Back in April, Corp Fin’s Office of Mergers and Acquisitions issued an exemptive order providing issuers and, in some cases, third party bidders with the flexibility to shorten the time period during which tender offers for equity securities must be open from 20 to 10 business days.
Yesterday, the Office of Mergers and Acquisitions revisited its existing relief for certain types of non-convertible debt tender or exchange offers in a new exemptive order, expanding the availability of a five business day minimum offering period that had been established through a series of no-action letters. The exemptive order permits a tender or exchange offer for any class or series of non-convertible debt securities to remain open for a minimum period of five business days, so long as several conditions are met, including that the offer is made by the issuer of the subject non-convertible debt securities, a direct or indirect wholly owned subsidiary of such issuer, or a parent company that directly or indirectly owns 100% of the capital stock (other than directors’ qualifying shares) of such issuer, and the offer is made for cash and or consideration consisting of certain “Qualified Debt Securities.” The commencement of the offer and any material changes to the terms of the offer must be announced via a press release, and the issuer must provide certain withdrawal rights.
This new exemptive order supersedes the Staff’s no-action letter Cahill Gordon & Reindel LLP (January 23, 2015) and any similar letters relating to abbreviated offering periods in tender or exchange offers for non-convertible debt securities.
On Monday, the Supreme Court refused to review the SEC’s now-rescinded “neither admit nor deny” policy, otherwise referred to as the “gag rule.” As Liz noted back in May, the SEC announced that it had issued a final rule to rescind its “neither admit nor deny” policy, and to rescind Rule 202.5(e) of the SEC’s informal rules of procedures, which codified that policy. This Bloomberg article notes:
The US Supreme Court refused to review the constitutionality of a now-rescinded Securities and Exchange Commission policy that forced people and companies settling enforcement cases to never publicly criticize or contest the Wall Street watchdog’s claims.
The justices without comment on Monday turned away a constitutional challenge over whether the SEC’s so-called gag rule violated individuals’ rights.
The justices declined to hear arguments from Thomas Powell, who was accused by the SEC in 2021 of making misrepresentations and omissions in connection with more than a dozen unregistered oil and gas securities offerings. Powell agreed to pay a penalty of $75,000 to end the case. His firm agreed to a separate penalty.
The settlement included a provision that he neither admitted to nor denied the SEC’s allegations. As part of the deal, he could never publicly deny wrongdoing. The provision amounted to “rank censorship,” his attorneys from the New Civil Liberties Alliance said.
The SEC had argued to the Supreme Court that the constitutional challenge was now moot, given the agency’s action in May to rescind the policy.
If you tuned into our annual Proxy Season Post-Mortem webcast on CompensationStandards.com a few weeks ago, you would have heard me give an update on the state of regulatory and other efforts targeting the proxy advisory firms. As has become tradition for that webcast, I built each of my webcast topics around a unifying theme, and this year I chose the Toy Story movie series in honor of the release of Toy Story 5 in June. When we got to the topic of proxy advisory firms, I noted:
Sticking with my Toy Story theme, I’m going to talk a little bit about the proxy advisory firms and what they’re going through at the moment. If you’ve watched Toy Story 4,000 times like I did because my kids were young when it first came out, you will certainly remember Sid Phillips, who is the neighbor of Andy. Andy is the owner of the toys, Woody and Buzz.
Sid had a penchant for torturing toys, including Woody when he got a hold of him. One can envision a world where young Sids like that would grow up to be politicians and regulators and state attorneys general who would turn their attention to proxy advisory firms instead of mounting doll heads on Erector set legs and things like that. That’s what we’re seeing with the proxy advisory firms as they are facing a multi-front attack, both at the federal and state levels.
As Meredith recently noted in the Proxy Season Blog, just last week courts in Kansas and Indiana granted preliminary injunctions preventing enforcement of laws seeking to regulate the activities of the proxy advisory firms in a manner similar to the Texas law that was enacted last year. The Kansas and Indiana laws would have gone into effect today.
Plaintiffs contend that they are likely to succeed on the merits of their First Amendment claim because SB 375 discriminates based on viewpoint (facially and in purpose) and fails strict scrutiny. Defendant responds that the law does not impose any viewpoint discrimination, so strict scrutiny does not apply. Defendant further argues that SB 375 passes constitutional muster because it only regulates commercial speech by requiring certain limited disclosures [. . .]
Plaintiffs’ voting recommendations are not commercial speech. The voting recommendations are not advertisements….The recommendations are not referencing a product. The recommendations are not offering a product for sale. The recommendations are the product. Also, although ISS and Glass Lewis offer their services for compensation, that transaction has already occurred before the voting recommendations are made. And the compensation is not for the specific vote, but for the service of providing voting recommendations….The fact that Plaintiffs are compensated for providing voting recommendations does not transform the voting recommendations into commercial speech.
Note that members of the TheCorporateCounsel.net can access the Proxy Season Blog. If you are not a member, email info@ccrcorp.com to sign up today or call us at 800.737.1271.
Yesterday, the Supreme Court overruled its 91-year old, New Deal-era decision in Humphrey’s Executor v. United States, expanding the President’s authority over those many independent boards and commissions that Congress has sought to protect from political influence by providing that their members can only be removed by the President for cause. The SCOTUS blog notes:
By a vote of 6-3, the justices struck down a federal law that bars the president from firing members of the Federal Trade Commission except in cases of “inefficiency, neglect of duty, or malfeasance in office.” That law, a majority of the justices ruled, violates the constitutional separation of powers between the three branches of government. And in reaching that decision, the court overruled its 91-year-old decision in Humphrey’s Executor v. United States, which had upheld the law at the center of the dispute.
More broadly, Monday’s decision was a major victory for proponents of the “unitary executive” theory – the idea that the president should have complete control over the executive branch. Under this theory, the president should be able to fire any member of the executive branch, and laws – like the one that the court struck down – that restrict his ability to do so violate the separation of powers.
Writing for the majority, Chief Justice John Roberts contended that “the President must have the assistance of officers he can trust. Although it is up to the Senate to decide whether to confirm those with whom the President would prefer to work, neither Congress nor the courts may saddle him with those with whom he cannot work. Subordinates who exercise the President’s power are subject to removal by him. Then, and only then, can they remain accountable to the President, and the President to the people.”
Justice Sonia Sotomayor penned a 49-page dissent that was joined by Justices Elena Kagan and Ketanji Brown Jackson. “Today,” she wrote, “the Court discards” the “democratic regime” created by the Constitution “in favor of one that distorts the structure of Government to fit the majority’s theory of unitary, total executive control. The result,” she concluded, “is a President who emerges with far greater power than ever before.”
The case arose following the Trump Administration’s attempt to remove Rebecca Slaughter, who was appointed during the first Trump Administration to fill one of the Democratic seats on the five-member Federal Trade Commission. Slaughter challenged her firing on the basis of Humphrey’s Executor v. United States, which addressed President Roosevelt’s attempt to fire William Humphrey as a commissioner of the FTC on policy grounds, when the FTC’s authorizing statute only allowed a president to remove a commissioner for “inefficiency, neglect of duty, or malfeasance in office.” A unanimous Supreme Court ruled in 1935 that the Federal Trade Commission Act was constitutional and that Humphrey’s dismissal on policy grounds was unjustified, paving the way for independent boards and commissions in the federal government to operate in a manner that was at least somewhat protected from political influence for the next 90 years.
It is certainly no surprise that we ended up here. As this CNN article notes: “For more than 40 years, since his service as a young Reagan administration lawyer, Chief Justice John Roberts has pressed for an exceptionally powerful US president, one who could fire the heads of independent agencies at any time.” As John Jenkins noted in this blog back in February of last year, many expected at the beginning of the second Trump Administration that SCOTUS would be open to revisiting, and ultimately overruling, Humphrey’s Executor.
I will freely admit my bias here – I have always been an independent agency fanboy.
To review the bidding, an independent agency is an entity that exists outside of the 15 executive departments and the Executive Office of the President, operating pursuant to statutory authority granted by Congress to serve some particularized mission that could be better carried out by a commission, agency or board that is shielded from direct political influence and the whims of the sitting President. While it is clear that the cabinet secretaries and their departments are always operating purely at the direction of the President, independent agencies enjoyed a certain level of detachment from the White House that, at least in my own view, allowed them to often pursue a more mission-focused agenda.
Now, don’t get me wrong, I recognize that the agenda of most “independent” agencies is set by a chairman or other leader who gets appointed by the President and is typically of the same political party as the President, so it is not like they are somehow magically above politics or not aligned with the White House’s overall agenda, but that veneer of “independence” afforded by their enabling statutes somehow has allowed many agencies to focus on their very particularized mission in what one might describe as a more objective manner with a longer-term perspective than the next presidential election.
Independent agencies actually predated the New Deal milieu in which the SEC was created, with Congress first establishing the Interstate Commerce Commission back in the 1880s for the purpose of regulating railroad rates. At that time, Congress thought that it was important to shield the ICC from the vagaries of politics so as to minimize the possibility of disruption. As this Economic Policy Institute paper notes:
Many additional independent agencies were created by Congress during the New Deal. It is commonly thought that these New Deal agencies were created to be independent because Congress wanted their decisionmaking to benefit from specialized expertise and—for several of these agencies—because they were tasked with performing adjudicative functions and, thus, were structured more like courts to preserve the integrity of the deliberative process and promote collaborative and consensus-based decisionmaking (Corrigan and Revesz 2017, 639).
During most of my time at the SEC, I observed this noble concept in action, and I was proud of it. As a federal agency with an important economic mandate, it would be insane to assert that the agency was somehow shielded from political pressure, and in fact we were continually bombarded by inquiries and cajoling from both the White House and the Hill; however, I rarely knew the political leanings of my colleagues, and typically the commissioners would approach issues from the perspective of the agency’s mission, rather than from the perspective of the current political climate. While some may accuse me of looking at my time at the agency through rose-colored glasses, I recall that I was always proud of how the agency operated so independently and with a laser-focus on its important mission in an increasingly politicized environment.
Note that my experience at the SEC was nearly twenty years ago, and toward the end of my tenure at the agency, the well-documented politicization of the SEC was becoming much more acute, and it has only gotten worse since then. Nonetheless, I am sad today to see the outcome of Trump v. Slaughter, because it will likely mean any last vestiges of the SEC’s independence will be lost, at least symbolically.
In the near term, there will obviously be no impact of the Supreme Court’s decision on the SEC, given that it is currently staffed with three Republican commissioners, going down to just two commissioners later this year. This means that there are no commissioners for the President to remove on policy grounds. Despite calls for the President to appoint Democratic commissioners to the SEC, it is likely that will not be a priority for the Administration going forward. So in terms of the SEC’s agenda, its rulemaking efforts and its enforcement efforts, yesterday’s decision will likely not change anything about how the SEC is operating in the current environment.
As we hurtle inexorably toward the Fourth of July holiday this week, I can’t help but feel that Summer is almost over even though it has really just begun. Before you break out your flag and hang your bunting to celebrate our nation’s 250th birthday, take a few moments to register for our 2026 Proxy Disclosure and Executive Compensation Conferences on October 12th & 13th in Orlando, Florida and via webcast.
Our agenda features two full days of fast-paced, topical panels, an all-star speaker lineup, and my interview with Corp Fin’s Deputy Director Christina Thomas. Our Fall Conferences will be a great opportunity to get up to speed on the SEC’s latest rulemaking initiatives, as well as other developments in executive compensation, governance, disclosure practices, activism and shareholder engagement.
You can register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271. Do it today so you don’t miss out on our discounted “early bird” rate!
On Friday, the SEC and the CFTC issued a joint request for public comment on potential approaches to harmonize the regulatory frameworks that are applicable to portfolio margining across securities, security-based swaps, futures, swaps, and related positions. The press release announcing the request for comment notes:
The request for comment is intended to assist the agencies in evaluating whether greater coordination or alignment in portfolio margining requirements may improve risk management efficiency, reduce unnecessary market fragmentation, and enhance customer protections consistent with the agencies’ respective statutory authorities and responsibilities.
The issues addressed in the request for comment include:
– Existing portfolio margining models and practices
– Customer protection considerations
– Cross-margining and cross-product offsets
– Capital, segregation, and collateral treatment
– Risk management and margin methodologies
– Clearing agency and derivatives clearing organization considerations
– Operational and technical implementation issues
– Potential impacts on market liquidity and competition
The public comment period will remain open for 60 days following publication of the request for comment in the Federal Register. This joint request for public comment follows two similar joint requests for public comment that Meredith covered last week.
The SEC’s Office of the Advocate for Small Business Capital Formation is partnering with the Division of Corporation Finance to host a live-streamed virtual discussion titled “Rethinking the Rulebook: Modernizing the IPO Process and Access to Public Capital.” The announcement notes that the program is:
Designed to unite innovative and seasoned practitioners who are willing to question conventional approaches, propose regulatory solutions, and share insights on the Commission’s recent proposed rule changes. The event will focus on ways to support public companies in raising capital and maintaining their public status, inviting participants to contribute their expertise and engage in meaningful dialogue about modernizing the IPO process and improving access to public markets.
The program will be moderated by Courtney Haseley from the Office of the Advocate for Small Business Capital Formation and Ted Yu from the Division of Corporation Finance. Registration for this program is not required.
In the latest episode of the “Mentorship Matters with Dave & Liz” podcast, Liz and I speak about the difficult topic of losing a mentor. As with most of our relationships with others, we do not really think about the time when someone is no longer going to be in our lives, so we often don’t take the time to prepare for that possibility. But it is still possible to draw inspiration and mentorship from those we have lost, and in many ways that is a great way to keep their memory going. During the podcast, I discuss the sudden loss of my friend and mentor, Marty Dunn, who passed away six years ago this month. Check out this 31-minute podcast to hear:
– What it’s like to lose a mentor.
– How to continue to draw inspiration and guidance from a mentor even if you are no longer regularly in touch.
– The value of maintaining multiple mentor relationships.
– How Marty’s passing changed Dave’s perspective on mentorship.
– Lessons from Marty that Dave continues to carry forward, and the benefits of continuing a mentor’s legacy.
– What Dave would like people to remember most about Marty.
Thank you to everyone who has been listening to the podcast. If you have a topic that you think we should cover or guest who you think would be great for the podcast, feel free to contact Liz or me by LinkedIn or email.
The Freshfields team recently reviewed the governance terms of 86 sponsor-backed companies that went public between 2021 and 2025. In this blog, they share some of their key findings. Here are some excerpts, but read the full blog for more context:
– 90% of the surveyed companies retained “controlled company” status under applicable listing standards following their IPO.
– 87% of surveyed companies granted sponsors the right to nominate or designate directors to serve on the public company’s board. 77% permitted the sponsor to designate a majority or supermajority of the board. In 26% of companies, sponsors secured the right to designate the chairperson of the board.
– 58% of surveyed companies went public with a majority-independent board despite having no obligation to do so. Nearly all (95%) established a compensation committee, and 90% had a nominating and governance committee in place.
– In 57% of surveyed companies, the sponsor retained the right to designate at least one member of the audit committee, and in 61%, the sponsor held the same right over the compensation committee.
– Almost half (47%) of the surveyed companies with shareholder agreements in place gave sponsors consent or veto rights over key corporate actions following the IPO [. . .] In the majority of cases where veto rights were granted (86%), the sponsor owned at least 50% of the outstanding shares at the time of the IPO.
– 93% of surveyed companies permitted stockholder action by written consent [. . .] 84% permitted shareholders to call special meetings. In both cases, these rights are structured for sponsor use and typically sunset once sponsor ownership falls below a defined threshold.
– 77% of surveyed companies have a springing supermajority requirement for charter amendments, which takes effect once the sponsor’s voting power decreases to a certain level.
– 27% of the surveyed companies used an Up-C structure.
– 12% of surveyed companies had dual-class share structures at the time of IPO [. . .] Of the companies with high-vote/low-vote dual-class structures, nine out of ten were founder-led, reflecting that dual-class structures remain relatively uncommon in pure sponsor-backed IPOs.
