Federal Securities Law Blog : Federal Securities Lawyer & Attorney : Porter Wright Law Firm : Securities Exchange Law : Serving Ohio, Washington DC, Florida

Xcel Energy has agreed to expand its disclosure of risks associated with climate change in its filings with the SEC. The announcement by Xcel comes in response to a subpoena issued by New York Attorney General Andrew Cuomo seeking information on the company’s plans to build an electric power plant in Pueblo, Colorado.

The most recent Form 10-K for Xcel includes disclosures under the following risk factors:

• “We are subject to environmental laws and regulations, compliance with which could be difficult and costly.”
• “We are subject to physical and financial risks associated with climate change.”
• “We may be subject to legislative and regulatory responses to climate change, with which compliance could be difficult and costly.”

Mr. Cuomo is also negotiating with AES Corporation, Dominion Resources, Dynegy, and the Peabody Energy Corporation under a mantle of protecting investors’ right to know all associated risks of climate change.

For a discussion of when companies are required to make disclosures regarding climate change and its associated risks, see the attached law alert prepared by Porterwright.
 

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The SEC has announced a new filing system and database called IDEA (Interactive Data Electronic Applications) that will eventually replace the EDGAR system originally begun in the 1980s. IDEA will be a major shift in the way the SEC maintains its extensive and valuable data contained in SEC filings.

IDEA depends on interactive data for data comparison applications that go far beyond a traditional, searchable database. Within the coming years, U.S. companies will be required to provide financial information using interactive data. IDEA uses the interactive data to compare and analyze company information as directed by the needs of an individual user. This is a major shift from the current EDGAR system, which is essentially just a searchable, reverse-chronological listing of each registrant’s filings.

The SEC has posted a video presentation introducing how IDEA will work to its website. The presentation uses IDEA to easily compare, for example, (i) executive compensation among two companies, (ii) quarterly financial information for the same company, and (iii) investment returns among two mutual funds. The SEC has only created a few applications to make use of the data that will be available in IDEA, but the presentation hints that software development by private companies to use IDEA data could be limitless.

One goal of IDEA, according to the presentation, is to empower investors to engage in comparison shopping for where to put their money. The presentation mentions that most people are comfortable with how to use internet databases to comparison shop for hotels, flights, cars, and homes, but not securities investments. The SEC wants IDEA to change that.
 

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The major U.S. securities exchanges and self-regulatory organizations have agreed to consolidate oversight of insider trading in the hands of two regulators: NYSE Regulation and FINRA. The following equity exchanges and FINRA have signed the agreement, which must now be approved by the SEC:

• American Stock Exchange LLC
• Boston Stock Exchange, Inc.
• CBOE Stock Exchange, LLC
• Chicago Stock Exchange, Inc.
• International Securities Exchange, LLC
• NASDAQ Stock Market, LLC
• National Stock Exchange, Inc.
• New York Stock Exchange, LLC
• NYSE Arca Inc.
• Philadelphia Stock Exchange, Inc.
• NYSE Regulation, Inc. (acting under authority delegated to it by NYSE)

Currently, each securities exchange is responsible for investigating insider trading by its market participants, which amounts to 11 separate programs. The consolidation of power into two regulators is expected to make insider trading investigations more efficient by preventing duplicative efforts and failed detection of illegal activity.

The consolidation may result in more convicted insider traders, or it may simply result in more efficient investigation of insider traders who would have been caught anyway. The Wall Street Journal's MarketWatch reports FINRA has already referred 104 insider trading cases to the SEC in 2008, compared to 118 in all of 2007. NYSE Regulation has referred 90 cases as of the end of June, compared to 141 in all of 2007.
 

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The SEC has announced it will soon provide guidance on how a company can use its corporate website to deliver important information to investors. It has been eight years since the Commission last issued guidance on websites.

The guidance, which is scheduled to fittingly appear on the SEC’s website soon, is expected to answer the following questions:

• When is information posted on a company website considered “public” and compliant with regulation FD?
• How can a company provide access to historical or archived data without the resulting liability from the data being considered reissued every time it is accessed?
• How can a company link to other websites without having to “adopt” the content for liability purposes?
• Do the securities laws’ antifraud provisions apply to statements made on behalf of the company in blogs and electronic forums? (yes)
• Can shareholders waive the antifraud provisions to participate in the forums? (no)
• When is information posted on a website subject to rules under Sarbanes-Oxley relating to a company’s “disclosure controls and procedures”?
• Does information presented need to be in a “printer-friendly” format? (only when other rules require it)

The guidance is expected to encourage further disclosure on corporate websites.

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