Monthly Archives: June 2016

June 30, 2016

A Special Webcast! “The SEC Speaks on Non-GAAP”

Since we’ve still been getting so many questions about what the SEC Staff expects in the wake of Corp Fin’s recent issuance of its new non-GAAP CDIs, we’ve calendared a new webcast – “Non-GAAP Disclosures: The SEC Speaks!” – for next Wednesday, July 6th with Mark Kronforst, the Chief Accountant of the SEC’s Division of Corporation Finance! Dave Lynn & Meredith Cross will join Mark as they parse the questions that Corp Fin has been receiving since the CDIs – as well as the type of comments that the Staff has been issuing (those comment letters aren’t public yet since the files aren’t “closed”).

If you can’t make the webcast live, the audio archive will be posted immediately after the program ends – and a transcript will be posted about 10 days after that. If you’re not a member of, try a “Half Price for Rest of ’16” no-risk trial now…

Broc Romanek

June 30, 2016

SEC Commissioner Nominees: Confirmation Not Gonna Happen (Anytime Soon)

The ridic Senate battle over confirmation of the SEC’s two Commissioner nominees continues. Here’s an excerpt from this WSJ article by Andrew Ackerman:

The two nominees to fill vacancies on the Securities and Exchange Commission face new delays—as at least one Democratic lawmaker has moved to block a Senate confirmation vote. A procedural step known as a “hold,” has been placed on Hester Peirce, a Republican nominee for the agency, according to a Democratic Senate aide.

That throws into limbo the confirmation this year of Ms. Peirce—and that, in turn, is likely to stall consideration as well for Lisa Fairfax, a Democrat tapped for a second vacancy at the five-member commission. That is because the Senate usually considers Democratic and Republican nominees together, to ensure partisan balance at the commission. So it is highly unlikely the chamber would consider Ms. Fairfax without also voting on Ms. Peirce.

Delays in advancing the nominees mean it may be up to the next presidential administration and Congress to restore the top U.S. markets regulator to its full complement of commissioners. The agency has operated with only three since January. If the SEC remains with only three commissioners, it could be difficult for SEC Chairman Mary Jo White to advance her agenda in what is likely her final year at the markets regulator, due to agency rules requiring a quorum of three commissioners to attend all votes. The Senate aide declined to identify any senator behind the hold.

The procedural move means the Senate is unable to quickly confirm both SEC nominees. The nominees could still advance, but overcoming a hold generally requires the high hurdle of support from 60 senators. Consideration of their nominations also would eat up valuable floor time that is in short supply, as the legislation session is truncated in advance of November’s election.

The SEC’s Pinterest Page

I’m digging the SEC’s Pinterest page. Check out the video of Joe Kennedy from 1934. And Peter Romeo is in the picture on the top left from the ’70s – he still looks the same!

ISS Opens “Peer Group” Submission Window for Non-12/31 Companies

Starting new Tuesday, July 5th, ISS will open its “peer group” submission window until July 15th. Only companies that have made changes need to submit new peers. And only companies with meetings between September 16th, 2016 and January 31st, 2017 are invited to participate in this round.

Broc Romanek

June 29, 2016

Climate Change Disclosures: Corp Fin Taking a Close Look

This recent speech by SEC Chair White not only indicates that a rule proposal regarding board diversity disclosures is coming soon, it highlights that the Corp Fin Staff is actively reviewing climate change & sustainability disclosures – and it could conduct rulemaking in this area soon too. Here’s an excerpt:

Currently, disclosure of sustainability information under SEC rules is being addressed by a combination of our materiality-based approach to disclosure, guidance on certain issues,[55] and shareholder engagement on a range of sustainability topics, whether through direct dialogue with management or our Rule 14a-8 shareholder proposal process. Although we are seeing increased disclosure and engagement on sustainability matters, we are taking a more focused look at such disclosures, particularly related to climate change, in our annual filings reviews.

We understand, however, that there are those who do not believe that our materiality-based approach to sustainability disclosure goes far enough.[56] That is one of the reasons we included a discussion of the topic in our recent Regulation S-K Concept Release and solicited input from investors and others on whether we should consider line-item disclosure on certain issues.[57] I encourage you to share your perspectives and give us your input on whether changes are needed, and if so, what specifically should be changed.[58]

Brexit Risk Factors: Tailor Them!

When I blogged about Brexit last Friday, I wrote “companies should now be assessing how this uncertain future will impact them uniquely.” As I write on page 23 of my “Risk Factors Disclosure Handbook,” macro events or trends can be appropriate risk factors – but I also write on page 25 that you should illustrate how those macro trends specifically impact your company. As nicely fleshed out in this memo, how do those known uncertainties impact how your company is thinking about its future? What is the impact of currency fluctuations? You’ll be writing about this for your MD&A & forward-looking safe harbors – so tailor them like your risk factors too. See this MarketWatch piece with a mention of me.

The first set of Form 8-Ks, Form 10-Ks & Form 10-Qs mentioning Brexit are dribbling in. And I’ve been posting oodles of Brexit memos in our “Europe” Practice Area – and here’s a few memos on the data privacy implications. Finally, get ready for our upcoming webcast: “After Brexit! Current Developments in Capital Raising.”

“Golfing” Risk Factors

Bass Berry’s Jay Knight sent along this risk factor for the Form S-1 that Titleist (corporate name – Acushnet Holdings Corp) recently filed for an IPO – a good example of a tailored risk factor:

Changes to the Rules of Golf with respect to equipment could materially adversely affect our business, financial condition and results of operations.

Golf’s most regulated categories are golf balls and golf clubs. We seek to have our new golf ball and golf club products conform with the Rules of Golf published by the United States Golf Association, or the USGA and The Royal and Ancient Golf Club of St. Andrews, or The R&A, because these rules are generally followed by golfers, both professional and amateur, within their respective jurisdictions. The USGA publishes rules that are generally followed in the United States and Mexico, and The R&A publishes rules that are generally followed in most other countries throughout the world. However, the Rules of Golf as published by The R&A and the USGA are virtually the same and are intended to be so pursuant to a Joint Statement of Principles issued in 2001. The Rules of Golf set the guidelines and establish limitations for the design and performance of all golf balls and golf clubs.

Many new regulations on golf balls and golf clubs have been introduced in the past 10 to 15 years, which we believe was one of the most active periods for golf equipment regulation in the history of golf. The USGA and R&A have historically regulated the size, weight, and initial velocity of golf balls. More recently, the USGA and R&A have specifically focused on regulating the overall distance of a golf ball. The USGA and R&A have also focused on golf club regulations, including limiting the size and spring-like effect of driver faces and club head moment of inertia. In the future, existing USGA and/or R&A rules may be altered in ways that adversely affect the sales of our current or future products. If a change in rules was adopted and caused one or more of our current or future products to be nonconforming, sales of such products would be impacted and we may not be able to adapt our products promptly to such rule change, which could materially adversely affect our business, financial condition and results of operations. In addition, changes in the Rules of Golf may result in an increase in the costs of materials that would need to be used to develop new products as well as an increase in the costs to design new products that conform to such rules.

Broc Romanek

June 28, 2016

SEC Proposes Changes to “Smaller Reporting Company” Definition

Yesterday, the SEC proposed changes to the “smaller reporting company” definition, which would increase the number of companies falling into that reporting category. Here’s the 83-page proposing release. The proposed rules would enable:

– Companies with less than $250 million of public float to provide scaled disclosures as a smaller reporting company, as compared to the current $75 million threshold
– If a company doesn’t have a public float, it would be permitted to provide scaled disclosures if its annual revenues are less than $100 million, as compared to the current “less than $50 million” threshold
– As under the current rules, once a company exceeds either of the thresholds, it won’t qualify as a smaller reporting company again until public float or revenues decrease below a lower threshold. Under the proposal, a company would qualify only if its public float is less than $200 million or, if it has no public float, its annual revenues are less than $80 million.
– The proposing release includes a great table showing the items of Regs S-K and S-X and the various accommodations made for scaled disclosure

The SEC isn’t proposing to increase the $75 million threshold in the “accelerated filer” definition. As a result, companies with a float of $75 million or more that would qualify as smaller reporting companies would be subject to the requirements that apply currently to accelerated filers – including the timing of the filing of periodic reports and the requirement that accelerated filers provide the auditor’s attestation of internal controls. As noted in this blog, so much for the harmonization recommended by the SEC’s Advisory Committee on Small and Emerging Companies last year.

SEC Adopts Resource Extraction Rules (Again)

The SEC was on a tear yesterday. In addition to proposing the “smaller company” changes, it adopted resource extraction rules. These are the rules that were originally adopted in 2012 – but were then struck down by the US District Court for DC in 2013. The rules were re-proposed in December after being sued by Oxfam America for not moving fast enough – and a court ordered that they be re-proposed. When the SEC re-proposed the rules, it promised to adopt the rules by June 27th – and it did on the nose!

Here’s the 268-page adopting release. And here’s an order from the SEC adopt the rules qualifying for some European Union & Canadian stuff…

I love it when the SEC conducts rulemaking without an open Commission meeting and confuses everyone. As noted in this blog, the SEC is entitled to take action in seriatim. I’ll be blogging about the circumstances that likely leads to rulemaking in seriatim in the near future…#headfake

Financial Choice Act: Discussion Draft

I recently blogged about how a House bill – the “Financial Choice Act” – would unwind much of Dodd-Frank & more. In this blog, Cydney Posner reports that the discussion draft for that bill is finally available…

Transcript: “Proxy Season Post-Mortem – The Latest Compensation Disclosures”

We have posted the transcript for our recent webcast: “Proxy Season Post-Mortem – The Latest Compensation Disclosures.”

Broc Romanek

June 27, 2016

Corp Fin: 7 New “Rule 701” CDIs

As noted in this Cooley blog, Corp Fin issued 7 new CDIs last week on Rule 701 issues – primarily in the M&A context…

Social Media: Deal Announced By Blog Post!

As noted in this blog by Steve Quinlivan:

Tesla, in an offer to acquire SolarCity, appears to be the first to announce a major proposed acquisition by a blog post. Since an 8-K was also filed, it can’t be sole proof that social media is a recognized distribution channel for Regulation FD. But dissemination was nonetheless rapid, with the first news apparently appearing on Twitter at about 4.11 pm, the 8-K being filed at 4.13 pm, and the first Wall Street Journal e-mail alert being received at 4.58 pm (all times Central).

There had to be some advance coordination between the parties, because SolarCity filed an 8-K almost simultaneously. The exhibit includes an email from SolarCity’s CEO, in which he wisely advises employees not to comment on social media.

The Tesla 8-K also discloses that Tesla adopted an exclusive forum by-law the day before the acquisition was announced.

DGCL Amendments: Appraisal Actions & “Intermediate-Form” Mergers

Here’s a summary of this memo from Ropes & Gray:

On June 16, 2016, Delaware Governor Jack Markell signed into law House Bill 371, which amends the Delaware General Corporation Law (DGCL) with respect to, among other things, appraisal proceedings and “intermediate-form” mergers.

Specifically, the bill amends Section 262 of the DGCL to limit de minimis appraisal claims and to provide surviving corporations with the right to pay stockholders exercising appraisal rights prior to the time the Delaware Court of Chancery makes a final value determination, thereby limiting the amount of interest that would accrue on an appraisal award.

The legislation also clarifies the requirements and procedures relating to “intermediate-form” mergers under Section 251(h) of the DGCL, particularly those involving rollover of target equity.

Broc Romanek

June 24, 2016

Brexit: The Risk Factors Cometh!

I’m out West for the Society of Corporate Secretaries Conference. So I was up when the ‘leave’ vote stunned the world. I just did a quick Edgar search and ‘Brexit’ has been scarcely mentioned in recent 10-Ks & 10-Qs. I found about 20 companies that have disclosed Brexit risk factors – which includes a search of 20-Fs and prospectuses.

That likely will change as companies should now be assessing how this uncertain future will impact them uniquely. See our ‘Risk Factors Disclosure Handbook‘ – and see this memo that lays out the basic legal implications of Brexit…

Venture Capital: Cooley’s “Go” Site

In our “Venture Capital” Practice Area, we have links to a number of model documents that folks can use. But I wanted to highlight Cooley’s “Go” site because I think it does a great job of highlighting the people at Cooley who work on VC. Look at the bios on this site – they list interests & books. Potential clients get a better sense of who they are.

Too many law firms neuter their content so there is no human element. People want “human” – that’s why this blog is easier to read than most law firm blogs…

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:

– ISS: Moody’s Changes Outlook From Negative to Stable
– Shareholder Proposals: Is “False & Misleading” on Life Support?
– Environmental-Related Disclosures: Companies Facing Increasing Scrutiny
– Shareholder Proposal Trends
– Broadridge’s ’15 Proxy Season Stats

Broc Romanek

June 23, 2016

Transcript: “Non-GAAP Disclosures: What Is Permissible?”

We have posted the transcript of our popular webcast that almost broke the Internet due to its demand: “Non-GAAP Disclosures: What Is Permissible?”…

SEC Finally Fixes “Insider Transactions” Links

For months, the links to “insider transactions” from a company’s “profile” on the SEC’s Edgar web pages has not been working. We’re happy to report that they are back online – and the tabular format for the insider transactions has been retooled. “Insider transactions” means Section 16 filings.

For example, here is the Edgar profile page for Microsoft. In the blue box at the top, you see these two lines in the bottom left:

Get insider transactions for this issuer.
Get insider transactions for this reporting owner.

Those two “insider transaction” links didn’t work until recently. Thanks to Weil Gotshal’s Howard Dicker for letting us know!

Note: Since I blogged this in the wee hours, a member has told me that the tabular data sometimes is screwed up even in this retooled format. Bummer! So you really need to look online after you file a Form 4 to verify that what’s posted matches your facts. More later…

Broc Romanek

June 22, 2016

SEC Enforcement: How Mickelson Case Relates to Your Directors

As part of my “Big Legal Minds” podcast series – check out this 45-minute podcast, during which Pravin Rao & Jose Lopez of Perkins Coie analyze the latest SEC enforcement developments, including:

1. Beyond the Phil Mickelson insider trading case – what that means for all directors & officers
2. Administrative law judge controversy
3. What’s it like to work in the SEC’s Enforcement Division

Remember that these podcasts are also available on iTunes or Google Play – just use the “My Podcasts” app on your iPhone and search for “Big Legal Minds”; you can subscribe to the feed so that any new podcast automatically downloads…

blm logo

PCAOB: Still No Ability to Inspect Chinese Auditors

Here’s the intro from this article about the standoff with regulators in China over inspections of their auditors:

A year after the U.S. Treasury Department announced a pilot program letting the PCAOB inspect a Chinese accounting firm, a formal inspection agreement is still not in place and may never be. The pilot program never took place after Chinese officials walked away from an October negotiating session with PCAOB representatives, and since that abrupt end, no progress has been made despite continued discussions. Treasury, for its part, issued a statement at the end of this year’s Strategic and Economic Dialogue (S&ED) that was, like statements from prior years, long on cheeriness and short on substance.

Broc Romanek

June 21, 2016

Virtual-Only Annual Meetings: Intel Dives Into the Pool!

Last year, I blogged about how Hewlett-Packard became the first big company to hold a virtual-only annual meeting. This year, Intel became the new bellwether. Intel had tried to become the first large company to do this about six years ago – but the resulting bad publicity forced them to turn the meeting into a hybrid.

Not so this year. The only bad press I saw was this NY Times piece – that didn’t come out until after the meeting was over! [By the way, the NYT piece incorrectly states that Intel held a virtual-only meeting in ’09 and that it was the first ever. Wrong on both counts – see my list of the true pioneers, starting with Inforte in 2001. The piece is also wrong in that Intel did take questions from the web during the ’16 annual meeting.]

Anyway, this is how Intel described how the meeting would work in its proxy statement – compare that to what Hewlett-Packard disclosed in this year’s proxy statement when it held a virtual-only meeting again…

In this blog, Cooley’s Cydney Posner describes a recent Financial Times article on virtual-only meetings…

Broc Romanek

June 20, 2016

Transcript: “Yes, It’s Time to Update Your Insider Trading Policy”

We have posted the transcript of our popular webcast: “Yes, It’s Time to Update Your Insider Trading Policy.” The transcript for our Non-GAAP webcast – the one that almost broke the Internet – will be up in a few days…

DTCC Re-Proposal: Imposition of Chills & Global Locks

Hat tip to McDermott Will’s Gary Emmanuel for informing me that DTCC has re-proposed a rule change with the SEC that would establish the circumstances under which DTC would impose and/or release a ‘Deposit Chill’ or a ‘Global Lock’ on a security. It also sets forth the proposed criteria for releasing these restrictions – and the procedures that would allow an issuer to challenge the restriction.

This re-proposal was necessary after DTC withdrew its prior rule – that it submitted over two years ago – in the face of negative comments…

DOJ’s FCPA Pilot Program: First Declinations & Rare NPAs

Recently, as noted in this memo, the DOJ issued the first public declinations of a criminal enforcement action since implementing its new “Pilot Program” enforcement plan when it declined prosecution of Akamai and Nortek for FCPA violations by their respective Chinese subsidiaries.

On the same day, both companies separately entered into non-prosecution agreements (“NPAs”) with the SEC, only the second and third FCPA NPAs from the SEC…

You gotta love any SEC case that uses the phrase “Bacchanalian Adventure”…

Broc Romanek