BILL ANALYSIS
AB 2281
Page 1
Date of Hearing: May 3, 2010
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Mike Eng, Chair
AB 2281 (Miller) - As Introduced: February 18, 2010
SUBJECT : Corporate disclosures.
SUMMARY : Makes changes to disclosures made by publicly traded
corporations in the annual statement each company is required to
file with the Secretary of State (SOS). Specifically, this
bill :
1)Provides that publicly traded corporations would be deemed to
have satisfied various reporting requirement if the
corporation includes certain information disclosed pursuant to
federal securities laws.
2)Provides guidance to publicly traded corporations as to what
type of fees and descriptions of related services must be
disclosed by a corporation.
3)Clarifies that publicly traded corporations should disclose
the amount of compensation and the number of any shares
issued, options for shares granted, and similar equity-based
compensation separately.
4)Clarifies when and how certain loans to directors much be
disclosed by publicly traded corporations.
5)Requires publicly traded corporations to disclose any material
legal proceedings.
6)Changes "compensation" to "total compensation."
7)Makes other technical, clarifying and conforming changes.
EXISTING FEDERAL LAW establishes the Securities Exchange Act of
1934 and the Securities and Exchange Commission which imposes a
federal framework on publicly traded corporations related to
disclosure obligations.
EXISTING STATE LAW
1)Requires publicly traded corporations doing business in
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California to file an annual statement with the SOS disclosing
information concerning the corporation's officers and
directors, auditor, compensation, prior bankruptcies and legal
proceedings. [Corporations Code Sections 1502.1 and 2117.1]
2)Defines "publicly traded corporation" as a corporation that is
an issuer as defined in Section 3 of the Securities Exchange
Act of 1934, as amended (15 U.S.C. Sec. 78c), and has at least
one class of securities listed or admitted for trading on a
national securities exchange, on the OTC Bulletin Board, or on
the electronic service operated by Pink OTC Markets Inc.
FISCAL EFFECT : None
COMMENTS :
Under current law, publicly traded corporations are required to
file annually within 150 days after the end of its fiscal year,
a statement, on a form prescribed by the SOS. AB 2281 cross
references federal securities laws with the hope of providing
more consistent and accurate disclosures.
NEED FOR THE BILL: According to the sponsor, The Corporations
Committee of the Business Law Section of the State Bar of
California, due to the lack of guidelines, instructions, rules,
regulations and cases, no clear pattern of consistent practice
has emerged in how corporations satisfy their disclosure
obligations under existing law. Unlike California law, the
federal framework includes a signification amount of rules,
regulations, guidance, instructions and cases that can be used
to assist corporations in complying with the disclosure
obligations imposed by such framework. Due to the guidelines
developed around the federal framework, a pattern of consistent
practice has emerged for how corporations can satisfy their
disclosure obligations.
In addition, according to the sponsor, the existing disclosure
requirements also lack sufficient detail for corporations to
determine how to comply with them. Consequently, companies
attempting to comply with California's annual disclosure
requirements lack the guidance necessary to comply and produce
the proper disclosures.
AB 2281 seeks to amend the specific disclosure requirements with
the intention of making the requirements more clear, promote
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increased consistency and comprehensiveness of disclosures and
reduce inconsistencies between California and Federal disclosure
requirements for substantially similar information. While this
bill may provide more clarity for publicly traded corporations,
it may decrease oversight in California.
According to the opposition, Secretary of State, Debra Bowen, AB
2281 will reduce disclosure and make information less accessible
to the public. The bill replaces California's broader
disclosure standards with a narrower disclosure mandated by
federal laws. Furthermore, it ties all future disclosures to
the federal requirements, putting the U.S. Congress, not the
California State Legislature, in charge of determining what
information is disclosed to investors and other members of the
public.
Previous legislation concerning disclosures made by publicly
traded corporations was enacted in 2004, the intent of this
legislation was to provide for the timely an accurate disclosure
of information to the public regarding key relationships and
activities of public corporations doing business in California
and to provide such critical items of information in one
centralized location where the information could be located
quickly and efficiently and in a manner that is readily
searchable and understandable by the average consumer or
investor.
CONCERNS: AB 2158 may be burdensome on the SOS by requiring
them to create new and additional disclosure forms. While the
bill is deemed non-fiscal, this may be a costly task. The SOS
currently receives and makes annual disclosure statements filed
by corporations which are made available to the public.
POLICY QUESTIONS: By conforming California law to be more
similar to federal law, would California actually require less
disclosure if this measure is enacted?
Does this measure take it one step further by ultimately
allowing publicly traded corporations in California to only file
at the federal level?
PREVIOUS LEGISLATION: AB 1000 ((Dutra) Chapter 819, Statues of
2004) Made various changes to the requirements for corporate
statements that must be filed annually with the SOS.
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REGISTERED SUPPORT / OPPOSITION :
Support
Business Law Section, State Bar of California (Sponsor)
Opposition
Secretary of State, Debra Bowen
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081