Two days ago, Delaware Chief Justice Leo Strine announced that he would retire from the bench. This isn’t a surprise. It’s been kind of an open secret in Delaware for the past several months – he didn’t hire clerks for the next term. Leo isn’t quite “retirement age,” so I imagine we will see grander things yet from this very grand lawyer. As noted in this article, there is speculation that Leo will run for governor in Delaware in 2024.

Over on the DealLawyers.com blog yesterday, John gave a nice summary of just how important Leo has been to the Delaware judiciary for the last few decades. And here’s a statement from SEC Chair Clayton…

SEC Approves Nasdaq’s “Liquidity” Proposal

Here’s the intro from this blog by Cooley’s Cydney Posner:

The SEC has approved, on an accelerated basis, the recent Nasdaq proposal (as amended by new amendment no. 3) to revise its initial listing standards to improve liquidity in the market. Prior to the amendments, under the initial listing rules, to list its equity on any Nasdaq tier, a company was required to have a minimum number of publicly held shares, calculated to include restricted securities. Nasdaq proposed, among other things, to revise the initial listing criteria to exclude “restricted securities” from the calculations of a company’s publicly held shares, market value of publicly held shares and round lot holders, given that restricted securities are not freely transferable and are generally illiquid.

To that end, the Nasdaq proposal added new definitions for “restricted securities,” “unrestricted publicly held shares” and “unrestricted securities.” As a result of these changes, only securities that are “freely transferable will be included in the calculation of publicly held shares to determine whether a company satisfies the Exchange’s initial listing criteria under these rules.” No changes were proposed to the continued listing requirements. To allow companies adequate time to complete in-process transactions based on the existing rules, the changes will become effective 30 days after approval (July 5) by the SEC (August 4).

California Reports on Mandatory Women Directors

Here’s the intro from this blog by Allen Matkins’ Keith Bishop:

As noted yesterday, the California Secretary of State published a report on its website concerning publicly domestic or foreign corporations with principal executive offices are located in California. This report was required to document the number of these corporations “who [sic] have at least one female director”. Cal. Corp. Code § 301.3(c). The report, which is in the form of Excel spreadsheets, includes two tables. The first, entitled “SB 826 Corporations By SEC Data”, lists some 537 corporations. The second, entitled “Reporting in Compliance”, lists 184 corporations.

It is hard to know what these tables actually represent. For example, the second table identifies Ball Corporation among the 184 corporations “reporting in compliance”. However, Ball Corporation doesn’t appear on the first list of “SB 826 Corporations By SEC Data”. That isn’t too surprising if one looks at the cover sheet of Ball Corporation’s most recently filed Form 10-K which identifies it as an Indiana corporation with its principal executive offices located in Colorado. As such, it would not be subject to SB 826. That of course begs the question of why it is listed among the compliant and the more philosophical question of whether a corporation that is not subject to the law can be considered compliant.

– Broc Romanek

Last week, SEC Chair Clayton issued this statement indicating that Enforcement will process settlement offers at the same time that “bad actor” waiver requests are made if so requested by the settling party. Here’s an excerpt from the Chair’s statement (we’re posting memos in our “SEC Enforcement” Practice Area):

I have consulted with the Office of the General Counsel and the Division of Enforcement regarding the mechanics of the Commission’s consideration of a simultaneous offer of settlement and waiver request. Based on these discussions, I generally expect that, in a matter where a simultaneous settlement offer and waiver request are made and the settlement offer is accepted but the waiver request is not approved in whole or in part, the prospective defendant would need to promptly notify the staff (typically within a matter of five business days) of its agreement to move forward with that portion of the settlement offer that the Commission accepted.

In the event a prospective defendant does not promptly notify the staff that it agrees to move forward with that portion of the settlement offer that was accepted (or the defendant otherwise withdraws its offer of settlement), the negotiated settlement terms that would have resolved the underlying enforcement action may no longer be available and a litigated proceeding may follow.

Tomorrow’s Webcast: “Current Developments in Capital Raising”

Tune in tomorrow for the webcast – “Current Developments in Capital Raising” – to hear Skadden’s Ryan Dzierniejko, Locke Lord’s Rob Evans, Shearman & Sterling’s Lona Nallengara and Wilson Sonsini’s Allison Berry Spinner explore the latest developments in raising capital and all the various alternatives, including ICOs, PIPEs and registered direct offerings, “at-the market” offerings, equity line financings and rights offerings.

Financial Reporting Structures: The Charts

Here’s an odd page that a member spotted on the SEC’s website. It contains three charts related to financial reporting structures: a blue print; a flow chart; and a segment chart. They were authored in the Spring of 2018 by Wes Bricker and Ying Compton from the SEC’s Office of Chief Accountant. Even though most companies will have their own unique circumstances, these could be useful as a “gut check”…

– Broc Romanek

The SEC will hold a roundtable next Thursday – July 18th – to address short-term vs. long-term “isms.” There are two panels – one for each “ism.” This follows the SEC’s “request for comment” in December about the nature, content and timing of earnings releases & quarterly reports – see the comments submitted to the SEC on that so far. And here’s the related memos we have posted…

Meanwhile, Sagar Teotia has been named the SEC’s Chief Accountant – he had been serving as “Acting” in that capacity for a while…

Usable Disclosure: Plain English Helps

Here’s a nice short piece by Third Creek Advisors’ Adam Epstein about how smaller companies can become more effective storytellers. Here’s an excerpt:

If your company’s storytelling acumen is high, your test subjects will quickly and accurately grasp the zeitgeist of your company. If they struggle, it’s likely that lots of small-cap investors – many of whom are generalists – don’t sufficiently understand what your company does either.

One way to dramatically increase messaging effectiveness is through website videos. Notwithstanding the fact that in excess of five billion videos are watched daily on YouTube, a surprising number of small-cap companies don’t have an “about us” video easily accessible on the home page of their corporate websites. This is a big mistake; a two-minute, professionally-produced, easy-to-understand video can pay for itself almost immediately.

Corp Fin Updates “Financial Reporting Manual” (Again)

Last week, Corp Fin indicated that it has updated its “Financial Reporting Manual” to remove guidance related to presentation of selected financial data & acquired business financial statements in a Form 10 filed by a “Smaller Reporting Company”; clarify the application of Rule 3-13 and Note 5 to Rule 8-01 of Regulation S-X; and provide revisions for certain technical amendments (e.g., update EGC revenue threshold pursuant to SEC Release 33-10332 and replace FASB ASU references with the applicable ASC Topics).

– Broc Romanek

At the Society of Corporate Governance’s conference last week, Skadden’s Hagen Ganem had an idea. Why not run a cute dog contest? Genius. So here is our first annual contest (vote for the cutest dog; not the cutest owner of a dog) – the poll is at the bottom of this blog:

1. Skadden’s Hagen Ganem – Teddy the “Snoozer”

2. Morrison & Foerster’s Dave Lynn – Jack the “Ripper”

3. PJT Camberview’s Shannon Johnson – Mia the “Mini Bernedoodle”

4. Gibson Dunn’s Ron Mueller – Jack & Morgan the “Love Bugs”

5. TheCorporateCounsel.net’s Broc Romanek – Willa the “Wonderful”

Vote Now: “Cutest Dog Contest”

Vote now in this poll – anonymously – for the dog that you think is the cutest:

– Broc Romanek

A long, long while back, I blogged a story about an IPO prospectus that contained the term “certified pubic.” Here are a few more reactions from members about disclosure gaffes:

While I hadn’t heard of the “certified pubic accountant” goof previously, I can vouch for the IPO red herring that was circulated in the early 1970s with an “initial pubic offering” statement on the cover page. I never did see the SEC comment letter to know whether or not the Staff examiner commented on it.

And Charles Vaughn of Nelson Mullins commented:

I’m sitting here chuckling at my desk. I guess “certified pubic accountant” does beat “commom stock.” I admit I have caught the “pubic accountant” terminology a couple of times before the SEC filing was made. Given the number of times it is found on Edgar, I think we all need to include that global search in our checklists.

Sneaker Exchange & Other Online Marketplaces

Back when the Web was born in the mid-90s, I remember working on some no-action letters related to trading various things on this new thing called the “Internet.” Complex securities law issues – novel stuff. Flash forward twenty years and we have an amazing array of online marketplaces worth billions, as noted in this NY Times article…

Transcript: “Proxy Season Post-Mortem – The Latest Compensation Disclosures”

We’ve posted the transcript for the recent CompensationStandards.com webcast: “Proxy Season Post-Mortem – The Latest Compensation Disclosures.” Mark Borges, Dave Lynn & Ron Mueller shared their latest takes on these topics:

1. Say-on-Pay Results
2. Performance-Based Compensation Disclosure
3. Shareholder Responsiveness Disclosure
4. Perquisites Disclosure
5. Director Compensation Disclosure
6. CEO Pay Ratio Trends
7. Hedging Disclosure Rule
8. Status of Other Dodd-Frank Rulemaking
9. Shareholder Proposals
10. Proxy Advisors
11. Proxy Strike Suits

– Broc Romanek

One of the stranger things in this field is hearing a SEC Staffer start off their public remarks by providing the “standard” disclaimer that their remarks are their own and not those of the Commission. It seems silly because I would argue that it’s implicit that a Staff member was not speaking for the Commission, but was simply expressing their own thoughts. And in a way, it’s embarrassing for them because it could be heard as “I’m not worthy of being here because what I say doesn’t really matter.”

Luckily, we are used to hearing the disclaimer – so we don’t hear it like that. We have come to expect it – and it even provides a bit of levity to the proceedings because everyone in the room recognizes how silly it is. Including the Staffer forced to utter it. I say “forced” because the Staff is forced to say it. That has been the case for as long as I can remember. It was the case when I spoke as a Corp Fin Staffer back in the ’90s.

But I have checked with some old-timers and they swear they didn’t provide a disclaimer when they spoke in the ’80s. So sometime between the ’80s & the ’90s, something must have happened that caused generations of Staffers to utter such nonsense…

From a member: “For some reason, this disclaimer blog reminded me of the honor pledge we had to write at law school. Whenever we took an exam, we had to write out the following pledge on the cover of the bluebook: “On my honor as a student, I have neither given nor received aid on this examination nor did I have prior knowledge of its contents.” Then you had to sign your name.

You could always tell the law students who’d gone to my school as undergrads, because while the rest of us were dutifully scribbling out all 25 words of the pledge, they were just scrawling “pledged” and signing their names to it. Anyway, maybe the Staffers who’ve been at the SEC for a long time should just say “disclaimed” and get on with their speeches.”

Poll: What Caused the SEC Staff to Start Providing a Disclaimer?

So what is your guess as to why the SEC Staff was forced to starting providing a “public speaking” disclaimer? Please provide your answer via this anonymous poll:

Our July Eminders is Posted!

We have posted the July issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!

– Broc Romanek

Looks like there is a brewing “turf war” as the Big 4 audit firms continue to provide more legal services – see this article about how EY just acquired a UK alternative legal services provider. And, as noted in this article, some general counsels are using the Big 4 for legal services (but remain wary). This blog suggests the ABA should get out of the way of this trend.

Here are a few thoughts contributed anonymously from members that I polled:

– The auditors are marketing machines, and I think they’d get a shot at ordinary course ’34 Act compliance stuff pretty readily. They are more sophisticated than regional law firms on budgeting, and Six Sigma/process management stuff. I think that would be really appealing to GCs who’ve been driven nuts by law firms blowing through budgets.

– I don’t know if it’ll catch on with hard-core US securities work since my recollection is that the ethics rules prohibit non-lawyers from owning law firms in the US. But I think that’s something that the legal industry disruptors keep predicting will change or be sidestepped…eventually. They’ll probably get their foot in the door with governance and executive comp work and go from there?

– Can’t see them getting a lot of high end stuff outside of tax, which they already own. The problem with the Big 4 is that once you get past their ability to initially form relationships, they generally aren’t very good substantively at anything. All their best people leave and the partners are politically astute empty suits.

– The GC-Big 4 article is intriguing. My predecessor at my last in-house job went to a law firm run by EY about a dozen years ago. He lasted two years. It wasn’t a fun job.

– My guess is they’ll push the regulatory envelope by following the virtual law firm model in some fashion.

Also see this Bloomberg article, which notes how some law firms are cognizant of the competition coming from the Big 4 – and what they are doing to stave them off…

Society’s Annual Conference: Come Say ‘Hello’!

As usual, Liz & I will be attending the Society for Corporate Governance’s annual conference – coming up at the end of June in San Diego – and this will be the first year that we will have a booth in the exhibit hall! Come by & say ‘hello’ – and meet some of the new members of our team: Mel, Albert, Larissa, Paige and Justin.

Vintage eRaider Swag!

A while back, I blogged a “vote counting” story that involved eRaider, a widely-media covered fund during the Internet boom in ’90s that hoped to cash in on “message board” activism. eRaider’s business model was to buy a 5% stake in small companies with good products, then get shareholders together to push for governance changes that would improve the company. The idea got a lot of publicity – but little “real life” traction and eRaider shut down in 2004.

Anyway, Lois Yurow sent in this pic of her vintage swag!

– Broc Romanek

Over a decade ago, this is what our HQ looked like with the storage of many extra copies of “The Corporate Counsel” & “The Corporate Executive” print newsletters – various editions that spanned decades. Back then, we kept extra copies of back issues for when subscribers called in a panic because they lost their copy. So this is sort of what our “factory” looked like:

PCAOB Staff Guidance: Deeper Dive into CAM Communcations

Last week, the PCAOB Staff issued this 4-pages of guidance on CAMs. See this blog by Mike Gettelman – and this blog by Steve Quinlivan…

May-June Issue: Deal Lawyers Print Newsletter

This May-June Issue of the Deal Lawyers print newsletter includes (try a no-risk trial):

– The Culture of Counterparties
– Cross-Border Carve-Out Transactions: Conditions & Staggered Closings
– California Consumer Privacy Act and Its Impact on M&A Transactions
– The Millenials Strike Back: 29 Tips for Older Deal Lawyers

Remember that – as a “thank you” to those that subscribe to both DealLawyers.com & our Deal Lawyers print 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 DealLawyers.com – 2nd 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 print newsletter, anyone who has access to DealLawyers.com will be able to gain access to the Deal Lawyers print newsletter. For example, if your firm has a firmwide license to DealLawyers.com – 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 print newsletter including how to access the issues online.

– Broc Romanek

With summer now upon us – boy, the year is moving fast – I thought I would bring something nice & light into your day: “Three Little Birds“…

Don’t worry about a thing
‘Cause every little thing gonna be all right
Singin’: “Don’t worry about a thing
‘Cause every little thing gonna be all right

Rise up this mornin’
Smile with the risin’ sun
Three little birds
Pitch by my doorstep
Singin’ sweet songs
Of melodies pure and true
Sayin’, this is my message to you-ou-ou

– Broc Romanek

In this article, the WSJ says big tech has “arrived” because Amazon, Google and Facebook had so many shareholder proposals this season – 12, 13, 8, respectively. But I think protesting poop emojis are a truer sign…

Amazon’s Annual Meeting: Dancing Emojis!

I feel that I would not be doing my job if I didn’t tell you that there were dancing poop emojis outside of Amazon’s annual meeting. Or maybe I had to mention it because I’m so proud of my younger son – who graduates from UCLA next month – for landing an engineering gig at Amazon in the fall. My older son is at Google, working on the “Stadia” project. I’m a proud papa. Did you know that some Google offices have fire poles to get between floors…

Conference Pointers: Quite Literally

I’ve done some silly stuff over the years when I’ve spoken at conferences to keep the audience engaged – often I pick up some cool swag in the exhibit hall & throw it out to the audience at the midpoint of the panel (eg. nerf footballs). Here’s one of those moments from a dozen years ago at the Society of Corporate Secretaries’ annual conference:

– Broc Romanek