Compliance Bits and Pieces for May 11

These are some of the compliance-related stories that recently caught my attention.
SEC Whistle blower
A Shiny New Website for the S.E.C. by Kevin Roose in DealBook

Our favorite part of the site is the silver whistle pictured on the homepage. Emblazoned with the agency’s logo, the whistle is a nod to the S.E.C.’s status as the whistleblower of wrongdoing on Wall Street. (And would make a good gag gift for Harry Markopolos.)

When we asked Mr. Nester whether actual, S.E.C.-branded whistles were available for sale to the general public, he replied, “Unfortunately, the cool-looking whistle is available only as a jpeg.”

Why Companies Shouldn’t ‘Do’ Compliance by Dov Seidman in

To be truly effective in shifting behavior, and moving an organization forward, leadership must move from a “governance, risk and compliance” to a “governance, culture and leadership” mindset. Focusing on actions that will build and maintain a values-based system of “governance, culture and leadership” will mean less compliance activity, less cost, and more compliance as a result of real, tangible and sustainable behavior change.

Trust, or verify? by William Carleton

When startups and private companies raise money today from angel investors, they count on the investors to self-certify they are accredited.

Sure, companies might ask prospective investors to fill out questionnaires, and might otherwise draw attention to the significance of the investor’s rep (“these securities are being sold to you under a Rule 506 exemption, the validity of which is based, in part, on your representation to us that you are in fact accredited . . . “); but no issuer today asks to see the prospective investor’s tax returns, nor bank balances, nor the appraised value of her art collection.

The SEC, Accredited Crowdfunding, And The Art Of Hair Splitting by Joe Wallin

If this argument is going to inform the SEC’s rulemaking on this subject, and if the SEC believes that this is what the legislative history indicates should inform the rulemaking, then it is unlikely we are going to see a continuation or retention of a check-the-box or questionnaire regime for advertised offerings. However, for non-advertised offerings, perhaps the old regime can continue. And in fact, the argument can be made that it should continue because if there is no advertising then the heightened risk which prompted these verification processes be added won’t exist. Of course, it remains to be seen whether the SEC will require verification in just offerings in which there is general solicitation, or all offerings.

‘Say on Pay’ vote destroys $500MM+ in shareholder value by Marc Hodak in Hodak Value

Aviva’s shareholders, saw the departure of Andrew Moss, their CEO, after his pay package was voted down. While it’s difficult to interpret any given Say on Pay vote, it’s a fair assumption that these votes respond to headline news about a company. In the case of Aviva, the headline appeared to be “Insurer performing badly; CEO pay goes up.” So, here is what the shareholders have wrought: …

[T]he stock drop has cost Aviva’s shareholders over $500 million, even accounting for the general slump in the market over the last couple of days. The shareholder’s putative complaint was that the board had agreed to pay Mr. Moss a $1.86 million bonus, on top of his $1.55 million salary. So, it appears that the shareholders, in their trading capacity, have penalized the company with a half billion dollar CEO changeover cost because they believed, in their proxy voting capacity, that two million dollars was too much to pay their CEO in a bonus.

What is Private Equity? from the Private Equity Growth Capital Council