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EisnerAmper LLPAccountants and Advisors

www.eisneramper.com

Recent Releases by the SEC About the JOBS Act 2

Accounting Standards Update 3

Reputational and Regulatory Risk are Top Concerns 4of Boards

From the Bar… Demystifying D&O Coverage 5

News 9

Latest Comments from the Commission 11

Summer 2012

A publication of EisnerAmper’s Services to Public Companies Group

SECTrends & Developments

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The Jumpstart Our Business Startups Act (“JOBS Act”) was enacted on April 5, 2012. The SEC has provided guidance on its implementation though a series of Frequently Asked Questions (“FAQ”) and other releases. More such FAQs, releases and rulemaking are expected.

On April 10, 2012, the Division of Corporation Finance (“Corp Fin”) released 13 questions relating to the confidential submission of registration statements for review under the JOBS Act. Under the JOBS Act, an emerging growth company (“EGC”) may confidentially submit to the Commission a draft registration statement for confidential, non-public review by the Commission’s staff prior to public filing, provided that the initial confidential submission will be filed publicly not later than 21 days before the issuer’s road show. These FAQs can be found at www.sec.gov/divisions/corpfin/guidance/cfjumpstartfaq.htm Additional guidance regarding submission of the draft registration statements for confidential review can be found at www.sec.gov/divisions/corpfin/cfannouncements/secureemail.htm

On April 11, 2012, Corp Fin released 5 FAQs related to Titles V and VI of the JOBS Act. Those sections amended Section 12(g) and Section 15(d) of the Exchange Act. These FAQs provide guidance as to how the rules affecting the requirement of issuers (including bank holding companies) to register a class of equity security under Section 12(g) and the ability of bank holding companies to deregister a class of equity security under Section 12(g) or to suspend a reporting obligation under Section 15(d) change. These FAQs can be found at www.sec.gov/divisions/corpfin/guidance/cfjjobsactfaq-12g.htm

Title I of the JOBS Act provides scaled disclosure provisions for EGCs, including, among other things, two years of audited financial statements in the registration

Recent Releases by the SEC About the JOBS Act

statement of an initial public offering, the smaller reporting company version of Item 402 of Regulation S-K, and no requirement for Sarbanes-Oxley Act Section 404(b) auditor attestations of internal control over financial reporting. Title I also allows EGCs to use test-the-waters communications with Qualified Institutional Buyers (“QIB”) and institutional accredited investors, and liberalizes the use of research reports on EGCs. 41 FAQs were released by Corp Fin to provide guidance on the implementation and application on the JOBS Act. They were issued on April 16, 2012 and May 3, 2012, and can be found at www.sec.gov/divisions/corpfin/guidance/cfjjobsactfaq-title-i-general.htm

On May 7, 2012, the Division of Trading and Markets released 5 FAQs regarding the implementation of the crowdfunding provisions which were included in Title III of the JOBS Act. The crowdfunding provisions allow issuers to offer and sell up to $1 million in securities, provided that the individual investment does not exceed certain thresholds and the issuer satisfies other conditions, one of which was that they use an intermediary that is a broker or a funding portal, both of which must be registered with the SEC. Those questions can be found at www.sec.gov/divisions/marketreg/tmjobsact-crowdfundingintermediariesfaq.htm

EisnerAmper previously issued an analysis of the JOBS Act and crowdfunding. That analysis can be found at www.eisneramper.com/jobs-act-crowdfunding-0412.aspx?c=nl

REMINDER — FULL XBRL TAGGING (FINANCIAL STATEMENTS AND RELATED NOTES) IS REQUIRED FOR ALL NON-ACCELERATED FILERS BEGINNING FOR THE QUARTER ENDED JUNE 30, 2012

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Accounting Standards Updates

AN UPDATE ON FASB’S CURRENT STANDARD-SETTING AGENDAThe FASB presents a project plan on its website www.fasb.org to communicate information about its standards-setting activities to stakeholders and other interested parties. Updates to its recently completed projects and ongoing technical plans are posted regularly on the website. As we’ve previously reported in our column, a significant portion of the FASB’s time and resources have been dedicated to joint projects with the IASB, with a goal toward “substantial” convergence with International Financial Reporting Standards (IFRS). There have been a number of noteworthy agreements reached by the two Boards recently on a number of projects. For instance, the IASB has tentatively decided to add a third category for classification and measurement of debt instruments which results in the same three categories for both U.S. GAAP and IFRS when accounting for financial

instruments. However, the Boards still hold diverse views on other projects, such as with recognition, measurement, presentation and disclosure requirements of insurance contracts. While the SEC continues to signal that its IFRS Work Plan will be released in the very near future, the expectation is that definitive action by the SEC regarding the adoption of IFRS could be delayed beyond 2012. It is also not clear how, or if, the recently announced and pending departure of the SEC’s Chief Accountant, James Kroeker, may affect the timing of this decision.

While the FASB is fully committed to its busy standard-setting agenda, the over-arching tone may be best stated by its Chairman, Leslie Seidman, in a recent comment reported in The New York Times: “I am in favor of some form of incorporation of international standards, but we do not have a compelling, urgent need to adopt IFRS.” Meanwhile, the FASB is also working on a number of other projects and standard-setting initiatives. Below is a summary of the timeline on a number of key projects currently on FASB’s technical plan. Additional information and a complete list of the Board’s projects and status can be found on the FASB’s website. n

FASB/IASB JOINT PROJECTS 2012 2013

Investment Company Q4 - Final Document

Financial Instrument - Impairment Q4 - Exposure Draft

Financial Instrument - Classification and Measurement Q4 - Exposure Draft

Insurance Contracts Q4 - Exposure Draft

Leases Q4 - Exposure Draft

Revenue Recognition Q1 - Final Document

FASB-ONLY PROJECTS

Financial Instrument - Liquidity & Interest Rate Disclosure Q2 - Exposure Draft

Liquidation Basis of Accounting - Phase 1 Q2 - Exposure Draft

Going Concern - Phase 2 Q4 - Exposure Draft

Nonpublic Entity Fair Value Measurement Disclosure Q2 - Exposure Draft

Investment Property Entity Q4 - Final Document

Impairment of Indefinite-lived Intangible Assets Q3- Final Document

Presentation of Comprehensive Income - Reclassification Out of AOCI Q3 - Exposure Draft

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4 EISNERAMPER’S CONCERNS ABOUT RISKS CONFRONTING BOARDS SHOWS CEO SUCCESSION AND IT RISK SIGNIFICANT CONCERNS

EisnerAmper recently issued its third annual Board of Directors Survey, Concerns About Risks Confronting Boards, designed to gain insight into the risks that are top of mind in today’s boardrooms. More than 190 board members, sourced from both EisnerAmper and NACD Directorship databases, were surveyed with respondents drawn from public and private companies. Sixty-eight percent of the survey group identified themselves as serving on audit committees.

Other than financial risk, respondents were asked to identify risks of most concern. 66 percent identified reputational risk as their primary concern. Regulatory & compliance risk was a close second at 59 percent, followed by IT Risk at 54 percent and CEO Succession Planning at 53 percent.

Go to www.eisneramper.com/IT-Risk-Management-0512.aspx?c=nl to access the complete report.

Commenting on the Survey’s results, Steven Kreit, a Partner in EisnerAmper’s Services to Public Companies practice, said “Reputational risk remains top-of-mind but what is emerging is a broader view of what reputational risk entails.” The results reveal that directors view reputational risk as comprising operational and human elements. Functional concerns such as product liability, outsourced networks, privacy and data security factor in with employee-related issues such as fraud, customer relations and crisis management.

Regulatory and compliance risk is still very much a concern of boards. When asked to rate their concerns about upcoming regulatory action, almost 60 percent cited mandatory audit firm rotation as important. More than half of the respondents said that financial reform

was of high or moderate concern. Commenting on these findings, Peter Bible, Partner and co-leader of the EisnerAmper Services to Public Companies practice, said “Boards have an ever-increasing demand put on them to review… the effects of myriad new rules. Added to this is the requirement to be knowledgeable about international agreements, treaties and tax laws. It is no wonder directors cite regulatory risk as being of significant concern.”

New to this Report were questions about directors’ views concerning the use and composition of their firms’ internal audit function. Almost 80 percent said their companies were turning to the IA department for help in identifying risk. As Jim Mack, Partner and leader of EisnerAmper’s Consulting Group said, “Developing more comprehensive skills…with regard to controls…Represents an opportunity for companies which view enterprise-wide risk assessment as a critical concern.”

Growth opportunities are of importance to directors, with sixty-eight percent citing mergers and acquisitions as being an investment option for their firms. Of particular note, 71 percent of respondents said that internal growth and expansion was a timely opportunity – a result that is fully twenty percent higher than reported just last year. Michael Breit, Partner and co-leader of EisnerAmper’s Services to Public Companies practice, said “Investment and re-investment should be of importance to boards now as expanding internal capabilities might be a real momentum builder and an advantage with regard to a highly competitive marketplace for talent.”

Summarizing the Report’s overall findings, Charly Weinstein, Partner and EisnerAmper CEO, said that “Today’s director is being asked to be aware of a seemingly endless variety of concerns and this ‘full plate’ could itself be a risk. A useful discussion might be had on whether concerns about risk should be centralized in its own committee of the board.” n

Reputational and Regulatory Risk are Top Concerns of Boards

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FROM THE BAR. . .

Demystifying D&O Coverage

By Les Levinson,Mary-Pat Cormier, andGreg PendletonEdwards Wildman Palmer LLP

Directors and Officers (“D&O”) insurance is designed to provide liability coverage – for both defense costs and indemnity (i.e., settlements/judgments) – to a corporation’s directors and officers. In many instances, a corporation will also purchase “entity” or “Side-C” coverage, which provides liability coverage to the entity itself for claims that typically arise out of the sale of its securities.

D&O policies are “claims-made” policies, meaning that the “Claim” against the corporate entity and/or its directors and officers must be first made during the “Policy Period.” (In contrast, most general liability policies are “occurrence” based, meaning that the policy covers the policyholder so long as the alleged damage occurred within the Policy Period, even if the Claim is not actually made until after the Policy Period has expired.)

Coverage provided by D&O policies often extends to defense costs associated with criminal and regulatory investigations. For example, D&O policies will usually cover inquiries made by the SEC or the FBI into allegations of insider trading; this is true even where the insureds are facing simultaneous, related civil lawsuits.

Modern D&O policies generally have three insuring agreements providing so-called Side-A, Side-B, and Side-C coverage. These insuring agreements are broadly designed to provide coverage to individual insureds and the entity itself for “Loss” resulting from “Claims” made against them during the “Policy Period” for their “Wrongful Acts.” • The Side-A insuring agreement covers the individual directors and officers in situations where they are not being indemnified by the company — e.g., where state law prohibits indemnification, or where the company is financially incapable of providing indemnification. More recently, Side-A insuring agreements have been

worded to provide coverage where the directors and officers of a corporation are not being indemnified for whatever reason. Typically, coverage for non- indemnified loss under Side A is not rescindable and the coverage is fully severable1.

• The Side-B insuring agreement covers the individual directors and officers in situations where they are being indemnified by the company. The easiest way to think about Side-B coverage is that it reimburses the corporation for covered loss it pays on behalf of its directors and officers. Coverage for the individual directors and officers will fall under either the Side-A insuring agreement or the Side-B insuring agreement, but not both. • The Side-C insuring agreement covers the corporate entity itself. For large, publicly traded companies, Side-C insuring agreements typically only cover “Securities Claims,” which concern a corporation’s alleged violations of federal and/or state securities laws. For smaller, private companies, the Side-C insuring agreement will usually provide coverage for a broader class of claims brought against the entity. Some D&O policies also contain a “Side-D” insuring agreement that provides sub-limits of coverage for the investigative costs incurred by the corporation in connection with shareholder derivative demands. For example, a corporation may have a $10 million limit of liability for securities claims — which will include actual shareholder derivative lawsuits — but a smaller (e.g., $250,000) sublimit of liability for corporate investigations undertaken pursuant to a demand from a disgruntled shareholder. Most companies purchase Side-A and Side-B coverage. Some companies self-insure the entity itself; that is, they forego purchasing Side-C coverage. In such situations, serious allocation issues (as to both defense costs and settlements/judgments) can arise when both the insured directors and officers and the uninsured entity are named as co-defendants in the same lawsuit. For that reason, when a company declines Side-C coverage, the D&O policy may contain an allocation clause or endorsement that specifies an allocation mechanism between covered and non-covered loss. Usually such clauses/endorsements contain “feel good” language requiring the parties to use their “best efforts” to reach a reasonable

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agreement as to allocation before resorting to formal dispute resolution processes.

Where warranted and recommended by its broker, a company may also purchase “excess coverage” that (with the exception of policy-specific items, such as the limit of liability and attachment point) is typically written on the same terms as the “primary policy.” The excess coverage is referred to as “follow form” coverage, meaning that in most material respects, it follows the insuring agreement, exclusions, and terms and conditions of the primary policy; insureds must, however, understand that there is a well-established body of case law that unequivocally holds that excess policies stand on their own. Thus, to the extent that an excess policy’s insuring agreement, exclusions, and terms and conditions differ from that of the primary policy, the excess policy’s insuring agreement, exclusions, and terms and conditions govern questions of coverage analysis and claims handling.

Finally, in addition to these typical coverages, companies may choose to purchase a Side-A DIC (“Difference in Conditions”) policy. Side-A DIC policies provide excess Side-A coverage to the individual directors and officers and operate to fill any gaps in coverage under the insuring agreements described above. The Side-A DIC policy should serve to cover the individual directors and officers in almost any situation where, for almost whatever reason, an underlying carrier is not paying a claim. Side-A DIC policies have the most restrictive language on rescindability and full severability, both of which inure to the benefit of the individual directors and officers.

Side-A DIC policies also offer the most protection for directors and officers in the case of a corporate bankruptcy. If a corporate entity goes bankrupt, bankruptcy courts may consider the blended (Side-A, B, and C) D&O policy to be an asset of the bankruptcy estate. This means that the individual directors and officers may not be able to access the proceeds of the D&O policy to pay their defense costs in related litigation.

Because the Side-A DIC policy is conventionally believed to be solely for the benefit of the company’s officers and directors — and confers no direct benefit on the entity itself — it is treated as separate from the bankruptcy estate.

KEY TERMS, CONDITIONS, EXCLUSIONS, AND ENDORSEMENTS

LIMITS OF LIABILITY AND SIRSThe first, and most obvious, consideration for purchasers of D&O policies is to consider and determine the appropriate Limit of Liability2. Of similar importance is the self-insured retention (“SIR”), which is the amount that the insured must first pay out-of-pocket before the coverage provided by the policy kicks in3. Keep in mind that some policies will have different limits of liability applicable to each insuring agreement. The same may also be true for deductibles and SIRs (e.g., there is usually no SIR for loss under the Side-A or investigative costs insuring agreements; thus, insurers pay defense costs immediately on non-indemnified or claims or on claims subject to sub-limits of liability).

DEFINITION OF CLAIM Given the “soft” (insured-friendly) marketplace for D&O insurance that has persisted for several years, the definition of “Claim” has slowly expanded.

“Claim” now typically includes variations of all of the following: 1. Written demands for monetary, non-monetary, or injunctive relief. This can be a monetary demand in a letter, or a request for arbitration, mediation, or some other ADR proceeding.

2. Civil, criminal, regulatory, administrative or proceedings, commenced by service of a civil complaint or a criminal indictment (or similar documents).

3. An investigation by a governmental body (formal orders, subpoenas, and Wells Notices typically satisfy this portion of the definition of Claim). See, e.g., MBIA v. Federal Ins. Co. (2d. Cir. 2011).

4. A shareholder derivative demand.

Demystifying D&O Coverage (continued)

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“Claim” is also usually defined to mean a securities claim. Often, the entity itself will have coverage for an administrative or regulatory proceedings against it (e.g., a SEC investigation of the entity), but only so long as the proceeding is also brought and continuously maintained against an insured individual. That is, an individual insured must typically be part of and named in whatever investigation is occurring in order for the entity to also have coverage for a regulatory investigation. With increasing frequency, the definition of claim includes written requests to the insureds to toll the statute of limitations period. This means that the D&O policy will treat the definition of claim as satisfied once such a written request is received, even though no actual proceeding has commenced.

DEFINITION OF LOSSThe “Loss” covered by D&O policies is judgments, damages, awards, settlements, and defense costs. Loss does not normally include civil/criminal fines and “matters deemed uninsurable under the law” (e.g., intentional acts, like fraud). Some D&O policies also provide coverage for punitive and exemplary damages, to the extent permitted by the law of the subject jurisdiction. Policies may also contain policy-specific carvebacks to the definition of loss. Some policies do not provide coverage for certain types of securities claims and/or claims involving violations of the Foreign Corrupt Practices Act.

Policies may also expand the definition of loss. Examples include costs associated with (i) protecting the assets and/or reputations of directors and officers, or (ii) compliance with certain securities laws (e.g., Section 304 of the Sarbanes Oxley Act, which requires forfeiture of certain bonuses and profits where reporting requirements are offended).

ORDER OF PAYMENTS/ALLOCATION OF LOSSD&O Policies may contain clauses governing the priority with which policy proceeds are paid out. Usually, the insurer will first pay Side-A (non-indemnifiable) Loss, followed by Side-B (indemnifiable) Loss, followed by Side-C Loss suffered by the entity. In this way, the policy will cover the individual insureds before the corporate entity.

Some D&O policies vest the CEO or other executives with the power to withhold policy payments under the Side-B and Side-C insuring agreements. This is an issue to be aware of when purchasing the policy and, for example, could be amended by endorsement such that discretion to make or withhold payments rests with the entire board of directors rather than just the CEO. It is possible that a Side-A DIC policy would drop in and provide coverage to individual insureds if the CEO/Board elected to withhold payments under the regular D&O policy.

Where a policy does not contain entity coverage, it is a good idea to include an “allocation” provision. As noted above, issues of allocation arise where there is no entity coverage, as well as where: (i) there is covered loss and uncovered loss alleged in a claim; or (ii) there are covered insureds and uncovered insureds named as defendants in a claim (e.g., where both individual insureds and the entity are named as a defendants in a litigation, but the entity is not covered because the claim is not a securities claim). In such situations, policies ask the insureds and the insurer to use their “best efforts” to reach agreement on how to fairly allocate loss, often based on the “relative legal exposure” of the covered and uncovered parties. Frequently, the policy will provide that where no agreement on allocation can be reached, the insurer has the discretion to advance whatever amount it deems fair pending agreement — by judicial proceeding or otherwise — on the allocation question.

DEFENSE AND SETTLEMENTMost D&O policies — with the possible exception of those issued to non-profits — are not “duty to defend” policies. Under a “duty to defend” policy, the insurer has both the right and the obligation to control the defense of the insureds. This includes the right appoint counsel of the insurer’s own choosing to defend the insureds.

Corporate insureds generally prefer to have the freedom to select their own counsel, sometimes from a pre-screened panel of law firms that have negotiated rates with the insurer. In many instances, the carrier will negotiate a rate with counsel selected by the insured, because the policy only requires the carrier to pay “reasonable” and necessary costs of defense. In addition, a carrier will almost always provide defense counsel with billing guidelines and very often conduct a review of the bills to ensure compliance with those guidelines.

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8 Just because a D&O carrier does not have a “duty to defend” does not mean that the insurer is not involved in the claim. Indeed, the D&O policy’s requirement for cooperation of the insured means that it must keep the carrier apprised of all material developments in the case, and many carriers have specific and detailed reporting guidelines. D&O policies also prohibit an insured from admitting liability or settling a claim absent the consent of the insurer, with the caveat being that the insurer cannot unreasonably withhold its consent. “CONDUCT” EXCLUSIONSEvery D&O policy excludes coverage for an insured’s bad conduct, such as fraud, dishonesty, or unlawful personal profit. In this market for D&O insurance, almost all policies require that there must be an actual “finding in fact” or “final adjudication” of such bad conduct for these exclusions to apply. Some D&O policies even go so far as to require a “final, non-appealable” adjudication before a carrier can deny coverage based on a “conduct” exclusion. This means that the insurer must provide coverage to an insured until all avenues of appeal have been exhausted; it is only then that the insurer, armed with the judicial finding that the insured acted badly, can seek to recoup the defense costs/judgments it has paid on the insured’s behalf.

There is a split in authority as to whether an insured can recoup defense costs paid on a claim later found not to be covered. Some courts have held that unless that right is specifically guaranteed in the policy or agreed to in writing by the insured on whose behalf the defense costs were paid, a carrier cannot recoup defense costs on a claim later found not to be covered. For this reason, some D&O policies purport to require insureds to execute so-called interim funding agreements or other memoranda by which the insureds agree to repay the insurer for defense costs for claims later deemed to be uncovered.

SEVERABILITY OF THE EXCLUSIONS AND THE APPLICATIONThe conduct exclusions in many D&O policies are “severable.” This means that the acts of one insured person will not be imputed to any other insured for the purpose of determining the applicability of the exclusions. In other words, if it can be shown that one insured person engaged in a criminal or fraudulent act, then coverage would be excluded for that insured only. (For coverage under the Side-C insuring agreement, many policies will impute the Wrongful Acts of the CEO or CFO to the entity itself).

A similar feature is a provision that severs the statements made in the application for the policy. When such a provision is present, the knowledge of the entity or of any one individual insured will not be imputed to another individual insured (e.g., if one insured person lied on the application, that lie will not operate to void the policy for another insured person). This means that the policy would not be rescindable as to the entity and all individual insured persons — just as to those that had made the misrepresentations in the application.

PENDING & PRIOR LITIGATION (“PPL”) AND PRIOR NOTICE EXCLUSIONSAbsent a specific endorsement to the contrary, a D&O policy will not cover litigation or regulatory investigations that are pending at the time the policy is issued. (Such proceedings should be covered by the insured’s prior year D&O policy). Similarly, an insurer will not cover claims that arise out of acts that the insured knew or should have known would ripen into a claim during the policy period; it is expected that these potential claims will be timely noticed to the existing insurer, who will then provide coverage if and when an actual claim is made.

PROFESSIONAL SERVICES (E&O) EXCLUSIONMost D&O policies, by exclusion or endorsement, disclaim coverage for professional services. Such coverage is generally provided under an entity’s errors and omissions insurance policy. Some D&O policies contain a carve-back in the E&O exclusion for failure to supervise or breach of fiduciary duty.

Demystifying D&O Coverage (continued)

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DISPUTES BETWEEN INSURER AND INSUREDSD&O policies will often contain provisions governing disputes between the insurer and the insureds. These provisions may require, for example, that all coverage disputes be submitted to binding arbitration, or to non-binding mediation. It is not uncommon to see either substantive or procedural choice-of-law clauses in these provisions. In the absence of a specific choice-of-law clause, arbitrators are not bound by the law of a particular jurisdiction, but instead are permitted to interpret the insurance contract without regard to substantive law. (With respect to procedural law, it is commonplace for D&O policies to refer to AAA procedural rules, which similarly do not require the application of traditional choice-of-law rules.) The lack of a choice-of-law provision is not necessarily a bad thing given that arbitrators will be free to reach the result that is most fair or equitable in their view, but choice-of-law rules can be outcome determinative. Therefore, if the insured considers certain jurisdictions to be more favorable to its interests, it may want to consider asking that a specific choice-of-law clause be added. n

1 This means that the acts of one insured person will not be imputed to any other insured for the purpose of determining the applicability of the exclusions. See discussion, below. 2 Consideration should also be given to purchasing excess policies that “follow-form” to the primary D&O policy, providing essentially identical coverage once the primary policy is exhausted. 3 SIRs should be distinguished from “deductibles.” Policies with deductibles provide “first dollar” coverage, meaning that the insurer responds to the loss immediately, with the deductible representing that portion of the loss for which the insured must reimburse the insurer. In contrast, the SIR is the portion of the risk that the insured retains for itself, and unless and until the insured pays that SIR, the insurer will not respond to the loss. SIRs are generally used by insureds that have frequent, relatively small losses that they are willing to fund themselves in order to avoid an increase in insurance premiums.

From the Bar… is designed to present our readers with the views of counsel from outside EisnerAmper LLP.

Please visit www.edwardswildman.com for more information on Edwards Wildman. You can reach Les Levinson at llevinson@edwardswildman.com, Mary-Pat Cormier at mcormier@edwardswildman.com, or Greg Pendleton at gpendleton@edwardswildman.com

News

• According to data released by the National Venture Capital Association (“NVCA”), venture capital fundraising in the United States dropped 35% during the first quarter of 2012. On the positive side, the amount raised by venture capitalists during the first quarter of 2012 is still the third largest amount raised in a recent quarter. Mark Heesen, the president of the NVCA, said “While the first quarter fundraising numbers represent a slower start than last year, venture firms appear to be more optimistic about the fundraising environment in 2012, especially those who have benefited from the improving exit environment of late, which has also been encouraging to our investors.” Heesen added “Many venture firms are either now officially in the market to raise a fund or will enter in 2012. For these firms, it will be ‘do or die’ – and the collective outcome of their fundraising efforts will lay the groundwork for the amount of venture capital available for investment in entrepreneurial companies the next decade.”

• The FASB and the International Accounting Standards Board (“IASB”) expect to issue a joint standard on revenue recognition. Deliberation will begin in the second quarter of 2012, and the final standard is expected to be issued in early 2013. Standards on leases, insurance, impairment, and classification and measurement of financial instruments, are expected to be re-exposed during the second half of 2012 and be issued later in 2013. (See our Accounting Standards Update elsewhere in this issue.)

• Based on a recent review of initial public offering documents filed with the SEC in 2012, approximately 42% included going concern language which states that “substantial doubt” exists about the entity’s ability to continue as a going concern.

• According to a poll conducted on behalf of the AICPA, couples argue more about finances than any other matter. Of those that responded to the poll, 27% said that arguments among partners are more likely to occur over finances than children, work, or friends. Of those that said that finances were the major issue leading to arguments, 58% had disagreements over what they

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considered a need or what they considered a luxury. In addition, 49% argued over unexpected expenses and 32% argued over amounts in savings.

• According to a recent study, the number one issue giving rise to audit deficiencies was asset valuation issues. The survey included PCAOB inspection reports of the Big 4 and covered 250 audits and other assignments. The inspection reports identified 234 audit deficiencies, of which 123 were related to fair value or asset impairment deficiencies. This is a stark increase from the 38 deficiencies related to fair value or asset impairment deficiencies in the inspection reports of the Big 4 in 2010, when a total of 72 deficiencies were identified.

• According to the AICPA’s Business and Industry Economic Outlook Survey for the second quarter of 2012, optimism on the U.S. economy by financial executives has dropped significantly after rising for two straight quarters. The survey also showed lower expectations on hiring than prior surveys indicated. While hiring expectations varied by industry, technology, retail trade, scientific and technical professional services, manufacturing, certain health care-related industries such as pharmaceuticals and medical device suppliers, financial services and insurance all forecasted an increase in staffing over the next 12 months. Health care providers, wholesale trade, construction, and real estate companies all expect reductions in staff over the next 12 months.

• The NASDAQ announced that it would reimburse investment firms approximately $14 million in cash to compensate them for losses incurred on Facebook transactions due to the computer glitches at NASDAQ on the first day Facebook went public. In addition to the $14 million in cash, NASDAQ expects to give

approximately $36 million in credits to investment firms, for the same issue, that the firms will be able to use against fees to be charged by NASDAQ in the future. This amount, $40 million, is well above the $3 million average NASDAQ has traditional reimbursed customers in the past for losses due to technical problems.

• The FASB is once again discussing the issue of disclosure overload. Leslie Seidman, FASB Chairman, said that the Board will issue a discussion paper in the coming weeks concerning disclosure requirements. Ms. Seidman said, “Let me emphasize that the purpose of this project is to improve disclosure effectiveness, not to single-mindedly reduce disclosure volume.”

• According to Audit Analytics, financial statements restatements in 2011 were similar in number to those in 2010. There were 787 restatements in 2011, compared to 790 in 2010. In comparison, the number of financial statement restatements in 2006 was 1,790. The leading issue in restatements continues to be issues related to accounting for debt, quasi-debt, warrants and equity. The second greatest number of restatements continues to result from recognition of expenses. The largest restatement of an entity came from China Unicorn, which had a $1.55 billion negative restatement.

• According to a recent report of the 100 largest public technology companies, 71% list data security breaches as a major risk to them. That compares to 57% in the prior year. Other concerns included competition and consolidation, general economic concerns in the U.S., government regulations, and lack of new products or services.

• According to a study by ValueBridge Advisors, in the first quarter of 2012, 68 companies on the S & P 500 reported earnings that were more than 5% below expectations previously released by analysts. The causes of the earnings misses were typically inherent risks in each entity’s business and included weather- related problems, equipment breakdowns, fraud, and one-time events such as acquisitions or legal fees. n

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Latest Comments from the Commission

“Latest Comments from the Commission” intends to highlight some of the more frequently appearing quotes from recent SEC comment letters. For a complete listing of SEC comment letters and registrants’ responses, please visit the commission’s website at www.sec.gov

RISK FACTORSIn future filings, revise each sub caption relating to each risk factor, to comply with Item 503(c) which requires that each sub caption adequately describe the respective risk and with Staff Legal Bulletin No.7. For instance, several of your sub captions fail to identify any consequence of a risk materializing. Others have vague consequences such as it would adversely affect you.

We note that your loan portfolio is highly concentrated in the following respects: • Ninety six percent of your loans are in real estate; • All of your loans are geographically concentrated in south and southwest Chicago and the western suburbs of Chicago; and

• Over fifteen percent of your loans is to companies controlled by two individuals (which exceed limits set by the OTS).

Please consider adding a risk factor addressing the risks associated with such high concentrations.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SCHEDULE 14A AUDIT COMMITTEEPlease provide to us and undertake to include in your future filings a more detailed explanation, consistent with Item 407(d)(5)(C), of the reasons why you do not have an audit committee financial expert on your Audit

Committee. Please explain how your current members have “sufficient knowledge and experience” and identify which of the attributes enumerated in Item 407(5)(C) your members possess.

NOMINATING COMMITTEEPlease provide to us and undertake to include in your future filings, a description of your process for identifying and evaluating nominees as required by Item 407(c)(2)(vi) including how your nominating committee considers diversity in identifying nominees for director. Confirm to us Item 407(c)(2)(ix) that you did not receive any recommended nominees from a security holder that beneficially owned more than five percent of your stock.

DIRECTORS COMPENSATIONPlease provide to us and undertake to include in your future filings disclosure of the role of executive officers in determining the amount of director compensation, as required by 407(e)(3)(iii).

TRANSACTIONS WITH RELATED PERSONSPlease provide to us and undertake to include in your future filings the disclosure required by Item 404 including the following: • Revise the last sentence to state, as required by Item 404(a) Instruction (4)(c)(ii), whether or not each of the loans “were made on substantially the same terms including interest rates and collateral, as those prevailing at the time for comparable loans with person not related” to you; and

• Revise the last sentence to state, as required by Item 404(a) Instruction (4)(c), whether either of the loans is nonaccrual, past due, restructured or potential problems. n

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Questions? Comments? Suggestions? Please send an email to sectrends@eisneramper.com and let us know what you thinkabout this issue. And feel free to let us know what you’d like to see in future issues.

EDITORIAL TEAMEric Altstadter, Managing Editor eric.altstadter@eisneramper.comMichael McMurtry, Technical Editor michael.mcmurtry@eisneramper.comYan Zhang, Technical Editor yan.zhang@eisneramper.com

SERVICES TO PUBLIC COMPANIES GROUPPeter Bible, Practice Group Co-Leader peter.bible@eisneramper.comMichael Breit, Practice Group Co-Leader michael.breit@eisneramper.com

AUDITGerard Abbattista Eric Altstadter Joel BarthMaureen BlairPatrick BoyleDavid CaceDavid CapodannoJohn Clark Richard CleavelandRichard CollocaBrian DowneyMichael GawleyNeal GodtNeil Goldenberg Bruce GombergSteven GuzikKenneth HirschAaron KaiserRobert KeaneWilliam KrautSteven KreitGregory KubikowskiChristal McElroy

Anthony MinneforRichard Nachmias John PennettBruce PragerGarth PuchertLori ReinerBruce RosenNicholas TsafosDiane Wasser Jay Weinstein

DUE DILIGENCE/VALUATIONMichael AronowJoel BarthMark Lee Craig TerBoss

RISK ADVISORY SERVICESAndrew Barfuss Art DruckerJohn FoderaAlan FrankJerry Ravi

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© 2012 EisnerAmper LLP This publication is intended to provide general information

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it intended to convey a thorough treatment of the subject matter.

A publication of EisnerAmper’s Services to Public Companies Group

SECTrends & Developments

TAX ADVISORY SERVICESJim AlajbeguJeffrey Allen Gary BingelPaul DoughertyJohn GenzMichael HadjiloucasJohn HarrisonJeffrey KelsonChristopher LoiaconoLester MarksRichard Sackin Vijay Shah Murray SolomonJon Zefi

PROFESSIONAL PRACTICEDavid EinhornLarry Gray Robert Hilbert Martin Knee Michael McMurtryPaula YoungYan Zhang