Companies are supposed to tell shareholders about risks to their investments...

wayneh

Joined Sep 9, 2010
17,031
If they issue major operational directives based on the findings, they damn sure do have to report it.
Absolutely wrong. Going back to the Apple example, it's become clear they are hiring automotive engineers. Lot of them. A "major operational directive" by any measure. I'm a shareholder, and I can say with confidence that Apple has NOT divulged any of their research into the transportation market to me and likely never will. We'll know what their first step is when they launch a product or service, or don't. Not before. I'm equally certain they're not breaking the imaginary law you are citing.
 

Brownout

Joined Jan 10, 2012
2,390
If they didn't disclose hiring the automotive engineers, how do you know about it? When their research results in a major operational directive (if it ever does) then you'll know about it.

The law isn't imaginary. Nor did I create it.

This section is listed within Title IV of the act (Enhanced Financial Disclosures), and pertains to 'Real Time Issuer Disclosures'.


Summary of Section 409

Issuers are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. These disclosures are to be presented in terms that are easy to understand supported by trend and qualitative information of graphic presentations as appropriate.
http://www.soxlaw.com/s409.htm
 
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wayneh

Joined Sep 9, 2010
17,031
I know about it because they cannot hide it. I believe they've even advertised for help wanted. That's not a legal disclosure to stockholders.

The link between Sarbanes Oxley and R&D is indeed your creation! I'm not aware of anyone else interpreting it the way you do.
 

JoeJester

Joined Apr 26, 2005
4,390
The problem with reading summaries and reading the full text is the summary may be inconsistent with respect to the legal terms.

from the full text of the Sarbanes-Oxley Act of 2002
SEC. 409. REAL TIME ISSUER DISCLOSURES.
Section 13 of the Securities Exchange Act of 1934 (15 U.S.C.
78m), as amended by this Act, is amended by adding at the end
the following:

(l) REAL TIME ISSUER DISCLOSURES.—Each issuer reporting
under section 13(a) or 15(d) shall disclose to the public on a rapid
and current basis
such additional information concerning material
changes in the financial condition or operations of the issuer, in
plain English, which may include trend and qualitative information
and graphic presentations, as the Commission determines, by rule,
is necessary or useful for the protection of investors and in the
public interest.
I guess 1970s and 1980s research is not current and that pesky word may shows up. Last time I checked, may is not a directive word like shall or must.

Of course if you want to know what is required to report, visit 15 U.S. Code § 78m - Periodical and other reports Then there's 17 CFR Chapter II, The Code of Federal Regulations. Happy reading.

Burn the witches!!!!

Of course if you want to see the assets, you'd have to follow the management's guidelines per 15 USC.
 

Brownout

Joined Jan 10, 2012
2,390
The link between Sarbanes Oxley and R&D is indeed your creation! I'm not aware of anyone else interpreting it the way you do.
You're not knowing something doesn't make it my creation. A summary is posted above, in plain English, which is identical to my interpretation.
 
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Brownout

Joined Jan 10, 2012
2,390
I guess 1970s and 1980s research is not current and that pesky word may shows up. Last time I checked, may is not a directive word like shall or must.
The text of the law is very consistent with what I've been saying. "Shall disclose to the public on a rapid
and current basis
such additional information concerning material
changes in the financial condition or operations of the issuer" mean the disclosure of changes in operation is not optional. "may include trend and qualitative information
and graphic presentations, as the Commission determines, by rule,
is necessary or useful for the protection of investors and in the
public interest." graphs, and such qualitative information are optional. But the reporting requirement is not optional.
 
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shortbus

Joined Sep 30, 2009
8,429
As you guy's debate this, when was the last time any higher up in a corporation or bank did any prison time for what they did or didn't do? Not for down right fraud(Enron) but for not following the letter of the law.
 

JoeJester

Joined Apr 26, 2005
4,390
The difference of opinion here is I don't believe research is included while Brownout does. Questionable research, as it was classified by those who did it, certainly is a company asset, under the company control. The research isn't included, as the company must explain in "plain English" and "may" use graphs and such. The only thing that global warming has done was lower the construction costs, hardly a fraudulent activity, leaving more money for the investors. That law was to protect the stockholders from activities tanking the value of their stock, not increasing the value, as experienced by the investors in ENRON.

Adverse regulation will do more harm stock values than some three decade old "what if" scenario. Of course, there probably is a three decade old "what if" scenario that had the construction costs rising as well. That's the nature of "what if" games as there are always two extremes like the two sides of a coin.

Of course, it must be a material change to the financial condition. Research, paid for by the company, is reported in the financials. A material change is if that report is incorrect as published and the change must have harmed the stockholders when the change is published.

A material change to the operations could include losing or replacing key players or knowingly losing key assets. That could be headline news and the company would have press releases on their website. Again, there must be a negative consequence to the stockholders.

Of course the NYS AG might be having a "Minority Report" style moment ...
 
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Brownout

Joined Jan 10, 2012
2,390
. Questionable research, as it was classified by those who did it,
Here is what "those who did it" actually said (and it does not sound like they classified the research as "questionable"):

Greenhouse gases are rising “due to the burning of fossil fuels,” Croasdale told an audience of engineers at a conference in 1991. “Nobody disputes this fact,” he said, nor did anyone doubt those levels would double by the middle of the 21st century.

Using the models and data from a climate change report issued by Environment Canada, Canada’s environmental agency, the team concluded that the Beaufort Sea’s open water season — when drilling and exploration occurred — would lengthen from two months to three and possibly five months.

They were spot on
.
http://graphics.latimes.com/exxon-arctic/

And this:

At all times," he said, "the opinions and conclusions of our scientists and researchers on this topic have been solidly within the mainstream of the consensus scientific opinion of the day and our work has been guided by an overarching principle to follow where the science leads. The risk of climate change is real and warrants action."
http://insideclimatenews.org/news/1...confirmed-fossil-fuels-role-in-global-warming
 
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Thread Starter

GopherT

Joined Nov 23, 2012
8,012
Absolutely wrong. Going back to the Apple example, it's become clear they are hiring automotive engineers. Lot of them. A "major operational directive" by any measure. I'm a shareholder, and I can say with confidence that Apple has NOT divulged any of their research into the transportation market to me and likely never will. We'll know what their first step is when they launch a product or service, or don't. Not before. I'm equally certain they're not breaking the imaginary law you are citing.
You are confusing research related to product development/business growth and research related to business risk. I agree with your example that Apple does not have to report research.

Take for example this example...
A soap/detergent company based all of their products on an inexpensive ingredient that makes really good soap for a really good price. Then, at some point, the company's researcher reads a report from a university that their soap ingredients cause fish to become infertile in a laboratory setting.

The company then does some research of its own and finds that their soap ingredients are found in rivers near water treatment plants - and infertile fish are found near these water treatment plants.

They immediately look for alternative ingredients but realize nothing can be found that is inexpensive and effective. They know other ingredients that disrupt aquatic organisms have been banned in the past. They realize their current competitiveness is in jeopardy.

In your opinion, are they obligated to report any business risk to share holders?
 

wayneh

Joined Sep 9, 2010
17,031
You are confusing research related to product development/business growth and research related to business risk.
No one can drawn a clear line between these two. Any project lies somewhere along a continuum. Going back to Apple, there are enormous risks that they'll not be successful in the transportation market, despite spending whatever they are. They report this only by detailing their R&D spending, not its findings or their strategic responses from the findings. A lost opportunity is just as big a risk as a failed business venture, but I can assure you will not read about big risks in the transportation market in Apple's annual report.

Take for example this example...are they obligated to report any business risk to share holders?
Yes, absolutely, but not in the form of disclosing their research. It would be noted in their outlook and guidance for future quarters, as a financial risk of higher costs and reduced margins. I do not believe they would be obligated to report the precise scientific nature of that risk, only the estimated financial impact.
 

Thread Starter

GopherT

Joined Nov 23, 2012
8,012

Take for example this example...are they obligated to report any business risk to share holders?
Yes, absolutely, but not in the form of disclosing their research. It would be noted in their outlook and guidance for future quarters, as a financial risk of higher costs and reduced margins. I do not believe they would be obligated to report the precise scientific nature of that risk, only the estimated financial impact.
Good. Nice to have agreement. Was ExxonMobile doing research to sell a global warming product? Or, were they doing research on risk of their on-going business like the soap company?
 

wayneh

Joined Sep 9, 2010
17,031
Again, that's a distinction without a difference. Shareholders need to be alerted to significant downside risks or shocks that may affect the financials in the short term. I don't see how Exxon's research is remotely relevant.
 

Thread Starter

GopherT

Joined Nov 23, 2012
8,012
Again, that's a distinction without a difference. Shareholders need to be alerted to significant downside risks or shocks that may affect the financials in the short term. I don't see how Exxon's research is remotely relevant.
The story with Exxon Mobil is different. ExxonMobil was a world leader in global warming research - praise from the scientific community on methods and execution and openness. Then, they stopped. They turned on the lobbying campaign, paid for 3rd party research papers to be written, 'experts' to make claims and doubt to be cast on previously published ExxonMobil research.

So. Which version of the truth is truthful? The scientific papers or the more recent campaign that ExxonMobil funds?

Need some background reading? http://graphics.latimes.com/exxon-research/
 

JoeJester

Joined Apr 26, 2005
4,390
Nice article Gopher.

I especially like the "drought" picture where the farmer stated "Walking through his drought-damaged cornfield in Gilbertville, Iowa, in June 1988, Firmin Rottinghauf, 72, calls the conditions “the worst I've seen since ’36.” (John Gaps III / Associated Press)"

Shows more to the effect that climate is cyclic.

The 1989 report cited in the article is here.

Here is Ken Cohen, ExxonMobil's Response on 06 November 2015 challenging the LA Times article.
 

nsaspook

Joined Aug 27, 2009
8,163

JoeJester

Joined Apr 26, 2005
4,390
The residents commit the crime yet, the enabler is the target. Prosecute the criminals, not the business.

I wonder what the AG thinks of those busses transporting NY residents across state lines to Atlantic city nj for the purposes of gambling.
 

Thread Starter

GopherT

Joined Nov 23, 2012
8,012
The residents commit the crime yet, the enabler is the target. Prosecute the criminals, not the business.
This has been the method of law enforcement for some time. Don't go after the drug users, go after the dealers. Same with gambling operations - go after the dealers (pun intended). The gambling operations are the ones that need to be regulated and insure a fair game for all (or as fair as a business can be expected to be). In the case of Fan Duel and the like, they have already shown their hands in the cookie jars.

I wonder what the AG thinks of those busses transporting NY residents across state lines to Atlantic city nj for the purposes of gambling.
Atlantic City is just another bankrupt venture started by Trump. Five of the Casinos there declared bankruptcy in 2014 and closed. I think only two are left. The Indian Reservations in Connecticut and NY are the place to go gambling if you live in NYC - Closer, newer, nicer with bigger names doing the shows. It doesn't look like NY State gets anything out of gambling as of now.
 
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