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Conference Features Ethics Discussion and Corporation Finance Workshop

During a panel discussion on ethics at the Practising Law Institute's "SEC Speaks" conference, Richard Humes, the associate general counsel, said he was not concerned that the SEC has not adopted a final rule to require attorneys to report misconduct to the Commission. Having proposed a rule seems to provide the leverage needed to encourage disclosure, he said.

Humes reported that a substantial number of whistleblower complaints have been submitted to the Department of Labor, the agency charged with receiving such complaints under the Sarbanes-Oxley Act. The SEC reviews the complaints, a number of which have been filed by lawyers who have reported misconduct and been retaliated against, he said. The Office of the General Counsel handles referrals from the Division of Enforcement on rule 102(e) cases. Enforcement does not investigate rule 102(e) cases, according to Humes.

The Division of Corporation Finance offered a workshop to review disclosure and processing developments in more depth. Pamela Long, an assistant director, advised registrants to highlight any staff interpretations that support their positions during the review process. Pointing to another company that has done the same thing won't necessarily win the day, she said, since the other company's filing may not have been reviewed, or the issue may have been overlooked.

When the staff comments on a Form 10-K, it asks for a response within 10 business days. If a company is unable to respond in that time frame, it should let the staff know. If a company inadvertently submitted a response that was intended to be confidential, she said to inform the staff immediately. There is a delay before the comment letters get posted online, so the staff may be able to prevent it from becoming public.

Paul Belvin, an associate director, discussed the use of special purpose acquisition companies, known as "SPACs." A SPAC is a blank check company making a firm commitment offering to acquire another company. Blank checks used to have a checkered history, Belvin noted, and a number of rules were adopted to address abusive practices. SPACs include most of the investor protections that were aimed at blank check companies, including the requirement that the acquisition, once identified, must be approved by the purchasers.

The Office of Emerging Growth Companies reviews all SPACs and all SPAC acquisitions, according to Belvin. The staff has been challenged by the turnaround time on comment letters given the increase in SPACs. He urged SPACs to provide complete and fulsome disclosure to help speed the reviews. Belvin also echoed Long's remarks that looking at another deal is not necessarily precedent.

SPACs must discuss the nature and extent of their industry research, the criteria used to evaluate potential targets and any conflicts of interest with management. When describing management, Belvin urged SPACs to avoid marketing hype. Belvin also encouraged SPACs to file early and to respond to staff comments quickly, given the specific window of time needed to complete the acquisition.

Carol McGee, in the Office of the Chief Counsel, reviewed private investment, public equity transactions, known as PIPEs. The staff has been providing telephone interpretations on these transactions since 1997, she advised. The staff recently updated its guidance on PIPEs. It is not changing its position, according to McGee, but the guidance emphasizes recent developments relating to underlying convertible securities.

Jacquelyn Lumb