Vitesse backdating settlement

[3] Notwithstanding its focus on disclosure of one category of risks – climate change – this release has much broader significance for companies regarding the duty to provide “early warning” to investors of all types of contingencies that, if realized, could have a material effect (whether negative or positive) on a company’s financial condition and results of operations.

The primary objective of this analysis is to shed light for investors on factors that are “reasonably likely to cause reported financial information not to be necessarily indicative of future operating performance or future financial condition.” [4] These complex, future-oriented disclosure judgments require management to: , an item of information is considered “material” if there is a substantial likelihood that a reasonable investor would consider it important to an investment decision, or if it would alter the “total mix” of available information about the company.

Where necessary to enhance investor understanding of the timing and amount of the specified contractual obligations, companies should add footnotes or additional narrative to explain the tabular data.

The SEC suggested, for example, that a company might consider separating amounts in the table into “on” and “off” the balance sheet, particularly where such a distinction helps to tie the information to disclosure in the MD&A and financial statements.

[18] A company that relies on a portfolio of cash and other investments as a material liquidity source, for example, should weigh whether to disclose the nature and composition (by asset type) of that portfolio, the existence of market, settlement or other risk exposure associated with the various asset types, and any limits or restrictions on access that might impair the company’s ability to finance business operations.

Banks could discuss policies and practices intended to satisfy banking agency guidance on managing liquidity and funding risk and, to the extent applicable, any internal policies and practices that might differ from such guidance.

Finally, the Staff continues to take the position that risk-mitigation measures should not be included in the Risk Factor section of periodic reports, although such measures appropriately may be discussed and analyzed in the MD&A.

Good risk factor disclosure is not just a matter of compliance with SEC line-item disclosure requirements – rather, if done well, it affords companies protections under one prong of the identical safe harbors added to each of the Securities Act of 1933, as amended (“Securities Act”) (Section 27A), and the Exchange Act (Section 21E) by the Private Securities Litigation Reform Act of 1995 (“PSLRA”).

vitesse backdating settlement-77vitesse backdating settlement-30

No matter how novel or complex a specific financing arrangement might be, or whether its disclosure is expressly mandated by rule, the longstanding “principlesbased” analysis of materiality embodied in Exchange Act Rule 12b-20 should govern: “[I]n addition to the information expressly required to be included …[in the MD&A, the financial statements, or elsewhere in the annual report], there shall be added such further material information, if any, as may be necessary to make the required statements, in the light of the circumstances under which they are made not misleading.” [26] Throughout 2010 and continuing into early 2011, the Staff reinforced the SEC’s message on the necessity of “early-warning” risk disclosures by means of Compliance and Disclosure Interpretations (“C&DIs”), industry-wide “Dear CFO” Letters, staff comments and speeches.We discuss some of the most significant Staff guidance below. Loss Contingencies Although the FASB ultimately decided not to move forward last year with a controversial proposal to change the accounting treatment of loss contingencies, [27] that remains a possibility and companies should not breathe a sigh of relief.If anything, the FASB’s decision to stay its hand, at least temporarily, has increased the pressure on both preparers and auditors of financial statements to demonstrate that they are complying with what FASB and the SEC staff have emphasized are existing GAAP requirements regarding loss contingencies (primarily ASC Subtopic 450-20, formerly known as FAS 5).Senior Staff members of both the SEC and FASB recently warned that they will be reviewing “FAS 5” compliance in upcoming annual reports with even greater rigor than before, after a year or more of intense SEC Staff focus on this issue in speeches and during the review and comment process.To ensure that risk factors qualify as “meaningful” in light of evolving facts and circumstances, companies should bear in mind the lessons of a May 2010 decision of the influential U. Court of Appeals for the Second Circuit, in [10] The Court ultimately ruled in favor of American Express and the other defendant-appellees on an appeal from the trial court’s grant of a motion to dismiss in a securities fraud case, based on the “actual knowledge” prong of the PSLRA safe harbor.[11] However, the Court criticized the risk factor invoked by the company under the separate “meaningful cautionary statement” prong of the PSLRA to protect a specific forward-looking statement set forth in the MD&A contained in its Form 10-Q for the first quarter of 2001: that losses in a key subsidiary’s high-yield debt investment portfolio, which had been large in the quarter being reported on, “are expected to be substantially lower for the remainder of 2001.” The company’s risk factor read as follows: “potential deterioration in the high yield sector … [the company’s investment] portfolio.” The Court found this language to be so “vague” as to “verge[] on the mere boilerplate, essentially warning [merely] that ‘if our [investment] portfolio deteriorates, then there will be losses in our portfolio.’” [12] The Court’s conclusion that this particular risk factor therefore was not “meaningful” was “bolstered by the fact that the defendants’ cautionary language remained the same even while the problem changed.” [13] The Deputy Chief Counsel of the SEC’s Division of Corporation Finance highlighted the importance of this case during the Practising Law Institute’s “SEC Speaks” conference held February 4-5, 2011. The September 2010 MD&A Liquidity Release The second of the SEC’s 2010 interpretive releases that we recommend you consider while preparing this year’s annual report on Form 10-K reflects the SEC’s serious concern about the adequacy of MD&A disclosure of liquidity and funding risks posed by short-term borrowing practices in which both financial and nonfinancial companies engage (the “MD&A Liquidity Release”).Through the inspection process, the PCAOB Staff likewise will be evaluating whether the outside auditors are meeting their obligations when auditing loss contingencies, disclosures and related items.In a PCAOB Staff Audit Practice Alert published in December 2010, [28] the PCAOB cautioned registered public accounting firms that the audit risks that existed in late 2008 regarding loss contingencies and guarantees (among other areas) persist to this day, [29] and that auditors should drill down on management estimates and judgments and communicate their views on this and other matters to the audit committee.Staff in the Division of Corporation Finance routinely look outside the four corners of SEC filings and submissions in connection with SEC filing reviews, examining the content of various non-filed corporate communications – including company press releases and statements made by officials during company or third-party sponsored investor conferences conducted via telephone and/or the Internet – as well as analyst reports, news articles and blogs covering the company.The Staff’s stated objective here is to assess the consistency of filed and non-filed communications being made by public companies, along with market perceptions of those communications, with a view toward determining whether all required material information has been disclosed in SEC-mandated documents.

Leave a Reply

Your email address will not be published. Required fields are marked *

One thought on “vitesse backdating settlement”

  1. It happened to be in the middle of football season when I was the head coach for the team. Now that I’m here, some of the things I had to pass up while I was down in Hawaii, I was in pursuit of again. Talk about being anxious — really, it’s about time. He throws this toad up in the air, and I see it flying, and the second it hits the ground, I felt this Hulk rage… So, there’s that old Irish, Scottish, warrior, love-to-fight and go out and battle…