Category: Securities
SEC Chair discusses completion of Dodd-Frank rulemaking mandate
In a speech delivered by video to the Securities Regulation Institute in San Diego, SEC Chair Jay Clayton shed some light (but just a little) on the anticipated completion of the rulemaking mandates under Dodd-Frank.
SEC files charges against former PCAOB staff and former KPMG partners—collateral impact?
Yesterday, the SEC filed charges against six CPAs, including former staffers at the PCAOB and former partners of KPMG, arising out of “their participation in a scheme to misappropriate and use confidential information relating to the PCAOB’s planned inspections of KPMG.” All have now been separated from KPMG or the PCAOB, and the U.S. Attorney’s Office for the SDNY has filed criminal charges. Here is the press release, which advises that the “SEC stands ready to work with issuers to ensure that collateral effects, if any, to issuers and, in particular, their shareholders are minimized.”
Get used to it— “lap dog” may now be a favored adjective in shareholder proposals
From here on out, I guess you can count on seeing your directors described as “lap dogs” in some shareholder proposals or, more accurately, nascent or possible lap dogs. (That helps, doesn’t it?) That’s because, in three separate shareholder proposals submitted to The Boeing Company by three beneficial owners (all working through John Chevedden), the SEC refused to allow the company to exclude portions of the supporting statements that suggested that some of the company’s directors might be “lap dogs.”
A Christmas gift from the SEC staff: guidance on disclosure of the accounting effect of the Tax Cuts and Jobs Act
Yesterday, the staffs of the Office of Chief Accountant and Corp Fin issued guidance regarding disclosure of the accounting impact of the Tax Cuts and Jobs Act, just signed into law on December 22. As discussed in this PubCo post, companies have been fretting about the timing of the new Act and whether they will be able to accurately determine the impact of the tax changes on their financial statements in time to file their annual and quarterly reports with the SEC. That is largely because, under U.S. accounting rules, companies must generally reflect the impact of these tax changes in the quarter they are signed into law, even if they go into effect at a future date. The staff has been talking with companies about their concerns and has responded with this guidance, which, Corp Fin Director Bill Hinman observes, “recognizes that investors demand and deserve high-quality information, while also recognizing that entities may face challenges in accounting for one of the most comprehensive changes to the U.S. federal tax code since 1986.” According to the related SEC Statement, the “staff guidance, which reflects the approach taken in prior situations where legislative changes could significantly affect financial reporting, provides a ‘measurement period’ for issuers to evaluate the impacts of the [Act] on the their financial statements. Importantly, the guidance also sets forth staff expectations for disclosure to investors during the measurement period.” Merry Christmas finance departments and auditors!
SEC nominees off “hold” and awaiting Senate confirmation
As has been widely reported, there are currently two nominees to fill the two empty slots at the SEC—from the Democratic side, Robert Jackson, a professor at Columbia Law School, and from the Republican side, Hester Peirce, a fellow at George Mason University. However, Senator Tammy Baldwin had put a “hold” on the nominees back in November, as reported in the WSJ, until they provided “their views on whether regulators should rein in activist investors, stock buybacks and executive pay.” Now that they have both responded to her questions, Baldwin has lifted her hold on the nominees, according to Law360, “clearing a hurdle for confirmation.” Their responses, although not exactly surprising, provide some insight into their views on these key issues.
Assessing impact of major tax law change, if enacted, on financial statements on a timely basis would present huge challenge
The potential passage of the new tax bill is giving some finance departments conniptions, according to Bloomberg BNA, and they’re hoping that the SEC will address the problem. The SEC? Yes. While companies are happy to see the tax breaks, some companies, especially large multinational companies, are anxious about whether they will be able to accurately determine the impact of the tax changes on their financial statements in time to file their annual and quarterly reports with the SEC. The obvious concern is that, if the SEC doesn’t extend the filing deadline, companies could risk making material misstatements.
What’s on the Agenda—the SEC’s Regulatory Flexibility Agenda, that is?
SEC Chair Jay Clayton has repeatedly made a point of his intent to take the Regulatory Flexibility Act Agenda ”seriously,” streamlining it to show what the SEC actually expected to take up in the subsequent period. (See this PubCo post and this PubCo post.) The agenda has just been released, and it certainly appears that Clayton has been true to his word: several items that had taken up long-term residency on numerous prior agendas seem to be absent from this one.
SEC Chair Clayton issues statement on cryptocurrencies and ICOs: are all ICOs securities offerings?
To SEC Chair Jay Clayton, so far, it sure appears that way. Yesterday, Clayton issued a statement on cryptocurrencies and initial coin offerings, which warns that, of the ICOs that Clayton has seen promoted so far, “[b]y and large, the structures…involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws. Generally speaking, these laws provide that investors deserve to know what they are investing in and the relevant risks involved.” This position is consistent with Clayton’s unscripted observation during his remarks at the 2017 PLI Securities Regulation Institute (see this PubCo post) that, other than pure cryptocurrency, he had yet to see an ICO that did not have some indicia of a securities offering. In his statement, he indicates that he has asked SEC Enforcement “to police this area vigorously.”
Cybersecurity risk disclosure remains at relatively low levels, but for how long?
Even though, in the wake of recent events, cybersecurity is a very hot topic, only 38% of U.S. public companies cite cybersecurity as a risk factor in their annual and quarterly SEC filings, according to a recent study from Intelligize. The study showed that, while only 426 public companies cited cybersecurity as a risk in 2012, that number grew to 1,662 in 2016. However, so far in 2017, the number has been relatively flat at 1,680. But the question remains, how long will that continue?
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