Founded in 1969, NIRI is the professional association of corporate officers and investor relations consultants responsible for communication among corporate management, shareholders, securities analysts and other financial community constituents. The largest professional investor relations association in the world, NIRI’s more than 3,500 members represent 2,000 publicly held companies and $5.4 trillion in stock market capitalization.

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IR Weekly - January 3, 2012

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IR Weekly - January 3, 2012

President’s Note

A New Year and a New Plan!

Happy New Year - welcome to 2012!

Who knows what 2012 has in store for each of us? Chances are that it will bring some unexpected twists and turns in our personal and professional lives. In your professional life, you can count on NIRI as your IR home. We will be there to help prepare and assist you to successfully weave through those professional challenges by providing, among other things, a wealth of professional development opportunities. So I hope you have a 2012 professional development plan in mind that includes NIRI educational opportunities. If you don’t, it is not too late to set several professional goals, but do it now.

If you are new to IR, consider attending NIRI’s Fundamentals of IR seminar offered in January and September. And every IR professional regardless of tenure should plan on attending the largest IR event in the world, the NIRI Annual Conference in Seattle from June 3-6, 2012. But the NIRI events keep coming to you month after month so your comprehensive development plan can extend throughout the year. Just take a look at our calendar of upcoming seminars and webinars. Remember that NIRI webinars are free to members and only require an hour at your desk. NIRI doesn’t stop here, though, as NIRI chapters have hundreds of great events all year!

NIRI is full of energy and enthusiasm about our profession, and we have the professional development programs to keep you on the cutting edge of IR in 2012. I look forward to seeing each of you at a NIRI program this coming year.

Until next week,

Jeff Morgan, FASAE, CAE
President & CEO
jmorgan@niri.org
www.twitter.com/jeffreydmorgan

Sponsored By:

Headlines

Annual Conference Update

Global Investors to Kick-Off U.S. Roadshow with Panel Session at Conference

Professional Development

Fundamentals of Investor Relations – January 8 - 11 in Santa Monica, CA
Pharma/Bio-Tech Reception and Program – January 11 in San Francisco
Writing Workshop for Investor Relations & Creating Powerful Investor Presentations – January 12 & 13 in Santa Monica, CA

Member Services

NIRI IR Fastrack Program
NIRI Career Center
NIRI Office Move

Chapter News

Upcoming Chapter Events

The Buzz

"A Margin for Error in Hedge-Fund Filings"
"Top Stories 2011: Exchange Price War!"
"Shutting Up Business"
"ISS Explains New Pay Review Plans"
"What to Expect in White-Collar Crimes in 2012"
"Rules for a New Year"
"NYSE and Deutsche Borse Extend Merger Deadline"
"Got an Ethical Dilemma? Here's What to Do"
"Some Chinese Companies Giving Up Their U.S. Stock Listings"
"Industry Balks at NYSE Sub-Penny Plan"
"SEC Ups Its Game to Identify Rogue Firms"
"Sovereign Wealth Funds Take on Wider Role"
"Narrowing the Scope of Inspection Rights: Espinoza v. HP (Part 1)"

Sponsored By:

Annual Conference Update

Global Investors to Kick-Off U.S. Roadshow with Panel Session at Conference

Great Expectations
Hear from leading global investors as they begin a U.S. roadshow at Conference. Learn what is driving their investment process in these uncertain markets.

Early Registration Now Open
The 2012 NIRI Annual Conference is June 3-6, 2012 in Seattle, WA!

Hotel Registration Now Open - Make your hotel reservations NOW!

Web Link | Return to Headlines

Professional Development

Fundamentals of Investor Relations – January 8 - 11 in Santa Monica, CA

This comprehensive seminar offers a structured overview of all aspects of investor relations, including marketing, communication, and finance

Web Link | Return to Headlines

Pharma/Bio-Tech Reception and Program – January 11 in San Francisco

Peer-based dialog and insight based on a recent survey of life sciences-focused institutional investors

Web Link | Return to Headlines

Writing Workshop for Investor Relations & Creating Powerful Investor Presentations – January 12 & 13 in Santa Monica, CA

Strong writing skills (view info) and vital techniques to craft best-in-class IR presentations (view info) all in a lovely beach setting

Web Link | Return to Headlines

Member Services

NIRI IR Fastrack Program

Do you have a colleague who is new to IR? If so, tell them to check out NIRI's IR Fastrack Bundled Education Program.

Web Link | Return to Headlines

NIRI Career Center

NIRI's Career Center is a highly valued member resource that is one of the most frequently visited web pages on the NIRI Web site. Members can search job listings and post resumes confidentially. Employers and recruiters can post a job for a 30-day period for a $350 fee, and search resumes.

Web Link | Return to Headlines

NIRI Office Move

Please note that NIRI has moved - our new address is:

225 Reinekers Lane, Suite 560
Alexandria, VA 22314
Phone: (703) 562-7700
Fax: (703) 562-7701

Return to Headlines

The Buzz

A Margin for Error in Hedge-Fund Filings
Wall Street Journal (12/30/11) Lahart, Justin

The valuations hedge funds report for their stocks in quarterly filings with the Securities and Exchange Commission (SEC) are sometimes incongruous with actual stock prices, according to new analysis conducted by Gjergji Cici of the College of William and Mary, and Alexander Kempf and Alexander Puetz of the University of Cologne. The economists say the findings, which they will present at the American Finance Association's annual meeting in Chicago the first week of January, suggest hedge funds "take advantage of lax regulation by strategically fudging equity position valuations to impress ... potential or existing clients." The economists amassed SEC quarterly filing data on stock positions and valuations for a selection of 864 hedge-fund managers from 1999 through 2008. Approximately 150,000 of the 2.3 million disclosed positions they examined--about 7 percent--showed valuations that deviated from quarter-ending closing values. For one in four of the hedge-fund companies they examined, there were at least some deviations that were "economically significant," the economists say. The economists referenced a widely used stock-price database maintained by the University of Chicago's Booth School of Business, but there are additional stock-price sources. For thinly traded stocks especially, different data providers might report varying prices. But the economists found that even for highly liquid stocks, about 7 percent of valuations deviated from end-of-the-quarter prices. More notably, they found that fund companies whose holdings exhibited significant price discrepancies were more likely to report smoother monthly returns to hedge fund database providers than other funds were. Moreover, price discrepancies occurred in the direction of return-smoothing. In flush times, valuations were marked lower than quarter-end closing prices and in lean times they were marked up. Investors are drawn toward funds whose performance is less volatile, and lower measured volatility also gives funds leeway to use more leverage. The researchers also found that funds with price discrepancies were more likely to demonstrate a statistically strange tendency: Of reporting returns slightly above zero far more often than slightly below zero. Another finding was that funds with price discrepancies were more likely to be domiciled outside of the United States.

| Web Link - May Require Paid Subscription | Return to Headlines

Top Stories 2011: Exchange Price War!
Traders Magazine (12/11) Chapman, Peter

With volume declining for the second consecutive year, the industry's major stock exchanges fought aggressively for brokers' business. That meant slashing prices. And in the stock-exchange business, price cuts translate into steeper rebates. In 2011, the exchanges introduced new rebate programs and sweetened the terms of current programs. They added new rebate tiers, lowered the volume thresholds necessary to qualify for higher rebates, and, simply, boosted rebates. The upshot was to give liquidity providers an easier path to qualify for higher rebates. And while most of the liquidity providers are market makers and other high-frequency trading types, the exchanges sought to broaden their source of supply by setting up rebate programs that appealed to nontraditional suppliers such as retail and institutional brokerages. "They are looking to add more flow to their platforms that is not high-frequency in nature," said Pankil Patel, a managing director of trading at Credit Suisse, in an interview earlier this year. "It's important for [the exchanges] to get a good mix of flow in the door." With that in mind, Nasdaq expanded its "Investor Support Program," while NYSE Arca introduced a similar program called "Investor Tiers." The heft of the rebate activity happened in the first six months of the year, when average daily volume was trending at 7 billion to 7.5 billion shares. That was down from a run rate of 9.8 billion shares in 2009 and 8.4 billion in 2010. Nevertheless, despite the recovery, the exchanges did not reverse course and continued tweaking their rebates.

| Web Link - May Require Free Registration | Return to Headlines

Shutting Up Business
Wall Street Journal (12/29/11)

Activist shareholders are using a Securities and Exchange Commission rule to place limits on the political actions of companies. Under the rule, any investor who owns more than $2,000 in stock can introduce shareholder proposals. That rule has been used a record number of times this year to introduce proposals on political spending. Most of the proposals made this year have been sponsored by social investing funds or labor union pension funds, and all of them have failed. But even if the proposals do not succeed, the votes can send companies the message that they should shut up or face continued harassment. Meanwhile, some labor union pension funds and social investing funds have taken steps to increase the amount of disclosure companies make about their political contributions. California's Calpers and Calstrs pension funds, for example, recently voted to include requirements in their corporate governance policies that call for the disclosure of political contributions by companies they invest their money in. In addition, the social investing group Walden Asset Management sent a letter to companies earlier this year saying they should disclose the details about their direct or indirect lobbying to their shareholders, as well as the decision-making and oversight processes related to their lobbying activities. These and other efforts are being criticized by some who say disclosure should not infringe upon the right to free speech, and efforts to limit the amount of money companies give to political causes is an abuse of corporate governance.

| Web Link - May Require Paid Subscription | Return to Headlines

ISS Explains New Pay Review Plans
Compliance Week (12/29/11) Darragh, Reese

Institutional Shareholder Services (ISS) has launched a new analytical model that the company will use to evaluate executive compensation. In a white paper published in mid-December, ISS pledged to take a two-pronged approach to reviewing compensation packages: a quantitative review that examines the CEO's pay and performance relative to other CEOs and to his own company's shareholder returns for the last five years will come first. If that phase raise any concerns, an in-depth qualitative assessment will be performed next; ISS will use analysts to determine if there is a long-term disconnect between pay and performance.

| Web Link - May Require Paid Subscription | Return to Headlines

What to Expect in White-Collar Crimes in 2012
New York Times DealBook Blog (12/28/11) Henning, Peter J.

White-collar crime has become more prominent in recent years, and the pace of investigations and prosecutions did not seem to slow in 2011. The Securities and Exchange Commission (SEC) promoted the filing of 735 enforcement actions in the past fiscal year. There have been a number of insider-trading convictions that have shut down hedge funds, while the Justice Department and the SEC are pursuing overseas bribery cases under the Foreign Corrupt Practices Act. Although the SEC has been criticized for failing to pursue potential crime related to the financial crisis, its pursuit of insider trading has been aggressive. The last fiscal year has seen the filing of 57 actions. Congress has been moving bills that clarify how the securities laws apply to trading on confidential information by congressional members and staff. The most difficult insider-trading case, made so because the evidence is largely circumstantial, involves Rajat K. Gupta, accused of passing tips to Raj Rajaratnam, who was the former leader of the Galleon Group and recently convicted of fraud and conspiracy. Gupta's trial is scheduled to begin on June 9.

| Web Link | Return to Headlines

Rules for a New Year
Wall Street Journal (12/28/11) Chasan, Emily

A bevy of new regulations impacting business activities ranging from buying supplies to financial planning and accounting are slated to take effect in 2012. While companies know what to anticipate in many cases, dozens of the expected new rules have yet to be finalized, causing some stress for corporate executives. The Securities and Exchange Commission (SEC) is working to finish new regulations spawned by the sprawling Dodd-Frank financial law. Rules not yet on the books include one involving conflict minerals, whose sales are blamed for inciting violence in areas of Africa. The SEC has said a proposed rule requiring companies to determine and disclose whether they are using certain minerals from the Democratic Republic of the Congo and the surrounding region is slated to be finalized next year. Meanwhile, the SEC is expected to issue final rules in mid-2012 under the Dodd-Frank clawback provision. The rules will require corporations to set policies for recovering pay from top executives who are later shown by an earnings restatement to have missed their financial goals. A new standard for fair-value measurement, aimed at bringing U.S. and international rules into alignment on how companies value their assets, takes effect for U.S. companies in the first quarter. They also will have to adapt to new rules on goodwill impairments, which streamline the process used to take write-downs on assets that are de-valued. Accounting-standards setters are slated to complete projects to align U.S. and international standards on issues such as revenue recognition, leasing, and insurance. In the meantime, the SEC's commissioners are expected to decide how U.S. companies might adopt International Financial Reporting Standards.

| Web Link - May Require Paid Subscription | Return to Headlines

NYSE and Deutsche Borse Extend Merger Deadline
New York Times DealBook Blog (12/28/11) Rusli, Evelyn M.

Deutsche Börse and NYSE Euronext have extended their proposed-merger deadline to March 31. The exchanges first announced the $9 billion merger in February 2010. Although the companies have won approval from the U.S. Justice Department, they have had difficulty convincing regulators from the European Union and Germany. European regulators are worried that a merger between the two stock exchanges will hinder competition. To appease critics, the exchanges proposed new concessions, including divesting parts of their operations and licensing the Eurex trading system. If European regulators' demands remain too heavy, the exchanges may abandon their merger plans.

| Web Link | Return to Headlines

Got an Ethical Dilemma? Here's What to Do
Inside Investor Relations (12/28/11) Stewart, Neil

Mary Beth Kissane, a board member at the National Investor Relations Institute (NIRI) and a principal at Walek & Associates, and Michael Verde, a partner at Katten Muchin Rosenman, recently participated in a discussion about potential responses to a number of hypothetical ethical problems. Among the issues Kissane and Verde discussed was whether or not an investor relations officer (IRO) should go directly to the board of directors when an investor perception study says the company's chief executive officer or chief financial officer should be fired. Verde said the IRO is not obligated to tell anybody but the people who commissioned the study about the study's results, but added that an IRO could take the results of such a study directly to the board in the event the findings show investors believe a bad business plan is the cause of the company's poor performance. Kissane said there could be a temptation in this scenario to change or omit something from the results of the study, which is problematic because calls between investors and analysts are likely to be taped and are thus discoverable. The original conversations could be made public in the event of a lawsuit, Kissane said, and the board could be seen as having had access to the data even though investor relations did not provide the board with the details. In another scenario, Kissane and Verde discussed what an IRO should do if a CFO comes to him with a complex strategy that involves keeping certain transactions off the record. Kissane said the IRO should call NIRI's ethics committee in this case, while Verde said the IRO should consult the in-house general counsel.

| Web Link - May Require Paid Subscription | Return to Headlines

Some Chinese Companies Giving Up Their U.S. Stock Listings
USA Today (12/28/11) Chu, Kathy

A growing number of Chinese firms that obtained listings on the U.S. stock exchanges within the past few years are going private. Harbin Electric, a Chinese manufacturer of electric motors that traded on Nasdaq, did so in November. A half-dozen others--including Sinoenergy, China Security & Surveillance, and Chemspec--have gone private in the past 18 months and dozens more are in discussions to do so, say attorneys working on the deals. The trend comes as accounting scandals and the slowing of the Chinese economy disarm U.S. investors once enamored with the prospect of purchasing a piece of the booming Chinese economy. "You have an environment that has become quite inhospitable to Chinese companies, and that causes a lot of them to rethink the desirability of being a public company in the U.S.," says Sidley Austin attorney Joseph Chan in Shanghai. Some Chinese companies are also thinking about going private to skirt the costs of U.S. regulatory compliance, including legal and auditing fees. By going private, companies no longer must file financial reports and other disclosures with the Securities and Exchange Commission (SEC), but they are not immune from investor lawsuits and investigations. Hundreds of small Chinese companies flocked to the United States in recent years because of problems raising capital and listing on exchanges in mainland China, according to Paul Gillis, visiting professor of accounting at the Guanghua School of Management at Peking University in Beijing. Many of them gained entré to the U.S. market by purchasing a publicly traded but inactive company in a so-called reverse-merger deal. The SEC is probing the financial statements made by Chinese reverse-merger companies including Duoyuan Printing and China One Sky Medical.

| Web Link | Return to Headlines

Industry Balks at NYSE Sub-Penny Plan
Traders Magazine (12/11) Chapman, Peter

A proposal from NYSE Euronext to allow its members to quote in sub-pennies is proving extremely controversial. The exchange operator's "Retail Liquidity Program" would set up dark pools at the New York Stock Exchange and NYSE Amex, where members could compete for retail order flow with quotes just one-tenth of a cent better than the market's best displayed prices. If approved, the plan could topple one of the four pillars of Regulation NMS--the prohibition against sub-penny pricing--and possibly change trading behavior drastically. NYSE submitted the proposal to the Securities and Exchange Commission (SEC) in October. The regulator opened it up to public comment the following month, and in December the comment period ended, with many respondents requesting the industry be given more time to process the plan. "This is a pretty flashy proposal," said Joe Wald, an executive with Knight Capital Group, during a recent industry conference. "There are several elements that need considerable time to comment on." If the NYSE obtains SEC approval for its proposal, the big trading house could find itself in competition with the exchange as well as a highly sought-after customer. Others in the industry are also requesting more time to absorb the plan. The Securities Industry and Financial Markets Association told the SEC the NYSE proposal raised "significant market structure implications that require additional time to be considered."

| Web Link - May Require Free Registration | Return to Headlines

SEC Ups Its Game to Identify Rogue Firms
Wall Street Journal (12/27/11) Eaglesham, Jean; Eder, Steve

The Securities and Exchange Commission (SEC) has a new "most-wanted" list: a chart covered with handwritten notes, yellow highlighter, and the names of roughly 100 hedge funds. The hedge funds all share a common trait: Their performances look too good to be true, with some scorching the overall market and others generating modest returns without ever suffering a bad month. Some funds on the list falter but still continually outperform rival hedge funds. "There is serious fraud in this space, and we have been attacking it," said Bruce Karpati, co-chief of the SEC's asset-management enforcement unit. The list is the tangible product of a comprehensive effort by the SEC to crack down on fraud at hedge funds and other investment firms. After the agency failed to spot the $17.3 billion Ponzi scheme by Bernard Madoff, who wooed investors with steady returns over several decades, SEC officials decided they needed a way to parse performance data and find red flags that might signal a potential ploy. In 2009, the SEC began creating a computer-powered platform that now examines monthly returns from thousands of hedge funds. Officials will not say exactly how it works or how much it cost to develop, but the agency has announced four civil-fraud lawsuits filed as a result of what it dubs the "aberrational performance initiative." One hedge fund targeted by the SEC reported yearly returns of more than 25 percent by allegedly overvaluing its assets, including Nigerian warrants. The hedge fund achieved its seemingly robust returns by allegedly overriding internal controls on vetting outside funds, causing it to divest investors' funds into frauds.

| Web Link - May Require Paid Subscription | Return to Headlines

Sovereign Wealth Funds Take on Wider Role
Sydney Morning Herald (Australia) (12/27/11)

The value of assets managed by central banks and sovereign wealth funds (SWFs) is set to begin growing again after stagnating during the recession. SWFs are expected to post annual growth rates of 17 percent for the next several years, reaching a total value of more than US$9 trillion by 2015. That is more than double the current value of assets in SWFs. The renewed growth in the value of assets managed by SWFs and central banks is the result of a number of factors, including the movement of capital into emerging markets in Asia and Latin America. Investors are also moving capital into developed economies such as Switzerland to minimize their exposure to the fiscal problems in the United States and the euro zone. As more money is put into SWFs, the roles that the U.S. dollar, the Japanese yen, and the British pound will play in reserve management will lessen. The currencies of commodity-exporting countries such as Canada, Australia, and Sweden, meanwhile, will become new reserve currencies. In addition, the Chinese yuan will be play a growing role in reserve management as China increasingly internalizes its currency.

| Web Link | Return to Headlines

Narrowing the Scope of Inspection Rights: Espinoza v. HP (Part 1)
The Race to the Bottom (12/22/2011) Brown, J. Robert

Under Delaware law, shareholders have the right to "inspect" corporate records. Like most states, Delaware's Section 220 requires shareholders to have a "proper purpose" for any request. The Delaware courts, however, have usually interpreted "proper" in a narrow manner. Aside from some rare exceptions, they require shareholders to mostly allege that the records are necessary to probe possible wrongdoing. Wrongdoing, in turn, means breach of fiduciary duty. Nevertheless, occasionally shareholders succeed in presenting a proper purpose and in producing the necessary documentation. Some such documents may be exceedingly sensitive and important. Investigative reports are one example. Frequently when the board has concern with possible misbehavior inside the corporation it will commence an investigation. This is sometimes necessary to meet the board's fiduciary obligation of good faith. The probes are commonly carried out by attorneys and may well be drafted in a manner that is "thoroughly advised." In Espinoza v. HP, the Delaware courts confronted an inspection request for an investigative report. Plaintiffs had a proper purpose for requesting the report and met the "credible basis" standard. Both the Court of Chancery and the Delaware Supreme Court nonetheless ruled that shareholders could not obtain the report, although both courts did not agree on the basis for the decision. The Supreme Court in the end turned down access by imposing onerous standards that plaintiffs must meet in describing the pertinent records that ought to be disclosed once a proper purpose and credible basis has been established.

| Web Link | Return to Headlines

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January 3, 2012

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Mission
NIRI is dedicated to advancing the practice of investor relations and professional competency and stature of its members.

IR Weekly , distributed every Tuesday, is an executive summary of upcoming NIRI professional development programs, timely member services information and noteworthy articles pertaining to investor relations and public company disclosure current issues and best practices. Our editorial staff monitors nearly 11,000 newspapers, business publications, Web sites, national and international wire services, and other periodicals and summarizes significant articles into an easy-to-read executive summary.

For more information on NIRI and IR Weekly, contact:

The National Investor Relations Institute
225 Reinekers Lane
Suite 560
Alexandria, VA 22314
703.562.7700
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IR Weekly - January 3, 2012