Intro Deck 10.09


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Intro Deck 10.09

  1. 1. Perspectives on SEC and FASB Leadership and Agendas<br />
  2. 2. Key Initiatives of the Obama Administration<br /> There is intense focus on Washington, DC currently as the Obama administration and the Democratic Congress attempt to address major legislative initiatives and other concerns:<br /><ul><li>Healthcare reform
  3. 3. Climate change
  4. 4. Combating rising unemployment
  5. 5. Rising Federal deficit and effectiveness of the stimulus bill
  6. 6. Financial services regulatory reform</li></li></ul><li>Financial Regulatory Reform Initiatives<br />Promote robust supervision and regulation of financial firms<br />Establish comprehensive supervision of financial markets<br />Protect consumers and investors from financial abuse<br />Provide the government with the tools it needs to manage the financial crisis<br />Raise international regulatory standards and improve international cooperation<br />
  7. 7. The SEC’s Role in Regulatory Reform<br />As the agency charged with protecting investors… we are dedicated to learning from recent events and making the changes necessary to help restore market integrity and investor confidence. The SEC must act promptly, decisively, and with resolve… and redouble our commitment to protecting investors.<br />We are:<br /><ul><li>Working to fill regulatory gaps exposed by the economic crisis
  8. 8. Seeking to strengthen standards governing broker-dealers and investment advisers
  9. 9. Enhancing disclosures provided to investors
  10. 10. Streamlining enforcement procedures and focusing on cases that will have the greatest impact
  11. 11. Revamping the system for handling the approximately one million tips and complaints we receive annually
  12. 12. Improving our risk assessment capabilities
  13. 13. Bolstering our internal training; and
  14. 14. Bringing on new leadership and new skill sets throughout the agency</li></ul>–Mary Schapiro, SEC Chairman <br />July 16, 2009<br />
  15. 15. Key SEC Agenda Items<br />Reinvigorating SEC Enforcement<br />Strengthening Examination and Oversight<br />Improving Transparency and Investor Protection<br />Combating Abusive Short-Selling<br />Enhancing regulation of Credit Rating Agencies<br />Strengthening Shareholder Rights<br />Improving Money Market and Mutual Fund Regulation<br />Filling Regulatory Gaps/Legislative Reforms<br />Securing appropriate SEC Resources<br />
  16. 16. Recent SEC Proposed Rules<br />Facilitating Shareholder Director Nominations (6/11/2009)<br />Shareholder Approval of Executive Compensation of TARP Recipients (7/1/2009)<br />Political Contributions by certain Investment Advisors (“Pay to Play” restrictions”) (7/22/2009)<br />Proxy Disclosure & Solicitation Enhancements (7/10/2009)<br />NYSE proposal for discretionary proxy voting by broker/dealers - Approved<br />
  17. 17. Proxy Disclosure and Solicitation Enhancement Proposal Areas<br />Compensation Disclosure & Analysis<br />Summary Compensation Table<br />Enhanced Director & Nominee Disclosure<br />Disclosures on Company Leadership Structure and Board’s Role in Risk Management<br />New disclosures for compensation consultants<br />Report voting results on Form 8-K<br />Proxy Solicitation process<br />
  18. 18. Trends in SEC comment letters<br />
  19. 19. Staff focus is on market conditions <br />The SEC staff is focused on the adequacy of disclosures related to the impact of current market conditions, including disclosures of:<br />The impact of market events<br />Updated and/or new risk factors <br />The risks that compensation plans encourage executives to take <br />Consider the impacts on:<br />Customers <br />Consumers <br />Suppliers<br />Creditors<br />Financing sources<br />Counterparties<br />Capital spending/business development<br />
  20. 20. SEC comment letter trends are impacted by the economy<br />Management’s Discussion & Analysis<br />Liquidity and capital resources<br />Debt covenant compliance<br /> Segment reporting<br /> Restructuring/impairments<br /> Pensions<br /> Income taxes<br />Executive compensation<br /> Litigation contingencies<br /> Non-GAAP measures<br />
  21. 21. Comment letter trends: MD&A<br />Increased transparency, more in-depth analysis, and plain English:<br />Executive overview<br />Quantify significant reasons underlying variances<br />Discuss critical accounting estimates <br />Judgments, estimates, variables, sensitivities<br />Fair value estimates (impact of credit risk)<br />Discuss trends, which may have a material impact on future operating results and liquidity<br />Focus on liquidity<br />Disclose items that impact the availability of credit<br />Compliance with covenants<br />Likelihood of covenant defaults<br />Tabular presentation of financial covenants versus actual ratios<br />Counterparty risks<br />
  22. 22. Comment letter trends: segment reporting<br /><ul><li>Biggest issue – aggregation of operating segments
  23. 23. Does the current environment impact analysis of economic similarities
  24. 24. Information provided to CODM but “not used”
  25. 25. Disclosures deemed sufficient because they are consistent with competitors
  26. 26. Assertions of only “one segment”
  27. 27. The Staff oftentimes will request a copy of the CODM package
  28. 28. They will also review press releases/website/analyst calls
  29. 29. Interaction of FAS 131 and FAS 142</li></li></ul><li>Comment letter trends: impairments<br />Define reporting unit levels<br />Disclose reporting units, with carrying value close to fair value<br />Provide disclosures of the specific facts and circumstances related to the impairment charges and assumptions used<br />Provide support for timing of recording impairment charge (foreshadowing disclosure is a helpful “trail” in situations where impairment is expected in near future)<br />Judgments relating to triggering events<br />
  30. 30. Comment letter trends: executive compensation<br /><ul><li>Clear analysis of executive compensation decisions
  31. 31. Specific quantitative performance targets
  32. 32. Disclosure peer group used for benchmarking
  33. 33. Describe respective roles and responsibilities of the CEO, compensation consultants and the compensation committee in the decision making process
  34. 34. What types of risks do the compensation plans encourage executives to take?</li></li></ul><li>Other areas of focus: impact of recent market events<br /><ul><li> Internal controls
  35. 35. New areas
  36. 36. Operational aspects
  37. 37. Disclosure of risks and uncertainties</li>