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As an expansion on yesterday's discussion of SEC accounting and FASB, I offer a quick research guide to GAAP materials for public companies.
Because of the variety of sources, I have found it useful to start with an accounting treatise. There are two Warren Gorham & Lamont treatises on Westlaw that cover accounting for public companies. Both treatises discuss the entire GAAP hierarchy from Regulation S-X to the FASB Emerging Issues Task Force. The SEC Accounting and Reporting Manual (WGL-SECMAN) is organized by disclosure type. There are sections on registering securities and filling out form 10-K. The Handbook of SEC Accounting and Disclosure (WGL-SECHDBK), on the other hand, is organized, like a convential auditors handbook, by financial statement type (the first chapter is "Balance Sheets.")
Reasearching primary FASB materials is about to change dramatically. In June, FASB published SFAS No. 168: The FASB Accounting Standards Codification (FASB ASC). The FASB ASC, which comes into force in the third quarter of this year, replaces pretty much every existing GAAP document and flattens the GAAP hierarchy to two levels (in FASB ASC, and not). Basic level access to a database containing FASB ASC is free.
Next Tuesday, I'm going to be in New York City presenting my Westlaw Securities Master Class, Part 1: Introduction to the '33 and '34 Act - twice in one day, actually. Please email if you'd like more information.
For them that missed it, a recording of last week's webinar: How to Stay Ahead of the Financial Crisis is now available on the West Librarian Relations website. I'm listening to it now because I love hearing the sound of my own voice.
Next week I'm going to be presenting (three times) a webinar on how Westlaw and Westlaw Business can help you stay atop developments in the ongoing financial crisis. *ahem*The financial crisis has changed the legal landscape. From the kaleidoscope of Madoff-spawned litigation to the regulatory shakeup that's waiting in the wings, it is a difficult time to keep current. Westlaw and Westlaw Business can help by providing tools that make it easier to:
* Track legislative developments
* Monitor administrative, civil and criminal proceedings
* Find crisis-related corporate disclosure
* Keep tabs on bailout transactionsTimes are as follows: Eastern Standard all.
Tuesday, April 14th: 12:30 pm
Wednesday, April 15th: 1:00 pm
Thursday, April 16th: 3:00 pm
Please email me if you'd like the webinar information.
There's a great story in the New York Times today about how M&T Bank invested $82 million in a Deutsche Bank CDO just moments before the CDO became worthless. The CDO in question, called Gemstone CDO VII, was arranged in several tranches. The tranches M&T bought were rated AAA and AA, respectively. Within the year they had been downgraded several times. The AA tranche was rated CCC-. Ouch. M&T is suing everyone involved (0007064/2008: Supreme Ct., Erie Cty) for fraud, breach of duty, negligent misrepresentation and other claims of the sort employed by them that bought unregistered securities. The complaint (2008 WL 3819736) is a fascinating look at how CDOs were put together and why most of them flew apart immediately.
The incestuous inter-connectedness in the CDO/ABS market is head-spinning. The complaint mentions that quite a bit of the underlying assets in Gemstone weren't mortgage-backed securities - they were credit default swaps written on mortgage-backed securities. Gemstone's criteria for accumulating CDS was the credit rating of the "reference obligation." In other words, the mortgage-backed securities that the CDO wasn't buying. I had a headache before and this isn't making it go away.
Default notice of Gemstone VII
Notice of S&P ratings downgrade
Last week my alma mater, New York Law School, sued (complaint here) J. Ezra Merkin the Chairman of the Board of GMAC LLC (you know, the bank). Merkin's day job is managing hedge funds, but it appears he had lots of free time because all he did was hand money to Bernie Madoff. New York Law School was a limited partner in a Merkin fund called Ascot Partners LP. Some of Merkin's other academic clients include Tufts, NYU and Yeshiva University.
Complaints against Madoff, his feeder funds and any auditors within reach are proliferating. Many of them have made their way into the FED-FILING-ALL database on Westlaw. A search for BERNARD /3 MADOFF turned up six:
New York Law School v J Ezra Merkin, Ascot Capital & BDO Seidman (2008 WL 5243584)
The Calibre Fund v J Ezra Merkin & Ascot Capital (2008 WL 5267855)
Scott Barrie v Gabriel Capital, J Ezra Merkin & BDO Seidman (2008 WL 5267808)
Michael Chaleff v. Stanley Chais & The Brighton Company (2008 WL 5267808)
Irwin Keller v Madoff & Does 1-100 (2008 WL 5231154)
SEC v. Madoff (2008 WL 5197070)
A docket search turned up:
USA v Madoff (SDNY 1:08MJ02735)
NYU v Gabriel Capital (NY Supreme Ct., 603803/2008)
A couple of days ago, a librarian in California posted a question on pll-sis about tracking corporate exposure to losses and litigation from auction rate securties (ARS). I have a couple of suggestions for accomplishing this with West resources.
Public companies with proportionately large ARS exposure would have to disclose this risk in the Risk Factors section of their 10-K. I used the 10-K search function on Westlaw Business and narrowed my search to item 1A - Risk Factors. Then, I used the free text search to look for "auction rate." I found more than 200 companies that specified their auction rate securities portfolio as a potential risk.
To find lawsuits I used Westlaw. Trial filings from ARS-related suits are included in the FC-FILINGS database (financial crisis, trial filings). I searched "auction rate" /30 "auction rate" and found 51 filings from ongoing ARS lawsuits.
To track developments going forward, both of these searches can be saved as Alerts.
Since I'm in recappin' mode, here are a couple items of interest from this week's BNA Securities Regulation Law Report (BNA-SRLR on Westlaw):
PEQUOT
BNA has obtained a copy of an internal SEC report about the insider trading investigation of Pequot Capital (40 SRLR 1634). For more about the Pequot investigation and about Gary Aguirre, the whistle blower lawyer who brought the whole thing to light, see this article in San Diego Magazine and this article on the WSJ blog.
CREDIT DEFAULT SWAPS
On page 1633, BNA reports on the SEC's call for Congress to regulate the credit default swaps market. The article also outlines the present state of CDS regulation (40 SRLR 1633).
Just added to the Westlaw front page is a clearinghouse for financial crisis-related documents. There's a notable tilt toward litigation. Here's today's crop:
Financial Crisis Resources:
President Bush Signs Bailout Law, PL 110-343.
Standing room only at Lehman Brothers bankruptcy hearing. Read the transcript: 2008 WL 4378192.
Citigroup files $60B suit against Wells Fargo, Wachovia: 2008 WL 4457346.
Wachovia files suit in Federal Court: 2008 WL 4456335.
Ousted Fannie Mae executives face shareholder securities fraud suit accusing them of hiding the company's subprime losses. Read the Andrews article 14 No. 10 ANSLRR 3 and the complaint 2008 WL 4153695.
For an immediate look at the legal, governmental, and economic ramifications of the government's takeover of Freddie Mac and Fannie Mae, see 2008 Aspatore Special Rep. 19
Sadly, were he living today, bank robber Willie Sutton would have to rethink his characterization of banks as, "where the money is." In the last twelve months, sovereign wealth funds (SWFs) have rescued (or tried to rescue) UBS, Morgan Stanley, Citigroup and Merrill Lynch.
Using the M&A-DEALS database on Westlaw you can track the activities of SWFs. To search for SWF deals use the "buyer description" field like so: BD("sovereign wealth fund"). A search run today generated 250 hits. The data in M&A-DEALS comes from Thomson Reuters' SDC Platinum product.
For more background on SWFs have a look at this report from Price Waterhouse Coopers and this one from The Council on Foreign Relations.
Finding securities documents can be difficult. We at West have not always been hep to this particular facet of the job. Recently however, we've cobbled together a much improved collection of finding aids for securities types. Some are obvious enough (Find a No-action Letter, for instance). I won't bother with them. I will try to point out a couple you may have missed.
* You need to go directly to the beginning of Regulation S-K:
the Tables of Contents pull-down (well pull-up, actually) on the Securities Practitioner Tab links directly to the TOC for the CFR or the USCA.
* You need to find SAB 99. This is two tips, actually. First, if you enter "release-no" followed by a release number in the find box you can retrieve any SEC release. Second, if you append "SAB No __" after the release code you can use Find to pull a Staff Accounting Bulletin (you knew what SAB meant, right?) So, "release-no SAB No 99," retrieves SAB 99. That's almost simple, isn't it?
* You need to find SEC Rule of Practice 402. The SEC Rules of Practice are probably the most exotic thing that can be accessed through the Find a Securities Document link on the Securities Practitioner Tab. The templates on this link ask for common citations instead of the USCA and CFR citations.
