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Are Buybacks Really Shortchanging Investment?

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by Jesse Fried (Harvard Law School) and Charles C.Y. Wang (Harvard Business School), on Monday, March 19, 2018 Editor's Note: Jesse Fried is the Dane Professor of Law at Harvard Law School and Charles C.Y. Wang is the Glenn and Mary Jane Creamer Associate Professor of Business Administration. This post is based on a recent article authored by Professor Fried and Professor Wang, recently published in the Harvard Business Review.

In an article recently published in the Harvard Business Review, Are Buybacks Really Shortchanging Investment?, Charles Wang and I use data to challenge the widely-held view that U.S. firms distribute too much cash to shareholders through stock buybacks and dividends, reducing these firms’ ability to innovate and invest for the long term.

Payout critics focus on the high volume of dividends and repurchases, often pointing to shareholder payouts routinely exceeding 90% of net income. For example, during the decade 2007-2016, S&P 500 firms distributed $7 trillion to shareholders, mostly via repurchases, totalling 96% of net income. These figures have led Larry Fink, CEO of Blackrock, to warn corporate leaders against seeking to “deliver immediate returns to shareholders, such as buy-backs… while underinvesting in innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth.” Vice-President Joseph Biden, reportedly mulling a run at the White House in 2020, claimed that the high level of buybacks “has led to significant decline in business investment” with “most of the harm …borne by workers.” Biden’s view is widely shared by prominent politicians in Washington, D.C. Just last week, Senate Democratic Leader Chuck Schumer, who claims buybacks “crowd out investment” that would benefit workers and firms, joined Senator Tammy Baldwin in introducing an amendment to the banking deregulation bill that gives the SEC the authority to block a stock buyback it deems to harm the corporation.


A Comparative Perspective on Regulation Versus Litigation in Corporate Law

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by Sean J. Griffith (Fordham Law School), Dan Awrey (University of Oxford), and Blanaid Clarke (Trinity College Dublin), on Monday, March 19, 2018 Editor's Note: Sean J. Griffith is T.J. Maloney Chair and Professor of Law and Director of the Corporate Law Center at Fordham Law School; Dan Awrey is a Professor of Financial Regulation at University of Oxford Faculty of Law; and Blanaid Clarke is McCann Fitzgerald Chair in Corporate Law at Trinity College Dublin. This post is based on their recent article, published in the Yale Journal on Regulation.

Regulation by litigation has been the dominant regulatory modality in U.S. corporate law for over a century. But that model is in crisis. The shareholder suit, the trigger of the state law-dominated, fiduciary duty-based model of regulation, has been drawn into disrepute. The crisis is most apparent in merger suits, which have been brought against virtually every deal, but which invariably generate no real benefit for anyone other than the lawyers that file and defend them. Delaware, the leading regulator in U.S. corporate law, has recently taken steps to address the problem, but the immediate result seems to have been a flood of litigation out of Delaware and into other fora. Regulation by litigation thus has demonstrated a tendency to devolve into rent seeking by attorneys.


The Appraisal of AOL, Inc.

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by Scott A. Barshay, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on Monday, March 19, 2018 Editor's Note: Scott A. Barshay is a partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul, Weiss publication by Mr. Barshay, Matt Abbott, Ross Fieldston, and Justin Hamill, and is part of the Delaware law series; links to other posts in the series are available here.

Recently in In re Appraisal of AOL Inc., the Delaware Court of Chancery, in an opinion by Vice Chancellor Glasscock, relied solely on its own discounted cash flow (“DCF”) analysis to appraise the fair value of AOL Inc. below the deal price paid in its acquisition by Verizon Communications Inc. While reiterating that deal price is the best evidence of fair value, and must be taken into account, when appraising “Dell‑compliant” transactions (i.e., those where “(i) information was sufficiently disseminated to potential bidders, so that (ii) an informed sale could take place, (iii) without undue impediments imposed by the deal structure itself”), the court held this was not such a transaction. The court found that certain of the deal protections combined with informational disparities between potential bidders and certain actions of the parties were preclusive to other bidders, and therefore, the court assigned no weight to deal price in its fair value determination. Applying its own DCF analysis, the court ultimately determined fair value to be approximately 3% lower than the deal price (possibly due to synergies), thus continuing a string of recent appraisal decisions finding fair value at or below deal price.


FCPA Compliance Report-Episode 375, Steve Durham on Impact of Digital Realty Trust

FCPA Compliance & Ethics -

In this episode, I welcome back Steve Durham, a partner with Labaton and Sucharow to discuss the continued reverberations from the recent Supreme Court decision narrow the definition of whistleblowers in Digital Realty Trust v. Somers. Durham discussed the impact the decision may portend for the SEC Office of the Whistleblower and both the quality [...]

The post FCPA Compliance Report-Episode 375, Steve Durham on Impact of Digital Realty Trust appeared first on Compliance Report.

SEC & FINRA: 4 Shared Regulatory Priorities

Corporate Compliance Insights -

Where Firms Should Concentrate Compliance Efforts In the past few months, both the SEC and FINRA issued guidance concerning their regulatory priorities for the coming year. Both of the agency’s annual priorities letters address a large number of diverse topics. Experts from Baker Donelson discuss where the SEC’s and FINRA’s concerns overlap, what they have indicated The post SEC & FINRA: 4 Shared Regulatory Priorities appeared first on Corporate Compliance Insights.

(This is only a summary. Click on the headline to view the entire article at Corporate Compliance Insights and participate in the discussion.)

To Mitigate Information Risk, Security and Compliance are Converging

Corporate Compliance Insights -

Collaboration Needed to Effectively Manage Data Security Cyber exposure at all levels of business operations, from financial transactions to customer service and customer apps, is increasing. At the same time, new regulations regarding the governance of data are posing higher potential fines, to the point of also posing a threat to business. As a result, The post To Mitigate Information Risk, Security and Compliance are Converging appeared first on Corporate Compliance Insights.

(This is only a summary. Click on the headline to view the entire article at Corporate Compliance Insights and participate in the discussion.)

Brainstorming for Compliance

FCPA Compliance & Ethics -

Brainstorming can be a useful and indeed powerful tool in the business world. In my corporate career I participated in several large brainstorming sessions to help develop or focus on new product or service initiatives. Typically we were brainstorming for answers. Yet I recently read an article in the Harvard Business Review (HBR), entitled “Better [...]

The post Brainstorming for Compliance appeared first on Compliance Report.

Has China Hit Peak Coal?

BRINK News -

China’s coal consumption has steadily decreased by a few percentage points every year since 2013, prompting our pronouncement of a coal consumption peak in an article published in the summer of 2016 in Nature Geoscience.

This declaration was echoed quickly by the former minister of the National Energy Administration, Zhang Guobao, who went further to suggest that the government make an official announcement on the coal peak.

Coal Rebound?

However in 2017, the beast of coal seemed to be quite untamed. Coal prices rose sharply, production and consumption went up, and the coal inventory was in sharp decline. Coal consumption appeared to have made a quick rebound.

In a recent report by the Global Carbon Project published during COP 23—the informal name for the 23rd Conference of the Parties of the United Nations Framework Convention on Climate Change—the authors predicted a 3 percent increase of coal consumption in China, leading to a 3.5 percent increase in China’s carbon emissions, a key contributor to a 2 percent increase of global emissions in 2017.

Many are concerned about the robustness of China’s energy decarbonization and its implication for climate change.

So Has China’s Coal Consumption Really Peaked?

First of all, the 3 percent increase of China’s coal consumption was likely to be an overestimate. The estimation was based on data from the China Coal Industry Association and the National Energy Administration for the first half of 2017, when China’s coal consumption experienced a sharp rebound. The CCIA reported 5 percent growth, while the NEA said it was 1 percent, with a difference of 100 million metric tons between the two.

The NEA data tends to be consistent with the official release from the National Bureau of Statistics and thus more appropriate for interannual comparison. According to the NEA, in the first three quarters of 2017, coal consumption in China reached 2.81 billion metric tons, an increase of less than 1 percent from 2016. A similar estimation of 2.82 billion to 2.83 billion tons is corroborated by the Energy Research Institute of the NDRC.

We support the conclusion that coal consumption is likely to have experienced a rebound of around 1 percent in 2017. Total consumption would be 3.82 billion metric tons—150 million tons less than that of 2015, or 420 million tons less than the 2013 level. Even if coal consumption increased by 3 percent to 3.90 billion tons in 2017, as the Global Carbon Project report said, it is still far less than the 4 billion tons in 2015, let alone challenging the 4.24 billion tons peak in 2013.

Coal-fired growth is over, despite the fact that coal remains the primary fuel for the Chinese economy.

Using the GCP estimation approach, we calculate that China’s overall emissions increase in 2017 was closer to 1 percent—instead of 3.5 percent—which is lower than the 2014 level.

Rise of Natural Gas

Countering the market effect of rebounding coal use in power and industry, the government has been implementing strong policies to substitute natural gas and electricity for coal use, mainly to address the air pollution problem. As a result, gas consumption increased by 17 percent in the first 10 months of the year. It is estimated that the substitution effort would replace about 47 million metric tons of coal use in 2017.

Entering the last quarter of the year, the momentum of coal-use growth faded. In September, coal-fired electricity output and steel production, together representing about 75 percent of overall coal consumption, declined by 0.5 percent and 1.4 percent, respectively, and further dropped by 2.8 percent and 1.3 percent in October. In November, coal-fired power production continued to decrease by 1.4 percent from last year.

Macro Trends Still Point in the Same Direction

Looking ahead, we do not anticipate significant new growth of coal consumption this year or in the next few years. First of all, the Chinese government is not setting a higher target of growth for 2018. The traditional drivers of coal growth—construction and manufacturing—will continue to give way to the service sector in economic growth. Real estate development is experiencing the coldest winter ever due to restrictive regulations by the central and local governments. Anticipation of a property tax would make speculators switch from “buy” to “sell” mode.

Additionally, investment in infrastructure construction by local governments is now haunted by the local debts and is unlikely to grow quickly. In fact, some provincial governments have gone public to acknowledge and correct their overestimations of GDP and revenue.

Finally, the regional coal-cap policy will continue to squeeze coal out of the energy mix, especially in the haze-intensive regions in the north. It is expected that even less coal will be used next winter, when more gas pipes are in place for heating.

So we stick to our conclusion made in 2016: Coal-fired growth is over, despite the fact that coal remains the primary fuel for the Chinese economy.

The Real Game-Changer Is Coming

The real game-changer is clean energy. The price of solar photovoltaic is at an all-time low, enough to compete against coal for power generation. Additionally, wind power is well positioned to play an even bigger role.

China is still the single largest coal user in the world, and coal represents more than 60 percent of its energy mix. But in the long run, coal consumption will continue declining—with current policies and the structural transformation of the economy from being a heavy industry-led, export-driven model to one sustained by services and domestic consumption—despite the annual and seasonal fluctuations.

We have no doubt that China’s coal consumption has peaked, and coal-fired economic growth has come to an end.

This piece was originally published by Brookings Institution.

LPM Insider Survey Results: Should Retailers Restrict the Sale of Firearms? Readers Are Split.

Loss Prevention Media -

In last week’s LPM Insider Survey, we discussed the decision made by several retailers to restrict purchases of certain firearms and gun accessories, or simply no longer sell these items rather than waiting for legislators to make up their minds on what should be done. Others have raised age restrictions and will no longer sell some or all firearms to those under 21 years of age.

Gun control issues have been an ongoing topic, and recently back in the spotlight as a primary focus of attention following the recent tragedy in Parkland, FL, and the dozens of other incidents involving gun violence in recent years.

Debates have raged as the public seeks action. While 97 percent of the public agrees that further gun control in some form needs to be implemented, legislators remain deadlocked on the best ways to address this polarizing issue.

Most recently, another retailer took additional steps in the assault rifles issue. Last week, Kroger, the largest supermarket chain in the United States, made the decision to remove publications about assault rifles from its stores, wading further into the debate on gun control.

Should we raise the age limits on the purchases of certain firearms? Should certain firearms be banned altogether? Should background checks and waiting periods be mandatory for every gun sale? Should bump stocks and high-capacity ammunition magazines be banned? Should teachers carry guns?

.inline-text-ad h1, .inline-text-ad h2, .inline-text-ad h3 { margin-top: 0; } .inline-text-ad h1 { font-size: 18px !important; font-weight: bold !important; } .inline-text-ad p { font-size: 1.0rem; } .inline-text-ad { border-top: 1px dotted #cccccc; border-bottom: 1px dotted #cccccc; padding-top: 20px; } @media only screen and (max-width: 768px) { .inline-text-ad { text-align: center; } .inline-text-ad h1, .inline-text-ad h3, .inline-text-ad h3 { font-size: 1.15em; } } @media only screen and (max-width: 460px) { .inline-text-ad h1, .inline-text-ad h3, .inline-text-ad h3 { font-size: 1em; } } Get the details on the hottest new trend in retail: Read our FREE Special Report, Top Omni-channel Retail Trends: A Guide to the Proven Value of an Omni-channel Retail Strategy.


Survey Results

Our survey participants shared passionate comments on both sides of this debate, resulting in a virtual stalemate in the discussion, with 47 percent agreeing that retailers should self-regulate and restrict the sale of certain firearms and gun accessories, 47 percent disagreeing with this decision, and 6 percent unsure which is the right decision.

Approximately 35 percent of respondents believe that that retail companies have every right to take these steps and agree with this decision, while 12 percent agree with the decision, but feel that retailers should only take these steps so far. Contrarily, 27 percent feel that refusing to sell these weapons or to restrict sales to those under 21 is a violation of their constitutional rights, and 20 percent believe that most gun owners are responsible and retailers should wait until new laws are passed.


Here is a sampling of your comments:

Retailers have every right to dictate who they will and will not sell to, and they’ve made the right decision. Private citizens don’t need assault-type rifles. They don’t need high-round magazines. They don’t need bump stocks. Hunt to your heart’s content – but don’t allow people to buy weapons solely intended to cause the death of a lot of people. It’s wrong. Period.

GUNS kill people. If you can’t see the importance of being a responsible gun owner, you shouldn’t own a gun. Bravo to the retailers that stood up! When 97 percent of the people agree on something this important, there’s something wrong with our political system if we can’t find a solution. It’s disgusting that money and special interests are more important than our children.

Buyers have the right to go elsewhere, too.

Policy and common sense need to compliment the protection of the public within the constraints of law. Whereas law protects the publics rights. Neither are mutually exclusive or all encompassing, they should complement each other.

Almost none of the ‘mass shooter’ suspects in recent years has been under 21 or obtained their firearms illegally anyway. If you’re going to impose unconstitutional restrictions on 18-20-year-olds due to age, maybe we need to question if they are ‘old enough to vote’ too?

Taking accountability for the responsible handling of gun sales is positive step within the laws of the land. Paying close attention to persons purchasing the firearms and reporting suspected activity would also be a prudent move.

Retailers have every right to sell or not sell what they want, within the law. Their right is to be applauded, not their decision.

Responsibility, common sense, and the safety of our children should reign over special interests and politicians that line their pockets while speaking in forked tongues. We don’t want to take guns from hunters and sportsmen – we want to take assault rifles from killers. Well played, retailers!

None of the above. Retailers have the right to decide what they will sell and how they will sell it. If they want to put restrictions on guns or not sell them at all, that is absolutely their right. However, I can’t say that I “applaud” a decision to do that. While everyone wants to make these issues about guns, there are so many other, realistic things we can do to prevent these tragedies. Putting restrictions on firearms, or completely outlawing them is a “knee-jerk”, “feel good” response, that will do nothing. Thousands of illegal weapons come into this country every year. Passing a law to “ban” guns, won’t stop that. It also won’t make all of the guns that are already out there, just “disappear”. Guns will ALWAYS be around. Let’s make some realistic and common-sense decisions. Why don’t we have controlled access with metal detectors at every school? Why don’t we have armed guards at every school, like banks, federal buildings, etc.? Again, while I don’t agree with these decisions by retailers, I certainly agree that they have the right to make that choice.

Changing the age to buy a firearm does nothing to stop criminals, who are breaking the law in the first place.

If our government can’t figure it out why not have responsible corporate citizens make a stand to cease the sale of assault weapons and high capacity magazines. I do applaud their courage knowing the fallout means lost revenue. Lost revenue or lost lives – you choose.

Retailers have every right to dictate who they will and will not sell to, as long as it is within the bounds of the law. People and customers need to straighten up and fly right – and be responsible for their own actions. The real problem: our court system. Crimes need to be punished accordingly and we as a country need to stop soft-soaping drugs, theft and all of those other crimes that the democrats want defined as “petty”. Crime is not petty. Start prosecuting the offenders, help parents keep their own kids safe and sane and make everyone accountable for their own actions. It has to start there. Retailers’ decisions will impact customers, and thus the bottom line, but it won’t make us any more or less safe. Prosecutors need to get on board.

My full (and personal) belief is: “NO they shouldn’t because most gun owners are responsible and they should wait until new laws are passed, but YES, they totally have the right to do so.” Let’s all analyze the real profitability that these sales had in any of these retailers making this shift before they are applauded as great humanitarian companies. If the financials substantiated the continued sales of these types of weapons they would not be making these moves. These are businesses. If cigarettes had increased profit margins and mitigated shrink they would be brought back to many of retailers that had previously banned the sales for moral reasons. They can do whatever they want, but claiming they are doing it for ethical/moral reasons is inappropriate. I would be happy to be proven wrong, but the potential for declining sales from the ‘left’ or inauspicious sales from the ‘right’ is the real motivator.

As much as I respect the rights as a private company to decide what they want to or don’t want to sell, I have the right as a consumer to never shop there again.

It depends on the type of retailer. Private retailers have the right to restrict sales however they wish. It gets grayer with public retailers, who have a responsibility to their shareholders first. That being said, in this social media focused work of public shaming we live in, it may behoove all retailers to stay on the good side of social media followers, as that has been a driving force with brand appearance as of late.


Do you have any additional thoughts? Let us know what’s on your mind in the comments below.


The post LPM Insider Survey Results: Should Retailers Restrict the Sale of Firearms? Readers Are Split. appeared first on LPM.

Episode 30 — Common Due Diligence Problems (Part III of III)

Corruption, Crime & Compliance Blog -

Companies continue to face significant risks from their third parties.  In response, companies are implementing sophisticated due diligence and third party risk management systems.  FCPA enforcement risks are only one of several risks created by a company’s third parties.  Companies have to screen and review their third parties for corruption, sanctions, money laundering, antitrust, human trafficking, child labor and reputational risks.

In this three-part series, Michael Volkov describes the law and enforcement risks, basic requirements for a third-party management system, and a problem-solving approach to difficult third-party risk issues.

In Part I, Michael Volkov discusses the law and government expectations for a third-party risk management system.

In Part II, Michael Volkov discusses the building blocks for an effective due diligence system.

In Part III, Michael Volkov discusses solutions to common due diligence problems.

The post Episode 30 — Common Due Diligence Problems (Part III of III) appeared first on Corruption, Crime & Compliance.

Do CEO Paycuts Really Work?

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by Gerald Lobo (University of Houston), Hariom Manchiraju (Indian School of Business), and Sri S. Sridharan (Northwestern University), on Sunday, March 18, 2018 Editor's Note: Gerald J. Lobo is Arthur Andersen Chair in Accounting at University of Houston C. T. Bauer College of Business; Hariom Manchiraju is Assistant Professor of Accounting at Indian School of Business; and Sri S. Sridharan is John and Norma Darling Distinguished Professor in Financial Accounting at Northwestern University Kellogg School of Management. This post is based on their recent article, forthcoming in the Journal of Accounting and Public Policy. Related research from the Program on Corporate Governance includes Paying for Long-Term Performance by Lucian Bebchuk and Jesse Fried (discussed on the Forum here).

Boards of directors (boards) often cut CEO pay following poor performance. These paycuts can go beyond the general pay-for-performance relation. Agency theory suggests that such paycuts can act as a disciplining mechanism against the CEO and, therefore, can lead to better performance in subsequent periods. Consistent with this line of reasoning, there is some empirical evidence that firm performance improves following a CEO paycut.

In our article, Accounting and Economic Consequences of CEO Paycuts, forthcoming in the Journal of Accounting and Public Policy, we examine the possibility that cutting the pay of an incumbent CEO might also induce an adverse response. Specifically, we examine whether, in response to paycuts, CEOs actually increase their efforts to improve the underlying economic performance of the firm, or simply resort to managing measured performance through activities such as accruals manipulation and real activities management. These latter activities may be designed to boost reported earnings in the short-run at the expense of long-term shareholder value. Since CEO pay is often linked to reported earnings performance, CEOs have incentives to engage in earnings management after a paycut because such activities can lead to faster improvement in reported performance and, hence, to speedier restoration of their pay to prior levels. Thus, the efficacy of a CEO paycut as a disciplining mechanism is unclear.


Investor Pressure on Firearms Manufacturers

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by Courteney Keatinge, Glass, Lewis & Co., on Sunday, March 18, 2018 Editor's Note: Courteney Keatinge is Director of Environmental, Social & Governance Research at Glass, Lewis & Co. This post is based on a Glass Lewis publication by Ms. Keatinge.

The mass shooting at a high school in Parkland Florida has focused renewed attention on the issue of gun violence. While regulators debate the appropriate actions to take, a number of companies and investors have recently made moves to address the issue.

For example, both Walmart and Dicks Sporting Goods announced at the end of February that they would place new restrictions on gun sales. Specifically, Dicks Sporting Goods announced that it would immediately end the sales of military-style semi-automatic rifles and its sale of high-capacity magazines. Walmart, which does not sell bump stocks, high capacity magazines or similar accessories, stated that it was removing from its website items that resembled assault-style rifles, including nonlethal guns and toys. In addition, both retailers stated that they would not sell firearms to customers under the age of 21.


Ethikos Editor’s Weekly Picks: What do Business Executives Think About Distributive Justice?

The Compliance & Ethics Blog -

Examining ethics and compliance issues in business since 1987 What do business executives think about distributive justice? By Alexander Pepper for LSE Blog This is the story of two cups of coffee, or at least that is where the story begins. The first, between me, Sandy Pepper, a Professor of Practice in the Department of Management […]

This Week in FCPA-Episode 94, the March Madness edition

FCPA Compliance & Ethics -

March Madness is upon us, with the first ever #16 knocking off a Number 1 see. In the midst of this true madness, Jay Rosen and myself take a look at some of the top compliance stories over the past week. March Madness is here. So is corruption in NCAA basketball. Tom considers both stories [...]

The post This Week in FCPA-Episode 94, the March Madness edition appeared first on Compliance Report.

Proposed Amendments to Public Reporting of Fund Liquidity Information

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by Robert J. Jackson, Jr., U.S. Securities and Exchange Commission, on Saturday, March 17, 2018 Editor's Note: Robert J. Jackson, Jr. is a Commissioner at the U.S. Securities and Exchange Commission. The following post is based on Commissioner Jackson’s recent public statement, available here. The views expressed in the post are those of Commissioner Jackson and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Thank you, Chairman Clayton, and thank you to the extraordinary Staff in the Division of Investment Management for all of the hard work reflected in this proposal. I appreciate your and the Staff’s engagement—and your willingness to answer my questions—a great deal.

Unfortunately, I cannot join the majority in approving this proposal. The Commission today [March 14, 2018] takes the unusual step of re-proposing an already-final, unanimously-approved rule to give mutual-fund investors less, not more, information about the risks that they face. I fear that the result will be to allow large institutions to avoid the costs of a liquidity crunch, leaving Main Street investors holding the bag. For the following three reasons, I respectfully dissent.


Proposed Amendments to Public Reporting of Fund Liquidity Information

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by Hester M. Pierce, U.S. Securities and Exchange Commission, on Saturday, March 17, 2018 Editor's Note: Hester M. Pierce is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on her recent public statement, available here. The views expressed in this post are those of Ms. Pierce and do not necessarily reflect those of the Securities and Exchange Commission or its staff.

I am honored to be here for Dalia Blass’s first open meeting as Director of Investment Management. Dalia has already shown herself to be a fantastic fit for the job. I greatly appreciate the staff’s work on this release. Having sat in your seats during my last stint at the Commission, I know how much work goes into getting a recommendation ready for an open meeting. I am particularly grateful for your efforts to keep the release short—in a relative sense anyway.

Today [March 14, 2018], we are considering a proposal to amend Forms N-PORT and N-1A to rescind the requirement that certain open-end funds disclose aggregate liquidity classification information about their portfolios. We are considering replacing that disclosure with a new requirement to disclose information about the operation and effectiveness of funds’ liquidity risk management programs in their annual report to shareholders. The proposed amendments also would allow funds to classify the liquidity of their investments pursuant to their liquidity risk management programs required by rule 22e-4 in multiple liquidity classification categories for a single position. Finally, we are considering amendments to Form N-PORT to require reporting of holdings of cash and cash equivalents.


National Whistleblower Center Meets with Top U.S. Department of Commerce Officials

Whistleblower Protection Blog -

This week the National Whistleblower Center (NWC) met with the U.S. Department of Commerce (DOC) General Counsel Peter Davidson and Senior Counsel James Uthmeier to discuss the implementation of whistleblower laws in their agency. NWC was represented by Executive Director Stephen M. Kohn, Managing Director of the Global Wildlife Whistleblower Program Scott Hajost, and Co-Chairperson of the Board Dr. Gina Green.

The meeting focused on how to combat illegal, unreported, and unregulated (IUU) fishing using whistleblower reward laws. Since the DOC has jurisdiction over the National Oceanic and Atmospheric Administration (NOAA), it is within their power to activate certain whistleblower reward provisions under U.S. wildlife laws, including the Lacey Act and Fish and Wildlife Improvement Act.

When speaking on IUU fishing, General Counsel Davidson commented that “Secretary Ross has a lot of interest in promoting U.S. aquaculture.” He continued, “combatting this illegal activity, it’s very similar to what we do on the trade front. It’s about unfair competition.”

The U.S. imports about 80% of its seafood. NOAA estimates that this leads to an annual seafood trade deficit of upwards of $13 billion USD. A 2014 study in Marine Policy shows that as many as one in three fish imported into the U.S. is caught illegally. In short, IUU fishing is a massive conservation and economic problem.

The implementation of whistleblower reward laws will serve to bolster the DOC’s 2018-2022 Strategic Plan. NOAA’s strategic goals and objectives include “enforc[ing] the nation’s trade laws and security laws.” Another goal includes “strengthen[ing] domestic commerce and the U.S. industrial base.” Combatting IUU fishing contributes to these objectives by cutting down on “unfair competition” against American industry and rebalancing the seafood trade deficit.

Mr. Kohn explained why leveraging U.S. whistleblower reward laws will prove to be a powerful tool in combatting illegal fishing. “Whistleblowers are key to stopping this kind of crime,” said Mr. Kohn. “Even with technological advances, the whistleblower is the human safety net when combatting IUU fishing. They are your eyes and ears on-the-ground.”

Mr. Kohn continued that implementing whistleblower reward laws does not cut into the DOC budget. In fact, sanctions gained from winning cases has the potential to recover millions of dollars for the government. Other laws with whistleblower reward provisions, such as the False Claims Act, have been tremendously successful in combatting criminal activity. In 2017 alone, whistleblowers filing under the False Claims Act recovered $3.4 billion in federal funds.

There is currently massive support within the U.S. for improving whistleblower protections in the Department of Commerce. NWC has already collected over 100,000 signatures on various petitions calling Secretary Ross to implement whistleblower reward laws in the DOC.

View the petitions here:


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