July 29, 2011

Hilarious Skit: Jon Stewart on Dodd Frank's Anniversary

Regardless of your political bent, you will enjoy's last night's 5-minute skit from "The Daily Show with Jon Stewart" that tackles the 1-year anniversary of Dodd-Frank. Jon Oliver is dressed up in a beaten-up costume representing the legislation and sings his answers to Jon's questions about where the rulemakings stand now, etc. Pure comical genius:


Canada's Continuous Disclosure Review Program

Recently, the Canadian securities regulators issued a Staff Notice about how their continuous disclosure review program was faring (see this press release). The CSA (Canadian Securities Administrators) is a council of the securities regulators of Canada's provinces and territories.

I don't know enough about how the Canadian's review program works to compare it to Corp Fin's (both use some sort of risk-based approach), but the Staff Notice is interesting. For starters, note the example disclosures in the appendix - including examples of deficient disclosures! It's rare that a regulator provides example disclosures of any kind (due to fear of one-size-fits-all disclosures, not blessing any particular disclosures in case they prove problematic, etc.) - but it definitely can be helpful to those of us drafting the darn things...

July-August Issue: Deal Lawyers Print Newsletter

This July-August issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:

- Tweeting Transactions: Social Media, Business Combinations & the Federal Securities Laws
- The Evolution of Poison Pills
- Advance Notice Bylaws: The Current State of Second Generation Provisions

If you're not yet a subscriber, try a "half-price for rest of '11" no-risk trial to get a non-blurred version of this issue on a complimentary basis.

- Broc Romanek

July 28, 2011

Risk Factors: Consider the Debt Ceiling Standoff

With the debt ceiling deadline approaching, a number of companies are likely considering the need to include risk factor or other disclosures in their Form 8-Ks (when reporting earnings) or Form 10-Qs - or already have done so. For example, EBay included a risk factor in its Form 10-Q filed last Friday. And Centene Corp. included the following risk factor in its Form 10-Q filed Tuesday:

The failure of the federal government to raise the federal debt ceiling could affect funding for Medicaid and our cash flow.

As has been widely reported, the United States Treasury Secretary has stated that the federal government may not be able to meet its debt payments in the relatively near future unless the federal debt ceiling is raised. If legislation increasing the debt ceiling is not enacted and the debt ceiling is reached, the federal government may stop or delay making payments on its obligations, including funding for Medicaid. A failure by the federal government to fund or a material delay in the funding for Medicaid could have a material adverse effect on our cash flows.

Whether a company should include this type of disclosure will depend on the potential impact of the debt crisis on its business. Brian Breheny of Skadden notes: "My general sense is that unless the company is in a specific industry that is reliant on government funding, holds a material amount of government securities, or can specifically identify a risk it may experience if the debt ceiling negotiations fail, then general disclosure regarding the debt ceiling negotiations is generic and probably unnecessary."

More on "SEC Filings: What is the Difference Between a 'Schedule' and a 'Form'?"

In response to my recent musings about the differences between an SEC "form" and "schedule," Scott Cooper of Rayburn Cooper & Durham responded with this interesting note:

In reading your blog regarding Schedule 13Fs, I recalled that I was involved with that rule-making as a Investment Management Staff attorney under the direction of Lee Spencer. That project was a long time ago and I do not remember any extensive discussion of whether to call it a "form" or "schedule." One distinction was that IM had responsibility for Section 13(f) while Corp Fin was responsible for the rest of the Williams Act. I believe that all IM reports and registration statements were called forms but I'm not sure about that.

A more important distinction - at least in my memory - is that Form 13F was to be one of the first forms/schedules designed to be filed in a computer format which meant at the time sending in a tape with the data. The idea was the market and the SEC would be able to manipulate the data and that it could be quickly dispensed if it was received on tape in a standard format. My principal mission was to design the standard format working with some of the few technology staff that the SEC had at the time. We also required a paper copy that was quite massive. Public dissemination became controversial as the SEC wanted to have an outside firm do it and there was a perceived economic benefit to having the data first.

In my undergraduate days, I had taken a computer science course and knew a little about programming, since the course work in the early 70's was to actually prepare punch cards to run programs. You spent a lot of time in the computer lab printing cards and hoping that the result was correct. Not many of my attorney colleagues at the SEC had done so and I always assumed that is why I was asked to assist.

Based upon the Form 13F experience, I transferred to Corp Fin's Office of Disclosure Policy and worked to develop other Williams Act rules with John Granda and John Huber and then in Integrated Disclosure projects. Thanks for letting me take a trip down memory lane (for at least the parts that I can remember!)

Understanding Corporate Espionage

In this podcast, Carolyn McNiven of DLA Piper - a former federal prosecutor - explains how companies can better protect themselves from corporate espionage, including:

- What are the most common types of corporate espionage?
- What steps can boards take to ensure that management is protecting corporate assets against these acts?
- When does a company have a duty to disclose that something has been stolen from them?

- Broc Romanek

July 27, 2011

Short-Form Registration: SEC Removes References to Credit Ratings

Yesterday, the SEC unanimously voted to adopt rule changes that remove references to credit ratings from some of its rules and forms to implement Section 939A of Dodd-Frank. These changes help preserve the availability of shelf and short-form registration - Forms S-3 and F-3 - for companies widely followed in the market. To replace the credit ratings criteria, the SEC created four new tests, one of which must be satisfied to use short-form/shelf registration - and subsidiaries of WKSIs do qualify. The rules include a transition 3-year grandfather period. Here's the SEC's press release (the adopting release is not out yet).

Here's an excerpt from a Davis Polk alert:

According to SEC Chairman Mary Schapiro, the SEC expects just about all issuers that currently rely on the existing test also to continue to qualify under the new criteria. While this may be the case, there are issuers of investment grade debt securities that do not meet the Form S-3 or Form F-3 public equity requirements and will not meet the new criteria adopted today. Once the grandfathering period is over, these issuers will lose access to Form S-3 or Form F-3 until they issue substantial amounts of registered debt. We expect, however, that most of these issuers will issue debt pursuant to Securities Act Rule 144A if they are not able to use Form S-3 or Form F-3, given the potential time delay in making registered offerings using a long form registration statement, and thus will likely never satisfy the new criteria adopted today.

SEC Re-Proposes Shelf Eligibility Requirements for Asset-Backed Securities

Yesterday, the SEC also issued this re-proposing release related to shelf-eligibility requirements for asset-backed securities. There is a 60-day comment period. Here's the SEC's press release.

The GAO's Study on Securities Fraud Liability for Secondary Actors

Last week, as required by Section 929Z of Dodd-Frank, the GAO published this study on the impact of creating a private right of action against secondary actors who aid and abet violations of the federal securities laws.

- Broc Romanek

July 26, 2011

Survey Results: More on Regulation FD Practices

We have posted the survey results regarding the latest Regulation FD trends, repeated below. This new survey supplements several prior surveys that we have conducted on this topic:

1. Our company has a written policy addressing Reg FD practices:

- Yes, and it is publicly available on our website - 11.8%
- Yes, but it is not publicly available on our website - 62.7%
- No, but we are in the process of drafting such a policy - 13.6%
- No, and we do not intend to adopt such a policy in the near future - 11.8%

2. Regarding reaffirmation of earning announcements, our company uses one of the following rules of thumb regarding private reaffirmations:

- We do not allow private reaffirmation - 63.6%
- Rule of thumb allowing for private reaffirmations of one week or less - 10.9%
- Rule of thumb allowing for private reaffirmations of one to two weeks - 10.9%
- Rule of thumb allowing for private reaffirmations of two to three weeks - 5.5%
- We permit private reaffirmations - but never use a rule of thumb, instead we require confirmation of no material change with CEO, GC, etc. - 9.0%

3. At our company, our CEO and other senior managers: (multiple answers apply, may total more than 100%):

- Are not permitted to meet privately with analysts - 6.9%
- Are only permitted to meet privately with analysts so long as someone else accompanies them (such as general counsel or IR officer) - 63.8%
- Are permitted to meet privately with analysts after briefing by IR officer, general counsel, etc. - 32.8%
- Are only permitted to meet privately with analysts during certain designated times - 25.9%

Please take a moment to participate in this "Quick Survey on Whistleblower Policies & Procedures."

8-Year Study: Audit and Non-Audit Fees

In this podcast, Don Whalen of Audit Analytics discusses the latest audit and non-audit fee study from his firm, entitled "Study: Audit Fees/Non-Audit Fees - 8 Years," including:

- What is the research population for the latest study?
- What do audit fee trends look like?
- What about non-audit fee trends?
- What were the biggest surprises from the latest study?

Cancelled: SEC Adopting Institutional Investment Manager Vote Reporting Rules

The SEC has amended its agenda for today's open Commission meeting and will not be voting on adopting rules requiring institutional investment managers to disclose their voting records yet (the proposal came out last October). No word on why the sudden cancellation of this agenda item - but I imagine adoption of these rules is merely postponed as they don't appear controversial looking at the comments submitted. The remaining three agenda items will still be dealt with at the meeting.

- Broc Romanek

July 25, 2011

DC Circuit Vacates SEC's Proxy Access Rule: Now What?

On Friday, the US Court of Appeals for the DC Circuit issued its much-anticipated opinion in the Business Roundtable's and Chamber of Commerce's challenge to the SEC's proxy access rule (we are posting memos in our "Proxy Access" Practice Area). The court found that the SEC "was arbitrary and capricious" under the Administrative Procedure Act in promulgating Rule 14a-11 and vacated it.

The news was greeted with much glee by the corporate community, much like Steve Martin when he received a new phonebook in "The Jerk" - even though the decision to vacate was not much of a surprise to those who followed the harsh line of questioning from the three judges during oral argument back in April (see this blog). The only surprise may have been that this decision was reached in July - more folks in my poll on when the decision would be rendered selected August.

Obviously, the SEC is not happy as reflected in this statement (nor are investor groups like CII - see their statement). As I blogged before, the SEC has various alternatives available to it going forward. This excerpt from a Skadden alert drives this point home:

It remains to be seen how the SEC responds to the decision. It is possible that the SEC will refine its economic analysis and re-propose a proxy access rule. In light of the SEC's continuing work load relating to the implementation of the Dodd-Frank Act and other time constraints, it seems likely that any new proxy access rule would not be effective in time for the 2012 proxy season.

It is worth noting that when the SEC adopted the proxy access rule, it also amended Rule 14a-8 in a way that would permit stockholders to propose additional proxy access (by narrowing the so-called "election exclusion" under Rule 14a-8(i)(8)). This amendment was not challenged by the Business Roundtable and Chamber of Commerce. When the SEC granted the stay of the proxy access rule in October 2010, it also stayed the effectiveness of the Rule 14a-8 amendment because the amendment was "designed to complement" the proxy access rule and the SEC viewed the two as "intertwined."

It is not known whether the SEC will keep this part of the stay in place while it considers its next steps on a proxy access rule or, alternatively, if it will allow the Rule 14a-8 amendment to take effect and open the door to proxy access stockholder proposals for the 2012 proxy season. A statement released by the Director of the SEC's Division of Corporation Finance, expressing disappointment in the Court's decision, specifically noted that the Rule 14a-8 amendment was not affected by the Court's decision.

Insider Trading: Cuban Loses Unclean Hands Defense

It's been a while since we heard of a development in the insider trading case, SEC v. Cuban (here's the last one I blogged about). Here's news from Knowledge Mosaic:

On July 18th, the Court overseeing the SEC's insider trading case against Mark Cuban, the owner of the Dallas Mavericks, held that Cuban cannot assert unclean hands as an affirmative defense to the SEC's action. The defense is strictly limited to cases where the SEC's misconduct is egregious, the misconduct occurs before the SEC files the enforcement action, and the misconduct results in prejudice to the defense rising to a constitutional level and established through a direct nexus between the misconduct and the constitutional injury.

The SEC's Report on Credit Ratings Reliance

On Thursday, the SEC issued this 24-page report on the reliance on credit ratings, as required by Section 939A(c) of Dodd-Frank.

- Broc Romanek

July 22, 2011

Happy Anniversary Dodd-Frank!

Happy anniversary Dodd-Frank! For those of us that received job security when Dodd-Frank became law a year ago, today should be a day of celebration (the anniversary was yesterday, but it seems more appropriate to celebrate on a Friday). I'm celebrating by not being too serious in today's blog. [Here's a Morrison & Foerster memo; Davis Polk memo; O'Melveny & Myers memo; and a Sullivan & Cromwell memo on "what's happened" in different areas - how far we've come and how much we have to go kind of thing. Certain provisions of Dodd-Frank become effective today and are identified in the memos. SEC Chair Schapiro delivered this anniversary testimony yesterday before the Senate Banking Committee.]

I imagine some of the celebrations would remind us of the Seinfeld episode where Elaine took offense with the large number of office parties. "Get well, get well soon, we wish you to get well!"

Poll: How I Plan to Spend Dodd-Frank's Anniversary


- Broc Romanek

July 21, 2011

SEC Commissioners Reject Enforcement Staff Proposal to Settle Clawback Case

According to this Washington Post article yesterday, the SEC's Commissioners have disagreed with its Enforcement Staff to settle the CSK Auto clawback case because the penalty amount was too low. It's relatively rare that the Commission disagrees with its Enforcement Staff - but certainly not unheard of - but it is rare that a closed Commission meeting outcome like this is made public.

The SEC's Enforcement Process: How Does a Commissioner Dissent?

There are various steps in the SEC's Enforcement process that requires blessing by the SEC's Commissioners. That approval either takes place behind closed doors at a closed Commission meeting or ad seriatim. Last week, the Washington Post ran this article about Commissioner Aguilar dissenting in a settlement - the article notes that only two dissents in an enforcement action have been posted since '04.

A public dissent by a Commissioner certainly is unusual, but it's not unprecedented as noted in the article. Because this settlement was in the form of an administrative proceeding, there was an opportunity for Commissioner Aguilar to have a public airing. Otherwise (i.e., with a federal court action), there's no public outlet to note a Commissioner's dissent - it is merely recorded by the SEC's Secretary in the minutes of the closed Commission meeting. But sometimes the press does get leaked information somehow - you may recall the news reports last year that the 2 Republican Commissioners dissented from the SEC-Goldman Sachs settlement involving the ABACUS CDO...

Next Tuesday: SEC to Adopt Institutional Investment Manager Vote Reporting Rules and More

As noted in ISS's Blog, the SEC will hold an open Commission meeting on Tuesday to adopt rules requiring institutional investment managers to disclose their voting records; rules replacing credit rating references with alternative criteria and rules establishing a large trader reporting system. The SEC will also consider re-proposing rules relating to shelf-eligibility for asset-backed securities.

- Broc Romanek

July 20, 2011

Dave & Marty on Analyst Relations, SEC Comment Trends and Vacation

In this podcast, Dave Lynn and Marty Dunn engage in a lively discussion of the latest developments in securities laws, corporate governance, and pop culture. Topics include:

- Dealing with securities analysts
- The latest SEC trends in SEC comments on Exchange Act filings
- Favorite beach activities

The GAO's Report on the SEC's Revolving Door

Last week, the GAO issued this report about the SEC's revolving door entitled "Existing Post-Employment Controls Could Be Further Strengthened." This report was mandated by Congress in Section 968 of Dodd-Frank. As I've blogged recently, revolving doors at federal agencies have been in the news, particularly since it's a pet peeve of Senator Grassley.

A couple of interesting facts from the report: 2127 staffers left the SEC between 2006-2010 - and there are 3729 staffers right now - so that's a startling percentage of departures (but maybe that is normal for most organizations - I have no idea since it's not my area of expertise). Of the 2127 departing staffers though, only 37% were attorneys or accountants (or other types of examiners); the rest were non-examination employees (egs. IT personnel, secretaries) - that was surprising to me too because I assumed most of the turnover was due to staffers leaving for more lucrative jobs in law and accounting firms. During this period, the average tenure of a staffer before departure increased to 13.5 from 8.3 years, mainly due to the recession.

Executive Compensation Disclosure During the '11 Proxy Season: A Large Step Forward

On CompensationStandards.com, we have posted the Summer 2011 issue of our Compensation Standards newsletter that contains practical guidance (and numerous specific examples) in the aftermath of a hectic proxy season. The Summer issue covers:

- The Evolving Role of the Executive Summary
- Coordinating the Executive Summary and the Say-on-Pay Supporting Statement
- The Newest Disclosure Tool - The Proxy Statement Summary
- The Second Round of Compensation-Related Risk Disclosure
- A Preview of the Coming Consultant Disclosure
- What to Expect in 2012

Act Now: This issue is available to all those with a CompensationStandards.com membership - which is "half-price for the rest of the year" with this no-risk trial. Members should print it out now so they can read Mark Borges' guidance today...

- Broc Romanek

July 19, 2011

President Obama Directs SEC & Other Agencies to Review Their Regulations

As noted in Jim Hamilton's blog, President Obama issued an Executive Order two weeks ago asking the SEC, CFTC and other independent agencies to follow the cost-saving, burden-reducing principles when proposing and adopting regulations as outlined in an earlier Executive Order issued in January that was addressed to other federal agencies (at that time, other agencies were encouraged to follow this order - but none of the independent agencies have submitted an action plan, so hence this new non-binding Order to push them). This new Executive Order also asks the independent agencies to analyze existing regulations to identify any that are outdated or too burdensome. The agencies have 120 days to report their findings to the Office of Management and Budget.

The SEC & the "Plain Writing Act of 2010"

A few days ago, I had just sat down to draft a blog about the Plain Writing Act of 2010 when Dominic Jones thankfully beat me to the punch with this "Coming soon: SEC advice you can (maybe) understand." I say "thankfully" because I had never heard of the Act nor have I seen anyone else write about it (other than this piece by Lois Yurow) even though implementation is due in a few months, i.e. October 13th. Here's the SEC's report on implementing the Act - and here's the SEC's Plain Writing Initiative.

Dominic writes that investors are unlikely to benefit from simpler prose in disclosure documents under the Act and I agree that is important. But I would even take that a step further and simplify how documents on Edgar are presented, long a pet peeve of mine. How can ordinary investors understand what a "DEFA14A" means? Or even a "Form 10-K" for that matter? The SEC's forms and schedules should have labels that more clearly identify what they are...

More on "The Mentor Blog"

We continue to post new items daily on our blog - "The Mentor Blog" - for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

- Is Going Public Going Out of Style?
- Corporate Political Spending Post-Citizens United
- A 12-Step Program to Truly Good Corporate Governance
- Study: "Bridging Board Gaps"
- Fifth Call Objectives, and Incremental Alternatives

- Broc Romanek

July 18, 2011

Congress Batters the SEC (Again) By Cutting Its '12 Budget

As noted in this NY Times' article on Saturday, the House Appropriations Committee cut the SEC's fiscal 2012 budget request by $222.5 million, to $1.19 billion (the same as this year's), even though the SEC's responsibilities were vastly expanded by Dodd-Frank. As I've blogged about numerous times before, the SEC needs to be self-funded because Congress is all too willing to play politics with this independent agency.

As noted in the article, cutting the SEC's budget doesn't help Congress in its battle to cut the federal deficit. In fact, this move hurts that effort because the SEC is funded out of fees it collects - and Section 991 of Dodd-Frank limits the fees that the SEC can collect by now tying the amount it is able to collect to its budget. Congress really shot itself in the foot when it included that provision in Dodd-Frank, but Wall Street and the corporate world have good lobbyists. Here's an excerpt from the NYT article:

By way of comparison, in 2009 Citigroup and JPMorgan Chase, two institutions the S.E.C. regulates, spent $4.6 billion each -- four times the SEC's entire annual budget - on information technology alone. Under the House's proposed budget, the S.E.C.'s resources for technology would be cut by $10 million and a $50 million reserve fund earmarked for technology would be eliminated.

The Re-Introduction of the Shareholder Protection Act

Last week, several prominent members of the U.S. Senate and House of Representatives re-introduced the Shareholder Protection Act for debate. As noted in the Harvard Corporate Governance Blog, the bill - which originally passed the House last year - would establish corporate governance rules for deciding when corporate resources may be spent on politics. Although it appears that the bill is unlikely to be adopted during this Congress, its reintroduction might mean that it will continue to surface until a time comes when it has substantial support.

Meanwhile, as part of the efforts to reduce the federal deficit, Sen. Levin and Sen. Brown have introduced legislation - the "Ending Excessive Corporate Deductions for Stock Options Act" (S. 1375) - to end a corporate tax break allowing corporations to deduct stock option expenses on their tax returns in amounts greater than the expenses shown on their books

Proxy Season Results of Mobile Phone Voting

In this podcast, Joe Vicari describes how Broadridge facilitated voting by mobile devices during the proxy season (following up on this podcast), including:

- How many shareholders voted by mobile phone?
- Was this more than expected?
- Are you aware of any companies that made special efforts to notify their shareholders that they could vote by mobile phone?
- What do you recommend that companies do next year to boost their mobile phone voting rates?

- Broc Romanek

July 15, 2011

Final Tally of the Proxy Season: 40 Failed Say-on-Pay Votes

Last month, Premiere Global Services became the 40th company to file a Form 8-K reflecting a failure to get majority support for it's say-on-pay agenda item (47%). A list of the Form 8-Ks of these companies is in CompensationStandards.com's "Say-on-Pay" Practice Area (bearing in mind that totals for three of these companies are somewhat in dispute). 40 failures is less than 2% of all companies that had say-on-pay on their ballot this season.

So what does this all mean? On the one hand, the relatively low percentage of companies failing has led commentators to label say-on-pay as insignificant as a force for needed change, such as this blog by Bob Monks and this one from Paul Hodgson. On the other hand, many corporate advisors are holding up this season's results as evidence that more change in pay practices is not necessary.

My take is that it's too early to tell what it means (including what level of "against" votes is a red flag that some pay practices are problematic - clearly, there are levels below a majority that should give boards pause). I believe this year was a test year as many institutional investors weren't prepared for the massive undertaking that a true look at pay packages for their portfolio companies entails. In addition, we didn't see much in the way of grass roots movements - surprising in this social media age. The potential for potent and inexpensive campaigning online against a company's say-on-pay vote will continue to loom. Five years from now - particularly when say-on-pay then applies to the numerous small companies that have a temporary bye right now - we'll have a better sense of what say-on-pay really means.

To be honest, 40 failures is many more than I expected. That should be clear from the poll I posted on this blog back in January asking y'all to guess how many failures there would be. In hindsight, the choices I offered in the poll revealed how low I thought the numbers would be. I offered choices of 0 failures (which garnered 1% of votes); 1-2 failures (1%); 3-4 failures (3%); 5-10 failures (18%); and More than 10 failures (75%). I should have broadened the choices - and I will next year.

I'm still mystified that most directors appeared to be unsupportive of say-of-pay before Dodd-Frank mandated it. So many of them are now resting easy, having shareholders bless their pay packages with flying colors. As I blogged a few years back, these boards now have a likely shield from liability and from reputational attack. I could always understand why board advisors didn't like say-on-pay - it's a lot more work with no additional resources during an already busy proxy season - but I never understood why directors would be against it. But maybe they saw those say-on-pay lawsuits coming...

CEOs: When Too Many Luxury Homes Becomes a Hassle

If you follow me on Twitter, you know I fell off my chair reading this recent article in "Chief Executive" magazine that essentially provides guidance for CEOs buying that 3rd or 4th luxury home. The CEO featured in the article is the head of a private family-owned company but it's still quite a brazen piece of journalism.

For those that argue that all the corporate jet trips to these far-flung homes are somehow for business purposes, there is no hint of that in the piece. In fact, the CEO in the article complains that his second biggest problem is that he works too much to get to these extra residences (although the article notes he gets to Martha's Vineyard every weekend in the summer). His biggest problem? "He owns too many homes, likening his passion for collecting top-tier getaways to the way other people collect paintings."

The Latest Compensation Disclosures: A Proxy Season Post-Mortem

We have posted the transcript for our recent CompensationStandards.com webcast: "The Latest Compensation Disclosures: A Proxy Season Post-Mortem."

- Broc Romanek

July 14, 2011

The Financial Printer Diaries: Tales of an Era Gone By - Part 1

A few months ago, I blogged a "Farewell to Bowne" and posted a poll about "your favorite financial printer moment." In response to the poll, 69% responded that free food was their favorite (no surprise!); 41% said tedious arguments over commas and periods; 19% said brushing up on proofing; 5% said good facetime with partners and 10% said sleeping in the bathroom.

In addition, I received many emails with specific memories, some of which are repeated below - please keep them coming and I will only blog them if you give me permission:

- My favorite memory is an experience done a hundred times melded into one memory: the clearing of the blue line, just before printing the final prospectus (you know, when nobody is left at the printer other than a couple of lawyers and accountants with sometimes a guest appearance by the junior analyst from the investment bank to make sure their name is spelled correctly on the cover of the 424). Ah, peace.

- My favorite story involves the hubris of a first-year associate from a large, very prestigious firm that shall go unnamed, in the early-ish days of constant cell phone use. This was about a decade ago, in mid-2000 or so, and it was dinnertime after the deal ended and I was having a brief meal before heading home, and he was having a few beers with a colleague before heading out, and we overheard him calling the front desk on his cellphone from the lunchroom and attempting to order a car, and totally confounding the front desk since he wasn't walking a few doors down to ask for the car or calling on the printer's phone, but using his cell phone. And he was a little tipsy. In the end, it devolved down to a "do you know who I am" moment on his part, after which he stated very loudly "I am a ____ associate", as if it was time for whoever was on the other line at the front desk to bow down to him and call that car - fast. That was an iconic moment, a classic "I don't want to be that entitled person" story.

- I spent many long hours at Bowne of Dallas, which had nice cushy chairs, a huge projection TV and free Pac Man and Ms Pac Man game tables (now that gives you the timeframe). Good BBQ for meals, too.

- I sure have a lot of good memories of lawyers, accountants and bankers working nights shoulder-to-shoulder at the printers in the '70's and 80's. In Cleveland, our printer was originally known as The Judson Brooks Company, which was later acquired by Bowne. We all knew some of the owners and most of the staff like family. They had a couple of cots separated by curtains in the back where you could catch a few hours' shut-eye before leaving for the dawn flight to DC with the SEC filing package. We did the red-lining on the plane. Many the nights I called my wife to let her know I would be working late and spending the night at "The Judson Hilton."

- Going to the printer was one on the best things about being a securities lawyer. Unlike everyone else in the world, financial printers loved lawyers and would do most anything to make them happy. I love you.

More on "An Emerging Hot Topic? Whether to Disclose Voting Result Percentages"

Last year, I blogged about grumblings that the SEC's adoption of the requirement of a Form 8-K to be filed to disclose voting results didn't go far enough because it only requires the disclosure of somewhat meaningless raw voting data and not the percentages themselves. In that blog, I weighed in that perhaps the SEC's omission was wise because there was so much confusion about how to count percentages.

Since then I have blogged about the troubles some companies (and their advisors) have had with figuring out how to determine whether an agenda item has passed. This obviously is not good and it's only a matter of time before some of these close votes wind up in court. Care must be taken to complying with the complexity of laws involved. Now that the votes are more important than ever, it's probably time for the SEC to tweak the Item 5.07 requirements and require a percentage, as this should help force companies into being more careful with their count. It is doable - see how IBM has done just that again this year in their Form 8-K...

Deals: The Latest Delaware Developments

We have posted the transcript for the recent DealLawyers.com webcast: "Deals: The Latest Delaware Developments."

- Broc Romanek

July 13, 2011

Welcome to Marty Dunn!

We are excited to announce that Marty Dunn has just come aboard as Editor of our print newsletter, The Corporate Counsel. Marty joins our esteemed team of Editors: David Lynn, Alan Dye and Mike Gettelman. As many of you know, Marty spent 20 years at the SEC, most recently as Deputy Director and former Acting Director of the Division of Corporation Finance; Marty is now a partner at O'Melveny & Myers. We are looking forward to Marty bringing a new dimension to each issue of The Corporate Counsel with his unique insider's perspective and his ability to apply practical guidance to situations that you grapple with every day.

Marty worked on the May-June issue of The Corporate Counsel that was just mailed. This issue analyzes these topics:

- Reaching Out for Say-on-Pay Approval: Additional Soliciting Material this Proxy Season
- Reporting Shareholder Meeting Voting Results - Form 10-Q/K Reporting
- Phrasing Management's Say-on-Pay Proposal on the Proxy Card
- Shareholder's Withdrawal of 14a-8 Proposal After Proxy Statement is Mailed - Impacts?
- Beware of HSR Filing Requirements That Can Apply to Equity Compensation of Executives
- More on Choice of Forum - Shareholder Approval
- Former Director Disclosure in the 10-K?
- Eliminating a Form 11-K Obligation
- Legislative Action on Exchange Act Registration Thresholds
- More Legislative Action - Regulation A+?

Act Now: Get the "Rest of 2011 for Free" when you try a '12 No-Risk Trial now.

ISS's 2011-2012 Policy Survey

Perhaps a little earlier than in prior years, ISS recently released its 2011-2012 Policy Survey. Responses and comments are due by August 3rd. Although it's only a survey, the questions, responses and comments serve as the basis for ISS's policy formulation process. As noted by an anonymous inhouse member yesterday on our "Proxy Season Blog, " some companies are looking at this survey closely - and it's likely that more will be submitting comments compared to prior years due to say-on-pay and a greater interest in providing input these days...

Webcast: "Key Disclosure Policies: The Dangers of Standing Pat"

Tune in tomorrow for the webcast - "Key Disclosure Policies: The Dangers of Standing Pat" - to hear Stacey Gear of Primerica, Isobel Jones of Del Monte Foods, Dave Lynn of TheCorporateCounsel.net and Morrison & Foerster, Jane Whitt Sellers of McGuireWoods and Bill Tolbert of Jenner & Block provide practical guidance about revisiting your corporate disclosure policies as well as your disclosure training program for officers, employees and directors.

- Broc Romanek

July 12, 2011

The 8th Say-on-Pay Lawsuit

Last week, the 7th company that failed to garner majority support for their say-on-pay was sued - Cincinnati Bell in a federal district court in Ohio (here's the complaint). For reasons I'm not sure of myself, I count this as the 8th say-on-pay related lawsuit even though this one didn't involved a failed SOP. We continue to post pleadings from these cases in CompensationStandards.com's "Say-on-Pay" Practice Area.

SEC Filings: What is the Difference Between a "Schedule" and a "Form"?

As noted in this article, Warren Buffett recently filed his latest Form 13F to disclose his latest portfolio holdings and the Form notes that some information has been omitted since its confidential. This 1998 form letter from the SEC gives some indication of the standards required for 13F filers to receive confidential treatment.

I know these Form 13F filings are closely followed by some investors, particularly those filed by Warren's Berkshire Hathaway. But for me, it raised this esoteric securities law question in my mind: Why does the SEC call some of its forms a "Form" and others a "Schedule"?

It seems odd that investment managers are required to file a "Form 13-F" and not a "Schedule 13-F" - particularly since Schedules 13D and13G are required to be filed by shareholders once they cross a certain percentage of ownership in a company. All of these filings are made by shareholders to report holdings - why don't their filings have the same "label"?

I don't know the answer. At first, I thought that the difference would be based on the language used in the statute that creates the obligation. That could be the distinction, but I'm not sure. Looking at Section 13(f)(1) of the '34 Act, the SEC has been delegated to create a Form 13-F filing obligation under this language: "...shall file reports with the Commission in such form..." In comparison, Section 13(d)(1) and Section 13(g)(1) creates the filing obligation of a "statement."

So although there is no mention of "Form" or "Schedule" in the statute, a distinction may exist because the statute requires that a "report" be filed under 13(f) - and that a "statement" be filed under 13(d) and (g). If someone out there knows if this is a distinction that matters, please fill me in. I struck out with my research (even Louie Loss) and asking old-time'ish colleagues. Maybe the difference comes down to some sort of authority or Administrative Procedures Act king of thing? Dunno.

From the perspective of the SEC's rulemaking process, I understand that the main difference between a Form and a Schedule is that a Schedule is usually codified as part of the Code of Federal Regulations - whereas with a Form, only the description is codified as part of the CFR (as the Form is maintained separately and doesn't appear in the CFR). That's a nice tidbit but it still doesn't explain how we got here in the first place. Not that this difference matters one iota in real life but it seems like good food for thought for securities law purists...

Webcast: "Understanding the Private Company Trading Markets"

Tune in tomorrow for the webcast - "Understanding the Private Company Trading Markets" - to hear Annemarie Tierney of SecondMarket, Dave Lynn of TheCorporateCounsel.net and Morrison & Foerster, Sharon Hendricks of Gunderson Dettmer and Kim Kovacs of OptionEase discuss the current environment for secondary sales in private companies like Facebook, and what policies and record-keeping procedures companies considering these programs should adopt to ensure compliance with the securities laws.

One of the most interest things going on (besides the liquidity aspect of all this and the related impact on equity compensation) is the emergence of new businesses building on top of the secondary trading markets. For example, there are equity research firms who are commencing research on private companies - and data companies who are mining through Delaware filings to reverse engineer private companies' cap structures. This is a fundamental shift in the world in which private companies operate, including their expectations of confidentiality. There are also endless technical issues beyond the obvious ones, including how these new markets affect the various definitions of "public trading market" used under tax and securities laws (280G, 409A, Reg S) and how this can impact private company valuations. Tune in to learn more...

- Broc Romanek

July 11, 2011

Corp Fin Issues 8 New CDIs and a WKSI Waiver Statement

On Friday, Corp Fin issued 8 new Compliance & Disclosure Interpretations (and withdrew one), as well as issued this statement that provides a framework about how WKSIs can seek waivers of ineligible issuer status (three new no-action letters were recently decided under this framework). The new CDIs are:

- Section 107. Form 12b-25 - New Question 107.02
- Section 121A. Item 5.07 of Form 8-K - New Question 121A.03
- Section 121A. Item 5.07 of Form 8-K - New Question 121A.04
- Section 116. Item 401 of Reg S-K - New Question 116.10
- Section 117. Item 402(a) of Reg S-K - New Question 117.07
- Section 118. Item 402(b) of Reg S-K - New Question 118.08
- Section 119. Item 402(c) of Reg S-K - New Question 119.28
- Section 108. CD&A - New Question 108.01

In her "100 F Street Blog," Vanessa Schoenthaler briefly describes these new CDIs. And in the May-June issue of The Corporate Counsel that was mailed last week, some of these new positions are analyzed more fully - get the "Rest of 2011 for Free" when you try a '12 No-Risk Trial now.

Kudos to FINRA for Strengthening Revolving Door Rules

From Suzanne Rothwell: Recently, FINRA submitted a rule filing to the SEC that amends its Code of Procedure to prohibit a former officer of FINRA for a period of one year after termination of FINRA employment from appearing on behalf of a client before any FINRA hearing related forum or testifying as an expert witness in a FINRA forum.

FINRA asked that the filing be treated as immediately effective and, therefore, the new requirements are already effective although not yet published by the SEC. This is continued progress in enhancing the ethical standards for attorneys serving as officers of FINRA and helps to avoid any untoward appearance of wrongdoing or undue influence by a former attorney officer. FINRA points out in its rule filing that the ABA's Model Rules of Professional Conduct includes provisions that would prevent a lawyer who has represented FINRA in an case from subsequently representing the respondent in the case.

Webcast: "Top IP Pitfalls in Deals: How to Avoid Them"

Tune in tomorrow for the DealLawyers.com webcast - "Top IP Pitfalls in Deals: How to Avoid Them" - to hear Karen Butcher of Morgan Lewis, Jose Estevez of Skadden Arps and Ryan Schneider of Troutman Sanders to hear the latest regarding how to spot and resolve intellectual property issues when doing a deal.

- Broc Romanek

July 8, 2011

Social Media, Social Media, Social Media

For those not enamoured with social media, you probably are sick of hearing the phrase. But it's something that really is here to stay - President Obama's Twitter Town Meeting this week should seal the deal if there were any doubters about Twitter's staying power - and it will continue to dramatically upend how we share information. Developments are happening so fast that I could devote this daily blog solely to the topic - but I will limit myself to occasional bouts of social medianess instead. Here are a handful of interesting blogs that you should check out:

- Dominic Jone's "Stats show PR wires less effective than company web channels"

- Reuter's "Morgan Stanley OKs Broker Use of Social Media"

- Q4's "PGi's iMeet Platform Enables More Personal and Engaging Conversations With Investors"

- PGI's "Getting Social with Investor Relations"

"Jive Talking": More Dancing Videos!

Following up on the videos that I recently posted in this blog, here's the Minneapolis chapter of the Society of Corporate Secretaries doing some "jive talking" after I did a panel regarding the proxy season followed by a standalone presentation on social media (thanks to Marty Rosenbaum for blogging about my appearance). These Minneapolis folks can really boogie:

And here is a video from the Society's Annual Conference held in Colorado a few weeks ago during the plenary session:

And I would be remiss if I didn't share this picture of me with my good friend Neal Smith of CSC in his snazzy jacket during the Conference's opening reception:

neal 2.JPG

- Broc Romanek

July 7, 2011

Shareholder Proposals: The Rise of Rebuttals to Company's Statements in Opposition

Until this year, I think it was fairly rare that a shareholder proponent would bother to file something with the SEC to disagree with a company's Statement in Opposition to the shareholder proposal. These Statements in Opposition are disclosed in a company's proxy statement directly after the 500-word-or-less proposal and are governed by Rule 14a-8(m).

Under that rule, the company must provide a copy of its Statement at least 30 calendar days before definitive proxy materials are filed (or a 5-day timeframe if the SEC Staff requires the proponent to revise its own proposal under a no-action response). Once a proponent sees the company's Statement, it can contest what it says if it feels its materially false and misleading with the SEC Staff.

In the alternative, the proponent can just "go public" with how it feels about the company's Statement if it first files a Notice of Exempt Solicitation under Rule 14a-6(g) - the information in this Notice can then serve as the proponent's formal rebuttal (technically, the proponent doesn't have to file this Notice unless they cross the $5 million ownership threshold of Rule14a-6(g). For the larger institutions, you can assume that to be the case, but necessarily for the smaller ones - thus, not all of these responses get filed with the SEC).

With the ability for proponents to easily publicize their views on the Web, it seems that proponents are now more willing to publicize their displeasure about how a company comments on their proposal by filing a Notice of Exempt Solicitation with the SEC rather than just complaining to the Corp Fin Staff. For example, As You Sow filed this Notice of Exempt Solicitation recently relating to a fracking proposal submitted to Exxon Mobil. And here's another one filed by As You Sow rebutting First Energy's Statement in Opposition. And here is one from the Detroit Province of the Society of Jesus sent to OM Group. Hat tip to Simon Billenness for pointing this trend out and Keir Gumbs for being the legal beagle!

Study: A Ten-Year Comparison of Restatements

In a recent study, Audit Analytics looked back over ten years of restatements and, among other things, found the following:

- The quantity of restatement and non-reliance disclosures peaked in 2006 with 1795 disclosures.

- Each of the three years thereafter experienced a decline in the number of disclosures with 683 restatements in 2009.

- After three years of decline, financial restatements experienced an uptick in quantity in 2010, largely due to non-accelerated filers, but the severity remained low.

- In 2010, the number of restatements disclosed by accelerated filers decreased.

We have posted the study in our "Restatements" Practice Area.

Managing Foreign Subsidiaries

In this podcast, Kevin Penzien of Citco Corporate Services explains how companies manage the complexities of multiple foreign subsidiaries, including:

- Why should foreign subsidiaries be a priority for the corporate secretary? Don't they have bigger fish to fry?
- Why not just hire local outside counsel to assist with foreign subsidiaries?
- Which foreign markets are particularly hot among your clients? And which jurisdictions are most difficult for US multinationals to manage legal entities?
- What are the typical foreign subsidiary implications in M&A transactions?

- Broc Romanek

July 6, 2011

Broadridge's '11 Proxy Season Statistics

Always interesting, Broadridge has released its annual report regarding how the proxy season fared from its unique perspective. Here are a few gems I pulled from the report:

- 362 billion shares were processed this proxy season, a 12 billion shares increase over last season.

- Number of shares voted increased by over 8 billion shares - 94.7% of shares voted were done so electronically.

- Percentage of shares voted edged up, primarily due to increased use of ProxyEdge (83.6% of all shares voted through Broadridge) and continuing increase in Internet voting.

- Quorum increased to 83.5% from 83.4%, on average.

- 100,000 shareholders used mobile phone voting, with 30% of those voting for the 1st time.

Here are Broadridge's e-proxy stats as of the end of 2010 - and here is a report with the proxy season stats for '08-10.

How to Handle XBRL's Last Phase-In

With mandatory XBRL now in effect for all companies, there is a bit of a whirlwind of folks asking questions regarding XBRL. Jill Radloff has two useful blogs - "Correcting Errors in XBRL Filings" and "XBRL Grace Periods" - and I also recommend the resources in our "XBRL" Practice Area.

In this podcast, Dan Roberts of raas-XBRL analyzes Year 3 implementation issues related to the SEC's phase-in of mandatory XBRL, including:

- What phase of XBRL recently took effect?
- What implementation issues are smaller companies facing now?
- What can smaller companies do to overcome these issues?
- How does raas-XBRL help clients overcome these issues?

Dodd-Frank: 4th Rulemaking Progress Report

Here is the 4th progress report from Davis Polk regarding all of the various agencies engaged in Dodd-Frank rulemaking.

- Broc Romanek

July 5, 2011

Corp Fin Updates Financial Reporting Manual (Again)

On Friday, Corp Fin updated its Financial Reporting Manual for issues related to subsidiary guarantor financial statements, ICFR reporting requirements for newly public companies, reporting requirements in a reverse recapitalization, as well as other changes. The good news is that Corp Fin has added a new summary of changes that comprise the current update at the beginning of the Manual. Last revised in April (and December and October before that), Corp Fin has been updating the Manual much more frequently than in the past, deciding to do so a little bit at a time rather than major rewrites as in the past.

SEC Announces IFRS Roundtable's Agenda

The SEC has announced the panelists and agenda for its IFRS Roundtable to be held this Thursday, July 7th.

Last week, the SEC delegated authority to the Enforcement Director to disclose information that could reasonably be expected to reveal a whistleblower's identity if the disclosure wouldn't result in a loss of confidentiality.

Our July Eminders is Posted!

We have posted the July issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!

- Broc Romanek