In the past couple days, much has been written about the contents of a leaked memo from Jeb Hersarling, Chair of the House Financial Services Committee, to the Committee’s Leadership Team. The memo, of which we have obtained a copy and posted here, outlines proposed changes from the original Financial CHOICE Act, introduced last year. The original version of the Financial CHOICE Act is located here.

According to sources, the current word (for whatever current “word” is worth nowadays) is that the revised draft of the Financial CHOICE Act may come out end of month with a pretty quick mark-up in March. Additionally, some think that if the repeal of the Durbin Amendment (which limits the fees that may be charged to retailers for debit card processing) remains in the bill, then that provision may hold it all up given that opposition doesn’t necessarily divide along party lines, but rather along who has a large bank or retail headquarter in their district.

Continue Reading What to Expect in the New Financial CHOICE Act (2.0)

Late Tuesday evening, Acting Chairman Michael Piwowar issued two statements — available here and here — announcing that he was directing the SEC Staff to reconsider whether the 2014 guidance on the conflict minerals rule is still appropriate and whether any additional relief is warranted. As a result, the SEC has created a website where interested parties can submit comments.

Continue Reading SEC Reconsidering Conflict Minerals Rule Implementation

Following the completion of one of the most divisive presidential elections in U.S. history, the election of President Trump and the retention of Republican majorities in both the U.S. Senate and House will impact the public disclosures of many U.S. public companies. The expectation of the securities markets that the results of these elections will significantly impact the prospects of many companies was reflected in the sharp movements in the stock prices in various sectors which occurred shortly after the 2016 elections. While the overall stock market trend since the 2016 elections has been positive, companies in certain sectors such as manufacturing and financial institutions have achieved gains significantly in excess of market norms, with companies in other sectors, such as utility and certain healthcare sectors, having underperformed in relation to market norms (although some healthcare companies have recovered from stock market declines seen in the immediate aftermath of the elections).

Continue Reading The Trump Effect: The Impact of the 2016 Elections on Public Company Securities Disclosures

Jay Clayton
Jay Clayton

President-elect Donald Trump on Wednesday chose Jay Clayton, a Sullivan & Cromwell deal lawyer, as his nominee to head the SEC.  Below are a few quick facts about his pick.

Bio Highlights:

  • Practice involves public and private mergers and acquisitions transactions, capital markets offerings, regulatory and enforcement proceedings, and other matters where multidisciplinary advice and experience is valued.
  • Clayton also advises several high-net-worth families regarding their public and private investments.
  • Thought leadership posted on his bio indicates significant interest/experience in cybersecurity.
  • JD – University of Pennsylvania, 1993

Continue Reading Quick Fact Sheet on Trump’s Pick for SEC Chair, Jay Clayton

As a former SEC Corp Fin staffer, I can certainly appreciate how closely the Staff reviews the specific disclosures related to internal controls and procedures and disclosure controls and procedures (DC&P) – just ask any registrant that has had to file a 10-K amendment for what they may believe is an immaterial error in their Sarbanes-Oxley Act certifications.  However, if anybody needs further convincing, I point you to a recent comment letter made public where the Staff commented of the company’s failure to state the entire definition of disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d(e) when the registrant was stating its conclusion regarding the effectiveness of its disclosure controls and procedures.  In particular, the Staff stated, “Although there is no requirement to disclose the full definition, specific reference to only a portion of the definition gives the appearance of limiting management’s conclusion solely to the portion referred to.”  Please see below for the SEC comment exchange as well as the company’s revised disclosure (via redline):

Continue Reading Disclosure Controls and Procedures Language? Use Entire Definition or Nothing at All

ISS and Glass Lewis recently updated their proxy voting guidelines in advance of the 2017 proxy season. The updates to the ISS guidelines will be effective for meetings beginning in February 1, 2017, and the updates to the Glass Lewis guidelines will be effective for meetings beginning in January 1, 2017.

Unlike in certain past years, the revisions to the proxy voting guidelines of ISS and Glass Lewis will not significantly impact the public company corporate governance landscape or impact most public companies.  The changes made to the ISS guidelines include:

  • tightening the overboarding policy of ISS (by lowering the number of public company board positions it considers acceptable for non-CEO directors from six to five),
  • certain technical revisions to ISS guidelines with respect to proposals to amend or approve equity-based compensation plans, and
  • updating the policies of ISS with respect to proposals to address non-employee director compensation.

Continue Reading ISS and Glass Lewis: Proxy Season Preparation

On December 5, 2016, Wes Bricker, the SEC’s Chief Accountant, delivered an insightful keynote address before the 2016 AICPA Conference on current SEC and PCAOB developments. The speech was entitled, “Working Together to Advance High Quality Information in the Capital Markets.” The speech covered a number of diverse topics, including an update on the Office of Chief Accountant, internal control over financial reporting, revenue recognition implementation, non-GAAP reporting, valuation practices, auditor independence, the PCAOB, IFRS and audit committees, among others. The full speech is linked here. Below is an excerpt of Mr. Bricker’s comments directed to audit committees, which included questions from audit committee members that he found helpful during his time as an audit engagement partner in generating dialogue:

Continue Reading SEC Chief Accountant Wes Bricker Delivers Keynote Address Before the 2016 AICPA Conference

Yogi Berra is often attributed with saying, “It’s difficult to make predictions, especially about the future.” This is especially true with predictions about revisions to the tax code.  However, many observers now believe a reduction in the corporate tax rate is a realistic possibility as a result of the combination of a new Trump administration and a Republican-controlled Congress. According to www.donaldjtrump.com, “The Trump Plan will lower the business tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax.” In light of these dynamics, a potential sleeper issue for many companies, especially those carrying sizeable deferred tax assets on the balance sheet, is a potential charge to earnings resulting from the remeasuring of deferred tax assets due to a change in the corporate income tax rate.

Continue Reading Sleeper Issue? Deferred Tax Assets under a Trump Administration

Recently, a shareholder was the first to attempt to use proxy access bylaws to nominate a director. The shareholder was GAMCO Asset Management, and the company involved was National Fuel Gas Company (NFG).

NFG amended its bylaws in March 2016 to include a proxy access bylaw and its terms are pretty typical:  the bylaws provide that a shareholder, or a group of up to 20 shareholders, owning 3% or more of the Company’s outstanding Common Stock continuously for at least three years may nominate and include in the company’s proxy materials directors constituting up to 20% of the board, provided that the shareholders(s) and the nominee(s) satisfy the bylaw requirements. Here is NFG’s proxy access bylaw.

Continue Reading Proxy Access Developments

Probably one of the most sensitive disclosures a public company may be required to make is information related to “contingencies.”  Disclosure of pending lawsuits and government investigations is closely scrutinized by analysts, investors and the SEC.  With respect to the latter group, we recently came across the below SEC staff comment, which is a stark reminder of the importance of fully considering the accounting literature when analyzing whether a litigation contingency is probable and reasonably estimable.  The comment pointedly asks the company (Stericycle, Inc.) why it was unable to disclose an amount or range of reasonably possible loss under the accounting literature for a legal proceeding when the settlement agreement was entered into shortly after the filing of the 10-Q.   The company’s response is worth reading.

Continue Reading A Recent SEC Comment Drives Home the Importance of Carefully Considering the Accrual and Disclosure Requirements under ASC 450 (Contingencies)