Craig's Corner For Counsel: Securities Compliance

Thursday, January 1, 2009 - 01:00

As the recession lingers, corporate America faces unprecedented scrutiny from both the government and the public. This stressful environment makes securities law compliance a high priority for any corporate in-house counsel.

Robert Wild, author of Designing an Effective Securities Compliance Program (Vol. 10, Corporate Compliance Series) from West, offers valuable insights into the securities compliance process. Wild, a partner in the Chicago office of Katten Muchin Rosenman LLP, regularly counsels publicly traded companies on the full range of securities compliance matters, from new securities offerings to disclosure requirements to daily issues of board governance.

Recently, we caught up with Mr. Wild and asked him about the securities compliance challenges facing corporate America.

Craig Miller: Given the current economic crisis, what should corporate counsel keep in mind when designing and maintaining an effective securities law compliance program?

Robert Wild : In the context of the market turmoil we've experienced over the last year and the dramatic drop in equity trading values, the significance of assembling the right securities disclosure committee team members can't be emphasized enough.

The committee should include a legal representative qualified on securities disclosure, someone in financial reporting who is qualified on securities reporting obligations and - because a lot of securities disclosure turns on executive compensation matters - a person from the human resources group who is familiar with the specifics of federal securities compensation disclosure.

It's also absolutely essential to have a properly trained legal and financial company team on the ground that can interact with outside experts. Do not rely entirely on outside consultants or securities counsel. If I'm an outside advisor, I'm not always in a position to identify the issues that someone who works at the company - who interacts on a day-to-day basis with management - can see within the company.

Craig Miller: What are the trends in securities compliance that you're paying attention to?

Robert Wild : Right now, in this volatile climate, there is clearly more scrutiny on the nature of comments that senior executives make to analysts and investors. Now more than ever, there's a need for disclosure as rapidly and as accurately as possible and being candid and complete where there are forward-looking statements. The disclosure committee is really the first line of defense working with the senior executives before they make any statements or presentations.

As the SEC has recently made clear in public comments, many companies still have a long way to go in satisfying the SEC requirements for executive compensation disclosure in their annual shareholder meeting proxy statements. There's a very specific focus under the SEC rules on aspects of how and why compensation decisions are made, including how executives are measured against established performance targets. Compensation committees of companies with poor stock performance that are granting increases in compensation would be well-advised to be very deliberate and very careful in their description of the rationale for those compensation decisions.

A compensation committee may be performing its role prudently and abiding by its fiduciary duties, but imprecisely or carelessly drafted disclosure may cause the committee's decision to be viewed negatively.

Robert Wild's book, Designing an Effective Securities Compliance Program (Vol. 10, Corporate Compliance Series), is available on the West Web site . He can be reached at Katten Muchin Rosenman LLP at 312- 902-5567 or robert.wild@kattenlaw.com .

For additional insight on securities compliance, the following Westlaw databases also are available:

Disclosure and Remedies Under the Securities Laws (SECDRSL)

Due Diligence-Periodic Reports and Securities Offerings (DUEDILSEC)

Federal Securities and Blue Sky LawFinal, Temporary, and Proposed Regulations (FSEC-REG)

Federal Securities-Code and Regulations (FSEC-CODREG)

Federal Securities-News Releases (FSEC-NR)

Federal Securities-SEC News Digest (FSEC-DIG)

Insider Trading Regulation, Enforcement, and Prevention (INSIDETRAD)

Mortgage-Backed Securities (MORTSEC)

Opinion Letters in Securities Matters: Texts-Clauses-Law (SECOPINION)

Regulation of Financial Planners (SECREGFINP)

Regulation of Investment Advisers (SECREGINA)