Section 16 Filings

Will the new Coca-Cola equity plan guidelines become the “classic” model or just “new Coke?”

Publisher: Cooley LLP
Author: Cydney Posner

Coca-Colas decision to scale back the use of its equity compensation plan and adopt “equity stewardship guidelines” has certainly received a lot of press – for an equity plan, that is.

Generally, under the new guidelines, the company will take steps to reduce the plan’s burn rate (defined as the number of shares granted as a percent of shares outstanding) so that the pool of shares in the plan will last until the plan expires. The question now –assuming that the new guidelines suffice to assuage the shareholders pressuring the company — is whether some version of the new Coke guidelines will soon become de rigueur for equity plans at other large companies.

This new direction stems from earlier pressures on Coke, in light of the company’s recent unsatisfactory financial performance, to rein in its executive compensation, notwithstanding shareholder approval of the equity plan and the last annual meeting. When the pressures come form a shareholder with a 9% stake named Warren Buffet, the company tends to listen. There have been rumblings that Mr. Buffet disapproved from the proposal in private, but has chosen to publically abstain from voting on the measure as a means to “make clear he wasn’t attacking Coke’s management or directors”.

For full access to the article and details of the “equity stewardship guidelines,” please click here.

By : Securex /October 08, 2014 /Compliance, General EDGAR filing, Section 16 Filings, Securites Law /0 Comment Read More

Insider Stock Sale: SEC Announces Fraud Charges against Biotech Company and Former Executive

SEC Press Release 9/10/2014

SEC Announces Fraud Charges against Biotech Company and Former Executive who failed to report Insider Stock Sales. Today, the SEC announced charges against 28 officers, directors, or major shareholders for violating federal securities laws that require them to promptly report information about their holdings and transactions in company stock.

A total of six publicly traded companies were charged for contributing to filing failures by insiders or failing to report their insiders’ filing delinquencies.

The charges were a result of an SEC enforcement initiative focusing on two types of ownership reports that give investors the opportunity to evaluate whether the holdings and transactions of company insiders could be indicative of a company’s future performance. Both types of ownership reports (Form 4 and Schedule 13D/13G) have certain timing requirements in regards to when they have to be filed.

The accused individuals are charged with repeatedly filing their insider stock sale documents late; sometimes by weeks, months, and even years.

Andrew M. Calamari, Director of the SEC’s New York Regional Office, added, “The reporting requirements in the federal securities laws are not mere suggestions, they are legal obligations that must be obeyed.  Those who fail to do so run the risk of facing an SEC enforcement action.”

These reporting requirements under Section 16(a) of the Securities Exchange Act of 1934 and under Section 13(d) or (g) of the Exchange Act apply irrespective of profits or a person’s reasons for acquiring holdings or engaging in transactions.  The failure to timely file a required beneficial ownership report, even if inadvertent, constitutes a violation of these rules.

The individuals that chose to settle the charges are required to pay financial penalties totaling $2.6 million.

For full access to the SEC press release, please click here.

By : Securex /September 11, 2014 /Compliance, General EDGAR filing,, Public Company Accounting, SEC EDGAR Filing Deadlines, SEC News and Public Statement, Section 16 Filings, Securites Law /0 Comment Read More

Substantial Risk of Forfeiture

Publisher: NASPP

At the same time that the IRS released regulations designed to clarify which restrictions constitute a substantial risk of forfeiture under Section 83, a recent tax court decision casts doubt on the definition in the context of employees that are eligible to retire.


When an employee is eligible to retire and holds restricted stock that provides for accelerated or continued vesting upon retirement, the awards are considered to no longer be subject to a substantial risk of forfeiture, and, consequently, are subject to tax under Section 83. This also applies to RSUs, because for FICA purposes, RSUs are subject to tax when no longer subject to a substantial risk of forfeiture and the regs in this area look to Section 83 to determine what constitutes a substantial risk of forfeiture.

Although there’s usually some limited risk of forfeiture in the event that the retirement-eligible employee is terminated for cause, that risk isn’t considered to be substantial. As a practical matter, at many companies just about any termination after achieving retirement age is treated as a retirement.

Austin v. Commissioner

In Austin v. Commissioner however, the court held that an employee’s awards were still subject to a substantial risk of forfeiture even though the only circumstance in which the awards could be forfeited was termination due to cause. In this case, in addition to the typical definition of commission of a crime, “cause” included failure on the part of the employee to perform his job or to comply with company policies, standards, etc.


Up until now, most practitioners have assumed that providing for forfeiture solely in the event of termination due to cause is not sufficient to establish a substantial risk of forfeiture, regardless of how broad the definition of “cause” is. Austin seems to suggest, however, that, in some circumstances, defining “cause” more broadly (e.g., as more than just the commission of a crime) could implicate a substantial risk of forfeiture, thereby delaying taxation (for both income and FICA purposes in the case of restricted stock, for FICA purposes in the case of RSUs) until the award vests.

For full access to the rest of the implications of Austin v. Commissioner, please click here. Give us your thoughts on forfeiture risk in the comments below.


By : Securex /April 24, 2014 /Compliance, Public Company Accounting, Section 16 Filings, Securites Law /0 Comment Read More

US insider trading cases face test at appeals court

Publisher: Reuters
Author: Nate Raymond

A U.S. appeals court is set hear a case whose outcome could make it harder for the government to prosecute insider trading and potentially jeopardize several high-profile guilty verdicts, including that of SAC Capital Advisors portfolio manager Michael Steinberg.

The question facing the 2nd U.S. Circuit Court of Appeals in New York on Tuesday is one that has divided lower court judges: whether to be convicted of insider trading, the recipient of non-public information must know that the source of the tip benefited from the disclosure.

In 1983, the US Supreme court held that a “tippee” can only be found to have engaged in insider trading if the tipper benefited from the disclosure. The case in question today highlights the issue of whether the prosecutors must show the tippee knew of the tipper’s benefit, whether financial or non-monetary. The results of the verdict will answer the question of whether prosecutors are trying to stretch securities law too far and will give guidance to the business community to protect itself from potential insider trading violations. For full access to the article, please click here.

What are some of your thoughts on insider trading laws? Give us your opinion in the comment section below.

By : Securex /April 22, 2014 /Compliance,, Public Company Accounting, SEC News and Public Statement, Section 16 Filings, Securites Law /0 Comment Read More

SEC Updates Guidance on Share-Based Compensation Disclosures in IPOs

Publisher: Morrison Foerster
Author: Ze’-Ev Eiger

In early February, the Division of Corporation Finance of the SEC updated its guidance regarding share-based compensation disclosures in IPO prospectuses.

The updates revise  prior SEC guidance recommending that issuers, in their disclosure of pre-IPO share-based compensation, include tabular disclosure (for the 12 month period preceding the most recent balance sheet date) regarding the number of instruments granted, the exercise price, the fair value of the underlying stock and the fair value of instruments granted, as well as narrative disclosure describing the factors that contributed to significant changes in the fair value of the underlying stock during the relevant twelve-month period. The updated guidance no longer requires this level of detail. Instead the SEC will consider, in assessing the adequacy of share-based compensation disclosure, whether the following critical accounting estimate disclosures are included in the company’s IPO prospectus:

  • The methods that management used to determine the fair value of the company’s shares and the nature of the material assumptions involved.
  • The extent to which the estimates are considered highly complex and subjective.

For full access to the article, please click here.

By : Securex /February 19, 2014 /Compliance, Public Company Accounting, Section 16 Filings, Securites Law /0 Comment Read More

The SEC’s Quiet Insider-Trading Loss

Publisher: Bloomberg
Author: Jonathan Weil

Last week, the SEC scored a big victory in the success conviction of former SAC Capital Advisors LP fund manager Mathew Martoma.

It followed a string of highly publicized successful criminal convictions of insider-trading allegations targeting SAC Capital Advisors LP Fund, run by billionaire Stephen Cohen. However, the SEC’s pursuit of civil insider-trading cases has been much less successful and less heralded then their more publicized criminal trial success. Two days before the Martoma trial, the SEC quietly announced the result of a civil insider-trading case against an Illinois farmer and his three sons. When the SEC announced its original complaint against the men, the agency issued a news release with the headline “SEC Charges Family Insider Trading Ring In Million-Dollar Scheme.” However, on January 27th, 2014, the federal jury in Chicago ruled in favor of the defendants, rejecting the SEC’s claim that the defendants “exploited their personal and family relationships for monetary gain.”

For full access to the article, please click here. What are your thoughts on the SEC’s dogged pursuit of inside trading for both civil and criminal cases? Do you believe the SEC’s tenacity in pursuing cases is misguided? Please feel free to give us your thoughts in the comment section below.

By : Securex /February 11, 2014 /Compliance,, Section 16 Filings, Securites Law /1 Comment Read More

Ex-SAC Fund Manager Martoma Found Guilty of Insider Trading

Publisher: Bloomberg Magazine
Author: Bob Van Voris and Patricia Hurtado

On February 6th, 2014, jurors in a Manhattan federal court found Mr. Mathew Martoma guilty on charges of insider trading for their 7th conviction in the SEC investigation of SAC Capital Advisors LP.

Mr. Martoma was accused of using non-public information on the results of clinical trials for an Alzheimer medication in order to reap a $275 million dollar benefit for his fund. The trial marks another success for the US Government in criminal cases involving insider-trading allegations and follows the successful conviction of another SAC Capital Advisors LP fund manager Michael Steinberg, who was convicted earlier.  The successful conviction marks another win for the SEC and may embolden prosecutors to go after Stephen Cohen, the billionaire founder of SAC Capital Advisors.

For full details of the article, please click here.

What are your opinions on the SEC’s persistence in pursuing criminal trials for alleged insider-trading? Feel free to engage with us on your opinions in the comment box below.

By : Securex /February 07, 2014 /Compliance,, SEC Forms, SEC News and Public Statement, Section 16 Filings, Securites Law /1 Comment Read More

Why Settling with the SEC Can Be Worse Than Losing at Trial

Published: Forbes
Author: Daniel Fisher

In SEC enforcement cases, the Commission has had a policy where they accept a “no-admit, no-deny” settlement from defendants.

Defendants get to close their case without having to admit or deny wrongdoing. Many cases have been settled with this standard, however, recently, the Securities and Exchange Commission announced that it intends to seek more admissions for wrongdoing as a condition of settlement in some of the more harmful cases, defined as those that include “misconduct that harmed large numbers of investors or placed investors or the market at risk of potentially serious harm; where admission might safeguard against risks posed by the defendant to the investing public, particularly when the defendant engaged in egregious intentional misconduct; or when the defendant engaged in unlawful obstruction of the Commission’s investigative process.”

This shift in enforcement policy has implications and collateral consequences that can manifest with defendants that are facing both a criminal and civil case. Admission of wrongdoing in settling a SEC civil suit can have collateral consequences if that defendant has a parallel criminal case. That is just one example of the far reaching effects of this policy shift.

To go into further details of potential consequences of this shift in policy, please read the article here.

By : Securex /January 30, 2014 /Compliance,, Public Company Accounting, Section 16 Filings, Securites Law /1 Comment Read More

Government Regulators Continue to Make Insider Trading a Trial Priority (With Mixed Success)

Publisher: Barnes & Thornburg LLP
Authors: Brian E. Casey, Patrick J. Cotter, Anne N. DePrez, Larry A. Mackey, Vincent Schmeltz III, David L. Young

In 2014, government regulators have continued to persist after insider traders both civilly and criminally; continuing a trend that defined 2013 as a busy year for litigators and the SEC.

The US Attorney’s office has had substantially more success in trying criminal cases than the SEC is having in regards to proving civil fraud. Criminal prosecutors continue to pursue Mr. Stephen A. Cohen’s hedge funds as they look to obtain a conviction in a very high-profile case against a Mr. Matthew Martoma on allegations of illegal insider trading that resulted in his fund avoiding $276 million in losses. This case follows the successful convictions of Mr. Michael Steinberg, an associate of Mr. Cohen, and the convictions involved in the Galleon Management Scandal that rocked Wall Street in the years following the wake of the 2008 financial crisis.

On the civil side, the SEC has run a string of unsuccessful civil case decisions dating back to late 2013. Already in the year of 2014, the SEC has lost civil cases in SEC v. Yang and SEC v. Schvacho. In both cases, the judge decided that the SEC’s circumstantial evidence was insufficient proof of insider trading. In the Schvacho case, the court concluded that the SEC’s analysis of its circumstantial evidence was “overreaching” and “self-serving.”

In light of the SEC’s unsuccessful civil trials, SEC chairwoman Mary Jo White has not backed down on her resolve to continue to make insider trading cases an enforcement priority for 2014. The implications of this continued pledge to enforce civil lawsuits against insider traders have yet to play out for the rest of the year. If the first month of 2014 is any indication of how far the SEC is willing to go in civil court, the rest of 2014 may be a busy year for the judicial system and government regulators.

By : Securex /January 22, 2014 /Compliance, Section 16 Filings, Securites Law /1 Comment Read More

U.S. Court Rejects Insider Trading Charges against Schvacho

Published by Morris, Manning & Martin, LLP

U.S. Court Rejects Insider Trading Charges against Schvacho; “Total Vindication” for MMM Client Who Faced Unfounded SEC Allegations.

Recently, the U.S. District Court for the Northern District of Georgia this week ruled in favor of defendant, Larry Schvacho, in a case that may have precedent-setting implications for future insider trading charges leveled by the SEC. The case was originally filed in July 2012 and has finally reached a resolution when Judge William Duffey Jr. ruled against the SEC in what he describes as the SEC’s “overreaching, self-serving interpretation” of evidence.

The SEC alleged that Mr. Schvacho made more than $500,000 dollars in improper profit from trading stock in Comsys IT Partners before a merger announcement in February 2010. The SEC believed that Mr. Schvacho had learned of the upcoming transaction from a close friend, then-Comsys CEO Larry Enterline. Upon examination of testimony, the Court established that the SEC had provided evidence that was insufficient to prove that insider trading had in fact occurred.

When vindicated by the Court’s decision, Mr Schvacho stated, “My experience demonstrates serious flaws in the way the SEC approaches some of these highly-questionable cases. They have the use of virtually unlimited taxpayer money, and if they lose there are no negative consequences — there’s zero accountability on the part of the SEC. Consequently the SEC has no incentive for fair treatment.” For full details on the article, please click here.

What do you think about the SEC and insider trading cases? Give us your opinion on whether the SEC is overreaching or not in the comment section below.

By : Securex /January 13, 2014 /Compliance,, Section 16 Filings, Securites Law /2 Comments Read More