TheCorporateCounsel.net

May 21, 2015

Study: How Social Media Influences Investment Decisions

This Q4 blog covers this recent study about how social media influences investment decisions. Here’s an excerpt:

The article pulls interesting research from Greenwich Associates, which notes that “almost 80% of institutional investors use social media as part of their regular work flow, and approximately 30% say the information consumed via social media has directly influenced an investment decision.” With input from 256 corporate and public funds, insurance companies, endowments and foundations in the U.S, Europe, and Asia, the research outlined that: 48% of investors noted that information from social media prompted them to do an additional research on an industry issue or topic; 37% said they shared information from social media with decision-makers at their companies; 34% said information learned on social media influenced a decision to work with a particular client or company; and that 33% said information obtained on social media triggered a discussion with their investment consultant.

Overall, the article points to the increasing effect that social media has on influencing investment decisions with investors. For example, 40% of the global institutions are expected to increase their use of social media in 2016. Using social media as part of your investor relations communications process will also benefit your company as it paves way for engagement, expands reach, and increases awareness with institutional investors and the financial media.

Social Media: Getting Up-to-Speed

Here’s other good stuff relevant to the use of social media:

– Q4 blog entitled “A Quick Recap of NIRI’s Social Media use for IR Webinar” – and this webcast recap about telling a story

– Check out Cisco’s nifty IR web page

Blog about Goldcorp’s IR web page

– Interesting article about how T-Mobile’s CEO weighs in via Twitter to battle for a customer

Acorda’s online annual report

Twitter: Who Should You Follow?

Many of you are on Twitter – and perhaps you are looking for funny or interesting things to follow outside your worklife (& beyond following me). I canvassed what some friends do for Twitter entertainment & received these recommendations (send me yours):

– @BeschlossDC – Historian who posts historical pictures

– @BullandBaird – Wall Street perspective with humor thrown in

– @BorowitzReport – pretty funny on political commentary

Parody: @TheTweetofGod, @TheOnion, @FauxJohnMadden, @TheFakeESPN
Comedians: @KeyAndPeele, @KristenSchaaled, @MindyKaling, @JimGaffigan, @SteveMartinToGo, @FrankCaliendo, @EricStangel

– Broc Romanek

May 20, 2015

The SEC “Waivers” Debate: Heating Up Over WKSI Status – And a New Battlefield!

Even with the SEC’s new policy on Reg A & D waivers fresh on the books, the topic of whether to grant waivers remains topical. Last week, SEC Commissioner Stein dissented from the SEC’s order granting a waiver to Deutsche Bank over its WKSI status (you may recall that Corp Fin issued a revised statement about how it would process WKSI waivers last year).

The WKSI waiver debate is new; there’s been controversy before. And interesting, although Deutsche Bank got its WKSI waiver request, apparently the same did not happen for Credit Suisse. According to this Reuters article, Credit Suisse withdrew a WKSI waiver request after SEC Staff informed it that the request would likely be denied.

But what apparently is new is a growing battle between the SEC and the CFTC, as noted in this excerpt from Stein’s dissent:

However, based on a loophole contained in Rule 506(d)(2)(iii), the CFTC has intervened and prevented the bad actor disqualification question from even coming before the Securities and Exchange Commission. The CFTC saw fit to opine on the SEC’s Rule 506 jurisprudence about whether Deutsche Bank AG should receive a waiver from automatic disqualification under SEC rules. It is unclear to me what, if any, analysis went into this decision and what prompted the CFTC to insert language into its final order stating that a bad actor disqualification “should not arise as a consequence of this Order.” The implications of the CFTC’s actions here — and in other actions — are deeply troubling. The Commission should closely review this provision and how it is being used.

The Rule 506(d)(2)(iii) provision has actually been used once before by the CFTC to “waive away” the 506 disqualification – last year in this CFTC order against JPMorgan for the London Whale incident. So two times now makes a trend perhaps.

But what may be the interesting trend is whether companies – faced with the SEC’s deadlock over 506 waivers – will look to get around the deadlock by relying on this provision in its negotiations with other state or federal regulators. The provision also allows courts to decree that there should be no 506 disqualification as well. Below is the language from the adopting release for Rule 506(d) (which was adopted by a 5-0 vote) that explains the purpose of this provision:

The amendments we are adopting include a provision under which disqualification will not arise if a state or federal regulator issuing an order advises in writing that Rule 506 disqualification is not necessary under the circumstances. We believe this provision will create cost savings for affected covered persons such as issuers, individuals and compensated solicitors by eliminating the need to seek waivers from the Commission or pursue other means of raising capital. We expect that some issuers and other covered persons will adjust their settlement negotiations to bargain for an express determination that disqualification from Rule 506 is unnecessary. As the provision applies only where state or federal regulators have determined that Rule 506 disqualification is not necessary, we do not believe it is likely to impair the intended investor protection benefits of the bad actor disqualification scheme.

Former Corp Fin Deputy Director Lona Nallengara to Leave SEC

Yesterday, the SEC announced that Lona Nallengara – who was Corp Fin’s Deputy Director before he headed upstairs to be Chair White’s Chief of Staff – will leave the agency at the end of next month. No next destination listed…

As noted in this blog, the House Financial Services Committee will mark-up a flurry of JOBS Act-related bills today…

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:

– Form 10-K Preparation Tips
– How to Proactively Tackle the Director Tenure Issue
– Code of Ethics/Conduct Primer
– Audit Committee Role in Improving Disclosure
– CEO Succession Planning Guidance for CEOs & Boards

– Broc Romanek

May 19, 2015

Fake SEC Filings: Avon’s “Unreal” Tender Offer

If you have read this blog for a while, then you know I dig fake SEC filings. As noted in this blog last year on the topic, they tend to be one of my most popular types of blogs. So last week was Christmas for me as this fake Schedule TO about a $8 billion takeover bid caused a stir and caused Avon’s stock to tank (see this DealBook piece).

This latest incident is a cautionary tale for investors as it’s not the first fake takeover announcement. My favorite dates back to 2001, as noted in this piece, when a fake “blank check” company calling itself “Toks Inc.” filed a Form SB-2 with the SEC announcing plans to take over General Motors, General Electric, AT&T, Hughes Electronics, AT&T Wireless, AOL Time Warner and Marriot International – for roughly $2 trillion in “Toks” stock. The promoter – Ade O. Ogunjobi – didn’t give up even when the SEC issued a “Stop Order” to prevent the registration statement from going effective and suing him for selling unregistered securities, later launching a website to promote his wild ambitions and plans to then hold press conferences to announce his plans for these major US companies he was to take over!

Hard to believe, but those SEC filings by Toks are still on EDGAR. Here’s my blog on “Fake Filings: How Do They Sneak a Form ID Past the SEC?” (scroll down)…

Transcript: “Form S-8: Share Counting, Fee Calculations & Other Tricks of the Trade”

We have posted the transcript for our recent webcast: “Form S-8: Share Counting, Fee Calculations & Other Tricks of the Trade.”

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:

– Study: Data Breach Preparedness
– Survey: Current (& Future) State of Compliance
– Spencer Stuart Addresses Board “Refreshment”
– Avoiding & Managing Boardroom Disputes
– Using COSO to Assess & Manage Cyber Risks

– Broc Romanek

May 18, 2015

SEC Enforcement Staff Issues “ALJ v. Civil Case” Guidance

Recently, the SEC’s Division of Enforcement Staff issued this 4-page guidance. This issue continues to generate controversy, with the SEC being criticized for its increased use of administrative proceedings. For example, the WSJ recently penned this article claiming the SEC won against 90% of defendants before its own judges in contested cases from October 2010 through March of this year – compared to a 69% success rate in federal court. See also this DealBook piece and Corporate Crime Reporter article.

As noted in these memos posted in our “SEC Enforcement” Practice Area, the new guidance identifies a non-exhaustive list of four factors that the SEC may consider in determining the proper forum for an enforcement action – with the guidance noting that the Enforcement will continue to prefer administrative hearings as the venue for resolving novel or complex issues.

Meanwhile, Enforcement Director Andrew Ceresney recently delivered this speech entitled “The SEC’s Cooperation Program: Reflections on Five Years of Experience“…

For all the latest stats on proxy access shareholder proposals, see what I just posted on our “Proxy Season Blog”…

SEC Receives At Least One Audit Independence Query Daily

This WSJ article has a catchy title of “SEC Receives At Least One Audit Independence Query Daily” to demonstrate how busy the SEC’s Office of Chief Accountant is when it comes to auditor independence. Here’s an excerpt from the article:

Auditor independence is a hot-button issue for the Securities and Exchange Commission’s enforcement unit. “Independence is an issue that we are very focused on, and will continue to stay focused on,” Michael Maloney, chief accountant at the SEC’s Division of Enforcement said at a Baruch College conference in New York last week.

Outside of enforcement, the SEC gets about 400 auditor-independence questions a year, or about one a day, says the agency’s chief accountant, James Schnurr. Last year, the SEC settled two cases against auditors over alleged violations. Ernst & Young LLP paid more than $4 million to settle allegations that it lobbied on behalf of audit clients. KPMG LLP paid $8.2 million to settle allegations that it provided prohibited extra services to audit clients. In their settlements, the firms neither admitted or denied the allegations.

Randi & Me

Randi Morrison is in town for the Society’s annual meeting with the Corp Fin Staff and we had a little sight-seeing fun last night:

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– Broc Romanek

May 15, 2015

SEC Commissioners Gallagher & Aguilar: Short-Timers?

Here’s an excerpt from this WSJ article (also see this piece):

Daniel Gallagher, a Republican member of the Securities and Exchange Commission, is preparing to step down after nearly four years at the agency, according to people familiar with the matter. Mr. Gallagher has notified the White House of his plans to leave the five-member agency as soon as a successor is confirmed by the Senate, people familiar with the matter said. His announcement was a surprise, as his SEC tenure won’t officially come to a close until the end of 2017.

The departure will likely coincide with the resignation later this year of Luis Aguilar, a Democrat, who is planning to step down soon after nearly seven years at the agency, people familiar with his thinking said.

The White House has already begun vetting candidates to succeed Mr. Aguilar, who would like to remain at the agency long enough to help complete long-awaited rules designed to boost executive-compensation disclosures, a person familiar with his thinking said.

A Look at the SEC’s Politics

I have blogged numerous times about the battle over waivers at the Commissioner level – not to mention battles over many other things. Check out this recent article entitled “How partisan politics have poisoned the SEC”…

The Role of In-House Lawyers

This article from “The Atlantic” is about how the in-house lawyer can be serve as more than a naysayer. Having been in-house, I can tell you that it’s no fun being a naysayer – but that is a role that is critical for the in-house lawyer to play. Not all the time of course. But periodically. Otherwise, the company gets into a lot of trouble as there is no one to check egos, etc…

– Broc Romanek

May 14, 2015

Political Contributions Disclosure: SEC Sued Over Petition Inaction

Yesterday, the newly-formed “Campaign for Accountability” (CfA) sued the SEC in the US District Court for DC for failing to act on the rulemaking petition submitted last year by the Citizens for Responsibility and Ethics in Washington (CREW). Interestingly, this lawsuit is not filed by the folks behind the much more popular rulemaking petition on this topic, the one submitted by Harvard Professor Lucian Bebchuk in 2011 that attracted more than 1 million comments in support (although CREW submitted this letter last month supporting that older petition).

The complaint is worth reading for a number of reasons:

– It opens with the parade of horrors wrought by the Citizens United decision by SCOTUS
– Talks about how institutional investors want to see this type of disclosure
– Goes into the history of shareholder proposals on this topic
– Reveals a number of discrepancies between companies who have voluntarily adopted disclosure policies in this area and what companies are actually doing (Counts #22-26)
– Mentions that political contributions disclosure showed up on the SEC’s Reg Flex Agenda in ’13. (Counts #28-29) Apparently, they believe that list of potential rulemakings is more than aspirational, which I have contended before…

Investors Seek More “Usable” Director Attribute Disclosure (+ Diversity Disclosures)

Speaking of rulemaking petitions, here’s a new one recently submitted by a group of 9 public pension funds that seeks the SEC to include a board matrix or chart in proxy statements, as well as including a nominee’s gender, race and ethnicity – thus taking the board attribute disclosures elicited by Item 407(c)(2)(v) a step further…

Dodd-Frank Rollback: Senator Shelby’s Discussion Draft

Here’s news from this blurb from Goodwin Procter (note that it appears this bill impacts only financial institutions; not other types of public companies):

On May 12, Senator Richard Shelby, the Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, announced that the Committee had released a draft of “The Financial Regulatory Improvement Act of 2015.” The Committee also issued a section-by-section summary. Senator Shelby said, “this discussion draft is a working document intended to initiate a conversation with all members of the Committee who are interested in reaching a bipartisan agreement to improve access to credit and to reduce the level of risk in our financial system. I look forward to engaging with members of the Committee on specific proposals in the discussion draft.” Democrats on the Banking Committee, including the senior Democrat, Sherrod Brown, have agreed to some changes that provide regulation relief for small banks and credit unions but in public statements have opposed broader changes in the draft bill. Senate Republicans require a few Democratic votes in order to reach the 60 necessary to go to a full vote. Observers expect discussions about the bill to continue for several months, with significant changes to the draft before the bill is brought on for a full vote.

Also note – per this blog – that a House Subcommittee will hold Round 2 of its hearings on a group of capital formation bills…

Aretha! Going Strong at 73

I was lucky enough to see Aretha Franklin & her 30-piece orchestra last night. Like watching royalty. Sounds great at 73!

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– Broc Romanek

May 13, 2015

IFRS: Dead in the US?

Here’s an excerpt from this CFO.com article:

Sounding a death knell for the more-than-decade long effort to fully “converge” International Financial Reporting Standards with U.S. Generally Accepted Accounting Principles, James Schnurr, the chief accountant of the Securities and Exchange Commission, said that he probably won’t recommend that the SEC should mandate IFRS or that U.S. companies should have the choice of preparing their financials under those standards.

Speaking at the 14th annual Baruch College Financial Reporting Conference in New York City, Schnurr said that “there is virtually no support to have the SEC mandate IFRS for all registrants.” Further, he said, “there is little support for the SEC to provide an option allowing [U.S. public] companies to prepare their financial statements under IFRS.” Since 2007, the commission has permitted foreign private issuers in the United States to report their financials under IFRS without reconciling them to U.S. GAAP. (Under the pre-2007 regime of reconciliation, foreign issuers had to identify and quantify the material differences they reported under IFRS in terms of U.S. GAAP.)

However, he added, “there does seem to be continued support for the objective of a single set of high-quality globally accepted accounting standards.” The chief accountant stressed that the U.S. Financial Accounting Standards Board and the International Accounting Standards Board continue to communicate and keep each other’s views very much in mind when each considers its own actions.

Schnurr bemoaned the current emphasis on the deterioration of relations between FASB and IASB. “The conversation seems to quickly transition to convergence, or the lack thereof, often with an adversarial, U.S. GAAP vs. IFRS, tone. Conversations on this topic typically highlight the differences and shortfalls in the efforts towards convergence in an attempt to suggest that the two sets of standards will never be able to achieve uniformity,” he said.

PCAOB Issues “Audit Committee Dialogue”

Last week, the PCAOB issued this “Dialogue” report – addressed to audit committees – that highlights key areas of recurring concern in PCAOB inspections of large auditors as well as certain emerging risks to the audit. As noted in this Cooley blog, the report also provides targeted questions that committee members may ask their auditors on each topic.

Delaware Senate Passes Fee-Shifting Bill (Now on to the House)

Here’s news from this Delaware Online article:

Lawmakers in the Delaware Senate voted 16-5 on Tuesday to approve legislation that would ban corporations from adopting bylaws that impose corporate legal costs on shareholders who file unsuccessful lawsuits. The fee-shifting legislation has been controversial, attracting opposition from the U.S. Chamber of Commerce. The Chamber says the legislation protects frivolous shareholder litigation and threatens Delaware’s business-friendly image. “Companies that incorporate in Delaware have valued the state’s clear and fair corporate law principles,” said Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform. “But they are increasingly becoming victims of ‘extortion through litigation.'” More than nine of every 10 corporate mergers or acquisitions are challenged in court.

The Delaware State Chamber of Commerce remained neutral on the legislation, which is sponsored by Delaware Sen. Bryan Townsend, a Newark Democrat and a practicing corporate lawyer at Morris James in Wilmington. In May 2014, the Delaware Supreme Court upheld a bylaw adopted by a private non-stock corporation, ATP Tour Inc., that shifted legal costs onto the loser in shareholder litigation. Delaware lawyers, concerned that stock corporations could seek similar bylaws, recommended that the General Assembly change the law to ban such bylaws.

The legislation now heads to the Delaware House of Representatives.

Meanwhile, here’s two blogs by Allen Matkins’ Keith Bishop:

It’s Time To Put A Stop To Fee-Shifting (But Not In the Way You Might Think)
Here’s One Way To Recover Attorneys’ Fees Without Adopting A Fee Shifting Bylaw

– Broc Romanek

May 12, 2015

Today’s Webcast: “The NYSE Speaks ’15: Latest Developments and Interpretations”

Tune in today for the webcast – “The NYSE Speaks ’15: Latest Developments and Interpretations” – to hear NYSE Staffers John Carey, Tanya Hoos and Jamie Patturelli discuss all the latest. Please print out this deck of “Course Materials” in advance…

Just a few days left to the Form SD filing deadline. Here’s a recap of the 15 filed so far – and here’s a tip on how to avoid conflict minerals smelter/refiner list errors…

NYSE Proposes Shareholder Approval “Share Issuances” Exemption for New Companies

Recently, the NYSE proposed amendments to Sections 312.03(b) & 312.04 of the NYSE Listed Company Manual to exempt “Early Stage Companies” from having to obtain shareholder approval before issuing shares for cash to related parties, affiliates of related parties or entities in which a related party has a substantial interest since these companies frequently have to rely on private placements to their founders or other significant existing shareholders or their executive officers or directors for capital-raising…

Nasdaq’s New FAQ on Net Share Settled Convertible Securities

This Gibson Dunn blog is about a new Nasdaq FAQ – here’s an excerpt:

While the FAQ speaks specifically to flexible settlement provisions where an issuer can settle conversions through cash, shares or a combination of both, a NASDAQ representative has told us that NASDAQ’s new position is equally applicable where net share settlement is mandatory. In addition, we understand from NASDAQ that its position is the same, regardless of how the issuer ultimately elects to settle conversions where the securities provide for flexible net share settlement. Issuers will still need to assess whether other provisions of NASDAQ’s shareholder approval rules may be applicable to a particular offering (for example, if the transaction might result in a change of control) or whether other terms of the convertible securities might implicate the 20% Rule (for example, certain conversion price adjustment provisions, any make-whole provisions, or provisions requiring additional cash payments to investors at the time of conversion such as payments for forgone future interest).

The New York Stock Exchange (“NYSE”) historically has taken a similar view that net share settled or flexible net share settled convertible securities should be viewed as being issued with a conversion price below the greater of book or market value. We understand based on a discussion with a representative of the NYSE that the NYSE has also expressly revised its position on this issue to be consistent with NASDAQ.

We view NASDAQ’s and the NYSE’s new position as a very welcome and pragmatic change, which should enhance the ability of smaller issuers to issue net share settled or flexible net share settled convertible securities and access the convertible securities market.

Tune in to our July webcast with the Nasdaq Staff! “Nasdaq Speaks ’15: Latest Developments and Interpretations”

– Broc Romanek

May 11, 2015

Today’s Webcast: “P4P – What Now After the SEC’s Proposal”

Tune into today’s CompensationStandards.com webcast – “P4P: What Now After the SEC’s Proposal” – featuring Compensia’s Mark Borges, Deloitte Consulting’s Mike Kesner, Morrison & Foerster’s Dave Lynn & Gibson Dunn’s Ron Mueller to learn everything you need to know about the SEC’s new proposal. And we’re posting memos in our “Pay-for-Performance” Practice Area on CompensationStandards.com.

And tune in tomorrow for this webcast on this site – “The NYSE Speaks ’15: Latest Developments and Interpretations” – to hear NYSE Staffers John Carey, Tanya Hoos and Jamie Patturelli discuss all the latest. Please print out this deck of “Course Materials” in advance…

FOIA: MuckRock Tracks the SEC’s Progress

Recently, I got turned on to “MuckRock,” a free site that tracks the progress of FOIA requests at government agencies. The site went live five years ago, the brainchild of a recent college grad (here’s an interview with the founder). Here’s the page that lists the progress of FOIA requests at the SEC – and here’s an example of a FOIA request to the SEC from MuckRock…

Poll: Will You Participate in Commenting on SEC’s P4P Proposal?

Comments on the SEC’s pay-for-performance proposal are due on July 6th. Here’s a poll regarding your level of participation in the comment process on the SEC’s pay-for-performance proposal:

survey service

By the way, I went to the Wizards-Hawks playoff game on Saturday, where Paul Pierce worked his magic – here’s a 1-minute video of that moment from inside the stadium:

– Broc Romanek