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April 13, 2012

Glass Lewis Launches New “Issuer Engagement Portal”

Yesterday, Glass Lewis announced it had launched a new “Issuer Engagement Portal.” As folks have complained about a lack of transparency regarding Glass Lewis’ voting policies over the years, this should be a positive development. Among the other things in the Portal are Glass Lewis’ “US Abridged Guidelines” and “Continental Europe Abridged Guidelines.” See Davis Polk’s blog on this development…

Dodd-Frank: SEC Releases Study on Cross-Border Private Securities Litigation

On Wednesday, the SEC issued its 106-page study of cross-border private securities litigation as required by Section 929Y of Dodd-Frank. At the same time, Commissioner Aguilar issued this statement to note his disappointment with the study, mainly because it doesn’t provide recommendations and because “I am particularly astonished that the Study states (at pages 58-59) that an option ‘would be for Congress to take no action’ and, thus, would continue to deny American investors who have been harmed by fraud the ability to seek redress in court.” Pretty unusual for a Commissioner to dissent from a study.

Before the study was released, the SEC received 72 comments on the topic. In his “D&O Diary” Blog, Kevin LaCroix provides some analysis of the study, which considers possible alternative approaches to the question of cross-border private securities litigation and provides a detailed overview of the ways in which the lower courts have been approaching these issues in the wake of the Supreme Court’s decision in the Morrison v. National Australia Bank.

SEC’s RiskFin Issues Report on Regulation D Offerings

On Tuesday, the SEC’s Risk Fin Division issued a 9-page report entitled “Capital Raising in the U.S.: the Significance of Unregistered Offerings Using the Regulation D Exemption” that crunches numbers extracted from Form D filings since early ’09 with goal of understanding the amount and nature of capital raised through Reg D unregistered offerings and to provide a perspective on the state of competition and regulatory burden in capital markets.

As far as I can tell, it’s Risk Fin’s first report dealing with a Corp Fin topic (hard to tell as reports are not listed on RiskFin’s webpage) – and it’s formatted in a style that I haven’t seen the SEC use before (has more of an academic feel). Oddly, the report is dated February 2012 even though it was just posted.

In his blog, Steve Quinlivan notes that some highlights of the report include:

- The median Reg D offering is modest in size: approximately $1 million.
- Both Rule 505 and Rule 506 (the most frequently used exemption in the Reg D filings) allow an issuer to sell securities to an unlimited number of accredited investors and up to 35 non-accredited investors. The average amount of non-accredited investors in the Reg D offerings over the entire period is 0.1, while the median is 0. In fact, in approximately 90% of the offerings there are no non-accredited investors.
- Capital raised through Reg D offerings is more than twice as large as public equity offerings as well as each other category of unregistered offerings.
- Less than one-third (29%) of issuers are pooled investment funds (i.e. hedge funds, private equity funds and the like), of which a little more than half (55%) are hedge funds (i.e., 16% of all Reg D offerings are by self-reported hedge funds).
- Excluding hedge funds and other investment funds, issuers of private offerings tend to be small. Although a significant number of issuers decline to disclose their sizes (50%), for those that do, most have revenue of less than $1 million. Only 1.8% of all new offerings are by issuers that report more than $100 million in revenues.

And here is more analysis from Vanessa Schoenthaler’s blog…

- Broc Romanek