Finally, Sound Fiscal Policy

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…to get the economy on track.  Only, it’s more than two thousand years old.
 
“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.”– Cicero, c. 55 BC

 

— PondelWilkinson, investor@pondel.com
 
 

XBRL – SEC Asks for Public Comment

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The SEC’s office of Interactive Disclosure began asking for public comment on the use of eXtensible Business Reporting Language, commonly known as XBRL, in public company financial statements.  Several large, well-known companies have voluntarily adopted XBRL in their EDGAR filings with the SEC and the agency has committed more than $50 million to make its public company disclosure system compatible with XBRL, according to the National Institute of Investor Relations.  XBRL International, a not-for-profit consortium of approximately 550 companies and agencies worldwide working together to build the XBRL language and promote and support its adoption, reports that XBRL is an open standard, free of license fees that promotes the interactive sharing of financial data.
 
It is believed that XBRL will provide investors and analysts with more useful financial disclosures by allowing companies to present their financial information in a format that allows investors and analysts to more easily locate and analyze this information.  It is also anticipated that XBRL will provide greater efficiency, improved accuracy and reliability and cost savings to anyone involved in supplying or using financial data.
 
While there will likely be some growing pains when public companies are required to adopt XBRL in their financial statements, over the longer term its use should make it easier for the investing public to analyze a company’s financial statements and easier for public companies to get their story out into the investing marketplace.
 
The public comment period ends April 4, 2008.

 

— Laurie Berman, Senior Vice President, lberman@pondel.com
 
 

(Nasdaq: QNET)

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On November 27, 2007,  the Nasdaq Stock Market Inc. launched
a new stock market index (Nasdaq: QNET) that tracks Internet-only companies in a broad range of industries, including retail commerce, Web hosting, search engines, Web site design, and access providers, among others.  Companies included in the index are, according to Nasdaq, “at the forefront of Internet technology.”
 
Aha.  That must explain why bloggers are asking why the likes of News Corp. and Microsoft are missing from the list, although both companies operate highly visible web properties (myspace.com and MSN/Live).  My mission for the rest of the day is to find out what parameters Nasdaq is using to classify companies as Internet-related and what metrics an Internet-related company must possess before Nasdaq considers it for inclusion in the Index.  

 

— PondelWilkinson, investor@pondel.com
 
 

E-Proxy Solicitations – Navigating the Rules

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What’s all the fuss about? After all, the SEC is only trying to provide shareholders with more options to access proxy materials, leverage technology and reduce costs for corporate issuers. While the SEC’s motivation to revise and modernize proxy solicitation procedures is commendable, navigating through the rules and how they apply to corporate issuers takes time.
 
In January 2007, the SEC adopted the Internet Availability of Proxy Materials rule, better known as the “Notice and Access Model,” which became effective March 30, 2007. This was a voluntary rule that leaves it up to the corporate issuer to decide whether or not to adopt e-proxy solicitations.
 
The rule incorporates guidance on a myriad of issues including but not limited to, householding, security and privacy issues, State Law Notices, the role of intermediaries, the mechanics of proxy solicitations, etc. Up to this point, the rule was voluntary
 
Then in June 2007 the SEC adopted additional amendments to the proxy rules under the Exchange Act, as well as approved the Shareholder Choice Regarding Proxy Materials rule. This is a mandatory rule that goes into effect January 1, 2008 for large accelerated filers (LAF) and January 1, 2009 for second tier filers and registered investment companies.
 
The SEC noted that it chose to adopt the proposal to “provide shareholders with enhanced choices without changing significantly the obligations of an issuer or other soliciting person.” In other words, the new rules should be no big deal to implement.
 
So what are a company’s obligations under the Shareholder Choice Regarding Proxy Materials rule? In simple terms, they are:
 

  1. If an issuer is required to furnish proxy materials to shareholders, then the issuer must also post its proxy materials on a specified, publicly-accessible Internet Web site (EDGAR does not apply here) and provide shareholders with a notice informing them that the materials are available as well as explain how to access those materials.NOTE: This rule does not apply to a proxy solicitation related to a business combination transaction.
     
  2. An issuer has two options to make proxy materials available to shareholder:
     

      A – The “notice only option” – requires an issuer to post its proxy materials on an Internet Web site and send a Notice to shareholders to inform them of electronic availability of the proxy materials at least 40 days before the shareholders meeting. If an issuer opts to use this option, it must respond to shareholder requests for paper copies and must offer shareholders the option to permanently request paper or email copies of proxy materials for all shareholder meetings

     

      B – The “full set delivery option” – an issuer can deliver a full set of proxy materials to shareholders, along with the notice. A separate notice does not need to be prepared if an issuer incorporates all of the information required to appear in the Notice into its proxy statement and proxy card. And the issuer does not need to respond to requests for copies as required under the notice only option.

     

  3. Within the “notice only option” and “full set delivery option,” the SEC provides issuers with details related to the timing of when notices need to be sent, what information needs to be included in the notice, the use of plain English, the design of the publicly accessible Web site, the means to vote, how to handle requests for paper or email copies of the proxy, Web site confidentiality, and other details.

 
The SEC should be commended for its work in crafting the new rule, providing corporate counsel with a level of detail to help ensure that issuers understand the new requirements. But conceptually understanding the new rules does not equate to knowing which e-proxy option to follow. While your corporate counsel will be able to navigate you, the issuer, through the legal framework, PondelWilkinson stands ready to guide you through the strategic decision-making that will lead to the right solution for your company.

 

— PondelWilkinson, investor@pondel.com