E-Minders April 2014
In This Issue:
E-Minders is our monthly e-mail newsletter containing the latest developments and practical guidance for corporate & securities law practitioners.
We view TheCorporateCounsel.net as the gathering place for the community and encourage those who may not yet be members to take advantage of a 2014 No Risk Trial to see what you are missing. Here are 10 Good Reasons to try us now.
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Coming Soon! 1st Edition of Morrison & Romanek's "The Corporate Governance Treatise": Wrapping up a project that Randi Morrison & Broc Romanek feverishly commenced two years ago, we are happy to say the inaugural 2014 Edition of Morrison & Romanek's "The Corporate Governance Treatise" will soon be at the printers. You will want to order now so that you can get your copy as soon as it's done being printed in a few weeks. With over 900 pages—including 212 checklists—this tome is the definition of being practical. You can return it any time within the first year and get a full refund if you don't find it of value.
Our Pair of Popular Executive Pay Conferences: We have posted the registration information for our popular conferences - "Tackling Your 2015 Compensation Disclosures" & "11th Annual Executive Compensation Conference: Say-on-Pay Workshop" - to be held September 29-30th in Las Vegas and via Live Nationwide Video Webcast on TheCorporateCounsel.net. Act now for phased-in pricing - which expires May 9th - to get as much as 20% off!
The full agendas for the Conferences are posted—but the panels include:
Upcoming Webcasts on TheCorporateCounsel.net: Join us on April 30th for the webcast - "Latest Developments in IPOs & Capital Raising" - to hear Jocelyn Arel of Goodwin Procter; Steve Bochner of Wilson Sonsini; Dave Lynn of TheCorporateCounsel.net and Morrison & Foerster; and David Strong, Partner of Morrison & Foerster explore the latest developments in IPOs and raising capital, including all the various alternatives, such as "Up-C" IPOs, PIPEs and registered direct offerings, "at-the market" offerings, equity line financings and rights offerings.
And join us on May 21st for the webcast - "Big Changes Afoot: How to Handle a SEC Enforcement Inquiry Now" - to hear Dixie Johnson of King & Spalding; Chris Mixter of Morgan Lewis and Linda Chatman Thomsen of Davis Polk get us up to speed on the latest about the SEC's Enforcement Division and provide practice pointers on what approaches work for many different types of investigations that exist today.
And join us on June 11th for the webcast - "Underwriter's Counsel: Latest Developments" - during which White & Case's Colin Diamond, Cravath's LizAnn Eisen and Fried Frank's Josh Wechsler will explore the latest developments that impact underwriter's counsel, including negotiating the underwriting agreement, obtaining a comfort letter and making filings with FINRA.
There is no cost for these webcasts if you are a member of TheCorporateCounsel.net. If you are not a member, take advantage of our no-risk trial to access the programs. You can sign up for this no-risk trial online, send us an email at email@example.com - or call us at 925.685.5111.
Upcoming Webcasts on DealLawyers.com: Join us on April 2nd for the webcast - "Rural/Metro and Claims for Aiding & Abetting Breaches of Fiduciary Duty" - to hear Kevin Miller of Alston & Bird; Brad Davey of Potter Anderson; Stephen Bigler of Richards Layton, Stephen Kotran of Sullivan & Cromwell and Morris Nichol's Bill Lafferty discuss a case expected to have a dramatic impact on the viability of claims for aiding and abetting breaches of fiduciary duty in connection with M&A transactions.
And join us on May 13th for the webcast - "Appraisal Rights: A Changing World" - during which Morris Nichols' John DiTomo, Morris Nichols' Eric Klinger-Wilensky and Berger Harris' Lisa Stark will analyze how appraisal rights work in a changing world, how to overcome common problems, and more.
And join us on July 15th for the webcast - "Divestitures: Nuts & Bolts" - during which Doug Campbell, Jim Rice, Jennifer Arnolie and Scott Berry of E&Y will teach us all we need to know about diversitures.
No registration is necessary - and there is no cost - for these webcasts for DealLawyers.com members. If you are not a member, take advantage of our no-risk trial to access the programs. You can sign up online, send us an email at firstname.lastname@example.org - or call us at 925.685.5111.
Upcoming Webcast on CompensationStandards.com: Join us on June 12th for the webcast - "Proxy Season Post-Mortem: The Latest Compensation Disclosures" - to hear Mark Borges of Compensia, Dave Lynn of CompensationStandards.com and Morrison & Foerster and Ron Mueller of Gibson Dunn analyze what was (and what was not) disclosed this proxy season.
No registration is necessary - and there is no cost - for this webcast for CompensationStandards.com members. If you are not a member, take advantage of our no-risk trial to access the programs. You can sign up online, send us an email at email@example.com - or call us at 925.685.5111.
Launched! CorporateAffairs.tv is Born!
Broc is very excited to announce the launch of our newest site - CorporateAffairs.tv! Well before Broc & Dave dabbled in silly videos years ago, he has wanted to build a site focusing solely on video. CorporateAffairs.tv provides free videos - all of them short in length - that fall within one of three categories: educational, news or entertainment.
You can receive an email when a new video is posted by inputting your email address into the subscription box on the right side of the site.
General Solicitation: Corp Fin Director Speaks!
In late March, Corp Fin Director Keith Higgins delivered this speech on Regulation D in an effort to correct any misperceptions out there. For starters, since the general solicitation were relaxed six months ago, 900 new offerings have been conducted, raising more than $10 billion in new capital (but that pales in comparison to 9200 offerings resulting in the sale of $233 billion over the same period in the prior year). Here is a recap of the speech's main points from Stinson's Steve Quinlivan's blog:
1. Reasonable Steps to Verify - Some believe that the reluctance of issuers to use the new Rule 506(c) exemption is because the rule requires that the issuer take "reasonable steps to verify" the accredited investor status of a purchaser. It's not true that the rule requires that an accredited investor produce his or her tax returns or brokerage statements in all circumstances. There are actually two paths for complying with the rule's verification requirement. Issuers can rely on one of the four non-exclusive verification methods for a natural person that, if used, would be deemed to satisfy the verification requirement. The other method, however, is the principles-based verification method in which the issuer would look at the particular facts and circumstances to determine the steps that would be reasonable to verify that someone is indeed an accredited investor.
When using the principle-based verification method consider:
- How much information about the prospective purchaser does the issuer already have? The more information the issuer has indicating that the person is an accredited investor, the fewer verification steps that it may have to take to comply with the rule's requirement.
- How did the issuer find the prospective investor? A person that the issuer located through publicly-accessible and widely-disseminated means of solicitation may need to undergo a greater level of verification scrutiny than a person who may have been pre-screened as an accredited investor by a reasonably reliable third party.
- Are the terms of the offering such that only a person who is truly an accredited investor could participate? The ability of a purchaser to satisfy a minimum investment amount requirement that is sufficiently high such that only accredited investors, using their own cash, could reasonably be expected to meet it is relevant in deciding what other steps are needed to verify accredited investor status.
The SEC has had recent inquiries asking whether the staff would provide guidance - presumably on a case-by-case basis - confirming that a specified principles-based verification method constitutes "reasonable steps" for purposes of the rule's requirement. Mr. Higgins noted the notion of the staff reviewing and approving specific verification methods seems somewhat contrary to the very purpose of a principles-based rule and he is not yet convinced of the need for this type of staff involvement. According to Mr. Higgins, while the staff may not be in a position at this point to provide guidance on what constitutes "reasonable steps" under particular circumstances, he believes the staff will not be quick to second guess decisions that issuers and their advisers make in good faith that appear to be reasonable under the circumstances.
2. Definition of "General Solicitation" - Mr. Higgins noted another commonly-heard criticism is that the definition of a "general solicitation" is too vague, creating so much uncertainty about whether a particular communication or activity is a form of general solicitation that issuers have adopted a very cautious mindset about the new Rule 506(c) exemption. He stated some may even be under the erroneous impression that the Commission has broadened the definition so that activities such as "venture fairs" and "demo days" are now prohibited. The truth of the matter is that the recent rulemaking has not changed any notions of what constitutes a general solicitation.
3. "Overhang" of the 2013 Regulation D Proposal - Mr. Higgins observed that he cannot predict what the Commission will ultimately do on the pending Regulation D rule proposal, but he spoke to a fear the staff has heard expressed that the proposed requirements and penalties might be applied retroactively to offerings conducted before the adoption of the proposal. He pointed to comments of SEC Chair White where she stated that issuers are not expected to comply with any aspect of the rule proposal until such time as the Commission approves a final rule and such rule becomes effective. Ms. White also expressed her expectation that the Commission will consider the need for transitional guidance for ongoing offerings that commenced before the effective date of any final rules, as it did when it adopted Rule 506(c) last summer.
Corp Fin Revises WKSI Waiver Framework
In mid-March, Corp Fin issued a revised statement that lays out its framework for how it considers waiver requests for situations that otherwise might render a company ineligible to qualify as a "well-known seasoned issuer." Corp Fin decided to tweak the framework after its experience to date...
Shareholder Proposals: Chevedden Wins Three Lawsuits!
In early March, Broc blogged about how John Chevedden had won two lawsuits involving his shareholder proposals over the past week. Make that now three - as John then won this "proposal by proxy" decision in a lawsuit filed by Chipotle in a federal district court in Colorado...
John is included in this 1-minute video explaining who "shareholder proponents" are.
Shareholder Proposals: Commissioner Gallagher Wants Can of Worms Re-Opened
In this speech, SEC Commissioner Gallagher - while discussing the continued federalization of corporate governance - highlighted what he believes are shortcomings of the current shareholder proposal process. Not a new concept, Gallagher pushes for a higher ownership bar - so that only institutional investors can submit proposals - and a longer holding period. He has beefs with other part of the process too (egs. "proposals by proxy," false & misleading statements, ability to submit same proposals year after year).
While many of these ideas might be appealing to corporate factions, the reality is that no area is more challenging to change than the shareholder proposal rule. The fixes are not as easy as some might think (eg. does it matter whose idea it is if a large slice of shareholders support it? how many years is reasonable for a new idea to take hold with a broader shareholder population? the answer certainly is more than one). The last time Rule 14a-8 was revised was in 1998 - and the battle over those changes was intense with a record number of comments at the time. And that was before the true Internet and social media era. Nowadays, Broc can't fathom how many comments would be received by the SEC on a proposal (eg. Bebchuk's mere petition on political contribution disclosures has received over 600k comments).
Of course, controversy is no reason not to tackle a project - but it is a reality that must be confronted. Is this where you want to spend Corp Fin to spend a considerable amount of resources over a period of probably more than several years? Particularly when disclosure reform is not gonna be easy. Too many big projects get started and go nowhere fast. Remember proxy plumbing. Sometimes Broc feels like we are on a merry-go-round.
Survey: Top 10 Most Common Risk Factors
Thanks to Intelligize, here are the most common risk factors during '13 based on their research looking through both '34 Act and '33 Act filings last year:
1. Failure to Compete Successfully
Here are some runner-ups:
- History of Losses/No Revenue
Don't forget our 39-page "Risk Factor" Handbook.
Too Many Risk Factors vs. Potential Liability: Where Is The Line?
Recently, Broc blogged - on my "Proxy Season Blog" - about "Will Corp Fin Start Objecting to Too Many 10-Q Risk Factors?" Meanwhile, Doug Greene of Lane & Powell ran this excellent blog on limiting your liability by improving the quality of your safe harbor warnings. Broc picked his brain by asking: "Now that disclosure reform is being discussed, some investors are complaining about too many risk factors - and I guess perhaps a safe harbor disclaimer that is too much kitchen sink would also be a complaint. How does a company attempt to manage its risk to litigation if only a handful of risk factors is allowed? Think investors want more than just killing the boilerplate."
The tension between curtailing risk factors and making them more meaningful is difficult. But it's possible to harmonize the two goals, and the solution may even be the same: a sharper focus on the company's real risks and more straightforward descriptions. The problem then becomes how to design and implement a better system for disclosing risks. Companies know their real risks and can plainly describe them, but should we leave them to do it or continue to provide a complex set of instructions? I think that companies, overall, would get it right under a streamlined system.
And here's a proposal to reform common risk factors from Keith Bishop...
Broadridge Updates Its VIF Guidelines
To deal with space constraints on voting instruction forms, Broadridge's
Independent Steering Committee recently approved these
updated VIF guidelines, updating the original guidelines that Broc
blogged about before.
1. Direct Broadridge to follow the guidelines about how to pare back the text
Broadridge Rolls Out More Proxy Cards/VIFs with QR Codes: Mobile Voting Growing Fast for Retail Holders
Recently, Broadridge posted its stats for the '13 proxy season. Last proxy season, Broadridge rolled out the use of QR codes on proxy card and VIFs, with each QR code being personalized (meaning embedded in the code is the personalized and secure Control Number that is associated with the account's position). Last year, a handful of companies participated in the pilot - about 1,000 investors used it out of about 1.1 million notices mailed with QR codes printed on them. This proxy season, the number of pilot companies was closer to two dozen.
QR codes appear to be a natural extension of Broadridge's Mobile ProxyVote since scanning a QR code with a mobile device brings the investor directly to the agenda to vote. Mobile ProxyVote is a version of ProxyVote that is gaining in popularity with about 826,000 accounts voted this proxy season - twice as many as last year. Mobile voting represented about 8% of all positions voted via Broadridge's Internet platforms for retail shareholders.
Dramatic Risk Factors: The Movies!
Dramatic readings are all the rage on YouTube. So to illustrate the silliness of some of the more common risk factors, one of the series on CorporateAffairs.tv features a variety of folks joining together to dramatically read a risk factor. Here are the first two: "We Face Competition" and "Trading Volatility."
Shareholder Engagement, Shareholder Engagement, Shar...
Over the last few weeks, there has been a sudden influx of groups issuing guidelines on shareholder engagement practices. A few weeks ago, Broc blogged about the new SDX protocol - and now we have a group of three documents from The Conference Board Governance Center:
Some good stuff in those new documents. And we do have a lot of good practical stuff in our own "Shareholder Engagement Checklists":
But maybe the best shareholder engagement advice you can get is in this 90-second video.
Will the Real ISS Buyer Please Stand Up? Vestar Capital Partners
In mid-March, Broc got this press release announcing that ISS had been sold by MSCI to Vestar Capital Partners to the tune of $364 million. Drats! Fooled again by a rumor in the mass media as he had blogged the prior week about another likely purchaser due to a WSJ article.
18 Cool Things About Coke's '14 Proxy Statement
21 Cool Things About GE's '14 Proxy Statement
32 Cool Things About Prudential's '14 Proxy Statement
The hits keep on coming! In this 2-minute video, find out 32 great ways that Prudential Financial (Peggy Foran & her team) enhances the usability of its 2014 proxy statement (with Addison's help). In particular, check out this infographic about the company's value creation model - part of its commitment to integrated reporting.
Cap'n Cashbags: Time to Enhance My Pay Package
In this 20-second video, Cap'n Cashbags - a CEO - just hanging out with his fellow CEO pals who serve on his board's compensation committee - talks about enhancing his pay package. And here is another one entitled: "Cap'n Cashbags: Wanna Ride My Corporate Jet?"
5 Cool Features of the "MyShares" Annual Shareholders Meeting App
Our New "Director Attendance at Annual Meetings Handbook"
Spanking brand new. Posted in our "Annual Shareholders' Meetings" Practice Area, this comprehensive "Director Attendance at Annual Meetings Handbook" provides a heap of practical guidance about how to deal with Item 407(b) of Regulation S-K. This one is a real gem - 10 pages of practical guidance.
March-April Issue: Deal Lawyers Print Newsletter
This March-April Issue of the Deal Lawyers print newsletter includes:
- A History Lesson: The SEC's Office of Mergers & Acquisitions
If you're not yet a subscriber, try a 2014 no-risk trial to get a non-blurred version of this issue on a complimentary basis.
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:
- Shareholder Proposals: "Enhanced" Confidential Voting Policies & Interim Vote Tallies
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:
- Target & the SEC's Cybersecurity Guidance
People: Who's Doing What and Where
The Society of Corporate Secretaries announced that it hired Stephen Brown from TIAA-CREF as its new Executive Director.
As noted in this article, the Delaware Governor tapped Andy Bouchard to serve as the Chancellor of the Court of Chancery, succeeding Leo Strine in that position. Andy is the managing partner of Bouchard, Margules & Friedlander, a firm that he and former Vice Chancellor Stephen Lamb founded in 1996 as a litigation boutique after serving a decade at Skadden. Here's a BusinessWeek article. Andy will be the 21st Chancellor once confirmed by the Senate...
What's New on Our Websites
Among other new additions, during the last month we have:
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