Monthly Archives: March 2022

March 28, 2022

OASB Director Martha Legg Miller to Depart SEC

Last week, the SEC announced that Martha Legg Miller, the Director of its Office of the Advocate for Small Business Capital Formation (OASB), will leave the agency at the end of April. She’s served as the OASB’s Director since it was first established in 2018, and this excerpt from the SEC’s announcement provides some of the highlights of her tenure:

During her tenure, she oversaw the development of novel educational resources to empower entrepreneurs – such as the centralized Capital Raising Hub, Navigator decision tool, Capital Trends Maps, and Cutting through the Jargon glossary. Ms. Miller’s leadership of the Office also helped increase the visibility and accessibility of SEC rulemakings through video summaries, collaboration on policy work across the agency, and engagement in year-round outreach events to elevate the voices of underrepresented entrepreneurs and investors. OASB also launched the SEC’s Small Business Capital Formation Advisory Committee, piloted digital solutions to increase public participation with the SEC’s annual Small Business Forum, and crafted annual reports to Congress.

The OASB’s current Deputy Director, Sebastian Gomez Abero, will serve as Acting Director after Martha Legg Miller’s departure.

John Jenkins

March 28, 2022

Tomorrow’s Webcast: “Conduct of the Annual Meeting”

Join us tomorrow at 2 pm eastern for the webcast – “Conduct of the Annual Meeting” – to hear General Mills’ Ben Backberg, Broadridge’s Dorothy Flynn, Juniper Networks’ Mary Catherine Malley, Capital One’s Vernicka Shaw, and the one & only Carl Hagberg, Independent Inspector of Elections and Editor of The Shareholder Service Optimizer, provide insights on investor expectations as well as practice pointers on meeting format & logistics, tricky vote tabulations, officer & director participation, and rules of conduct.

If you attend the live version of this 60-minute program, CLE credit will be available. You just need to fill out this form to submit your state and license number and complete the prompts during the program.

Members of are able to attend this critical webcast at no charge. The webcast cost for non-members is $595. If you’re not yet a member, subscribe now by emailing – or call us at 800.737.1271.

John Jenkins

March 25, 2022

BlackRock’s Letter to Shareholders: Global Crisis No Match For Capitalism

You can imagine that Larry Fink, the co-founder, Chair & CEO of the world’s largest asset manager, sat down 6 weeks ago to start outlining his letter to shareholders and vetting everything through the appropriate channels. There were plenty of important issues to cover – the net zero transition, human capital, inflation. Then Russia invaded Ukraine. Governments and private companies are cutting ties, the world order has been upended, we’re witnessing a massive humanitarian crisis, and BlackRock had to make some key recalculations & decisions in a very uncertain regulatory environment – including how to handle portfolios with Russian securities. BlackRock’s success & shareholder returns are very much tied to macroeconomic conditions.

The letter to shareholders that was posted yesterday (and filed in multiple formats on Edgar as additional soliciting material) is remarkably responsive to these recent developments, in line with the speed at which many companies took action. Larry Fink says that the way things are playing out reinforces BlackRock’s approach to using capitalism for good:

These actions taken by the private sector demonstrate the power of the capital markets: how the markets can provide capital to those who constructively work within the system and how quickly they can deny it to those who operate outside of it. Russia has been essentially cut off from global capital markets, demonstrating the commitment of major companies to operate consistent with core values. This “economic war” shows what we can achieve when companies, supported by their stakeholders, come together in the face of violence and aggression.

He goes on to say that supply chains and the inflationary impact will become even more important:

Russia’s aggression in Ukraine and its subsequent decoupling from the global economy is going to prompt companies and governments worldwide to re-evaluate their dependencies and re-analyze their manufacturing and assembly footprints – something that Covid had already spurred many to start doing.

And while dependence on Russian energy is in the spotlight, companies and governments will also be looking more broadly at their dependencies on other nations. This may lead companies to onshore or nearshore more of their operations, resulting in a faster pull back from some countries. Others – like Mexico, Brazil, the United States, or manufacturing hubs in Southeast Asia – could stand to benefit. This decoupling will inevitably create challenges for companies, including higher costs and margin pressures. While companies’ and consumers’ balance sheets are strong today, giving them more of a cushion to weather these difficulties, a large-scale reorientation of supply chains will inherently be inflationary.

I admit I was surprised to not find anything in this letter about cybersecurity or disinformation, or any specific references to China. But those topics aside, it does have something for almost everyone – which makes sense, given the wide-ranging fallout of this war and the many issues that BlackRock and its portfolio companies are dealing with. On crypto:

Finally, a less discussed aspect of the war is its potential impact on accelerating digital currencies. … As we see increasing interest from our clients, BlackRock is studying digital currencies, stablecoins and the underlying technologies to understand how they can help us serve our clients.

On the net-zero transition:

Longer-term, I believe that recent events will actually accelerate the shift toward greener sources of energy in many parts of the world. During the pandemic, we saw how a crisis can act as a catalyst for innovation. Businesses, governments, and scientists came together to develop and deploy vaccines at scale in record time.

To ensure the continuity of affordable energy prices during the transition, fossil fuels like natural gas will be important as a transition fuel. BlackRock’s investments – including one late last year – on behalf of our clients in natural gas pipelines in the Middle East are a great example of helping countries go from dark brown to lighter brown as these Gulf nations use less oil for power production and substitute it with a cleaner base fuel like natural gas.

On client-directed voting:

Much like asset allocation and portfolio construction, where some clients take an active role while others outsource these decisions to us, different clients are interested in different levels of involvement when it comes to casting proxy votes. After talking with our clients, we used new technology and other innovations to offer proxy voting choice. This is now available to institutional clients representing just over $2 trillion of index equity assets, including public pension funds serving over 60 million people. We see this as just a first step. Our ambition over time is to continue developing new technologies and working with industry partners to expand voting choice for even more clients.

On board oversight of strategy and recent downturns in performance, slotted in to the mid-section of the letter:

Our strategy, which we regularly review with our Board of Directors, remains rooted in our commitment to serving clients over the long term. We will: keep alpha at the heart of BlackRock; accelerate growth in iShares, private markets, and Aladdin; deliver whole portfolio advice and solutions to our clients and be the global leader in sustainable investing. Successful execution of this strategy will enable us to continue delivering industry-leading organic growth and generate value for our shareholders over the long term.

On BlackRock’s attention to internal human capital issues:

At the same time, we recognize the pandemic has redefined the relationship between employers and employees. To retain and attract best-in-class diverse talent, we need to maintain the flexibility of working from home at least part of the time. And our Aladdin technology has given us the flexibility to quickly pivot our operating model over these past two years, which will continue to be important given the uncertainty of the pandemic and the threat of new variants emerging.

We also remain focused on investing in our employees’ experience with BlackRock in other important ways: improving training and development, expanding mental health services and other benefits, and continuing to advance diversity, equity and inclusion (DEI) to make sure we’re broadening representation across the firm and cultivating an inclusive culture.

On Board composition:

We also give careful consideration to the composition of our Board to ensure it is positioned to be successful over the long term. We are committed to evolving our Board over time to reflect the breadth of our global business and look for directors with a diverse mix of experience and qualifications. We will continue to introduce fresh perspectives and make diversity in gender, race, ethnicity, nationality, age, career experience and expertise, as well as diversity of mind, a priority when considering director candidates.

In times of crisis, many companies take the very reasonable approach of saying that they’re monitoring events and will respond accordingly. What’s impressive about this particular letter, even though it’s still just words on a page, is that it “shows” rather than “tells.” The level of detail puts to rest any doubts that the board & management are thinking through the evolving situation from all angles, while not losing sight of the core business strategy and commitments. Larry Fink and team didn’t gain $10 trillion in assets under management without being master communicators.

Liz Dunshee

March 25, 2022

State Street’s Voting & Engagement Guidelines: Annual Update is Here

After releasing a bunch of guidance earlier this year on its priorities & expectations, State Street Global Advisors has now also recently updated the following documents to reflect its positions:

1. North American Proxy Voting & Engagement Guidelines

2. Global Proxy Voting & Engagement Principles

3. Global Proxy Voting & Engagement Guidelines for E&S Issues

4. Frameworks for Voting E&S Shareholder Proposals

5. Issuer Engagement Protocol

This 6-page summary of material changes outlines the most significant changes, which include:

Climate-Related Disclosure: SSGA may vote against the independent board leader at companies in the S&P 500, S&P/TSX Composite, FTSE 350, STOXX 600 and ASX 100 if companies fail to provide sufficient disclosure in accordance with the TCFD framework. SSGA views this as a “natural escalation” of previously stated expectations and expects to continue to expand this policy in coming years.

Enhancing Racial & Ethnic Diversity: SSGA may vote against the Chair of the Nominating Committee at companies in the S&P 500 and FTSE 100 that do not have at least one director from an underrepresented racial and/or ethnic community on their boards; and may vote against the Chair of the Compensation Committee at companies in the S&P 500 that do not disclose their EEO-1 reports.

Board Diversity: SSGA is maintaining its policy to possibly vote against the Chair of the Nominating Committee at companies in the S&P 500 and FTSE 100 that do not disclose, at minimum, the gender, racial and ethnic composition of their boards. In 2022, it will expect boards of listed companies in all markets & indices to have at least one woman director.

In 2023, it will expect companies in the Russell 3000, TSX, FTSE 350, STOXX 600, and ASX 300 indices to have boards composed of at least 30 percent women directors. It may waive the policy if a company engages with State Street Global Advisors and provides a specific, timebound plan for reaching the 30 percent representation of women directors.

SSGA may vote against the chair of the nominating and governance committee if a company fails to meet expectations. If that continues for 3 consecutive years, it may vote against all incumbent members of the nominating committee.

R-Factor: Again this year, State Street Global Advisors may take voting action against the independent board leaders at companies in the S&P 500, FTSE 350, ASX 100, TOPIX 100, DAX 301 and CAC 40 indices that are R-FactorTM ‘laggards’ and ‘momentum underperformers’ unless it sees meaningful change. In 2024, it will be expanding the voting screen to include all R-FactorTM ‘laggards’ and ‘underperformers’ (i.e. not only ‘momentum underperformers’).

Overboarding: As previously announced, starting in 2022, for non-executive board chairs/lead independent directors and director nominees who hold excessive commitments, as defined above, we may consider waiving our policy and vote in support of a director if a company discloses its director commitment policy in a publicly available manner (e.g., corporate governance guidelines, proxy statement, company website).

These updated policies & guidelines are posted along with other institutional investor policies in our “Investor Voting Policies” Practice Area, so that members can have easy access to policies of various investors in one place. If you aren’t yet a member and want access, email

Liz Dunshee

March 25, 2022

March-April Issue: Deal Lawyers Newsletter

The March-April issue of the Deal Lawyers newsletter has been posted online and mailed. Articles include:

– Delaware Chancery Court Issues Highly Anticipated SPAC-Related Decision

– Rule 145: 10 Frequently Asked Questions

– Regulation M: Reminders for Public Company M&A

Remember that, as a “thank you” to those that subscribe to both & our Deal Lawyers newsletter, we are making all issues of the Deal Lawyers print newsletter available online. There is a big blue tab called “Back Issues” near the top of – 4th 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 newsletter, anyone who has access to will be able to gain access to the 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 newsletter including how to access the issues online.

Liz Dunshee

March 24, 2022

Third Time’s the Charm? SEC Re-Proposes Removing Credit-Rating References from Reg M

Yesterday, the SEC announced this 98-page release to re-propose amendments to Reg M that would remove the references to credit rating agencies from existing exceptions provided in Rule 101 and Rule 102. Section 939A of the Dodd-Frank Act directed the Commission to remove references to credit ratings included in certain rules, and this is the SEC’s third attempt for these particular amendments: they were initially proposed in 2008, and then re-proposed in 2011. The Fact Sheet explains what the proposal aims to do:

Proposed Amendments to Regulation M

The Commission proposed to remove the requirement that nonconvertible debt securities, nonconvertible preferred securities, and asset-backed securities be rated investment grade by at least one nationally recognized statistical rating organization. In place of that requirement, under Rule 101, the Commission proposed to except (1) nonconvertible debt securities and nonconvertible preferred securities of issuers having a probability of default of less than 0.055%, as measured over certain period of time and as determined and documented using a “structural credit risk model,” as defined in the rule, and (2) asset-backed securities that are offered pursuant to an effective shelf registration statement filed on the Commission’s Form SF-3. The Commission proposed to eliminate from Rule 102 the existing exception for investment grade nonconvertible debt securities, nonconvertible preferred securities, and asset-backed securities.

Recordkeeping Requirement

To aid the Commission in its examination and oversight of broker-dealers who are distribution participants or affiliated purchasers and rely on the proposed exception in Rule 101 for certain nonconvertible debt securities and nonconvertible preferred securities, new paragraph (b)(17) of Rule 17a-4 would require those broker-dealers to retain the written probability of default determination supporting their reliance on the exception. Rule 17a-4(b)(17) would require broker-dealers relying on Rule 101’s exception for certain nonconvertible debt securities and nonconvertible preferred securities to preserve, for a period of not less than three years, the first two years in an easily accessible place, the written probability of default determination.

The comment period will remain open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer. We’ll be posting memos in our “Credit Ratings” Practice Area.

Liz Dunshee

March 24, 2022

SEC Open Meeting Next Wednesday: SPACs on the Agenda!

Yesterday, the SEC posted a Sunshine Act Notice for an open meeting of the Commissioners to be held next Wednesday, March 30th, which will also include Staff from Corp Fin and the Division of Investment Management. Here’s what’s on the agenda:

The Commission will consider whether to propose amendments regarding special purpose acquisition companies, shell companies, the use of projections in Commission filings and a rule addressing the status of special purpose acquisition companies under the Investment Company Act of 1940.

Pedal to the metal, everyone. Let’s recap this week so far, which still has two business days remaining:

– Monday: Landmark climate disclosure proposal
– Tuesday: M&A CDIs
– Wednesday: Reg M re-proposal and scheduling consideration of SPAC amendments

For members, we’ll be keeping our cheat sheet updated – bookmark it to keep up on significant developments. And if anyone at the Commission is reading this, I want to personally thank you – first & foremost, for your hard work on all of these topics, but also, for thoroughly rewarding my procrastination on the blogs this week.

Liz Dunshee

March 24, 2022

Holding Foreign Companies Accountable Act: SEC Begins Identifying Affected Issuers

With final rules under the Holding Foreign Companies Accountable Act adopted late last year, the SEC now has a process in place to fulfill the statute’s requirement to identify companies that use auditors that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority of a foreign jurisdiction where the firm is located. The Staff has now started to list provisional & final determinations of identified issuers in charts on this page.

Six companies have been provisionally identified so far and have 15 business days to submit evidence disputing the identification. The Commission’s role at this stage of the process is solely to identify issuers that have used public accounting firms to audit their financial statements that the PCAOB has determined that it is unable to inspect or investigate completely – and it urges companies to consult the adopting release for information on how the HFCAA will be implemented.

Liz Dunshee

March 23, 2022

M&A Securities Compliance: Corp Fin Posts 6 CDIs Addressing M&A Topics

Corp Fin issued some M&A-related CDIs yesterday. Here’s what John had to say about them on the blog this morning:  Yesterday, the SEC’s Division of Corporation Finance issued a handful of new CDIs relating to M&A topics. Here are links to the individual CDIs & a brief summary of the issues they address:

Exchange Act Form 8-K

CDI #102.04 – The material terms and conditions of an acquisition agreement that should be disclosed in an Item 1.01 Form 8-K.

CDI #102.05 – Whether the acquisition agreement should be filed as an exhibit to the Item 1.01 Form 8-K.

Proxy Rules & Schedules 14A/14C

CDI #101.02 – When a private target that isn’t soliciting its own shareholders may be viewed as engaged in a “solicitation” of the acquirer’s shareholders.

CDI #132.01 – The availability of Rule 14a-12 for communications by a private target under the circumstances described in CDI #101.02.

CDI #132.01 – The availability of Rule 14a-12 for communications by an acquirer relating to a transaction for which the target is soliciting proxies but the acquirer is not.

Tender Offers & Schedules

CDI #166.01 – Guidance on the circumstances under which the Staff will not object to will not object to purchases by the SPAC sponsor or its affiliates outside of the redemption offer.

Liz Dunshee

March 23, 2022

SEC Investigating “Non-Audit Services”

Our “Audit Fees” Handbook notes that shareholders tend to question auditor independence if a company’s proxy statement indicates that fees paid for non-audit services are more than 20-30% of the total fees received by the independent auditor. According to this scoop from WSJ reporter Dave Michaels, the SEC is also looking into that:

Regulators are carrying out a sweeping investigation of conflicts of interest at the nation’s largest accounting firms, asking whether consulting and other nonaudit services they sell undermine their ability to conduct independent reviews of public companies’ financials, according to people familiar with the matter.

The Securities and Exchange Commission probe highlights the agency’s new focus on financial-market gatekeepers such as accountants, bankers and lawyers. These firms help companies raise capital and communicate with shareholders, but also have duties under federal investor-protection laws. Auditors are a shareholder’s first line of defense against sloppy or dodgy accounting.

This write-up from Francine McKenna provides even more context and notes that it’s somewhat surprising that the SEC’s Miami office appears to be leading this inquiry. But, the investigation certainly aligns with recent statements out of Washington from the SEC’s Acting Chief Accountant.

What does this mean for companies? Well, this is definitely not a new issue. But the extra attention may mean that audit committees need to start exercising even more scrutiny over fees for non-audit services. It’s never a great look for a company to have to defend the independence of its auditor.

Liz Dunshee