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The Filing Cabinet

"The Filing Cabinet," which covers compliance with the Dodd-Frank Act and the Sarbanes-Oxley Act, as well as other regulatory action from the Securities and Exchange Commission, executive compensation, and shareholder activism, is written by CW staff writer Joe Mont. Mont welcomes questions, comments, and statements from readers on SEC filing matters and will address them here when appropriate. Readers can contact him at

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.

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.

New Cyber Risk Task Force Seeking Members

April 15, 2014

The Casualty Actuarial Society has announced the establishment of a new task force to search for effective ways to analyze cyber-risk. According to the industry group, many aspects of cyber-risk remain poorly understood and tying research on specific IT aspects of cyber-risk to financial outcomes and insurance coverage has been particularly difficult. More 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.

FDIC: Enforcement Actions on the Decline

April 14, 2014

The number of enforcement actions brought by the Federal Deposit Insurance Corp. dropped 27 percent last year, from 775 in 2012 to 567 in 2013, due largely to the improving health of the financial industry. "The banking industry in the United States continues to experience gradual but steady improvement," said FDIC Acting General Counsel Richard Osterman. Details inside.

Group Touts Plan to Consolidate Bank Regulators into Single Overseer

April 14, 2014

The Bipartisan Policy Center, a Washington think tank, is urging Congress to consider a sweeping consolidation of government agencies. Bank regulators would be combined into a unified Prudential Regulatory Authority under the plan and a new Federal Insurance Regulator would oversee insurance companies deemed as systematically important. More inside.

Judge Takes Wind out of Wyndham's Sails in Data Security Case

April 10, 2014

A federal judge ruled that the Federal Trade Commission could move forward with its lawsuit against Wyndham Worldwide over allegations that the hotel company's data security practices violated Section 5 of the FTC Act. The ruling potentially opens the door to more cyber-security compliance charges for companies. Details 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.

Big Banks Face Greater Capital Demands Under New Rule

April 09, 2014

The eight largest U.S. Banks must set aside billions of dollars more in cash reserves if they want to avoid restrictions on bonuses and dividend payments. Regulators have adopted a final rule that strengthens leverage ratio standards for bank holding companies with more than $700 billion in consolidated assets or $10 trillion in assets under custody.

Federal Reserve Grants Banks More Volcker Rule Extensions

April 08, 2014

Once again, the Federal Reserve is giving banks a reprieve from the Volcker Rule, agreeing to grant them an additional two years to unwind their ownership and sponsorship interests in collateralized loan obligations. Banks will not have to include ownership interests in CLOs against investment limits set by the rule.

Jobs Act 2.0 Gathers Momentum With Congressional Hearing

April 08, 2014

The push for a JOBS Act 2.0 kicked into high gear last week with a Congressional hearing on several bills that are likely be part of a forthcoming legislative package to stimulate growth at emerging companies. The bills are intended to bolster capital formation and roll back public company disclosure requirements. More details inside.

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.

OSHA Seeks Comments on Whistleblower Rule

April 07, 2014

The Occupational Safety and Health Administration issued an interim final rule last week establishing procedures and time frames for handling retaliation complaints under the Consumer Financial Protection Act. The agency also issued a new fact sheet on the rule and is seeking public comments on it until June 2. Details inside.

OCC Celebrates Anniversary, 150-Year-Old Bank Concerns Persist

April 03, 2014

The Office of the Comptroller of the Currency is celebrating its 150th anniversary and a letter to national banks drafted by Hugh McColloch, the first comptroller, shows how little regulatory concerns have changed from the Reconstruction Era to the aftermath of the Financial Crisis. Much of the letter wouldn't have been out-of-place in a Dodd-Frank Act stump speech or Volcker rule pitch.

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

Sustainability Group Issues ESG Standards for Technology and Communications Companies

April 02, 2014

The Sustainability Accounting Standards Board today issued a new set of reporting standards for technology and communications companies to help them improve disclosure of environmental, social, and governance risks. The standards represent the third set in a planned industry-focused series of standards that the non-profit intends to issue through the beginning of 2016. Details inside.

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.

Automakers in U.S. and Europe Pledge Supplier Sustainability

March 27, 2014

Fourteen of the world's largest automakers have agreed to new sustainability and business responsibility standards for their suppliers, addressing human rights, working conditions, and business ethics. Participating companies include BMW, Chrysler, Daimler, Fiat, Ford, GM, Honda, Jaguar, Peugeot, Scania, Toyota, Volkswagen, and Volvo.

Five Big Banks Failed Federal Reserve's Annual Stress Tests

March 27, 2014

Five of the nation's biggest banks flunked their annual Federal Reserve stress tests for 2013. Citibank also came up short in 2012, and its back-to-back failures will prevent it from increasing shareholder dividends. Problems included insufficient capitalization, risk management failures, and deficient controls. The Volcker rule was a factor for at least one bank.

Rubio Makes Legislative Pitch for a National Regulatory Budget

March 25, 2014

Congress will set a budget each year limiting what regulations can cost American businesses if the National Regulatory Budget Act of 2014, a bill introduced in Congress this week by U.S. Senator Marco Rubio (R-Fla.) passes. The bill authorizes Congress to set a regulatory budget cap for federal agencies, penalizing those that exceed it with budget cuts.

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.

Ethisphere Institute Lauds the World's Most Ethical Companies

March 20, 2014

What are the world's most ethical companies? According to the Ethisphere Institute, an independent organization that promotes best practices in corporate ethics and compliance, General Electric, Marriott, ING, 3M, Xerox, Google, and Johnson Controls are among the U.S. Companies making the list in 2014.

U.S. Joins Global Transparency Initiative for Extractive Industry

March 20, 2014

The Extractive Industries Transparency Initiative officially accepted the United States as a candidate country last week, making it the first G-8 country to achieve candidate status. In a prepared statement, Secretary of the Interior Sally Jewell said the approved candidacy "marks another significant milestone" on the road to EITI implementation. Details inside.

Curry: Boards Must Be Accountable for Bank Compliance Failures

March 19, 2014

Bank compliance programs have plenty to improve upon and boards and top executives must take a more active role or suffer the consequences, Comptroller of the Currency Thomas Curry is warning. "Where there has been a serious breakdown in Bank Secrecy Act compliance someone has to be accountable," he said this week.

Treasury Officials Welcome Bitcoin Onto BSA Advisory Group

March 18, 2014

Amid the backdrop of speeches outlining the Treasury Department's current approach to virtual currencies, it was announced that a representative of the Bitcoin community will soon join the Bank Secrecy Act Advisory Group, a panel of representatives from regulatory and law enforcement agencies, financial institutions, and trade associations that advises it on policy recommendations.

FDA Publishes Revised Guidance on Reprint Practices for Off-Label Drugs and Medical Devices

March 17, 2014

The Food and Drug Administration this month issued revised draft guidance that clarifies for drug and medical device makers recommended practices for distributing information that discuss the off-label uses of approved drugs or medical devices. Details inside.

Survey: Compliance Officers Expect Personal Liability to Increase in 2014

March 13, 2014

A recent survey finds that more than half of compliance professionals at financial services companies around the world expect their personal liability to increase this year. The report also found that two-thirds of respondents anticipate the cost of staffing the compliance department to increase in 2014. More survey results 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.

Resolving an Impasse, CFTC and FERC Begin Sharing Data

March 10, 2014

The Commodity Futures Trading Commission and Federal Energy Regulatory Commission have put to rest a longstanding inter-agency squabble and will begin sharing market data under a recently adopted agreement. The move could mean tighter enforcement by the agencies on the energy and financial markets they regulate. More details inside.

FERC Orders Power Companies to Assess Physical Security

March 10, 2014

The Federal Energy Regulatory Commission is demanding heightened security standards needed to for protect the nation's electrical grid. It has directed the North American Electric Reliability Corporation, which sets standards for bulk power suppliers, to develop reliability standards, address physical security threats, and safeguard confidential information.

Final Stress Test Guidance Issued for Medium-Sized Banks

March 06, 2014

Bank regulators have issued final guidance detailing their expectations for required stress tests conducted by banks with total consolidated assets of $10 billion to $50 billion. The first stress tests, as required by the Dodd-Frank Act, must be conducted by March 31.

FINRA May Ease Requirements for Corporate Financing Brokers

March 05, 2014

The Financial Industry Regulatory Authority is soliciting public comments on a proposed rule set that eases the regulatory burden on firms that meet a new definition of "limited corporate financing broker." These are firms that advise companies and private equity funds, but don't maintain customer accounts.

CFTC Issues Cyber-Security, Customer Data Guidelines

March 05, 2014

New guidance from the Commodity Futures Trading Commission outlines the data security measures it expects from both the firms it oversees and third parties they contract with. The staff advisory from the Division of Swap Dealer and Intermediary Oversight follows demands by other regulators for financial firms to do more to protect the privacy and personal information of customers. More inside.

Obama's CFTC Budget Trims $35 Million, Pushes Transaction Fees

March 04, 2014

With a proposed budget submitted to Congress, the White House is seeking $1.7 billion to fund the Securities and Exchange Commission for the fiscal year that starts on Oct. 1. The Commodity Futures Trading Commission would work with a budget of $280 million, $35 million less than previously pitched. The budget does, however, ask Congress to consider transaction fees for the agency.

Supreme Court Expands Whistleblower Protections Under Sarbanes-Oxley

March 04, 2014

The Supreme Court broadly expanded the scope of whistleblower protections under the Sarbanes-Oxley Act when it ruled that the protections apply to employees of contractors and subcontractors hired by public companies. The decision expands the universe of companies regulated by the protections, "from roughly 5,000 public companies to potentially six million private ones," says Lloyd Chinn, a partner at law firm Proskauer. More inside.

McKesson Overhauls Its Executive Compensation Program

March 03, 2014

Amid growing pressure from investors and proxy advisory firms to strengthen the connection between pay and performance, drug and medical supply distributor McKesson last week become the latest company to make sweeping changes to its executive compensation program. Chief Executive Officer John Hammergren voluntarily cut his pension benefit by $45 million, because it had become a "source of distraction" for the company. Details inside.

Study: Cyber-security Forces Boards to Rethink Risk Oversight

March 03, 2014

Experience overseeing growing cyber-security risks is one of the top attributes boards will look for when appointing new directors, according to a new survey by NYSE Governance Services and senior executive search firm Spencer Stuart. The study also found boards wrestling with how to encourage director turnover. More survey results inside.

House Passes Bill Demanding Greater Rulemaking Transparency

February 27, 2014

The House of Representatives has passed a bill that strives to "create a more open and transparent regulatory process" by requiring the White House to publish information about pending regulations and related cost-benefit studies online. The legislation would also require the administration to publish annual assessments of regulatory activity. Details inside.

Delayed for Months, Senators Will Finally Question CFTC Hopefuls

February 27, 2014

The long-delayed first step to filling vacant seats on the Commodities Futures Trading Commission takes place this week, when the Senate Agriculture Committee questions three Obama Administration nominees. It will hear from Timothy Massad, picked to replace former chairman Gary Gensler, as well as commissioner nominees Sharon Bowen and J. Christopher Giancarlo. More inside.

Sustainability Group Issues ESG Standards for Financial Industry

February 24, 2014

The Sustainability Accounting Standards Board plans to issue this week a new set of standards for financial companies to help them improve disclosure of environmental, social, and governance risks. The standards will represent the second set in a planned industry-focused series of standards that the non-profit intends to issue through the beginning of 2016. Details inside.

SEC Commissioners Push Agendas at Washington Conference

February 24, 2014

At "The SEC Speaks," an annual conference held by the Practising Law Institute in Washington D.C., four of the agency's commissioners presented their pet projects for 2014. Among them, rethinking disclosure requirements, a fresh look at bad actor rules, regulating transfer agents, and refocusing the SEC on its core mission after years of Dodd-Frank distractions.

Business Wire Drops Direct Feeds to High-Speed Trading Firms

February 24, 2014

Addressing concerns that high-speed trading firms unfairly benefited from licensing direct feeds, Business Wire, a press release distribution service owned by Berkshire Hathaway, will no longer offer the controversial service. Critics of selling direct content distribution complain that the practice violates the intent of the SEC's Regulation FD.

HHS Weighs New Compensation Caps for Hospitals

February 21, 2014

The Department of Health and Human Services announced in its Work Plan for fiscal year 2014 that it will begin reviewing hospital compensation data included in operating costs reported to and reimbursed by Medicare that could result in controversial new pay caps. HHS-OIG said it's seeking to determine what effect imposing limits on the compensation amounts hospitals may report would have on the Medicare Trust Fund. Details inside.

SEC Files Amicus Brief to Support Whistleblower Protections

February 21, 2014

The Securities and Exchange Commission has filed a brief in federal appeals court arguing for an expansive definition of whistleblowers and strong anti-retaliation protections for them. The filing of the brief "makes clear that under SEC rules, whistleblowers are entitled to protection, regardless of whether they report wrongdoing to their employer or the Commission," Sean McKessy, chief of the Office of the Whistleblower, said in a statement. Details inside.

Study: Companies Vary on Approach to Cotton Supply Chain Risks

February 20, 2014

Companies in the textile space have a lot of work ahead of them in assessing and disclosing the risk that the cotton they use involved slave labor, says a new report. The study by the non-profit Responsible Sourcing Network details steps companies are taking to identify that risk and establish procedures to prevent cotton picked with forced labor from entering supply chains.

FDIC Lawsuits Against Directors and Officers Reach Record High

February 20, 2014

A new report shows that for the third consecutive year, the number of lawsuits filed by the Federal Deposit Insurance Corporation against directors and officers of failed financial institutions reached a new high. The report by Cornerstone Research shows that the FDIC filed 40 lawsuits against directors and officers in 2013 compared to 26 such lawsuits filed in 2012, and 16 in all of 2011. Details inside.
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