Monthly Archives: December 2013

December 11, 2013

Confidential Treatment Request Confusion: Rule 24b-2/406 vs. Rule 83

I’ve heard that there is some confusion as to when you need to send a CTR to the SEC’s FOIA office. You don’t need to do so for a Rule 24b-2 or 406 confidential treatment request – those CTRs should be only sent to the SEC’s Office of the Secretary (& don’t direct it to the attention of any individual or other office at the Commission). Only this address and the return address should appear on the envelope conveying a Rule 24b-2 or 406 confidential treatment request:

Office of the Secretary
Room 10915
Mail Stop 1090
Securities & Exchange Commission
100 F. Street NE
Washington, DC 20549-1090

In comparison, a FOIA letter must be sent for confidential treatment requests under Rule 83. As noted on page 40 of my “Confidential Treatment Requests Handbook,” Rule 83 requires three different submissions (ie. letter to Corp Fin Staffer reviewing your filing; comment letter response filed via Edgar and the letter to the SEC’s FOIA office)…

How is Morale at the SEC? A 2013 Job Satisfaction Survey

Two years ago, I blogged about the results of a biannual government-wide “Federal Human Capital Survey” as it pertained to the SEC. Now, a new government-wide survey is out – and here is the SEC’s 2013 Federal Employee Viewpoint Survey. Overall, the SEC did not fare well compared to the other 36 federal agencies included in the survey – coming in 35th on Job Satisfaction; 33rd on Talent Management; 33rd on Results-Oriented Performance Culture and 26th on Leadership & Knowledge Management.

Transcript: “Audit Committees in Action – The Latest Developments”

We have posted the transcript from our recent webcast: “Audit Committees in Action: The Latest Developments.”

– Broc Romanek

December 10, 2013

When is the SEC Required to Hold an Open Commission Meeting?

I received many emails from members last week when the news came out that the SEC would likely adopt the Volcker rules by seriatim (as noted in this WSJ article, this indeed will happen today). Members wondered why the SEC wasn’t required to hold an open Commission meeting to vote upon such important rules. Note that all five federal agencies responsible for implementing the Volcker rule requirements of Dodd-Frank will act on their rulemakings today (all 5 agencies approved; the SEC voted 3-2 to adopt the rule).

As noted in my webcast last year about how the SEC really works, the SEC makes great use of the seriatim process – roughly about 600x per year. These basically are written consents in lieu of a meeting. In literal terms, they are pieces of paper circulated for signature to all the Commissioners. Under the Sunshine Act, the Commissioners can’t get in a room and sign together – unless they do so silently – that’s why the orders are circulated in series (“seriatim” is a Latin adverb, meaning serially or in series). As long as the Commissioners aren’t getting together to act, the Sunshine Act doesn’t apply and the SEC isn’t required to hold an open Commission meeting. Open Commission meetings are held at the SEC Chair’s discretion.

Thus, it is conceivable that the SEC could take various actions for years without an holding an open Commission meeting. But it doesn’t do so because of the interest in holding the meetings, both within the SEC and outside. In the case of the Volcker rule, the SEC is coordinating with four other agencies – and my guess is that it was too complicated to attempt to coordinate action among such a large group by holding simultaneous open meetings (eg. some of the Commissioners could be unavailable to attend an open meeting today). Thanks to Hunton & Williams’ Scott Kimpel for his wisdom!

At the Fed, the Governors just reply to emails to vote and don’t even have the fancy cover pages that the SEC’s seriatim memos do. The Washington Post has posted the text of the Volcker rules.

Corp Fin’s New Head of Small Business Policy: Sebastian Gomez-Abero

I have updated our popular “Corp Fin Organization Chart” to show that Sebastian Gomez-Abero has been tapped as Corp Fin’s new Chief of Small Business Policy. Sebastian moves over from the Office of Chief Counsel. He was in the Office of Financial Services II before that…

Twitter’s IPO: Corp Fin’s Comments Are Uploaded

Now which title do you like better? Mine above about how Corp Fin has uploaded its comment letters and Twitter’s responses – or this one from the WSJ: “Unpacking Twitter’s Secret IPO Memos With the SEC“? I know, I know. The WSJ headline is sexier. Here is the correspondence related to Twitter’s IPO (which is released by the SEC; not the company as erroneously stated in the WSJ piece)…

– Broc Romanek

December 9, 2013

Think You’ve Had a Full Career After 30 Years? What About 70!

Recently, I learned that Bill Godward – whose name used to grace the Cooley brand – still goes into the office at age 100! In this podcast, Mr. Godward describes his incredible career – harkening back to an era where it was rare for a company to have any in-house counsel:

– What did you do before you joined Cooley?
– How big were firms back then?
– What types of law did you practice back then? How did dealmaking differ?
– What other differences in the way that lawyers practiced can you tell us about?

Corp Fin Grants First Rule 506 Bad Actor Waiver

In this blog, Steve Quinlivan notes that Corp Fin has granted the first “Bad Actor” waiver to RBS Securities. Join our Reg D email listserv to learn of developments on a real-time basis…

PCAOB’s New Report: Implementation of Engagement Quality Review Standard

On Friday, the PCAOB issued this report that provides information about auditors’ implementation of Auditing Standard No. 7, Engagement Quality Review. The findings include:

– While methodologies generally were consistent with the requirements of Auditing Standard No. 7, they did not always result in an appropriately executed engagement quality review.
– In a number of engagements in which the PCAOB Inspection staff identified audit deficiencies, the staff concluded that the audit deficiency should have been identified by the engagement quality reviewer.
– Observations from the Board’s 2012 inspections indicated that audit deficiencies and the related deficiencies in engagement quality reviews continued to be high.

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for 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:

– Another Salvo on SEC Penalties
– Corp Fin Staff Doesn’t Like “Likes”
– SEC Explains Denial of Whistleblower Award
– SEC Sheds Light on Its Pursuit of “Streamlined” Investigations
– Will SEC’s Whistleblower Awards Lead to More Whistleblowers (& Civil Lawsuits)?

– Broc Romanek

December 6, 2013

Board Diversity: The Impact of Short Slates

Recently, I got into a discussion with someone about short slate nominees and whether dissidents ever put up female nominees. I asked around and didn’t find anyone that keeps those statistics – but anecdotally heard that it’s fairly rare. Clinton Group has been pretty aggressive nominating directors over the past few years and several have been women – they put three women on Wet Seal’s board last year and they just nominated two for ValueVision Media’s board last month.

As noted in this article, Twitter has appointed its first woman to its board. And check out this Reuters article entitled “‘Male, pale, stale’ boardrooms worry investors.” And Sylvia Groves’ note entitled “Should Directors Come with a Sell-By Date?“…

Mailed: Special Supplement to November-December 2013 Issue of “The Corporate Counsel”

We just mailed a Special Supplement to the November-December 2013 issue of The Corporate Counsel that we put together recently (the regular issue itself is forthcoming). It updates the “Say-on-Pay Solicitation Playbook” that I wrote a few years back for the July-August 2010 issue of The Corporate Counsel. This time around, we tackle adopting shareholder engagement policies and forming shareholder engagement committees, etc.

Act Now: Get this issue rushed to when you try a 2014 No-Risk Trial to The Corporate Counsel.

Should You Be Talking the Youth Out of Law School?

My greatest accomplishment? I know of at least three people that I have talked out of law school. And they all thank me every time they see me. Here’s news about how things continue to get worse for our profession:

The Atlantic’s “Law School Applications Are Collapsing (As They Should Be)
ABA Journal’s “‘Massive layoffs’ predicted in law schools due to big drop in applicants
WSJ’s “Crop of New Law Schools Opens Amid a Lawyer Glut
The Atlantic’s “How the Job Market for Law School Grads Crumbled (and How It Could Come Back to Life)

– Broc Romanek

December 5, 2013

Corp Fin Issues 14 New “Bad Actor” CDIs

Yesterday, Corp Fin updated its “Securities Act Rules Compliance and Disclosure Interpretations” to provide 14 new interpretations clarifying the application of the “bad actor” disqualifications from Rule 506 offerings. In this blog, Blank Rome’s Yelena Barychev provides a summary – and in this blog, Leonard Street’s David Jenson provides some analysis – and here’s Keith Bishop’s take.

Don’t forget to join our new “Reg D email listserv,” that has an easy-to-use online “subscribe/unsubscribe” functionality. These FAQs clarify how to use our listservs – but there are four easy steps:

1. Input your email address
2. Input your name
3. Choose the listservs you want to join
4. Click “Subscribe” button

You can unsubscribe at any time by following the first three steps above – and then click the “Unsubscribe” button as your 4th step. Here are instructions on how to email your listserv once you join a group.

PCAOB Reproposes “Disclosure of Engagement Partner” Standards

Yesterday, the PCAOB reproposed amendments to its auditing standards that would provide disclosure about the engagement partner and certain other participants in the audit, including seeking input on what types of disclosure would be useful, the potential costs, etc.

Here’s the comment letters received on the original proposal. And there is coverage of the discussion among the PCAOB’s Board Members during yesterday’s deliberations in FEI’s blog.

SEC Chair White Speaks on Benefits of Shareholder Engagement

As noted in this Reuters article, SEC Chair White recently delivered this speech addressing shareholder engagement and shareholder activism. At the same event, SEC Commissioner Gallagher gave this speech on proxy advisors, a precursor to today’s proxy advisors roundtable

– Broc Romanek

December 4, 2013

Calling All Controlled Companies! Your Own E-Mail Listserv

To facilitate conversations and help answer your questions, I’m excited to announce that we have launched a number of new email listservs that have an easy-to-use online “subscribe/unsubscribe” functionality. We built this tool in-house and I believe it’s superior to what others do for their listservs.These FAQs clarify how to use our listservs – but there are four easy steps:

1. Input your email address
2. Input your name
3. Choose the listservs you want to join
4. Click “Subscribe” button

You can unsubscribe at any time by following the first three steps above – and then click the “Unsubscribe” button as your 4th step. Here are instructions on how to email your listserv once you join a group.

The first four listserv groups I have created are: Reg D; Controlled Companies; Treasury Support; and Cool Technology. Email me if there are other topics that you think deserve their own listserv…

Update: Nasdaq’s Compensation Committee Certification

After my blog got pushed out yesterday morning, I tweaked it to note that the form of certification that I linked to was merely just a preview of what Nasdaq will require. Nasdaq expects to release the final form in early January, which will be changed somewhat from the preview to accommodate the proposals that the Nasdaq filed last week, etc.

Also note that listed companies will not file a paper certification with Nasdaq – but rather will certify electronically through Nasdaq’s “Listing Center” website, similar to the process companies (and applicants) use to submit listing applications and forms such as this one

Fixing the Securities Laws: Removing Obstacles to Recognizing LGBT Partnerships

In the SEC’s rules & forms, by only referring to spouses – which is defined to mean only married couples – the securities laws disqualifies couples in civil unions or domestic partnerships in 15 states across the country. Learn more in this article on TechCrunch entitled “Remove Restrictions on Gay Investors.”

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for 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:

– Your Guide to Purchases by Directors in an IPO
– Sixth Circuit Upholds “Big Boy” Agreement to Bar Fraud Claim
– Expanded Role for Corp Fin in Monitoring Violations of Iran Sanctions?
– Dodd-Frank: Anti-Retaliation Provisions Don’t Protect Overseas Whistleblower
– DTC’s White Paper Proposes Changes to Reverse Trading Chills

– Broc Romanek

December 3, 2013

Nasdaq Proposes Comp Committee Independence Changes to Align with the NYSE

In this memo, Cleary Gottlieb gives us this news:

On November 26, 2013, the Nasdaq Stock Market filed a proposal to amend its listing rules implementing Rule 10C-1 of the Securities Exchange Act of 1934, governing the independence of compensation committee members. Currently, Nasdaq Listing Rule 5605(d)(2)(A) and IM-5605-6 employ a bright line test for independence that prohibits compensation committee members from accepting directly or indirectly any consulting, advisory or other compensatory fees from the company or any subsidiary subject to certain exceptions.

Based on the potential burden the bright line approach places on companies’ ability to recruit eligible directors, Nasdaq has proposed to replace this rule and its exceptions with a requirement that all compensation received from a company be considered in the independence determination. Separately, Nasdaq has also proposed some minor revisions to the affiliation prong of the compensation committee independence test under Rule 10C-1, which requires that consideration be given in independence determinations to whether a compensation committee member is affiliated with the issuer, a subsidiary of the issuer or an affiliate of a subsidiary of the issuer. All of these changes would align Nasdaq’s approach to compensation committee independence with that employed by the NYSE.

Yesterday, Mike Melbinger blogged a reminder that the Nasdaq has provided a preview of its form of certification (see pg. 16) for listed companies to use when it complies with Nasdaq Rule 5605(d) next year; the Nasdaq will be releasing the final form sometime in early January…

Say-on-Pay: Now 71 Failures – How Does That Compare With My Early Season Poll?

Last month, DFC Global became the 66th company to fail its say-on-pay in ’13 with just 26% support – see the Form !0-Q. DFC Global has failed two years in a row (last year with 25% support). And these five companies became first-time failures – #67-71: Gigoptix with 39% support (Form 8-K); Corinthian Colleges with 48% support (Form 8-K); CytoDyn with 43% support (Form 8-K); Fusion-io with 36% support (Form 8-K) and SWS Group with 48% support (Form 8-K). Thanks to Karla Bos for these as always!

Here are poll results from earlier this year in which readers predicted the number of say-on-pay votes that would fail to garner majority support in ’13 (here are results of 2012’s predictions):

– 10 or fewer failures – 7%
– 11-20 – 5%
– 21-30 – 15%
– 31-40 – 10%
– 41-50 – 22%
– 51-75 – 27%
– More than 75 – 15%

Check out this blog by Davis Polk’s Ning Chiu about how say-on-pay fared – Ning notes that of the 995 equity incentive plans voted on, ISS supported 73%, but ultimately only 8 plans did not pass.

Take Two Video: “Say-on-Pay in 2013”

Here is a 45-second video about the success rates for say-on-pay over the past three years:

– Broc Romanek

December 2, 2013

Should SEC Staffers Be Required to Punch a Clock?

Although reading from each side’s perspective in this Bloomberg article leads me to believe that SEC Staffers have no reason to be concerned about being watched for taking a lunch that is too long, it does reveal that there are a number of issues between the SEC’s union and management that bears watching. In fact, bigger issues than the ones identified in the article are under the skin of many Staffers. [And for a walk back in time, check out my blog entitled “The Security at the SEC: A 20-Year Timeline.”]

Here’s an excerpt from the article:

“Despite the fact that most SEC employees are often told that they may take an hour for lunch, technically, we are only entitled to thirty minutes,” wrote Greg Gilman, president of the union, in an e-mail sent to SEC workers last week. “Do not fall into the trap of believing that because you are a ‘professional’ the rules do not apply to you.”

Fueling the union’s angst is a new SEC plan to require the use of security cards that record the times people enter and exit the building in its offices across the country, a move Gilman wrote would “substantially increase surveillance.” He said that data from the system in place at the Washington headquarters is increasingly used in cases against employees accused of skipping out of work.

SEC officials said the worries are overblown. While the security system does keep data on employees’ comings and goings, the agency doesn’t check the information unless there is a reasonable complaint that attendance violations are occurring, said John Nester, an SEC spokesman. Those tips come from both managers and co-workers, he said.

Relations have been tense between the SEC’s management and its union, which represents some 3,000 of the agency’s 4,000 employees. Gilman has also criticized a recent decision by Chairman Mary Jo White to give added retirement and vacation benefits only to managers and has accused the commission of reneging on part of a student-loan repayment program. A Government Accountability Office report in July described agency workers as having “low morale” and a “distrust of management.” Gilman’s Oct. 24 note said the group, part of the National Treasury Employees Union, is seeking the services of a federal mediator to help resolve the matter.

This excerpt balances the tone of this article somewhat:

Not all of White’s interactions with the union have been troubled. In July, she and Gilman issued a joint statement lauding a new collective bargaining agreement they negotiated. The contract, set to go into effect shortly, could help tamp down the lunch controversy: One of its provisions would allow some employees to telecommute for as many as five days a week from home — where presumably there are no time clocks installed.

Will the Sequester Force the SEC to Furlough Staffers?

A few weeks ago, the CFTC announced that it was being forced to implement an administrative furlough of up to 14 days, including three days before January 15th. No word yet on what will happen to the SEC Staff along these lines…

The SEC has announced the agenda & panelists for this Thursday’s proxy advisors roundtable.

Our December Eminders is Posted!

We have posted the December issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!

– Broc Romanek