October 1, 2014

Coca-Cola’s New “Equity Stewardship Guidelines”

Back in May, I blogged about a flap over Coca-Cola’s equity compensation plan. Showing how shareholder engagement works, the company announced this morning that its Compensation Committee has adopted “Equity Stewardship Guidelines” for the company’s equity plan.

Perhaps just as interesting is that the Compensation Committee Chair pushed out a blog on the company’s “Unbottled” blog about the announcement.

This looks to be a pretty innovative approach to explaining how shares under the equity plan will be used responsibly, while addressing the criticism about the plan. In addition to including a burn rate commitment that is expected to make the plan last its full term of 10 years, the Guidelines provide that Coca-Cola will include information on actual dilution, burn rate and overhang in their proxy statement each year. Plus they will continue to minimize dilution through share repurchases and encourage an open dialogue with shareholders about compensation. I look forward to seeing what they do in their next proxy statement…

All of the video archives from our two days of executive pay conferences are now posted…

Bad Actors: SEC Grants Waivers to Citigroup

In this WSJ article, Andrew Ackerman writes about these Citigroup “bad actor” waivers (here’s the 2nd one):

U.S. securities regulators quietly granted Citigroup waivers from restrictions that would have crimped a range of the bank’s activities, including selling investments in hedge funds to individuals, following a recent securities-fraud settlement. The Securities and Exchange Commission, which in August completed a $285 million settlement with Citigroup over allegations related to complex debt instruments, granted the waivers late Friday.

The relief allows Citigroup to resume selling investments in hedge funds and private-equity funds to wealthy clients. The bank also retains its special status as a “well-known seasoned issuer,” or WKSI, which allows large companies to quickly issue stocks or bonds without the speed bump of an SEC review of their offerings. Kara Stein, a Democratic commissioner, dissented on granting Citigroup the expedited filing status, according to a person familiar with the matter.

Citigroup became subject to new restrictions in August, after a federal judge approved the SEC’s 2011 settlement with Citigroup over the sale of certain collateralized debt obligations to clients in late 2006 and early 2007. Under the SEC’s bad actor rule, parties with a “a relevant criminal conviction, regulatory or court order, or other disqualifying event” are restricted from participating in a private offering. The rule, adopted last year, is part of the 2010 Dodd-Frank regulatory overhaul.

Citigroup told clients in August it was working with the SEC to resolve the restrictions over the bank’s sale of hedge funds. The five-member SEC unanimously granted Citigroup its request for a waiver to resume selling so-called private fund investments, accepting the bank’s arguments that its $285 million settlement didn’t involve intentional misconduct or a large number of employees. The SEC grants waivers to let firms conduct normal business, as long as the waiver is seen as being in the public’s interest. The SEC also allowed Citigroup to retain its “WSKI” status, removing a restriction that applied to the bank given the SEC’s finding that Citigroup violated antifraud provisions of U.S. securities laws. Firms found to have violated those laws typically have their special status revoked for three years but are granted the option of appealing the decision.

The agency was divided that waiver, however, with Ms. Stein dissenting. She has repeatedly argued the agency has been too lenient on the largest financial institutions and voted against providing a well-known seasoned issuer waiver for the Royal Bank of Scotland Group PLC earlier this year after the firm reached a $612 million settlement with U.S. and U.K. regulators over allegations that traders at the bank tried to rig interbank lending rates. “Our website is replete with waiver after waiver for the largest financial institutions,” Ms. Stein said at the time, warning the commission’s decision to overturn RBS’s disqualification “may have enshrined a new policy—that some firms are just too big to bar.”

As with the hedge-fund waiver, the SEC granted the expedited filing waiver because the bank’s misconduct was limited in scope and confined to a small group of employees, a person familiar with the matter said. The SEC and Citigroup reached a $285 million settlement in 2011, but U.S. District Judge Jed Rakoff rejected it, saying the terms were “pocket change to any entity as large as Citigroup.” On Aug. 5, following a reversal of that ruling by an appellate court, Judge Rakoff approved the settlement.

Our October Eminders is Posted!

We have posted the October issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!

– Broc Romanek

September 30, 2014

Today: “Say-on-Pay Workshop: 11th Annual Executive Compensation Conference”

Today is the “Say-on-Pay Workshop: 11th Annual Executive Compensation Conference”; yesterday was the “Annual Proxy Disclosure Conference” – and the video archive of that Conference is already posted. Note you can still register to watch online by using your credit card and getting an ID/pw kicked out automatically to you without having to interface with our staff. Both Conferences are paired together; two Conferences for the price of one.

How to Attend by Video Webcast: If you are registered to attend online, just go to the home page of or to watch it live or by archive (note that it will take about a day to post the video archives after it’s shown live). A prominent link called “Enter the Conference Here” – on the home pages of those sites – will take you directly to today’s Conference (and on the top of that Conference page, you will select a link matching the video player on your computer: Windows Media or Flash Player). Here are the “Course Materials,” filled with talking points and practice pointers.

Remember to use the ID and password that you received for the Conferences (which may not be your normal ID/password for or If you are experiencing technical problems, follow these webcast troubleshooting tips. Here is today’s conference agenda; times are Pacific.

How to Earn CLE Online: Please read these FAQs about Earning CLE carefully to see if that is possible for you to earn CLE for watching online – and if so, how to accomplish that. Remember you will first need to input your bar number(s) and that you will need to click on the periodic “prompts” all throughout each Conference to earn credit. Both Conferences will be available for CLE credit in all states except for a few – but hours for each state vary; see the CLE list.

ISS: New Policy Survey Results

Yesterday, ISS released its 2014-2015 policy survey results. 21 pages of interesting data (ie. key findings and detailed survey responses). Here’s analysis from Davis Polk’s Ning Chiu…

Today In “Hmmm”: Auditor Dismissed for Finding Internal Control Deficiencies

This Bloomberg article entitled “Munger Likens Auditor to Doctor Prodding Groin to Treat Nose” caught my eye. Charlie Munger is Warren Buffett’s right-hand man who also owns Daily Journal Corp. – and he fired E&Y after the auditor had determined there were flaws in the company’s accounting for acquisitions and deferred tax provisions (here’s the Form 10-K). Don’t like it when the auditor finds internal control deficiencies? Fire the auditor…

– Broc Romanek

September 29, 2014

Today: “Tackling Your 2015 Compensation Disclosures: Annual Proxy Disclosure Conference”

Today is the “Tackling Your 2015 Compensation Disclosures: Annual Proxy Disclosure Conference”; tomorrow is the “Say-on-Pay Workshop: 11th Annual Executive Compensation Conference.” Note you can still register to watch online by using your credit card and getting an ID/pw kicked out automatically to you without having to interface with our staff. Both Conferences are paired together; two Conferences for the price of one.

How to Attend by Video Webcast: If you are registered to attend online, just go to the home page of or to watch it live or by archive (note that it will take about a day to post the video archives after it’s shown live). A prominent link called “Enter the Conference Here” – on the home pages of those sites – will take you directly to today’s Conference (and on the top of that Conference page, you will select a link matching the video player on your computer: Windows Media or Flash Player). Here are the “Course Materials,” filled with talking points and practice pointers.

Remember to use the ID and password that you received for the Conferences (which may not be your normal ID/password for or If you are experiencing technical problems, follow these webcast troubleshooting tips. Here is today’s conference agenda; times are Pacific.

How to Earn CLE Online: Please read these FAQs about Earning CLE carefully to see if that is possible for you to earn CLE for watching online – and if so, how to accomplish that. Remember you will first need to input your bar number(s) and that you will need to click on the periodic “prompts” all throughout each Conference to earn credit. Both Conferences will be available for CLE credit in all states except for a few – but hours for each state vary; see the CLE list.

What People Are Really Doing When They’re on Earnings Calls

This article from the Harvard Business Review is pretty interesting.

One of the best Ted Talks: Brene Brown on “The Power of Vulnerability.”

– Broc Romanek

September 26, 2014

Could a CEO’s Divorce Materially Affect a Company’s Future?

This Dallas News article set me off. It talks about a CEO keeping his divorce a secret for 10 months. It’s not the board’s business – it’s not the business of shareholders either. My opinion is that folks should be evaluated based on their job performance – not how they manage their personal lives (unless it veers into criminal territory a la Ray Rice).

Of course, your personal life can impact your job performance – and if so, that’s a tough break and that flawed job performance is fair game to be judged on.

But to me, a divorce is no different than hundreds of other situations in our personal lives that might impact someone’s perception of how we perform – but not reflect how we truly perform. And if that’s truly the case, it ain’t no one’s business but your own.

I should note that this case has complicating factors in that the divorce might wind up with the CEO giving 20-30% of the company to his soon-to-be-ex-wife…

More on “Disclosure of Preliminary Voting Results”

As Steve Quinlivan notes in this blog, the “Investor as Owner” Subcommittee of the SEC’s Investor Advisory Committee has issued two recommendations on disclosure of preliminary voting results. The paper making the recommendations has a nice recap and lay of the land in this area…

This MoFo blog notes that a group of Senators has sent in a letter to SEC Chair White about the need to adopt the SEC’s proposal that would make certain changes to Regulation D, Form D and Rule 156. In contrast, SEC Commissioner Gallagher recently delivered a speech urging the SEC to withdraw those proposed rules…

Course Materials Now Available: Many Sets of Talking Points!

For the many of you that have registered for our Conferences coming up on Monday, we have posted the “Course Materials” (attendees received a special ID/PW this week via email that will enable you to access them; note that copies will be available in Vegas). The Course Materials are better than ever before – with over 50 sets of talking points comprising over 150 pages of practical guidance. We don’t serve typical conference fare (ie. regurgitated memos and rule releases); our conference materials consist of originally crafted practical bullets and examples. Our expert speakers certainly have gone the extra mile this year!

For those seeking CLE credit, here’s a list of states in which credit is available for watching the Conferences live in Vegas and by video webcast.

How to Attend by Video Webcast: If you are registered to attend online, just go on Monday to the home page of or to watch it live or by archive (note that it will take about a day to post the video archives after it’s shown live). A prominent link called “Enter the Conference Here” – that will be on the home pages of those sites – will take you directly to Conference. Remember to use the ID and password that you received for the Conferences (which may not be your normal ID/password for or Here is the conference agenda; times are Pacific.

Register Now – There is still time to register for our upcoming pair of executive pay conferences – which starts on Monday, September 29th – to hear Keith Higgins, etc. If you can’t make it to Las Vegas to catch the program in person, you can still watch it by video webcast, either live or by archive. Register now.

Registration for Attendance in Vegas – Walk-Ups Only: Going forward, you are no longer be able to register to attend in Vegas through this site (however, you still will be capable of registering online to watch by video at any time). You can still register to attend in Vegas – you just need to bring payment with you to the conference and register in-person.

– Broc Romanek

September 25, 2014

Live Tweeting Earnings Calls: The Megaphone Effect

In this 80-second video, learn how Zillow’s 43 live tweets during an earnings call led to a potential reach of 3 million (includes a shout-out to Q4’s Darrell Heaps who responded in this video):

SEC’s Enforcement Initiative Against Short Sellers Continues

Last week, the SEC charged 19 firms and one individual trader for engaging in short selling – in particular, stocks shortly before they bought shares from an underwriter or broker participating in a follow-on public offering. Each firm and the individual trader agreed to settle the SEC’s charges and pay a combined total of more than $9 million in disgorgement, interest and penalties.

September-October Issue: Deal Lawyers Print Newsletter

This September-October Issue of the Deal Lawyers print newsletter includes:

– Much Ado About … Conflict Minerals in M&A?
– Exclusive Forum Provisions: A New Item for Corporate Governance and M&A Checklists
– Checklist: Special Committees – M&A Context
– Respecting Boilerplate: Definitions & Rules of Construction

If you’re not yet a subscriber, try a “Free for Rest of ’14” no-risk trial to get a non-blurred version of this issue on a complimentary basis.

– Broc Romanek

September 24, 2014

Nasdaq’s Annual Listing Fees: Going Up

Here’s news from this blog by Gunster’s David Scileppi:

In late August, Nasdaq announced changes to their annual listing fees. Generally, the fees will increase effective January 1, 2015, but Nasdaq is also adopting an all-inclusive annual fee and eliminating its quarterly fees. The new annual fee will now include fees related to listing additional shares, record-keeping changes, and substitution listing events. The all-inclusive fee is optional for issuers until January 1, 2018 at which point it becomes mandatory. Issuers have a choice to make:

Option #1 – An issuer can do nothing and continue to pay an annual fee as well as pay the quarterly fees to list additional shares. Under this method, an issuer will experience increased 2015 fees ranging from 0% to 40% depending on how many shares an issuer has outstanding. Generally, the largest increases are for issuers with less than 10 million shares outstanding (14% increase) and for issuers with more than 100 million shares outstanding (40% if there are between 100 and 125 million shares outstanding and 25% if there are more than 150 million shares outstanding). Think of this option as the same as flying on an airplane. You get a seat (usually), but if you want anything else you need to pay.

Option #2 – Elect to pay an all-inclusive annual fee. Because the all-inclusive annual fee includes the ability to list additional shares during the year, this fee will be higher than the à la carte method. If an issuer wants to elect the all-inclusive method, then the issuer must complete the All-Inclusive Annual Listing Fee Opt-in Form electronically through the Nasdaq Listing Center anytime between now and December 31, 2014. To give issuers some incentive to choose this method, Nasdaq will not increase the listing fees on issuers (who elect to pay the all-inclusive fee) before January 1, 2018 (and its fee can decrease if the number of shares issued and outstanding decreases). This option is like flying on Southwest Airlines. Your ticket includes two checked bags for no extra fee. (But, then again, who checks two bags per person anymore?)

Companies that list on Nasdaq after January 1, 2015 will be required to pay the all-inclusive fee. Nasdaq has included a comparison of the fees to help you make a decision on its website.

The SEC’s 2014-2018 Five-Year Strategic Plan

Last week, the SEC released its 60-page strategic plan for the next five years – 2014 through 2018 – as required by the Government Performance and Results Act of 1993 (the last one was released in 2010). I’ve blogged before about how I dislike five-year horizons for any plan since unforeseen events often change priorities and needs.

A quick perusal of the strat plan doesn’t reveal anything earth-shattering. I think the SEC realizes that five-year horizons are foolish too as I don’t see much of anything beyond what we already expect to potentially come out of the agency. On page 9, it is artfully worded how Congress places limits on the SEC’s resources. The Corp Fin-related content mostly is on pages 37-39. The influence of the Investor Advisory Committee is felt in the strat plan – for example, on pages 20-21, there is discussion about “enhancing” the no-action letter process – and more accurately and promptly responding to informal guidance requests.

Chart: SEC Filing Fees – 2002-2015

It really has been a yo-yo. Thanks to David Westenberg of WilmerHale for providing this chart of the SEC’s filing fees over the years:

2015 – $116.20
2014 – $128.80
2013 – $136.40
2012 – $114.60
2011 – $116.10
2010 – $71.30
2009 – $55.80
2008 – $39.30
2007 – $30.70
2006 – $107.00
2005 – $117.70
2004 – $126.70
2003 – $80.90
2002 – $92.00

And don’t forget our new “SEC Filing Fees Handbook“…

– Broc Romanek

September 23, 2014

Whistleblowers: $30 Million! Time to Quit That Day Job…

Wow. A $30 million whistleblower award. Maybe we all soon will be shopping for a job where the CEO and CFO are crooked? Might be a nice way to cash in. Yesterday, the SEC announced an award of that size to a whistleblower in a foreign country. A whistleblower’s identity is kept confidential so we don’t know exactly where.

The kicker is that the SEC’s order notes that the whistleblower might have been awarded even more money if he had acted sooner in bringing information forward! I would have blown the whistle for a mere $5 million. Maybe there needs to be some kind of cap?!? Here’s analysis from Kevin LaCroix.

Climate Change: $24 Trillion Coalition!

As noted in this press release, big investors and a number of companies want more climate policy certainty in order to make investments. Nearly 350 global institutional investors representing over $24 trillion in assets have called on government leaders – see the press release (and this “Proxy Season Blog” entry) for specific aspects of policy and a price on carbon to move forward…

PCAOB: Staff Alert for Auditors Dealing with Going Concerns

Yesterday, the PCAOB issued Staff Audit Practice Alert #13 to remind auditors to continue to follow existing PCAOB standards when considering a company’s ability to continue as a going concern. Here’s some analysis from the “FEI Daily.”

– Broc Romanek

September 22, 2014

The House’s New JOBS Act Bill: A Closer Look

Buried at the end of a long blog last week was a note that the House passed HR 5405, a JOBS Act-related bill called the “Promoting Job Creation & Reducing Small Business Burdens Act.” HR 5405 is a collection of 10 separate Acts plus more. It’s amazing the House passed anything given that Congress is only working 8 days from mid-July until the end of November!

If enacted into law, it could present a bunch of new Congressionally-mandated tasks for Corp Fin to tackle (a mere 60 days to implement Section 1101’s adjustment to Rule 701 threshold) – thereby reducing the likelihood that we will get effective disclosure reform anytime soon (although Section 1003 requires a study that sounds awfully similar to what Corp Fin is already doing in this area). Or maybe it would ramp up that effort as Section 1002 gives the SEC only 180 days to scale back disclosure requirements for smaller companies – and reduce “duplicative, overlapping, outdated or unnecessary” disclosure requirements for all companies.

There are a number of things in HR 5405 that are already required. Shocker. For example:

– Liquidity pilot program is already required by the JOBS Act and the SEC has a pending proposal from FINRA and the exchanges to implement it.
– Review/streamlining of S-K is already required by the JOBS Act.

Then there is always at least one idiotic thing that finds its way into the work of Congress. In this case, it’s Section 1001 – it would force the SEC to adopt a rule that “allows” companies to use a summary page for its Form 10-K – but companies could only do this if the summary page includes links to more deeper discussions in the 10-K. I’m pretty sure that is already allowed if a company wanted to do it – and it sounds pretty similar to an amplified table of contents…

By the way, HR 5405 includes some Dodd-Frank technical corrections – but it doesn’t include the “wish list” item that stops the SEC’s adoption of a pay ratio disclosure rule. Note that the Chamber issued a letter supporting this bill. And note the controversy over collateralized loan obligations – dealt with in this bill and in a companion bill – as noted in this article. Meanwhile, SEC Commissioner Gallagher delivered this speech last week about institutionalizing a small business focus…

Today’s Webcast: “Cybersecurity Role-Play: What to Do & Who Does What, When”

Does the magnitude of the Home Depot breach rock you to your core? Three times as many credit cards stolen as the Target incident. Tune in today for the webcast — “Cybersecurity Role-Play: What to Do & Who Does What, When” – to hear the FBI’s Richard Jacobs and Cleary Gottlieb’s Louise Parent, Craig Brod, Pam Marcogliese and Jonathan Kolodner role-play a variety of possible cybersecurity scenarios that could happen to you. Please print out these “Hypotheticals” before the program.

And also check out the audio archive for last week’s companion webcast — “Cybersecurity: Working the Calm Before the Storm“— during which Weil Gotshal’s Paul Ferrillo, Hogan Lovells’ Harriet Pearson and Dave Lynn of and Morrison & Foerster analyzed a host of issues that you need to consider now — before you have a security breach.

This WSJ article entitled “Ex-Cyber Spy’s Message to Board Members: You’re Not OK” is an eye-opener…

The Gender Disparity of Social CEOs

In this Huffington Post piece, my good friend Andrea Learned explores the gender disparity in CEOs that leverage social media to get their message across. Check it out!

– Broc Romanek

September 19, 2014

Corp Fin Comment Letters: Insiders Selling Ahead of Their Public Availability?

Geez, I don’t know what to make of this Forbes article – which describes this study that found an abnormal level of selling by insiders in the days before Corp Fin comment letters that contained revenue recognition comments were made public. The total amount of abnormal selling in the 2006-2012 study period was $463 million, or $356k on average. I suppose insiders should be savvy enough to understand accounting comments from Corp Fin and their implications – but I still tend to think this couldn’t be happening on a widespread basis? Let me know what you think.

Comment letters (and the related responses) are made public no earlier than 20 business days after all comments are resolved. Learn more in my “SEC Comment Letter Process Handbook.”

New Bill: “The CEO-Employee Pay Fairness Act”

Yesterday, Rep. Chris Van Hollen – the ranking democrat on the House Budget Committee – introduced “The CEO-Employee Pay Fairness Act.” The bill would prevent companies from obtaining Section 162(m) tax deductions for CEO bonuses unless certain employee salaries were raised. The bill’s goal is for companies to reward all workers — not just top executives and major shareholders — for the company’s gains in productivity. Here’s a Washington Post article – and here’s an article from The Hill…

Resource Extraction Rules: SEC Sued (Again)

As noted in this Bloomberg article, Oxfam America has sued the SEC in a Massachusetts federal court to force the SEC to adopt the resource extraction rules again. In July, a federal court in DC vacated the rules the SEC had already adopted. As noted in Steve Quinlivan’s blog, Oxfam cites the following as grounds for relief:

– Administrative Procedure Act (5 U.S.C. § 706(1)) provides a remedy to “compel agency action unlawfully withheld or unreasonably delayed.”
– Federal mandamus statute (28 U.S.C. § 1361) gives a federal district court jurisdiction to compel an agency of the United States to perform a nondiscretionary duty owed to a plaintiff as a matter of law.

– Broc Romanek

September 18, 2014

Corp Fin’s Comment Letters: WSJ Peeks Under the Hood

It was bound to happen. I just thought it would happen much sooner. It’s been just over a decade since Corp Fin began posting its comment letters (and the related responses) – but yet there has been scant mass media attention paid to them other than high profile IPOs. Some of us in the industry have tracked comment letter trends (see these memos in our “SEC Comment Process” Practice Area) – but the mass media has left this area alone for the most part. That’s why I was a little surprised to see this WSJ article entitled “To Be Clear, SEC Reviewers Want Filings in Plain English, Period”:

After combing through a 19,974-word filing for a securities offering, Securities and Exchange Commission senior counsel Catherine Gordon had some guidance for the company that drafted it. “In the second paragraph, add a comma,” she wrote to an attorney for the trust, sponsored by Incapital LLC, in December, “to improve readability.” Meet the stock market’s punctuation police. Corporate securities filings are plagued by some of the world’s most impenetrable prose, but it isn’t for lack of effort. Every year, SEC lawyers and accountants review several thousand of the more than half-million documents that companies file with the agency. And while they are primarily on the prowl for accounting inconsistencies and breaches of securities regulations, they also chase down typos, sentence fragments, jargon, puffery and sloppy punctuation.

Making sure corporate disclosures pass muster falls to the SEC’s 350-member Corporation Finance division—Corp Fin in the trade—which reviews every public company’s primary filings at least once every three years. Last year alone, the securities industry’s style police sent nearly 8,800 letters to more than 4,600 companies, according to LogixData, which analyzes SEC filings. The letters, which eventually become public, contained more than 66,000 questions, most seeking fuller disclosure or better adherence to accounting rules. But many would have been right at home in freshman English.

SEC staffers asked a brewer to provide the volume of a barrel, a wedding organizer to define “marriage-seeking profiles,” racing companies to describe their horses with complete sentences, a biopharmaceutical maker to explain aplastic anemia and an annuity company to punctuate the end of a sentence. In reply, they received nearly 8,700 letters containing more than 67,000 answers and proposed revisions. Incapital added the comma and agreed to additional changes prompted by 19 other queries in the letter from Ms. Gordon and her colleagues, including requests for more detail about investment practices and references to the “economic environment.” The SEC declined to comment on specific letters or to make staffers who sent them available for comment.

“Please use a readable type size throughout,” senior staff attorney Kathryn McHale wrote First Internet Bancorp in October after it filed to sell shares. “The summary selected financial data beginning on page 6 is too small.” The bank promised to increase the font size, though subsequent filings continued to use 8-point type for the numbers. Most of the rest of the text appears in 13-point type. First Internet said it used small type to fit figures for seven financial periods in the table. The company uses larger type where possible, and online filings mean readers can zoom in, spokeswoman Nicole Lorch said. “It was not our intention to obfuscate financial data,” she said.

Some inquiries get technical. Pamela Long, one of Corp Fin’s assistant directors, questioned Technology Applications International Corp. , a marketer of water purifiers and cosmetics based in Aventura, Fla., about this phrase: “rotatable perfused time varying electromagnetic force bioreactor.” She asked the company to explain what exactly it was, along with “how this enhances the product, if at all.” Technology Applications proposed a revision: “In use, the rotatable perfused time varying electromagnetic force bioreactor supplies a time varying electromagnetic force to the rotatable perfusable culture chamber of the rotatable perfused time varying electromagnetic force bioreactor to expand cells contained therein.”

Ms. Long wasn’t satisfied. “The revised disclosure uses a number of terms that are unclear to the reader and appear to be industry jargon,” she wrote, asking the company to revise. The company’s next revision—with a color illustration—mostly passed muster: The device is designed to grow more-natural cell cultures. But Ms. Long remained concerned by language saying the device was “sponsored” or “managed” by the National Aeronautics and Space Administration. “As currently drafted, the disclosure suggests that NASA is actively involved in the process of making the cosmetics,” she wrote in January 2013. The company now says in its filings that the device was “developed and patented” by NASA and a private firm. John Stickler, vice president at Technology Applications, said the company expected some back and forth with the SEC over its share registration, though the extent came as a bit of a surprise. “The process got a little old after a while when you kept reiterating this is how it works, this is how it works,” said Mr. Stickler.

Most of Corp Fin’s inquiries tackle tougher topics. But simplifying language to be better understood by investors is also a serious goal. Former SEC Chairman Arthur Levitt made clarity a career mission, prompting the agency in 1998 to publish an 83-page “Plain English Handbook” that still circulates today. “What we are getting to is clear and concise disclosure that people can understand,” said Shelley Parratt, Corp Fin’s deputy director for disclosure operations. One pitfall for corporate filers: forgetting that filings are primarily legal documents, not marketing material. Restaurant chain Zoe’s Kitchen Inc., which blends Southern and Greek dining, bills itself as providing “flavorful, Mediterranean, naturally healthful meals prepared fresh each day.”

Similar language didn’t fly when Zoe’s registered shares for sale to the public. “We note that 17% of your total cost of sales was chicken; 7%, beef; and 4%, feta cheese and that your menu includes soft drinks and potato chips. Do you believe this is a reflection of traditional Mediterranean cuisine a 100 years ago?We suggest revising your descriptions,” wrote Max Webb, then assistant director of Corp Fin for transportation and leisure and a law-school lecturer. “Are the potato chips prepared from scratch daily? The soft drinks?” Zoe’s replied: “The Company respectfully advises the staff that chicken, beef and feta are significant contributors to the Company’s cost of sales, and the Company’s traditional Mediterranean menu includes a majority of ingredients that reflect cuisine from 100 years ago.”

Mr. Webb also highlighted redundancies. “We note…that on pages 1 and 2 you mention that your food is ‘fresh’ five times. The same two pages inform the reader that your offerings are prepared ‘from scratch’ four times,” he wrote. “In the four sentence paragraph under Overview on page 56 you use ‘fresh’ and/or ‘freshly-prepared’ three times.” Zoe’s agreed to most of the requested changes, although references to “traditional Mediterranean cuisine” made it into the final prospectus. The company’s shares have roughly doubled since their April 11 initial public offering.

Conflict Minerals: NAM Argues Against En Banc Rehearing 

Here’s a blog from Steve Quinlivan (and here’s a related one from Ning Chiu):

Earlier, the United States Court of Appeals for the District of Columbia Circuit ordered the appellants in the conflict minerals case, NAM et al, to file a response to the SEC’s and Amnesty International’s petition for an en banc rehearing.

The response has now been filed. NAM says there is no need for a rehearing. According to NAM the standard for a rehearing isn’t met because the case presents no conflict in the DC Circuit’s decisions or with decisions of the Supreme Court or other Courts of Appeals.

Maybe it’s not surprising so far because the court essentially ruled in favor of NAM. Then NAM says what it really wants – the appellate panel should amend its decision in light of the American Meat case to clarify that the compelled statement is not eligible for Zauderer rational basis review. The reason Zauderer doesn’t apply is the conflict minerals disclosure does not constitute “purely factual and uncontroversial information.”

According to NAM, doing anything else would break dangerous new ground: “Appellants are aware of no case permitting the government to require a company to adopt an ideological slogan written by the government that attacks the company and its products, and neither the SEC nor Amnesty has cited any such case. If such requirements were deemed permissible, the temptation for Congress and state legislatures to require similar self-shaming measures across a range of controversial issues could be irresistible.”

The response also includes predictable references to the “scarlet letter,” issuers with “blood on their hands” and like rhetoric that has become familiar in this case.

House Passes JOBS Act-Related Bill 

As noted by MoFo’s Anna Pinedo in this blog: The House of Representatives voted 320 to 102 to pass H.R. 5405 (Promoting Job Creation and Reducing Small Business Burdens Act) that contains a number of JOBS Act related measures that previously were the subject of individual bill proposals. For example, the bill addresses the JOBS Act inadvertent failure to address the Exchange Act threshold as to savings and loan holding companies; a pilot tick-size pilot program for emerging growth companies; a grace period for transitioning from EGC status; and an exemption from xBRL requirements for EGCs.

– Broc Romanek