TheCorporateCounsel.net

On September 30th, the NYSE filed a proposed change to the NYSE Listed Company Manual with the SEC that would eliminate Section 203.01’s requirement that listed companies physically distribute annual reports to shareholders – so long as they make the Form 10-Ks (or 20-Fs/40-Fs) available through their websites instead. Under the proposal, companies would have to offer – via a prominent plain English undertaking – to deliver paper copies, free of charge, to any shareholders who so request. [Check out footnote 1 of the proposal – the delivery requirement can be traced back to 1895!]

Standing alone, this proposal doesn’t mean much for US companies so long as the SEC’s Rule 14a-3(b) continues to require delivery of an annual report, along with the proxy statement, in advance of shareholder meetings. But the NYSE’s proposal is a big deal for foreign private issuers who are exempt from the proxy rules (and who now are often required to mail two annual reports each year – one to comply with home country rules and one to comply with the NYSE’s requirement).

Don’t be surprised if the SEC follows the NYSE’s lead here and moves to an access model for proxy delivery – those cost savings sure would be welcome for many companies to help offset their new 404 costs.

Getting Ready to Transition Your Shelf

I continue to highlight timely and useful law firm memos in the “Hot Box” on the home page – the latest is this 34-page memo from Sullivan & Cromwell that includes a healthy discussion about what you should be doing now with your existing shelf offerings. It’s a nice companion to the ’33 Act reform transition webcast we held recently – and the numerous other law firm memos we have posted on the topic.

SOX Opens the Door for More O&D Bars

From Bruce Carton’s Securities Litigation Blog: For years, a threshold requirement for the SEC to obtain the equitable remedy of an officer and director bar against a defendant in one of its cases was an underlying fraud charge under Section 10(b). As stated in Section 21(d)(2) of the Exchange Act, a court has the authority to “prohibit, conditionally or unconditionally, and permanently or for such period of time as it shall determine, any person who violated section 10(b) or the rules or regulations thereunder…”

So historically, in a case like the recently settled enforcement action against David Michael, former director and chair of the audit committee of Del Global Technologies Corp., Inc., in which the SEC charged Michael only with violations of the books and records, internal controls, and lying-to-auditors provisions of Section 13 of the Exchange Act, no O&D bar would have been possible.

The Sarbanes-Oxley Act of 2002 changed this, however. Section 305 of SOX amends Section 21(d) by adding a new Section 21(d)(5): ” 5. Equitable Relief -In any action or proceeding brought or instituted by the Commission under any provision of the securities laws, the Commission may seek, and any Federal court may grant, any equitable relief that may be appropriate or necessary for the benefit of investors.”

The end result? Despite the absence of any fraud charge against David Michael, the SEC’s settlement provided for a final judgment that, among other things, permanently bars Michael, pursuant to Exchange Act Section 21(d)(5), from serving as an officer or director of a public company.

On the Lighter Side

Been a while since I showed my personal side. Excited about the White Sox! Grew up in Cubs country on the north side of Chicago but worked for the Sox in 1983 when I was in college. Part of my job was to ensure the network ran the right commercials and the announcers gave the appropriate plugs – so I never could go to the bathroom when watching a game unless a buddy watched with me. Talk about perils on the job! The Sox hosted the 50th anniversary all-star game that year and I met a bunch of Hall-of-Famers.

Recently saw the movie “In Her Shoes” – a very good flick. Reminded me a lot of “Terms of Endearment” and not just because Shirley MacLaine starred in both. Not that I see too many movies, but I am pretty selective and the only movie I saw this year that was better was little known “Off the Map” starring Joan Allen and Sam Elliott. That was a classic!