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GAO Scolds SEC for Ongoing Cyber-Security Deficiencies

April 17, 2014

A new report from the Government Accountability Office warns that the Securities and Exchange Commission must improve its cyber-security efforts. A key system that processes and tracks financial information could be vulnerable to hackers and, despite having a disaster recovery plan, a key database didn't have a suitable back-up, the report said.

SEC Charges Two Audit Committee Chairs for Blind Eye

April 17, 2014

The Securities and Exchange Commission recently delivered enforcement actions to two audit committee chairs, a rare enforcement target, accusing both of failing to act on obvious red flags of fraudulent accounting and financial reporting. The cases involve two China companies, AgFeed Industries and L&L Energy, where the SEC says audit committee chairs continued to oversee the filing of financial statements they knew were faulty. More inside.

Business Groups Petition SEC for Tougher Proxy Rules

April 17, 2014

A coalition of business groups is petitioning the Securities and Exchange Commission to increase the threshold of favorable votes that a shareholder proposal must get before a company is obligated to include proposals on the same issue on the proxy the next year. Proposals must garner at least 3 percent of the total vote the first year to be resubmitted and 6 percent of votes in the second year. More inside.

SEC's Gallagher Rails on Third-Party Rule Makers

April 16, 2014

Third parties trying to set disclosure standards for public company financial reporting, like the Sustainability Accounting Standards Board, are ruffling some feathers at the Securities and Exchange Commission. Commissioner Daniel Gallagher recently protested attempts by SASB, and other groups not authorized by the SEC, to tell companies what they should disclose in their financial statements. More inside.

Court Decision Won't be Final Word on Conflict Minerals

April 15, 2014

Rather than providing clarity, a federal court decision this week provides even more uncertainty for companies facing a fast-approaching deadline for disclosing the use of conflict minerals in their products. While a variety of scenarios may unfold, experts are urging companies to stay the course with their preparations.

Extraction Payment Disclosure Moves Forward, Despite Delays

April 15, 2014

The Securities and Exchange Commission will rewrite a Dodd-Frank Act requirement that oil, gas, and mining companies disclose payments they make to foreign governments. When remains unclear, but some multinational companies, now facing similar regulations around the world, are moving forward and voluntarily reporting the expenditures. Full details inside.

Court Says Conflict Minerals Disclosures Violate First Amendment

April 14, 2014

A federal appeals court overturned the SEC's conflict minerals rule Monday, saying that companies cannot be required to list on their Websites what products are or are not conflict-minerals free. The court did say the SEC's cost-benefit analysis of the rule was adequate—almost a victory for the SEC anyway, considering past legal setbacks. The court's decision comes mere weeks before companies had to start filing conflict mineral disclosures with the SEC. More inside.

Poll: First Conflict Minerals Filings Have Companies Scrambling

April 09, 2014

With the first reporting requirements for the Securities and Exchange Commission's conflict minerals rule due on May 31, many public companies are still in the early stages of compliance and risk falling behind, according to a new survey by audit firm PwC. It found that only four percent of companies have completed a draft of their filings.

SEC, CVS Settle Accounting Charges for $20 Million

April 08, 2014

CVS Caremark Corp. has agreed to pay $20 million to settle charges with the Securities and Exchange Commission that the company misled investors about a big financial setback with accounting gimmicks and disclosure omissions. Its controller, Laird Daniels, also agreed to a penalty of $75,000, although he remains employed with CVS and the company is not required to restate any prior financial statements. More inside.

As Whistleblower Protections Expand, Companies Must Act

April 08, 2014

With whistleblower complaints rising and regulators and courts expanding the pool of employees covered by whistleblower retaliation rules, companies must ensure they have systems and policies in place to handle whistleblower claims properly. Companies with established procedures for handling claims, including documenting everything, stand a better chance of mitigating retaliation risks. More inside and related stories at left.

Could an SEC Disclosure Overhaul Actually Make Things Worse?

April 08, 2014

The Securities and Exchange Commission has embarked on a comprehensive review of disclosure requirements. Don't expect results any time soon, experts warn, and some also fret that the ambitious effort could actually add to the compliance burden and increase costs. "There is the potential it could become more time consuming," says Brian Lynch, a partner at the law firm Drinker Biddle & Reath.

Updated SEC Guidance Addresses Conflict Minerals Audits

April 07, 2014

The Securities and Exchange Commission has published new guidance on audit requirements for companies disclosing their use of conflict minerals. Nine new topics were added to an ongoing list of compliance and disclosure interpretations published by the SEC's Division of Corporation Finance. Full details inside.

Friended on Facebook? Praised on Yelp? The SEC May Take a Look

April 03, 2014

The SEC gave fresh guidance last week on how to navigate federal securities law in the age of social media. This time around the agency focused on shout-outs investment advisers might get on sites such as Yelp or Angie's List and when such statements might cross the line into prohibited use of testimonials. More inside.

Few Using JOBS Act Exemption for Private Offering Solicitations

April 02, 2014

Although greatly anticipated, the response to a JOBS Act requirement to lift the longstanding ban on advertising private offerings has been tepid at best. The hesitancy of issuers to use a new exemption likely stems from concerns with verifying accredited investors, says Keith Higgins, director of the Securities and Exchange Commission's Division of Corporation Finance

Investors Seek Less Noise in Disclosures, Says NACD

April 02, 2014

While regulators ponder how to address concerns of disclosure overload, major investors would welcome alternative placement for certain kinds of information, such as on corporate websites instead of in regulatory filings, says Peter Gleason, a managing director for the National Association of Corporate Directors. "They are advocating for more disclosure, but in different places than the filed document," Gleason says.

SEC Could Consider New Cyber-Security Disclosures

April 01, 2014

In light of large data security breaches at companies like Target and Neiman Marcus, the Securities and Exchange Commission is gathering feedback on the need for new cyber-security and data breach disclosures. During a recent roundtable on the topic, company representatives and advisers mostly opposed the idea. Many of them, however, were in favor of new guidance on how to adhere to the current rules. Details inside.

Former SEC Official Joins Mayer Brown

March 31, 2014

Matthew Rossi, former Assistant Chief Litigation Counsel in the Securities and Exchange Commission's Enforcement Division, has joined the global law firm Mayer Brown as a partner in its securities litigation and enforcement group.

Amid Privacy Concerns, SEC Extends Comment Period on ABS Rules

March 28, 2014

The Securities and Exchange Commission has once again extended the comment period for rules covering asset-backed securities. One proposal would require issuers to create a private Website for investors looking to access data on each individual loan in the underlying pool. Several companies have already expressed privacy concerns with the plan; others will now have until April 28 to respond.

SEC Must Limit Shareholder Resolutions, Commissioner Says

March 27, 2014

The Securities and Exchange Commission should have a smaller role in corporate governance and, likewise, activist investors should have less influence over proxy voting, Commissioner Daniel Gallagher said in a speech last week. The stock ownership threshold for submitting shareholder proposals should increase to as high as $2 million, he suggested.

Aguilar Pitches Creation of an SEC Cyber-Security Task Force

March 27, 2014

As the Securities and Exchange Commission grapples with whether to pursue additional cyber-security disclosure requirements and mandatory safeguards for public companies and exchanges, Commissioner Luis Aguilar is proposing a new Cyber-Security Task Force. It would be composed of representatives from each SEC division and advise on future guidance and rules. More inside.

SEC Announces Agenda, Panelists for Cyber-Security Roundtable

March 24, 2014

Topics on tap this week at a roundtable the Securities Exchange Commission will hold on Wednesday, March 26 include cyber-security disclosure issues faced by public companies, cyber-threats faced by by exchanges, and how broker-dealers, investment advisers, and transfer agents address identity theft and data protection.

White: SEC Disclosure Reform Moving Forward, Despite Hurdles

March 20, 2014

The next steps in a comprehensive rethinking of the Securities and Exchange Commission's disclosure regime should be coming soon and an assessment is underway by the Division of Corporation Finance, according to SEC Chairman Mary Jo White. The biggest hurdle, she said, is balancing the needs of retail and institutional investors. More details inside.

Regulators Push for More Transparency on Independent Valuation Services

March 18, 2014

When preparing financial reports that include a hefty amount of fair-value accounting, companies have been caught in a dispute between valuation professionals and auditors. Valuation firms want to protect their proprietary processes, while auditors want more transparency. The SEC is weighing in by pushing valuation firms to better meet the needs of the financial reporting community, and the industry is taking heed. More inside.

SEC and States Square Off Over Reg. A Securities Offerings

March 18, 2014

Looking to reinvigorate rarely used Regulation A, which exempts some securities offerings from registration, Congress increased the capital-raising threshold from $5 million to $50 million. The SEC went a step further and pre-empted the state review process for such offerings. Now, state securities regulators are fighting back, demanding the return of their oversight and pitching a new, streamlined review process. More inside.

House Panel Recommends Partial XBRL Exemption

March 17, 2014

The House Financial Services Committee has recommended exempting smaller public companies from the SEC requirement to submit financial statements formatted in XBRL. The committee approved a bill that would free public companies with revenues of less than $250 million of the XBRL filing requirement for five years or until the SEC can demonstrate that the benefits outweigh the costs. More inside.

SEC: Lions Gate's Takeover Battle Led to Disclosure Lapses

March 13, 2014

Movie studio Lions Gate Entertainment has agreed to pay a $7.5 million fine to settle charges by the Securities and Exchange Commission that it failed to disclose to investors an important aspect of its effort to thwart a hostile takeover bid by activist investor Carl Icahn. As part of the settlement, the company agreed to admit wrongdoing. More inside.

SEC Plans Stress Tests, Liquidity Demands for Clearing Agencies

March 12, 2014

The Securities and Exchange Commission has proposed new rules to enhance its oversight of clearing agencies that are designated as systemically important. Included in the proposal are capital requirements, liquidity standards, and ongoing stress tests similar to those conducted at the nation's largest banks.

Texas Becomes First State to Halt a Bitcoin Investment Deal

March 12, 2014

Officials in Texas have issued an emergency cease and desist order against an oil and gas exploration company that accepted Bitcoin from investors, making the state the first securities regulator to intervene in transactions based on the virtual currency. Also this week, the Financial Industry Regulatory Authority warned investors of Bitcoin's inherent risks. More inside.

Study Links Audit Fee Pressure to Quality, Restatements

March 07, 2014

Public companies demanding audit fee relief have won the upper hand the last several years, paying less even when they pose greater risk of intentional mis-statements and filing more restatements as a result—except when there's an ex-auditor on the board. More inside.

SEC May Be Closer to Approving the Latest IFRS Taxonomy

March 06, 2014

The Securities and Exchange Commission may be getting closer to approving the latest taxonomy to enable U.S. IFRS filers to begin submitting financial statements in XBRL. The SEC says it wants to see more tags in the taxonomy to create detailed mapping of financial data, ultimately making financial statements more easily comparable across capital markets. More inside.

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