June 13, 2011

Say-on-Pay: 32nd – 35th Failed Votes

We’ve now had four more companies file Form 8-Ks reporting failed say-on-pay votes: Nabors Industries (43%): Tutor Perini (49%); Cadiz (38%); and BioMed Realty Trust (46%) . I keep maintaining our list of Form 8-Ks for failed SOPs in’s “Say-on-Pay” Practice Area.

SEC Brings “Blue Ribbon” Enforcement Proceeding Against “Crowdsourcing” Offering

With thanks – and permission to blog – from the ABA’s State Regulation of Securities Committee:

This recent press release announcing the SEC’s entry into a cease and desist order with two individuals who attempted to raise $300 million via a website, a Facebook page and a Twitter account, to finance a company which would purchase the Pabst Brewing Company. While the respondents purportedly raised over $200 million in pledges from more than 5 million pledgors, they never collected any monies. A unique feature of the offering was the respondents’ promise that investors would not only receive a certificate of ownership in the acquisition company, but beer of a value equal to the amount invested (at least the SEC didn’t allege that the beer was a “security,” too – note, however, the old “whiskey warehouse receipt” cases).

One interesting point not mentioned in the press release – but raised in the actual Order – is that the SEC describes the offering as being effected “via crowdsourcing” (see paragraphs 3 and 5). Query whether this is the first enforcement proceeding by any securities regulator against a “crowdsource” offering? In any event, it sounds like the respondents never consulted with a reputable securities (or any?) attorney before commencing their offering; I would hope that any member of our Committee would have dissuaded them from attempting this venture in the chosen manner.

Here is a pun related to this case that I received: “I understand that the SEC went after the respondents when they heard that this offering was brewing on the Internet. Unfortunately for the SEC staff, they were only able to bottle up the respondents with their cease-and-desist order, the Justice Department decided the case wasn’t worth throwing them in the can with a criminal action.”

And another member noted: My foggy memory thinks that the Boston Beer Company tried to do something that was the then-equivalent of that back in the (maybe?) early 1990s when it was organized. I think they had “solicitation” language on their labels or something goofy like that…

Senator Grassley: How Does the SEC Treat Enforcement Referrals from Fellow Agencies?

As noted in this Reuters article, Senator Grassley’s recent investigation of SAC Capital Advisors is not really about the private investment firm but rather is a look into how the SEC treats referrals from other agencies. Here’s a letter from Grassley to reporters about how he believes that this response from the SEC into questions about how the SEC handled a referral from FINRA about suspicious trades by SAC Capital.

There are two Congressional hearings this week related to the SEC. Tomorrow, the Senate Banking Committee takes up the Commissioner nominations of Luis Aguilar and Dan Gallagher.

And then on Thursday, the House Transportation Committee hearing is holding a hearing entitled “The SEC’s $500 Million Fleecing of America” regarding the SEC leasing a building after it was directed to hire many more Staffers under Dodd-Frank – and then Congress reversed ship on the SEC’s budget (and is now blaming the SEC for thinking it was staffing up). This briefing memo relies heavily on the SEC Inspector General report about the lease that has been mentioned in the mass media lately. Note that it’s pretty rare that this House Committee gets involved with SEC affairs…

– Broc Romanek