Exchange Act

The SEC Adopts Final Whistleblower Incentive and Protection Rules and Forms

by Vanessa Schoenthaler on May 26, 2011

Yesterday, by a vote of 3-2, the Securities and Exchange Commission approved a final set of rules and forms to implement the Whistleblower Incentive and Protection Program added in Section 21F of the Securities Exchange Act by Section 922 of the Dodd-Frank Act.

The purpose of the whistleblower program is to award incentives and afford protections to individuals who provide the Commission with high-quality tips leading to successful enforcement actions. To be eligible for an award, a person must provide original information that leads to a successful administrative or federal enforcement action in which the Commission obtains monetary sanctions in excess of $1 million.

The adopting release, weighing in at 305 pages, is available here, and the rules and forms will be effective 60 days after their publication in the federal register (which is good, because it’s going to take me that long to read them).

In the meantime, as was noted in the Commission’s open meeting yesterday morning, the final rule and forms that were adopted do differ from the proposed rules and forms in some material respects. Comparatively, they seek to strike a more appropriate balance between concerns that the Commission’s whistleblower program will undermine companies’ own internal compliance efforts and the intent of Section 922 in incentivizing would-be whistleblowers to report potential securities law violations. I’ll have more on this after I actually finish reading the rules.

Of course, these final rules and forms really only mark the beginning of the whistleblower program and the Commission’s newly implemented Office of the Whistleblower.  And, even now, there are still efforts underway to amend the Dodd-Frank Act’s whistleblower requirements.

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Executive Paywatch: A New Site Featuring A CEO Compensation Database and Comparison Tools

by Vanessa Schoenthaler on April 19, 2011

2011 Executive CompensationEarlier today the American Federation of Labor and Congress of Industrial Organizations, better known as the AFL-CIO, the U.S.’s largest federation of labor unions, launched a new website: Executive Paywatch.

The site focuses on the Dodd-Frank Act’s say-on-pay provisions with a particular emphasis on Section 953, which directs the Securities and Exchange Commission to adopt rules requiring disclosure of the:

  • median annual compensation of all of a company’s employees, except for its chief executive officer;
  • total annual compensation of the chief executive officer; and
  • ratio of the median annual compensation of all employees to the total annual compensation of the chief executive officer.

Based on the current Dodd-Frank implementation schedule, the Commission should be proposing rules to address Section 953 some time between August and December 2011 but, as Broc Romanek notes over at The Corporate Counsel, there’s no deadline for implementing Section 953 and the release of proposed rules has already been pushed back once.

Executive Paywatch features a database that includes compensation information for the chief executives of Russell 3,000 companies.

It also includes comparisons of CEO compensation to minimum wage workers, median workers and President Obama, and even allows you to fill out a form to compare your own compensation package (trust me, it’s a pitiful sight, even if you are very well paid).

Executive Paywatch also compares the compensation of chief executives from 299 of the S&P 500′s largest companies, as disclosed in the companies’ most recent proxy materials and compiled by salary.com, with the median salary of workers like nurses, teachers and fire fighters as disclosed in the Bureau of Labor Statistics’ Occupational Employment Statistics estimates.

Source: AFL-CIO analysis of pay data from 299 companies, provided by salary.com

Even though all of this information is publicly available, it’s still utterly jaw dropping when laid out like this.

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Proposed Rules Requiring Proposed Listing Standards About Compensation Committees

by Vanessa Schoenthaler on March 31, 2011

Proposed Rules on Compensation Committees and Compensation ConsultantsSection 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act amends the Securities Exchange Act of 1934 by adding new Section 10C, requiring the Securities and Exchange Commission to adopt rules directing the national securities exchanges* to prohibit the listing of the equity securities of a company that does not comply with certain compensation committee and compensation advisor requirements. Yesterday the Commission released a set of proposed rules and amendments that are designed to implement Section 952.

As per usual, the Commission is soliciting public comments on the proposed rules and amendments, which are due on or before April 29, 2011.

Updated April 29, 2011:

On April 29, 2011, in response to a request from the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, the Commission has extended the comment period through May 19, 2011.

Who do the proposed rules and amendments apply to?

Proposed Rule 10C-1

Proposed Exchange Act Rule 10C-1 requires that the rules of the national securities exchanges prohibit the initial or continued listing of any equity security of a company that does not comply with certain compensation committee and compensation advisor requirements.

As proposed Rule 10C-1 only applies to companies with exchange-listed equity securities, excluding security future products and standardized options. The Commission estimates that there are approximately 76 companies that fall outside of the scope of Rule 10C-1 by virtue of having only exchange-listed debt securities, and is specifically seeking comment on whether these companies should be made to comply with the final rule.

Additionally, by definition, companies with securities quoted through inter-dealer quotation systems in an over the counter market, such as the OTC Bulletin Board or the OTC Markets Group (formerly the Pink Sheets), are excluded from Rule 10C-1, unless, of course, they also have a class of equity securities listed on a national securities exchange.

Proposed Amendments to Item 407 of Regulation S-K

The proposed amendments to Item 407 of Regulation S-K broaden the scope of existing disclosure requirements with respect to compensation advisor and conflict of interest disclosures.

As proposed the amendments apply to all Exchange Act reporting companies that are subject to the proxy rules, this includes companies with securities quoted in an over the counter market, such as the OTC Bulletin Board or the OTC Markets Group, and controlled companies, but excludes foreign private issuers, which are not subject to the proxy rules, and registered investment companies, but only because they are not subject to the disclosure requirements of Item 407 of Regulation S-K.

What does proposed Rule 10C-1 require regarding compensation committees?

Proposed Rule 10C-1 requires that if a company has a compensation committee, or a committee performing the function of a compensation committee (i.e., one that oversees executive compensation), each committee member must also be a member of the company’s board of directors and must be independent. The national securities exchanges are themselves tasked with defining independence in the context of compensation committee membership, but must take into consideration factors such as:

  • sources of compensation paid to a board member, including consulting, advisory and other fees paid by the company; and
  • whether a board member is affiliated with the company or a subsidiary of the company.

Notably, as proposed Rule 10C-1 does not direct the national securities exchanges to adopt listing standards that would require a company to have a compensation committee, or to apply the compensation committee independence standards to the independent members of a board of directors that oversee executive compensation when there is no committee. The Commission is also specifically seeking comment on whether the final rule should instead direct the national securities exchanges to adopt listing standards that simply require compensation committees.

What does proposed Rule 10C-1 require regarding compensation advisors?

Proposed Rule 10C-1 requires that a compensation committee have the discretion and reasonable funds available to retain compensation consultants, independent legal counsel and other advisors, and that the committee be responsible for appointing, compensating and overseeing the work of such advisors, but not be required to follow the their advice or recommendations.

When choosing advisors, proposed Rule 10C-1 does not require that they also be independent, only that the compensation committee, in its selection process, consider:

  • whether the advisor provides other services to the company;
  • the amount of fees the advisor receives from the company as a percentage of the advisor’s total revenues;
  • what policies and procedures the advisor has in place to prevent conflicts of interest;
  • whether the advisor has a business or personal relationship with any member of the compensation committee; and
  • whether the advisor owns any company stock.

In addition to the foregoing, the national securities exchanges may adopt other relevant factors for consideration in their respective listing standards.

Are there any exemptions?

Exchange Act Section 10C exempts five categories of companies from the the compensation committee independence requirements:

  • controlled companies;
  • limited partnerships;
  • companies in bankruptcy proceedings;
  • open-ended management companies; and
  • foreign private issuers that disclose in their annual report the reason they do not have an independent compensation committee.

Proposed Rule 10C-1 also authorizes the national securities exchanges to adopt listing standards that exempt:

  • certain relationships from the compensation committee independence requirements; and
  • entire categories of companies from all of the Section 10C requirements, taking into consideration the potential impact that the requirements may have on smaller reporting companies.

When will the new listing standards take effect?

Procedurally, following the public comment period, and once the final rules and amendments are adopted and published in the Federal Register, the national securities exchanges will have 90 days to propose conforming listing standards, which must then be approved by the Commission within one year of the date on which its final rules and amendments were published in the Federal Register.

To the extent that they do not already do so, the listing standards of the national securities exchanges will have to provide companies with a reasonable opportunity to cure any defects that would otherwise cause their securities to be delisted, or ineligible for listing, based on a failure to meet the new standards.

What new disclosures do the proposed amendments to Item 407 of Regulation S-K require?

As proposed, the amendments to Item 407 of Regulation S-K would require a company to make certain expanded disclosures in any proxy or information statement filed in connection with an annual or special meeting at which directors are elected, regarding whether:

  • management or the company’s compensation committee retained or obtained the advice of a compensation advisor during the most recently completed fiscal year; and
  • the work of the compensation advisor raised any conflicts of interest, and, if so, how the conflicts are being addressed.

When do the new disclosure requirements take effect?

The new disclosure requirements will not take effect until the effective date of the final rules and amendments adopted by the Commission.

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* The proposed rules would also apply to a registered national securities association that lists equity securities in an automated inter-dealer quotation system.  At present, the Financial Industry Regulatory Authority (FINRA) is the only registered national securities association, however, FINRA does not list equity securities and, as such, the new rules do not apply to it.

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An Update on Shareholder Advisory Votes in Graphs

by Vanessa Schoenthaler on February 24, 2011

As of February 22, 2011 250 non-TARP participating companies have filed preliminary or definitive proxy materials containing shareholder advisory votes on executive compensation (Say on Pay) and shareholder advisory votes on the frequency of Say on Pay votes (Say on Frequency).  The following is a brief update on the initial filings and results:

Shareholder Advisory Vote on Executive CompensationShareholder Advisory Vote on the Frequency of Executive CompensationShareholder Advisory Vote on the Frequency of Executive Compensation

Also as of February 22, 2011, 87 companies have disclosed the results of their initial Say on Pay vote and 88 have disclosed the results of their initial Say on Frequency vote (one smaller reporting company voluntarily complied with the Say on Frequency vote, but not the Say on Pay vote, accounting for the difference in the number of reported results).  Of the companies that have disclosed results, 86% have considered their Say on Pay vote successful if approved by a majority of shareholders and 68% have considered the Say on Frequency choice that has received a plurality of votes to be the Say on Frequency choice of their shareholders.

Shareholder Advisory Vote on Executive CompensationShareholder Advisory Vote on Executive Compensation

Of the companies have disclosed the results of their initial Say on Frequency vote 68% have reported that their shareholders have voted to approve either the same Say on Frequency choice as recommended by their board of directors or, where their board of directors has not made a recommendation, an annual, biennial or triennial choice. The remaining 32% have reported that their shareholders have voted to approve an annual Say on Frequency choice as opposed to the biennial or triennial choice recommended by their board of directors.

Shareholder Advisory Vote on Executive Compensation

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The Proposed Amendments to the Definition of Accredited Investor and Other Odds and Ends

by Vanessa Schoenthaler on February 1, 2011

Last week the Securities and Exchange Commission issued proposed amendments to conform the definition of accredited investor to the requirements of Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. As amended, the definition would read:

Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of purchase, exceeds $1,000,000, excluding the value of the primary residence of such natural person, calculated by subtracting from the estimated fair market value of the property the amount of debt secured by the property, up to the estimated fair market value of the property.

An interesting tidbit from the footnotes of the proposing release: in fiscal year 2010 the Commission received 17,593 initial Form D filings, of those 16,856, or 96%, claimed an exemption that relies on the definition of an accredited investor.

The Commission is soliciting comments on a number of aspects of the new definition, which are due on or before March 11, 2011. Of particular note, at the Commission’s January 25, 2011 open meeting, both Commissioners Casey and Paredes expressed interested in hearing comments on whether the amended definition should “grandfather” existing investors who were accredited at the time of their initial investment, but who may no longer be accredited under the new definition, to allow those investors to make follow-on investments.

An Extension of Comment Periods

On Friday the Commission announced that it was extending the comment period for its proposed rules on disclosures related to conflict minerals, mine safety and payments made in connection with resource extractions through March 2, 2011. The original comment period was set to expire on January 31, 2011. The extension is being issued in response to several requests for additional time to “allow for the collection of information and improve the quality of responses” by interested persons. Each of the extending releases, available here, here and here, references a representative sample of letters that have made a request for additional time.

The Cost of Implementing Dodd-Frank

Also on Friday Representatives Randy Neugebauer, Chairman of the Subcommittee on Oversight and Investigations, and Spencer Bachus, Chairman of the House Financial Services Committee, issued a joint letter to the Commission, and several other federal agencies, seeking information regarding the estimated costs associated with implementing and executing the Dodd-Frank Act. The Commission has until February 10, 2011 to respond.

(Download File)

The Commission continues to suffer from budgetary constraints and is currently operating on the basis of a continuing resolution that temporarily extends its fiscal year 2010 budget through March 4, 2011. As a result, the Commission has been forced to scale back or delay a number of Dodd-Frank initiatives, among other things.

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ProxyMonitor: A New Shareholder Proposal Monitoring Tool

by Vanessa Schoenthaler on January 20, 2011

Shareholder Proposal Monitoring The Manhattan Institute for Policy Research’s Center for Legal Policy, a conservative, market-orientated think tank, launched a new proxy monitoring resource earlier this week: ProxyMonitor.org.  A searchable database of shareholder proposals submitted to the 100 largest U.S. companies over the past three years.  You can sort through the data by company, industry, proponent and proposal type.

Even though the data set is a bit limited at this point (the Center intends to expand it over time), the site is straightforward and aggregates some pretty useful proxy information, providing quick insight into shareholder proposal tends, plus it allows you to easily dig deeper.  For example, in three mouse clicks you can see that there were 32 shareholder proposals on executive compensation submitted to companies in the health care industry between 2008 and 2010:

Shareholder Proposals

The table columns are sortable, you can export the data into a spreadsheet, which I think is a wonderful and often overlooked option, and there’s a link to take you straight to the company filing or you can just print the proposal:

Shareholder Proposal

ProxyMonitor definitely makes for a useful resource for anyone interested in shareholder proposals, and will become more so over time as data is added, especially if the Securities and Exchange Commission prevails in its current battle for proxy access.

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Will Facebook be Forced to IPO by Spring?

by Vanessa Schoenthaler on December 30, 2010

Looks like those exorbitant transfer fees weren’t enough to put a damper on the growing market for shares of companies like Facebook and Zynga.

The New York Times and The Wall Street Journal have been reporting that the Securities and Exchange Commission has launched an inquiry into the trading of shares of Facebook,  Zynga, Twitter and LinkedIn in secondary markets like SecondMarket and SharesPost.com.

The Commission declined to comment on the matter, but that’s to be expected as inquires are always conducted confidentially unless an administrative proceeding or legal action are filed.

Both articles also note that the inquiry appears to be focused, in part, on certain investment funds set up to purchase the companies’ shares (Bloomberg did a piece on three such funds back in November) and both question whether the inquiry could ultimately force Facebook into filing for an IPO.

But how do you force a company to IPO?

Companies with an excess of $10 million in assets and a class of equity securities held of record by 500 or more persons are required to register that class of equity securities under Section 12(g) of the Securities Exchange Act of 1934.  The required registration statement must be filed within 120 days of the end of the first fiscal year in which a company meets both the asset and shareholder tests.

As an aside, registering under the Exchange Act isn’t the same as filing for an IPO.  Exchange Act registration only requires that a company comply with applicable disclosure requirements, such as the filing of quarterly and annual reports.  When a company files for an IPO it does so by registering securities for sale to the public under the Securities Act of 1933.  What frequently happens when a company is forced to register under the Exchange Act is that it will simultaneously file for an IPO under the Securities Act.  This was the case in the often cited example of Google, which filed for registration under both the Securities Act and Exchange Act on April 29, 2004.

Each of Facebook,  Zynga, Twitter and LinkedIn have already surpassed the asset requirement of Section 12(g), so the deciding factor in whether they will be forced into registration under the Exchange Act is whether their securities are held of record by 500 or more shareholders.  As currently defined, the holder of record is the person identified in a company’s records as the owner of the securities in question.  Meaning that securities held in the name of an entity, like one of the investment funds being set up to purchase shares of Facebook, are only counted as being held by one person, regardless of how many investors make up the funds.  There is an exception to this rule, however: if Facebook knows or has reason to know that the investment funds are primarily being used to avoid Exchange Act registration the Commission can count the beneficial owners of the securities as the holders of record, meaning, in our example, the investors that make up the funds.  This may be where Facebook and other companies run the risk of being forced into Exchange Act registration.

If this is the case, and assuming Facebook uses the calendar year for its fiscal year, then if the Commission finds that Facebook had 500 or more shareholders of record on the last day of its fiscal year end on December 31, Facebook would be required to file a registration statement under the Exchange Act by April 30, 2011.

Another potential explanation for the inquiry is that the Commission may be considering amending the definition of “held of record”, the current version of which was adopted in 1965.  In 2003 a group of investment funds petitioned the Commission to revise the definition to count the beneficial owners of securities held in street name as the holders of record.  Interested parties have been commenting on the proposal since its introduction, with the most recent comment letter being submitted in April 2009.

With the growth of secondary markets for illiquid assets and the increased use of alternative investment vehicles, perhaps the Commission is reconsidering how it tallies up shareholders and whether a company the size of Facebook should be required to disclose certain information to its investors.

Update: January 10, 2011

At this point this topic has pretty much been covered to death. Rapper 50 Cent has opined on Facebook’s reported $50 billion valuation and there was even a rumor floating around that Mark Zuckerberg was going to shutter the company by March 15, because it was just too stressful for him to run.  With that kind of competition, I don’t think there’s much for me to add.  In the interest of being complete, however, I did want to include a few links to round out the story.  So, in summary:

Facebook did not have 500 shareholders as of its December 31, 2010 fiscal year end, so no IPO until next spring; the Commission is still investigating the trading of private company shares in the secondary markets (and I’ll probably have something more to say on the subject if, and when, we get details); some of Facebook’s financial information was leaked; and it looks like the Goldman Sachs offering was a success; but not everyone thinks that’s a good thing.

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How to Search for Proxy Filings in the SEC’s EDGAR Database

by Vanessa Schoenthaler on December 14, 2010

EDGAR, the Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval system, is used for the automated collection and indexing of filings that are required to be made with the Commission. The EDGAR database provides a portal to those filings, allowing access to certain information on a real-time basis (e.g., current and periodic reports on Forms 8-K, 10-Q and 10-K) and other information on a delayed basis (e.g., comment and response letters, which are generally available 45 days after the Commission has completed it review process).

There are a number of subscriptions services that offer EDGAR search capabilities, all of which provide features not otherwise available through the EDGAR database.  However, if you’re not running highly customized queries or doing sophisticated comparative analyses the EDGAR database probably has everything you need.*

Let’s take a look at how it works …

Right now the first proxy statements that contain proposals addressing shareholder advisory votes on executive compensation (“Say on Pay“) and the frequency of future advisory votes on executive compensation (“Say When on Pay“) are being filed with the Commission. Let’s say you’d like to review one of those proxy statements, but you don’t know which companies are filing them.

Where do you begin? Well, there are a couple of different ways you can go about it:

Starting from the Commission’s homepage (sec.gov), under the Filings & Forms heading, select the Search for Company Filings link:

Securities and Exchange Commission - EDGAR

This will bring you to a list of EDGAR’s main search options:

Securities and Exchange Commission - EDGAR

If you knew the name of the company you were looking for the first option (to search by Company name, ticker, etc.) would be the obvious choice, but since we’ve assumed that you don’t, let’s look at some of your alternative options.

You could select the second link, Most recent filings, and enter the form you’re looking for in the Form Type field. The form type for a definitive proxy statement is DEF 14A, if you wanted to, you could also look at preliminary proxy statements on form type PRE 14A. If you don’t know the form type that you’re looking for you can click on the Form Type link to download a copy of the Commission’s Index of Forms.

Securities and Exchange Commission - EDGAR

While this search method would provide a list of the most recently filed definitive proxy statements, it’s less than ideal for our hypothetical because there’s no way to know whether any of the proxies include proposals addressing shareholder advisory votes unless you review each one.

Going back to EDGAR’s main search options and skipping down to the Custom searches heading you could select the Daily filings link and run a search similar to the one described above, except this form allows you to limit your search to any day within the previous five business days.  Of course, you also have the same problem as above; you’d have to go through each proxy statement until you found one that includes a proposal addressing shareholder advisory votes.Securities and Exchange Commission - EDGAR

This brings us to Full-Text Search, the most efficient way to conduct our proxy search. Again going back to EDGAR’s main search options, if you select the third link from the top, Full text (past four years), you’ll be brought to a simple text search box that allows you to search the full text of all EDGAR filings, including exhibits, for the past four years.  If you then select the link for the Advanced Search Page you can perform the same search using additional features, such as form type and date range.

Securities and Exchange Commission - EDGAR

Using the Advanced Search Page, if you were to search for the phrase “advisory vote” in all definitive proxy statements, on form DEF 14A, filed between October 1, 2010 and today (December 14, 2010), you would find 16 results:Securities and Exchange Commission - EDGAR

If you select the first link for Costco Wholesale Corporation’s definitive proxy statement and scroll down to the Notice of Annual Meeting of Shareholder and you’ll find that Costco’s proxy statement contains proposals addressing both shareholder advisory votes on executive compensation and the frequency of future advisory votes on executive compensation.

Securities and Exchange Commission - EDGAR

It’s that simple. Unless you’re looking for a specific filing by a specific company, the advanced Full-Text Search option is going to be the most useful way for you to search the EDGAR database.

And, if you get stumped along the way, the Filings & Forms section of Commission’s website contains a number of useful tutorials and other resources.

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*There are limitations which may affect both the EDGAR database and subscription services, for example:

  • If you’re looking for filings made before 1996, you may not find them. Companies were first required to submit filings through EDGAR between 1993 and May 6, 1996, before that all filings were submitted to the Commission in paper form.
  • There are specific forms that have only recently been filed through EDGAR (e.g., Forms 3, 4 and 5 were filed through EDGAR on a voluntary basis prior to June 30, 2003 and Form D was strictly a paper filing prior to March 16, 2009).
  • Annual reports to shareholders (the glossy versions) are generally not required to be filed through EDGAR, though companies may do so voluntarily.

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The Commission May Not Be So Quick to Grant Your Next Confidential Treatment Request

by Vanessa Schoenthaler on November 3, 2010

The Office of Inspector General has been conducting an audit of the Securities and Exchange Commission’s processes and procedures for handling confidential treatment requests under Securities Act Rule 406 and Exchange Act Rule 24b-2.  In September OIG released its final report containing eight recommendations designed to improve these processes and procedures; the Commission has agreed, or partially agreed, with seven of them and will provide OIG with a written action plan to address the agreed upon recommendations by November 12, 2010.

A Brief Overview of Confidential Treatment Requests

There are generally two types of confidential treatment requests, those made pursuant to:

  • Securities Act Rule 406 or Exchange Act Rule 24b-2 with respect to information required to be filed with the Commission, such as a material agreement filed as an exhibit to a registration statement or periodic report; and
  • Rule 83 of the Commission’s Rules of Practice with respect to information not required to be filed with the Commission, such as supplemental information provided in the context of the comment and review process.

Requests Made Pursuant to Securities Act Rule 406 or Exchange Act Rule 24b-2

When making a request for confidential treatment pursuant to Securities Act Rule 406 or Exchange Act Rule 24b-2 the request must:

  • be sufficiently narrow, so that only information eligible for exemption under the Freedom of Information Act is covered;
  • contain legal and factual analyses substantiating the exemption;
  • contain an affirmative representation as to the confidentiality of the information; and
  • set forth the duration for which the exemption is being sought;

The Commission will not generally grant a request for confidential treatment with respect to information that is specifically required to be disclosed under applicable securities laws or information that is material to investors.

Requests Made Pursuant to Rule 83 of the Commission’s Rules of Practice

As with a request for confidential treatment made pursuant to Securities Act Rule 406 or Exchange Act Rule 24b-2, a request made pursuant to Rule 83 of the Commission’s Rules of Practice must be sufficiently narrow so as only to include information eligible for exemption under the FOIA.  However, it is not necessary to substantiate a request for confidential treatment made pursuant to Rule 83 until such time as a FOIA request is made.  Additionally, it is possible to request that the Commission return any supplemental materials, thus rendering them unavailable for production in a FOIA request.  The Commission will generally do so provided returning the materials is consistent with the protection of investors and the provisions of the FOIA. Any request for confidential treatment that is granted under Rule 83 will expire after 10 years, unless renewed prior to its expiration.

How the OIG’s Recommendations Might Apply

Two of the OIG’s eight recommendations focus on the processes and procedures for the Commission’s initial screening and selective full review of requests for confidential treatment that are based on the required disclosures causing competitive harm and not being necessary for the protection of investors.  Specifically, that such requests are overly broad, use conclusory statements and contain boilerplate language.  The Commission has agreed, or partially agreed, to address these recommendations by revising its internal processes and procedures.  So as to avoid delay, or even further review, issuers should also consider whether they have fully addressed these concerns in their next confidential treatment request.

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Got A Calculator?

by Vanessa Schoenthaler on October 13, 2010

You’d better double-check those compensation figures before filing your next disclosure document or you may be needlessly inviting additional SEC scrutiny.

On Monday The Boston Globe ran a follow-up piece to an earlier story in which it identified 34 Massachusetts-based public companies which reported incorrect compensation figures for reasons such as “typos, mistakes in addition and other inadvertent blunders.”

Most of the companies, when initially interviewed, stated that they had no intention of correcting the errors, which they all viewed as immaterial.  However, in its follow-up piece, the Globe indicated that the Commission now plans to look into a number of the cases.  One law school professor interviewed for the piece even suggested that the Commission consider questioning the companies’ certifying accountants. … Surely they had calculators?

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