April 18, 2013

Social Media: The NYSE Weighs In

After the SEC's Section 21(a) report on Netflix, the NYSE sent a reminder to listed companies about its process for handling material news. To me, it reads as a reminder of the NYSE process - not as a wet blanket as it could be interpreted. In the excerpt from the reminder below, the NYSE says "Regulation FD-compliant manner" - so if it's good enough for the SEC, then it's good enough for the NYSE. It's just that companies have to provide advance notice to the NYSE for certain material events. So it should not change the considerations for using social media much. What do you think? The relevant excerpt from the NYSE's reminder is below:

The Securities & Exchange Commission issued guidance last week on the acceptability of utilizing social media outlets like Facebook and Twitter to comply with Regulation Fair Disclosure. Given the SEC's new guidance, companies may be considering the merits of utilizing these outlets for disclosure purposes. Please be aware that the NYSE has certain disclosure rules that companies must follow and we thought it might be helpful to review these rules with you so that you can consider them as you evaluate the SEC's new guidance. Additionally, as the 2013 proxy season is now underway, companies are reminded that NYSE rules require listed companies to provide the NYSE with at least 10 days advance notice of all record dates.

NYSE's Timely Disclosure Rule:
Under Section 202.06 of the NYSE Listed Company Manual, companies can comply with the NYSE's timely disclosure rule by issuing a press release or by means of any Regulation FD compliant method (or combination of methods). When news will be released during market hours (leading up to the opening and between 9:30 am - 5:00 pm EST), companies are reminded that the NYSE requires that ten minutes advance notice be provided to the NYSE's Corporate Actions & Market Watch team prior to the dissemination of any news that is deemed to be of a material nature or that might impact trading in the company's securities, or at the time the company becomes aware of a material event having occurred.

Companies must provide the NYSE with the means by which the company intends to disseminate the news and the NYSE must have the ability to view the news to ensure it has been fully disseminated. This advance call provides the NYSE with an opportunity to consider whether a temporary trading halt in the company's securities should be put in place. A halt in trading allows investors to evaluate the official company news in its entirety and adjust their trading positions as they see fit.

Further to this rule:
- The NYSE expects that a company representative will be available to discuss the details of the news and answer any potential questions the NYSE may have.
- While not intended to be an exhaustive list, examples of news the NYSE would consider to be potentially material include: earnings, mergers/acquisitions, securities offerings and pricings related to these offerings (see below for more information), major product launches or new patent approvals, dividend announcements, etc.
- In instances of unusual market activity or rumor-driven activity, a company is expected to contact the NYSE and promptly release to the public any news or information which might reasonably be affecting the market in its securities. Where there is no knowledge of material news, a company may be contacted by the NYSE and asked to issue a press release promptly so that the activity/rumor can be addressed for the overall market.
- While foreign private issuers are not required to comply with Regulation FD, they must still comply with the NYSE's timely disclosure rule. Given that foreign-based issuers are operating in different time zones, it is especially important that the NYSE be provided with contact details for company representative(s) that can be reached during the NYSE's market hours and who have the authority to speak on a company's behalf. This contact information is critical in case a situation were to arise where the NYSE became concerned about the trading in your company's securities and a company representative was not immediately available; the NYSE may be forced to halt trading in your company's securities until information can be received by the NYSE to support the resumption of trading.

NYSE Proposes to Eliminate Separate Voting Standard

Here is a Davis Polk blog from Ning Chiu, Mutya Harsch and Gillian Moldowan [Broc's note - since this blog went up, the NYSE's proposal has been taken down amid vague circumstances - perhaps the SEC didn't approve of it; overall, not a transparent process]:

Companies seeking approval of equity compensation plans as required under NYSE rules have often struggled to understand, and describe in proxy statements, the application of the NYSE voting standard alongside the state law provisions, for determining approval of the plan. The NYSE has now proposed to eliminate its own separate voting standard.

Where the NYSE makes shareholder approval a prerequisite to the listing of any additional or new securities, Section 312.07 mandates that the proposal obtain a minimum vote of a majority of votes cast, provided that the total vote cast on the proposal represents over 50% in interest of all securities entitled to vote on the proposal. This provision can be baffling, for example, if the treatment of abstentions under applicable state law differs from how abstentions are calculated under the NYSE voting standard. In some states, a "votes cast" standard would not include abstentions. In addition, the 50% requirement layers another level of complexity with respect to broker non-votes, which would be applied toward state law quorum obligations.

The NYSE proposal to remove its own voting requirement, which will also affect other NYSE-required votes, including issuances of over 20% or more of a listed company's outstanding common stock or voting power, recognizes that it is unnecessary and confusing to mandate two separate voting standards to any proposal subject to the NYSE rules, while applying only the state law requirement for all the other proposals. Nasdaq does not have a similar requirement.

The NYSE has requested that the SEC approve the proposed rule change on an accelerated basis so that, in the case of companies holding shareholder votes on proposals currently subject to Section 312.07, such proposals would be subject only to the requirements of state law.

More on our "Proxy Season Blog"

We continue to post new items regularly on our "Proxy Season 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:

- Unbundling Lessons Learned from the Apple Case
- Apple: Judge Dismisses Say-on-Pay Injunction Request
- A European Report on Proxy Advisors
- Climate Risks at Banks: Corp Fin Doesn't Allow Shareholder Proposal Exclusion
- Calls for Proxy Access Whither

- Broc Romanek