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Bramwell's Lunch Beat: SEC Investigates Marketing of Private Tech Shares

Jul 6th 2015
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lunch beat

Regulators probe marketing of hot private tech shares
The US Securities and Exchange Commission (SEC) has launched a broad investigation into whether hedge funds and other investors are improperly selling hot private technology stocks amid a boom in the trading of such shares, wrote Susan Pulliam and Telis Demos of the Wall Street Journal. The investigation is focused on a burst of new activity recently by people selling pre-IPO shares as valuations of private tech companies have exploded and companies have opted to remain private for longer. The SEC also is examining a recent rise in firms selling employee-owned shares of private companies through derivative transactions. The regulatory probe reflects concern about activity in the swelling private market for tech shares of big, established companies. Startups worth more than $1 billion have raised about $15.5 billion in additional funds through the first half of 2015, according to Dow Jones VentureSource.

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Senate Finance working groups set to release tax proposals
After being delayed for a second time, the Senate Finance Committee Tax Reform Working Groups are expected to submit their reports to the full committee on July 7, according to an article by National Law Review. Presently, it is unclear the extent to which the reports will be made public, although it appears that this will be left to the discretion of the various groups' co-chairs. In addition to timing, it is also uncertain what the final recommendations will look like. While the recommendations are unlikely to be tied to specific legislative proposals, it is likely that some of the working groups' proposals – especially the International Tax Working Group – will be quite detailed.

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SEC reappoints Lewis Ferguson to second term on PCAOB
The SEC announced on July 2 that it had reappointed Lewis Ferguson to a second term on the Public Company Accounting Oversight Board (PCAOB). Ferguson's new term runs until October 2019.  He was first appointed to the PCAOB in January 2011 and served as its first general counsel from 2004 to 2007. Before joining the PCAOB as a board member, Ferguson was a partner in the law firm of Gibson Dunn & Crutcher LLP, where he focused on securities regulation and corporate disclosure and governance. He was a partner at the law firm of Williams & Connolly LLP from 1979 to 1994 and again from 1998 to 2004, specializing in corporate transactions, securities enforcement matters, and representation of audit committees and boards of directors. From 1994 to 1998, he was senior vice president, general counsel, and director of Wright Medical Technology.

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NJ hospitals monitor effects of Tax Court ruling in Morristown
A court's ruling that a New Jersey nonprofit hospital essentially functioned as a for-profit business – and therefore owed property taxes – could have implications for hospitals and nonprofit organizations across the state, wrote Corinne Ramey of the Wall Street Journal. The opinion issued late last month was the result of a lawsuit filed against Morristown by Atlantic Health System Hospital Corp., parent company of Morristown Medical Center, after the town denied the hospital's property tax exemptions in the years 2006 through 2008. The town said the 687-bed hospital shouldn't receive the exemptions because it didn't operate like a nonprofit. “If it is true that all nonprofit hospitals operate like the hospital in this case, as was the testimony here, then for purposes of the property tax exemption, modern nonprofit hospitals are essentially legal fictions,” wrote Judge Vito Bianco of the Tax Court of New Jersey.

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California tax officials blast Blue Shield in audit
California tax officials slammed nonprofit health insurer Blue Shield of California for stockpiling “extraordinarily high surpluses” – more than $4 billion – and for failing to offer more affordable coverage or other public benefits, wrote Chad Terhune of the Los Angeles Times. The California Franchise Tax Board cited those reasons, among others, for revoking Blue Shield's state tax exemption last year, according to documents related to the audit. These details have remained secret until now because the insurer and tax board have refused to make public the audit and related records. Blue Shield has come under increasing scrutiny from regulators, lawmakers, and consumer groups over its massive financial reserves and its proposed purchase of a Medicaid insurer for $1.2 billion.

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IRS technical guidance roundup (week of June 29)
The IRS issued the following technical guidance last week:

Notice 2015-43 provides interim guidance based in part on the definition of expatriate health plans set forth in the temporary relief under Affordable Care Act Implementation Frequently Ask Questions Part XIII (issued March 8, 2013) and Part XVIII (issued Jan. 9, 2014). Additionally, the notice provides guidance on the requirements for certain individuals to be considered qualified expatriates under the EHCCA. The notice does not apply to the health insurance providers fee imposed by § 9010 of the Affordable Care Act.

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