E-Minders August 2018

E-Minders August 2018

In This Issue:

E-Minders is our monthly e-mail newsletter containing the latest developments and practical guidance for corporate & securities law practitioners.

We view TheCorporateCounsel.net as the gathering place for the community and encourage those who may not yet be members to take advantage of a "Half-Price for Rest of '18" No-Risk Trial to see what you are missing. Here are 12 Good Reasons to try us now.

You can subscribe below to receive a complimentary E-Minders subscription - even if you don't subscribe to TheCorporateCounsel.net. Our hope is that once you get to know us, you will understand the true value of a subscription to TheCorporateCounsel.net. Note that subscribers to TheCorporateCounsel.net should sign up below for E-Minders too, as we don't have the e-mail addresses for many people in our community.

Our "Pay Ratio & Proxy Disclosure Conference" - 10% Reduced Rate: Register now and save. Check out this registration information for our popular conferences – "Pay Ratio & Proxy Disclosure Conference" & "Say-on-Pay Workshop: 15th Annual Executive Compensation Conference" – to be held September 25-26 in San Diego and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days.

Discounted Rate – Act by August 10th: Executive pay disclosure is more important than ever, with evolving pay ratio disclosures and increased attention on perks disclosure and director pay. We are doing our part to help you stay informed – and avoid costly pitfalls – by offering a special discounted rate to help you attend these critical conferences (both of the Conferences are bundled together with a single price). So register by August 10th to take advantage of the 10% discount.

"101 Pro Tips – Career Advice for the Ages" Paperback! You know you're old when you're writing a book with career advice. John & Broc have wrapped up their latest paperback – " 101 Pro Tips – Career Advice for the Ages" Paperback. Here's the " Table of Contents." It's free for members of TheCorporateCounsel.net (but it does cost $20 in shipping & handling).

This book is designed for fairly young lawyers – both in law firms and in companies. It's written in an "easy to read" style, complete with some stories & anecdotes to make it interesting. A fairly unique offering in our field. This is a unique offering – and we're pretty happy about how it came out. Members can request it now.

Our New "In-House Accelerator"! If you're relatively new to being in-house - or you want to gain that perspective - take advantage of our new "In-House Accelerator"! This online - and offline - training program is free for members of TheCorporateCounsel.net. In addition to the "In-House Accelerator" paperback (paperback consists of 216 FAQs; here's the "Table of Contents"), there is a series of podcasts & other comprehensive materials covering these four areas:

1. Corporate Governance
2. Proxy Season
3. '34 Act Reporting
4. Other

It's Done! 2019 Edition of Romanek & Dunshee's "In-House Essentials Treatise" : Broc Romanek & Liz Dunshee have wrapped up the 2019 Edition of the definitive guidance on securities law for the in-house lawyer and it's printed: Romanek & Dunshee's "In-House Essentials Treatise." With over 1850 pages - spanning 21 chapters - you will need this practical guidance for the challenges ahead. Here's the "Detailed Table of Contents" listing the topics so you can get a sense of the Treatise's practical nature. Order on TheCorporateCounsel.net.

It's Done! 2019 Edition of Romanek's & Dunshee's "Proxy Season Disclosure Treatise": Broc Romanek & Liz Dunshee have wrapped up the 2019 Edition of the definitive guidance on proxy season disclosure and it's been sent to the printers: Romanek & Dunshee's "Proxy Season Disclosure Treatise & Reporting Guide." With over 1750 pages - spanning 33 chapters - you will need this practical guidance for the challenges ahead. Here's the "Detailed Table of Contents" listing the topics so you can get a sense of the Treatise's practical nature. Order on TheCorporateCounsel.net.

New! "Deal Tales" - A Three Volume Set! Education by entertainment! This "Deal Tales" series of three paperback books teaches the kind of things that you won't learn at conferences, nor in treatises or firm memos. Here's the " Table of Contents" for each volume rolled into one. With the set containing over 600 pages, John Jenkins - a 30-year vet of the deal world - brings his humorous M&A stories to bear. Order "Deal Tales" today!

Upcoming Webcasts on TheCorporateCounsel.net: Join us on September 6th for the webcast – "Nasdaq Speaks: Latest Developments & Interpretations" – to hear senior Nasdaq Staffers Arnold Golub, Lisa Roberts, David Strandberg and Nikolai Utochkin discuss all the latest that Nasdaq-companies need to know.

And join us on October 16th for the webcast – "Proxy Solicitation: Nuts & Bolts" – to hear Morrow Sodali's Tom Ball, Strategic Governance Advisors' Kim Castellino, Kingsdale Advisors' Lydia Mulyk and Alliance Advisors' Reid Pearson discuss the art of proxy solicitation in this activism-heightened world.

And join us on November 28th for the webcast – "How Boards Should Handle Politics as a Governance Risk" – to hear CalPERS' James Andrus, Downey Brand's Bruce Dravis, Politicom Law's Erin Lama and Richard Levick discuss the increasing risks caused by the entanglement of business & politics and how boards oversee the different dimensions of political speech.

There is no cost for these webcasts if you are a member of TheCorporateCounsel.net. If you are not a member, take advantage of our no-risk trial to access the programs. You can sign up for this no-risk trial online, send us an email at info@thecorporatecounsel.net - or call us at 925.685.5111.

Upcoming Webcasts on DealLawyers.com: Join us on September 18th for the webcast – "Blockchain in M&A" – to hear Potter Anderson's Chris Kelly, Matt O'Toole and Mike Reilly discuss the new implications wrought by blockchain for deals.

And join us on October 10th for the webcast – "This is It! M&A Nuggets" – to hear McDermott Will & Emery's Wilson Chu, Hogan Lovells' Rick Climan, Arnold & Porter's Joel Greenberg and Sullivan & Cromwell's Rita O'Neill impart a whole lot of practical guidance!

And join us on November 14th for the webcast – "GDPR's Impact on M&A" – to hear Davis Polk's Avi Gesser and Pritesh Shah discuss the impact of the EU's new "General Data Protection Regulation" for M&A transactions involving EU & US businesses.

No registration is necessary - and there is no cost - for these webcasts for DealLawyers.com members. If you are not a member, take advantage of our no-risk trial to access the programs. You can sign up online, send us an email at info@deallawyers.com - or call us at 925.685.5111.

Upcoming Webcasts on CompensationStandards.com: Join us on January 9th for the webcast – "The Latest: Your Upcoming Pay Ratio & Proxy Disclosures" – to hear Mark Borges of Compensia, Alan Dye of Hogan Lovells and Section16.net, Dave Lynn of TheCorporateCounsel.net and Morrison & Foerster and Ron Mueller of Gibson Dunn discuss all the latest guidance about your upcoming pay ratio & say-on-pay disclosures - including the latest SEC positions, as well as how to handle the most difficult ongoing issues that many of us face.

And join us on February 12th for the webcast – "How to Use Cryptocurrency as Compensation" – to hear Perkins Coie's Wendy Moore and Morrison & Forester's Ali Nardali and Fredo Silva discuss the groundswell in the use of cryptocurrency as compensation among private companies – and the legal framework that applies.

No registration is necessary - and there is no cost - for these webcasts for CompensationStandards.com members. If you are not a member, take advantage of our no-risk trial to access the programs. You can sign up online, send us an email at info@compensationstandards.com - or call us at 925.685.5111.

Exempt Solicitations: 2 New CDIs

There's been a lot of buzz this year about voluntary exempt solicitations - increasingly, these notices are being used to publicize shareholder views on proposals and other topics. Broc blogged about John Chevedden's first "Notice of Exempt Solicitation" in March - and we've noted on our "Proxy Season Blog" that it may become a year-round practice. In late July, Corp Fin issued two new Proxy Rules CDIs that confirm that voluntary exempt solicitations are okay - if it's clear who is making the filing.

- Question 126.06 says that the Staff will not object to a voluntary submission of such a notice, provided that the written soliciting material is submitted under the cover of Notice of Exempt Solicitation as described in CDI 126.07 and such cover notice clearly states that the notice is being provided on a voluntary basis. Doing so will make it clear to investors the nature of the submission and that it is being made on behalf of a soliciting party who does not beneficially own more than $5 million of the class of subject securities.

- Question 126.07 says that the Rule 14a-103 information required by Rule 14a-6(g)(1) - e.g. the filer's name & address - must be presented in an Edgar submission before the written soliciting materials, including any logo or other graphics used by the soliciting party. To the extent that the notice itself is being used as a means of solicitation, the failure to present the Rule 14a-103 information in this manner may, depending upon the particular facts and circumstances, be misleading within the meaning of Exchange Act Rule 14a-9. This requirement applies regardless of whether the filing is voluntary or to satisfy the requirements of Rule 14a-6(g)(1).

For more background & commentary, visit this Gibson Dunn blog. Here's an excerpt:

While these new CDIs provide helpful guidance on the use of voluntary Notices of Exempt Solicitations, the CDIs may not go far enough to address potential abuses that increasingly are arising when the EDGAR system is used as a platform for disseminating a filer's views. For example, C&DI Question 126.06 does not expressly require that the filer represent that it is in fact a shareholder.

Absent further guidance from or review and comment on such filings by the Staff, the process allows anyone with EDGAR codes to submit filings unrelated (or only tangentially related) to a proposal, or to set forth disparaging or inflammatory views, subject only to the Rule 14a-9 standard governing false and misleading statements. For example, John Chevedden, who as of July 31 has filed 21 of these filings in 2018, filed a Notice of Exempt Solicitation at Netflix a week after the company's annual meeting, which contained only a vague and confusing voting recommendation at the very end, and instead was devoted largely to criticizing the company's decision to hold a virtual annual meeting. However, the Staff has informally indicated that companies should contact them if they believe the PX14A6G process is being abused, and the new interpretations hopefully indicate that the Staff will be more proactive in reviewing and possibly commenting on such filings.

SEC Announces Proxy Roundtable (Here We Go Again)

In late July, the SEC announced that it will hold a "proxy process" roundtable this fall. The date & agenda are TBD - but Chair Clayton is asking Corp Fin to reconsider the voting process, retail shareholder participation, shareholder proposals, proxy advisors, technology & universal proxy cards.

This isn't the first time the SEC has tackled "proxy plumbing." It issued its first concept release on this topic back in 2010 (see our "Proxy Plumbing" Practice Area). That effort didn't result in much rule-making - maybe the SEC's initiatives will be less controversial this time.

10-K/10-Q "Cover Page" Changes: Courtesy of SRC & Inline XBRL

In late June, we blogged about the SEC's changes to the definition of a "smaller reporting company" & its adoption of a new requirement for companies to use Inline XBRL in their filings. This Steve Quinlivan blog points out that changes have been made to many of the SEC forms due to this new regime. We're posting memos about this development in our "Smaller Reporting Companies" Practice Area.

To reflect these changes, we've updated the Word version of the Form 10-K cover page in our "Form 10-K" Practice Area, as well as the Word version of the Form 10-Q cover page in our "Form 10-Q Practice" Area. We're also updating our "Form 10-K Handbook" and our "Form 10-K Cover Page Requirements Checklist" to reflect the new cover page language.

This excerpt from Steve's blog notes the effect of the new Inline XBRL requirement – and points out that changes to the form may be applicable before compliance with the new requirement becomes mandatory:

The new Inline XBRL rules include conforming amendments to the cover pages for certain periodic reports, including Forms 10-K and 10-Q. The change to the cover pages eliminates reference to compliance with the website posting requirement. While there is a generous phase in period for required use of Inline XBRL, the rules are technically effective 30 days from publication in the Federal Register. Therefore, these changes to the cover page are potentially applicable to second quarter Form 10-Qs for calendar year issuers.

The changes to the "smaller reporting company" definition have resulted in conforming amendments to the cover pages for registration statements (Forms S-1, S-3, S-4, S-8, S-11, Form 10) & periodic reports (Forms 10-K and 10-Q). The change reflects the fact that while the new rules specify a larger threshold for SRC status, the definition of "accelerated filer" remains unchanged. The rules are effective 60 days from publication in the Federal Register.

SEC Concept Release: Expanding Form S-8 & Rule 701

At an open meeting in mid-July, the SEC voted to issue a 36-page concept release that seeks input on expanding and simplifying Form S-8 & Rule 701. Among other points, the release asks whether:

  • Rule 701 & Form S-8 accommodations should extend to "gig economy" relationships – and what parameters should apply
  • Form S-8 requirements should be revised to ease compliance issues that arise when plan sales exceed the number of shares registered
  • The SEC should permit all of a company's plans to be registered on a single registration statement
  • Companies would benefit from a "pay-as-you-go" or periodic fee structure for Form S-8
  • Rule 701 should be extended to reporting companies – eliminating the need for Form S-8
  • The SEC should amend the disclosure content & timing requirements of Rule 701(e)

This blog from Cooley's Cydney Posner notes that much of the discussion at the open meeting and in the concept release relates to whether or not liberalizing the equity compensation rules would create incentives for companies to "go public and stay public" (here's Commissioner Stein's statement and here's Commissioner Peirce's statement).

SEC Raises Rule 701 Disclosure Threshold

In mid-July, the SEC announced that it had unanimously approved an amendment to Rule 701(e). Non-reporting companies that issue equity compensation won't have to provide financial statements, risk factors and other disclosures to participants until they've sold an aggregate of $10 million in securities during a 12-month period. Previously, that threshold was $5 million.

As John blogged a couple months ago, this amendment was a result of the "Economic Growth, Regulatory Relief & Consumer Protection Act." The amendment will become effective immediately upon publication in the Federal Register – and companies that have already started an offering in the current 12-month period will be able to apply the new threshold.

Debt Offerings: SEC Proposes to Simplify Guarantor & Pledgor Disclosures

In late July, the SEC proposed amendments to Rule 3-10 & Rule 3-16 of Regulation S-X, which address the financial information about subsidiary issuers, guarantors & affiliate pledgors required in registered debt offerings. Here's the 213-page proposing release.

According to the SEC's press release, the proposed changes are intended to "simplify and streamline the financial disclosure requirements" applicable to registered debt offerings for guarantors and issuers of guaranteed securities, as well as for affiliates whose securities collateralize a registrant's securities. Highlights of the proposed amendments to Rule 3-10 include:

  • replacing the condition that a subsidiary issuer or guarantor be 100% owned by the parent company with a condition that it be consolidated in the parent company's consolidated financial statements;
  • replacing the requirement to provide condensed consolidating financial information, as specified in existing Rule 3-10, with certain financial and non-financial disclosures;
  • permitting the proposed disclosures to be provided outside the footnotes to the parent company's audited annual and unaudited interim consolidated financial statements in the registration statement prior to the first sale of securities;
  • requiring the proposed disclosures to be included in the footnotes to the parent's financial statements beginning with the annual report for the first fiscal year during which sales of the debt securities were made.

In addition, the obligation to provide the required disclosures would terminate when the issuers and guarantors no longer had an Exchange Act reporting obligation with respect to the securities – instead of terminating only when the securities were no longer outstanding, as provided under current rules.

Proposed changes to Rule 3-16 include:

  • replacing the requirement to provide separate financial statements for each affiliate whose securities are pledged as collateral with financial and non-financial disclosures about the affiliates & the collateral arrangement as a supplement to the consolidated financials for the entity issuing the collateralized security;
  • permitting the proposed disclosures to be located in filings in the same manner as the proposed guarantor disclosures under Rule 3-10; and
  • replacing the existing requirement to provide disclosure only when pledged securities meet a numerical threshold relative to the securities registered with a requirement to provide the proposed disclosures in all cases, unless they are immaterial to holders of the collateralized security.

By reducing the compliance burdens associated with existing financial statement requirements for these entities, the SEC hopes to encourage issuers to register debt offerings, & thus provide investors with greater protections than they receive in unregistered offerings.

Perk Disclosure: SEC's Enforcement Blasts Company for Poor Drafting Training

You'll be hearing a lot about the SEC's Enforcement action against Dow Chemical over poor perk disclosures. As you can learn from the SEC's order (and memos posted in the "Perks" Practice Area on CompensationStandards.com) – the company was not only fined $1.75 million – but it was ordered to retain a consultant for a period of one year to review its perks policies, controls & training (note that no individuals were charged, just the company). Wow! There were $3 million of perk omissions over four years.

So what can you do? For starters, we have an 82-page chapter on perk disclosure as part of the Lynn, Borges & Romanek's "Executive Compensation Disclosure Treatise" posted on CompensationStandards.com. The entire Treatise is 1650 pages – and it's just about pay disclosure! In addition to being posted on CompensationStandards.com, you can order a hard copy.

Then, we've had a panel about perk disclosures for 16 straight years as part of our annual "Proxy Disclosure" conference – which is coming up soon: September 25th & 26th in San Diego and also available by video webcast. This upcoming big disclosure conference has nearly 20 panels. Register by August 10th for a reduced rate.

Perks: Another SEC Enforcement Case!

As you can see from our list of SEC perks cases (posted in our "Perks" Practice Area on CompensationStandards.com), the SEC has averaged one perks enforcement case per year for the past dozen years. That's why it's so surprising that the SEC has now brought two perks cases in one week. Coincidence or a theme?

In this new case against Energy XXI, the CEO & board were charged with hiding more than $10 million in personal loans that the CEO obtained from company vendors and a candidate for the company's board. The company wasn't charged, interestingly. Here's a blog about last week's case.

The list of perks in para 56 of this complaint raises a couple of interesting issues. Is a bar stocked with cigars and liquor – on company premises for use in entertaining customers – necessarily a perk? You might ask what is a "Denny Crane" room? (Hint: TV show "Boston Legal" – that's the character played by William Shatner). Come learn what you need to know as Mark Borges & Alan Dye lead a panel devoted just to perks at our upcoming "Proxy Disclosure Conference" – to be held September 25-26 in San Diego and via Live Nationwide Video Webcast.

Reduced Rates – Act by August 10th: Time to act on the registration information for our popular conferences – "Pay Ratio & Proxy Disclosure Conference" & "Say-on-Pay Workshop: 15th Annual Executive Compensation Conference" – to be held September 25-26 in San Diego and via Live Nationwide Video Webcast. Here are the agendas – nearly 20 panels over two days. So register by August 10th to take advantage of the discount.

House Passes "Jobs Act 3.0"

The "Jobs & Investor Confidence Act of 2018" has now passed the House – by a vote of 406-4 – according to this announcement from the House Financial Services Committee. Among other things, the 32 pieces of legislation that comprise the bill would:

  • Require the SEC to analyze the costs & benefits of the use of Form 10-Q by emerging growth companies and consider the use of alternative formats for quarterly reporting for EGCs.
  • Direct the SEC to consider amendments to Rule 10b5-1 that would, among other things: limit insiders' ability to use overlapping plans, establish a mandatory delay between the adoption of the plan and execution of the first trade, limit the frequency of plan amendments, require companies and insiders to file plans and amendments with the SEC, and impose board oversight requirements.
  • Require companies with multi-class share structures to make certain proxy statement disclosures about shareholders' voting power.
  • Allow emerging growth companies with less than $50 million average annual gross revenue to opt out of auditor attestation requirements beyond the typical 5-year period.
  • Amend the definition of "accredited investor" to include people with education or job experience that would allow them to evaluate investments.
  • Expand to all public companies the "testing the waters" and confidential submission process for registration statements in an IPO or a follow-on offering within one year of an IPO.
  • Allow venture exchanges to register with the SEC, as a trading venue for small & emerging companies.
  • Direct the SEC & FINRA to study the direct and indirect costs for small & medium-sized companies to undertake public offerings.

Brave New World: The 1st Blockchain Annual Meeting

In 2017, Delaware amended its corporate statute to permit corporate records to be maintained using distributed ledger technology – aka "blockchain." While it's not a Delaware corporation, Banco Santander recently became the first company to use blockchain as part of the voting process for its 2018 annual meeting. This "IR Magazine" article suggests that the results were impressive. Here's an excerpt:

At this year's Santander AGM, held on March 23, investors were asked to cast their vote twice: once in the traditional manner and once on the distributed ledger. Investors accessed the distributed ledger through Broadridge's web application. One in five (21 percent) of the AGM participants made use of the new technology.

The results of the votes cast using blockchain were available within two days of the AGM, compared with the usual two or three-week wait with traditional proxy voting. In the near future, voters will be told real-time what the results are, according to Broadridge Financial Solutions.

The article notes that 60% of the company's shareholders are institutions, and that its blockchain initiative is designed to increase turnout among those investors.

We've previously blogged about initiatives to use blockchain technology for voting at shareholder meetings – one of these initiatives involved Broadridge & several banks (including Santander), while another involved Nasdaq.

Revenue Recognition: How's Your Disclosure Stack Up?

This Deloitte memo looks at disclosure trends under the new revenue recognition standard. Here's eight key takeaways:

  1. Many revenue disclosures were at least three times as long as the prior-year disclosures.
  2. Over 85% of surveyed companies elected to adopt the new revenue standard by using the modified retrospective approach.
  3. The new requirement to provide more comprehensive disclosures significantly affects financial statements regardless of the standard's effect on recognition patterns.
  4. Not everybody is adding a lot of disclosure. While some companies provided robust and thorough explanations, particularly on the nature of performance obligations and on the significant judgments and estimates involved, others didn't.
  5. Many entities have chosen to add a separate and specific revenue footnote that contains the required disclosures.
  6. When providing disaggregated revenue disclosures, the majority of entities in our sample used two or fewer categories. The most commonly selected categories presented in tabular disclosure were (1) product lines and (2) geographical regions.
  7. Most entities in our sample elected multiple "practical expedients" related to their ASC 606 disclosures, most commonly those related to remaining performance obligations.
  8. We expect entities to continue to refine the information they disclose as (1) they review peer companies' disclosures, (2) accounting standard setters clarify guidance, and (3) regulators continue to issue comments.

Revenue Recognition: Trends in Staff Comments

This FEI memo reviews comments issued on the new revenue recognition standard and identifies some trends.  FEI says that Staff comments have focused on the following areas of ASC 606:

  • Disaggregation of revenue
  • Disclosure of performance obligations; consideration of significant payment terms
  • Disclosure of performance obligations; determination of whether promised goods/ services are distinct
  • Timing of satisfaction of performance obligations
  • Principal versus agent considerations
  • Transaction price determination and allocation to specific performance obligations
  • Costs to obtain and fulfill a contract

The memo reviews & provides links to individual Staff comment letters and company responses.

Tax Reform: Sooner or Later, SAB 118's "Holiday Gift" Will Stop Giving

In a recent speech, the SEC's Deputy Chief Accountant – Sagar Teotia – reminded companies that the clock is ticking on finalizing disclosures relating to the impact of tax reform. As you'll recall, the OCA gave everyone a holiday gift last December by issuing Staff Accounting Bulletin No. 118.

At the risk of oversimplifying, SAB 118 permits companies to assess, record provisional amounts & ultimately finalize disclosure of the financial impact of tax reform over a "measurement period" of up to one year from the date of the legislation's enactment.  However, this excerpt from the Deputy Chief Accountant's speech clarifies that SAB 118 does not allow companies to defer reporting of tax reform's impact:

Let me clarify a point about the measurement period and the expectation to be acting in good faith. SAB 118 states that the measurement period ends when an entity has obtained, prepared, and analyzed the information that was needed in order to complete the accounting required under ASC 740 and in no cases should the measurement period extend beyond one year from the enactment date. This should not be interpreted as a window to put pencils down until we are close to one year from the enactment date to get started on the accounting. Instead, entities should continue to keep moving in good faith to complete the accounting.

The measurement period ends when an entity has completed the process necessary to finalize its assessment of tax reform's impact – and for certain income tax effects, that could be well before the one-year mark.

Tying Executive Pay to Diversity

Here's something we blogged recently on CompensationStandards.com: This Forbes op-ed notes that a few "pace-setting companies" now link executive bonuses to diversity objectives – and makes the case for more companies to follow suit. Here's an excerpt:

If an objective is important, then the company should ensure (1) its employees know about it and (2) that their performance in meeting this goal will be measured along with the company's other core values and targets. Fostering greater diversity and preventing harassment and discrimination is more than simply the right thing to do on a broader societal level. Indeed, a business case exists for these initiatives. According to research by McKinsey & Company, achieving these goals correlates with concrete financial improvement.

At Intel & Microsoft, diversity is one of the strategic performance goals that determine 50% of executives' annual cash incentives. This is described on pg. 66 of Intel's proxy statement – and on pg. 39 of Microsoft's proxy statement.

At Alphabet, a recent shareholder proposal to link executive pay to diversity received about 9% of the vote. The company's statement in opposition (pg. 66) noted that the CEO receives a base salary of only $1 per year and isn't paid based on performance – so it argued that a rule like this would have little impact. And at Nike, a similar proposal was withdrawn after the company agreed to meet quarterly to discuss diversity.

Sustainability: Will Delaware's Certification Statute Move the Needle?

Last month, Delaware enacted legislation permitting businesses to signal their commitment to global sustainability by signing on to a voluntary certification regime. Here's an excerpt from this Richards Layton memo summarizing the statute's operation:

For an entity to seek certification as a "reporting entity" subject to the terms of the Act, the "governing body," which is defined generally to mean the board of directors or equivalent governing body, must adopt resolutions creating "standards" (i.e., the principles, guidelines or standards adopted by the entity to assess and report the impact of its activities on society and the environment) and "assessment measures" (i.e., the means by which the entity measures its performance in meeting its standards).

The Act enables an entity to select its own standards, tailoring them to the specific needs of its industry or business. In designing its standards, the governing body may rely upon various sources, including third-party experts and advisors as well as input from investors, clients and customers. The Delaware Secretary of State does not evaluate or pass judgment on the substantive nature of an entity's standards or assessment measures.

Entities that participate in the regime contemplated by the Act can obtain a certification of adoption of transparency and sustainability standards from the Delaware Secretary of State. Obtaining the certificate involves the creation of a standards statement (which includes the standards and assessment measures), the payment of relatively nominal fees to the Delaware Secretary of State, and the entity's becoming and remaining a reporting entity. That an entity is a reporting entity allows it to disclose its participation in Delaware's sustainability reporting regime.

Any entity that wishes to continue as a reporting entity must annually file a renewal statement. The renewal statement requires disclosure with respect to changes to the entity's standards and assessment measures. The entity must also include in its renewal statement an acknowledgement that its most recent sustainability reports are publicly available on its website, and must provide a link to that site. If the entity fails to file a renewal statement (and thus becomes a non-reporting entity), it may have its status as a reporting entity restored through the filing of a restoration statement, which requires disclosure and acknowledgments similar to those in the renewal statement.

The statute does not give anyone a right to bring claims for an entity's decision regarding whether or not to become a reporting entity - and there's no penalty for a reporting entity's failure to comply with its own standards.

Some people seem pretty excited about this new statute's potential, but we're pretty skeptical. Maybe we're too cynical, but since everything is voluntary & "do-it-yourself" and there's no real liability exposure, the statute appears to be little more than a mechanism for virtue-signaling. You know what we mean - it's sort of the corporate equivalent of buying a Subaru.

Whistleblowers: The SEC's Stats

Here's an excerpt from this blog by Allen Matkins' Keith Bishop about the SEC's recent whistleblower proposal:

The SEC's release does provide some eye-popping data. As a result of the program, the SEC has received over 22,000 tips and ordered payouts over $266 million. That is a lot of tips and a great deal of money. For some perspective, the SEC's budget authority for 2018 is $1.652 billion. Thus $266 million is equivalent to about 16% of the SEC's 2018 budget authority. Here in California, this $266 million represents 8.5 times the amounts appropriated by the California legislature for support of the California Department of Business Oversight's investment program.

July-August Issue: Deal Lawyers Print Newsletter

This July-August issue of the Deal Lawyers print newsletter was just posted – & also mailed – and includes articles on (try a "Half-Price for Rest of '18" no-risk trial):

  • Finders & Unregistered Broker-Dealers
  • Governance Perils Involved in Financing Transactions by Emerging Companies
  • Impact of the European GDPR on M&A

Remember that – as a "thank you" to those that subscribe to both DealLawyers.com & our Deal Lawyers print newsletter – we are making all issues of the Deal Lawyers print newsletter available online for the first time. There is a big blue tab called "Back Issues" near the top of DealLawyers.com – 2nd from the end of the row of tabs. This tab leads to all of our issues, including the most recent one.

And a bonus is that even if only one person in your firm is a subscriber to the Deal Lawyers print newsletter, anyone who has access to DealLawyers.com will be able to gain access to the Deal Lawyers print newsletter. For example, if your firm has a firmwide license to DealLawyers.com – and only one person subscribes to the print newsletter – everybody in your firm will be able to access the online issues of the print newsletter. That is real value. Here are FAQs about the Deal Lawyers print newsletter including how to access the issues online.

Conference Calendar

What's New on Our Websites

Among other new additions, during the last month we have posted the following:

People: Who's Doing What & Where

Hearing on SEC Commissioner Candidate Elad Roisman: The Senate Banking Committee held a hearing in late July to consider the nomination of Elad Roisman, who has been nominated to succeed SEC Commissioner Mike Piwowar.

SEC's OMA – Walk Down Memory Lane: Mauri Osheroff – who until a few years ago was Corp Fin's Associate Director who oversaw the Office of Mergers & Acquisitions – was reading the transcript of our DealLawyers.com webcast with the Chiefs of OMA from the past three decades. Mauri noted that the original office was called "Tender Offers and Small Issues" – they processed tender offers and Reg A offerings. Go figure. We don't know when Reg A offerings dropped out of the picture.

The Office Chief back then was the legendary Ruth Appleton. Here's Ruth's obit, which details her SEC career and the obstacles she faced as a professional woman...

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