E-Minders January 2017

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 "No-Risk" Trial to see what you are missing. Here are 10 Good Reasons to try us now.

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It's Printed! 2017 Executive Compensation Disclosure Treatise: We just wrapped up Lynn, Borges & Romanek's "2017 Executive Compensation Disclosure Treatise & Reporting Guide" — and it's been printed. Over 1600 pages - with comprehensive coverage of the coming pay ratio rules.

How to Order a Hard-Copy: Remember that a hard copy of the 2017 Treatise is not part of a CompensationStandards.com membership so it must be purchased separately. Act now as this will ensure delivery of this 1600-page comprehensive Treatise right away. Here's the "Detailed Table of Contents" listing the topics so you can get a sense of the Treatise's practical nature. Order now.

It's Printed! 2017 Edition of Romanek's "In-House Essentials Treatise": We are happy to say the 2017 Edition of Romanek's "The In-House Essentials Treatise"is printed & mailed. Here's the 90 pages of our "Detailed Table of Contents" listing the topics - so you can get a sense of the Treatise's practical nature. You will want to order now so you can receive it as soon as possible.

With over 1700 pages, 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.

It's Printed! 2017 Edition of Romanek's "Proxy Season Disclosure Treatise": Broc Romanek has wrapped up the 2017 Edition of the definitive guidance on the proxy season - Romanek's "Proxy Season Disclosure Treatise & Reporting Guide" - and it's been printed. With over 1500 pages – spanning 32 chapters – you will need this practical guidance for the challenges ahead. Here's the Detailed Table of Contents listing the topics so you can get a sense of the Treatise's practical nature.

Upcoming Webcasts on TheCorporateCounsel.net: Join us on January 10th for the webcast - "Non-GAAP Disclosures: Analyzing the Comment Letters" - to hear Meredith Cross of WilmerHale; Steven Jacobs of E&Y; and Dave Lynn of TheCorporateCounsel.net and Morrison & Foerster provide practical guidance about what to do now with your non-GAAP disclosures given Corp Fin's new batch of comment letters.

And join us on January 18th for the webcast - "Pat McGurn's Forecast for 2017 Proxy Season" - when Davis Polk's Ning Chiu and Gunster's Bob Lamm join Pat McGurn of ISS and the proxy season expert to recap what transpired during the 2016 proxy season and what to expect for 2017.

And join us on January 24th for the webcast - "Audit Committees in Action: The Latest Developments" - to hear Morgan Lewis' Rani Doyle, Deloitte's Consuelo Hitchcock and Gibson Dunn's Mike Scanlon catch us up on a host of new SEC & PCAOB developments that impact how audit committees operate - and more.

And join us on February 2nd for the webcast - "Conflict Minerals: Tackling Your Next Form SD" - to hear our own Dave Lynn of Morrison & Foerster, Ropes & Gray's Michael Littenberg, Elm Sustainability Partners' Lawrence Heim and Deloitte's Christine Robinson discuss what you should now be considering as you prepare your Form SD for 2017.

And join us on April 4th for the webcast - "Whistleblowers: What Companies Should Be Doing Now" - to hear Margaret Cassidy of Cassidy Law, Sean McKessy of Phillips & Cohen (& former Chief, SEC's Office of the Whistleblower, Division of Enforcement) and Baker & McKenzie's Joan Meyer discuss what you need to be doing now in the wake of the latest SEC – and other regulator - actions in the whistleblower arena.

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 info@thecorporatecounsel.net - or call us at 925.685.5111.

Upcoming Webcasts on CompensationStandards.com: Join us on January 11th for the webcast - "The Latest Developments: Your Upcoming Proxy Disclosures" - to hear Mark Borges of Compensia, Alan Dye of Hogan Lovells and Section16.net, Dave Lynn of CompensationStandards.com and Morrison & Foerster and Ron Mueller of Gibson Dunn discuss all the latest guidance about how to overhaul your upcoming disclosures in response to pay ratio and say-on-pay - including the latest SEC positions, as well as how to handle the most difficult ongoing issues that many of us face.

And join us on February 1st for the webcast - "The Art of Working With Proxy Advisors" - to hear Strategic Governance Advisors' Amy Bilbija, Davis Polk's Ning Chiu, Teneo Governance's Martha Carter and CamberView Partners' Allie Rutherford analyze how to interact with proxy advisors to get the most out of your proxy season.

And join us on February 13th for the webcast - "Pay Ratio: The Top Compensation Consultants Speak" - to hear Mike Kesner of Deloitte Consulting, Blair Jones of Semler Brossy and Ira Kay of Pay Governance "tell it like it is. . . and like it should be" about the upcoming implementation of the pay ratio rules.

No registration is necessary - and there is no cost - for these webcasts 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 info@compensationstandards.com - or call us at 925.685.5111.

Upcoming Webcasts on DealLawyers.com: Join us on January 19th for the webcast - "Privilege Issues in M&A" - during which Alston & Bird's Lisa Bugni, Bass Berry's Joe Crace and Akin Gump's Trey Muldrow discuss how to deal with the attorney-client privilege in M&A transactions - including practical guidance on how to address privilege issues in acquisition agreements and the latest on the applicability of the "common interest" doctrine to M&A communications.

And join us on February 15th for the webcast - "Activist Profiles & Playbooks" - to hear Bruce Goldfarb of Okapi Partners, Tom Johnson of Abernathy MacGregor, Renee Soto of Sotocomm and Damien Park of Hedge Fund Solutions identify who the activists are - want what makes them tick.

And join us on March 29th for the webcast - "Structuring, Negotiating & Litigating Public Deals: Has the Pendulum Moved?" - to hear Greenberg Traurig's Cliff Neimeth, Richards Layton's Ray DiCamillo and Richards Layton's Mark Gentile analyze how recent Delaware case law and statutory changes are influencing the way that M&A deals are structured, negotiated, and litigated.

And join us on May 4th for the webcast - "Public Company Carve-Outs: The Nuggets" - to hear Sidley Austin's Sharon Flanagan, Sullivan & Cromwell's Rita O'Neill and Schulte Roth's Claudia Simon discuss the latest on cutting-edge carve-out techniques & all the related developments.

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 info@deallawyers.com - or call us at 925.685.5111.

Upcoming Webcast on Section16.net: Join us on January 31st for the webcast - "Alan Dye on the Latest Section 16 Developments" - to hear Alan Dye of Section16.net and Hogan Lovells discuss the most recent updates on Section 16, including new SEC Staff interpretations and Section 16(b) litigation.

Corp Fin Director Keith Higgins to Leave!

In early December, the SEC announced that Corp Fin Director Keith Higgins is leaving in early January. We are happy for Keith – sad for the rest of us. Keith did an amazing job under tough circumstances. For example, getting the "disclosure effectiveness" project off the ground was a huge challenge. Having seen the launch of the "aircraft carrier" up close, Broc knows how difficult it is to engage in comprehensive reform. Directors never get the time to achieve their goals these days, as Congress gives them plenty to do. We're sure we would have even seen more change during Keith's tenure if he was given the leash.

And Keith is among the best speakers out there. His wit never dimmed, even wearing the "Gov" mantle...we're glad that Keith got this rousing standing "O" at the ABA meeting last month...

Deputy Director Shelley Parratt will serve as Acting Director as she did during the last transition...

Our New "John Tales" Blog!

Education by entertainment! The new blog on DealLawyers.com – "John Tales" – will teach you the kinds of things that you don't learn at conferences, nor in treatises or law firm memos. John Jenkins is a 30-year vet of the deal world & he brings his humorous stories to bear on this new "long-form" blog.

When you check out "John Tales" – located at the top left corner of the DealLawyers.com home page – insert your email address when you click the "Subscribe" link if you want these precious tales pushed out to you!

Bonus! "Broc Tales" is coming to TheCorporateCounsel.net in January!

ISS Updates Slew of FAQs - & P4P White Paper

Recently, ISS updated the FAQs for Equity Plan Compensation, Executive Compensation Policies and Peer Groups – along with an updated pay-for-performance white paper to reflect the new financial performance alignment test...

IPOs: No Action Blessing for "Conditional Offers to Buy"

Corp Fin recently issued a no-action letter to Morgan Stanley regarding the use of "conditional offers to buy" – or "COBs" – in connection with IPOs. COBs are intended to facilitate sales to retail investors by providing a way for them to commit to a deal without having to be available to their financial advisors during the period between pricing and the commencement of trading. This Cydney Posner blog reviews the mechanics of the COB process laid out in Morgan Stanley's request.

COBs are not a new idea – and have been sanctioned in concept by Corp Fin since at least 1999's Wit Capital no-action letter. What's interesting about Morgan Stanley's letter is that it lays out detailed procedures that are to be followed in using COBs as part of the offering process. The desire to obtain some comfort on those procedures may reflect Morgan Stanley's past regulatory issues in this area – the bank was fined $5 million by FINRA in 2013 for shortcomings in its IPO procedures applicable to conditional offers & indications of interest.

How Will the SEC Reach Quorum With Only Two Commissioners?

Recently, a member asked why doesn't SEC Chair White cram in a bunch of rulemakings while she can. Putting aside how she likely would be sensitive to the optics of that, Broc reminded the member that Commissioner Piwowar can stop any rulemakings simply by not showing up – as the SEC's rules require three Commissioners to be present to reach quorum (as noted in this blog).

The question then arises as to how will the SEC reach quorum when Chair White leaves on Inauguration Day. At that point, only Commissioners Piwowar & Stein will be on the Commission – and it likely will take the new Administration awhile to getting around to nominating new Commissioners (& then the Senate to confirming them).

No worries. Back in the 90s, President Clinton was slow to nominate new members to federal agencies and the SEC dropped down to a level of two Commissioners for a spell – Chair Levitt & Commissioner Wallman. In order to get business done, the SEC amended its rules to accommodate the Commission when it drops to such a low level. "The Rule of 2" – adopted in 1995 – is still on the books:

§200.41 Quorum of the Commission.

A quorum of the Commission shall consist of three members; provided, however, that if the number of Commissioners in office is less than three, a quorum shall consist of the number of members in office; and provided further that on any matter of business as to which the number of members in office, minus the number of members who either have disqualified themselves from consideration of such matter pursuant to §200.60 or are otherwise disqualified from such consideration, is two, two members shall constitute a quorum for purposes of such matter.

So the quorum rules are different when there are three sitting Commissioners as compared to two.

Corp Fin: CDIs Here, CDIs There, CDIs, CDIs Everywhere!

Getting them out the door before Keith Higgins' imminent departure, Corp Fin dropped a whopping 35 new CDIs in mid-December, covering a broad range of topics. Here's the inventory:

– 5 new Exchange Act Forms CDIs: Form 20-F

– 2 new Securities Act Forms CDIs: F-Series Forms

– 7 new Exchange Act Rules CDIs: Rules 3a11-1 to 3b-19

– 2 new Exchange Act Rules CDIs: Rules 12g-3 & 12h-3

– 6 new Securities Act Rules CDIs: Rule 144A

– 7 new Securities Act Rules CDIs: Rule 405

– 6 new Securities Act Rules CDI: Rules 902 & 903

SEC's Chief Accountant Speaks: Disclose More on New Accounting Standards

As noted in these memos posted in our "Conference Notes" Practice Area, the SEC has posted its annual slew of speeches (see the December 5th stuff) – a total of 10 – made by members of its Chief Accountant's office at the big AICPA conference.

Chief Accountant Wes Bricker's speech highlighted what the Staff has been out saying before – that the impact of new accounting standards need to be disclosed more fully. With new revenue recognition (see also this speech) & lease standards becoming effective soon, this is something to bear in mind for this proxy season. Wes also covered questions that audit committees should be asking...

Crowdfunding: "Take It or Leave It" Approach to Investors?

Andrew Abramowitz has an interesting take on the potential for crowdfunding & new Regulation A to tilt the playing field in favor of issuers:

Traditional capital-raising involves spending an enormous amount of time with potential investors, explaining the business, responding to due diligence requests, etc. In addition, when there is an investor syndicate rather than just one investor, the different members of the syndicate may have different requests/concerns, so the process is like herding cats. In contrast, at least in theory, with crowdfunding and Regulation A, once the proper disclosure is prepared and posted for investor review, the investors make their choices, and if there's enough interest, you just go ahead and close.

Of course, a potential crowdfunding investor can decide to ask detailed questions of the company and try to negotiate terms of the offering. However, the dynamic is different than the venture capital scenario if the questioning investor is proposing to invest, say, $1,000. The company may try to be responsive up to a point, but when the individual investments are in small increments, it's easier for the company to maintain a take it or leave it attitude.

Time will tell whether there is enough investor interest for crowdfunding to be a workable alternative to traditional methods of fundraising. But if we get to a point where a company only needs to take a week or so to put together the necessary disclosure, rather than taking out a few months or more to negotiate with individual investors, crowdfunding could prove to be an attractive way to do things.

Speaking of crowdfunding's potential to flip the script – check out VidAngel. This company reportedly raised over $6 million in the first part of its Reg A+ offering in just two days. It took a break to blue sky the deal in more states, reopened it to investors – and promptly raised another $4 million in three days. The deal's done – but the entertaining video offering circular lives on!

Trump Transition: Rolling Back Rules Harder Than It Might Seem...

Here's the intro from this great WSJ article: President-elect Donald Trump's promise to eliminate regulations on U.S. businesses will likely take years to fulfill given the complex steps involved in reversing them and political and legal challenges from Democratic lawmakers and state attorneys general. Mr. Trump has said his administration will take aim at regulations across industries, and he will be backed by congressional Republicans eager to undo some of the more controversial Obama administration initiatives. Big targets include power-plant regulations and regulatory rules imposed on banks and financial institutions after the financial crisis of 2008, though the effort will also reach deep into the federal bureaucracy to include rules involving labor, telecommunications and health care.

Mr. Trump has a handful of ways to reach his goal, but they mostly point to a slow death of attrition for the Obama rules rather than an immediate elimination. He can opt not to defend rules currently tied up in court. His federal agencies can write new rules to justify revoking the ones he wants to eliminate. He can work with the GOP-controlled Congress to nullify recently completed regulations and restrict funding to certain parts of departments as a de facto way to hamstring a rule's force.

In some cases, replacing rules will be as arduous as making them in the first place, particularly in the financial sector where some regulations have been issued by multiple agencies. The Volcker rule, which bans banks from making hedge-fund-like wagers, was adopted by five financial regulatory agencies. All five agencies would need to agree to changes for them to apply broadly. The Trump administration could loosen its enforcement of rules promulgated under Mr. Obama. That could make a difference where rules can be interpreted subjectively, such as in the case of the Volcker rule.

But where explicit rules are on the books, companies would be taking a risk by not complying, and there is no guarantee that career government staffers would agree to simply drop their enforcement actions.

Experience shows the difficulty of unraveling rules. Eight years ago the incoming Obama team pledged to review rules from the George W. Bush administration, including many so-called "midnight regulations" that were pushed through as Mr. Bush was preparing to leave office.

But of the more than 4,500 proposed or final regulatory actions cleared by the Bush White House, Mr. Obama repealed just 74 in his first nine months in office, when rules are most-often revisited, according to a 2009 presentation by a former official of the White House Office of Management and Budget. Of those, only 34 were final rules.

Insider Trading: High Court Says Tipper's Gift = "Personal Benefit"

In early December, the US Supreme Court officially removed stock tips from this year's holiday gift list. In Salman v. United States, the Court unanimously affirmed that a tipper's gift of inside information can satisfy the "personal benefit" requirement of Dirks v. SEC. The Court rejected the view of the 2nd Circuit's 2014 decision in U.S. v. Newman, which required a "tangible benefit" in order to support an insider trading conviction. In his opinion, Justice Alito wrote that:

To the extent the Second Circuit held that the tipper must also receive something of a 'pecuniary or similarly valuable nature' in exchange for a gift to family or friends . . . we agree with the Ninth Circuit that this requirement is inconsistent with Dirks.

This Sullivan & Cromwell memo notes that although Salman resolves uncertainties that Newman created about the personal benefit requirement, it leaves many unanswered questions:

Salman removes the uncertainty about insider-trading liability introduced by Newman, reaffirming the long-standing principle that a mere gift of information to "a trading relative or friend" is sufficient to constitute the requisite "personal benefit" to support liability for both the tipper and tippee. Yet Salman left unanswered important questions about the reach of liability, including:

(1) what sort of relationship is sufficient to meet the "relative or friend test"?

(2) where a tippee is not a "friend or relative," what constitutes an exchange sufficient to constitute a non-pecuniary "personal benefit"? and

(3) what will constitute legally sufficient proof of knowledge of a "personal benefit" by remote, downstream tippees?

We're posting oodles of memos in our "Insider Trading" Practice Area.

Whistleblowers: Yet Another SEC Enforcement Action on Separation Agreements

The SEC's Enforcement Division is on another whistleblower tear. On the heels of this blog about an action involving severance agreements, here's this settlement with SandRidge Energy over separation agreements. This WSJ article says more of these cases to come...

Joe Hall on Life as a Corporate Lawyer

Check out this 30-minute podcast with Joe Hall of Davis Polk in Manhattan, another born n' bred big legal mind. With nearly 30 years of practice under his belt, Joe leads the corporate governance practice at Davis Polk – one of Broc's favorite law firms – and has a wealth of capital markets experience, both on the issuer and the underwriter side.

Joe has left Davis Polk twice: once to go in-house for a few years and once to work for SEC Chair Bill Donaldson in DC, during the height of Sarbanes-Oxley rulemaking – but has always returned to what he feels is his true home, Davis Polk.

More recently, Joe has led his firm into the art of podcasting – launching the firm's "Before the Board" podcast series. Check it out on iTunes & other platforms today!

This podcast is also posted as part of our "Big Legal Minds" podcast series. Remember that these podcasts are also available on iTunes or Google Play (use the "My Podcasts" app on your iPhone and search for "Big Legal Minds"; you can subscribe to the feed so that any new podcast automatically downloads...

NYC Triple Threat on That's So Random

This is a fun one! In this 22-minute podcast, our NYC trio – Roshni Banker Cariello and Melissa Glass of Davis Polk, as well as Connor Kuratek of Marsh & McLennan – discuss the latest in random things about life, including:

1. Hometowns
2. Office sizes
3. Deal cubes
4. TV shows about NYC
5. Holiday parties
6. Pencils

This podcast is also posted as part of our "Big Legal Minds" podcast series. Remember that these podcasts are also available on iTunes or Google Play (use the "My Podcasts" app on your iPhone and search for "Big Legal Minds"; you can subscribe to the feed so that any new podcast automatically downloads...

Calling All Corporate Secretaries! Your Golden Ticket Is Here!

John & Broc had a lot of fun taping our 6th "news-like" podcast. This 8-minute podcast is about the director who was insider trading during a board meeting, placing an order for the target company's stock when the deal was not yet announced! We also discuss the SEC's "links to exhibits" proposal.

For those in charge of managing the board, this podcast explains how this SEC enforcement case is your "Golden Ticket"! You want to be aware of this case because it's a great hook to get the attention of your directors when you're reminding them of their insider trading & Section 16 obligations. Shucks, it may even help you when you ask for a raise! I highly encourage you to listen to these podcasts when you take a walk, commute to work, etc.

This podcast is also posted as part of our "Big Legal Minds" podcast series. Remember that these podcasts are also available on iTunes or Google Play (use the "My Podcasts" app on your iPhone and search for "Big Legal Minds"; you can subscribe to the feed so that any new podcast automatically downloads...

Cap'n Cashbags: Insider Trading During a Board Meeting

What can be better than a reenactment of how this situation above went down? In this 30-second video, a director places a trade with her broker to buy shares in the company being acquired while she is learning about the not-yet-announced deal...

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:

- Issuing Shares Via Blockchain: Delaware Poised to Act
- Describing an Officer's Duties 101
- Data Privacy: More Federal Agencies Join Enforcement Bandwagon
- Stats: Controlled Companies
- How Law Firms Should Strengthen Their Cybersecurity

People: Who's Doing What & Where

SEC Enforcement Chief to Leave by Year-End

In early December, the SEC announced that Enforcement Director Andrew Ceresney will leave the agency by the end of the year. The release notes that the SEC filed more than 2,850 enforcement actions & obtained more than $13.8 billion in monetary sanctions during his tenure. The SEC also charged over 3,300 companies & over 2,700 individuals - including many CEOs, CFOs, & other senior corporate officers. Stephanie Avakian will become the Acting Director of Enforcement.

This announcement is on the heels of the one about Keith Higgins' pending departure. As Broc blogged, this exodus of Senior SEC Staffers is normal when the Administration changes hands...

Conference Calendar

What's New on Our Websites

Among other new additions, during the last month we have:

Your Input, Please

Please let us know what you like - and don't like - so we can tailor TheCorporateCounsel.net to be more of a hands-on resource for you and your colleagues.

Because we view TheCorporateCounsel.net as a "community" site, let us know if you would like to contribute content to our site. E-mail comments, suggestions and other input to broc.romanek@thecorporatecounsel.net.

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