Broc Romanek is Editor of CorporateAffairs.tv, TheCorporateCounsel.net, CompensationStandards.com & DealLawyers.com. He also serves as Editor for these print newsletters: Deal Lawyers; Compensation Standards & the Corporate Governance Advisor. He is Commissioner of TheCorporateCounsel.net's "Blue Justice League" & curator of its "Deal Cube Museum."
Spanking brand new. Posted in our “Board Composition” Practice Area, this comprehensive “D&O Biographical/Director Qualifications & Skills Disclosure Handbook” provides a heap of practical guidance – including a sample board resolution to designate executive officers and sample D&O questionnaire language. In particular, the Handbook focuses on disclosure obligations under Item 401(a) through (e) of Regulation S-K.
The Pioneers: First Company Leverages Moxy Vote
In this podcast, Doug Chia of Johnson & Johnson and Mark Schlegel of Moxy Vote discuss how companies can use Moxy Vote during the proxy season (here is a podcast with Mark from last year to learn more about Moxy Vote), including:
– How does Moxy Vote work?
– What is J&J’s involvement with Moxy Vote?
– How did J&J’s collaboration with Moxy Vote begin?
– What have been the experiences so far?
“No Personal Misconduct” Clawbacks: SEC Sues to Recover Bonuses and Stock Profits Again
As noted in this press release, in a Section 304 of Sarbanes-Oxley clawback action, the SEC sued both the former CEO and CFO of ArthroCare recently to recover bonus compensation and stock sale profits they received during an accounting fraud at the company. The two former officers had not been personally charged in connection with fraudulent financial statements; two other former officers were charged for that last year. This jibes with the District Court of Arizona holding in SEC v. Jenkins – that disgorgement of compensation and profit under Section 304 does not require personal misconduct.
By my loose count, the SEC has used Section 304 at least seven or eight times since its birth in 2002 – see the list of links to SEC clawback actions in CompensationStandards.com’s “Clawbacks” Practice Area.
Yesterday, Corp Fin issued 17 FAQs helping to interpret a bunch of issues regarding “emerging growth companies” under Title I of the JOBS Act – including scaled disclosure – ahead of the SEC’s rulemaking in this area. Here’s a Cooley alert describing these FAQs. I continue to post oodles of memos, etc. in our “JOBS Act” Practice Area, including this redline of how the ’33 and ’34 Acts have been altered…
In his blog today, Keith Bishop notes that the JOBS Act weighs in at less than 9000 words – compared to 360k for Dodd-Frank – but yet has a surprising number of technical errors…
Dave & Marty on More JOBS Act Guidance
In this podcast, Dave Lynn and Marty Dunn engage in a lively discussion of the latest developments in securities laws, corporate governance, and pop culture. Topics include:
– Determining emerging growth company status
– Navigating the confidential submission process for registration statements
– Staff guidance on Exchange Act Section 12(g) thresholds
– Dave’s & Marty’s crowdfunding endeavors (or lack thereof)
Transcript: “What the Top Compensation Consultants Are NOW Telling Compensation Committees”
We have posted the transcript for the recent CompensationStandards.com webcast: “What the Top Compensation Consultants Are NOW Telling Compensation Committees.”
On Friday, Corp Fin posted this sample letter – courtesy of the Office of Capital Markets Trends – that has been sent to certain financial institutions in connection with their structured note offerings. The letter provides comments applicable to prospectus supplements and ’34 Act reports after the Staff’s review of takedowns of structured notes from shelf registration statements.
This WSJ article notes that at least two companies have already sent confidential registration statement submissions to Corp Fin…
Corp Fin Updates Financial Reporting Manual (Again)
On Friday, Corp Fin updated its Financial Reporting Manual for issues related to scaled disclosure for smaller reporting companies, filing requirements for reverse acquisitions, the treatment of related businesses in significance testing, revisions pursuant to ASU 2011-12, as well as other changes.
Chamber Blankets DC Subway Station Closest to SEC HQ with Ads
In what has to be a certain waste of money, according to this Bloomberg article, the Chamber of Commerce hopes to influence the SEC in a money-market fund rulemaking by the use of a “so-called station domination ad buy consisting of more than 30 posters, banners and ‘backlit dioramas’ on the train platforms, above fare card machines and even on the floor.” Maybe the money would have been better off spent renting a giant Foghorn Leghorn suit for someone to hand out flyers in…
Interesting piece in Financial Times on Friday entitled “Our faith is fraying in the god of money.” I always find taxi drivers to be enlightening and a good indicator about what the masses are thinking (ask them about CEO pay!)…
Dodd-Frank: SEC Releases Study on Cross-Border Private Securities Litigation
On Wednesday, the SEC issued its 106-page study of cross-border private securities litigation as required by Section 929Y of Dodd-Frank. At the same time, Commissioner Aguilar issued this statement to note his disappointment with the study, mainly because it doesn’t provide recommendations and because “I am particularly astonished that the Study states (at pages 58-59) that an option ‘would be for Congress to take no action’ and, thus, would continue to deny American investors who have been harmed by fraud the ability to seek redress in court.” Pretty unusual for a Commissioner to dissent from a study.
Before the study was released, the SEC received 72 comments on the topic. In his “D&O Diary” Blog, Kevin LaCroix provides some analysis of the study, which considers possible alternative approaches to the question of cross-border private securities litigation and provides a detailed overview of the ways in which the lower courts have been approaching these issues in the wake of the Supreme Court’s decision in the Morrison v. National Australia Bank.
SEC’s RiskFin Issues Report on Regulation D Offerings
On Tuesday, the SEC’s Risk Fin Division issued a 9-page report entitled “Capital Raising in the U.S.: the Significance of Unregistered Offerings Using the Regulation D Exemption” that crunches numbers extracted from Form D filings since early ’09 with goal of understanding the amount and nature of capital raised through Reg D unregistered offerings and to provide a perspective on the state of competition and regulatory burden in capital markets.
As far as I can tell, it’s Risk Fin’s first report dealing with a Corp Fin topic (hard to tell as reports are not listed on RiskFin’s webpage) – and it’s formatted in a style that I haven’t seen the SEC use before (has more of an academic feel). Oddly, the report is dated February 2012 even though it was just posted.
In his blog, Steve Quinlivan notes that some highlights of the report include:
– The median Reg D offering is modest in size: approximately $1 million.
– Both Rule 505 and Rule 506 (the most frequently used exemption in the Reg D filings) allow an issuer to sell securities to an unlimited number of accredited investors and up to 35 non-accredited investors. The average amount of non-accredited investors in the Reg D offerings over the entire period is 0.1, while the median is 0. In fact, in approximately 90% of the offerings there are no non-accredited investors.
– Capital raised through Reg D offerings is more than twice as large as public equity offerings as well as each other category of unregistered offerings.
– Less than one-third (29%) of issuers are pooled investment funds (i.e. hedge funds, private equity funds and the like), of which a little more than half (55%) are hedge funds (i.e., 16% of all Reg D offerings are by self-reported hedge funds).
– Excluding hedge funds and other investment funds, issuers of private offerings tend to be small. Although a significant number of issuers decline to disclose their sizes (50%), for those that do, most have revenue of less than $1 million. Only 1.8% of all new offerings are by issuers that report more than $100 million in revenues.
And here is more analysis from Vanessa Schoenthaler’s blog…
Yesterday, Corp Fin issued 5 FAQs regarding Section 12(g) registration triggers and, for banks and bank holding companies, the Section 12(g) and Section 15(d) deregistration and cessation of reporting triggers.
I have to hand it to the Corp Fin Staff. I’ve never seen a new set of guidance come out every single day, not an easy thing to do and it definitely helps those of us navigating uncharted waters. I already have JOBS Act fatigue just watching from the sidelines (with a related case of JOBS Act carpal tunnel posting so many memos in our “JOBS Act” Practice Area)…
JOBS Act: SEC Offers “Comment Letter” Field Day
Akin to what it did nearly two years ago in the wake of Dodd-Frank, the SEC announced yesterday that it would accept comments ahead of proposing any rulemaking under the JOBS Act. Here’s the SEC’s new “JOBS Act Comments Page.”
And here is my blog from two years ago when the SEC did this for Dodd-Frank, as most of my commentary from then still applies. Looking back at the “Dodd-Frank Comment Page,” it does appear that some folks did take advantage of pre-rulingmaking commenting – although I have no idea how useful those comments were for the SEC ahead of drafting proposals.
My gut feeling is that the JOBS Act will not be quite so “popular” in attracting advance comments as the topics tend to be little “technical” for the general public and many of the rulemakings won’t impact a vast majority of existing public companies. Plus you would be shocked how many folks still haven’t gotten the news that the JOBS Act has changed the ’33 Act dramatically – many of us practice in several different fields and don’t have time to keep up with the very latest (ie. they don’t read this blog!). Anyways, weigh in yourself in the anonymous poll below…
Poll: Commenting in Advance of SEC’s JOBS Act Rulemaking
Early Bird Rates – Act by End of this Friday, April 13th: For the special early bird discount rate – both of the Conferences are bundled together with a single price – register by the end of this Friday, April 13th.
JOBS Act: Corp Fin’s New “Confidential Registration Statement Submissions” FAQs
Yesterday, Corp Fin issued 13 FAQs relating to the confidential submission process for draft registration statements by emerging growth companies. This new guidance is in addition to last week’s announcement about the confidential submission process.
– The Staff will not object if an emerging growth company does not treat “test-the-waters” communications conducted in reliance on Section 5(d) as a road show for purposes of Section 6(e). Section 5(d) test-the-waters communications are limited to communications with qualified institutional buyers (“QIBs”) and institutional accredited investors.
– An issuer currently in registration at the time of enactment of the JOBS Act that qualifies as an emerging growth company may switch to the confidential submission process for future amendments.
– A foreign private issuer that qualifies as an emerging growth company may use the confidential submission process to the same extent as a domestic company.
– Draft registration statements submitted confidentiality must be “substantially complete,” including a signed audit report of the registered public accounting firm and exhibits consistent with the existing requirements for non-public submissions by foreign private issuers.
Transcript: “The SEC Staff on M&A”
We have posted the transcript for the recent DealLawyers.com webcast: “”The SEC Staff on M&A.”
When President Obama signed the JOBS Act last week, he issued this statement that includes this excerpt:
The President is directing the Treasury Department, Small Business Administration and Department of Justice to closely monitor the implementation of this legislation to ensure that it is achieving its goals of enhancing access capital while maintaining appropriate investor protections. These agencies, consulting closely with the SEC and key non-governmental stakeholders, will report their findings to the President on a biannual basis, and will include recommendations for additional necessary steps to ensure that the legislation achieves its goals.
No doubt this is a reaction to the many Democrats who railed against the JOBS Act over the past month (and the response of some in Congress to reporter’s questions of whether they would monitor its consequences – the answer which was ‘no’ – at least they are honest about that!). But it’s just so strange – and unfortunately predictable these days – that the leaders in our government don’t even seem to know who should be minding the store. The Treasury, SBA and DOJ monitoring the securities laws? So I guess the SEC should be monitoring food and drugs…
Will the JOBS Act Rulemaking Impact the SEC’s Dodd-Frank Rulemaking Schedule?
Many members have emailed asking whether the slew of JOBS Act rulemaking ahead of Corp Fin will impact the timing of its Dodd-Frank rulemaking projects. Although I haven’t heard anyone from Corp Fin address this yet – and the SEC’s Dodd-Frank Implementation Schedule hasn’t changed – I can’t see how it won’t given the incredibly tight timeframe in which the Staff has to work.
How tight? Keith Bishop notes how the timeframe is so tight for the JOBS Act rulemaking – in his blog entitled “The SEC’s Rule Making Rule Doesn’t Follow The Rules” – that it might be impossible to finish under the President’s recent rulemaking directive…
Dodd-Frank: The SEC Finally Establishes the New “Investor Advisory Committee”
However, the SEC continues to plug away at its Dodd-Frank obligations – yesterday, it announced the formation of the new “Investor Advisory Committee” that was mandated by Section 911 of Dodd-Frank. Among the 21 members of the new committee is Steve Wallman – the tech guru that doubled as a SEC Commissioner in the ’90s who hasn’t been heard from much during the past decade…
On Thursday afternoon, President Obama signed the JOBS Act and it was off to the races for law firms as a new wave of memos bombarded the airwaves that night (we continue to post them in our “JOBS Act” Practice Area). There was a wave of other activity too – many crowdfunding services began (as will be covered in a future blog) and some regulatory activity as discussed below.
In addition, here is just a smattering of JOBS Act coverage in the press over the past week:
Corp Fin Issues Confidential Filing Guidance for Emerging Growth Companies
On Thursday, Corp Fin announced these procedures by which emerging growth companies can furnish a confidential IPO registration statement to the Staff. Section 106 of the JOBS Act provides that an EGC may submit its IPO registration statement to the Corp Fin Staff in draft form for confidential review – conditioned on the furnishing of the confidential submission and all amendments publicly with the SEC no later than 21 days prior to the date the company first conducts a road show for its IPO. Here’s more about this guidance culled from this O’Melveny & Myers memo:
Under this guidance, one copy of the draft registration statement should be sent to the following address:
Draft Registration Statement
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
The Division also announced the following with regard to the submission of draft registration statements for IPOs of emerging growth companies:
– the submission should include a transmittal letter confirming the issuer’s status as an emerging growth company;
– the draft registration statement should be submitted either as a text-searchable PDF file supplied on a CD/DVD or, alternatively, on paper (it may not be stapled or bound if submitted on paper); and
– there is no requirement to provide a registration fee at the time a confidential submission is made.
Following its receipt of a confidential submission, the Division will contact the emerging growth company to confirm receipt of the submission and to advise it of the office assigned to review the submission.
Emerging growth companies with questions regarding the draft registration statement submission and review process should call (202) 551-5867.
– Confidential Submissions by Foreign Private Issuers – In addition to the confidential submission process for emerging growth companies, the Division has long had a confidential submission process for certain foreign private issuers. This process is described in our Client Alert here. In its guidance, the Division announced that, going forward, any foreign private issuer that is permitted to submit a draft registration statement (either as an emerging growth company or under the Division’s foreign private issuer confidential submission policy) must now submit that draft registration statement in the same format and to the same address discussed above. In connection with this requirement, foreign private issuers may no longer use the e-mail address that the Division had provided for confidential submissions.
– Application of Section 5 to Confidential Submissions – The Division took the opportunity in the guidance to make clear that the confidential submission of a draft registration statement is not a public filing. Accordingly, a registration statement submitted through this process is not considered “filed” for purposes of Section 5 of the Securities Act.
JOBS Act and General Solicitation: 14 Law Firm White Paper
Also on Thursday, 14 law firms joined together to issue this white paper to address questions about private offerings during the transition period until the SEC adopts the required revisions to Rule 144A and Rule 506 under Regulation D. Under the JOBS Act, the SEC has 90 days – by July 4th – to eliminate certain existing prohibitions on general solicitation or general advertising. As noted in this Morrison & Foerster memo, the white paper “concludes that, until the SEC adopts final rules as directed by Title II of the JOBS Act, market participants relying on the Rule 506 and Rule 144A safe harbors will generally continue to implement customary procedures for these offerings. The report also concludes that market participants will continue to satisfy conditions of applicable safe harbors such as Securities Act Rules 135c, 152 and 155, as well as comply with applicable SEC and staff guidance regarding the integration of concurrent private and public offerings.”
Members often ask what are the pressing issues being discussed down at the SEC. And those issues typically are not what people would think they would be. Sometimes they are about morale, sometimes they are about limited resources (by the way, Corp Fin is hiring accountants right now). But often they are about the types of things that folks are concerned about at their own job. The little things.
The buzz right now is that Dunkin’ Donuts has moved out of its internal location within the SEC’s HQ and replaced with an inferior tenant. And I can understand that. They didn’t have a Dunkin’ Donuts either time I worked there and I would have killed for one! Instead, they had a McDonalds and other fast-food joints that couldn’t hold a candle to the master of donuts. So far, no word of a strike or any other meaningful way to try to persuade Dunkin’ Donuts to return.
No, this is not an April Fool’s joke. A tad too early for that. Thanks to Dave for handling the blog next week as I am off for Spring Break 2012…
PCAOB’s Updated Standard-Setting Timeline
On Monday, the PCAOB updated its timeline for expected action on standard-setting projects. Here is Congressional testimony by Chair Jim Doty – and testimony from SEC Chief Accountant James Kroeker – on this topic from Wednesday (as part of a hearing on a draft bill that would amend Sarbanes-Oxley’s Section 103 to eliminate the PCAOB’s authority to mandate audit firm rotation – here’s a related Reuters article)…
As the sleepers of the STOCK Act continue to get visibility in the memos posted in our “Insider Trading” Practice Area (and this blog), hat tip to Bridgeway Software’s Blane Erwin for pointing out this excerpt from the Act (on pages 12 and 13):
Not later than 18 months after the date of enactment, the Secretary of the Senate and the Sergeant of Arms of the Senate and the Clerk of the House of Representatives shall develop systems to enable (A) electronic filing of reports… (B) public access to financial disclosure reports… (ii) allow the public to search, sort and download data contained in the reports.
As noted in this Washington Examiner article, the new software and hardware will be developed at a cool cost of $9 million ($3.2k per Congressman per year per this article). Wonder if the new system will be like the SEC’s Edgar? Take part in the anonymous poll below…
Latest Developments in Use of Supplemental Proxy Materials
In this CompensationStandards.com podcast, Jim Kroll of Towers Watson discusses the latest developments in using supplemental proxy materials for say-on-pay votes (here’s our ongoing list of supplemental materials), including:
– How many companies have filed them so far this year?
– Is the approach that companies are taking any different than last year?
– What are the pros and cons of using supplemental materials?
Poll: What Should the Name of the New Congressional Trading Database Be?
Did you know that the SEC had an internal contest to name its filing database back in the ’80s? Then Corp Fin’er Herb Scholl won that contest with his “EDGAR” entry. Now it’s your turn. Note that the suggestion of “Crotch” below is an acronym for “Congressional Recordkeeping of Trades, Changes & Hooch”:
