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December 2016 

Greetings,

We are pleased to release MaloneBailey's December 2016 newsletter highlighting recent SEC and FASB updates and proposals. Please note that the updates provided in this newsletter are not a comprehensive list. We have selected the updates and proposals that we believe may be of relevance to you. Our goal is to provide you with resources to keep you informed of the ever-changing rules and regulations pertaining to regulatory and accounting matters. 

We encourage you to visit the SEC and FASB websites for more information as well as a complete list of updated rules and regulations and proposals. We invite you to contact us should you have any questions about the information provided in this issue. You can find a list of MaloneBailey partners and their contact information at the end of this newsletter. 

For easy navigation, please refer to the 'In This Issue' section, which contains a hyperlinked table of contents of rule and regulation updates and proposals that may affect you. We invite you to visit our website to review archived versions of this newsletter containing past SEC and FASB updates and proposals.

The MaloneBailey Team
www.malonebailey.com
 
In This Issue

SEC Updates & Proposals
     Recent SEC Updates & Proposals

Summary - The SEC has issued a Final Rule, Adoption of Updated EDGAR Filer Manual. This final rule includes revisions to the Electronic Data Gathering, Analysis, and Retrieval System (EDGAR) Filer Manual and related rules to reflect updates to the SEC's EDGAR system. The updates are being made primarily to support the new submission form types N-MFP2 and N-MFP2/A for money market mutual funds.
 
This rule is effective upon publication in the Federal Register.

For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Summary - The SEC adopted final rules that modernize how companies can raise money to fund their businesses through intrastate and small offerings while maintaining investor protections. The final rules amend Securities Act Rule 147 to modernize the safe harbor under Section 3(a)(11) of the Securities Act, so issuers may continue to use state law exemptions that are conditioned upon compliance with both Section 3(a)(11) and Rule 147. The final rules also establish a new intrastate offering exemption, Securities Act Rule 147A, that further accommodates offers accessible to out-of-state residents and companies that are incorporated or organized out-of-state.
 
To facilitate capital formation through regional offerings, the final rules amend Rule 504 of Regulation D under the Securities Act to increase the aggregate amount of securities that may be offered and sold from $1 million to $5 million. The rules also apply bad actor disqualifications to Rule 504 offerings to provide additional investor protection, consistent with other rules in Regulation D. In light of the changes to Rule 504, the final rules repeal Rule 505 of Regulation D.
 
Amended Rule 147 and new Rule 147A will be effective 150 days after publication in the Federal Register. Amended Rule 504 will be effective 60 days after publication in the Federal Register. The repeal of Rule 505 will be effective 180 days after publication in the Federal Register.

For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.


Summary - SEC Commissioner Kara M. Stein recently gave the keynote address at the "Big Data in Finance Conference" held at the University of Michigan. Ms. Stein discussed the role of data on the SEC and U.S. capital markets. Specifically, Commissioner Stein discussed the following broad themes:
  • The new opportunity data provides;
  • Why the SEC must keep up with data's growing role in the markets;
  • Some of the challenges to keeping up; and
  • Some ideas for overcoming these challenges.
Regarding the current revolution in data, Ms. Stein indicated that it "allows us to make novel connections. However, instead of connecting physical locations, we're connecting data points to uncover new insights. The result may be another leap forward in how knowledge develops and spreads."

For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Summary - SEC Commissioner Michael S. Piwowar recently spoke about auditing and the capital markets. Mr. Piwowar made his case for why high-quality economic analysis is an essential part of regulatory processes and also discussed some of the common myths and misconceptions about the process.
 
For more information, click  here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC5Remarks at the National Society of Compliance Professionals 2016 National Conference by Andrew J. Donohue, Chief of Staff

Summary - Andrew J. Donohue, Chief of Staff of the SEC, recently spoke at a national conference for compliance professionals. Mr. Donohue spent time summarizing some of his previous remarks on the subject of compliance and then shared his thoughts on the future challenges compliance professionals may face in performing your difficult, but absolutely critical, task.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC6Has Big Data Made Us Lazy? by Scott W. Bauguess, Deputy Director and Deputy Chief Economist, DERA

Summary - Scott W. Bauguess, Deputy Director and Deputy Chief Economist of the SEC, recently gave a speech in which he provided his views on the role of human interaction with analytical processes that have developed as a consequence of the proliferation of big data.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC7Staff Speech, Improving Disclosure with Smart Data by Rick A. Fleming, Investor Advocate

Summary - Rick A. Fleming, SEC Investor Advocate, recently spoke at the "XBRL US Investor Forum 2016: Finding Value with Smart Data Conference" held in New York. Mr. Fleming discussed the SEC's strides to make better use of technology. Mr. Fleming also indicated that there is more that can be done by the SEC to incorporate smart data and technology, including that he would like to see the SEC:
  • Embrace the Legal Entity Identifier with the goal of making public company disclosure to the SEC interoperable with disclosure to other reporting regimes, as recommended by the Data Coalition and XBRL US;
  • To require block-tagging of narrative text disclosures; and
  • To require detail-tagging within narrative text disclosures.
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC8Staff Speech, Inside the National Exam Program in 2016 by Marc Wyatt, Director, Office of Compliance Inspections and Examinations

Summary - Marc Wyatt, Director, Office of Compliance Inspections and Examinations (OCIE), recently spoke at the "National Society of Compliance Professionals 2016 National Conference" held in Washington, D.C. Mr. Wyatt provided his perspective on the National Exam Program and his thoughts about measuring the OCIE's impact. Specific topics discussed by Mr. Wyatt included:
  • OCIE and it risk portfolio;
  • OCIE evolving as a risk-focused organization;
  • OCIE making an impact;
  • Improving compliance.
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC9Staff Speech, The Impact of SEC Enforcement on Public Finance, Andrew Ceresney, Director, Division of Enforcement

Summary - Andrew J. Ceresney, Director, Division of Enforcement, recently gave the keynote address at "Securities Enforcement Forum 2016." Mr. Ceresney discussed the SEC's enforcement efforts in the area of public finance. Mr. Ceresney noted that public finance "and the municipal securities market in particular, is a critically important area, and one on which the Enforcement Division needs to be, and has been, focused over the last few years. Our numerous recent enforcement actions have resulted in significant changes in the public finance market, where the Commission has brought many first-of-their-kind actions and used a range of legal theories and remedies."
 
Topics covered in this Mr. Ceresney's remarks included:
  • Background on the public finance marketplace;
  • A specialized approach to securities enforcement in public finance;
  • Increased enforcement activity in public finance;
  • Using sweeps to reveal and address widespread misconduct;
  • Recent public finance matters; and
  • Additional theories and remedies used in recent public finance matters
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
SEC10Universal Proxy

Summary  - The SEC proposed amendments to the proxy rules to require parties in a contested election to use universal proxy cards that would include the names of all board of director nominees. According to the SEC, the proposal gives shareholders the ability to vote by proxy for their preferred combination of board candidates, similar to voting in person.
 
The proposed rules would require proxy contestants to provide shareholders with a proxy card that includes the names of both management and dissident director nominees. The rules would apply to all non-exempt solicitations for contested elections other than those involving registered investment companies and business development companies. In addition, the proposed rules would require management and dissidents to provide each other with notice of the names of their nominees, establish a filing deadline and a minimum solicitation requirement for dissidents, and prescribe presentation and formatting requirements for universal proxy cards.
 
To further facilitate shareholder voting in director elections, the Commission also voted to propose amendments to the proxy rules to ensure that proxy cards specify the applicable shareholder voting options in all director elections and require that proxy statements disclose the effect of a shareholder's election to withhold its vote.

For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
      Recent FASB Updates & Proposals
FASB1FASB Accounting Standards Update No. 2016 -17 , Consolidation (Topic 810): Interests Held through Related Parties That Are Under Common Control

Summary -  The FASB has issued ASU No. 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control. The amendments affect reporting entities that are required to evaluate whether they should consolidate a variable interest entity in certain situations involving entities under common control. Specifically, the amendments change the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity treats indirect interests in the entity held through related parties that are under common control with the reporting entity.
 
The amendments do not change the characteristics of a primary beneficiary in current GAAP. A primary beneficiary of a variable interest entity has both of the following characteristics: (1) the power to direct the activities of a variable interest entity that most significantly impact the variable interest entity's economic performance; and (2) the obligation to absorb losses of the variable interest entity that could potentially be significant to the variable interest entity or the right to receive benefits from the variable interest entity that could potentially be significant to the variable interest entity.
 
If a reporting entity satisfies the first characteristic of a primary beneficiary (such that it is the single decision maker of a variable interest entity), the amendments require that reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a variable interest entity and, on a proportionate basis, its indirect variable interests in a variable interest entity held through related parties, including related parties that are under common control with the reporting entity. That is, under the amendments, a single decision maker is not required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties.
 
If, after performing that assessment, a reporting entity that is the single decision maker of a variable interest entity concludes that it does not have the characteristics of a primary beneficiary, the amendments continue to require that reporting entity to evaluate whether it and one or more of its related parties under common control, as a group, have the characteristics of a primary beneficiary. If the single decision maker and its related parties that are under common control, as a group, have the characteristics of a primary beneficiary, then the party within the related party group that is most closely associated with the variable interest entity is the primary beneficiary.
 
The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted.

For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB2FASB Accounting Standards Update No. 2016 -16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory

Summary -  The FASB has issued Accounting Standards Update (ASU) No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP.

The amendments require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments eliminate the exception for an intra-entity transfer of an asset other than inventory. Two common examples of assets included in the scope of the amendments are intellectual property and property, plant, and equipment.
 
The amendments do not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory.
 
The amendments align the recognition of income tax consequences for intra-entity transfers of assets other than inventory with International Financial Reporting Standards. IAS 12, Income Taxes, requires recognition of current and deferred income taxes resulting from an intra-entity transfer of any asset (including inventory) when the transfer occurs.
 
The amendments are effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual periods beginning after December 15, 2019. Early adoption is permitted for all entities in the first interim period if an entity issues interim financial statements.
 
The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.