According to a release issued by the Utah State Bar, the jam was part of a week-long national celebration recognizing the importance of pro bono service.

The Vapor Trails String Band is made up of Debora Threedy, Dianna Cannon, J.S. “Shawn” Foster, and Barry Scholl, all of them lawyers.  The group was formed in 2006.

Abstract:

Across the country, a variety of laws regulate (i) who may take or require a genetic sample from a person, and (ii) what may be done with those samples. These laws may be of interest, for example, to indi­viduals who perform research on genetic materials and need to know when consent is or is not required for certain uses of genetic informa­tion. Some states provide virtually no protections for testing of genetic material, while others provide that no testing of genetic material can occur without the patient’s consent, even if the material is otherwise de-identified pursuant to the federal Health Insurance Portability and Accountability Act. This survey seeks to combine those laws—from all 50 states and the District of Columbia—to allow a comparison of the protections afforded in each jurisdiction. The survey does not include genetic counselor licensing acts, nor does it include laws that apply only to employers. For jurisdictions in which no law specifically pro­tects genetic information, the survey includes, where possible, that jurisdiction’s general health information protection law. Otherwise, such general laws are not included. The research supporting this survey was conducted between April and July of 2011 and, to the best of the authors’ knowledge, was up-to-date as of July 2011. www.healthlawyers.org/JHLSL

To learn more about the contents of this survey, please contact Platte S. Nielson.  We may distribute the full-text of this survey, but only in accordance with guidelines set by the Journal of Health and Life Sciences Law.  This survey does not constitute an opinion or legal advice.

Kevin focused on two rules adopted by the U.S. Securities and Exchange Commission (SEC) in the wake of the Dodd-Frank Wall Street Reform and Consumer Protection Act. He first discussed how the definition of an “Accredited Investor” has changed and explained that, in light of the changes, a consumer “can no longer count equity in [his] primary residence,” as part of his net worth.

KLMR attorney Kevin Timken presents on Dodd-Frank at recent CLE.

He also discussed the SEC’s new whistleblower provisions, which include a provision allowing for payment to a whistleblower based on the amount recovered by the SEC and prohibit employers from retaliating against whistleblowers.

Kevin’s co-presenter was Elliott Taylor, whose remarks focused on future Dodd-Frank developments.

May 19, 2010 – A recent scholarly paper by Stavros Gadinis, a Lecturer and Post-Graduate Fellow at Harvard Law School, investigates long-held concerns that the SEC provides preferential treatment to “large and well-known investment houses,” compared to small broker-dealers.  Gadinis, Stavros, The SEC and the Financial Industry: Evidence from Enforcement against Broker-Dealers (August 11, 2009). Available at SSRN:http://ssrn.com/abstract=1333717. Using enforcement data from the SEC’s administrative and litigation releases, the author examines enforcement biases and suggests that big firms (defined as those with more than 1,000 employees in the U.S. or abroad) receive preferential treatment and that, far from being isolated, the causes of such biases are “systematic.”

SEC Enforcement

Using a new dataset of 545 cases that compiles all SEC actions against broker-dealers in 1998, 2005, 2006, and the first four months of 2007, the study’s author looks at the choice of defendant in enforcement actions against large and small brokers, and more specifically, whether the SEC elected to direct an enforcement action against an individual who violated securities laws, a broker-dealer firm whose employees engaged in misconduct, or both.

The dataset finds that 40% of all actions against the larger broker-dealer firms involved exclusively corporate liability and did not subject either “front-line employees” or “high-level supervisors” for regulatory actions.  Generally, these actions resulted in fines negotiated between the firm and the SEC in administrative actions.  By contrast, just 10% of enforcement actions against small firms target the firm exclusively, without attributing individual liability.

Administrative Proceedings for Big-Firm Defendants

The author also researches the choice of venue in enforcement proceedings.  The SEC may pursue a broker in one of two ways—either by filing a civil lawsuit or through administrative proceedings before an administrative law judge (ALJ).  The author concludes that courts are a less desirable forum for the finance professional because a court that determines there has been a violation is more likely to ban a defendant from the securities industry than an ALJ.  The study determines that 59% of cases against small firms or employees of small firms ended up in court, while the SEC assigned only 29% of large-firm cases to court.  Furthermore, the SEC appears to be less willing to take individuals associated with big firms to court than those associated with small firms; a large firm employee accused of wrongdoing faces a 53% likelihood of going to court, while a small firm employee’s likelihood is 71%.

Securities Industry Bans

Turning to the issue of administrative cases, the paper similarly concludes that, for the same violation and comparable levels of harm to investors, big firms and their employees are less likely to receive a securities industries ban than small firms and their employees.  Similarly, the author writes that “big firm employees are likely to receive an industry ban almost two years (22 months) shorter than a ban ordered against a small firm for the same violation, disgorgement, and fines.”  The author concedes that there may be some justification for preferential treatment of big firms on several grounds, including, for example, concerns about unfairly penalizing entire firms for violations that are relatively limited.  Significantly, however, he states that “no public policy justification exists for the preferential treatment of individual employees in large firms.”

Supporting the above conclusion, the paper gathers qualitative data on a group of cases that present heightened concern: those cases involving a failure to supervise subordinates.  In the author’s words, the research “finds that small- and big-firm violations are so similar in terms of fact-patterns, types of supervisory failures, and specific omissions, that they are effectively indistinguishable from a law enforcement perspective.”

Explanations

Additionally, the paper reviews the admittedly limited available public data about enforcement patterns.  The author’s conclusion here is that there is no data to support the common supposition that the SEC favors big firms over small firms because of the greater political clout wielded by the big firms.  Instead, the author suggests an alternate explanation: that the agency’s budget limitations, combined with the “revolving door” between the SEC and industry, lead to a degree of reluctance on the SEC staff’s part to aggressively pursue claims against large firms, either because of concerns about alienating prospective future employers or because the staff has “come to share the industry’s perspective through socialization mechanisms.”

Recommendations

Finally, the author makes a series of recommendations to reform SEC policy.  First, he argues that the agency should increase the transparency of its operations, in order to allow for public monitoring of the performance of its employees.  Second, he contends that the agency should more vigorously pursue individual violators, instead of continuing its current extensive reliance only on corporate liability.  Finally, he opines that the SEC should attempt to more equally balance its enforcement actions between large and small firms.

Conclusion

We have prepared this summary of Stavros Gadinis’s paper for informational purposes only.  Although we generally agree with the outcome of his research and share in his conclusions, we note that the author points out that further research might produce valuable additional insights, particularly when attempting to explain the SEC’s enforcement choices.  In sum, however, we concur with the author’s determinations and believe this paper represents a valuable starting point that validates long-held concerns about the SEC’s biases in favor of large-firm brokers.

SEC Updates represent our efforts to provide our clients and friends with information about relevant current events.  They do not constitute an opinion or legal advice.  Please direct questions about the 2010 proxy season or any other securities compliance matters to members of our Corporate/Securities Section, including James R. Kruse, Lyndon L. Ricks, Kevin C. Timken, Jack G. Hanley, Paula W. Faerber, or Barry G. Scholl.

New SEC Review Policies

Expanded executive compensation disclosure, particularly compensation disclosure and analysis, has been required in proxy statements for two proxy seasons, and the staff has indicated that it is dissatisfied with the results. This dissatisfaction is no doubt influenced by the continuing public outcry respecting executive compensation at major financial institutions, the government bailout, and a broad downturn in the economy. In the past, many SEC staff comments have been addressed toward future compliance with the comments, requiring a substantive response as to how the company may respond to the comment in future filings, but not requiring an amendment to the current proxy statement. The staff has announced that this year it will ask for amendments to proxy statements, in some cases notwithstanding the fact that the stockholders’ meeting may have already been held. This, of course, highlights the fact that the proxy statement is important disclosure about the company for the entire year and, in fact, is incorporated into the annual report on Form 10-K for a full business and financial picture of the company. Post-proxy solicitation amendments to the proxy statement raise interesting theoretical questions as to whether or not the proxies were obtained through a solicitation that was in some way inaccurate or incomplete. In the absence of substantial material revisions, it would seem that the validity of action taken at the meeting would not be brought into question, however.
In addition to the published releases, Compliance and Disclosure Interpretations, and previous comments from the staff of the SEC on the company’s filings, companies are also expected to be guided by the comments made by the staff of the SEC on the filings of other companies. Those comments are now publicly available, but by no means easy to access and search. We will forward a compilation of principal comments from staff letters on other companies when they are available.

Substantively the staff’s overarching comment reiterates the importance of disclosing why specific compensation was awarded, not the mere mechanism by which it was determined.

Expanded Proxy Statement Disclosures
Effective February 28, 2010, the SEC’s release of December 23, 2009, Release No. 33-9089; 34-61175, announced significant proxy disclosure enhancements, particularly respecting corporate governance. In summary, the expanded disclosures require:

(1) discussion of compensation policies or practices as they relate to risk management and risk-taking incentives that can affect the company’s risk and management of that risk;

(2) reporting of the aggregate grant fair date value of stock awards and option awards granted in the fiscal years, rather than the dollar amount recognized for financial statement purposes for that year, which will generally result in a large lump sum amount reported in the initial year of grant, rather than having the amount spread over the term of vesting, grant, or other applicable criteria;

(3) a specific, person by person discussion of the qualifications of directors and nominees;

(4) new disclosure respecting any directorships held by each director and nominee at any time during the preceding five years of any public company or registered investment adviser;

(5) new disclosure regarding the consideration for diversity in the selection of candidates for nomination for director election;
(6) additional disclosure respecting legal actions involving the company’s executive officers, directors, and nominees and expanding the time during which such disclosure is required from five to ten years;

(7) new disclosures about a company’s board leadership structure and the board’s role in the oversight of risk;

(8) new disclosure about the relationship between the company and compensation consultants, including fees for various levels of service; and

(9) disclosure of the vote results from the meeting of stockholders on Form 8-K within four business days of the meeting.
In related Compliance and Disclosure Interpretations recently released, the SEC clarifies that the disclosure about each director’s “specific experience, qualification, attributes or skills,” that led the board to select a person to become a director must be stated for each director and cannot be stated generally respecting a particular group. This disclosure needs to be provided for each member of the board of directors, notwithstanding the fact that a particular director may not be up for reelection because of a classified board. The SEC believes that the composition of the board is important disclosure on all directors. Therefore, for a director who is not up for election, the evaluation of such director’s particular and specific experience, qualifications, attributes, and skills, and the conclusion as to why the director should continue serving on the board, should be included because it informs the shareholders about the full complement of skills on the board.

As a result of the requirement for an annual discussion of director qualifications, boards that do not conduct annual self-evaluations, but defer such evaluations until classified board members come up for reelection every three years, may need to implement an annual review policy to support the annual disclosures required in the proxy statement.
SEC Updates represent our efforts to provide our clients and friends with information about relevant current events. They do not constitute an opinion or legal advice. Please direct questions about the 2010 proxy season or any other securities compliance matters to members of our Corporate/Securities Section, including James R. Kruse, Lyndon L. Ricks, Kevin C. Timken, Jack G. Hanley, Paula W. Faerber, or Barry G. Scholl.