1. Heaping further empirical evidence on the postulate that self-indulgence trumps common sense, Elon Musk is at it again, now charged by the SEC with violating his earlier settlement agreement, which required that he pre-clear material non-public disclosures about Tesla through an internal process. According to the SEC’s complaint, here, Musk inaccurately tweeted to 24 million people that “Tesla made 0 cars in 2011, but will make around 500k in 2019.” (Musk later tweeted: “Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.”) Musk’s response to the SEC complaint, here, claims the information wasn’t material, that he has cut back on tweeting generally and therefore has complied with the settlement agreement, and that, in any case, enforcement infringes his free speech rights. Setting aside the fundamentally dumb argument that the SEC can’t hold you accountable for speech that violates U.S. securities laws, to say nothing of a settlement agreement you voluntarily signed, it’s tough to see how a statement that Tesla will make 25% more cars than it will actually make is not material and misleading. As for the argument that Musk “diligently attempted to comply with the order in a reasonable manner,” it’s also difficult to see how evidence that he has cut back on tweeting outrageous things means he shouldn’t be accountable for what seems a pretty clear violation of the settlement agreement. Because Tesla’s fortunes appear inextricably linked to Musk (see here), it has got to be rough to be on Tesla’s board, charged with reining in a nut without damaging your enterprise.¹
2. Audit Analytics reports, here, on the SEC’s recent enforcement action against four public companies for repeated failure to address weaknesses in internal controls (see SEC press release, here). Unusual, AA notes, is that the SEC brought the enforcement action primarily for internal control problems and not, as is the norm, for a material accounting issue or for fraud. Of the four companies, only one had to restate financial statements. Just in case anyone needed the reminder: a public company must have internal controls over financial reporting, and continually disclosing that they don’t work isn’t sufficient. At the risk of sending mixed messages, a bill to extend the five-year deferral of auditor attestations on internal control reports for small cap companies with little revenue is discussed here.
3. As a reminder for those who haven’t yet filed their annual report on Form 10-K, or to engender stomach-dropping angst for those who have, recall that the cover page for Form 10-K has changed to incorporate rules that no longer require a company to post interactive data files on its website and that expand the definition of “smaller reporting company” (see here) that may now qualify for scaled disclosure.
4. Perhaps also in the category of changes that might slip through the cracks, note that Item 407(i) of Regulation S-K is effective March 8, 2019 and requires disclosure of anti-hedging policies in upcoming proxy statements. (Many already disclose this to placate ISS and Glass Lewis, or pursuant to Item 403 of Regulation S-K or Rule 16.)
5. As the 2019 proxy season looms, a few items:
   • The SEC published a CDI regarding board diversity disclosure, noting that Regulations S-K Items 401(e) and 407(c)(2) require that a company disclose how the board considered the diversity attributes of a specific nominee and how it considers diversity attributes generally under its diversity policies. See here. Meanwhile, a preliminary study on the effect of the California law that requires that public companies with their principal executive office in California have female directors is here.
   • At least one commentator went out of its way to announce there is nothing to learn from last year’s pay ratio disclosures. See here. The SEC apparently made no comments, suggesting perhaps that it thinks, as we do, that the disclosures are silly, or perhaps that everyone did a fantastic disclosure job. (Sometimes knowing there isn’t anything to know is, itself, knowledge.)
   • The NY Comptroller garnered attention for going straight to court to compel inclusion of a shareholder proposal regarding climate change reporting, rather than fighting about it in the SEC no-action letter process, which is the norm. Is this the new norm, at least for the NY Comptroller? It succeeded (see here), so maybe.
   • Delaware Chancellor Leo Strine published his thoughts, here, on the “fiduciary blind spot” of Blackrock, Vanguard, State Street and Fidelity for failing to prevent “the illegitimate use of working Americans’ Savings for Corporate Political Spending.” Might this admonition, from a corporate governance luminary, fuel the push to require public companies to disclose political spending? (See here.)
   • An early look at 2019 U.S. shareholder proposals – climate change and political activity disclosures are the top two – is here.
   • Consistent with shareholder proposal results so far, according to a recent institutional investor survey, here, 85% of respondents claim that climate change is their most important engagement topic. A summary of the report is here.
6. The SEC proposed rules, here, to allow any issuer, and not just emerging growth companies, to have “test the water” discussions with potential investors it reasonably believes are qualified institutional buyers or institutional accredited investors. Comments on the proposed rule are due April 29, 2019.
7. Nasdaq published an immediately effective rule, here, clarifying its rules for a “direct listing” – a listing on the exchange so shareholders can start trading without an underwritten IPO. Nasdaq’s rules follow NYSE rules adopted in early 2018 to facilitate direct listings on the NYSE (see here). Spotify garnered attention for its direct listing in 2018 and for its deviations from typical practices, including no six-month lockup for insiders (see here). On the heels of Spotify’s listing and NYSE and Nasdaq rule changes, are direct listings a thing now? According to Matt Levine, in an article titled Direct Listings Are a Thing Now (here), “yes.”
8. Finally, and also in the vein of non-traditional ways to go public, an article about the apparent rise in popularity of “at the market” offerings – traditional IPOs but without a negotiated sales price for sales to institutional investors – is here.

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¹Any suggestion that this is an allegory for the Republican party is, while dead accurate, entirely coincidental. Please do not complain to our editorial staff about the political nature of this post.