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Simpson Thacher discusses SEC Charges Against Computer Sciences Corporation and its Former Executives for Accounting Fraud, Invoking Sarbanes-Oxley’s Clawback Provision
On June 5, 2015, the Securities and Exchange Commission (“SEC”) entered into settled administrative cease-and-desist proceedings with Computer Sciences Corporation (“CSC”) and some of its former executives due to the company’s alleged manipulation of financial results and concealment of problems …
The Effect of Regulatory Alteration on Management Earnings Forecast?
In 1999 Kotsovolos, the leading Electronics Supplier in Greece, reported in its initial public offering prospectus an earnings forecast that missed its actual earnings, as announced by its first annual report, by 234%. This inaccuracy is attributed to the mandatory …
Morrison & Foerster discusses CFTC Proposed Relief from Trade Option Reporting and Recordkeeping Requirements for Commercial End Users
On April 30, 2015, the Commodity Futures Trading Commission (“CFTC”) approved for publication in the Federal Register proposed amendments to the trade option exemption (the “Proposal”) that would reduce reporting and recordkeeping requirements for trade option counterparties that are not …
Jones Day discusses SEC’s Proposed Pay Versus Performance Disclosure Requirements
On April 29, 2015, the SEC issued a proposing release regarding the so-called “pay versus performance” disclosure mandated by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposed rules would require certain companies registered under …
Reconsidering the Institutional Design of Federal Securities Regulation
The scholarly literature on institutional design focuses on how legal institutions, including administrative agencies, legislatures and courts, should be organized in order to produce the best legal outcomes. In a recent article, I consider how this literature might help …
Two Audiences, Two Stories: Comparing What Companies Tell Regulators With What They Tell Investors
In 2010, the Securities and Exchange Commission (SEC) issued guidance that requires companies to tell shareholders how they may be harmed by proposed energy regulations, unless the company determines that the regulation will be unlikely to affect the company.[1]…
Shearman & Sterling discusses Capital Markets Unions: the EU’s Next Focus for Reforms
On 18 February 2015, the European Commission published a green paper on building a Capital Markets Union, alongside two complementary consultation papers on a revised EU framework for securitisation and a review of the Prospectus Directive. The proposals are part …
Evidence on Contagion in Management of Earnings
In this paper, we study peer firm behavior to ascertain (i) whether exposure to financial misrepresentation fuels similar behavior or deters it among peer firms; and (ii) what factors increase or decrease the likelihood of contagion? The prior years have …
Simpson Thatcher discusses SEC Filing Sarbanes-Oxley Clawback Action Against Two Former CFOs
On February 10, 2015, the Securities and Exchange Commission (“SEC”) filed settled administrative cease-and-desist proceedings against two former chief financial officers (“CFOs”) of Saba Software, Inc. for their failure to reimburse the company for the stock-sale profits and bonuses they …
Guiding Through the Fog: Financial Statement Complexity and Voluntary Disclosure
“I am raising the question here and internally at the SEC as to whether investors need and are optimally served by the detailed and lengthy disclosures about all of the topics that companies currently provide in the reports they are …
Wilson Sonsini discusses SEC Proposal Requiring Disclosure of Hedging Policies for Directors, Officers, and Other Employees
On February 9, 2015, the U.S. Securities and Exchange Commission (SEC) issued a proposed rule related to the disclosure of hedging policies applicable to board members, officers, and other employees. The proposed rule would implement one of the remaining requirements …
Why Don’t The Lawyers Learn What Investors Are Taught?
In December 2013, the SEC at the direction of Congress under the JOBS Act dutifully provided an initial SEC staff report addressing securities disclosure requirements for public companies to question whether the SEC’s detailed disclosure mandates for public company disclosure …
Paul Hastings discusses Second Circuit Decision That Failure to Make Required Item 303 Disclosure Can Provide Basis for Securities Fraud Claim
Recently, the United States Court of Appeals for the Second Circuit in Stratte-McClure v. Morgan Stanley, No. 13-0627-CV, 2015 WL 136312 (2d Cir. Jan. 12, 2015) affirmed dismissal of a securities fraud class action lawsuit. The Court also ruled, …
Goodwin Procter discusses Two New York Decisions Rejecting Disclosure-Based Settlements of Merger Lawsuits
Speed Read
In two recent rulings, the New York Supreme Court rejected settlements arising from lawsuits in which plaintiff stockholders challenged the defendant public companies’ merger-related disclosures. The court in each case found that proposed supplemental disclosures that defendants would …
Greater Disclosure Harms Cartels
The U.S. Department of Justice estimates that breaking up illegal cartels leads to consumer savings of at least 10% of annual sales in the relevant market. However, from the regulator’s perspective it is notoriously difficult to identify cartels. Even more …
Pepper Hamilton on Round Two of Shareholder Say-on-Pay Litigation
The third proxy season of the Dodd-Frank Act’s mandatory shareholder “say-on-pay” advisory votes is well underway, and “round two” of shareholder say-on-pay litigation is in full swing. Unlike the first round of say-on-pay lawsuits, which were based on negative advisory …
Disclosure and Ratings Requirements in European Structured Finance
The newly amended credit rating agencies regulation coming into force on 20 June will expand the scope and application of disclosure requirements and other ratings related regulation for structured finance instruments – a concept wide enough to include many transactions
Should Municipal Bond Issuers be Required to Disclose Bank Loans?
You may be surprised to learn that municipal bond issuers are not required to disclose bank borrowings. I’ve heard numerous estimates that such issuers have outstanding bank borrowings in the $200 to $300 billion range, which would amount to approximately
Latham & Watkins Discusses the JOBS Act after One Year: A Review of the New IPO Playbook
Latham & Watkins LLP has prepared a comprehensive report, “The JOBS Act After One Year: A Review of the New IPO Playbook.” The report focuses on Title I of the JOBS Act, which changed the initial public offering …