JOBS Act: Corp Fin Updates Its Confidential Submission Process Again
Yesterday, Corp Fin provided an updated announcement that merely says that EGCs and FPIs should continue to use the secure email system currently in place – but that Edgar will soon be reconfigured to allow for an EDGAR-based system for confidential and non-public submission of draft registration statements.
Report: Views on Use of “Virtual Annual Meeting” Services
Recently, Broadridge published a report – entitled “Guidelines for Protecting and Enhancing Online Shareholder Participation in Annual Meetings” – based on the views of a group it assembled to recommend “best practices” for electronic participation in shareholder meetings. The report’s conclusions are not that profound, but can be useful to help guide those using the Web to supplement its in-person meeting – and it includes a useful appendix that summarizes each state’s laws governing electronic participation in shareholder meetings.
Deal Cube Tournament: Round Two; 8th Match
Last match of the second round – this round sets up the Sweet Sixteen! As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
Recently, I blogged about corporate political spending. It’s a hot topic, but the numerous shareholder proposals on the topic have not received widespread shareholder support – although the first proposal did recently receive a majority vote as noted in this Davis Polk blog. And now there is a new Manhattan Institute study that claims that corporate political spending doesn’t hurt shareholders.
As noted in Jim Hamilton’s blog, some members of Congress are again (still?) pushing the SEC to adopt rules requiring disclosure of corporate political activity and to require a shareholder vote before being able to use funds for political spending. A push from someone in Congress in this area is essentially an annual rite of passage – but you never know when something might get traction on the Hill.
And one last item about The Conference Board’s corporate political spending conference I attended. One term that was bandied about was how to avoid being “Target-ized.” I asked Heidi Welsh of Si2 what that meant and here is her guidance:
Basically, Target gave $150k to a Minnesota political committee called “Minnesota Forward,” which was “business friendly” ie. in favor of lower taxes, less regulation, etc. Then Minnesota Forward gave the money to a Republican gubernatorial candidate, Tom Emmer. Emmer is against gay marriage and had taken some other strongly conservative social positions. The contribution was made known from media trolling of the state’s campaign finance disclosures – which are more robust than most – and gay rights groups felt the company had betrayed its commitment to the gay community (Target previously was well regarded by the Human Rights Campaign, etc.). So there was a nation-wide boycott. Very hard to quantify the impact on sales (it always is), but the publicity firestorm was intense and until now it’s been used as the index case for political embarrassment that can occur when companies dabble in politics.
Today, I think there are three more recent examples that are far more potent: 1. ALEC and Pepsi, Coke, etc., with “stand your ground” legislation (I think 14 companies have cut their funding to the group), 2. Wal-Mart lobbying against FCPA while knowing it quashed an internal investigation of bribery in Mexico, 3. the health insurance companies and the $86 million funneled through AHIP to the U.S. Chamber of Commerce on health care lobbying. The common denominator on all these three is that the money went to non-profit groups (either trade/501 c-6s or 501 c-3s) and thence into politics.
The challenge for companies is “how to address an apparently insatiable appetite for more information about how corporate money gets into the political arena?” Usually it’s not a straight-forward path as there are different definitions about what “political spending” is. My sense is that the general public’s definition is much broader than the one used by most companies. For example, this issue of “what is political spending” was in a Chicago Tribune article. Boeing apparently didn’t consider ballot initiative spending to be “political.” We found in our study of 2010 corporate political spending that companies spend quite a bit on ballot initiatives, but don’t always consider them political since they theoretically are non-partisan (but generally aren’t really).
Our analysis of all the S&P 500 political spending policies suggests that companies usually think it just means campaign spending directly to candidates, although this is changing. But the shareholder proponents on this topic have increasingly focused on indirect political spending, which encompasses money that is spent on both campaigns and lobbying, and on issue ads and campaigns from non-profits. While the investors in almost all cases are looking at company treasury money, the general public usually doesn’t perceive much difference between treasury and PAC money – even though the latter is from executives/employees, and isn’t “shareholder money” per se (unless you get into the issue of executive compensation, which many do). The 99 percenters don’t make these distinctions, however.
Does Corporate Spending Disclosure Impinge on Free Speech?
Check out Nell Minow’s blog entitled “‘Tis the Season of the Shareholders” on the important topic of whether forcing companies to make disclosures about their political spending is impinging on free speech.
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:
– Progress Report: Political Contributions & Lobbying Proposals
– Extension of the CPA-Zicklin Corporation Political Disclosure and Accountability Index
– How to Mitigate Disruptions at Your Annual Meeting
– ProxyMonitor.org: Tracking Fortune 200 Ballots & Voting Results
– ICCR’s ESG Shareholder Proposal Database
– US Season Preview: Governance Proposals
Deal Cube Tournament: Round Two; 7th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
I’m still reeling from the news that FINRA’s Corporate Financing fees are going way, way up as I recently blogged. As I blogged, FINRA’s new rates – effective this upcoming Monday, July 2nd – are as follows: the calculation is raised from 0.10 percent to 0.15 percent of the aggregate value of all securities on the offering document, plus $500. The maximum is raised from $75,500 to $225,500. In the case of a WKSI, such an issuer filing a shelf offering must pay the maximum fee of $225,500.
Last Friday, the SEC issued four releases publishing a group of FINRA’s with immediately effective rule changes that all raise various fees. This is the release that raises the Corporate Financing filing fee. As Suzanne Rothwell notes, this is a significant change. In the case of a $500 million offering, the filing fee was $50,500 and will now be $75,500. For a $1 billion offering, the fee was $75,500, the maximum, and will now be $150,500. In the case of REIT offerings, which generally register $2 billion on the initial and each follow-on registration statement, the fee is increased from $75,500 to $225,500. – a $150,000 difference.
Webcast: “Proxy Season Post-Mortem: The Latest Compensation Disclosures”
Tune in tomorrow for the CompensationStandards.com webcast – “Proxy Season Post-Mortem: The Latest Compensation Disclosures ” – to hear Mark Borges of Compensia, Dave Lynn of CompensationStandards.com and Morrison & Foerster and Ron Mueller of Gibson Dunn analyze what was (and what was not) disclosed this proxy season – as well as how the SEC’s new compensation committee and compensation advisor rules impact you.
Court Finds No Duty to Publicly Disclose Wells Notices
I’m feeling quite manly because my new “Legal Proceedings Disclosure Handbook” answered the question of whether receiving a Wells notice from the SEC’s Enforcement Division requires disclosure of the SEC investigation with a very lengthy answer that can be summed up as “it depends.”
Last week, as noted in this Morrison & Foerster memo, a US District Court in New York ruled that Goldman Sachs could not be sued for fraud under the federal securities laws for failing to publicly disclose that it had received a Wells notice. The court’s decision – Richman v. Goldman Sachs Group (S.D.N.Y. June 21, 2012) – held that there is no “automatic” obligation to disclose receipt of a Wells notice under the federal securities laws. The court went further, providing some guidance to companies grappling with the always-difficult issue of whether to disclose the receipt of a Wells notice.
Deal Cube Tournament: Round Two; 6th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
On Sunday, the Washington Post ran this front-page, lengthy article about the extent to which members of Congress trade in stocks of companies that lobby them. It is a meandering piece that explains how the new Stock Act fails to prohibit trading that can easily be perceived as giving an advantage to Congress (and fails to prohibit trading to the extent that laws reining in senior members of federal agencies do). To me, that is the central point – perception is everything. And that is reflected by the fact that nearly 2000 people have commented on the article – most of them raking Congress over the coals.
The bizarre thing is that the WaPo article gets into the details of a number of specific trades – but most of the dertails seem to clear the profiled Congress-folk of any wrongdoing (this blog agrees there were no smoking guns found). On the other hand, there are excerpts such as this that would sound like classic insider trading to the layperson:
“[a]t least 34 members of Congress recast their portfolios following phone calls or meetings with high-ranking Treasury Department and Federal Reserve officials during the economic crisis.”
The bottom line is that Congress should take the perception point to heart and either require all members of Congress to use blind trusts to trade – or at least impose upon themselves the same stringent laws that they apply to federal agencies…
SEC Posts Internal Memo on Conducting Economic Analysis for Rulemaking
Last week, the SEC posted its internal memo about how it will conduct economic analysis when it is involved with rulemaking in the wake of last year’s loss in the proxy access lawsuit in the District of Columbia Circuit court.
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:
– Anarchy Comes to an Annual Shareholders Meeting in Pittsburgh – And Executive Compensation is One of the Reasons!
– Loeb Tries to Win a Yahoo Proxy Battle, One Blog Post at a Time
– Six Companies to Provide More Auditor Information
– Questions that Shareholder Might Ask During Annual Meetings
– Exclusive Forum Proposal Survives No-Action Challenge
– AFL-CIO Releases Updated Proxy Voting Guidelines
Deal Cube Tournament: Round Two; 5th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
I’ve added 5 more companies to CompensationStandards.com’s failed say-on-pay list for 2012. We are now at 54 companies in ’12 that have failed to garner major support. Hat tip to Karla Bos of ING Funds for keeping me updated.
For this year’s pre-season poll predicting how many say-on-pay failures there would be, the results were as follows: Less than 10 failures – 5%; 11-20 failures – 13%; 21-30 failures – 24%; 31-40 failures – 20%; 41-50 failures – 17%; 50-99 failures – 24% and more than 100 failures – 24%. So once again, perhaps I predicted too few failures myself in designing the poll. But a hardy 24% predicted correctly…
The Latest on CEO/Director Background Diligence
Recently, I’ve blogged several times about the Yahoo resume saga. In this podcast, Keith Meyer of CTPartners provides some insight into conducting diligence into management and director backgrounds, including:
– How much vetting of a CEO candidate’s background should be conducted?
– What if the CEO candidate is an internal one? Is diligence still necessary?
– Should director candidates be vetted? Does it depend if they already sit on prominent boards?
– Who should conduct the diligence?
– Who should receive the results of diligence?
Transcript: “Looking Out for #1: How to Manage Your Career”
We have posted the transcript from our recent webcast: “Looking Out for #1: How to Manage Your Career.”
Deal Cube Tournament: Round Two; 4th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
Yes, Congress passed a comprehensive reform of the IPO process just a few months ago (JOBS Act). Yes, Congress did so without holding a single hearing. Yes, Congress is now complaining the IPO process is broken and needs reform. You can’t make this stuff up folks. One member asked: “If Congress reforms the IPO process 3x per year. How many years will it take for them to get it right?”
See this letter from the head of the House Financial Services Committee Darrell Issa (R-Ca.) – although Democrats are agreeing with this notion too. And here’s a WSJ article – and Prof. Bainbridge blog about it.
The Latest D&O Insurance Developments
In this podcast, Tom Bentz of Holland & Knight explains the latest in D&O insurance, including:
– What are the latest developments in D&O insurance?
– What role does the recent explosion in M&A litigation play in D&O insurance?
– What are some of the most common mistakes companies make regarding their D&O insurance?
– What should directors do now to make sure that they have broad coverage?
Deal Cube Tournament: Round Two; 3rd Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
Yesterday, the SEC finally adopted rules that direct the stock exchanges to adopt listing standards for compensation committees and compensation advisers under Section 952 of Dodd-Frank (Section 952 added Section 10C to the ’34 Act). The Commission adopted the rules by seriatim.
The stock exchanges have 90 days from when the SEC’s rules are published in the Federal Register to propose listing standards (and they have one year to finalize them). As noted in Mark Borges’ blog, if the exchanges and the SEC move quickly, it’s possible that the listing standards could be in place in time for the 2013 proxy season. In any event, there will be at least one new disclosure requirement in place for the 2013 proxy season – the adopting release provides that companies must comply with the disclosure changes in Item 407 of Regulation S-K in any proxy statement for a regular annual meeting occurring on or after January 1, 2013. This Item 407 change requires disclosure of an assessment of whether any work performed by a compensation consultant raises any conflict of interest (and if so, to disclose the nature of the conflict and how it was addressed).
As Mike Melbinger’s blog notes, the SEC’s rules confirm that Section 10C does not require compensation committees to retain – or obtain advice – only from independent advisers. A listed issuer’s compensation committee may receive advice from non-independent counsel, such as in-house counsel or outside counsel retained by management, or from a non-independent compensation consultant or other adviser, including those engaged by management.
Tune in next Thursday, June 28th, for the webcast – “Proxy Season Post-Mortem: The Latest Compensation Disclosures” – to hear Mark Borges, Dave Lynn and Ron Mueller analyze what was (and what was not) disclosed this proxy season as well as discuss these new rules.
UK One Step Closer to Binding Say-on-Pay: On to Parliament
Yesterday, the UK took another step closer to mandating binding say-on-pay when Business Secretary Vince Cable presented a bill to Parliament mandating binding say-on-pay for consideration. Here is a page with information on the “Enterprise and Regulatory Reform Bill.”
As I understand it, it looks very likely that the bill will pass and perhaps be law by October of 2013. There would actually be three types of say-on-pay votes:
– Review of past compensation – non-binding and annual
– Prospective review on compensation policy – binding and would happen every three years so long as the company’s pay policy hadn’t changed; if it had changed, would happen annually
– Share plans – binding
The biggest debate is over the annual advisory vote – which is backward looking – and supermajority vote thresholds. This Manifest blog captures some of the debate. I’ll be blogging more on this as I figure it out.
What will happen now is that amendments to the Enterprise Bill are introduced in the House of Commons for debate. It then goes to committee and then to the upper chamber, the House of Lords, which then has their debate and committee and then if all is well, it is passed into law (unlike Congress, no riders or changes can be snuck in – only the bill that has been debated can pass). The Financial Reporting Council – which is a separate body and which looks after the UK Governance Code – will then do its own consultation regarding amendments to the UK Governance Code to ensure that the Law, as it applies to UK incorporated companies, will apply to listed companies. Thanks to Sarah Wilson of Manifest for helping to explain the UK process!
SEC Chief Accountant Kroeker Headed Back to Private Sector
Yesterday, the SEC announced that that Chief Accountant Jim Kroeker will leave the SEC in July to enter the private sector. No word on where he is headed…some conjecture in FEI’s Financial Reporting Blog.
Deal Cube Tournament: Round Two; 2nd Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
From this Cooley alert by Chad Mills: As a follow-up to Cydney Posner’s article from a few years back, please note that calendar-year public companies were required to adopt a new accounting standard on comprehensive income (ASU 2011-05, as amended by ASU 2011-12) in their 2012 first quarter Form 10-Q with retrospective application. As described below (and see also Corp Fin’s financial reporting manual (FRM) at Topic 13), if a company is filing a Form S-3 and had filed interim financial statements for a period that includes the date of adoption of a new accounting standard requiring retrospective application, Item 11(b)(ii) of Form S-3 normally requires the company to recast its prior period annual financial statements that are incorporated by reference to reflect the retrospective application (if material).
However, similar to the accommodation noted in Cydney’s article, in lieu of recasting the prior period annual financial statements, a company may (and assuming the company’s auditors agree) instead include a selected financial data table either included in or incorporated by reference in the Form S-3 containing certain information. Accordingly, if your clients are filing or post-effectively amending Forms S-3 this year, please take note of this and make sure to discuss with the client and its auditors. Note that in the case of a takedown from an already effective shelf S-3, a prospectus supplement is not subject to the Item 11(b)(ii) updating requirements; rather, companies would instead apply the “fundamental change” guidance in S-K 512(a) discussed in FRM Section 13110.2.
Below are a couple of recent S-3s with the selected financial data table reflecting the above:
For more background info, see this KPMG article at Part 3.
Study: A 11-Year Comparison of Restatements
In a recent study, Audit Analytics looked back over 11 years of restatements and, among other things, found that during the last three years, the quantity of total restatements appears to have leveled off, and the severity remained generally low, but hidden within the macro view of the data is the fact that restatements increased from companies trading on the NYSE and OTC.
Benchmarking Merger Agreements
In this DealLawyers.com podcast, Paul Koenig of Shareholder Representative Services explains how his company’s novel initiative SRS MAX™ that allows for M&A analysis of merger agreements, including:
– What is the problem that the SRS MAX product is solving?
– How does it work and what do the users of the product receive?
– Do you charge for this, and if so, how much?
Deal Cube Tournament: Round Two; First Match
Round Two begins! This will determine the Sweet 16. As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
One of those things I swore I blogged about – but slipped through the cracks. Corp Fin recently changed its policy on IPO price ranges, now allowing a $2 price range for offerings up to $10 per share, and 20% if the price is over $10. Previously, the range was limited to a $2 spread. (I note Facebook’s price range was $34 to $38.) The intent is to better reflect the inherent difficulty in pricing IPOs. Learn more in this memo posted in our “IPOs” Practice Area.
Check out this Cooley alert entitled “How Can ‘Oversubscribed’ be a Sign of IPO Weakness?”
62-Pages About This Season’s Disclosures: Spring Issue of Compensation Standards Newsletter
For CompensationStandards.com members, we have posted our Spring 2012 issue of Compensation Standards print newsletter – thanks to Mark Borges! – that is a 62-page recap of how proxy disclosure went this past proxy season. Tune in next Thursday, June 28th to catch our CompensationStandards.com webcast featuring Mark, Dave Lynn and Ron Mueller entitled: “Proxy Season Post-Mortem: The Latest Compensation Disclosures.”
Transcript: “Nasdaq Speaks ’12: Latest Developments and Interpretations”
We have posted the transcript from our recent webcast: “Nasdaq Speaks ’12: Latest Developments and Interpretations.”
One member asked: “How can you tell if a EGC bothered with Corp Fin’s confidential submission process or just publicly filed its Form S-1 right away?” You can tell from the exhibit list. When a company that went through the confidential submission process makes its first filing, it has to file the confidential draft (or drafts) as Exhibit 99 to the registration statement. So for LegalZoom, they filed an “Exhibit 99.1 Confidential Draft #1” and no others – so it appears they stayed confidential for only one round of comments.
Using Rule 135 to Announce a Confidential Submission
Rule 135 says that a very limited press release announcing a proposed public offering won’t be deemed an offer for Section 5 purposes. Way back at the end of April, SolarCity became the first company to announce in a Rule 135 notice that it is making a confidential submission at the time of its private submission to Corp Fin (FleetMatics also announced one). This is something that companies are not required to do – and that I believe no other company has done since…
Dave notes one interesting unintended consequence he has heard from bankers is that having companies go through confidential submission means their visibility into the “pipeline” is all screwed up – so they don’t have as good a feel for what is out there in the market going public, which could ultimately impact marketing and valuation.
Transcript: “LLCs: Understanding Capital Account and Allocation Concepts for M&A”
We have posted the transcript for our recent DealLawyers.com webcast: “LLCs: Understanding Capital Account and Allocation Concepts for M&A.”