Disclosure regime hijacked by social activists
Citing recent mandates from Congress that focus more on thwarting social problems than assisting investors, SEC Commissioner Michael Piwowar charged that the U.S. corporate disclosure regime “has been hijacked” by social activists.
The Wall Street Journal reports that in his address to the Financial Executives International Conference last Monday, Piwowar said, he wanted to stop the Commission “from being used as a pawn” in political debates. The recent actions on conflict minerals and pay ratio rules have emboldened special interests that want to see corporate disclosures on everything from corporate political spending and climate change to child labor and human trafficking. “Our disclosure regime is supposed to serve investors, not special interests,” he said.
What is material?
Members of the PCAOB’s Standing Advisory Group voiced concerns about controversial proposals from the Financial Accounting Standards Board to change the threshold for corporate disclosure. MarketWatch reports that the proposals would redefine materiality as a legal concept to be interpreted by the courts, rather than an accounting concept.
SAG member Tom Selling believes investors should be able to decide for themselves what’s important. “Perhaps, the PCAOB has set the bar too high, or perhaps lawyers are driving the bus with an overabundance of caution. But whatever the cause, I think the FASB’s proposal is an overreaction. Fair presentation is what the audit report advertises. That’s a higher standard than materiality and I think that’s what companies should be aiming for,” he said.
On the other hand…
The World Federation of Exchanges, a group representing 64 of the world’s largest regulated stock exchanges including NYSE, Nasdaq OMX, Deutsche Borse and the Hong Kong Stock Exchange, has presented recommendations to its member exchanges on how to implement their sustainability policies, the culmination of a year-long project by its Sustainability Working Group.
The guidance is designed to push, albeit voluntarily, their member exchanges to require listed companies to report on 34 new environmental, social and governance-related metrics such as energy consumption, employee turnover, human rights and gender and board diversity.
SEC reduces use of in-house judges
The SEC has quietly reduced its use of in-house judges that brought it criticism and legal challenges, reports the Wall Street Journal. Although the SEC defended its authority under the 2010 Dodd-Frank financial law, as well as the fairness of its practice, a Wall Street Journal analysis showed the SEC won against 90% of defendants in contested cases heard by its in-house judges compared to 69% success in cases it took to federal court.
Crowdfunding Rules adopted
The Securities and Exchange Commission adopted final rules to permit companies to offer and sell securities through crowdfunding. The new rules and proposed amendments are designed to assist smaller companies with capital formation and provide investors with additional protections.
Crowdfunding is an evolving method of raising capital that has been used to raise funds through the Internet for a variety of projects. Title III of the JOBS Act created a federal exemption under the securities laws so that this type of funding method can be used to offer and sell securities.
The final rules, Regulation Crowdfunding, permit individuals to invest in securities-based crowdfunding transactions subject to certain investment limits. The rules also limit the amount of money an issuer can raise using the crowdfunding exemption, impose disclosure requirements on issuers for certain information about their business and securities offering, and create a regulatory framework for the broker-dealers and funding portals that facilitate the crowdfunding transactions. [SEC Full News Release and Fact Sheet]
Just don’t fall asleep on the job
San Francisco based Altwork says that it has received over $1 million in funding for a reclining office chair they have designed and plan to sell for $5,900. Similar to one you’d find in a dentist’s office, the chair allows you to lie down while you work, the U.K.’s Independent reports.Though we wish these entrepreneurs well, we are concerned that their workplace innovation may cause payroll accounting problems. Due to the close resemblance between sleeping and the normal working attitude of some employees, companies may find that they have made unearned overtime payments.
At the top of the top
A Wealth-X report found 3,130 of Harvard’s alumni (or 1% of its total graduates) are ultrahigh net worth individuals. That places Harvard at the top of the Top 10 Schools for Ultra-wealthy Alumni list. Not addressed is whether it is a case of rich in, rich out or if they become that wealthy because they went to Harvard. According to Wealth-X, the top 10 schools account for 5% of the world’s 211,275 ultra-wealthy individuals.
In case you are wondering, Wealth-X defines ultrahigh net worth as having a worth of at least $30 million — good to know, we thought it was anyone who has more than two showerheads in their shower.
Here are the top 10 schools and ultrahigh net worth alumni counts: Harvard (3,130); University of Pennsylvania (1,580); Stanford (1,240); Columbia (940); NYU (860); MIT (670); University of Chicago (665); Northwestern (575); Yale (570); Cornell (560).
Near the bottom of the bottom
The Tax Foundation just released its 2015 International Tax Competitiveness Index (ITCI) and once again, the United States ranks 32nd out of the 34 countries in the OECD. With the 3rd least competitive tax code in the developed world, only Italy and France have less competitive codes. On the other end of the spectrum, Estonia, New Zealand, and Switzerland have the most competitive tax codes among OECD nations.
The ITCI attempts to determine which countries provide the best tax environment for investment and business growth and development. It does this by measuring the competitiveness of tax systems in the OECD’s 34 countries based on over 40 tax policy variables in five categories: corporate income taxes, individual taxes, consumption taxes, property taxes, and the treatment of foreign earnings.
The U.S. scores poorly largely due to three factors. The U.S. is one of the six remaining countries in the OECD that doesn’t have a territorial tax system; it maintains the highest corporate income tax rate in the industrialized world at 39 percent; and it has a relatively high and poorly structured individual income tax system that taxes both dividends and capital gains.
“No longer can a country levy high taxes on business investment and activity without adversely affecting its economic performance,” said Tax Foundation Economist Kyle Pomerleau. “In recent years, many countries have recognized this fact and have moved to reform their tax codes to be more competitive. However, others have failed to do so and are falling behind the global movement.” Full Report: 2015 International Tax Competitiveness Index
I always followed the mama whale’s advice to the baby whale: Son, the time you get harpooned is when you come up to spout off.
In the United States, anybody can be president. That’s the problem.
Simply the right choice
Weinberg & Company is a leading, international, full service, multi-office CPA firm serving clients throughout the United States and the Pacific Rim. Founded over two decades ago, the practice groups include: Assurance and Audit, Tax and Accounting, and Advisory Services. Weinberg has a depth of knowledge and experience to meet the needs of both public and privately held companies, high net worth individuals, entrepreneurs, family offices, and can provide customized business management services. www.weinbergla.com
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