SEC

Don't Be Fooled by the Lull in FCPA Enforcement Actions

May 14, 2013

It has been quiet on the Foreign Corrupt Practices Act front, with the Justice Department and the SEC bringing just three enforcement actions against companies so far in 2013, compared to a combined 19 last year and 48 in 2010. But don't be lulled by that eerie calm; lawyers say it won't be long before regulators are once again piling up FCPA settlements. "All signs indicate that those numbers will shoot back up," says John Davis, a partner at law firm Miller & Chevalier.
 

Comp Committee Standards Arrive

May 14, 2013

Forget the Fourth of July: For companies listed on the New York Stock Exchange and Nasdaq, July 1 is independence day. That is when new standards go into effect for independence of board directors who serve on the compensation committee, and for hiring pay advisers—which may be the trickier part of compliance. Our complete look at following the standards is inside.
 

Auditor Sanctions Tied to Fraud Most Common at Small Companies

May 08, 2013

The Securities and Exchange Commission has sanctioned auditors a total of 87 times from 1998 through 2010 for various failures associated with financial reporting fraud, with only 11 of those failures falling in the years after enactment of the Sarbanes-Oxley Act.
 

Making Changes to Pay Plans? Don't Forget the Accounting

May 07, 2013

When companies make changes to their executive compensation plans they often overlook the accounting consequences. As public companies gravitate toward performance-based plans, for example, they face more mark-to-market accounting. And adding clawback provisions creates other accounting headaches. Some changes leave accountants scratching their heads: "It certainly must not be accountants designing these plans," says Doug Reynolds, a partner at Grant Thornton.
 

Lessons From SEC's First FCPA Non-Prosecution Agreement

May 07, 2013

Last month the SEC struck a deal with clothing retailer Ralph Lauren Corp. not to prosecute the company for alleged violations of the Foreign Corrupt Practices Act in exchange for the payment of fines and other concessions. Ralph Lauren Corp.'s actions—it conducted a thorough investigation and quickly self-reported the violation—provide new insights on how to win credit from government agencies when allegations of corruption arise. Full details inside.
 

EU's Extraction Payments Rules Go Beyond Dodd-Frank

May 07, 2013

European companies in the oil, gas, mining, and logging industries will soon be required to reveal more about the payments they make to governments for the rights to extract resources in the counties in which they operate. The EU directive goes beyond what a similar Dodd-Frank Act regulation requires by including the forestry industry and private companies. More inside.
 

Companies Prepare for Disclosure on Social Media

May 07, 2013

After the SEC clarified that companies can use social media outlets to announce material information, several companies, including Netflix, GE, and AutoNation, filed details with the SEC on their intentions to disclose information on sites such as Twitter and Facebook. Some corporate communication specialists, however, are urging caution. "I think there are some pitfalls," says Laurie Green, a partner with the law firm Holland & Knight. "There are liabilities that go with it."
 

KPMG Insider-Trading Scandal Leaves Some Clients in the Lurch

April 23, 2013

An insider-trading scandal has left KPMG reeling, but it has also created a crisis for audit clients pulled into the fray, including Skechers and Herbalife. The companies must find new auditors and submit to new audits going back as far as 2010, which could require a substantial amount of rework. "The new audit firm would not want to rely on anything that team did," says Brian Fox, founder of audit services firm Confirmation.com.
 

Conflict Minerals Rule Compliance Is Off to a Slow Start

April 16, 2013

Many companies are finding it difficult to get started on compliance with an SEC rule requiring disclosure of conflict minerals in the supply chain, according to new research. Those that have begun are struggling with vague language of the regulation and limited visibility into the supply chain. With a May 2014 deadline, the clock is ticking. "It's game time," says Barbara Kipp, a partner in PwC's risk assurance services practice.
 

Former KPMG Partner Charged With Insider Trading

April 12, 2013

The Securities and Exchange Commission and the U.S. Attorney's Office have charged Scott London, the former partner in charge of KPMG's Los Angeles audit practice, with insider trading, alleging he traded information on five KPMG public company audit clients with a friend in exchange for cash, jewelry, and entertainment. More details inside.
 

SEC's Social Media Guidance Raises as Many Questions as it Answers

April 09, 2013

Last week the Securities and Exchange Commission approved the use of social media sites such as Facebook and Twitter to make company announcements. While some criticized the agency for taking so long to embrace modern communication technology, others quickly pointed out that the guidance raises lots of new questions on using social media to disclose material information. Details inside.
 

Internal Audit Continues a Push Into Risk Management

April 02, 2013

The role of internal audit continues to evolve. New requirements from Nasdaq and the Federal Reserve emphasize practices such as analyzing the effectiveness of risk management, monitoring compliance with stated risk tolerances, and other risk-based responsibilities. "Stakeholders are stepping up their expectations of internal auditors," says Richard Chambers, CEO of the Institute of Internal Auditors.
 

Companies Respond to Increased Whistleblower Protections

March 26, 2013

Most companies are finding they need to add more protections for an expanding group of potential whistleblowers, as new regulations proliferate on retaliation against employees who raise concerns. In addition to programs created by the Dodd-Frank Act, federal agencies have strengthened and added to protections in existing whistleblower programs, too. More details inside.
 

SEC Proposes Rules to Keep Markets Functioning

March 19, 2013

Battered by Hurricane Sandy, stock exchanges based in New York were forced to suspend trading for two days in October. Now regulators are requiring exchanges and providers of other services critical to keeping markets functioning to take steps to prevent failures from human error, software glitches, or extreme weather and natural disasters. More details inside.
 

Supreme Court Rulings a Mixed Bag for Companies

March 12, 2013

The U.S. Supreme Court issued a pair of decisions last month with implications on corporate compliance: one could make it easier for shareholders to bring securities class-action lawsuits, the other could put more pressure on the Securities and Exchange Commission to move quicker on fraud and corruption investigations. Details inside.
 

Proxy Access Efforts Fizzle

March 05, 2013

Companies, once concerned that proxy access would throw the boardroom doors open to shareholder activists, are breathing a sigh of relief; campaigns to gain proxy access haven't really materialized, with only a handful of proxy access proposals filed so far this year. "If anything, we're actually seeing a drop-off in the level of activity," says Patrick McGurn, executive director at proxy advisory firm Institutional Shareholder Services.
 

Is the JOBS Act a Bust?

March 05, 2013

The Jumpstart Our Business Startups Act was billed by Congress as a way to remove barriers to capital formation, re-energize the stagnant IPO market, and create jobs. So far, however, it hasn't lived up to high hopes. "One view is that there was more messaging around the JOBS Act rather than what it actually did," says David Lynn, a partner with the law firm Morrison & Foerster.
 

Companies Will Pay Increased Fee to Support PCAOB

February 14, 2013

Public companies will be paying more to support the Public Company Accounting Oversight Board, after the Securities and Exchange Commission approved a nine percent increase in the fee to fund the PCAOB's 2013 operating budget. The additional funding will go mostly to bolster audit inspection staffing.
 

After Charges of Abuses, SEC May Consider Changes to 10b5-1

February 12, 2013

Large shareholder groups, including the Council of Institutional Investors, say company executives may be abusing so-called 10b5-1 plans, which allow corporate insiders to sell shares at predetermined intervals to avoid accusations of insider trading. CII is urging the SEC to examine the use of such plans and issue new guidance to curb misuse.
 

FASB Kicks Off XBRL Guidance Series

February 11, 2013

The Financial Accounting Standards Board issued new guidance meant to help companies through some rough patches in their submission of financial statements formatted in XBRL. The new guidance is part of a series intended to help users of the taxonomy understand how certain disclosures are structured within it. More details inside.
 

IFRS Filers Get Another Reprieve on XBRL

January 30, 2013

The IFRS Foundation has published its 2013 draft IFRS taxonomy, but that doesn't mean companies filing under International Financial Reporting Standards in the United States will be using it any time soon. The Securities and Exchange Commission doesn't expect to approve an IFRS taxonomy for current reporting periods and advises IFRS filers to quit trying to use the GAAP taxonomy. More inside.
 

Auditors Are Seeking More Information From Internal Investigations

January 29, 2013

External auditors, under pressure to improve audit quality, are increasingly demanding to see behind the curtain of internal investigations that could affect financial statements—a request often at odds with the interests of lawyers conducting the investigations who want to keep the information privileged. "Privilege has always been a barrier to seeing what's going on in an investigation," says Peter Bible, a partner with audit firm EisnerAmper.
 

How the SEC Is Using Analytics to Spot Reporting Problems

January 29, 2013

The Securities and Exchange Commission is hard at work on a project, the Accounting Quality Model, that when finished could subject all financial filings to sophisticated analysis for risky accruals, accounting problems, and even fraud. SEC Chief Economist Craig Lewis described it as "a model that allows us to discern whether a registrant's financial statements stick out from the pack." Details inside.
 

XBRL's Future Questioned Amid Errors, Adoption Lags

January 23, 2013

XBRL is in danger of becoming obsolete before it is even fully established, according to research out of Columbia University. The report finds that consumers of financial statement data, including analysts and investors, who are meant to benefit from XBRL, are not adopting it as expected due to errors in the data and the lack of XBRL-enabled tools. More findings inside.
 

Regulators Look to End Tax Deductions on Fines

January 23, 2013

A recent report assailed what it calls the common practice of companies lowering the fines and penalties they agree to with federal enforcement agencies by exploiting a loophole that allows them to claim a portion of them as a tax-deductible business expense. Legislative attempts to close the loophole have failed, but now the SEC and the Justice Department are writing language into settlements that specifically prohibits the practice. More details inside.
 

No Clear Solutions in Audit Standoff With China

January 23, 2013

As U.S. regulators press forward with their pursuit of access to documentation from audits conducted in China, public companies with units or subsidiaries there are becoming increasingly concerned that the countries won't be able to resolve the conflict. As few solutions emerge, some are wondering if Big 4 and other leading global audit firms could see their China affiliates barred from practicing before the SEC. More inside.
 

Judge Balks at SEC Settlement With IBM, Wants More Reporting

January 23, 2013

A U.S. district court judge is challenging an SEC settlement, claiming that it lets the defendant, IBM, off too easy. The move is the latest in a series of contested settlement agreements that could change the way that the SEC resolves civil cases. Judge Richard Leon says he wants IBM to submit regular reports on its compliance efforts. "This is not a rubber stamp court," he stressed. "I'm not just going to roll over like the SEC has."
 

JOBS Act Puts Spotlight on Investor Accreditation Practices

January 23, 2013

A top provision of the JOBS Act ends the solicitation and advertising ban that kept companies from promoting private securities offerings and hedge funds. But the measure comes with a catch: The SEC wants issuers to do more to prove that they are only targeting sophisticated investors who qualify, yet it is not giving them specific rules on just how to do that. Details inside.
 

SEC to Consider New Rules on Political Spending Disclosures

January 23, 2013

Companies may soon have reason to prepare for more scrutiny of their political giving and lobbying efforts. Earlier this month, the SEC updated its roadmap for rulemaking in the coming months, adding a political disclosure rule with the projected timeline of April for a first proposal on the topic. "This is one of the most important issues in corporate governance right now," says Robert Jackson, an associate professor at Columbia Law School.
 

The Costs and Benefits of Regulatory Cost-Benefit Analysis

January 11, 2013

Federal agencies such as the Securities and Exchange Commission and the Commodity Futures Trading Commission are under siege from legal challenges to rulemaking, based on allegations of faulty cost-benefit analyses. Inside, Executive Editor Joseph McCafferty considers the effect such challenges could have on rule-writing, including the potential for clearer regulations.
 

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Events of the Week

Addressing the Challenges of Solvency II Pillars 2 and 3
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Information Governance: Managing the Lifecycle of Data
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Who's Minding the Files? Managing the File Transfer Explosion
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Getting It In Writing: The Art of Policy Management
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Information Governance: Managing the Lifecycle of Data
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Anti-Money Laundering Illustrated: Visualizing an Effective Capability
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Thought Leadership

Today's Chief Audit Executive: Continuing on a Path to Value Creation
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What Does an Effective Customer Risk Assessment Program Look Like?
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Getting Ready for the Physician Payment 'Sunshine' Rule
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New Compliance Week and Kroll Benchmarking Report on Anti-Bribery & Corruption
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Strengthening Controls in 2013, Part 3: Purchase-to-Pay Cycle
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Evolution of Compliance: 2013 State of Compliance Survey Results
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