Here are the latest failures - including one with 9% support, the lowest level since say-on-pay became law:

- Patriot Scientific - Form 8-K (46% support)
- Gentiva Health Services - Form 8-K (37% - also failed last year with 37% support)
- Golden Star Resources - Form 8-K (38%)
- Everest Re Group - Form 8-K (38%)
- OraSure Technologies - Form 8-K (46%)
- The Middleby Corporation - Form 8-K (48%)
- Hecla Mining - Form 8-K (48%)
- Volcano Corporation - Form 8-K (38%)
- Apache Corp - Form 8-K (49%)
- Ultimate Software Group - Form 8-K (49%)
- Alexandria Real Estate Equities - Form 8-K (9%)
- Boston Properties - Form 8-K (19%)

Thanks to Karla Bos of ING for the heads up on these!

Here's a Forbes article on Apache's close vote...

Corp Fin Issues BTR Guidance for the 1st Time!

Yesterday, Corp Fin issued its inaugural interpretative guidance on Regulation BTR (Blackout Trading Restrictions) in the form of this no-action response. As you may recall, BTR restricts sales and purchases of certain equity securities by directors and executive officers during any period in which at least a majority of employees are blacked out from selling or purchasing securities in an employee benefits plan. This provision was required to be adopted by Congress in Section 306 of Sarbanes-Oxley to address the issue that employees of Enron had when they couldn't sell company securities because of a change in employee benefit plan administrators and Enron's share price was dropping significantly.

Corp Fin's guidance - issued to Skadden Arps' Brian Breheny on behalf of Pfizer - clarifies that sales by directors and executive officers of equity securities pursuant to a tender offer conducted in compliance with SEC rules are exempt from Section 306 and Reg BTR.

Over 60 Panels: Full NASPP Agenda Announced

With just a little over a week left in the last extension of our 15% early bird discount - and on a pace for record attendance - we have just posted the full agenda for the NASPP Conference to be held in Washington DC on September 23rd-26th. Combined with the proxy disclosure pre-conference, there are over 60 panels! Here is the NASPP Conference Brochure. The panels cover a wide range of topics, featuring many representatives from federal agencies, stock exchanges and proxy advisors - and covering hot buttons like "Say-on-Pay Litigation 2.0" which features both the lawyer most responsible for bringing these cases and lawyers who are defending them. Register before the Friday, May 31st early bird deadline.

- Broc Romanek

Each time I see an article from the mass media indicating that an imminent proposal from the SEC on political contribution disclosure rules, I tweet about how misinformation is so easily spread (here is the latest example of misinformation). A rumor of a proposal coming in April started last year - which I quickly blogged as being unlikely. Now in the course of testifying before a House committee, SEC Chair White laid to rest the rumors that a proposal was coming soon, as noted in this Reuters article. As noted in this Davis Polk blog, House Republicans were disturbed to learn that the SEC is considering such a petition, believing the initiative to be "highly partisan" in light of the controversy surrounding the IRS' examination of certain groups. Rep. Garrett pressed Chair White to commit that the SEC will not be "bullied by these outside radical groups." However, Chair White declined to take a position.

As would be expected, there is a groundswell of public support for a SEC rulemaking, evidenced by the 600,000 signatures on the petition for rulemaking and pieces like this Forbes' article.

Note that Congress has already had SEC Chair White testify in hearings twice during her first month in office. And Ning Chiu blogs about how Chair White has responded to Sen. Rockerfeller's inquiry about cybersecurity disclosures, noting that Corp Fin has issued comments to about 50 companies.

The Movement for More Political Contribution Disclosures

In this podcast, Lisa Gilbert of Public Citizen's Congress Watch explains how the movement to elicit more political contribution disclosures is proceeding, including:

- What is Public Citizen (and what is your role there)?
- What has Public Citizen done to help support the political spending disclosure rulemaking petition?
- How are interested parties working together to support the petition?
- What are the political forces at work on this issue?
- What other types of efforts do you foresee to obtain greater disclosure from companies?

Recently, Prof. Lucian Bebchuk submitted a new comment letter to his petition to the SEC...

House Bill: Shareholder Approval of Political Contributions

Meanwhile, Rep. Capuano (D-MA) and Sen. Menendez (D-NJ) re-introduced the Shareholder Protection Act last month, a bill that would amend the '34 Act to require shareholder approval for political expenditures and require political contribution disclosure in 10-Qs. Here is the related press release.

Meanwhile, President Obama has come out against the House's "SEC Regulatory Accountability Act," as noted in Jim Hamilton's blog...

- Broc Romanek

Today is the vote for what looks to be the most contentious battle of the proxy season - at least if the metric is ink spilt - here is the timeline of events as far as I can glean from media reports:

1. Co-shareholder proponents - AFSCME, New York Comptroller and Connecticut's Retirement Plans successfully include a shareholder proposal seeking a split of the CEO and Chair positions in JPMorgan's proxy statement. The company opposes the proposal.

2. Broadridge provides early voting results to both company representatives (and presumably their agents) as well as the co-proponents, who had paid Broadridge to distribute materials as part of an exempt solicitation.

3. Last week, there is a leak to NY Times' DealBook about the level of early voting results. See my blog below on that.

4. Then, SIFMA calls Broadridge to complain about the co-proponents obtaining early voting results. Since SIFMA's members are comprised of Broadridge's brokerage clients, it acquiesces due to the contractual obligations that Broadridge has with its broker clients - as noted in this DealBook article. [Why was an association for brokers weighing in on an issue that seemingly is most relevant to investors and public operating companies? Perhaps because JPMorgan's head of regulatory policy was SIFMA's chief until earlier this year, as highlighted in this American Banker article.]

5. Shareholders go bananas about this change in Broadridge policy, including CII sending a letter to the SEC asking for the agency to intervene, as noted in this DealBook article.

6. Over the weekend, JPMorgan relents and allows early voting tallies to continue after a series of calls with the NY Attorney General, as noted in this DealBook article.

Here are long-time inspector Carl Hagberg's thoughts on the facts as he knows them:

There is fresh news here about Broadridge giving information to folks who had paid them to send materials out on a closely contested matter which apparently was the case here - and which, arguably, might give them "standing" to receive such updates.

The most important thing to note regarding this ruckus is that such updates are mostly meaningless, given the fact the the deciding votes are not usually cast until the evening before the meeting - and sometimes the morning of - which is likely the situation at JPMorgan. In other words, knowing this information typically doesn't allow anyone to predict what the final outcomes will be - because of the high percentage of "last minute votes" that are being cast by activist investors these days. At many meetings I've inspected, large shareholders will change their positions just before the polls officially close. And in really closely contested elections they may show up and cast their votes then and there - after hearing directly from the management at the meeting.

Also, knowing the results a few days or weeks early doesn't necessarily indicate what might be the best thing to do about them from a tactical perspective - but that is another matter altogether. At best, all one can expect to learn from any sneak previews is if the voting is following previous trends on similar or identical matters.

Here is my own take based on the facts as I know them:

Unfortunately, the conduct of annual meetings is not subject to much scrutiny other than proxy disclosures. The regulatory framework is sort of a Bermuda triangle between state law, exchange listing standards and SEC rules. As I have said for a while, as the outcomes of annual meetings continue to grow into "real" events, this is going to be a huge problem. Think hanging chads and much litigation.

I had no idea that Broadridge's practice was to share early voting results with proponents if they conducted a solicitation through Broadridge - although that certainly seems the fair thing to do. I don't have Carl's extensive experience with meetings, but I do think that having knowledge of early voting results can be beneficial in a contested situation. Regardless, the uproar over this situation points a spotlight on the need for the SEC's proxy plumbing project to get back on track.

There are several other debates related to this vote, including whether it matters whether the positions are split or not. Here's a Columbia Law School blog that illustrates the difference between a lead director and a non-executive board chair...

Leaks of JPMorgan's Early Voting: Confidentiality Concerns

"Ah, you're crazy."
"Am I? Or am I so sane that you just blew your mind?!"
"It's impossible!"
"Is it? Or is it so possible that your head is spinning like a top?!"
"It can't be."
"Can it? Or is your entire world just crashing down all around you?"
"Alright, that's enough."
"Yaaaaaaahhh!!!"
- Jerry & Kramer in "The Stall" episode

That Seinfeld dialogue pretty much sums up my reaction to reading in the middle of last week about how JPMorgan's voting on its controversial CEO/Chair split proposal was faring - even though the voting was supposed to be confidential ahead of today's annual meeting. It's a first for me to read about early returns in the paper.

A leak leads to several concerns. One is whether leaks other than to reporters are happening? The traditional insider trading stuff. Another concern is whether a leak might impact whether other shareholders bother to vote - or how they vote. Of course, this cuts both ways - investors irked about this development might choose to vote against a company who has leaked results. Although Carl Hagberg might be right that knowledge of early voting results may not be useful in all cases - I certainly don't think that means that leaks are not problematic. They could move the market. What if this was a proxy contest for which early results were leaked?

A European Proxy Advisor's Views on Voting Leaks

Here's an excerpt from a blog detailing Manifest's concerns with the voting tally leak:

With Dimon threatening to walk away if shareholders support the splitting of roles, thereby requiring him to relinquish the chair, the question is now material to the immediate valuation of the company. Investors generally don't like uncertainty, and with commentators talking about the potential for a 10% drop in share price if the vote wins, access to information about how the vote might turn out is valuable.

Let's be clear about one thing: although investors around the world may already have instructed how they wish to vote, they have not voted yet. The vote does not commence until shareholders at the meeting are invited to vote on the resolution in Tampa next week. Nor is Broadridge, from which the data has come, actually the entity tasked with formally tallying the votes at the meeting (don't forget, they only have the information in the first place because of the regulation-supported monopoly the enjoy). That makes counting votes already submitted akin to counting the chickens before the eggs have hatched. Yet we are told that so far, the proposal to split the roles has 40% support, and that means "inside JPMorgan they believe they're going to win this vote" (Dividend.com).

Investors, especially those outside the US, will be shocked to see that their private voting instructions may be used to try to influence other shareholders in their decisions on the same issue (in the same vein, investors should also be equally concerned that some proxy advisors are urging shareholders to support the split - it's none of our business as analysts!).

Clearly, it's in the board's interest and it's their prerogative to discourage shareholders from supporting the proposal. But to take advantage of their access to early voting intentions as a part of their strategy is, at best, very bad sportsmanship, at worst potentially manipulative - not least when the issue at hand is potentially immediately material. This is especially true because access to the pre-meeting voting data is unavailable to all but the issuer - giving them a distinct information advantage ("Shareholders Denied Access to JPMorgan Vote Results").

To European investors, this is nothing new - shareholder voting is a private matter between them and the company. However, the other side of the pond, things have never been as clear cut, and this week's move by the US financial services trade lobby SIFMA to prevent leakage of sensitive voting data by Broadridge is an important development in the US recognizing the sanctity - and market value - of shareholder voting information. With the furor over Bloomberg accessing confidential user data, the breakdown of the LIBOR and oil price setting mechanisms, potential irregularities in transition management (to name but a few hot issues) the financial services industry also seems to be at last waking up to the importance of integrity in all aspects of investment operations.

There's a reason why France has election laws that prohibit public opinion poll data being published in the final few days before an election. That's because the chief architect of the Constitution of the Fifth Republic, Charles de Gaulle (not known for shunning powerful executive positions himself, don't forget), recognized that the influence of the press and speculation about potential voting results can skew general opinion and the vote.

In the high stakes poker hand currently on the JPMorgan AGM table, the absence of a similar rule this time could prove significant in enabling Dimon to continue in both his current roles. Apart from the sheer quantity of votes cast against Bond, the other notable fact was the complete silence around the progress of the vote and its likely outcome which showed that we should not worry that confidential voting prevents the effective exercise of shareholder choice.

The JPMorgan/Dimon vote is a watershed in more ways than one. Let's not miss this opportunity to ensure we have a proxy plumbing system which is fit for 21st century shareholder democracy.

- Broc Romanek

Last week, Corp Fin issued a batch of 15 new and revised Compliance & Disclosure Interpretations in both the '33 and '34 Act contexts. Sort of a hodge podge. Here they are:

1. Section 139. Securities Act Section 5 - Revised Question 139.13
2. Section 129. Rule 144(a) - Definitions - New Question 129.03
3. Section 133. Rule 144(e) - Limitation on Amount of Securities Sold - New Question 133.07
4. Section 210. Rule 413 - Registration of Additional Securities and Additional Classes of Securities - New Question 210.03
5. Section 228. Rule 430B - Prospectus in a Registration Statement After Effective Date - New Question 228.04
6. Section 256. Rule 502 - General Conditions to be Met - New Question 256.22
7. Section 532. Rule 144(d) - Holding Period for Restricted Securities - Revised Question 532.01
8. Section 116. Form S-3 - General Instructions I.B.1 to I.B.6 - Transaction Requirements - New Question 116.24
9. Section 125. Form S-4 - New Question 125.12
10. Section 118. Item 402(b) - Executive Compensation; Compensation Discussion and Analysis - New Question 118.09
11. Section 134. Item 501 - Forepart of Registration Statement and Outside Front Cover Page of Prospectus - New Question 134.04
12. Section 146. Item 601 - Exhibits - New Question 146.17
13. Section 110. Item 2.06 Material Impairments - New Question 110.01
14. Section 106. Rule 4-10(a)(6) Definitions - Developed Oil and Gas Reserves - New Question 106.01
15. Section 119. Item 402(c) - Executive Compensation; Summary Compensation Table - Revised Question 119.03

Here's analysis on 14 of the CDIs from this Cooley news brief, including a shout out to Jesse Brill for getting an item on his wish list fulfilled, nearly 30 years later! And Mark Borges blogs about the two Item 402 CDIs.

SEC Commissioner Gallagher Supports a Global Proxy Advisor Code of Conduct

On Friday, as noted in this Reuters article, SEC Commissioner Gallagher gave a speech that supports the European Securities and Markets Authority's ("ESMA") code of conduct for proxy advisors and would like it adopted globally.

House Passes Two Bills: Economic Analysis & Reg A+ Deadline

As noted in FEI's "Financial Reporting Blog," the House voted 235 - 161, mainly along party lines, in favor of passing H.R. 1062, the "SEC Regulatory Accountability Act," whose stated aim is "To improve the consideration by the SEC of the costs and benefits of its regulations and orders."

And as noted by Morrison & Foerster's Anna Pinedo in this blog: "the House of Representatives by a vote of 416-6 approved H.R. 701, a bipartisan bill that directs the SEC to finalize rules by Oct. 31 to implement Title IV of the JOBS Act. Rep. Patrick McHenry (R-NC), who serves as Chairman of the Subcommittee on Oversight and Investigations, sponsored the legislation along with Reps. Anna Eshoo (D-CA), David Scott (D-GA), David Schweikert (R-AZ) and Scott Garrett (R-NJ). Rep. McHenry stated that, "To cultivate a stronger economy, we have to build a more vibrant marketplace for our startups and entrepreneurs, which is what this legislation is all about. It's critical that the SEC finally start to implement the JOBS Act - a bipartisan bill that was signed into law more than a year ago. Small businesses and entrepreneurs are starving for capital, and this legislation simply sets a firm deadline for the SEC to get its job done."

- Broc Romanek

In this half-hour podcast, Sean McKessy, Chief of the SEC's Office of the Whistleblower brings us up-to-date on what is happening in his Office, including:

- How do you like the job so far?
- How big is your Staff now?
- What do you consider the Office's biggest accomplishments so far?
- What has been the biggest surprise so far - either organizationally or otherwise?
- Do you think the push for whistleblowers to report internally first poses a threat to the SEC's office?
- What about the tension between language in Codes of Conduct, confidentiality agreements, severance agreements, etc. that encourage or requires internal reporting and the SEC's rule which prohibits any person from taking action to impede an individual's ability to report information directly to the SEC?

Nasdaq Withdraws Internal Auditor Proposal With Plans to Re-Propose

Recently, Nasdaq withdrew its proposal that would have required listed companies to have an internal auditor - with plans to re-propose the rule after it has considered the comments it has received. I find it odd they would go proposal-withdraw-reproposal rather than just proposal-reproposal - which is what a federal agency would have done - but perhaps it's because the SROs have to keep their listed companies happy and have that burden to carry. Thus, by withdrawing the proposal now, Nasdaq can take their time to put together a re-proposal while listed companies breathe easy that the original proposal won't suddenly become law...

More on our "Proxy Season Blog"

We continue to post new items regularly on our "Proxy Season 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:

- Calls for Proxy Access Whither
- Declassification, Political Spending Again Ubiquitous
- Campaign Mounts for Independent Chairs
- No-Action Letter Challenge to New Version of Retail Proxy Access Proposal
- Western Union Seeks to Exclude Norges Bank Proxy Access Shareholder Proposal
- Survey: Mutual Fund Support for Corporate Political Disclosure

- Broc Romanek

It couldn't happen to two nicer guys. Keith Higgins was tapped yesterday to become Corp Fin's Director - and Acting Director Lona Nallengara was promoted to become SEC Chair White's Chief of Staff! Keith brings a wealth of knowledge to the job - and quite an entertaining personality. Always a favorite at our proxy disclosure conference. And it's great to have someone with a disclosure & deal background in the Chief of Staff position.

Survey Results: End-User Exception for Swaps

We have posted our survey results on end-user exception for swaps:

1. When it comes to the end-user exception to the clearing requirement for swaps and board review and approval of the decision to use the exception, our company:
- We have already implemented a board approval policy before the need for the exception arises - 11%
- We have started the process of adopting a board approval policy but have not done so yet - 63%
- We have decided that we don't anticipate ever needing the exception so we have not adopted a board approval policy - 3%
- We have decided to seek board approval on a swap-by-swap basis rather than annually - 0%
- We have not yet decided what to do - 23%

2. For those companies that plan on relying on the end-user exception, will the company:
- Make an annual filing of the electing counterparty information ahead of the first swap transaction - 27%
- Report the electing counterparty information on a swap-by-swap basis - 6%
- We have not yet decided what to do - 68%

Please take a moment to participate in this "Quick Survey on Lead Directors" and "Quick Survey on Rule 10b5-1 Plan Practices."

Relief Delayed is Relief Denied: Treasury Subsidiaries of Non-Financial Companies

I recently got this from a member: The frustration of the non-financial corporate community grows regarding the long-hoped-for but still elusive relief from a significant unintended consequence of Dodd-Frank regarding the availability of the very important End User exception from mandatory clearing requirements. Beginning as early as June 2013, certain transactions with bank counterparties such as interest-rate derivatives and credit default swaps may need to be cleared and full collateralized unless the End User exception is available. This important exception provides that a swap does not have to be cleared if one of the parties is a non-financial entity that is using the swap to hedge or mitigate commercial risk, and that party's reliance on the End User exception has been approved by its board or an appropriate committee.

Background on "Financial Entity" v. "Non-Financial Entity"

Many non-financial companies are planning to rely on the helpful End User Exception. Some of them do not have any problem satisfying the "non-financial entity" requirement, which is determined under a very complicated definition. Under the provision most relevant for non-financial public companies, if 85% or more of the entity's annual gross revenues is derived from activities that are "financial in nature" (as defined by banking regs) or 85% or more of its consolidated assets are related to activities that are "financial in nature" (same), then the entity is deemed to be a "financial entity" that cannot use the End User exception (there's a 2 year lookback for each test).

The problem arises for non-financial companies that have separate legal entities for their in-house treasury operations. Even though there's no legal requirement to use a separate legal entity for treasury operations, many companies have historically taken that approach for a variety of reasons including centralization, i.e., having one group of treasury professionals available to interface with a variety of outside banks. These so-called "treasury subsidiaries" are wholly owned by the parent company. They are often the subsidiaries that non-financial companies use as their bank-facing parties to hedge or mitigate commercial risk for the company and its subsidiaries. Because of the nature of their activities, treasury subsidiaries often fail the 85% test, and therefore are "financial entities" that cannot elect as End Users.

CFTC Aware & Looking for Solutions

On April 10th, CFTC Chairman Gary Gensler gave a speech to the US Chamber of Commerce where he acknowledged the treasury subsidiary issue and suggested that the CFTC may provide some relief. Here's the relevant excerpt from Gensler's speech:

"Treasury Affiliates. We've received many comments and had many meetings with non-financial end-users that [SIC] about required clearing if they use a treasury affiliate when entering into their market facing swaps. Though I don't have any announcements today, let me assure you that the staff and Commission are taking a close look at how to appropriately address these issues in the context of the Dodd-Frank Act."

CFTC, Here's the Solution!

The CFTC does not need to be concerned about going beyond the Congressional mandate with regard to the scope of the End User exception. Instead, it can provide narrow relief to treasury subsidiaries by relying on certain language in the End User text of Dodd-Frank, specifically in Section 723(a) under clause (i) in "Treatment of Affiliates".

The reason CFTC relief is needed on this issue despite the clear intention of Congress as evidenced by Section 723(a) to allow affiliates of non-financial companies - which would include treasury subsidiaries - to benefit from the End User exception is solely because that affiliate provision in Section 723(a) has language requiring that the affiliate (in our case, the treasury subsidiary) be acting "as an agent..."

The way the swap world works is that the documentation between the treasury subsidiary and the counterparty bank identifies the treasury subsidiary as principal in the transaction, which means this scenario technically does not fit squarely within the parameters of this exception - despite the clear fact that when they enter into these swap transactions, treasury subsidiaries are, as a practical matter, acting on behalf of one or more non-financial parent company subsidiaries (i.e., hedging their commercial risk) and essentially are "defacto agents" as such.

Non-financial entities should not have to do unnatural contortions to be able to have their treasury subsidiaries benefit from the very significant End User Exception. Those contortions - not prohibited by Dodd-Frank - would include transferring sufficient non-financial assets to the treasury subsidiary so that it no longer is a "financial entity" under the 85% test and therefore can itself elect as an End User (after a two year period) without relying on the Section 723(a) affiliate exception.

Specific Relief Needed: Sooner Rather Than Later

For the reasons above, the CFTC should recognize the practical and economic realities concerning treasury subsidiaries. Specifically, it should issue guidance confirming that so long as a treasury subsidiary is entering into a swap to hedge or mitigate commercial risk for its parent or company affiliates who, in each case, are not financial entities, then the treasury subsidiary is "acting on behalf ... and as agent" within the purview of Section 723(a), regardless of whether it may be identified as principal in the swap documentation with the bank.

As an aside, it was disappointing how long it took the CFTC to provide relief from certain reporting requirements that went into effect on April 10, 2013, which would have required, among other things, reporting of transactions between wholly-owned affiliates of non-financial entities. Fortunately, the CFTC provided significant relief from those reporting obligations with regard to these wholly-owned affiliates but not until April 5, 2013. To state the obvious, at the 5 day point before the reporting requirements became effective, companies had already devoted significant time and resources trying to ensure compliance. While the relief provided on April 5 was certainly appreciated, it was far less valuable from a work reduction and resources perspective than it would have been if it had been provided a reasonable amount of time before the compliance date. Let's hope that the CFTC does not make the same mistake this time around with regard to allowing treasury subsidiaries to use the End User Exception.

- Broc Romanek

Spanking brand new. Posted in our "Internal Controls" Practice Area, this comprehensive "Internal Controls Disclosure Handbook" provides a heap of practical guidance about how to deal with Item 308 of Regulation S-K and Rules 13a-14 & 13a-15. This one is a real gem - 61 pages of practical guidance.

COSO Updates Its Internal Controls Framework: Time to Pay Up!

Perhaps not a big a story as the reveal of "The Mother" on "How I Met Your Mother," but it's big: COSO issued its updated "Internal Control-Integrated Framework" yesterday. A framework which hadn't been updated since '92. This framework is the one most commonly used by companies for designing and implementing their internal controls. This update was authored by PwC, under the direction of the COSO board - and officially takes effect in 2014. Here's a summary from FEI's "Financial Reporting Blog."

Here is the Executive Summary and related FAQs. To obtain the actual framework, you have to buy the three new volumes that comprise it from COSO. I know it takes a lot of work to develop a framework and that COSO is not a governmental body, but the fact that folks have to pay for what has become a regulatory framework bothers me. Perhaps I'm still scarred from when FASB's accounting standards (here's an example) and the AICPA's auditing standards (back before the PCAOB was born) also were not free...

The Death of Corporate Reputation: How Integrity Has Been Destroyed on Wall Street

In this podcast, Prof. Jonathan Macey provides some insight into his new book: "The Death of Corporate Reputation: How Integrity Has Been Destroyed on Wall Street," including:

- Why write this book? How long did it take?
- What is your favorite part of the book?
- Any surprises along the journey of writing it?
- What are the biggest take-aways that public companies can derive from it?

- Broc Romanek

Recently, SEC Chair White delivered this testimony to Congress to request $1.674 billion for the 2014 fiscal year, a 27% increase - which would be offset indirectly by transaction fees collected from regulated entities. The increased budget would enable the SEC to hire more Staffers, including many more economists to meet the growing burden of conducting economic analysis during the rulemaking process. Here's an article from The Hill entitled "New SEC chief pushes dramatic budget increase to grow agency." And here's a DealBook article.

Also see this Reuters article entitled "SEC chief defends 'neither admit nor deny' but will review."

Journalism in the News: Bloomberg's Privacy Invasion & More

Many are talking about how Bloomberg News reporters have - for years - used the company's terminals to monitor when subscribers logged onto the service to find out what types of functions they had looked at. Here are related articles:

- NY Times' "Privacy Breach on Bloomberg's Data Terminals"
- CNBC's "Snooping Part of the Bloomberg Way, Inside and Out"
- CNBC's "Wall Street: How Much Does Bloomberg Know?"
- CNBC's "Can Wall Street Live Without Bloomberg?"
- WSJ's "At Bloomberg, Wall Between News and Data Came Late"
- Forbes' "Bloomberg's Privacy Breach And The New Church/State Divide"
- FT's "Central banks question Bloomberg privacy"
- TheStreet's "Bloomberg Privacy Breach Angers Wall Street Traders"

People are upset and understandably so. I can't imagine what was going on in anyone's head who thought this was an acceptable form of journalism. But even more crazy is the Justice Department's sweeping subpoenas for the phone records of AP reporters in a terrorism investigation, as noted in this Washington Post article...

May-June Issue: Deal Lawyers Print Newsletter

This May-June issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:

- Therapy for "Deal Fever": An Objective, Disciplined Due Diligence Process
- Proposed DGCL Section 251 Amendments Should Lead to More Negotiated Tender Offers
- Setting the Record (Date) Straight
- How Today's Technology Simplifies the M&A Agreement Process
- Delaware: Reverse Triangular Mergers Don't Result in Assignment
- Economic Realism: Impact of Unvested Options on Purchase Price

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

- Broc Romanek

Many have been warning about creating securities law liability for ERISA plan fiduciaries where a "Summary Plan Description" for a 401(k) plan that offers a "Company Stock Fund" investment choice incorporates SEC filings by reference (and the filings later turn out to be inaccurate). Here are the results from a recent poll about what companies are doing in response:

1. Our company:
- Recently separated the 401k SPD from the prospectus - 17%
- Always separated the 401k SPD from the prospectus - 27%
- Is considering separating the 401k SPD from the prospectus - 33%
- Has decided to not separate the 401k SPD from the prospectus - 23%

Please take a moment to participate in this "Quick Survey on Lead Directors" and "Quick Survey on Rule 10b5-1 Plan Practices."

Liability for 401(k) SPDs

In this CompensationStandards.com podcast, Mike Melbinger of Winston & Strawn discusses the risks of not separating your 401(k) summary plan description from the prospectus, including:

- I have seen you blog on this issue of securities law liability and 401(k) Plan summary plan descriptions, but as a compensation and securities lawyer, what exactly is the issue we need to worry about?
- So what should companies do now?
- I have run this poll on the topic - but what are you seeing - are companies moving to separate the SPD from the prospectus?

Transcript: "D&O Insurance Today"

I have posted the transcript for our recent webcast: "D&O Insurance Today."

- Broc Romanek

In this podcast, Ginny Fogg of Norfolk Southern provides some insight into handling director expenses, including:

- Is there a policy for director expenses? Is it written?
- What processes are in place to handle director expenses?
- How are pre-approvals of expenses handled?
- What is your favorite way to celebrate the arrival of Spring?
- How do your directors decide what conferences to attend?
- Have you been to any director conferences yourself?

Check out our new checklist on director expense reimbursement policies...

Unusual Assets in Pension Plans

I rarely blog about pension plans. Not because there is nothing newsworthy. In fact, it's probably because there is so much newsworthy and I have to draw the line somewhere or I'd be blogging 24 hours per day. The New York Times recently ran an article - entitled "Companies Substitute Intangibles, Like Cheese, for Investments" - describing the growing trend of the use of unusual assets to fund pension plans. Along those lines, check out this case study from Valuation Research Corporation which describes how TUI Travel plc - one of the world's largest travel companies - is using intellectual property to shore up their pension plan.

9th-11th Say-on-Pay Failures of the Year

As noted in its Form 8-K, Stillwater Mining is the 9th company holding an annual meeting in 2013 to fail to gain majority support for its say-on-pay (32% support). And as noted in its Form 8-K, AXIS Capital Holdings is the 10th company (also 32% support).

And for the 11th failure, as noted in its Form 8-K, Comstock Resources had just 32% support this week - it also failed last year with 35% support.

- Broc Romanek

As noted by Blank Rome's Yelena Barychev in this blog:

It has been a long-standing practice of the NYSE to post on its website the forms of the documents required to be submitted in connection with the NYSE listing applications. On April 30th, the NYSE filed proposed rule changes to its Listed Company Manual, which, if adopted, will result in the Manual sections containing the listing application materials being deleted, and updated listing application materials will be posted only on the NYSE's website.

Although the NYSE amends its Manual from time to time, forms of listing agreements contained in the Manual have not always been amended to reflect changes made to the NYSE listing documents. Some provisions in the listing agreements contained in the Manual are obsolete. The NYSE proposes to remove from the Manual (i) each of the agreements set forth in Sections 901.01 through 901.05, (ii) the form of original listing application contained in Section 903.01, and (iii) the form of supplemental listing application contained in Section 903.02.

In the event that in the future the NYSE makes any substantive changes to those documents that are being removed from the Manual, it will submit a rule filing to the SEC to obtain approval of such changes, except for typographical or stylistic changes. The NYSE also plans to maintain all historical versions of those documents on its website after changes have been made, so that it will be possible to review how each document has changed over time.

In addition, the NYSE proposes to state certain requirements, which it has been imposing as a matter of practice, in the Manual to add transparency to the listing process. For example, the NYSE proposes to include in the Manual a new Section 107.00, Financial Disclosure and Other Information Requirements, which will contain the following requirements, among others:

- Section 107.03 (SEC Compliance): No security shall be approved for listing if the issuer has not for the 12 months immediately preceding the date of listing filed on a timely basis all periodic reports required to be filed with the SEC or Other Regulatory Authority or the security is suspended from trading by the SEC pursuant to Section 12(k) of the Exchange Act.
- Section 107.04 (Exchange Information Requests): The NYSE may request any information or documentation, public or non-public, deemed necessary to make a determination regarding a security's initial listing, including, but not limited to, any material provided to or received from the SEC or Other Regulatory Authority. A company's security may be denied listing if the company fails to provide such information within a reasonable period of time or if any communication to the NYSE contains a material misrepresentation or omits material information necessary to make the communication to the NYSE not misleading.

The NYSE also proposes to no longer require the following supporting documents in connection with an original listing application (see Section 702.04):

- Stock Distribution Schedule (the stock distribution schedule requirement is obsolete because the NYSE obtains the distribution information it needs from the applicant's public filings and from its transfer agent).
- Certificate of Transfer Agent/Certificate of Registrar (the information that the NYSE needs about the applicant's outstanding shares is available in its prospectus or periodic SEC reports, as well as the report of the applicant's outstanding shares that will be required to be delivered to the Exchange once a quarter after listing).
- Notice of Availability of Stock Certificates (all transactions in listed securities in the national market system are conducted electronically through DTCC).
- Prospectus (final prospectuses are publicly available on the SEC's website).
- Financial Statements (financial statements are included in the applicant's SEC filings which are publicly available on the SEC's website).

On the Rise: "Foreign Indefinitely Reinvested Earnings" (IRE) Balances

Apple recently chose to borrow a record $17 billion in the US bond market instead of using available overseas cash because paying interest on the bonds was a better choice than paying the repatriation tax. Since many companies maintain "Foreign Indefinitely Reinvested Earnings" (IRE) balances, Audit Analytics has put together this chart with the amounts of Foreign IRE balances held by the Russell 3000 since 2008. The percentage has increased yet again.

Our Executive Pay Conferences: 15% Early Bird Discount Ends Tomorrow Night

The early bird deadline for our popular conferences - "Tackling Your 2014 Compensation Disclosures: The Proxy Disclosure Conference" & "Say-on-Pay Workshop: 10th Annual Executive Compensation Conference" - to be held September 23-24th in Washington DC and via Live Nationwide Video Webcast expires at the end of tomorrow, Friday, May 10th. Register now.

The full agendas for the Conferences are posted - but the panels include:

- Q&A with ISS
- Q&A with Glass Lewis
- Say-on-Pay Shareholder Engagement: The Investors Speak
- Compensation Committees & Advisors: The NYSE & Nasdaq Speak
- Realizable Pay Disclosure: How to Do It
- How to Improve Pay-for-Performance Disclosure
- We Don't Have a Good Pay Story: What Do We Disclose?
- How to Avoid Executive Pay Disclosure Litigation
- Peer Group Disclosures: What to Do Now
- In-House Perspective: Strategies for Effective Solicitations
- The SEC Staff Review Process
- Creating Effective Clawbacks (and Disclosures)
- Pledging & Hedging Disclosures
- The Executive Summary
- The Art of Supplemental Materials
- Dealing with the Complexities of Perks
- Say-on-Parachute & Post-Deal Disclosure Developments
- Compensation Accounting, Tax & Risk Assessment Disclosures
- Shareholder Proposals & Executive Pay
- The Rise of Political Contribution Disclosures

- Broc Romanek

In planning for our week of executive pay conferences - the 15% early bird discount expires at the end of this Friday, May 10th! - it occurred to me that quite some time has passed since we posted "Ed Woolard's Candid, Inspirational Challenge to CEOs and Directors." These truly remarkable remarks were originally delivered at our conference. Here is a transcript of them. Ed is a former CEO and Chair of DuPont and has served on numerous boards.

Note that the folks from Q4 will be live tweeting (use #corpgov) and live blogging during today's webcast: "Social Media: Parsing the Hypos." I will add some live tweets myself - here is my Twitter handle...

CEO Gives Bonus to Employees: Motivational Tool or Gift of Shareholder Assets?

This Telegraph article describes how a CEO of a UK company - Lord Wolfson of Next - recently gave away his bonus to the 19,400 employees of his company. It got me thinking. On the one hand, that certainly helps the pay gap - and could prove to be a great motivational tool. On the other hand, maybe that bonus to employees should have come from the company directly to drive loyalty to the company and not that particular CEO? What do you think?

Comp Committee & Advisor Independence: Actions to Take Now

We have mailed the March-April Issue of The Corporate Executive, featuring a comprehensive article by Mark Borges about the new comp committee & advisor rules, including:

- Compensation Committee and Advisor Independence Standards: Actions to Take Now
- What's Covered by the New Requirements
- When the New Requirements Take Effect
- Ensuring the Independence of Your Compensation Committee Members
- Assessing the Independence of Compensation Committee Advisers
- Updating Your Compensation Committee Charter
- Disclosing Compensation Consultant Conflicts of Interest
- The Initial Disclosures--Examples
- Final Cost-Basis Reporting Regs--Bad News for Stock Compensation

Act Now: Get this issue rushed to when you try a 2013 No-Risk Trial to The Corporate Executive.

- Broc Romanek

Tune in tomorrow for the webcast - "Social Media: Parsing the Hypos" - during which two legal pros (Dave Lynn & Davis Polk's Joe Hall) and two IR pros (Q4's Darrell Heaps & IR Web Report's Dominic Jones) will join an in-house lawyer - Zillow's Brad Owens - to parse a group of hypotheticals to determine what is feasible - and what is not - under the SEC's Regulation FD framework. The panel will also cover what are effective IR strategies to leverage social media and more. Please print off the hypotheticals in advance.

Meanwhile, there are now 11 companies that have filed Form 8-Ks announcing the use of social media channels. Here is my list with links to all those 8-Ks.

Survey: Corporate Leadership Lacking on Social Media

A while back, The Conference Board put out these survey results that found limited use and understanding of social media among officers and directors. The survey notes that while 90% of respondents claim to understand the impact that social media can have on their company, just 32% monitor social media to detect risks to their business activities and 14% use metrics from social media to measure corporate performance - and only 24% of senior managers and 8% of directors receive reports containing summary information. Notably, half of the companies don't collect this information at all.

If It Didn't Happen on Twitter, It Didn't Really Happen. Here's Why.

Great food for thought from Mark Suster's blog entitled "If It Didn't Happen on Twitter, It Didn't Really Happen. Here's Why."

- Broc Romanek

According to this Bloomberg article, SEC Chair Mary Jo White may go the unusual route of adopting the rule lifting the prohibition against general solicitation and general advertising in exempt securities offerings - first proposed back in August last year - as an interim final rule. Here is an excerpt from that article:

White, who became SEC chairman on April 10, has suggested the commission pass the existing plan without major changes and add additional protections later, said the people, who declined to be identified because the deliberations are private. The approach would placate congressional Republicans who have complained the SEC has slow-walked the rule, which was required to be completed by July 2012.

Approving the regulation would allow White to make good on a promise she made in her Senate confirmation hearing to prioritize rules mandated by the Jumpstart Our Business Startups Act, which was designed to boost capital-raising and job creation. At the same time, it could anger advocates for small investors and at least one Democratic commissioner.

But then you have this MarketWatch piece, which describes Chair White as saying that investor protections are key to the JOBS Act - in essence, "haste makes waste" as noted by Steve Quinlivan. So I don't know what to believe...

Learn more about "what is an 'interim final rule'?" from this paper...

1788 Annual Meetings in May: How Many Protests?

Thanks to CorpGov.net and CookESG Research, here is a list of the 1788 annual meetings to be held in May. Davis Polk's Ning Chiu blogs about protests at bank annual meetings as the 99% Power group gets back into action. Here's the first sprinkling of media accounts of protests:

- PNC annual meeting cut short
- U.S. Bank Shareholder Meeting Brings Protesters to Boise
- Wells Fargo Shareholder Meeting Disrupted

Meanwhile, on BeyondProxy.com, investor Tom Russo provides a preview of the Berkshire Hathaway annual meeting. Here's a nice pic of shareholders arriving for the meeting in their private jets - and this DealBook "live meeting" blog has pics from the meeting itself. Berkshire Hathaway's annual meeting has gotten so big that 2000 people ran a 5k related to the meeting...

Webcast: "FCPA Issues in Deals Today"

Tune in tomorrow for the DealLawyers.com webcast - "FCPA Issues in Deals Today" - to hear Mauricio Espana and Derek Winokur of Dechert and Rebekah Poston of Squire Sanders explain how FCPA diligence is being conducted, how reps & warranties related to FCPA violations are being negotiated, and more.

- Broc Romanek

After reading so many articles about the uphill climb that today's law students have in finding a job, I thought I would ask one how bad it really is. Here are some thoughts from Kyle Flann (flan0160@umn.edu) a 3L at the U. of Minnesota:

For the last 21 years of my life I have been in school. From graduating high school, to getting my undergraduate degree, to attending law school - which I will graduate from in less than a month. For the last 21 years I have been a student. Yet even after all the sleepless nights working tirelessly on term papers and preparing for final exams, little did I know what would be my next biggest challenge. The last 21 years have been attempting to prepare for this one moment... trying to land a job.

Finding My Passion

Going into college I hadn't been completely sure what I intended to do with my life. I bounced around classes and majors until finally taking a course in business law, which changed everything. I discovered how much I love business and declared my major soon after. The ability of businesses to be innovative and analytical in trying to become the most efficient and successful business it can be appealed greatly to a mind like mine. My decision to go to law school and to pursue my JD with a concentration in business law sprang from this love of business, and I have found the variety of legal issues that business attorneys are exposed to extremely exciting.

From Day One of law school I have intended to pursue my career in corporate law - and that has been my job focus every step of the way. However, even with a clear vision of what I want - and using a variety of search techniques - I've struggled in this search as have a majority of my classmates.

Morale is Low

The job market for lawyers is tough right now. For law students it is even more difficult. The wavering morale of my classmates is reflected by the whisperings that permeate the lecture halls. Searching for jobs right now can be extremely frustrating. Not only do you need to distinguish yourself from your classmates, but also from previous years' still unemployed graduates, as well as experienced attorneys many of whom have been forced back into the job market.

Just getting an initial interview is a big deal for most law students. And a student actually having a job lined up before graduation is increasingly rare. Not having the security of a job offer is very intimidating, especially with enormous student debt looming, some with payments starting just weeks after bar exam results are released.

Today's Job Search Tools: Online

In trying to find a job, I believe I've been doing as much - or more - than most of my classmates. Most of my job search has included utilizing a variety of online resources. I've found many extremely useful job boards including my career services job board; the Association of Corporate Counsel job board; and the job board on FindLaw.com. In addition, I have utilized some of the more general job boards such as Indeed, Monster, The Ladders, Career Builder and Simply Hired - although these boards typically have less relevant positions than what I am looking for.

I've also identified a variety of law firms and companies around the Midwest that I am interested in working for - and have signed up for the mailing lists associated with their individual career boards. These actions have allowed me to identify hundreds of potential job opportunities - and I've applied to nearly every one.
In addition to this I have attempted everyone's first piece of advice in conducting a job search: "networking." This honestly has been one of the most useful steps I have taken. It has led to me meeting many kind folks, receiving useful advice, and on occasion has even led to some interviews.

Networking at events has been great, but again using online tools has also been successful for me. Utilizing my career services networking webpage has allowed me to meet many who have been in the same position as me and who can give me terrific advice. In addition, using social networking - primarily LinkedIn - to get introduced to others in my industry has been very effective. It seems like there is a way to reach just about anyone through these tools - and I've yet to find someone who isn't at least willing to talk to me about how their career has progressed and to give me any advice they may have.

Know Yourself

While my job search has been terrifying - and at times slightly depressing - in the end, I am confident that I will find a job that I will love and that will jumpstart my career. I know this because I know my own work ethic and I know my own desire to find the right job. I will continue to work in every way I know how until I find an employer willing to let me grow with them. I know it may take a while but I am willing to do what it takes (and I know my classmates are too). So while we will continue to grumble about this job market, be ensured that we will continue to apply - and that there are many terrific young lawyers coming out for hire.

Give Me the Bad News Please

If there is one thing that I could say to potential employers, it would be this: the worst thing about this job search for me personally is not hearing anything at all from a position I have applied for.

I would much rather get a rejection letter than to never hear anything. At least getting some correspondence reinforces the belief that at least someone took the time to look at my application and resume - and have taken me and my job search seriously. It is much appreciated by me and many others to at least have this closure in these situations, even if it means not getting an opportunity at a job we believe we are qualified for.