I had a different blog topic in mind for today, but as I was literally putting this to bed, Congress voted to end the 16 day government shutdown and raise the debt ceiling – at least temporarily. We promised updates as things changed, so I’ll take this opportunity to assess the situation. Separately, there was a verdict yesterday in the high-profile insider trading civil case brought against billionaire celebrity Mark Cuban that will round out today’s news.
Government Back Online
As I write this, the word on the street is that the government will reopen “immediately”. I wasn’t quite sure what that meant, but based on news reports, it appears that “immediately” means today or at some point shortly thereafter. Since Congress voted late at night, I’m wondering if word will really get out that government workers need to return to work first thing today. But things should be back to the normal routine soon. I’ve heard that the National Zoo will be one of the last places to reopen, and they are presently saying Friday, October 18th will be the day. I guess we’ll know for sure that the government has reopened on a widespread basis when the panda cam at the zoo (which went dark in the shutdown – depriving many of us fans the ability to tune into the latest panda baby) is back on.
Areas where we’ll see some changes are:
- The IRS should reopen and resume accessibility for taxpayer questions. Other pending activities, such as audits and refunds should move forward imminently as well.
- The SEC’s filing systems were never shut down, so everything related to company filings should still be business as usual.
- The poison ivy eating goats furloughed in New Jersey should be back to work soon. If you’re wondering what I’m talking about, see my blog on the Government Shutdown: Part 2 from a couple of weeks ago.
An Insider Trading Verdict
Billionaire Mark Cuban (owner of the Dallas Mavericks basketball team, star of TV’s Shark Tank) was found not guilty of insider trading by a jury yesterday. The SEC first initiated action against Cuban back in 2008, filing a civil suit alleging that he dumped his 6.3% stake in Mamma.com ahead of negative news, based on insider information. The initial lawsuit was dismissed by a judge, but the SEC persisted, and the case was revived on appeal in 2009. Cuban refused to settle and, after a tooth and nail 5 year fight in which Cuban refused to settle, the case went to trial, culminating with yesterday’s verdict. This case was part of a long string of cases brought by the SEC in recent years. The SEC has quite a track record of success in these cases. According to the SEC’s web site (yes, I obtained this information from their web site even in spite of the government shutdown), 161 entities and individuals have been charged with insider trading as of September 1, 2013, resulting in more than $1.53 billion in penalties. The Cuban verdict was one of few losses for the government in this long string of insider trading cases (though the SEC has lost some other high profile cases as well), which is part of what makes it newsworthy. Some prominent newspapers are already asking the question of whether this verdict will undermine the SEC’s movement to hold more individuals accountable for insider trading. It seems the SEC is not giving up, though. In a statement, the SEC spokesperson said that “while the verdict in this particular case is not the one we sought, it will not deter us from bringing and trying cases where we believe defendants have violated the federal securities laws.” All indications are that this long insider trading crackdown is yet to be over.
One message to employees continues to be that SEC action is not limited to larger cases like Cuban’s. In a recent blog, I highlighted another case that amounted to a mere profit of $7,900 for one guilty party, and consequences for an unintentional tipper that didn’t profit at all. While some cases get a lot of publicity, like Cuban’s case, it’s important to remember that no trade is too small or person too insignificant to escape SEC scrutiny.
-Jennifer
Tags: government shutdown, insider trading, IRS
Earlier this week, Barb blogged about the government shutdown as the deadline passed and it became apparent that yes, the government would indeed be closing its doors – at least temporarily. As I watched this all unfold (from the suburbs of DC), I couldn’t help but breathe a huge sigh of relief that our wildly successful 21st Annual Conference concluded last week – allowing us full opportunity to enjoy all that our nation’s capital has to offer. This week is a different story – all those museums: closed. All the monuments: closed. The national parks: closed. Even the tour bus service that some of us used to shuttle to a vendor event last week: closed. With so many of you thrilled to be in DC and talking about how you hadn’t been there in years, I’m thankful that our timing was indeed perfect.
Fast forward to this week, and we’re now in the middle of that government shutdown. In today’s blog I’ll share a few updates on where things stand:
- Most of the regulators that we interact with as stock plan administrators are using their websites to communicate with their employees and the public. If you’re wondering about the status of an agency, try their web site. The SEC and IRS both have notices on their home pages.
- The SEC’s EDGAR filing system is still operational and the SEC confirms it will remain so during the shutdown. Translation: no reprieve for company filings.
- The law is still the law during a government shutdown. One approaching deadline is the October 15th tax filing deadline for taxpayers who filed extensions earlier this year. Filings are still due when they are due, regardless of the government status. You may have inquiries from employees about whether they still need to file their tax returns by October 15th. Now’s not the time to start giving tax advice, but you can certainly remind employees that all laws remain intact, including IRS filing deadlines and requirements.
- This has nothing to do with stock administration, but I wanted to repeat a small piece of trivia I’ve heard several times over the past couple of days. Courtesy of USA Today, “What is one of the most bizarre government program canceled by the government shutdown? The Gateway National Recreation Area in Sandy Hook, N.J., has furloughed its poison ivy-eating goats.” Who knew!
For most of us, it’s business as usual. Let’s hope this comes to a swift close! Regardless, if anything significant changes that concerns equity plans, we’ll be sure to get the word out.
-Jennifer
Tags: government shutdown
I’m sure many of you are wondering how the government shutdown will impact stock plan administration. Here is what I could determine as of 12:08 AM Pacific this morning, when I posted this entry and implemented a shutdown of my household (just for the night, however–the Baksa household will be up and operating as normal in the morning, when the cats will demand food):
- The IRS is still accepting all tax payments. I assume this refers to deposits of tax withholding, as well as individual payments. So you should plan to collect the required tax withholding on any stock plan transactions that occur during the shutdown and deposit that withholding with the IRS just as you normally would.
- Hopefully you won’t need any help from the IRS in making the deposits, because the IRS support services will be closed, however.
- If you happen to be in the midst of an IRS audit, you get a reprieve; IRS audit activity is suspended during the shutdown.
- The SEC has indicated that it will remain open today (see the announcement on the SEC’s home page) and EDGAR will remain operational, so get those Form 4 filings submitted on time. Ditto for any other filings planned for today (Forms S-8, 8-K, etc.).
- No word yet on how long the SEC will remain open after today. According to the SEC’s shutdown plan, however, EDGAR will remain operational during a shutdown. Thus, plan on submitting filings as scheduled for the duration of the shutdown. SEC review and approval of filings will be suspended during the shutdown, but this doesn’t mean that you are off the hook for submitting them on time.
- The FASB is a private institution, so I don’t think it will be impacted by the shutdown. If you urgently need to look up a paragraph in ASC 718, the Codification system should be up and running.
- The forces of capitalism will remain operational. The securities markets are also private sector entities, so they should open as normal at 9:00 AM Eastern. I’m guessing that today might not be the best day to sell, however.
That’s what I’ve figured out so far; we’ll provide updates as further information is available.
– Barbara
Tags: government shutdown