you attended (yes, this is annoying – complain to them, not us). Each pop-up box will be prominent and will say “You must click me.” Keep clicking each one you see; don’t stop after just clicking one.
A few other items to note:
– Register for CLE Every Day – If you want CLE credit for web attendance, when you first enter the conference page on the day of the conference and click on one of the video feed links; from there, you must click the prominent link in the red box entitled “How to Earn CLE Credit for Web Attendance” and follow the steps. You will need to do this each day if you watch more than one Conference.
– Earn Partial CLE Credit – If you can only watch a portion of the Conference, you can still earn CLE credit for the amount of time watched (assuming you click on the prompts as noted above); this is particularly relevant for those on the East Coast.
– Limits on Group Watching – You must click the periodic prompts yourself so you can prove to the state bar that you indeed attended (so you can’t earn CLE by sitting in a conference room unless you have your computer with you).
– CLE Certificate Mailed Out Next Month – If you followed our online CLE system, we will be mailing a CLE certificate to you – but it’s gonna take us a while to get those out (at least a few weeks).
– Pending States – If you seek CLE credit for Kansas where our application is pending, you should sign-in for the prompt system in case they approve the Conference.
Here are a set of FAQs about earning CLE credit for web attendance.
For Those Coming to San Fran…
All three of the Conferences will be held at the San Francisco Marriott, which is at 55 4th Street (here is the hotel’s phone number if you get lost: (415) 896-1600 /(888) 575- 8934). Once you reach the hotel, you will want to check in to receive your badge, etc. – and if you are early enough, there is a continental breakfast available. This master agenda lists check-in and breakfast times for all three Conferences.
If you haven’t registered yet, but do plan to attend in San Fran – note that our HQ can’t accept registrations after 5 pm Pacific today. However, walk-in registration can be done at the SF Marriott – and bring a check or credit card. (Note: registrations for web attendance still can be done online at any time.)
[Captain XBRL strikes again! As noted in this blog, he drops Britney Spear’s former lawyer from top of the heap…]
Free Stoneridge Webcast
Coming up next Tuesday is the much-anticipated Supreme Court oral argument in the case of Stoneridge Investment Partners v. Scientific-Atlanta. As we have noted in the blog before, this one is a biggie!
Tomorrow, the Center for Business Law & Regulation at Case Western Reserve University is hosting a half-day conference on the issues involved in this important case. This event will be webcast live – and for free.
Yesterday was the deadline for comments on the two competing shareholder access proposals, and as might be expected they both pulled in lots of comments. If anything was to be decided on the sheer number of comment letters, then the proposing release that would give 5% shareholders the ability to submit binding access bylaw amendments would be the hands down winner, with over 15,000 comment letters so far. Of those over 15,000 letters, a little more than 14,700 were designated by the SEC as “form” letters. The proposing release seeking to codify the SEC Staff’s interpretation of Rule 14a-8(i)(8) only garnered just north of 7,400 comments (of which over 7,370 were designated as “form” letters). True to form, while the investor community and individuals belonging to organizations with an interest in this matter turned out in force, there does not appear to be a whole lot of input from the issuer side on these proposals. While these comment numbers are nothing to sneeze at, they still don’t touch – when viewing the two access releases separately – the well over 20,000 letters commenting on the 2006 executive compensation disclosure proposals.
Now that the SEC Staff has all of these comments to sift through, it remains to be seen which way the SEC will ultimately go and when. In order to have proposals in place for the upcoming proxy season as Chairman Cox told the Senate Banking Committee he would at the end of July, it would seem that an adopting release needs to be on the SEC’s calendar in November, when many of the other Corp Fin proposals from earlier this year are expected to be considered. As noted in the RiskMetrics Risk & Governance Group blog, former Commissioner Campos said at a September CII conference that he doubted a replacement would be named in time to participate in shareholder access deliberations before next proxy season. Campos also indicated that he thought it was unlikely that Chairman Cox would push for a final decision on the issue without a full complement of commissioners.
At a House Committee on Financial Services hearing last week, investor and business representatives squared off on the shareholder access proposals. The SEC did not participate in the hearing. Reminiscent of the debate that ensued when shareholder access was last proposed in 2003, the two sides can seemingly find no middle ground. The investor side would rather see neither proposal move forward, and instead would like to submit access proposals without any restrictions. John Castellani, president of the Business Roundtable, raised the specter of “fractured boards representing special interests or small groups of shareholders” if the SEC adopts some form of shareholder access.
Adding to the uncertainty about the ultimate outcome of shareholder access is the outstanding warning from Senator Christopher Dodd (D-CT), who said that he will consider legislation to resolve the question of proxy access if the SEC doesn’t adopt access rules.
Farewell to Commissioner Nazareth
The SEC announced that Commissioner Annette Nazareth intends to step down. Commissioner Nazareth has indicated to the President that she does not wish to be re-nominated, and her term expired earlier this summer. No departure date has been set.
Commissioner Nazareth has been at the SEC for nine years, first as Director of the Division of Market Regulation and then as a commissioner. It is rare these days to see someone appointed to a commissioner slot from the Staff, and I believe that Nazareth’s experience on the Staff always contributed to her outstanding work as a commissioner. I really enjoyed working with Commissioner Nazareth and her excellent Staff – her departure is a big loss for the SEC.
ACAP Gets Off the Ground
Yesterday, Treasury Secretary Paulson announced the members of the Treasury Advisory Committee on the Auditing Profession. The date of the Committee’s first public meeting is set for October 15th. As Broc noted in this blog from back in May, the Committee – headed by former SEC Chairman Arthur Levitt and former SEC Chief Accountant Donald Nicolaisen – is tasked with examining issues such as audit firm concentration, how to strengthen the accounting industry’s financial soundness and how to enhance the ability to attract and retain qualified personnel. More information is available at the Committee’s website.
Our October Eminders is Posted!
We have posted the October issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!
In yesterday’s blog, three out of the top ten recent Enforcement cases that I listed involved allegations of insider trading—clearly a top priority at the SEC. In late August, the SEC sent a 27-page letter to registered hedge fund advisers, seeking information about employees and clients who might be in a position to obtain material non-public information. As noted in this Washington Post article, Mark Schonfeld of the SEC’s New York regional office indicated “[t]his is an effort to look out for potential insider trading at hedge funds and to ensure that hedge-fund advisers are living up to their obligation to detect and prevent insider trading.”
According to published reports, the letter asks for lists of all employees and clients of the fund, as well as any relatives serving as officers or directors of public companies. The letter also requests information about contacts at brokerage firms with which the fund has done business. In addition, the SEC is seeking information about controls in place to prevent insider trading.
With this level of scrutiny, now more than ever companies need to focus on their insider trading policies and the activities of their officers and directors (including the use of Rule 10b5-1 plans). Even though we are only a week away, it is still not too late to sign up for our three critical conferences. In addition to Linda Chatman Thomsen’s keynote address at our Hot Topics conference, you can also hear the latest on Rule 10b5-1 plans and everything you need to know—in a nutshell—to prevent inadvertent, costly insider trading, Section 16 and Rule 144 violations. Register now for:
– “Tackling Your 2008 Compensation Disclosures: The 2nd Annual Proxy Disclosure Conference” (10/9)
– “Hot Topics and Practical Guidance Conference: The Corporate Counsel Speaks” (10/10)
– “4th Annual Executive Compensation Conference” (10/11)
Register for the “Member Appreciation Package” online—or use this Order Form.
If you have any questions, contact our HQ at info@compensationstandards.com or 925.685.5111.
– match the corporate tax deduction for stock option compensation to the book expense reflected in a company’s financial statements;
– permit companies to deduct stock option compensation in the same year that it is recorded on their books, rather than when the options are exercised;
– provide that research tax credits use the same stock option deduction when computing the “wages” eligible for those particular tax credits;
– establish a transition provision that would apply the new tax deduction to stock option exercises occurring after enactment, permit the old tax deduction rule to apply to options vested prior to adoption of FAS 123R, and allow a catch-up deduction in the first year after enactment for options that vested after adoption of FAS 123R but before the date of enactment; and
– make stock option compensation part of the same $1 million cap on the tax deductions that can now be claimed by public companies for other forms of executive compensation under Section 162(m).
In Senator Levin’s statement introducing the bill, he noted the significant disparity in pay between the CEO of a large corporation and the average worker. As for the influence of the tax code on executive compensation decisions, Levin noted: “When a company’s compensation committee learns that stock options can produce a low compensation expense on the books, while generating a generous tax deduction that is multiple times larger, it’s a pretty tempting proposition for the company to pay its executives with stock options instead of cash or stock. It’s a classic case of U.S. tax policy creating an unintended incentive for corporations to act.” This legislation stems from the Senate’s Permanent Subcommittee on Investigations hearing entitled “Executive Stock Options: Should the IRS and Stockholders be Given Different Information” from back in June. The bill would not affect the stock option compensation tax rules applicable to individuals.
Test Your M&A Knowledge: Are You a Pro or Troll?
We have posted one of our popular quizzes – “Pro” or “Troll”? Test Your Knowledge – on DealLawyers.com. It will score your answers as you go—and let you know how you compare against your peers.
Simply read each statement and decide whether you agree with it (by clicking “Ah Yes”) or disagree (by clicking “That’s Ridiculous”). Then, you will be told whether you were correct—and we also provide some analysis if you wish to learn more about each answer.
Today is the start of fiscal 2008 at the SEC. As is typically the case, the end of the last fiscal year saw lots of Enforcement activity, as the Division sought to make or beat its budget numbers. The number of Enforcement cases and Corp Fin filing reviews are always very important for supporting the SEC’s annual budget request. The stepped-up Enforcement activity at year-end is demonstrated by the crush of 52 litigation releases issued in September, as compared to an average of around 36 litigation releases per month during the other 11 months of fiscal 2007. Here is my top 10 list of cases from the end-of-year blowout:
1. Daniel McKay – McKay was charged with trading on material non-public information that he misappropriated from his spouse, who was an executive vice president at Triangle Pharmaceuticals. As noted in this NY Times article from August, there has been a notable increase in insider trading cases involving husbands and wives.
2. Salvador Chavarria, et al. – Continuing the insider trading theme, three Dell accountants were charged with trading in options on Dell stock while in possession of material nonpublic information about the company’s disappointing results for the second quarter of 2006. This case should be a reminder that all employees in an organization (and particularly those with access to sensitive financial information) need to have the company’s insider trading policy drilled into their heads, as well as the potential consequences for not adhering to that policy.
3. Buca, Inc. – Buca, which operates the Buca di Beppo restaurant chain, was charged with, among other things, failing to report compensation to the company’s former CEO and CFO arising from reimbursed personal expenses. The personal expenses included ATM cash withdrawals, duplicate airline tickets, family wedding expenses, dog kenneling, home remodeling costs, vacations, and visits to strip clubs. The company is also charged with failing to report various related party transactions, including the former CEO’s purchase of an Italian villa with company funds and the former CFO’s ownership interest in a vendor. While the unreported compensation and related party transactions predate the SEC’s new rules, the case demonstrates that the SEC is more than ever willing to pursue these types of cases, even when the amounts involved are not large. Be sure to sign up now for next week’s conferences, including Linda Chatman Thomsen’s keynote speech at the “Hot Topics and Practical Guidance Conference: The Corporate Counsel Speaks,” to hear more.
4. Exo-Brain – The SEC announced a final judgment against this company and its principal for the usual unregistered offering and fraudulent misrepresentations and omissions violations. I just thought the name “Exo-Brain” was cool.
5. Federal Home Loan Mortgage Corporation, et al. – Freddie Mac and four of its former executives settled charges stemming from the company’s alleged fraudulent scheme to deceive investors about its true performance, profitability, and growth trends. Much of the conduct centered around Freddie Mac’s accounting for derivatives. The company agreed to pay a $50 million civil penalty, which is expected to be distributed to injured investors through a Fair Fund.
6. Joseph Keeney – Keeney, who was acting a business consultant to Frederick’s of Hollywood, was charged with trading on the basis of material non-public information obtained about the possible merger of privately-held Frederick’s and publicly-held Movie Star, Inc. Keeney was directly involved in the merger negotiations and was in charge of maintaining communications between the Special Committees of the two boards.
7. FCPA Actions – The recent trend toward stepped-up Foreign Corrupt Practices Act enforcement continued last week with a case against a former EDS official named Chandramowli Srinivasan, who was charged with bribing senior employees of Indian state-owned enterprises. EDS was also charged with related reporting, books-and-records, and FD violations. In another case, the SEC announced a settlement with Bristow Group for FCPA violations arising from improper payments made to Nigerian state government officials.
8. Stock Loan Crackdown – In Darin DeMizio, et al. and Joseph Simone, et al., the SEC charged 38 defendants with involvement in schemes where stock loan traders paid improper finders fees and illegal kickbacks. The defendants include current and former stock loan traders at Morgan Stanley, Van der Moolen, Janney Montgomery, A.G. Edwards, Oppenheimer, and Nomura Securities. Clearly there are some real problems in the stock loan industry that the SEC is seeking to ferret out.
9. Dwight Sean Jones – Jones – who was a defensive end for the LA Raiders, Houston Oilers, and Green Bay Packers – was charged with failing to allow the SEC Staff to examine his business records. Jones had been a registered investment advisor. The SEC may be the least of his worries – he was arrested in June on charges of mortgage fraud.
10. Robert Berlacher, et al. – The SEC’s efforts to crack down on illegal insider trading by hedge funds in the PIPEs market continues with a case against Berlacher, his Lancaster Investment Partners fund and related funds. According to the SEC’s complaint, the defendants generated $1.7 million in gains by shorting stock based on information about upcoming PIPEs offering and then covering those shorts with PIPE shares.
SEC Filing Fees: No Changes For Now
Another sign of the new fiscal year is the SEC’s Fee Rate Advisory from Friday. As is typically the case, the SEC starts fiscal 2008 off under a continuing resolution, because Congress has not yet passed the agency’s regular appropriation. As Broc noted in this blog, the SEC sets the filing fees annually under the “Investor and Capital Markets Fee Relief Act of 2002,” and the fiscal 2008 fees were set in this April order. The new fees will not go into effect, however, until five days after the date of enactment of the SEC’s appropriation.
For now, the filing fee rate for Securities Act registration statements remains at the current rate of $30.70 million. The same rate applies under Exchange Act Sections 13(e) and 14(g). Once the appropriation is enacted, this rate will rise to $39.30 per million.
Webcast Crush: Test Your Access Now
We are receiving so many last minute registrations for our three critical Conferences coming up next week – particularly the Video Webcast sign-ups – that we are concerned that many more of you are waiting until the very last minute to register.
Those that wait any longer may not have sufficient time to sign up and adequately test your ability to access streaming video, which is the format by which the webcasts will be displayed.
Those that have not yet registered for these essential Conferences – particularly in view of the latest executive compensation proxy disclosure guidance that will be provided by senior SEC Staffers John White and Paula Dubberly – are encouraged to do so now by clicking any of the links below:
– “Tackling Your 2008 Compensation Disclosures: The 2nd Annual Proxy Disclosure Conference” (10/9)
– “Hot Topics and Practical Guidance Conference: The Corporate Counsel Speaks” (10/10)
– “4th Annual Executive Compensation Conference” (10/11)
Over the last day or so, Corp Fin started faxing out a second wave of comment letters as part of Phase One of its compensation disclosure review project. These are new comment letters to companies who had not yet received a letter – this is not a second round of comments to those companies who originally received letters in August.
“Member Appreciation Package”: With just over a week left, the mad dash to register at the last minute has begun as our HQ is overwhelmed. Most waiting this long are watching our popular Conferences by video webcast and are taking advantage of our “Member Appreciation Package,” which enables you to catch all three of these Conferences at a much reduced rate:
If you have any questions, contact our HQ at info@compensationstandards.com or 925.685.5111.
The SEC’s (and Fed’s) New Regulation R
At last week’s open Commission meeting, the SEC adopted Regulation R. This is a joint project with the Federal Reserve Board. The Federal Reserve Board adopted this Regulation at an open meeting on Monday. Regulation R replaces the SEC’s prior efforts in the area of bank broker activities — including the previously proposed Regulation B – as it creates some exceptions for banks from the definition of the term “broker” under Section 3(a)(4) of the ’34 Act, as amended by the Gramm-Leach-Bliley Act. The SEC also amended existing bank dealer rules that were originally adopted by the SEC in 2003.
Here are opening remarks from Market Reg Director Erik Sirri. Here is the SEC’s adopting release regarding exemptions for banks under Section 3(a)(5) of the ’34 Act – and here is the adopting release regarding definitions of terms and exemptions relating to “broker” exceptions for banks.
Next, the federal banking agencies will issue, after consulting with the SEC, recordkeeping rules and guidelines for bank securities activities. And any future regulatory actions regarding bank securities activities will apparently be jointly issued by the SEC and the bank agencies.
How to Value Illiquid Assets
In this podcast, Espen Robak, President of Pluris Valuation Advisors, provides some insight into how to value illiquid assets, including:
– Given the sub-prime market meltdown, valuation of illiquid assets is big news these days. What areas are implicated in valuing illiquid assets?
– Can you talk a little more about last year’s FAS 157, which requires “fair value” methodologies for valuing assets?
– What different approaches are companies taking to valuing their illiquid assets?
Even though the IRS and Treasury recently pushed back the deadline for some of the 409A provisions, many believe that they didn’t go far enough. Recently, 96 law firms joined together to send this letter requesting a broader extension of the deadline for amendment of deferred compensation plans to comply with Section 409A to the IRS and Department of Treasury.
Corp Fin Guidance: Filing Date Adjustments, Filing Deletions/Withdrawals, Etc.
Given the number of questions we get on the topic, I was pretty excited to see Corp Fin issue written guidance about how they handle EDGAR filing date adjustments, post-acceptance corrections, filing deletions and withdrawals, and continuing hardship exemptions.
I imagine that if the Office of Disclosure Support continues to issue this type of guidance on relatively common situations like this, it will diminish the number of phone calls they receive…
Clawbacks and Careful Drafting
From Mike Melbinger’s blog: A case decided earlier this month caught my attention, as it illustrates three important points. In JPMorgan Chase & Co. v Pierce, JPMorgan sued its former Senior Vice President Sandra Pierce to recover $376,000 in compensation Ms. Pierce received from 1999 through 2003 under certain Stock Award Agreements. Pierce left JPMorgan in December 2004 to accept a position with another Bank. The Stock Award Agreements authorized JPMorgan to “claw back” stock award compensation Pierce received if she became employed by a JPMorgan competitor and “perform[ed] the same or substantially similar functions to those which [she] performed while employed by [JPMorgan].” [ed. note: we have posted the opinion in the “Clawback Provisions” Practice Area on CompensationStandards.com.]
The court faced three interesting and relevant issues: (1) whether the claw back provisions of the award agreements was enforceable, (2) whether JPMorgan Chase had properly delegated the authority to make the decision on competitive employment to is Human Resources Director, and (3) whether the court should apply a deferential standard of review to the decision of the Human Resources Director.
The court dispose of the first issue easily, finding that the claw back provision was clearly enforceable as a matter of Delaware contract law.
The second issue was a bit closer, since JPMorgan’s documentation of its delegation of authority to the Human Resources Director was less than thorough. (Make a note: be sure to document all delegations of authority carefully and fully.)
The third issue was the unusual feature of this case/decision – its discussion of the judicial standard of review applicable to ERISA cases. Many of us have – for years – drafted our equity compensation plans (and other non-ERISA plans) to include language we developed for ERISA plans following the US Supreme Court’s decision in Firestone v. Bruch (1989). Firestone held that if the plan document reserved to the plan administrator the power and authority to apply and interpret the plan’s (ambiguous) terms in its sole discretion, and the plan administrator made such a decision, then the court would only overturn that decision if it found the administrator’s decision to be “arbitrary and capricious” – a high standard. We add this language in the hope that a court seeing this interpretive language will look to ERISA, by analogy, for guidance and apply the arbitrary and capricious standard. In this case, the court did not rely solely on the arbitrary and capricious standard, but seemed to apply a similar analysis in finding in favor of JPMorgan and its Human Resources Director.
Act Now: Join Mike – as well as in-house practitioners from McDonalds and Intel – to learn more about protective/proactive plan drafting and claw backs for their panel at the “4th Annual Executive Compensation Conference.” You can catch this Conference in two weeks either in San Fran or by video webcast. And you can watch this Conference online – along with our “2nd Annual Exec Comp Disclosure Conference” and “Hot Topics Conference” as part of a “Member Appreciation Package.”
