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."
“The Twittersphere is alive with the sound of #proxyaccess!” Sung to the tune of “The Sound of Music.” Late yesterday, SEC Chair Mary Schapiro issued a statement that the SEC would neither seek a rehearing of the US Court of Appeals for the District of Columbia Circuit decision nor appeal the decision to the US Supreme Court. So the SEC chose “Door #4” of the options available that I laid out in a blog yesterday.
In her statement, Chair Schapiro reaffirmed her support for the proxy access concept – but she also pledged not to rewrite a proxy access rule anytime in the near future. While this means that “mandatory” proxy access is dead for now, the real story is that the SEC did allow the Rule 14a-8 amendments to go into effect (when the current stay expires next week), which means that the agency will allow access shareholder proposals (“absent further Commission action”) for this proxy season. Private ordering, here we come – a nice boon for corporate lawyers. Here’s the SEC’s statement:
The Securities and Exchange Commission today confirmed that it is not seeking rehearing of the decision by the U.S. Court of Appeals in Washington, D.C. vacating a Commission rule, Rule 14a-11, which would have required companies to include shareholders’ director nominees in company proxy materials in certain circumstances. Nor will the SEC seek Supreme Court review.
Chairman Mary L. Schapiro issued the following statement:
“I firmly believe that providing a meaningful opportunity for shareholders to exercise their right to nominate directors at their companies is in the best interest of investors and our markets. It is a process that helps make boards more accountable for the risks undertaken by the companies they manage. I remain committed to finding a way to make it easier for shareholders to nominate candidates to corporate boards.
At the same time, I want to be sure that we carefully consider and learn from the Court’s objections as we determine the best path forward. I have asked the staff to continue reviewing the decision as well as the comments that we previously received from interested parties.”
# # #
Last year, when the Commission adopted Rule 14a-11, it also adopted amendments to Rule 14a-8, the shareholder proposal rule. Under those amendments, eligible shareholders are permitted to require companies to include shareholder proposals regarding proxy access procedures in company proxy materials. Through this procedure, shareholders and companies have the opportunity to establish proxy access standards on a company-by-company basis — rather than a specified standard like that contained in Rule 14a-11.
Although the amendments to Rule 14a-8 were not challenged in the litigation, the Commission voluntarily stayed the effective date of those amendments at the time it stayed the effective date of Rule 14a-11. The Commission’s stay order provides that the stay of the effective date of the amendments to Rule 14a-8 and related rules will expire without further Commission action when the court’s decision is finalized, which is expected to be September 13. Accordingly, absent further Commission action, Rule 14a-8 will go into effect and a notice of the effective date of the amendments will be published.
The SEC’s Rethink of All Its Rules: The First Step
Yesterday, the SEC issued this press release announcing that it’s seeking public comment on the process it should use to conduct retrospective reviews, such as how often rules should be reviewed, the factors that should be considered, and ways to improve public participation in the rulemaking process. Comments are due by October 6th – and can be submitted via this form.
This forward-looking retrospective is due to President Obama’s memo a few months ago recommending that independent agencies do this rethink (see Vanessa Schoenthaler’s blog for the full background of Obama’s memo). How the SEC will be able to undertake this project given its Dodd-Frank rulemaking burden – not to mention all the resources needed to constantly respond to various Congressional inquiries – is a mystery. But note that this request is just to help the agency develop a plan under which it will then review its rules and regulations – it is not soliciting comment on specific items at this time (although the SEC does have this webpage that solicits comments on specific rules & regs – so there is that opportunity).
To develop this review plan, the timeframe is tight. As noted in this blog, agencies have 120 days to report their findings to the Office of Management and Budget as well as the public – and that clock started ticking about 60 days ago…
Poll: Which Corp Fin Rules Should the SEC Reconsider?
Although it’s early in the process of the SEC rethinking its rules, we can still conduct an anonymous poll about which rules you wish the SEC to review (“XBRL” seems to be popular write-in candidate):
Today is the deadline for the SEC to decide whether to appeal the decision of the US Court of Appeals for the DC Circuit in the Business Roundtable’s and Chamber of Commerce’s lawsuit over proxy access. The SEC can file a petition for rehearing (which seeks review before the panel) or a petition for rehearing en banc (seeking review of all judges of the DC Circuit) or both.
If the SEC doesn’t not file anything today, the court’s mandate (ie. final judgment) will issue seven days later and the case will be sent back to the SEC. Even in this scenario, the SEC could ask the Solicitor General to appeal the decision to the US Supreme Court – but that is fairly unlikely given that there is no split among the circuit courts on this issue and a statutory standard is involved that is fairly unique to the SEC and CFTC. Thus, it is improbable that SCOTUS would grant certiorari.
Although CII has urged the SEC to appeal, it also has urged the agency to continue the stay on Rule 14a-8 – even if the case is not taken up for rehearing. And now the ABA’s Business Law Section has also submitted a letter to the SEC also urging that the stay be continued.
A Facelift! Corp Fin Reformats the “Financial Reporting Manual”
Last Thursday, Corp Fin posted a new and improved formatted “Financial Reporting Manual.” The facelift didn’t change the substance in the Manual…
Last week, the SEC also revised Form ID to allow for new applicant types to file the Form and make Edgar filings. The new Form ID requires the filer to select an entity type. Those that have already filed a Form ID are not required to re-file or otherwise revise what they already have filed.
Our September Eminders is Posted!
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Yesterday, the SEC issued its second fee advisory for the year (along with this methodology). Right now, the filing fee rate for Securities Act registration statements is $116.10 million (the same rate applies under Sections 13(e) and 14(g)). Under the fee advisory, this rate will slightly decline to $114.60 per million, a 1.2% price drop. Not bad, unless you recall last year’s 63% price hike, the largest one-year rate hike in my experience.
As noted in this SEC order, the new fees will go into effect on October 1st – which is a departure from the past when the new rates didn’t become effective until five days after the date of enactment of the SEC’s appropriation for the new year, which often was delayed well beyond the October 1st start of the government’s fiscal year as Congress and the President battled over the government’s budget.
You might be asking, “How are the SEC’s fees set?” Or more importantly, “Will the rate hike help the SEC’s push for more resources?” The SEC sets its filing fees annually under the “Investor and Capital Markets Fee Relief Act of 2002.” The SEC’s budget is not dependent on its fees as it’s not a self-funded agency. All of the fees go to the US Treasury. In theory, these fees could help convince Congress to allow the SEC to receive their requested budget – but that surely hasn’t worked as of late. Learn more how the filing rate-setting process works in this blog.
Too funny. I had a brief conversation with an AP reporter last night and today I’m quoted in 468 newspapers, all of them in this same short piece. The power of the Associated Press! I wonder how @MrPoorCEO will take it…
Heating Up: Calls for More Political Contribution Disclosures
One topic that has been on the lobbyist agenda – but never quite on the hot seat – is greater disclosure about corporate political contributions. In the wake of the Citizens United decision by the Supreme Court, that is changing. As Ted Allen blogged a few days ago, the International Corporate Governance Network is the latest to weigh in with a letter to the SEC on the topic, commenting upon the rulemaking petition filed several weeks ago by a group of academics (here are other letters sent in about the petition).
Section 13(d) Reporting: CSX Case Highlights Need for SEC Action on Derivatives
A divided panel of the U.S. Court of Appeals for the Second Circuit has finally issued its opinion in the CSX case in which the District Court addressed whether the long party in a cash-settled total-return equity swap should be considered the beneficial owner of the underlying shares for reporting purposes under Section 13(d) of the Williams Act. The majority opinion — issued nearly three years after the appeal was argued — declined to resolve the beneficial ownership issue, noting that there was disagreement within the panel on the subject. Instead, the panel considered only whether a “group” had been formed under Section 13(d) as to the shares held outright by the defendant activist funds.
The majority opinion also addressed whether and under what circumstances a party should be precluded from voting shares acquired during a period when it was in violation of its disclosure obligations under Section 13(d). CSX Corp. v. The Children’s Inv. Fund Mgmt. (UK) LLP, Docket Nos. 08-2899-cv, 08-3016-cv (2d Cir. July 18, 2011).
As to the District Court’s finding of a “group,” the majority opinion, by Judge Newman, found insufficient for appellate review the District Court’s finding that a group was formed by the activities of the two funds (TCI and 3G) that suggested “concerted action” vis-à-vis CSX. The Court therefore remanded the case to the District Court for additional findings on that limited subject, as well as to reconsider the appropriateness and scope of any injunctive relief should a group violation of Section 13(d) be found with respect to the purchase of shares outright. In connection with its consideration of the group issue, the majority ruled that “activities” resulting from group action were insufficient to form a group unless — in the words of the rule — the group “act[s] together for the purpose of acquiring, holding, voting or disposing” of equity securities of the issuer.
As to the availability of injunctive share “sterilization,” the majority opinion adhered to prior precedent holding that an injunction prohibiting the voting of shares acquired while in violation of Section 13(d)’s reporting requirements was not an available remedy if the required disclosure is ultimately made in sufficient time for informed action by shareholders. The opinion rejected the arguments that sterilization may be necessary to provide a “level playing field” and to deter violations of Section 13(d), relying in part on the policy notion that sterilization might injure those stockholders who, after full disclosure, choose to support an insurgent’s program.
Judge Winter filed a separate opinion concurring in the result, and, unlike the majority opinion, directly addressed the issue as to whether the long party in a total-return swap transaction may be deemed to beneficially own the shares purchased as a hedge by the short counterparty. Judge Winter’s opinion rejected the District Court’s view that equity swaps are (in Judge Winter’s words) “an underhanded means of acquiring or facilitating access to [shares] that could be used to gain control through a proxy fight or otherwise.” Judge Winter instead writes that, absent an agreement on acquiring or voting the short party’s hedge position, “such swaps are not a means of indirectly facilitating a control transaction. Rather, they allow parties such as the Funds to profit from efforts to cause firms to institute new business policies increasing the value of a firm.”
Judge Winter rejected the position that the shares acquired by the swap dealer to hedge the swap should be deemed beneficially owned by the long party based on a review of the statutory language; other legislation that has addressed swaps — including Dodd-Frank, which granted new authority to the SEC to promulgate rules providing that “a person [] be deemed to acquire beneficial ownership of an equity security based on the purchase or sale of a security-based swap”; and the SEC’s ongoing and, as yet, inconclusive consideration of derivatives and beneficial ownership under Section 13(d), including its recent repromulgation of Rule 13d-3.
The CSX majority’s determination not to address whether the long party to a total-return swap may be deemed, for purposes of Section 13(d), the beneficial owner of the underlying shares underscores the need for SEC action. We have previously set forth detailed proposals on the subject, and continue to believe that SEC action is both necessary and overdue.
The concluding statement in Judge Winter’s concurrence eloquently articulates the need for SEC leadership on the issue:
Total-return cash-settled swap agreements can be expected to cause some party to purchase the referenced shares as a hedge. No one questions that any understanding between long and short parties regarding the purchase, sale, retention, or voting of shares renders them a group — including the long party — deemed to be the beneficial owner of the referenced shares purchased as a hedge and any other shares held by the group.
Whether, absent any such understanding, total-return cash-settled swaps render a long party the beneficial owner of referenced shares bought as a hedge by the immediate short party or some other party down the line is a question of law not fact. At the time of the district court opinion, the SEC had no authority to regulate such “understanding”-free swaps. It has such authority now, but it has simply repromulgated the earlier regulations. These regulations, and the SEC’s repromulgation of them, offer no reasons for treating such swaps as rendering long parties subject to Sections 13 and 16 based on shares purchased by another party as a hedge. Absent some reasoned direction from the SEC, there is neither need nor reason for a court to do so.
Recently, I have blogged about the risks involved in some Chinese companies, more recently because the US exchanges have listed questionable companies even when the Chinese regulators would not. So it’s noteworthy that the SEC’s Division of Enforcement recently issued two stop orders to prevent effectiveness of the registration statements of two Chinese companies (whose auditors had resigned and trading had been halted several months earlier). Stop orders are fairly rare but certainly seem warranted in this case (here’s stop order for China Century Dragon Media and here’s stop order for China Intelligent Lighting and Electronics).
What might a Chinese company – one incorporated in the Cayman Islands – do when accused of fraud? How about move the assets to another company and leave 8000 employees stranded…
The Problems of Chinese Reverse Mergers
In this podcast, Matt Orsagh of the CFA Institute talks about reverse mergers for some Chinese companies that have implications for investors:
– What has the PCAOB said about Chinese reverse mergers?
– What do you think is the biggest risk for investors in these companies?
– How should investors go about analyzing these companies?
Enforcement Actions: Compare PCAOB vs. SEC
In a trio of recent enforcement actions, the PCAOB recently barred three certified public accountants for 2-3 years. It is a positive development to see the PCAOB take action against CPAs in such instances. In one of the actions, an audit partner was fined $50,000 for providing misleading documents to the PCAOB and not being truthful with respect to whether documents had been changed. The PCAOB can fine an individual up to $750,000 and a firm up to $15 million. In this case, the fine for misleading the PCAOB was 1/15th of the maximum. It will be interesting to see if the state boards of accountancy take action.
Lynn Turner notes “the enforcement actions do not name the company being audited. That is in contrast to SEC enforcement actions which do often name the company. I don’t believe there is anything in Sarbanes-Oxley that prevents the PCAOB from informing investors as to the name of the company. IT will be interesting to see if that is a trend.”
Here’s the latest on attempts in Congress to tweak Dodd-Frank, courtesy of this alert by Cooley’s Cydney Posner which is repeated below:
They’re at it again! H.R. 2483, the ”Whistleblower Improvement Act of 2011,” takes another stab at remaking Dodd-Frank, this time by modifying the whistleblower provisions set forth in Section 21F of the Exchange Act. The bill would require, as a prerequisite to receiving a whistleblower bounty, that the employee first report the matter to his or her employer. The bill was introduced at the end of last week by Representative Michael Grimm (R-NY) and is co-sponsored by four other Congressman, Reps. John Campbell (R-CA), Bill Flores (R-TX), Scott Garrett (R-NJ) and Steve Stivers (R-OH). The bill was referred to the House Committees on Financial Services and Agriculture.
The bill is designed to address the most contentious aspect of the SEC’s final whistleblower rules – the SEC’s decision not to mandate internal compliance reporting, prior to or contemporaneously with SEC reporting, as a prerequisite to eligibility for a whistleblower bounty. Critics charged that mandatory internal reporting would deter many whistleblowers, while advocates contended that allowing whistleblowers to bypass companies’ internal compliance programs would have a corrosive effect on these programs (including those mandated by SOX) and undermine companies’ ability to address the wrongdoing. The SEC’s decision not to mandate internal reporting arose out of its concern that employees could be hampered in internal reporting if, for example, management were involved in the misconduct.
The bill would amend Section 21F to require that, to be eligible for a whistleblower award, an employee who provides information relating to a violation of the securities laws that was committed by his or her employer (or by another employee of his or her employer), must first report the information to his or her employer before reporting to the SEC and then must report that information to the SEC within 180 days after internal reporting.
However, the bill does attempt to address the SEC’s concern regarding potential deterrents to internal reporting. Under the bill, whistleblowers who did not comply with the internal reporting requirement could still be eligible for awards if the SEC determined the following:
– that the employer lacked either a policy prohibiting retaliation for reporting potential misconduct or an internal reporting system allowing for anonymous reporting; or
– that internal reporting was not a viable option for the whistleblower based on either (i) evidence that the alleged misconduct was committed by or involved the complicity of the highest level of management, or (ii) other evidence of bad faith on the part of the employer.
The bill would also amend Section 21F to make ineligible any whistleblower who had legal, compliance or similar responsibilities and had a fiduciary or contractual obligation to investigate or respond to internal reports of misconduct or violations (or to cause the entity to do so), if the information learned by the whistleblower in the course of duty was communicated to the him or her with the reasonable expectation that he or she would take appropriate steps to respond.
Currently, Section 21F requires that awards be at least 10% and no more than 30% of the total monetary sanctions collected on an action. The bill would eliminate the minimum award requirement and cap awards at 30% of the amount collected. Also, under Section 21F, any whistleblower convicted of a criminal violation related to the matter is ineligible for an award. The bill would expand the exclusion from eligibility for culpable whistleblowers to include civil liability or other determination by the SEC that the individual committed, facilitated, participated in or was otherwise complicit in the misconduct.
Under the bill, the SEC would be required to notify the entity prior to commencing any enforcement action related to a whistleblower complaint to enable the entity to investigate the alleged misconduct and take remedial action, unless, based on evidence of bad faith or complicity in the misconduct at the highest levels of management, the SEC determined that notification would jeopardize the investigation. If the notified entity responded in good faith, which may include conducting an investigation, reporting its results to the SEC and taking appropriate corrective action, the SEC would be required to treat the entity as having self-reported the information and its actions in response to the notification evaluated accordingly.
With regard to the anti-retaliation provisions of Section 21F, the bill would make clear that employers would not be prohibited from enforcing any established employment agreements, workplace policies or codes of conduct against a whistleblower, and that any adverse action taken against a whistleblower for violation of those agreements, policies or codes would not be considered retaliation, as long as enforcement was consistent with respect to other employees who were not whistleblowers.
The bill would also make corresponding changes to Section 23 of the Commodity Exchange Act.
FINRA’s New Social Media Guidance: Guidance for Companies?
From Suzanne Rothwell: Recently, FINRA issued updated guidance to broker/dealer firms on social networking websites in Regulatory Notice 11-39. This Notice supplements guidance issued early last year in Regulatory Notice 10-06. Although the FINRA requirements are specific to the regulatory environment for broker-dealers, companies may nonetheless find some of the guidance useful in developing a social media policy for themselves – particularly where employees use social media sites for business purposes – and in reviewing the company’s website.
The most recent FINRA Notice clarifies that broker-dealer employees may use smart phones or tablet computers and other personal communication devices to access the firm’s business applications so long as the business and personal communications can be separated on the device thereby enabling the firm to retrieve and supervise the business communications without accessing the employee’s personal communications.
In addition, a principal of the broker-dealer firm must review prior to use any social media site that an associated person intends to employ for a business purpose. A broker-dealer firm is responsible for training its associated persons on its social media policies and must follow up on “red flags” that might indicate non-compliance with firm policies.
FINRA points out that some firms require that associated persons annually certify compliance with the policies and some firms randomly spot check the websites of associated persons to monitor compliance with firm policies. The Notice also warns that a broker/dealer firm is responsible for ensuring that a data feed to the firm’s website does not contain inaccurate information and should not include a link on its website to a third-party site that the firm knows has false or misleading content (for which the firm will be responsible if it endorses the content on the third-party site).
SEC Decides to Rescind Form F-9
Recently, as noted in this Paul Weiss memo, the SEC decided to eliminate Form F-9, effective as of December 31, 2012. Form F-9 is the SEC’s Multijurisdictional Disclosure System form used by some Canadian companies to register investment grade debt and preferred securities. One of the reasons for the SEC’s decision is Dodd-Frank’s Section 939A that directs the SEC to propose alternative criteria to replace rating agency criteria. Thus, Form F-9 had become largely duplicative of Form F-10. Still, it’s notable because it’s pretty rare that the SEC rescinds a form.
Last week, the WSJ ran this article about how Corp Fin is peppering oil & gas companies with comments about fracking. Members were quick to ask: “Is Corp Fin pulling the ’34 act reports for all oil & gas companies as part of a special targeted review project?”
Personally, I don’t think that these is a “special” review project and that these comments are being delivered in the normal-course review process. Clearly, this has been a big topic for the oil and gas industry for some time. For example, the Interfaith Center on Corporate Responsibility ran this press release on Friday noting the WSJ article and that an investor coalition has been pressing 2 dozen companies on this issue through shareholder proposals since ’09. So it’s become a high profile issue and perhaps Corp Fin’s actions will help head off any Congressional action in this area.
Here are some random examples of comment letters that Corp Fin has sent recently:
Proxy Access: CII Urges SEC to Appeal Court Decision
As noted by Ted Allen in ISS’s Blog, the Council of Institutional Investors has sent this letter to SEC Chair Schapiro urging the agency to seek an en banc rehearing from the full US Court of Appeals for the D.C. Circuit over the adverse decision by a 3-judge panel of the DC Circuit Court last month. The SEC has until September 6th to decide whether to appeal the Business Roundtable/Chamber of Commerce case.
More Thoughts on Proxy Access and Judicial Review
I’ve blogged several times recently about the DC Circuit’s proxy access decision in the Business Roundtable/Chamber lawsuit and its implications far beyond proxy access. Here’s some thoughts on the topic – as well as proxy access itself – from Prof. Larry Hamermesh of the Widener University School of Law, fresh off his stint as a Corp Fin Fellow at the SEC.
The leading Republican contender for his party’s nomination – Mitt Romney – apparently would like to roll back the clock, take another swing at regulatory reform and repeal Dodd-Frank, or at least parts of the year-old law. Here are excerpts from a recent Boston Globe article:
In the past, Romney has criticized the bill for creating uncertainty in the financial industry and causing bankers and the financial service employees to pull back. Today, he went further and said he would repeal Dodd-Frank, if he were elected president. “The extent of regulation in the banking industry has become extraordinarily burdensome following Dodd-Frank,” Romney told a roundtable of 18 businessmen at The Common Man Restaurant.
“I’d like to repeal Dodd Frank, recognizing that some revisions make sense,” Romney said. In July, Romney was unable to name specific parts of the bill that he liked or disliked. When asked, he said only, “It’s 2,000 pages. I’m sure there’s something in there that’s good…I’d be happy to take a look at it perhaps line by line at some point and lay out the provisions that I think are unfortunate.”
Today, he was more specific. Romney said he believes it does make sense to regulate derivatives. He said it also makes sense to have different capital requirements if someone is holding a home mortgage compared to someone holding high-risk securities. “Some features have to be addressed,” he said. At the same time, he said, the 2,000 pages of the bill are “overwhelming” for community banks and the fact that pages of rules must still be written creates too much uncertainty.
It’s always fascinating to see which business issues become focal points in the Presidential campaign. Last time around, CEO pay became a high profile issue and that may well happen again. I’m not sure why the length of Dodd-Frank itself should be an issue. I suppose it has to do with the “smaller & less intrusive government” movement – and the sheer length of a bill somehow becomes a proxy for its true impact. Candidate Herman Cain initially wanted bills to be limited to 3 pages!
I guess Romney is betting that most of the voting public won’t recall that it took Congress over two years to pass anything in response to the financial crisis (not that I think that Dodd-Frank is perfect by any stretch of the imagination). So the question remains: “How long a piece of legislation did that near-Depression warrant?” Take the poll below…
In more political news, according to this LA Times article, Rick Perry will be hamstrung by new SEC rules that inhibit donations from financial services company employees to sitting governors.
The PCAOB’s Upcoming Roundtable on the Auditor’s Reporting Model
Yesterday, the PCAOB announced that it will host a roundtable on September 15th to discuss its recent concept release on possible changes to the auditor’s reporting model. Here’s the related briefing paper. Here’s some thoughts from Jim Peterson’s “Re:Balance” Blog on the concept release.
Poll: Congressional Legislation & Does Size Matter?
Last week, I blogged about the PCAOB’s concept release on mandatory audit firm rotation – which essentially floats the idea of mandatory firm rotation every 10 years, at least for large companies. Here’s some thoughts from a Forbes’ article penned by Francine McKenna. And here’s a reaction from an inhouse member:
The thing that surprised me the most as I read through this release is that it essentially admits that not only have the regulators not found any correlation between audit failures and long-term audit firm tenure — but academic studies essentially have found the opposite. On a related note, the concept release quotes heavily from a detailed GAO study issued in 2003 that recommended against mandatory rotation for a variety of reasons, including estimates that initial year audit costs would increase by over 20% and that there would be an increased risk of audit failures in the early years of the audit. The concept release even admits that based on its experience conducting inspections since the GAO report, the PCAOB believes that audit quality has improved since then — yet they still put out this release, stating generally that “more can be done to bolster auditors’ ability and willingness to resist management pressure.”
In light of all this, I have to believe that some comment letters will be tempted to quote from the recent proxy access decision, to remind the regulators that they must adequately consider the effect of any new rules upon efficiency, competition and capital formation. In addition, that case reminds the regulators that they must rely on sufficient empirical evidence when claiming benefits of a new rule – the agency must examine the relevant data and articulate a satisfactory explanation for its action, including a rational connection between the facts found and the choices made. I understand that we are just at the concept release phase – and do not even have proposed rules never mind final rules to fight at this stage. But I think the PCAOB really has an uphill battle on this one, and I can’t figure out why they are pursuing something like this at this time.
Voluntary Early Disclosure of Material Events: Is it OK to Stop?
I just finished reading the July-August issue of The Corporate Counsel that was just mailed and I was struck by this question because it’s something I’ve often been asked. In other words, whether an issuer that chooses to report under Item 8.01 of Form 8-K material events that are not required to be reported on Form 8-K has created a duty to continue filing voluntary 8-Ks when similar events occur in the future? The theory is that the duty would be based on an implied representation to investors that such events will be disclosed promptly rather than after the end of the quarter, on Form 10-Q/K. This question is different from the question of whether an issuer has a “duty to update” previously disclosed information. Check out your copy of the July-August issue to read Alan Dye’s analysis on this challenging topic (or if not yet a subscriber, try a “Rest of 2011 for Free” when you try a ’12 No-Risk Trial).
Mailed: July-August Issue of The Corporate Counsel
The July-August issue of The Corporate Counsel was just mailed to subscribers. This issue includes important practical guidance on:
– What You Should Be Doing Now With Respect to Proxy Access
– Staff Confirms/Clarifies 8-K and S-K Item 401 Interpretations
– Disclosure of Broker Non-Votes on the Say-on-Frequency Proposal
– Use of Non-GAAP Financial Measures to Demonstrate (vs. Explain) Pay for Performance
– The CSX Case–Still Not Clear Whether Cash-Settled Equity Swaps Confer 13(d) Beneficial Ownership
– Voluntary Early Disclosure of Material Events–Is it OK to Stop?
– Whither the Devon Energy Corp. 701 No-Action Letter?
– Communications with Auditors: Citing the Right Auditing Standard
Act Now: Get the “Rest of 2011 for Free” when you try a ’12 No-Risk Trial now.
Wow. Two earthquakes in a year over here in DC. After none for the first three decades that I have lived here. Maybe not a big deal for those out in California, but yesterday’s quake scared this bald guy (and broke a few vases). Many workers were sent home early after being evacuated, making the commute a real mess. And some national treasures suffered damage, like cracks in the Washington Monument and broken spires on the National Cathedral.
Even the SEC felt the “shakes,” as this notice was posted on the agency’s home page last night:
The SEC has temporarily suspended operation of its EDGAR filing system as a precautionary measure due to Tuesday’s earthquake activity in the Washington, D.C. area. The system will be available tomorrow (Wednesday, 8/24) during regular business hours. For specific filer questions, SEC staff will be available to provide filer support for those filers attempting to submit documents during the temporary shutdown. Please contact Filer Support at 202-551-8900 for assistance.
At this point, it’s unclear if any “live” filings were impacted by the Edgar suspension since this notice was posted after the 5:30 pm cut-off. So, we don’t know at what time Edgar went off-line. If there were any missed filings that need backdating, sometimes the SEC allows for a blanket exemption – and sometimes requests for relief are needed. I imagine that the SEC will advise on this today.
Earthquake: The Aftershock Picture
Many pictures have been posted in the wake of what was a historical event in DC (“where were you during the quake of ’11?”). Here is my aftershock “crazy-eyes” picture:
Poll: What Caused the Quake?
Please take a moment for this anonymous poll regarding what caused the DC earthquake:
Want to hear some mind-blowing numbers when it comes to shareholder participation for an annual meeting online? In this podcast, Jared Brandman of The Coca Cola Company describes his company’s experience using an e-Forum for an annual shareholders meeting for the first time, including:
– What was your first year’s experience with the e-Forum like?
– How much work did the Forum end up being, both before and after the annual meeting?
– How hard was it to convince senior management to try the e-Forum?
– For those out there considering a Forum, what pointers would you give them now?
The “Man U” IPO: Singapore Bound!
Although relatively rare, there certainly are precedents for sports teams to sell stock to the public (egs. Green Bay Packers; Florida Panthers). But it’s big news that the most popular team in the world – Manchester United, a UK football (ie. soccer) team – is selling a minority interest in an IPO. No, this high profile company will not be listed in the US – nor will it be listed in the United Kingdom. The owners have chosen Asia – but not even Hong Kong. It will be Singapore as noted in this Business Insider article.
Did you know that the Boston Celtics even sold securities to the public at one point in time? It was structured as a limited partnership, but the LP owners were all bought out in ’02 when the team’s controlling ownership changed hands. The Cleveland Indians were also publicly traded for a time in the ’90s.
SEC Adopts Rules to Suspend Duty To File Asset-Backed Reports Under Section 15(d)
Last week, the SEC adopted rules under Section 942(a) of Dodd-Frank to provide certain thresholds for suspension of the reporting obligations for asset-backed securities issuers.
