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Tips From the 2010 Bowne Conference: How to Avoid Disclosure Problems

(The following post originally appeared on ONSecurities, a top Minnesota legal blog founded by Martin Rosenbaum to address securities, governance and compensation issues facing public companies.)

June 1, 2010

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.


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