E-Minders December 2014


In This Issue:

E-Minders is our monthly e-mail newsletter containing the latest developments and practical guidance for corporate & securities law practitioners.

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2015 Edition of Romanek's "Proxy Season Disclosure Treatise": Broc Romanek has wrapped up the 2015 Edition of the definitive guidance on the proxy season— Romanek's "Proxy Season Disclosure Treatise & Reporting Guide." With over 1450 pages—spanning 32 chapters—you will need this practical guidance for the challenges ahead.

Popular "Romeo & Dye Section 16 Forms & Filings Handbook": Good news. Alan Dye has completed the 2014 edition of the popular "Section 16 Forms & Filings Handbook," with numerous new—and critical—samples included among the thousands of pages of samples. Remember that a new version of the Handbook comes along every 4 years or so—so those with the last edition have one that is dated. The last edition came out in 2009.

Act Now: Try a '15 no-risk trial to the "Romeo & Dye Section 16 Annual Service" - and we will mail this invaluable resource to you now that it's done being printed.

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" is finished. 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.

Upcoming Webcasts on TheCorporateCounsel.net: Join us on January 14th for the webcast - "Governance Roadshows: In-House & Investor Perspectives" - during which Vanguard's Sarah Goller, BlackRock's Michelle Edkins, Morrow & Co's Bill Ultan and Global Governance Consulting's Susan Wolf will explain governance roadshows - including provide practice pointers about what works - and what doesn't.

And join us on January 20th for the always entertaining webcast - "Pat McGurn's Forecast for 2015 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 2014 proxy season and what to expect for 2015.

And join us on February 11th for the webcast - "Conflict Minerals: Tackling Your Next Form SD" - to hear our own Dave Lynn of Morrison & Foerster, Schulte Roth'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 2015.

And join us on March 3rd for the webcast - "Conduct of the Annual Meeting" - to hear Randy Clark of Sempra Energy; Angela Hilt of Clorox; Carol Ward of Mondelez International and Carl Hagberg of The Shareholder Service Optimizer explain how they handle the many challenges of running an annual shareholders meeting.

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 15th 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 say-on-pay-including the latest SEC positions-and the other compensation components of Dodd-Frank, as well as how to handle the most difficult ongoing issues that many of us face.

And join us on January 28th for the webcast - "Executive Compensation Litigation: Proxy Disclosures " - to hear Pillsbury's Sarah Good, Shearman & Sterling's Doreen Lillenfeld and Winston & Strawn's Mike Melbinger as they drill down on how proxy disclosure-related lawsuits are faring and what you can do to avoid them.

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 29th for the webcast - "Proxy Solicitation Tactics in M&A" - to hear Okapi Partners' Chuck Garske, Alliance Advisors' Waheed Hassan, Managing Director and Innisfree's Scott Winter discuss the latest techniques used to sway opinion and bring in the vote - including social media - as well as how traditional tactics have evolved.

And join us on February 5th for the webcast - "Rural/Metro II: Aiding & Abetting Breach Claims Now" - to hear Steve Haas of Hunton & Williams, Kevin Miller of Alston & Bird and Blake Rohrbacher of Richards Layton discuss the pair of decisions 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.

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 27th 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.


Proxy Access: Will the Whole Foods No-Action Request Maim Private Ordering?

Proxy access is back to being red hot. So hot that we just calendared this webcast in a few weeks: "Proxy Access: A New World of Private Ordering." Why is it hot? Some pension funds are frustrated because it's been three years since the court struck down part of Rule 14a-11 and the SEC hasn't acted further. In addition, they are angry that many boards are ignoring majority votes "against" individual directors - these boards are keeping directors on by declining to accept their resignations.

As a result, as Broc blogged, the New York Comptroller has launched a "Boardroom Accountability Project" - through which 75 companies have received a 3%/3-year proxy access proposal (this is the formula that has received majority support so far). And other pension funds are weighing whether to submit similar proposals to other companies.

Meanwhile, as Broc blogged on the "Proxy Season Blog," Whole Foods has submitted a no-action request to Corp Fin arguing that a 3%/3-year proxy access proposal (submitted by retail holder Jim McRitchie) should be excluded because the company intends to have its own proxy access proposal on the ballot - with a 9%/5-year formula! So Whole Foods is seeking exclusion under Rule 14a-8(i)(9), arguing that the 3%/3-year shareholder proposal is an excludable counterproposal.

As the Whole Foods request argues, the Corp Fin Staff frequently permits companies to exclude shareholder proposals asking companies to provide shareholders with the right to call special meetings on the basis of Rule 14a-8(i)(9), when companies agree to ask shareholders to vote on management proposals at a different ownership threshold level than those sought in the shareholder proposals. But as noted in the proponent's rebuttal (also noted in this blog), the company's proposal includes a proxy access threshold that likely would never be triggered - Whole Foods' largest shareholder owns just 5.4%.

Given that the date of the Whole Foods no-action request is October 23rd, Corp Fin should be making a decision in early-to-mid December. The ramifications of that could be quite important, as it could well end the private ordering movement just as it was really getting started...

Here's a blog from "The Activist Investor" entitled "The Proxy Access Project We Need" - and here's one entitled "How Activists Collaborate"...


Proxy Access: Many Shareholder Proposals Coming!

Did you see this NY Times article that notes that 75 companies will be receiving shareholder proposals seeking proxy access from a group of institutions led by the New York City pension funds? Wow! Here's the NY Comptroller's press release, a list of the companies receiving the proposals - and a sample proposal. The initiative is called the "Boardroom Accountability Project."

Also, as noted in this blog by Davis Polk's Ning Chiu, the CFA Institute recently came out with a study that is being cited in shareholder proposals that proxy access has the potential to raise U.S. market capitalization by between $3-$140 billion. As Ning notes, by examining 16 companies that have adopted proxy access globally, including 4 US companies, the study concludes that slightly more than half of the companies experienced positive one-day returns following proxy access, 63% had positive returns in the year following the adoption, and around 71% outperformed their industries. Some of the other studies analyzed demonstrated negative outcomes - and a few were not included due to what the study deemed to be faulty methodology.


SEC's Reg Flex Agenda: Pay Rulemakings Pushed Back to October '15

As Broc has blogged many times (here's the latest one), the SEC's Reg Flex Agendas tend to be "aspirational" - and experience bears that out as the SEC often misses its "targeted" deadlines. So no sooner than Broc blogged about Corp Fin's silence about the timing of Four Horsemen rulemakings at the ABA Fall meeting in late November, the SEC issued its latest Reg Flex Agenda. This Reg Flex Agenda notes that the pay ratio rules would be adopted by October 2015 (same with investment managers disclosing their say-on-pay votes) - and that the clawback, pay-for-performance and hedging rules would be proposed by October 2015 as well. We'll see if that really happens. Don't hold your breath...


ISS Issues 2015 Policy Updates

In early November, ISS released their '15 policy updates for 2015. We are posting memos in our "Proxy Advisors" Practice Area. And our "Proxy Advisors Handbook" is coming soon...


Glass Lewis (Quietly) Issues 2015 Proxy Voting Guidelines

Without much fanfare, in early November, Glass Lewis posted its "Guidelines for the 2015 Proxy Season," which includes a summary of the changes to its policies for the upcoming proxy season on pages 1-3.


SEC Brings 10 Enforcement Actions for Failing to File "Stock Dilution" 8-Ks

In early November, the SEC announced enforcement actions against 10 companies for failing to file Form 8-Ks about financing deals and unregistered sales that diluted their stock. Companies are required to file a 8-K when stock is sold in transactions that are not registered and constitute at least 5% of their outstanding stock. Companies also must file a 8-K when they've entered into a financing agreement not made in the ordinary course of business. Each of the 10 companies failed to make the required 8-K disclosure - and 3 additionally failed to use accurate numbers when later reporting the dilution in 10-Qs/10-Ks. All of the companies settled the SEC's charges, each paying $25-50k for a total of $350k in penalties among the group.

According to the SEC's press release, the following regs were implicated:

- Item 1.01 of Form 8-K, a registrant must disclose within four business days its entry into a material definitive agreement.
- Item 3.02 of Form 8-K, a smaller reporting company must disclose within four business days the unregistered sales of equity securities unless they constitute less than 5% of the number of last reported shares outstanding of the class of equity securities sold.
- Form 10-Q or 10-K, issuers must disclose the number of outstanding shares of their common stock as of the latest practicable date, and the information must be true, correct, and complete.

Here's an excerpt from this blog by Steve Quinlivan: "The majority of the charged issuers appeared to be sitting ducks, with the increases reportedly being between 95% and 35,000%, with others at 7%, 15%, 25% and 50%. Seven percent may be a "broken window" but it seems hard to take that position with some of the others. It is also interesting no one was charged for disclosure controls and procedure violations and no individuals were charged."


Dodd-Frank: Republican Senate Takeover Could Bring Changes

Many are asking what the GOP's takeover of the Senate might mean for the SEC's pay ratio proposal, among others. It's too soon to tell - but it's a good bet that Chair White's "hope & expectation" to adopt the pay ratio rules by the end of this year might not happen. But you never know. Anyways, this memo from Greenberg Traurig lays out a bunch of possibilities about how Dodd-Frank could change, including an observation that 60 votes in the Senate is needed to pass changes to Dodd-Frank (meaning that some Democratic Senators must cross party lines) and musings about who is now likely to chair the Senate Banking Committee, which oversees the SEC (Sen. Richard Shelby (R-AL) - again!)...


Conflict Minerals: Panel Rehearing Granted on 1st Amendment Issues!

As noted by Cooley's Cydney Posner in this blog, the DC Circuit court of Appeals has granted the petitions of the SEC and Amnesty International for a panel rehearing (and the motion of Amnesty to file a supplemental brief) in connection with NAM v. SEC. (The Court also ordered that the petitions filed for rehearing en banc be deferred pending disposition of the petitions for panel rehearing.)

The per curiam order of the Circuit Court directs the parties to file supplemental briefs addressing the following specific questions related to the First Amendment:

(1) What effect, if any, does this court's ruling in American Meat Institute v. U.S. Department of Agriculture, 760 F.3d 18 (D.C. Cir. 2014) (en banc), have on the First Amendment issue in this case regarding the conflict mineral disclosure requirement?

(2) What is the meaning of "purely factual and uncontroversial information" as used in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985), and American Meat Institute v. U.S. Department of Agriculture, 760 F.3d 18 (D.C. Cir. 2014) (en banc)?

(3) Is determination of what is "uncontroversial information" a question of fact?

We have calendared a webcast to help you prepare for your next Form SD


Twist to Fee-Shifting Bylaws: Limit Suing Ability of Small Shareholders

As highlighted in this RacetotheBottom blog and Reuters article - and analyzed in this Cooley blog - Imperial Holdings, a Florida corporation, is trying out a permutation on fee-shifting bylaws: requiring plaintiffs to obtain consents to the litigation from shareholders holding shares in excess of a minimum threshold (3% of the outstanding). The problem the bylaw seeks to address is that shareholder litigation is frequently launched by counsel representing shareholders with only nominal stakes. Here's the "consent by other shareholders" bylaw.

Meanwhile, in the fee-shifting bylaw lawsuit in Delaware, the defendants have opposed a limit on discovery...


SEC & FASB Issue Guidance on Pushdown Accounting

In late November, the SEC's Office of the Chief Accountant & Corp Fin jointly released Staff Accounting Bulletin #15 to rescind portions of the interpretive guidance included in its SAB Series for what's known as pushdown accounting. To reflect private sector developments in GAAP, the SAB #115 rescinds SAB Topic 5.J. entitled New Basis of Accounting Required in Certain Circumstances. The new bulletin brings existing guidance into conformity with FASB Update No. 2014-17 - Business Combinations (Topic 805): Pushdown Accounting, a consensus of the FASB Emerging Issues Task Force, which was ratified by the FASB last month and issued recently too...


More on "EDGAR Dissemination: Still Favoring Subscribers?"

In early November, Broc blogged about a study that found that paying subscribers appear to gain access to SEC filings ahead of the rest of us. Good news! This WSJ article notes how that advantage has steadily dwindled over the past week since the mass media has been covering this story. Here's an excerpt from that article:

On Tuesday, filings were published on the SEC's website an average of 35 seconds after Mr. Jackson received them on his direct feed. The lag dropped to 27 seconds on Wednesday, when the Journal article was published. On Thursday and Friday the delay narrowed even more, with filings appearing on the SEC's "Edgar" site an average of about three seconds and 2.5 seconds, respectively, after being published on Mr. Jackson's feed. The drop in the lag time continued Monday, according to Mr. Mitts.


Poll Results: When Did EDGAR Filings Become Available in Real-Time? Shocking Answer of 2002

Broc also ran a poll in this blog about when EDGAR filings became available to the general public in real-time. For some reason, he wasn't shocked that only 22% guessed the right answer - that the delay of SEC's EDGAR database being available to the general public only after a 24-48 hour delay ended in 2002. Broc wasn't shocked because the right answer is so unbelievable. Anyways, 41% guessed 1995 and 29% guessed 2000 (6% guessed 1989 and 2% guessed 1987). His lack of surprise is that it's shocking that this incredible delay continued for years and years after EDGAR was born...


Survey Results: Earnings Releases and Earnings Calls

Here are the results from a recent survey on earnings releases and earnings calls (the last similar survey was in '07):

1. Regarding the archiving of earnings calls on our corporate web site:

- We archive them for one quarter - 31%
- We archive them for six months - 3%
- We archive them for between 6 and 12 months - 6%
- We archive them for 12 months - 40%
- We archive them for over one year - 11%
- We don't archive our earnings calls - 9%

2. When we make/provide our earnings calls and related materials timely by a broadly available webcast and/or teleconference:

- We always file (or "furnish") the transcript and related materials on a Form 8-K - 14%
- We sometimes file (or "furnish") the transcript and related materials on a Form 8-K - 3%
- We never file (or "furnish") a transcript and related materials on a Form 8-K (unless material information was disclosed during the earnings call that was not disclosed in the earnings release) - 84%

3. During the past few years:

- We have changed our earnings release practices, so that such releases coincide with our 10-Q filings - 28%
- We have kept our earnings release practices the same, and they get released a few weeks before our 10-Q filings - 22%
- We have kept our earnings release practices the same, and they get released a few days before our 10-Q filings - 17%
- We have changed our earnings release practices, so that they get released closer to the time of our 10-Q filings - 8%
- Our earnings releases have always been released at the same time as the 10-Q filings - 25%
- We decided to no longer provide earnings releases at all - 0%

4. In the near future:

- We definitely intend to revise the timing of our earnings releases so that they coincide with our 10-Q filings (or no longer provide earnings releases at all)- 0%
- We might revise the timing of our earnings releases so that they coincide with our 10-Q filings (or no longer provide earnings releases at all) - 10%
- We don't need to change our earnings release practices because we recently did so - 43%
- We are comfortable with our earnings releases being issued before our 10-Q filings and don't need to review those practices - 47%
- We already no longer provide earnings releases at all - 0%

5. We issue our earnings releases:

- Immediately before the start of the earnings calls - 17%
- Two hours before start of the earnings calls - 42%
- More than two hours before the start of the earnings calls - 42%
- During or immediately after earnings calls - 0%
- After, but within four business days of the earnings calls - 0%

6. We disclose earnings guidance:

- In the text of the earnings release - 23%
- During the earnings call, but not in the text of the earnings release - 17%
- On a Form 8-K filing, but not in the text of the earnings release - 0%
- In the text of the earnings release as well as during the earnings call - 23%
- On a Form 8-K filing and in the text of the earnings release - 3%
- During the earnings call, on a Form 8-K filing and in the text of the earnings release - 17%
- We do not give earnings guidance - 17%

7. We provide archives of our earnings calls (eg. calling them "podcasts" sometimes):

- On our website only - 75%
- On iTunes only - 0%
- On both our website and iTunes - 0%
- We do not provide audio archives of our earnings calls - 25%

Take a moment to participate in our "Quick Survey on Shareholder Engagement" and our "Quick Survey on Whistleblower Policies & Procedures."


Fifth Time's A Charm: Series Of Corporate Disclosures, Together, Can Be A "Corrective Disclosure"

As noted in this blog, a federal appeals court recently revived a securities class action that had been dismissed by the trial court for failure to plead loss causation. In Public Employees Ret. Sys. of Mississippi v. Amedisys, 13-30580 (5th Cir.; 10/14), the court found that a series of partial disclosures could collectively constitute a "corrective disclosure" of the defendant's misrepresentations, which the plaintiffs plausibly alleged caused a decline in the defendant's stock price.


SCOTUS: Oral Arguments in Omnicare

In early November, the Supreme Court heard oral arguments in Omnicare v. The Laborers District Council Construction Industry Pension Fund, No. 13-435, to decide the standard of liability for statements of opinion. Is it enough for a plaintiff to show that a statement of opinion was incorrect or lacked a reasonable basis? Or should a plaintiff also be required to show that the opinion was subjectively false? Liability under that standard would turn on whether the speaker sincerely believed the opinion or not. This MoFo memo covers what was argued in the briefs filed - as well as summarizes what transpired during oral argument. And here's the analysis from the SCOTUS Blog that the court is likely to affirm - and analysis from Lane Powell's Claire Loebs Davis...


Our New "NYSE Listing Standards Handbook"

Spanking brand new. By popular demand, this comprehensive "NYSE Listing Standards Handbook" covers the corporate governance listing standards for companies listed on the NYSE. A "must have" for any listed company (or for those that work for listed companies). This one is a real gem - 114 pages of guidance.


November-December Issue: Deal Lawyers Print Newsletter

This November-December Issue of the Deal Lawyers print newsletter includes:

- What's the Big Deal? Why Some Seemingly Material Acquisition Agreements Might Never See the Light of Day
- The Quest for Universal Ballots: Might Boards Benefit Too?
- Amendment to Delaware's Statute of Limitations Rules: Drafting Tips
- The Continuing Importance of Process in Entire Fairness Review: In re Nine Systems
- Respecting Boilerplate: Scope and Communications Provisions

If you're not yet a subscriber, try a 2015 no-risk trial to get a non-blurred version of this issue on a complimentary basis.


People: Who's Doing What and Where

Disclosure Effectiveness: SEC Awards Contract to Modernize EDGAR

Recently, the SEC acted on this RFP to modernize Edgar, a massive undertaking which is an important component of the disclosure effectiveness project. Fulcrum IT was awarded this contract, although I'm not certain if that is for the entire reform (as I can't find any press release/article written about it - and this contract is worth $5 million; entire modernization estimated to cost $16 mil). The SEC is looking to effectively replace EDGAR by reducing its complexity and reduce costs both to the agency and filers - including a reduction in the number of form types and acceptable data formats.

How is Morale at the SEC? A 2014 Job Satisfaction Survey

Here's the SEC's 2014 Federal Employee Viewpoint Survey. You can see how the various Divisions & Offices within the SEC compare to each other, as well as how the responses compare to a government wide ratio. The overall number of responses is pretty high, 2472 Staffers. Compare the results to last year's survey...

This DealBook article really slams the performance of SEC Chair White after one year...


Conference Calendar


What's New on Our Websites

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


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