New Bank CEO Survey Released: More Optimism, but Top Worries Include Regulatory and Information Security Risks

In December, Abound Resources, a banking industry consultancy, surveyed CEOs of community banks
(which it defined as depository institutions with less than $10 billion in assets). Sixty one percent (61%) had a positive outlook for 2014. This is a significant shift in attitude from last year, when only 28% of CEOs polled had a positive outlook for 2013.

photo by Micky.! 

Here are some highlights from the survey:

• Regulatory concerns topped the list of CEO worries for the third consecutive year. (86% of CEOs surveyed) This is not surprising given the volume and pace of rulemaking by the CFPB and other federal agencies as the Dodd-Frank Act-mandated regulations continue to be rolled out. 
• 85% of CEOs named commercial lending as their top priority for growth.
• Almost half (49%) will expand their bank's online presence to drive growth.
• 25% of CEOs saying that reducing personnel costs will be a priority in 2014.
• Concern about information security has risen dramatically on the CEO priority list, and is now the fourth most cited CEO concern. (As those of you who read this blog regularly know, I have been vocal about the growing information security and privacy risks faced by community banks in recent years, from speaking at the North Carolina Bankers Association's 2013 Security Summit to founding a blog on the topic, the North Carolina Privacy & Information Security Law Blog. It is reassuring to know that CEOs are paying attention to this area of risk. Addressing these risks properly involves legal, as well as technological, components.)

I encourage you to read the full survey report, which is available here. (Registration is required, but no fee is charged.)

Using a Limited Liability Company to Protect Privacy

There are a host of perfectly legitimate reasons to use a Limited Liability Company to preserve the owner's privacy.

People have formed LLCs to allow them to buy real estate when the the bidder's identity, if known, would affect the price.  (When purchasing many parcels of real estate for the construction of Walt Disney World, the Walt Disney Company famously used trusts so that landowners would not realize the buyer had deep pockets and attempt to hold out for more money.)

Financial institutions have formed LLCs to sell foreclosed property.  Some bidders offer "lowball" bids when they believe a lender is selling a foreclosed asset, thinking the lender will take almost any price to dispose of the property.  Creating an LLC to hold the property has been thought to yield higher bids in some instances.

The list goes on and on....

I have written more about this topic in a new post on the North Carolina Privacy & Information Security Law Blog.  I hope you find it useful.

photo by Roo Reynolds

NASDAQ Updates Compensation Committee Requirements

Companies listed on NASDAQ will have new criteria to apply when making director nominations and preparing proxy statements this year.


credit: dkshots

In December, NASDAQ amended its listing standards in order to permit compensation committee members to receive fees from their companies.  NASDAQ Listing Rule 5605(d)(2)(A) previously stated that a compensation committee member could not accept, either directly or indirectly, any "consulting, advisory or other compensatory fee" from the company or its subsidiaries. 

The change makes a director's receipt of fees for services provided to the company merely one a factor in determining director independence (for purposes of the compensation committee service)--it is no longer an automatic disqualification.  In weighing compensation as a factor in determining independence, the board of directors must consider the source of the compensation and whether the compensation would impair the director’s ability to make independent judgments about the company’s executive compensation.  In other words, if a director receives fees as a result of an executive's decision, the board needs to decide whether the director's decisions about the executive's compensation would be influenced.

This rule change certainly gives boards of directors more flexibility, but also potentially opens them up to criticism if they exercise their discretion in this area.  It will be important for boards who deem compensation committee members eligible despite the receipt of fees to document the basis for the board's determination and to articulate it carefully in their proxy statements.

This NASDAQ rule change has implications for even unlisted companies and non-public companies. The SEC's rules require public reporting companies that are not listed on a national securities exchange to apply the rules of one of the exchanges for purposes of stating which directors are independent in their proxy statements.  Therefore, even unlisted reporting companies will need to consider the rule change when making independence determinations.  Furthermore, listing standards are something of a "best practice" standard for non-public companies, and therefore the rule change could have some relevance to the decisions made by non-public company boards when making committee appointments.

NASDAQ-listed companies must comply with the independence requirements of compensation committee members by the first annual meeting after January 15, 2014 (or October 31, 2014, if no meeting has been held).

As a result of this amendment, NASDAQ’s compensation committee independence rules are now in line with the NYSE.

You can read the amended rule here.

A Sincere Thank You--Again! (The 2014 "Super Lawyers" List Has Been Released)

 

The list of North Carolina Super Lawyers has been released for 2014, and I am honored to share this recognition with some of the finest lawyers in North Carolina (including 20 of my partners at Ward and Smith, P.A.).   While there are many stellar lawyers who were not included in the list, it is a great honor to be named along with the exceptional lawyers who were listed this year. 

What Does Inclusion in "Super Lawyers" Mean?

Super Lawyers' stated objective is to create a credible, comprehensive listing of outstanding attorneys.  Super Lawyers compiles its list each year using 
peer nominations from lawyers around the state, peer evaluations, and independent, third-party research.  Each candidate receiving sufficient nominations from across the state is evaluated on 12 criteria of professional achievement. 

The selection process for the "Rising Stars" list is the same as the ordinary Super Lawyers selection process, with one exception: to be eligible for inclusion in Rising Stars, a candidate must be either 40 years old or younger or in practice for 10 years or less.  The idea is that it is very difficult for young lawyers to develop a significant statewide reputation within the first ten years of practice, so a separate process is used for them.  While up to 5 percent of the lawyers in the state are named to Super Lawyers, no more than 2.5 percent of eligible lawyers are named to the Rising Stars list.

To the lawyers who take the time to participate in this and other peer review surveys, I give you my sincere thanks.  Please know that I always submit Super Lawyers nominations and respond to peer review surveys, and I am very pleased to recommend exceptional professionals.





Mortgage Performance Seems To Be Improving

The Office of the Comptroller of the Currency (OCC) has released its Mortgage Metrics Report for the third quarter of 2013.  The report indicates good news--improved performance of home mortgages.  Here are some highlights:

• Mortgage loans in foreclosure fell to just under 605,000, just over than half the number a year ago.
• 91.4% of mortgages were current and performing at the end of the Q3, up from 88.6% in 2012.
• About 3.6% of mortgages were "seriously delinquent" (meaning 60 or more days past due or held by bankrupt borrowers whose payments are 30 days or more past due). 
• 130,592 new foreclosures were initiated during the third quarter of 2013, down to just over half of the number of new foreclosures in the third quarter of 2012. 

Let's all hope mortgage performance continues to improve!

Thank You! (The 2014 "Legal Elite" List Has Been Published)

I would like to take a moment to thank the lawyers across North Carolina who participated in the peer review process conducted by Business North Carolina magazine to create the 2014 list of the Legal Elite.  Thank you for your votes of confidence.  I am very honored to be included along with several of my colleagues at Ward and Smith, P.A., as well as a number of fine lawyers across the state.

When Business North Carolina magazine surveyed more than 20,000 North Carolina attorneys, they asked only one question: "Whom would you rate among the current best in these categories?"  Fewer than 3% of the lawyers in North Carolina were selected for the distinction.

I was very honored to have been included among the Legal Elite for 2013 in the "Young Guns" category (for lawyers under 40 from all practice areas).  For 2014, I was named in the "Business" category along with some exceptional business lawyers (of all ages) from around the state.

I truly appreciate the lawyers who take the time to participate in this and other peer surveys.  I consider it a privilege to be able to recommend exceptional professionals for well-deserved recognition, and I am pleased to see some very deserving names on this year's list (although there are several others I wish had also been included). 

May 2014 bring you the success and recognition you have earned.

A Resolution for 2014: Understand and Manage Privacy and Information Security Risks

As a business owner, manager, or executive, you probably have a long list of things you'd like to see your organization accomplish in 2014.  Perhaps you've even come up with some New Year's Resolutions for your organization.  Maybe--like most of us--your goals for 2014 are not quite so precisely defined.  I'd like to encourage you to consider making a resolution to ensure that your organization has a firm grasp on privacy and information security issues so that you can take control of the risks they present. 

I've written a post on the N.C. Privacy & Information Security Law Blog to help you get started.  Please have a look.

Best wishes for a prosperous 2014!