Monthly Archives: May 2016

May 16, 2016

Sheryl Sandberg Is Beyond Amazing!

So moving. So powerful. So compassionate.

We’ve heard those words before about a college commencement address. But there might not have been anything as amazing as Facebook COO’s Sheryl Sandberg’s remarks at my son’s Cal graduation on Saturday. Sheryl spoke publicly for the first time about her husband’s sudden death last year. She cried periodically throughout – and we all cried with her.

But rather than merely dwell on her misfortune, she leaned on her experience to impart the wisdom she has learned over the past year, struggling to comprehend the incomprehensible. There are many quotes worth noting – but best to read the entire transcript. And at least take in this gem:

You are not born with a fixed amount of resilience. Like a muscle, you can build it up, draw on it when you need it. In that process you will figure out who you really are — and you just might become the very best version of yourself.

You also can watch this amazing speech yourself. And here’s a pic of Sheryl with my sister – who is 25 years younger than me – an hour before the event. Sheryl is so full of passion & energy!


Crowdfunding: Corp Fin Issues 7 New CDIs & Small Entity Compliance Guide

With Regulation Crowdfunding becoming “official” today, Corp Fin issued this “Small Entity Compliance Guide” and these seven CDIs about crowdfunding on Friday…

Webcast: “The Top Compensation Consultants Speak”

Tune in tomorrow for the webcast – “The Top Compensation Consultants Speak” – to hear Mike Kesner of Deloitte Consulting, Blair Jones of Semler Brossy and Ira Kay of Pay Governance “tell it like it is. . . and like it should be.”

Broc Romanek

May 13, 2016

Social Activist CEOs & Duties to Shareholders

Here’s the intro from this blog by Kevin LaCroix:

I am sure many readers saw Monica Langley’s front page Wall Street Journal article earlier this week about Salesforce CEO Marc Benioff and how he uses his position to advance social causes he favors, including most recently, his efforts to combat state legislation concerning transgender bathroom use. The Journal article suggests that Benioff has launched a “new era of corporate social activism.” As the article details, Benioff’s efforts have drawn praise in some quarters, criticism in others. In a May 3, 2016 post on his eponymous blog, UCLA Law Professor Stephen Bainbridge raises some interesting questions about the compatibility of Benioff’s activities with traditional notions of corporate officers’ duties to shareholders.

Internal Controls: “Management Review Controls”

Here’s an excerpt from this Cooley blog:

For those of you who would like to gain some insight into suggested ways to improve ICFR, as well as some of the nuts and bolts involved, has an interesting article written by a Deloitte partner about one type of internal control, “management review controls”(MRCs), that delves into some detail. According to the article, PCAOB requirements are now causing auditors “to require a level of precision and specificity for management review controls beyond prior years. Auditors are also reviewing far more documentation than they use[d] to. At the same time, there is a lack of clarity on what exactly is sufficient in management review controls and how precise they need to be.”

What is an MRC? According to the article, MRCs are an “essential aspect of effective internal control” that involve management reviews of the reasonableness of estimates and other financial information. These reviews typically involve an assessment of recorded amounts in light of the reviewers’ expectations, judgment, knowledge and experience, as well as related reports and underlying documents. MRCs are different from regular “transaction” controls: they tend to look at the forest, not the trees.

More on our “Proxy Season Blog”

We continue to post new items regularly on our “Proxy Season 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:

– Guide Investors Through Your IR Site Via Quick Links
– Political Contributions Disclosure: Pressure Now on Investors
– Online Proxies: More Examples
– Online Proxies: Examples of How to Display Your Board
– Study: Cybersecurity Risk Factors
– Study: Risk Factors Not Specific Enough

Go Bears!

I’m out in Berkeley for my older son’s graduation. Time surely flies…


Broc Romanek

May 12, 2016

Revenue Recognition: It’s For Real Now

As noted in this blog from “The SEC Institute,” there truly is no reason for companies to be procrastinating when it comes to the FASB’s new revenue recognition standard (we have a ton of memos posted in our “Revenue Recognition” Practice Area). Here’s the blog:

Let’s face it, almost all of us procrastinate! And when there is a good reason to procrastinate, well, that is all the better! One of the big rationales for procrastinating dealing with the new revenue recognition standard was that the FASB was definitely going to make changes to the original ASU (ASU 2014-09). As the Transition Resource Group identified and discussed issues in the new standard it became clear that the FASB would clarify certain issues and improve the standard in other areas. In fact the FASB started four discrete projects to make changes.

Yesterday that rationale came to an end. The FASB released the fourth of the four ASU’s. They are:

– ASU 2015-14 – Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date – Issued August 2015
– ASU 2016-8 – Revenue Recognition — Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net) – Issued March 2016
– ASU 2016-10 – Revenue Recognition — Identifying Performance Obligations and Licenses – Final Standard Issued in April 2016
– ASU 2016-12 – Revenue Recognition — Narrow-Scope Improvements and Practical Expedients – Issued May 2016

All the core issues are now in the standard as amended! And yes, the TRG and the AICPA’s Industry Task Forces will continue to work on specific issues. You can read about the TRG’s issues.

CEO Removal: How to Do It

Probably the toughest task for a board is to remove a CEO that performs poorly (see this checklist & other resources in our “CEO Succession/CEO Removal” Practice Area). It’s easier – but can still be challenging – to remove a CEO that behaves badly. This new Stanford study delves into that interesting topic (also see this Cooley blog)…

SEC Commissioners: Grundfest Weighs In

Former SEC Commissioner Joe Grundfest recently penned this WSJ op-ed on the saga of trying to get two SEC Commissioner candidates confirmed by the Senate. Here’s an excerpt:

President Obama has nominated Lisa Fairfax, a Democrat, and Hester Peirce, a Republican, to fill two vacancies on the Securities and Exchange Commission. New York Sen. Charles Schumer demands that the nominees promise—in writing—that if the SEC ever considers a rule requiring publicly traded corporations to disclose political contributions, the nominees will support it.

The nominees haven’t done so, and on April 7 Mr. Schumer lambasted them for “fence-sitting” and for feeding him a bunch of “gobbledy gook.” So spurned, Sen. Schumer, joined by fellow Banking Committee Democrats Elizabeth Warren, Robert Menendez and Jeff Merkley, announced that they will oppose the nominees. The confirmation process has now ground to a halt. Are these senators striking a powerful blow for disclosure of campaign-finance reform, or are they merely shooting themselves in the foot? There’s every reason to believe that these senators will end up limping out of the hearing room.

The law is clear that when it comes to adopting a rule, SEC commissioners must be open to persuasion based on public comment. If a commissioner has an “unalterably closed mind”—as the U.S. Court of Appeals for the District of Columbia Circuit put it in a 1980 decision—then she can’t participate.

What better evidence is there of an unalterably closed mind than a nominee’s written promise to support a senator’s policy no matter what? Any nominee who agrees to such a demand effectively disqualifies herself from participating in the rule-making that the senator so ardently desires. By demanding the promise, Mr. Schumer and his colleagues destroy her ability to deliver on the promise. It also transforms the nomination process into a scene from the theater of the absurd: “I promise to support a policy position that I won’t be able to vote on because I am making this promise.”

Broc Romanek

May 11, 2016

Proxy Advisors: Upcoming House Bill Would Enhance Oversight

Here’s an excerpt from this WSJ article by Andrew Ackerman:

Firms that advise shareholders in corporate elections would be subject to stricter government oversight under bipartisan legislation set to be introduced this week, amid complaints from public companies that such firms hold too much sway over investors. The legislation, sponsored by Reps. Sean Duffy (R., Wis.) and John Carney (D., Del.), would require U.S. regulators to impose new registration and disclosure requirements on firms like Institutional Shareholder Services Inc. and Glass, Lewis & Co. that weigh in on governance debates such as executive compensation or the composition of corporate boards. It is the latest sign of how contentious the roles of such firms have become at a time when corporate elections have grown more competitive amid a rise in activist investing. Proxy advisers analyze corporate proxy statements and make voting recommendations to investors. A “no” recommendation from an adviser can make the difference in a close ballot.

Both ISS and Glass Lewis were at the center of a fierce debate in 2013 about whether to split the chairman and CEO jobs at J.P. Morgan Chase & Co., a proposal the firms supported but which ultimately was rejected by shareholders. They also have played a key role in the successful campaign prodding companies to allow shareholders to nominate their own directors directly onto company proxies. Proxy firms oppose the proposed legislation, saying concerns about their businesses are overblown and that they already operate transparently.

The House Financial Services Committee is expected to hold a hearing on the bill next week, a sign the legislation could advance quickly through the chamber.

Disclosure of Audit Partner: SEC Approves PCAOB’s New Rules

A few days ago – and five months after the PCAOB’s adopting release came out – the SEC issued this order approving the PCAOB’s new rules requiring disclosure of the identities of audit engagement partners & other audit firms participating in the audit. Let’s see those Form APs! These PCAOB rules will be effective as follows:

– Disclosure of engagement partner: for audit reports issued on – or after – January 31, 2017
– Disclosure of other auditors: for audit reports issued on – or after – June 30, 2017

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:

– Nominating Committee: Heightened Scrutiny & Responsive Tips
– Why Open Door Policies Don’t Work
– CIOs/CISOs Pressured to Unleash IT Projects Prematurely
– Stanford/S&C Launch FCPA Database
– Helping the Board Understand & Impact Corporate Culture
– Social Media Analytics: Corporate Investigations Tool

Broc Romanek

May 10, 2016

More on “Non-GAAP Disclosures: The Gloves Are Off”

Recently, I blogged – yet again – about the saber rattling by the SEC (& others) over how some companies might be playing fast & loose with their non-GAAP disclosures. Last week, SEC Deputy Chief Accountant Wesley Bricker delivered this speech on the topic (read a summary in this Cooley blog). And a week before that, as noted in this memo, Corp Fin Chief Accountant Mark Kronforst spoke at a conference about the topic as well, providing several examples that are attracting attention & concern…

We have a webcast coming up in mid-July – “Non-GAAP Disclosures: What Is Permissible?” – featuring Brink Dickerson of Troutman Sanders; Chris Holmes of E&Y; Deb Kelley of Genesis; and Dave Lynn of and Morrison & Foerster…

When Stars Collide: CEOs v. Analysts

Love this piece from IR Magazine about how a good analyst report might be worth more to a company’s market cap than the company’s CEO!

More on our “Proxy Season Blog”

We continue to post new items regularly on our “Proxy Season 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:

– Revoking An Irrevocable Proxy
– Shareholder Engagement: Is the DOJ’s ValueAct Case Just “One-Off”?
– Investor Policies: Board Tenure & Retirement Ages
– Splunk’s Proxy Access Disclosure
– BlackRock’s Engagement Activity
– Proxy Access: NYC Comptroller Reports More Success

Broc Romanek

May 9, 2016

Excessive Incentive Pay: SEC’s 488-Page Proposing Release

On Friday, the SEC became the last of the six financial regulators to approve the 488-page joint agency proposal to prohibit incentive-based compensation that may encourage inappropriate risks by financial institutions under Section 956 of Dodd-Frank. The other agencies are the FDIC, Federal Housing Finance Agency, Federal Reserve Board of Governors, National Credit Union Administration and Office of the Comptroller of the Currency. Here’s the memos I have been posting about the proposal on in our “Financial Firms” Practice Area

Cybersecurity: Another Verizon Report & More

For the 9th year in a row, Verizon has put out a new “Data Breach Investigations Report.” Here’s an excerpt from this Cooley memo about it:

In 2015, more than 90% of incidents and data breaches fell into one of nine categories. Most commonly, security incidents were caused by miscellaneous errors, such as sending emails or paper documents to the wrong recipients (11,347 incidents); insider and privilege misuse, such as an employee using unapproved hardware like a USB drive to store sensitive information (10,490 incidents); and physical theft or loss of laptops and paper documents (9,701 incidents). The most serious incidents—those resulting in the most confirmed data breaches—however, were web app attacks, including hacking using stolen credentials and installing malware (908 confirmed breaches) and point of sale or “POS” attacks against environments where debit and credit card retail transactions are conducted (525 confirmed breaches).

2015 found attackers are getting faster at compromising their victims. For example, the time to compromise was almost always on the order of days or minutes. One particularly fast method of accessing sensitive data is phishing, which accounted for 9,576 security incidents and 916 confirmed data breaches in 2015. Phishing (a form of social engineering) involves sending an email message containing a malicious attachment or link to a victim with the intent of tricking him or her into opening the attachment or clicking on the link. In the majority of phishing cases, that click allows the attacker to install persistent malware on the victim’s computer.

The DBIR analyzes several million results of phishing tests conducted by various information security vendors. Their findings show that we may be getting worse, not better, at recognizing phishing messages; the number of targets who opened the test phishing message rose by 7%, from 23% in 2014 to 30% last year, and about 12% of those who opened the message went further and clicked on the malicious attachment. The median time between sending a phishing message and the first click on its attachment? Under four minutes. In fairness to those who clicked, however, the DBIR notes that the main perpetrators of phishing attacks are sophisticated, with significant time and resources to craft believable “bait”: in 2015, 89% of phishing attacks were perpetrated by organized crime syndicates and 9% were perpetrated by state-affiliated actors.

Insider and privilege misuse was also very common, with insiders most frequently motivated by financial gain, followed closely by espionage. The 2016 DBIR looked at how insiders’ motivations have changed since 2009, and while incidents motivated by espionage have risen, incidents motivated by the prospect of financial gain have fallen. Other inside actors are motivated by grudges, ideology, and even just plain fun. Even more concerning, actions by insiders are some of the hardest for organizations and law enforcement to detect. In fact, 70% of these incidents are taking months or even years to discover.

Also check out our checklists related to incident response planning, disclosure practices and risk management – as well as a chart of state laws related to security breaches. And see this blog about a Congressional bill that would amp up internal controls over cybersecurity…

May-June Issue: Deal Lawyers Print Newsletter

This May-June Issue of the Deal Lawyers print newsletter includes:

– Structuring Considerations for Minority Investments
– Insurance Due Diligence: Three Practical Tips
– Basics: Drafting & Negotiating Disclosure Schedules
– Talent Retention: A Toolkit for M&A
– Which Investors Like Which Risks?

Remember that – as a “thank you” to those that subscribe to both & our Deal Lawyers print newsletter – we are making all issues of the Deal Lawyers print newsletter available online for the first time. There is a big blue tab called “Back Issues” near the top of – 2nd from the end of the row of tabs. This tab leads to all of our issues, including the most recent one.

And a bonus is that even if only one person in your firm is a subscriber to the Deal Lawyers print newsletter, anyone who has access to will be able to gain access to the Deal Lawyers print newsletter. For example, if your firm has a firmwide license to – and only one person subscribes to the print newsletter – everybody in your firm will be able to access the online issues of the print newsletter. That is real value. Here are FAQs about the Deal Lawyers print newsletter including how to access the issues online.

Broc Romanek

May 6, 2016

John Olson: A Legal Giant

As you’ll find out in this 40-minute podcast with Gibson Dunn’s John Olson, he is a legal giant. In 52 years of practice, he has done it all. Chair of the ABA’s Federal Regulation of Securities committee; Advisory Committee for both the NYSE and NASD. Drafting insider trading legislation for Congress. Just to name a few.

John has proven not to just be a leader among securities lawyers – but also in the field of corporate governance. John may have been in more boardrooms during his life than any other lawyer. More recently, John has spent more time with his true love – teaching. Learn all about him…

Will All Institutional Investor Become “Activists”?

Here’s the intro from this Cooley blog:

To date, for the most part, when it comes to shareholder activism, the heavy lifting has been done by hedge fund activists. Now, as discussed in this NYT DealBook column, institutional shareholders may be stepping out on their own.

Transfer Agents: Companies Need to Focus on SEC’s Proposal

Recently, Carl Hagberg forced me to read his comment letter over the SEC’s recent transfer agent proposals – as I admit that I didn’t realize that transfer agents can assume – and sometimes create – significant liabilities for companies! This proposal really hadn’t been on my radar screen. The SEC extended the comment period so that it ended a few weeks ago – so I imagine the agency will still accept comments as the deadline typically is soft. Here’s all of the comments submitted so far…

Broc Romanek

May 5, 2016

A Novel Format: Our Executive Pay Conferences

We are excited about the upcoming set of our popular conferences – “Proxy Disclosure Conference & Say-on-Pay Workshop” – to be held October 24-25th in Houston and via Live Nationwide Video Webcast. Register now for a 20% reduced rate that expires in just two weeks.

Here are the agendas – 20 panels over two days. You’ll notice that many panels have a new novel feature – a post-panel commentary by different experts than the experts on the panel. For example, after Corp Fin Director Keith Higgins speaks, Meredith Cross & Mark Borges will kibitz on what we just heard from Keith. Think of it as being akin to post-debate analysis on the cable networks. The panels include:

1. Keith Higgins Speaks: The Latest from the SEC
2. SEC Speaks: Post-Panel Commentary
3. The SEC All-Stars: The Bleeding Edge
4. The Proxy Designers Speak: How to Make Disclosure Usable
5. Navigating ISS & Glass Lewis
6. Hot Topics: 50 Practical Nuggets in 60 Minutes
7. Pay-for-Performance Disclosure: Now What
8. P4P: Post-Panel Commentary
9. Creating Effective Clawbacks (& Disclosures)
10. Clawbacks: Post-Panel Commentary
11. Pay Ratio: Now What
12. Pay Ratio: Post-Panel Commentary
13. Pay Ratio: The In-House Perspective
14. Pay-for-Performance: How to Do The Proper Messaging
15. Proxy Access: Tackling the Challenges
16. Proxy Access: Post-Panel Commentary
17. Pledging & Hedging Disclosures: What to Do Now
18. Pledging & Hedging Disclosures: Post-Panel Commentary
19. Dealing with the Complexities of Perks
20. The Big Kahuna: Your Burning Questions Answered

Early Bird Rates – Act by May 20th: Huge changes are afoot for executive compensation practices with pay ratio disclosures on the horizon. We are doing our part to help you address all these changes – and avoid costly pitfalls – by offering a special early bird discount rate to help you attend these critical conferences (both of the Conferences are bundled together with a single price). So register by May 20th to take advantage of the 20% discount.

Capital Formation: House Passes the “HALOS Act”

As noted in this MoFo blog by Ze’-ev Eiger (also see this blog), last week, the House of Representatives passed the “Helping Angels Lead Our Startups Act” (H.R. 4498) (aka HALOS Act), which would direct the SEC to limit demo days in certain ways – and to amend Regulation D to make the prohibition against general solicitation or general advertising inapplicable to events with specified sponsors (including angel investor groups not connected to broker-dealers or investment advisers) where:

– Presentations or communications are made by or on behalf of an issuer;
– Advertising does not refer to any specific offering of securities by the issuer;
– Sponsor does not engage in certain activities (such as offering investment recommendations or advice to attendees); and
– No specific information regarding a securities offering is communicated (other than that the issuer is in the process of offering or planning to offer securities, including the type and amount of securities being offered).

Happy Anniversary Baby! 14 Years of Blogging & Counting

Yesterday marked 14 years of my blither and bother on this blog (note the Blog is nearly 13 years old – not shabby!). It’s one time of the year that I feel entitled to toot my own horn – as it takes stamina and boldness to blog for so long. A hearty “thanks” to all those that read this blog for putting up with my personality. I’m sure I won’t get more refined with age…

Broc Romanek

May 4, 2016

The JOBS Act Is So Over, Man!

As noted in this press release, yesterday, the SEC approved amendments to revise the rules related to the thresholds for registration, termination of registration and suspension of reporting under Section 12(g) of the ’34 Act. I love it that the thresholds for savings & loan holding companies are now consistent with those for bank holding companies. I need balance in my life. Not only did this take care of some of the FAST Act business, it eliminated the last vestiges of outstanding JOBS Act rulemaking from the SEC’s plate. Here’s the adopting release

In this video from the SEC, you will learn that the SEC values teamwork. Do you think Cap’n Cashbags needs to make a parody?

A Novel One: Gannett’s “Just Vote No” Campaign = Merger Talks?

Here’s something I blogged yesterday on my “ Blog“: Is it novel for a wannabe acquiror to put pressure on a target by running a ‘withhold’ campaign? Yes, it’s very unusual. There may have been others, but not that I can think of. The intro from this WSJ article explains the situation:

Gannett Co. on Monday urged Tribune Publishing Co. shareholders not to back Tribune’s slate of director nominees, in an effort to send a “clear signal” that investors want the two companies to engage in merger talks. Last week, Gannett went public with its proposal to acquire Tribune in a deal valued at about $400 million that would combine titles like USA Today, the Los Angeles Times and Chicago Tribune, as the struggling print news industry increasingly consolidates. Getting Tribune Publishing shareholders to withhold director votes is the only way that Gannett can influence this year’s proxy vote. Gannett made its offer public because it was frustrated at Tribune’s lack of response.

I can think of a few proxy fights where the buyer has run board seats like Roche/Illumina or Airgas – or when Valeant solicited consents to get a special meeting called against Allergan. But not a “withhold” campaign against directors. I haven’t looked at the situation that closely, but possibly Gannett is going this route because they missed the nomination deadline for a proxy fight – Tribune’s annual meeting is June 2nd…

Crowdfunding: First Portal Application Appears on EDGAR

As reported by Steve Quinlivan in this blog, CFS, LLC became the first crowdfunding portal application available on EDGAR. Actually, the initial application and two amendments are available. The company will conduct business under the name uFundingPortal and its website will be Other than that, the application isn’t very exciting reading, but is good news as the May 16, 2016 effective date for crowdfunding nears. NextSeed US LLC became the 2nd company to file a crowdfunding portal application

Broc Romanek

May 3, 2016

Trust Indentures: 28-Firm White Paper

This 28-Firm White Paper provides guidance that should facilitate the closing of certain debt restructurings and indenture amendments in the wake of two recent court decisions that interpreted Section 316(b) of the Trust Indenture Act as prohibiting amendments to an indenture that would impair the issuer’s ability to pay amounts due on the debt securities even if those amendments are otherwise expressly permitted by the indenture.

The decisions caused uncertainty over whether legal opinions typically required for indenture amendments can be delivered in connection with a debt restructuring or in circumstances where the issuer may be in financial distress. Also see these memos in our “Trust Indentures” Practice Area.

Webcast: “Legal Opinions – The Hot Issues”

Tune in tomorrow for the webcast – “Legal Opinions: The Hot Issues” – to hear from the foremost authorities on legal opinions as they analyze the most difficult topics today: Goodwin Procter’s Don Glazer, Mike Kendall and Ettore Santucci. The topics include:

1. Opinions on forum selection clauses when the contract chooses the law of another state or country
2. Opinions on arbitration provisions, including contrasting practice on agreements governed by US and foreign law
3. Opinions on provisions shortening or lengthening the statute of limitations
4. Drafting the “no violation of law” opinion
5. Excluding agreements governed by non-US law from the list of agreements covered by the “no breach” opinion
6. Giving separate opinions on “choice of law” clauses choosing the law of another state or country (exclude fundamental policies for both)
7. Venture capital opinion issues, including DGCL Section 204 opinions
8. Dealing with New York’s recent extension of its shareholder liability statute to non-NY corporations whose stock is not publicly traded
9. Dealing with the possibility that a limited partnership has dissolved when giving opinions – validly existing and power – on a LP.
10. Giving opinions on Delaware LPs when a gap exists between the filing of its certificate of limited partnership and its satisfaction of all the requirements for becoming an LP
11. Not giving “as if” opinions on cross-border agreements choosing foreign law

How Many Companies Are Filing With the SEC? 9100

I’m always curious how many public companies are filing disclosure documents with the SEC. A sentence from the SEC Chair’s recent budget testimony before Congress reveals that “the SEC is responsible for selectively reviewing the disclosures and financial statements of over 9100 reporting companies.” Meanwhile, as captured in these notes from a panel of Corp Fin speakers, in fiscal 2015, Corp Fin reviewed the periodic reports of 4400 companies and 600 IPOs…

Also check out this blog by Kevin LaCroix about “Yes, But WHY Are There So Many Fewer Publicly Traded Companies?“…

Broc Romanek