March 16, 2018

Corp Fin Comments: Levels Dropping Significantly?

Shortly after his confirmation, SEC Chair Jay Clayton promised that the agency was “open for business.” This recent memo from Orrick’s Ed Batts says that Corp Fin seems committed to making that slogan a reality. This excerpt summarizes some notable efforts to streamline the Staff’s processes:

– The most significant development is the dramatic shift in receptiveness for waivers for audited financial statements where the production may be burdensome but not clearly material to investors. Such waivers are being granted specifically with respect to financial statements in cases of marginal significance tests or where fully audited financials would involve significant cost but not necessarily provide substantial incremental useful information.

– In addition, the Staff continue to emphasize eligibility for all filers (and not just “emerging growth companies” under the JOBS Act) to take advantage of confidential preliminary registration statements for IPOs as well as follow-on offerings occurring within one year of IPO.

– The number of Staff comments issued upon review of registration statements have declined significantly, in an effort toward a speedier path to encourage use of public markets.

Cybersecurity:  “Yahoo!” for Plaintiffs in Landmark Class Settlement

Over on “The D&O Diary,” Kevin LaCroix recently blogged about Yahoo’s landmark $80 million shareholder class action settlement in a case that arose out of the massive data breaches it announced in 2016.  Kevin points out that although derivative suits have followed on the heels of other high-profile breaches, this settlement represents the first time that shareholder plaintiffs have really hit the jackpot in data breach litigation.

This excerpt suggests that the suit could be a preview of coming attractions:

The Yahoo settlement (assuming it is approved by the court) is the first significant data breach-related shareholder lawsuit settlement. The plaintiffs’ lawyers have now figured at least one way they can make money off of this type of litigation. Interestingly, this settlement coincidentally comes just days after the SEC released new guidance in which the agency underscored the disclosure obligations of reporting companies that have experienced data breaches. It is hard to know for sure, but it could be this milestone settlement together with the SEC’s new disclosure guidelines could mean that data breach-related shareholder litigation could be an area of increased focus for the plaintiffs’ lawyers.

Wells Fargo: When All Else Fails, Send in the Nuns!

To say that Wells Fargo’s had a bumpy ride lately is a big understatement, but it now it looks like the bank may have finally “got religion” – albeit in a rather unorthodox way.  Here’s an excerpt from this CNBC report:

A group of nuns and religiously-affiliated investors said Wells Fargo & Co. has agreed to publish a review that shows the root causes of the systemic lapses in governance and risk management that have led to ongoing controversies, litigation and fines. As a result of the company’s commitment, the Interfaith Center on Corporate Responsibility will withdraw a resolution filed for the 2018 proxy calling for the review.

The engagement was spearheaded by Sister Nora Nash of the Sisters of St. Francis of Philadelphia – and the shareholder proposal had 22 other co-filers from the Interfaith Center for Corporate Responsibility, as well as the Treasurers of Rhode Island and Connecticut.

John Jenkins