SEC Reviewing LIBOR-Related Disclosures by Issuers

According to SEC Division of Corporation Finance director Meredith Cross, Corp Fin is now looking at issuers’ closers related to the LIBOR scandal. Cross said that right now we are in the ‘early stages” for these types of disclosures, which could be more material for financial institutions. She also spoke about how companies that issue payments according to the London InterBank Offered Rate would have to consider their own circumstances when determining whether they should/shouldn’t make disclosures to shareholders about how exposed they were to the controversy. Cross, who addressed a Federal Regulation of Securities Committee panel at this year’s American Bar Association meeting in Chicago on August 3, made it clear that the views she is expressing are her own and not that of the SEC or any other staffers.

European and US regulators have been looking into whether a number of financial institutions rigged LIBOR, which is considered the global benchmark interest rate for banks to borrow from other banks in the London interbank market. A couple of months ago, Barclays Bank PLC (BCS) consented to pay $360 million to settle charges made by the Commodity Futures Trading Commission and the US Justice Department that it engaged in the manipulation of its LIBOR submissions.

Cross said that the SEC division would likely look at the disclosures belonging to companies that, per media reports, experienced computer breaches. If any of these companies that were reportedly hacked only reports in its disclosure that it may have been “infiltrated,” Cross said that this would be a potential red flag. Also, while Cross spoke about how issuers need to make sure their disclosures are accurate, she emphasized that Corp Fin isn’t looking for disclosures to reveal too much that they show hackers how to get in. (It was nearly a year ago that Corp Fin put out guidance on how companies should disclose incidents involving data breaches, cyber security, and related expenses.)

Last month, US News said the LIBOR controversy may very well be the “mother of all scandals” and the one that could cause major banks’ insolvency, as well as criminal charges to finally be filed. Meantime, regulators are also being accused of contributing to the rigging of LIBOR when they allegedly disregarded clear indicators that the rates were being fixed. Rather than bringing in law enforcement agencies, regulators were busy looking at how to improve ongoing practices.

SEC Division of Corporation Finance

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