Disclosure

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The young ones among you may not be familiar with Harvey Pitt, but he is an incredibly smart man and a gifted attorney who chaired the SEC some years back.  He made some political gaffes in that role, but that doesn’t diminish his understanding of the securities laws and how disclosure works.

A few weeks ago, he was quoted in The Wall Street Journal on the subject of disclosure (“Harvey Pitt Envisions a New Form of Corporate Disclosure”).  Specifically, he points out that “[d]isclosure is supposed to be for the purpose of informing…but…it’s become for the purpose of providing a defense”.  He also says “…when you have proxy statements that run hundreds of pages…it’s impossible to expect any normal individual to put in the time to read all of those pages”.  As I said, he’s an incredibly smart man.

So what is his solution?  He suggests a “summary disclosure document the way disclosure used to be” – say five or six pages – and that more detailed information be available by hyperlink for the investors who want to dig deep.  At the same time, companies could track how many people actually make that deep dive and make judgments as to eliminating information that no one seems interested in.Continue Reading On the subject of effective disclosure…

back-to-school-954572_1280My last post was a re-posting of Adam Epstein’s great piece on the importance of the proxy statement.  I promised that I would follow up on Adam’s thoughts with some recommendations of my own.  Here goes.

General

  • Manage your proxy statement “real estate” to maximize user-friendliness and create an optimal flow: Think about where things go.  For example, if your company is owned largely by institutions (and perhaps even if it’s not), should you lead off with an endless Q&A about the annual meeting and voting, discussing such exciting topics as the difference between record and beneficial ownership and how to change your vote?  Some of it is required, but consider taking out what’s not required and moving what is required to the back of the book.
  • Use executive summaries: Investors like them, and even the SEC has more or less endorsed their use. Think of it this way – whatever you think of ISS, it does a great job of summarizing your key disclosures, albeit not with your company’s best interests in mind.  Why pass up an opportunity to convey your key disclosures with those interests in mind?

Continue Reading Required reading (Part 2)

waldryano
waldryano

I don’t know when Congress decided that every piece of legislation had to have a nifty acronym, but the House Financial Services Committee recently passed (on a partisan basis) what old-fashioned TV ads might have called the new, improved version of the “Financial CHOICE Act”.  The word “choice” is in solid caps because it stands for “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs”.

Whether and for whom it creates hope, opportunity or something else entirely may depend upon your perspective, but whatever else can be said of the Act, it is long (though at 589 pages, it is slightly more than half as long as Dodd-Frank), and it addresses a very broad swath of issues.  Here’s what it has to say about some key issues in disclosure, governance and capital formation, along with some commentary.
Continue Reading The Financial CHOICE Act – everything you’ve ever wanted, and more?

In the hopefully unlikely event you were wondertraffic-lights-2147790_640ing if the compromise on government funding changed things vis-à-vis possible SEC rulemaking on political contributions disclosure, rest easy (or not, as the case may be).

The bar on such rulemaking that has been in place since the last appropriations bill (and, if memory serves me correctly, one or more previous appropriations bills) remains in place. However, the appropriations bill does not prohibit the SEC from addressing any of the remaining mandates under Dodd-Frank; the CHOICE Act that’s rumbling around Congress would prohibit work on those items.Continue Reading Breaking news!!!! Nothing has changed!!!

Cornell University Library
Cornell University Library

New York Surrogate Gideon Tucker (1826-1899) is credited with originating the maxim that “no man’s life, liberty or property are safe while the legislature is in session.”  Were Surrogate Tucker around today, he might have added boards of directors to those who should be wary of legislative action.

There are numerous weird bills rumbling around the hallowed halls of Washington these days, but one of the bills that is making me unhappy is the Cybersecurity Disclosure Act of 2017.  The good news is that the bill is very short.

The bad news is threefold.
Continue Reading Beware when the legislature is in session