Back in April, Corp Fin’s Office of Mergers and Acquisitions issued an exemptive order providing issuers and, in some cases, third party bidders with the flexibility to shorten the time period during which tender offers for equity securities must be open from 20 to 10 business days.
Yesterday, the Office of Mergers and Acquisitions revisited its existing relief for certain types of non-convertible debt tender or exchange offers in a new exemptive order, expanding the availability of a five business day minimum offering period that had been established through a series of no-action letters. The exemptive order permits a tender or exchange offer for any class or series of non-convertible debt securities to remain open for a minimum period of five business days, so long as several conditions are met, including that the offer is made by the issuer of the subject non-convertible debt securities, a direct or indirect wholly owned subsidiary of such issuer, or a parent company that directly or indirectly owns 100% of the capital stock (other than directors’ qualifying shares) of such issuer, and the offer is made for cash and or consideration consisting of certain “Qualified Debt Securities.” The commencement of the offer and any material changes to the terms of the offer must be announced via a press release, and the issuer must provide certain withdrawal rights.
This new exemptive order supersedes the Staff’s no-action letter Cahill Gordon & Reindel LLP (January 23, 2015) and any similar letters relating to abbreviated offering periods in tender or exchange offers for non-convertible debt securities.
– Dave Lynn
On Monday, the Supreme Court refused to review the SEC’s now-rescinded “neither admit nor deny” policy, otherwise referred to as the “gag rule.” As Liz noted back in May, the SEC announced that it had issued a final rule to rescind its “neither admit nor deny” policy, and to rescind Rule 202.5(e) of the SEC’s informal rules of procedures, which codified that policy. This Bloomberg article notes:
The US Supreme Court refused to review the constitutionality of a now-rescinded Securities and Exchange Commission policy that forced people and companies settling enforcement cases to never publicly criticize or contest the Wall Street watchdog’s claims.
The justices without comment on Monday turned away a constitutional challenge over whether the SEC’s so-called gag rule violated individuals’ rights.
The justices declined to hear arguments from Thomas Powell, who was accused by the SEC in 2021 of making misrepresentations and omissions in connection with more than a dozen unregistered oil and gas securities offerings. Powell agreed to pay a penalty of $75,000 to end the case. His firm agreed to a separate penalty.
The settlement included a provision that he neither admitted to nor denied the SEC’s allegations. As part of the deal, he could never publicly deny wrongdoing. The provision amounted to “rank censorship,” his attorneys from the New Civil Liberties Alliance said.
The SEC had argued to the Supreme Court that the constitutional challenge was now moot, given the agency’s action in May to rescind the policy.
– Dave Lynn
If you tuned into our annual Proxy Season Post-Mortem webcast on CompensationStandards.com a few weeks ago, you would have heard me give an update on the state of regulatory and other efforts targeting the proxy advisory firms. As has become tradition for that webcast, I built each of my webcast topics around a unifying theme, and this year I chose the Toy Story movie series in honor of the release of Toy Story 5 in June. When we got to the topic of proxy advisory firms, I noted:
Sticking with my Toy Story theme, I’m going to talk a little bit about the proxy advisory firms and what they’re going through at the moment. If you’ve watched Toy Story 4,000 times like I did because my kids were young when it first came out, you will certainly remember Sid Phillips, who is the neighbor of Andy. Andy is the owner of the toys, Woody and Buzz.
Sid had a penchant for torturing toys, including Woody when he got a hold of him. One can envision a world where young Sids like that would grow up to be politicians and regulators and state attorneys general who would turn their attention to proxy advisory firms instead of mounting doll heads on Erector set legs and things like that. That’s what we’re seeing with the proxy advisory firms as they are facing a multi-front attack, both at the federal and state levels.
As Meredith recently noted in the Proxy Season Blog, just last week courts in Kansas and Indiana granted preliminary injunctions preventing enforcement of laws seeking to regulate the activities of the proxy advisory firms in a manner similar to the Texas law that was enacted last year. The Kansas and Indiana laws would have gone into effect today.
This ValueEdge Advisors blog quotes the Kansas decision:
Plaintiffs contend that they are likely to succeed on the merits of their First Amendment claim because SB 375 discriminates based on viewpoint (facially and in purpose) and fails strict scrutiny. Defendant responds that the law does not impose any viewpoint discrimination, so strict scrutiny does not apply. Defendant further argues that SB 375 passes constitutional muster because it only regulates commercial speech by requiring certain limited disclosures [. . .]
Plaintiffs’ voting recommendations are not commercial speech. The voting recommendations are not advertisements….The recommendations are not referencing a product. The recommendations are not offering a product for sale. The recommendations are the product. Also, although ISS and Glass Lewis offer their services for compensation, that transaction has already occurred before the voting recommendations are made. And the compensation is not for the specific vote, but for the service of providing voting recommendations….The fact that Plaintiffs are compensated for providing voting recommendations does not transform the voting recommendations into commercial speech.
ISS issued statements following both orders.
Note that members of the TheCorporateCounsel.net can access the Proxy Season Blog. If you are not a member, email info@ccrcorp.com to sign up today or call us at 800.737.1271.
– Dave Lynn
