Tips From the 2010 Bowne Conference: How to Avoid Disclosure Problems
The 2010 Bowne SEC Accounting, Compliance & Legal Issues Conference held in Minneapolis last week was a major success. More than 250 public company representatives and advisors attended to hear a day-long program featuring up-to-date information on disclosure, corporate governance, executive compensation and accounting issues.
I moderated a panel discussion on public company disclosure issues that also featured my partner, Paul Chestovich. Paul provided an update on the SEC’s new positions on climate change disclosures and non-GAAP financial measures, also the subject of a very handy article Paul wrote for the Small Public Company Forum called “Generation Non-GAAP”. We also participated in a discussion of tips for public companies to avoid disclosure problems. The SEC has beefed up its enforcement staff and enforcement activity, making compliance especially important these days, to avoid being “busted” by the SEC. Some of our disclosure and compliance tips were as follows:
- When making tough disclosure calls, remember the current public skepticism and SEC activism (business as usual may not be enough).
- Revisit forward looking disclaimers, risk factors and MD&A in light of current conditions.
- Before you have a problem, check your D&O policy – does it cover SEC investigation expenses? (Many do not.)
- Focus on process, process, process - in light of SEC scrutiny, it’s important to have consistency and proper oversight, and to be able to demonstrate that with good documentation.
- Make sure disclosure controls are formalized (written and compiled), and that the internal disclosure committee keeps proper records.
- Re-examine whistleblower policies, especially in relation to reporting of financial fraud. Note that, under the new financial reform bills, whistleblowers may receive a “bounty” for reporting financial fraud, which will encourage further activity by whistleblowers.
- Consider a formal Communications Policy to control the flow of information to analysts, media, etc. This will reduce the risk of inconsistent or misleading statements and help promote compliance with Regulation FD (prohibiting selective disclosures to analysts).
- Review the corporate website and make sure disclosures are consistent with public reports.
- Focus on your insider trading policy - make sure the policy is up to date and policed. Even the appearance of insider trading gives plaintiffs and SEC additional basis for actions, where a disclosure issue alone might not trigger a proceeding.
Our complete presentation is available here (PDF).
If you were not there, hope you can make it to the Conference next year!
.jpg)
And the survey says . . . executives are still doing okay in this economy. Many media outlets have just released surveys of the 2009 compensation of public company executives. They generally reported higher cash compensation (especially bonuses) than for 2008, when many companies did not hit their earnings targets. Relative equity compensation value was harder to assess.
After all the speculation about effective dates of the new amendments to the proxy disclosure rules, the SEC on Tuesday published a set of 
As I reported previously, the SEC enforcement staff is "loaded for bear," stepping up its enforcement activities to go after violations of the securities laws. Some recent stories reinforce that it is more important than ever to guard against these violations: The Wall Street Journal 
Early November finds us in a kind of limbo - those of us who advise public companies on governance and compensation matters are waiting for something big to happen. But there's plenty of smaller stuff to report on - although most of these items present more questions than answers:
I spoke this week at a Minnesota CLE Conference on the topic of how public companies can avoid liability for their disclosures. In preparing my remarks, it struck me that the SEC is "loaded for bear" in going after public companies and their officers with investigations and enforcement proceedings. The SEC has increased and reorganized its enforcement staff and is trying to raise its profile - really, an attempt to justify the agency's continued existence. Recent examples, just during July and August of 2009:
The simple rule is to disclose material information in a way that's not misleading. However, Rich cautions that a higher standard of disclosure may be required now. As Rich puts it, "There is a growing public skepticism that will make its way into the jury pool and even into the judiciary. In a dispute, a tie may no longer go to the company." SEC enforcement also poses new dangers, because the agency has a beefed-up enforcement staff and new energy. In other words, business as usual may not be the best course in the current atmosphere. 
