The new rule means the value of the primary residence does not count toward the net worth. Another new wrinkle in the rules penalizes investors for being “upside down” in their primary residence. Any debt secured by the main residence that is above the value of the home in a fair market will now be treated as a liability against net worth.

The move was made in an attempt to prevent rule manipulation as some investors could artificially inflate their net worth by borrowing against their home just before an investment opportunity, according to the SEC. The SEC will have to revisit the “accredited investor” definition in 2014 and every four years after that to make sure they remain fair, according to requirements by the Dodd-Frank Act.

The market has been busy for several reasons. Since the market has been weak, companies are being more creative to build value for their investors. Some “activist investors” even push company management to separate the high-growth part of the business from the rest of the company. The uptick in spinoffs may also be a result of a slow IPO market.

Spinoffs should be attempted only after considering the complicated legal issues that are likely to arise with a qualified corporate and securities lawyer. The board needs to take into consideration what is in the best interest of the shareholders while still being fair to the stakeholders. Management will have to carefully split up assets, liabilities and workers so that neither of the two companies created by the spinoff are left weak and potentially unable to survive.

Management will also need to revisit compensation terms and non-compete agreements since the structure of the new company may put one of the new businesses (and its executives) at higher risk. Thorough disclosure to shareholders is also required in a spinoff transaction.

U.S. tax codes dictate that both companies in the spinoff need to have been performing the same function for at least five years to qualify as a tax-free transaction. This means a company cannot start a new business and immediately spin it off into a new public company. It would need to incubate for five years.

The SEC’s Division of Corporate Finance issued the guidance document, which is not a new regulation, to offer guidance on how existing disclosure obligations apply to cybersecurity risks. Since many companies are relying heavily on digital technology to conduct business, the guidance document could prove to play a key role in the future of disclosures.

Too many details online could create a roadmap for those who wish to do harm, but not enough disclosure and a company may not be in compliance with other required disclosures. There are no SEC disclosure requirements that specifically refer to cybersecurity.

The guidance document suggests disclosing risks of cyber incidents if they are among the factors that make investing in the company risky. If a company has a history of cybersecurity breaches and it is likely that they will continue, then an evaluation of what the company is doing to prevent those attacks would be valuable. As with all risk disclosures, an appropriate disclosure of cybersecurity risks should include an analysis of outsourced functions that put the company at risk, a list of issues and how they are addressed and resolved and a description of insurance coverage.

The document also warns against boilerplate disclosures and encourages detail. It is important to reiterate that the guidance document is only a guide and does not represent any new official requirements.

H.R. 2940 proposes allowing small private companies to solicit investors through advertising. The SEC’s ban on solicitation is said to shrink the pool of investors in small companies. H.R. 2930 would change SEC rules to allow for “crowdfunding,” where companies pool smaller investors. Two other bills propose to help grow the economy by changing SEC thresholds to allow more companies to maneuver outside of the regulatory agency’s jurisdiction.

The House also passed H.R. 1070, which makes it easier for a small company to go public. The Small Company Capital Formation Act would allow companies to have an offering threshold of $50 million without having to register with the SEC instead of the current $5 million mark. Another bill, H.R. 1965, would change regulations on small bank holding companies making it easier for them to register or deregister by raising the shareholder threshold from 500 to 2,000.

One other bill that proposes a change to a SEC threshold recently passed the Financial Services Subcommittee. H.R. 2167 would make it so that a company would need 1,000 shareholders before it had to register with the SEC instead of just 500. The committee said the lower threshold was an impediment to capitalization.

The SEC proxy access rule states that public companies need to provide shareholders with information regarding shareholder-backed candidates when board of directors are going to be voted on. The Business Roundtable and U.S. Chamber of Commerce said this rule violates the Administrative Procedure Act and had not “…adequately considered the rule’s effect upon efficiency, competition, and capital formation.”

Lately the SEC has come under fire for not analyzing their new rules with data and economic analysis that demonstrates the trade-offs and consequences of the new procedures. Some accuse the SEC of “back of the envelope” analysis or picking and choosing what makes sense to them rather than assessing the full economic repercussions of those rules. The Circuit Court decision is the first time one of the new rules has been vacated out of the 250 new requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Other rules from the Dodd-Frank Act have been challenged and the SEC must consider the far-reaching effects of their regulations. SEC Chairwoman Mary Schapiro has admittedly, “…parachuted into complex legislative matters demanding immediate specialized expertise” that warrants solid economic analysis and legal consideration before releasing as a rule.

The Dodd–Frank Wall Street Reform and Consumer Protection Act, passed last July, required the SEC to pay 10 to 30 percent of any monetary sanctions over $1 million levied after company misconduct to the whistleblower who reported it.  Congress hopes the law will encourage employees to alert the government to fraud and mismanagement.

Corporations argued against the provision, saying the rules do nothing to encourage employees to contact management to the problem first, potentially fixing the issue at a much lower cost to the company.  They sought a mandatory internal reporting requirement, but that idea was ultimately thrown out.

Instead, the SEC suggested it would push potential whistleblowers to report any misconduct internally first by increasing incentives if evidence showed the employee tried to fix the issue internally before contacting the authorities.

In addition, the SEC has decided to pay whistleblowers who come forth even after it has begun an investigation, greatly increasing its power to gather information about any suspected misconducts.

The new rules also provide whistleblowers with strong protections against employer retaliation, even if the SEC decides not to investigate the whistleblower’s claim.

The new rules are expected to see some flack from Congress, but insiders expect it to go forward without any significant delays.

The act contains a temporary exclusion for 100 percent of the gain accepted by non-corporate investors from the sale of qualified small business stock that was acquired after Sept. 27, 2010 and before Jan. 1, 2011 for QSBS held for beyond five years.

Previous policy provided only a 50 percent exclusion (or 75 percent for QSBS purchased before the enactment of the act in 2009 or 2010) and treats a portion of the excluded gain as a preference item for the alternative minimum tax.  This exclusion, however, applies for both the federal income tax and the alternative minimum tax, potentially decreasing the federal income tax on qualifying gains to zero.

The cumulative amount of gain that a taxpayer may exclude as related to an investment in a single issuer is usually restricted to $10 million or 10 times the investor’s total tax basis in the issuer’s QSBS, whichever is greater.

The investor must not be a corporation.  The investor is required to have secured the stock at original issuance for money or non-stock property, and must hold it for more than five years.

The issuer must meet the requirements for a qualified small business at the time the QSBS is issued – meaning the issuer is a U.S.-based C corporation with gross assets of $50 million or less, and must have maintained gross assets of $50 million or less since Aug. 10, 1993.  The corporation must use more than 80 percent of its total assets actively conducting a business or trade during the time the stock is held.

Barclays was forced to pay one investment banker $715,000, plus a 4 percent interest change and trial fees, after Lehman Brothers collapsed. The banker had a compensation agreement when he worked for Lehman Brothers, which Barclays attempted to renege upon their acquisition of the firm.

In a similar case, two Merrill Lynch brokers were awarded a total of more than $1.1 million after they left the firm when it was acquired by Bank of America. FINRA found that Merrill Lynch had reneged its deferred compensation policy prior to the acquisition, and ordered the firm to pay the employees the compensation to which they were entitled. Since the employees left for “good reason”, Merrill Lynch policy states that they are entitled to their vested benefits, which includes deferred compensation.

Financial experts believe these cases are good news for investment bankers that were fired in the midst of the 2008 collapse. Some in the financial field allege that investment banks fired many bankers for no reason other than to avoid paying them bonuses. If this is the case, many expect payouts over reneged compensation to increase in the future.

FINRA’s Regulatory Notice 10-39 warns member firms to be more detailed when completing U-5 forms after firing employees. The notice focuses on a section of the form that asks why an employee is being fired and says that the common response of “broker violated firm policy” is too vague. FINRA now wants to know the exact reason for the firing.

Experts expect this to lead to litigation over defamation. Some of the information from a U-5 form becomes publicly available through a FINRA system after it is filed. If fired brokers believe the new detailed reports to be unfair and detrimental to their careers, they may seek litigation against their former firms. This could expose firms to a slew of new lawsuits.

Additionally, brokers are upset over the regulation because they worry it could limit their ability to sue for malicious use of U-5 forms.

Firms are criticizing the new FINRA notice for going overkill. They see no need to give additional detail if an employee was fired for an offense that had nothing to do with industry standards; for instance, in firings over dress code violations or tardiness. These firings have nothing to do with FINRA or industry standards, the firms argue, so the information should be kept within the firm.