December 7, 2006
Third Time’s a Charm?
Late yesterday, the SEC postponed – for a second time – a scheduled vote on whether to allow shareholders to nominate directors. Not surprisingly given the press reports leading up to next Wednesday’s open Commission, it appears that the five commissioners have not reached the consensus that Chairman Cox is striving for. The SEC had originally planned to propose new rules on October 18th.
Until it proposes new rules, the SEC has said that the 2nd Circuit court’s AFSCME decision will stand, giving shareholders more power to nominate directors. The SEC is being aggressively lobbied by both sides in the debate. In fact, the Business Roundtable threatened yesterday to sue the SEC if it acted, following the US Chamber of Commerce’s lead who last month warned the SEC that it may not have the authority to act.
I wish I had a bookie that handled bets for this sort of thing, because it was easy money that the SEC would postpone this proposal given the magnitude and controversial nature of what it is considering. Here is the Sunshine Act notice for the December 13th Commission meeting with the neutered agenda (the big Corp Fin items left on the agenda are adopting e-Proxy and providing internal controls guidance).
Foreign Private Issuer Deregistration: Reproposal and Liberalization
The SEC also announced yesterday that it intends to re-propose the foreign private issuer deregistration rule at next week’s December 13th meeting. This rulemaking also is controversial and resulted in the SEC receiving lots of comments and lots of visits from those that would be impacted overseas. Floyd Norris wrote his NY Times column today on this development.
Here is a summary of what is happening from Cleary Gottlieb:
“The new proposal would allow foreign private issuers to terminate SEC registration when their U.S. trading volume is below a threshold that will be specified in the rule proposal. Press reports have indicated that the threshold may be 5%. If so, the revised rule would be consistent with a proposal made by a group of European organizations, with the support of Cleary Gottlieb, in February 2004.
The SEC’s initial rule proposal, made in December 2005, would have allowed foreign private issuers to deregister using a test based in part on the percentage of their shares held in the United States, and in part on trading volume (for the largest companies). The European organizations and Cleary Gottlieb supported this proposal, but suggested that the SEC revise the tests, which would have allowed only a few European companies to deregister (fewer than one in ten large companies included in a February 2006 study). The new SEC proposal, if it is in fact based on a 5% U.S. trading volume test, would appear to address this concern.
The SEC announced that the modified rule will be re-proposed for further comment, rather than adopted, because the SEC had previously stated that it was not in favor of a trading volume test when it released the December 2005 proposal. At the same time, the SEC appears to be committed to moving quickly, as it announced its intention to limit the comment period to 30 days, and that it hopes to adopt a final rule in the first quarter of 2007.
Whether the SEC’s new rule will in fact provide a practical mechanism for companies to exit the U.S. market when they find that the costs of U.S. registration outweigh the benefits will depend on the details of the new proposal, which should be available shortly after the December 13 meeting.”
Underwriter Compensation Developments
In this podcast, LizAnn Eisen of Cravath, Swaine & Moore discusses the latest issues relating to underwriter compensation, including:
– What are the latest developments regarding the NASD’s rule regarding underwriter compensation?
– What are the latest market trends regarding underwriter compensation?
– For those representing underwriters, what should they be looking out for in this area?