June 15, 2015

Corp Fin: “No Review” Status of Registration Statements Now Publicly Available

Recently, Corp Fin announced a new policy that the Staff will publicly release “no review” letters for registration statements that are not selected for review. These “no review” letters will be posted on Edgar in a company’s “correspondence” stream. A company and its advisors would already know about a registration statement not being selected for review – so this move really only benefits third parties who wanted to know.

Some folks want Corp Fin to issue “no review” letters for preliminary proxy statements since the existing practice is that companies can presume that no comments from Corp Fin are forthcoming if they don’t hear from the Staff within 10 calendar days of filing, per Rule 14a(6)(a). Learn more about this process in our “Preliminary Proxy Statements Handbook.”

On the other hand, most folks like the fact that the Staff is silent and doesn’t issue a “no comments” letter if its ’34 Act filings are reviewed and the Staff has no comments. In other words, it’s possible that your 10-K was reviewed but the Staff had no comments – but you wouldn’t know that since they never contacted you. Typically, the ’34 Act review is only of the company’s financials, conducted by Corp Fin’s accounting staff. This review is necessitated by Section 408 of Sarbanes-Oxley, which mandates that every company’s periodic disclosures must be reviewed at least once every 3 years.

The rationale for not wanting a “no comments” letter is that you don’t want the CFO and Controller’s office getting excited and thinking they are doing a great job because Corp Fin didn’t issue any comments. Better to keep them on their toes…

Court Finds SEC’s Use of ALJ Likely Unconstitutional

The debate over whether the SEC’s use of administrative law judges in enforcement proceedings has ratcheted up a few notches. Last week, in Hill v. SEC, the US District Court for the Northern District of Georgia preliminarily enjoined the SEC from conducting the administrative proceeding brought against an alleged insider trader, finding a substantial likelihood that he will succeed on the merits of his claim that the SEC has violated the Appointments Clause of Article II of the US Constitution.

As noted in this blog, the Appointments Clause requires that “inferior officers” be appointed by the President, department heads or courts of law. SEC administrative law judges are not appointed by the SEC – they are hired by the SEC’s Office of Administrative Law Judges, with input from the Chief Administrative Law Judge, human resource functions and the Office of Personnel Management. The Court looked to the powers of the administrative law judge which are functionally comparable to that of a judge in making its decision.

As noted in this blog, this WSJ article indicated that the SEC will likely resolve this issue by having the Commissioners appoint its ALJs directly. But in the meantime the court’s ruling could spur similar challenges to the validity of current and past SEC proceedings – but the US government is fighting this new decision.

Tomorrow’s Webcast: “Proxy Season Post-Mortem – The Latest Compensation Disclosures”

Tune in tomorrow for the webcast – “Proxy Season Post-Mortem: The Latest Compensation Disclosures” – to hear Ken Bertsch of CamberView, Alan Dye of Hogan Lovells, Dave Lynn of and Morrison & Foerster and Ron Mueller of Gibson Dunn analyze what was (and what was not) disclosed this proxy season.

– Broc Romanek