Showing posts with label Securities and Exchange Commission. Show all posts
Showing posts with label Securities and Exchange Commission. Show all posts

Tuesday, September 5, 2017

What's Going On with Bitcoin Now? Brendan Cody, Impact Investing Intern, George Washington University

The meteoric rise of cryptocurrencies supported by the blockchain has regulatory agencies, financial institutions and central banks around the globe asking the same question: What in the world is going on here?











(Illustration by Jacques Barkhuizen, Chief Information Officer - Distribution & Digital at Barclays) 
Applications in finance, data storage, cybersecurity, and government merit the attention blockchain technology has received. As of last week, Bitcoin (the first and most notable cryptocurrency) approached $5,000, up +600% on the year compared to a 20% return for the Dow Jones Industrial Average over the same time. (Bitcoin has since returned to the more mundane level of $4,470 as of 9/5/17) Other cryptocurrencies ,including Litecoin and Ethereum, have seen a similar pattern of rise, retreat and rise.

Governments and financiers acted decisively in the past month in an attempt to seemingly make up for lost time. The Securities and Exchange Commission issued new regulations on the proliferation of Initial Coin Offerings (see: the American Banker Newspaper BankThink section - SEC takes jab at startups while leaving the big banks alone at https://www.americanbanker.com/opinion/sec-takes-jab-at-startups-while-leaving-the-big-banks-alone). Chinese regulators issued an outright ban on ICOs. Additionally, central governments in Russia, Estonia and Thailand have been studying blockchain. Russia and Thailand may create their own cryptocurrencies while Estonia is studying the potential to secure records and government data on the blockchain. New regulations foreshadow further actions as policymakers pay closer attention. (For our take on what should be done at this stage in the development of these new financial technologies, see: Why we need a Global ICO Census and Databasehttps://www.linkedin.com/pulse/global-ico-census-database-william-michael-cunningham-am-mba)

Furthermore, six of the world’s largest financial institutions announced the development
of a cryptocurrency to improve “record-keeping and transparency” of financial transactions. This
“utility settlement coin” is intended to speed transaction and asset transfer times while maintaining privacy and security. If executed correctly, this could lower transaction costs and time without sacrificing quality. The coin is still in development, with a projected launch date at the end of 2018. (NOTE: Picture at left not necessarily reflective of the author's opinion.)

Wall Street has also taken notice, with fifty hedge funds (including one backed by Mark
Cuban) now exclusively focusing on cryptocurrency investing. Institutional finance’s interest in
cryptocurrencies will only increase, with a Blockchain Electronically Traded Fund coming online soon and increased access for retail investors.

The myriad potential uses of blockchain and increased interest from financial institutions
might prolong the rally in asset prices for the foreseeable future. (Already, bitcoin shows signs of recovering from the Chinese Government's sudden policy shift.) Bitcoin’s volatility may keep
some investors away amid a distinct possibility of a pullback, but for buy-and-hold investors
with a long-term outlook, there is still great value in cryptocurrencies. When compared to bonds
at historically low and even negative yields and equities at high valuations, cryptocurrencies
present value for risk tolerant investors unmatched by other asset classes.

Edited by William Michael Cunningham

Friday, August 11, 2017

SEC takes jab at startups while leaving the big banks alone


The Securities and Exchange Commission’s concern about “initial coin offerings” is understandable. There are significant problems in the ICO marketplace, but new markets always have issues. Unfortunately, the SEC’s recent restrictions defining the tokens sold through such offerings as “securities” completely miss the point and once again will constrain the ability of startups to raise much-needed capital without having to go to a bank or venture capitalist first.

See: https://www.americanbanker.com/opinion/sec-takes-jab-at-startups-while-leaving-the-big-banks-alone

Wednesday, August 25, 2010

Proxy Access Granted! (Sandy Wu, CIR Intern and MSF program, GWU)

The Securities and Exchange Commission voted this morning to adopt changes to the federal proxy and other rules to facilitate director nominations by shareholders by allowing shareholders to more easily nominate directors to corporate boards.

This will definitely change the balance of power between general investors and management at many U.S. companies. This is the fourth time the SEC considered questions about proxy access over the past few years.

The Dodd-Frank Wall Street Reform and Consumer Protection Act finally confirmed the Commission’s authority to resolve the issue. “The proxy is often the principal means for shareholders and public companies to communicate with one another, and for shareholders to weigh in on issues of importance to the corporation,” said SEC Chairman Mary L. Schapiro.

The rule was passed on a 3-2 vote, with two Republican commissioners, Troy Paredes and Kathleen Casey, opposing. “The rule is fundamentally and fatally flawed, and it will have great difficulty surviving judicial scrutiny..the SEC's staff will be burdened with the unenviable responsibility of brokering disputes between shareholders and companies every board-election season,” Ms. Casey predicted.

The matter, debated at the SEC for years, had dogged two prior chairmen, Christopher Cox and William Donaldson. "Proxy access" would force public companies to print the names of shareholder-nominated board candidates directly onto corporate ballots if certain conditions are met. Under the new rule, "proxy access" will be available to a shareholder, or group of shareholders, who own — and have owned continually for at least the prior 3 years — at least 3 percent of the company's voting stock. The Commission decreased the ownership threshold for small companies from 5 to 3 percent. The Commission increased ownership thresholds for large companies from 1 percent to 3 percent, and increased the period of required ownership for companies of all sizes from 1 to 3 years. In order to reduce uncertainty, the final rule includes detailed provisions on how to calculate these requirements.

During the deferral period, the Commission will monitor how these new rules have been implemented at larger companies and will continue to assess the distribution of stock among holders of smaller company shares.

Under the new rules:

  • Shareholders who otherwise are provided the opportunity to nominate directors at a shareholder meeting under applicable state or foreign law would be able to have their nominees included in the company proxy materials sent to all shareholders.
  • Shareholders also have the ability to use the shareholder proposal process to establish procedures for the inclusion of shareholder director nominations in company proxy materials.

Application of the new access rules for the smallest public companies — those defined as "smaller reporting companies" under SEC rules — will be deferred for three years.

Generally, the new rules will become effective 60 days after their publication in the Federal Register. (Adopted from www.sec.gov/news/press/2010/2010-155.htm)

We think the SEC’s adoption of the Proxy Access rule is a huge move forward for investors. The rule shifts the balance of power toward shareholders and away from company management and boards. It will certainly give rise to more competition among Board candidates: this is actually healthy. We believe proxy access will invigorate shareholders and force boards to be more vigilant in their oversight of companies.

Friday, December 18, 2009

SEC Approves Enhanced Disclosure About Risk, Compensation and Corporate Governance

On December 16, 2009, the Securities and Exchange Commission "approved rules to enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies.

Additional Materials

Final Rule: Proxy Disclosure Enhancements

Beginning in the upcoming annual reporting and proxy season, the new rules will improve corporate disclosure regarding risk, compensation and corporate governance matters when voting decisions are made.

In particular, the new rules require disclosures in proxy and information statements about:

The relationship of a company's compensation policies and practices to risk management.

The background and qualifications of directors and nominees.

Legal actions involving a company's executive officers, directors and nominees.

The consideration of diversity in the process by which candidates for director are considered for nomination.

Board leadership structure and the board's role in risk oversight.

Stock and option awards to company executives and directors.

Potential conflicts of interests of compensation consultants.

The new rules, which will be effective Feb. 28, 2010, also require quicker reporting of shareholder voting results."

Monday, November 2, 2009

Major SEC shareholder resolution policy change

According to the Responsible Investor and SEC websites, in a major policy reversal, "the Securities and Exchange Commission (SEC) (will) allow shareholder resolutions (concerning) companies’ environmental and social risks.. Similar resolutions had previously been blocked under policies dating back to the Bush administration. The move was unveiled in new guidance by the SEC’s Division of Corporation Finance under new director Meredith Cross. As a result, companies will no longer be able to automatically exclude resolutions seeking information on the risks of environmental, human rights and other social issues." Shareholder resolutions are now sure to include executive compensation, community development, diversity, gender, SRI, ESG and CSR issues.

See: http://www.sec.gov/interps/legal/cfslb14e.htm

Thursday, March 5, 2009

Wall Street firms systematically cheated customers

As noted in the New York Times, "More than a dozen Wall Street trading firms systematically cheated their customers of millions of dollars by improperly slicing bits of profit from countless trades, federal regulators said on Wednesday. The Securities and Exchange Commission disclosed the allegations after negotiating settlements. The firms did not admit or deny the charges but agreed to pay a total of more than $69 million in forfeited profits and penalties.

The 14 firms named in the complaints are all “specialists,” trading firms that have a specific duty to maintain orderly markets by matching buyers and sellers and standing ready to conduct trades when buyers or sellers are scarce. They include units or subsidiaries of well-known Wall Street names, including E*Trade Capital Markets, Goldman Sachs Execution and Clearing, Knight Financial Products and TD Options."

SEC to Discuss Rules Governing Credit-Rating Agencies

According to the Washington Post, "The Securities and Exchange Commission is planning to announce Thursday it will hold a roundtable to discuss how to revamp the rules governing credit-rating agencies, according to people familiar with the matter.

This would be the first step toward addressing problems in the industry and the first public policy initiative taken by new SEC Chairman Mary L. Schapiro since she started at the commission.

Schapiro has raised concerns about credit-rating agencies, which are private firms that have been blessed by the SEC to judge the credit-worthiness of securities. Credit-rating firms gave high grades to many of the mortgage-related securities that turned out to be toxic and have wreaked havoc in the financial crisis.

The roundtable is scheduled for April 15. The three major credit- raters, including -- Standard & Poor's, Fitch Ratings and Moody's, -- and others have been invited to speak.

Schapiro has criticized the way credit-rating firms are paid. Currently, the issuers of securities pay the firms to rate them, which Schapiro has called a conflict-of -interest. She has said it might be better for financial firms to contribute to a pot of money that would be used to pay for calculating ratings."

Wednesday, December 3, 2008

SEC Approves Measures to Strengthen Oversight of Credit Rating Agencies

The SEC today "approved a series of measures to increase transparency and accountability at credit rating agencies, and ensure that firms provide more meaningful ratings and greater disclosure to investors.

The new measures impose additional requirements on credit rating agencies, whose ratings of residential mortgage-backed securities backed by subprime mortgage loans and of collateralized debt obligations linked to subprime loans contributed to the recent turmoil in the credit markets. The SEC also proposed additional measures related to transparency and competition concerning credit rating agencies."

We think these reforms are important first steps, and are mindful of the fact that politics and regulation are the "art of the possible."

As we said in 2005, fradulent practices by credit rating agencies

"threaten the integrity of securities markets. Individuals and market institutions with the power to safeguard the system, including investment analysts and NRSRO’s, have been compromised. Few efficient, effective and just safeguards are in place. Statistical models created by the firm show the probability of system-wide market failure has increased markedly over the past eight years. Investors and the public are at risk."

See http://www.sec.gov/rules/proposed/s70405/wcunningham9442.pdf

Monday, November 10, 2008

What we said...

Someone recently asked about our track record with respect to the market crisis. Here, from 2003 and 2006, are a few of our comments:

SEC Comments. Page 6: "Envy, hatred, and greed have flourished in certain capital market institutions, propelling ethical standards of behavior downward. Without meaningful reform, there is a small (but significant and growing) risk that our economic system will simply cease functioning."

http://www.sec.gov/rules/proposed/s71903/wmccir122203.pdf December 22, 2003.

and:

SEC Comments. Page 2: "Together these practices threaten the integrity of securities markets. Individuals and market institutions with the power to safeguard the system, including investment analysts and rating agencies, have been compromised. Few efficient, effective and just safeguards are in place. Statistical models created by the firm show the probability of system-wide market failure has increased over the past eight years.

Investors and the public are at risk."

http://www.sec.gov/rules/proposed/s71005/wcunningham5867.pdf February 6, 2006.

Thursday, October 9, 2008

SEC Disclosure Initiatives (E.M. Chang)

Modernizing the Securities and Exchange Commission’s Disclosure System

Yesterday, the SEC hosted a roundtable meeting to discuss the 21st Century Disclosure Initiative. The Initiative seeks to examine the basic purposes of disclosure, from the perspectives of investors and markets. The SEC hopes to create a comprehensive plan for overhauling the current disclosure system, EDGAR.

In the first panel, panelists talked about the kinds of information and data format that the market and investors really need, given this dynamic market environment. Most panelists argued that investors need summarized information rather than whole financial statements.

A summary of panelist comments would be:

"Most individual investors access company information using third party services, like Yahoo Finance, Bloomberg, etc… The issue is that people don’t really have time and ability to figure out where is the number they want by looking at the hundreds pages financial statements in the EDGAR system. However, XBRL technology might help improve the usefulness of the new disclosure system by providing a more efficient information distribution. However, one member pointed out that the nature the information is much more important than the way we distribute it. We still lack much important information under the current filling system, like the off-balance sheet transactions, unregulated financial products, especially the credit default swap transactions. We still need to force the companies to disclose this material information to help investor to understand the risk they are facing and further to make their investing decisions."

In addition, some members suggested that the SEC should consult with an top level information provider, like Bloomberg or Morningstar, to figure out what kind of information format and summary most investors need, how to present the data, how to create useful graphs and summary tables.

One panel member stated that: “the information in the EDGAR system is a national treasure, but we need to present it in a more attractive way to our audience, or we might not have people to appreciate it and take a look at the treasures."

In the second panel, panelists provide suggestions for a future disclosure system. The goal of the system is to reduce filing cost and to provide more timely information to investors.

One panelist stated that the goal of the new system is “not to find a way to make the candle burn longer but to create a light bulb to replace the candle.” “The SEC should control the technology to do the job, instead letting the technology bind them.”

There are several challenges to developing this system. Some outlined were:

How to make sure all material information is disclosed in this system?
How to transfer some important footnote information or qualitative information into this new system?
How to disclose the information about unregulated products, like credit default swap?
How to broaden the scope of the information without increasing the burden for companies?

These issues were raised during the panel as was the need for further discussion to find solutions.

We see that the nature of the information is still the most important issue in this new disclosure system.

One member argued that “we want a real time disclosure system, but that is a little bit unrealistic.”

“We still need periodic report filing system to force companies to disclosure their information to increase transparency. But the goal is to force these companies to think about where they are and where they should go in the future,” said by one member in this panel.

In sum, we need to find a way to make the new disclosure system more useful to both institutional investors as well as individual investors. As one panelist noted: “We should not only make it work for the Wall Street, but also make it work for the Main Street.”

The 21st Century Disclosure Initiative seeks not only to creating a more sophisticated system for investors, but also to prevent future financial market turmoil.

As SEC Chairman Christopher Cox mentioned in his opening remarks: “The investors have a right to know the truth — and the risks — about the securities that trade in our public markets.”

Communicating these truths to investors and forcing companies to disclose these truths via this new system will be the main consideration for this new disclosure initiative.

E.M. Chang
MA, Economics (2009)
George Washington University

Thursday, September 18, 2008

Christopher Cox

Christopher Cox is still, without a doubt, the best financial regulator appointed thus far by the Bush Administration. We base this on performance. Mr. Cox knew the situation. He came in at a time of unprecedented corporate and market institution fraud and malfeasance. Things got worse, of course, but it was bad when he walked in the door. As soon as he took over, he increased staff and started investigating Wall Street broker/dealers, something many did not believe he would do, given his close ties to the Street. His Office of Interactive Disclosure is a masterpiece, and shows he understands the role technology will play in preventing future crises. The Office created an online tool that enables investors to easily and instantly compare what 500 of the largest American companies are paying their top executives, an Internet Web page that enables investors to more easily read, analyze, and compare the information provided by mutual funds related to fund cost, risk, and past performance, Financial Explorer, an open source tool to help investors quickly and easily analyze the financial results of public companies, and a web tool that permits investors to obtain information directly from company disclosure documents about their business interests in countries the U.S. Secretary of State has designated 'State Sponsors of Terrorism (later taken down because of objections from business lobbyists).

The problem is not at the SEC, as we noted on 5/5/2006.

Wednesday, September 3, 2008

SEC Charges Former CEO of Kellogg, Brown & Root, Inc. with Foreign Bribery

According to the SEC:

"Washington, D.C., Sept. 3, 2008 — The Securities and Exchange Commission today charged former Kellogg, Brown & Root, Inc. (KBR) executive Albert Jackson Stanley with violating the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) and related provisions of the federal securities laws. The Commission alleges that over a 10-year period, Stanley and others participated in a scheme to bribe Nigerian government officials in order to obtain construction contracts worth more than $6 billion. The contracts were awarded to a four-company joint venture of which The M.W. Kellogg Company, and later KBR, was a member."

Monday, August 4, 2008

Pax Fined for Failure to Screen Investment Funds (Angela Wang)

According to the Associated Press, “Pax World Management Corp. has agreed to pay a $500,000 fine because it failed to follow its own socially responsible investing criteria over a five-year period, when two of its mutual funds invested in off-limits industries such as gambling and liquor, and oil and gas exploration.”
“Portsmouth, N.H.-based Pax, a pioneer in the growing socially responsible investing niche, agreed to pay the penalty to resolve civil charges announced Wednesday by the Securities and Exchange Commission.”

“Pax said the portfolio managers that had overseen the two funds at which the SEC found violations are no longer employed by Pax. The firm's head of social research at the time of the failures also has left, along with the chief compliance officer.”

http://ap.google.com/article/ALeqM5jpAR6_I1tvMPstp_dU30tfdqP-AQD928BKJ03


Angela Wang

Monday, June 30, 2008

U.S. Senate confirms 3 new SEC commissioners

According to Reuters,

"WASHINGTON, June 27 (Reuters) - The U.S. Senate on Friday confirmed one Republican and two Democratic nominees to fill open commissioner seats at the Securities and Exchange Commission. Luis Aguilar, a law partner at McKenna Long & Aldridge, and Elisse Walter, a senior executive with the Financial Industry Regulatory Authority, were approved for the vacant Democratic seats on the commission.

Troy Paredes, a professor at Washington University School of Law, was approved for the open Republican spot."

We do not expect much, at this late date, from these new Commissioners. In the SEC's upcoming battle with Treasury and the Federal Reserve Board, having the SEC board at full strength (something the Fed is not) is a small advantage, but will probably be negated.

Under the "Blueprint for Regulatory Reform: A Report from the Treasury Department on Ways to Improve Oversight of the Financial Services Sector" plan announced on Saturday, March 29, 2008, the Securities Exchange Commission and the Commodity Futures Trading Commission would be consolidated. As one blogger put it, "This would be done on the time-honored government principle of when you don’t know what to do, reorganize. ..the plan would actually weaken the SEC and replace some of its functions with industry self-regulation.

Under the heading of locking-the-barn-door-after-the-horse-has-escaped, the plan would create a new Mortgage Origination Commission (MOC) which would, among other .. innovations, set 'minimum educational requirements' for mortgage lenders."

To quote those guys from the Guinness beer commercial "Brilliant!"

We agree with former SEC Commissioner Grundfest, who said that "Cox was right to let the Federal Reserve and Treasury take the lead (in the Bear Stearns bailout), because it would be unseemly for the regulator of financial markets to be involved in a deal where he could be perceived as playing favorites."

Cox is still, in our opinion, the best financial regulator appointed thus far by the Bush Administration.

But it may be too late. The Bank for International Settlements issued a statement this morning that:

"The global economy may be close to a 'tipping point' that could see it enter a slowdown so severe that it transforms the current period of rising inflation into a period of falling prices.

In its annual report, the central bank for central banks said the impact of rising food and energy prices on real disposable incomes, combined with the reduced ability of financial institutions to make loans and high household debt levels may lead to a slowdown in global growth that 'could prove to be much greater and longer-lasting than would be required to keep inflation under control.'"

Of course, we could get lucky...

Saturday, March 29, 2008

"Treasury Dept. Plan Would Give Fed Wide New Power"

According to the New York Times, a Treasury Department plan released (over a weekend to the press and selected insiders only) would give substantial new power to the Federal Reserve Board. "The Treasury plan would let Fed officials examine the practices and even the internal bookkeeping of brokerage firms, hedge funds, commodity-trading exchanges and any other institution that might pose a risk to the overall financial system." This would be a significant expansion of the central bank’s regulatory mission.

We are not, at this point, opposed to this effort. We noted, in an October 2, 1998 filing with the DC Circuit of the US Court of Appeals (Case Number 98-1459), our belief that the Fed should be designated a "Super-regulator, with broad responsibility for overseeing the activities of banks, thrifts, pension funds, insurance companies, mutual funds, brokerage firms and investment banks.

We believe social investors need to review the plan carefully. The Times stated:

"The proposal is part of a sweeping blueprint to overhaul the nation’s hodgepodge of financial regulatory agencies, which many experts say failed to recognize rampant excesses in mortgage lending until after they set off what is now the worst financial calamity in decades." (This is, of course, false. Financial regulatory agencies recognized "rampant excesses in mortgage lending" (see: Irrational Exuberance) but were unable to take the steps required to protect the financial system.)

Treasury's plan calls for the consolidation of "banking and securities regulators into a powerful trio of overseers responsible for everything from banks and brokerage firms to hedge funds and private equity firms."

Further, "the plan does not recommend tighter rules over the vast and largely unregulated markets for risk sharing and hedging, like credit default swaps, which are supposed to insure lenders against loss but became a speculative instrument themselves" and it "reduce the power of the Securities and Exchange Commission" while merging the S.E.C. with the Commodity Futures Trading Commission.

Saturday, February 16, 2008

SEC launches new investment analysis tool

According to the SEC,

"The Securities and Exchange Commission announced the launch of the “Financial Explorer” on the SEC Web site to help investors quickly and easily analyze the financial results of public companies.
Financial Explorer is open source, meaning that its source code is free to the public, and technology and financial experts can update and enhance the software."

"In addition to Financial Explorer, the SEC currently offers investors two other online viewers – the Executive Compensation viewer and the Interactive Financial Report viewer, also available at www.sec.gov/xbrl. The Executive Compensation viewer enables investors to instantly compare what 500 of the largest U.S. companies are paying their top executives. The Interactive Financial Report viewer also helps investors gather, analyze, and compare key financial disclosures filed voluntarily by public companies using XBRL."

Friday, December 21, 2007

New Internet Tool With Instant Comparisons of Executive Pay

According to the SEC:

"Securities and Exchange Commission Chairman Christopher Cox today launched the first-ever online tool that enables investors to easily and instantly compare what 500 of the largest American companies are paying their top executives. The new database highlights the power of interactive data to transform financial disclosure.

The Executive Compensation Reader - available today on the SEC's Web site at http://www.sec.gov/xbrl - builds on the Commission's new requirements that went into effect earlier this year to dramatically enhance clarity and completeness of executive compensation disclosure."

Thursday, November 8, 2007

On Shareholder Proposals: the Big Dogs Weigh In

In a November 1st letter to the Chairman of the SEC, Christopher Cox, 9 members of the Senate Banking Committee, or almost ten percent of the full U.S. Senate, wrote urging the SEC to maintain the current set of proxy rules and regulations. In the view of these members, "neither proposal should be adopted."

(For our response, see:
http://twisri.blogspot.com/2007/10/response-to-sec-shareholder-proposals.html
)

Current federal law leaves regulation of the proxy process up to the SEC. Period. In a side conversation at a House Financial Services Committee hearing on Proxy Access held on 9/27, we warned Tim Smith, Chairman of the Social Investing Forum against believing that pushing to hold a hearing or getting letters written will block implementation of one of the two proposed rules. The issue is similar to what occurred in Florida (2000) and Ohio (2004:) what matters is the relevant vote, not the popular vote. In this case, the relevant vote is that of the Commission. Unless you have a seat on the Commission, you don't get to vote on the matter.

The views of the other 91 U.S. Senators are not known at this time. This means there is a good chance Mr. Cox will be able to approve one of these proposals and stay in his position, at least for the next twelve months.

We see nothing here to change our opinion that the more restrictive of the two proposals, S7-17-07 and S7-16-07, will be adopted.

Friday, August 10, 2007

Turmoil at the SEC

According to the SEC, "Commissioner Roel C. Campos..announced that he intends to leave the Commission in a month's time and plans to return to the private sector. Currently serving his second term, Mr. Campos was first appointed by President George W. Bush and confirmed by the U.S. Senate as a Commissioner in August 2002." This follows the August 6, 2007 announcement that "Martin P. Dunn, Deputy Director of the Division of Corporation Finance, will leave the agency at the end of August to join O'Melveny & Myers LLP as a partner in its Washington D.C. office."

We believe Mr. Campos and Mr. Dunn may have been implicated in, or administratively responsible for, the leak of a draft proxy access proposal (SEC Proxy-Access Proposal Draws Fire from Investors. The Wall Street Journal. By JUDITH BURNS. July 11, 2007; Page D2). This leak led to concerns about the early and selective distribution of proposed public policies only to moneyed interest groups. We note that, at the last Open Meeting, Wednesday, July 25, 2007, Mr. Campos complained that he did not receive a copy of the second, revised shareholder access proposal until 11 pm on July 24th. This was done to insure confidentiality of the new proposal, released internally only after press publication deadlines had passed. The revised proposal was not leaked.

These changes mean that paths to an optimized shareholder access and proxy policy, while still present, are fewer in number. Thus, chances are greater now that the restrictive shareholder access proposal we discussed on July 20th will be adopted.

Thursday, August 9, 2007

This Week's Events and News

Presbyterian Foundation cited for socially responsible investing

According to The Presbyterian News Service, "The Social Investment Forum Foundation listed the Presbyterian Foundation as one of the leading United States foundations using social or environmental screening along with traditional financial analysis as criteria for their investment strategy. Other foundation leaders in social and environmental screening recognized include the United Methodist Foundation and the United Church Foundation."

SEC News and Enforcement Actions

On August 7, 2007, the Securities and Exchange Commission "filed financial fraud charges against First BanCorp, alleging that former senior management of the NYSE-listed, Puerto Rico-based bank holding company concealed the true nature of more than $4 billion worth of transactions involving "non-conforming" residential mortgages. Non-conforming mortgages have income verification and credit history standards that are generally more flexible than those required for sale or exchange under Fannie Mae and Freddie Mac programs and can constitute 'subprime' mortgages."

On August 3, 2007, the Securities and Exchange Commission announced "that a federal jury found Michael J. Pietrzak and Maurice W. Furlong liable for securities fraud and other charges in their operation of Hexagon Consolidated Companies of America, Inc. (HCCA), a development stage mining company headquartered in Reno, Nev. Pietrzak was HCCA's general counsel, CFO, and executive secretary, as well as a director. Furlong was HCCA's chairman, president and CEO."

Also on August 3, 2007, the Securities and Exchange Commission "charged a London, England resident with insider trading ahead of the July 14, 2006, announcement that San Diego-based Petco Animal Supplies, Inc. would be purchased by two private equity firms."

On August 1, 2007, the Securities and Exchange Commission "announced that it started distribution of the $267 million Fair Fund created as part of settlements with Qwest Communications International Inc. and several of its former executives. The funds will be distributed to approximately 200,000 investors who purchased Qwest's securities between July 27, 1999, and July 28, 2002."

Also on August 1, 2007, the Securities and Exchange Commission "filed charges against Silicon Valley semiconductor company Integrated Silicon Solution, Inc. (ISSI) and its former Chief Financial Officer, Gary L. Fischer, alleging that they engaged in a long-running fraudulent scheme to backdate stock option grants."

On July 26, 2007, the Securities and Exchange Commission "announced that Cardinal Health, Inc., a pharmaceutical distribution company based in Dublin, Ohio, has agreed to pay $35 million to settle charges that it engaged in a nearly four-year long fraudulent revenue and earnings management scheme, as well as other improper accounting and disclosure practices."

Also on July 26, 2007, the Securities and Exchange Commission "filed a civil fraud action against Robert J. Therrien, former President and CEO of Brooks Automation, Inc., a Massachusetts software company, alleging that he received millions of dollars in undisclosed compensation by fraudulently backdating his exercise of an option to purchase company stock."

City Recycles, but Its Investments Aren't Necessarily Green

According to the Seattle Weekly, "the Seattle City Employees' Retirement System—which maintains an investment portfolio of about $2 billion on behalf of current and former employees—has no criteria for how socially responsible a company must be to receive its financial backing. The city's current policy is to make investments that yield the highest returns with a reasonable amount of risk."

SRI Growing in Australasia

“According to the Ethical Investment Association of Australasia, managed SRI portfolios in Australia grew by a staggering 56 percent in the 2006 financial year, growing from AUD$7.76 billion, to AUD$11.98 billion. Managed mainstream portfolios grew by just 15.5 percent over the same period.”

Ways to Do Your Share

According to the Wall Street Journal, "Many twentysomethings want to do something positive for the world but don't have large sums to give to charitable organizations whose efforts they admire. Beyond giving what you can, though, there are numerous other ways, small and large, that you can reach out to address problems such as poverty and global warming. Consider socially responsible investing (SRI). In selecting stocks, SRI funds typically screen out companies that deal in alcohol and tobacco, or which are deemed undesirable for such things as a record of pollution or worker exploitation. Some funds attempt to use their ownership stakes in various companies to push for social, political or ethical revisions. These funds are increasingly becoming available in 401(k) retirement plans, which is good news for younger workers who may have limited investment resources."

The Diversity Portfolio

The Creative Investment Research, Inc. Diversity Portfolio contains equity investments in some of the largest U.S. companies. These companies have been selected for inclusion because they have outstanding financial and diversity performance. Diversity performance is calculated by reviewing several key measures: Human capital, CEO commitment, and supplier diversity. From 4/7/06 to 8/8/07, the model portfolio returned 18.72% versus an 15.59% return for the market, as measured by the S&P 500 Index, a major stock market index (without considering dividends. Returns calculated before fees deducted. Past performance is no guarantee of future returns.) See DiversityFund.net for more information...

Angels Descend on Minority Business Enterprises

Investors gather to consider investments in top minority-owned ventures.

Portsmouth, VA (PRWEB) July 17, 2007 -- Virginia Housing and Community Development Corporation (VHCDC) continues its pioneering initiatives to facilitate the flow of capital to Minority Business Enterprises (MBEs) with the announcement of the 2007 MBE Capital Call Conference, Exhibition, and Venture Forum -- September 20 & 21 in Hampton, Virginia. The MBE Capital Call presents entrepreneurs with innovative and marketable business ideas the opportunity to secure capital, and other essential resources, by "Pitching" their business plans to active, accredited investors. This event invites Entrepreneurs, aspiring entrepreneurs, Investors, aspiring investors, and College/University Students to Hampton, Virginia for a rewarding two day conference aimed at facilitating investment in minority- and women-owned businesses.

VHCDC created the MBE Capital Call to expose and connect MBEs, particularly African-American, Hispanic, and Native American entrepreneurs, to capital (funding) to start and grow or expand their business. This year, twenty-one (21) entrepreneurs will be selected to pitch their business plans to active, accredited investors. A team of active investors and business development professionals will select the presenters from among registrations received thru August 10, 2007. Presenters will be judged on several criteria and may pitch plans for virtually any industry/business sector.

Registration is easy, and there's no additional cost to enter the competition. Business owners, aspiring entrepreneurs, investors, lenders, and students may register by visiting the MBE Capital Call website: www.mbecapitalcall.com now for complete details, registration, and terms and conditions.