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."
As noted in this WSJ article, Goldman Sachs recently released its earnings through its own website & Twitter – foregoing the use of the wire services. Here’s an excerpt from this Q4 blog:
Earlier this week, we briefly noted Goldman Sachs decision to release their earnings report exclusively through their Twitter account rather than go the traditional route of press release through a large newswire. With a financial leader like Goldman choosing to forgo the standard practice of a press release, we saw it as a strong statement on how much value they felt the service added to their announcement.
While we were excited by the change, there was still the question of whether or not releasing exclusively through Twitter is a truly viable option. Without the use of the wire, how would the story be picked up? Would there be a stumble when it came to reporting? Would it be met with the same urgency as it would’ve been through traditional media? We maintained a lookout throughout the day to see how the media interaction went.
Earnings Releases: NYSE Warns on Date Changes Without Pre-Announcements
Recently, the NYSE issued this guidance to listed companies:
The Exchange wishes to remind its listed companies of the importance of making a prior public announcement of the scheduling of a company’s quarterly earnings release or any change in that schedule. The Exchange believes that providing this information to all market participants at the same time is important to the maintenance of a fair and orderly market.
Generally, listed companies publicly announce the date on which they intend to issue their quarterly earnings information. Occasionally, a company needs to change the date of its earnings release for a particular quarter at which time, the company usually also makes a public announcement of the revised date. It has come to the Exchange’s attention that companies occasionally do not publicly announce a change in the date of their earnings release or, in certain instances, may inadvertently selectively disclose this information in advance of a broad dissemination of the new date. The Exchange believes that a change in the earnings announcement date can sometimes affect the trading price of a company’s stock and/or related securities and that market participants who are in possession of this information before it is broadly disseminated may have an advantage over other market participants.
Consequently, the Exchange believes that it is important for listed companies to promptly and broadly disseminate to the market non-selectively, news of the scheduling of their earnings announcements or any change in that schedule and to avoid selective disclosure of that information prior to its broad dissemination.
By the way, as noted in this Cooley blog, the SEC’s Investor Advocate took his first position – on the NYSE’s proposal related to exempting early stage companies from receiving shareholder approval before selling additional shares to insiders. And check out this Fortune article entitled “Here are the five dumbest excuses for a bad quarter”…
Latest CPA-Zicklin Index: More Political Disclosures Being Made
Recently, the Center for Political Accountability published its “CPA-Zicklin Index of Corporate Political Disclosure and Accountability” for the 5th year in a row. The latest shows 87% of the S&P 500 voluntarily post a political spending policy; 25% place some type of restriction on political spending; and 54% have a dedicated webpage to address political spending.
Meanwhile, two House Committee Chairs sent this letter to SEC Chair White recently asking her to not conduct any rulemaking in the disclosure of political spending area…
Yesterday, Corp Fin released its first Staff Legal Bulletin on shareholder proposals in three years – Staff Legal Bulletin No. 14H. The heart of this SLB wraps up Corp Fin’s review of Rule 14a-8(i)(9) that kicked off in January after Chair White announced that the Staff would take “no view” on (i)(9) proposals during this past proxy season. This exclusion basis relates to counterproposals – and the use of it came under fire when companies attempted to battle against proxy access shareholder proposals by floating their own access proposals with terms more amendable to them. We’ll be posting the oodles of memos in our “Shareholder Proposals” Practice Area as they come in.
Under the SLB’s new “direct conflicts” standard for counterproposals, Corp Fin will only allow exclusion “if a reasonable shareholder could not logically vote in favor of both proposals.” In other words, proposals won’t be found conflicting unless they “directly conflict.” The SLB provides four examples about how a shareholder proposal & management proposal may be found to directly conflict – or not. In the proxy access context, the upshot is that a more restrictive management proposal – like the one that Whole Foods came up with – will not be considered by Corp Fin as conflicting (and thus won’t be excludable). Overall, (i)(9) will rarely be used as an exclusion basis going forward.
So how will companies that need to place two different types of proxy access proposals on the same ballot explain this confusing scenario to shareholders? Explanatory disclosure, as noted in footnote 22 of the SLB as follows:
Where a shareholder proposal is not excluded and companies are concerned that including proposals on the same topic could potentially be confusing, we note that companies can, consistent with Rule 14a-9, explain in the proxy materials the differences between the two proposals and how they would expect to consider the voting results. As always, we expect companies and proponents to respect the Rule 14a-8 process and encourage them to find ways to constructively resolve their differences.
If companies still seek to rely on (i)(9) because they believe they face “directly conflicting” proposals, they need to consider when to implement their “proposal” to illustrate the conflict to Corp Fin. This timing issue is brought home by footnote 15, which states:
We remind companies that the staff may need a complete copy of a company’s proposal to evaluate a no-action request under Rule 14a-8(i)(9) and that the staff may not be able to agree that the company has met its burden of demonstrating that a shareholder proposal is excludable if those materials are not included with the company’s no-action request. This same principle applies when the staff evaluates no-action requests under Rule 14a-8(i)(10).
The SLB also touches on the Rule 14a-8(i)(7) litigation playing out in Trinity Wall Street v. Wal-Mart by disagreeing with how the majority in the Third Circuit applied the “significant policy exception” to the ordinary business exclusion. More specifically, Corp Fin didn’t endorse the majority’s “new two-part test, concluding that ‘a shareholder must do more than focus its proposal on a significant policy issue; the subject matter of its proposal must ‘transcend’ the company’s ordinary business.’” As noted in this Cooley blog, the Third Circuit’s opinion requested Corp Fin’s views in this area – and now they have it…
The U.S. Chamber of Commerce isn’t planning to mount a legal challenge to the Securities and Exchange Commission’s pay ratio rule. The rule, required by the Dodd-Frank Act of 2010, will force companies to disclose the gap between their chief executive’s pay and that of their median employee by 2017. It formally took effect on Monday, after the Securities and Exchange Commission approved it by a 3-2 vote in August. “We decided not to move forward on [the legal challenge],” said Tom Quaadman, senior vice president for Capital Markets Competitiveness at the U.S. Chamber of commerce. The pay ratio rule won’t affect most companies until 2018, Mr. Quaadman said. The political landscape around the rule could also change in Congress and the White House following the 2016 election, he added. Last month, the House Financial Services Committee sent a bill to overturn the rule to the floor. A vote is still pending.
For now, the Chamber said it is more important to move forward with litigation surrounding its challenge of another Dodd-Frank disclosure rule, the one on conflict minerals, he said. The conflict minerals case “has implications for the pay ratio,” Mr. Quaadman said. The conflict minerals litigation focuses on whether it violates corporate free speech rights by forcing companies to declare their supply chains contain minerals blamed for fueling violence in the Democratic Republic of the Congo. A U.S. Appeals Court reaffirmed a ruling in August that struck down conflict minerals disclosure requirements. But the U.S. Securities and Exchange Commission and Amnesty International filed another challenge against the rule this month. Mr. Quaadman said other groups could still move forward.
Since the pay-ratio rule just took effect, that “opens the door” for a legal challenge from someone, said James Barrall, a compensation attorney at law firm Latham & Watkins LLP. Companies are concerned about the rule because finding their median employee will force them to navigate different payroll systems and wage and benefits rules across disparate countries. They also worry that the disclosure will be hard to compare between companies and industries and will be difficult to explain to their workforce. “This is a complex process that will require significant time and resources, particularly as companies work to report this information for the first time,” said Mike Stevens, a partner in law firm Alston & Bird’s employee benefits and executive compensation group.
Speaking of the rulemaking process, the SEC’s Chief Economist delivered this speech yesterday about economic analysis for rules…
Proxy Advisors: Only Half of Investors Globally Use Them
These survey results from Proxy Insight appear to call into question those that believe that most institutional investors routinely follow the recommendations of proxy advisors to cast their votes, including:
– Only 21% of investors use proxy advisor voting policies
– 71% of investors vote according to their own policies
– 9% of investors delegate voting to sub-advisors or other asset managers
– Nearly 50% use at least one proxy advisor for research or recommendations based on their own policy
I’ve blogged a bit on this topic over the years, arguing that ISS’s influence on voting results is overstated…
Wow, I just learned that Mary Kosterlitz has retired as Chief of the Office of Enforcement Liaison (Jennifer Ours recently retired from that office too). Mary presided as Chief of that Office for two decades, as it grew in size from just her to a handful of Staffers. She was not the first Chief of OEL as Ann Wallace served in that position when OEL was initially created. Mary worked for Ann in OEL before Ann left and Mary took over. Then OEL was dissolved in the late ’90s and Mary served a dual role in the Office of Chief Counsel while also serving as the Enforcement Liaison. OEL became a stand-alone office again in the mid-’00s and the office began to grow.
I actually served as the Enforcement Liaison for a few months in the mid-’90s when Mary went on adoption leave. Mary is as nice as can be. It’s a tough job and you wouldn’t know it because she went about her business so quietly. Her departure makes me feel old – and even sad. There are so many nice people that work at the SEC. I’m sure the new arrivals are just as nice. But I do miss the folks I used to work with…
Anyways, I imagine most out there didn’t even know that Corp Fin had an “Office of Enforcement Liaison” – so you likely don’t know what it does. Not many members of our community would have a situation that would require you to interact with that Office. Here’s the “official” description from the Corp Fin web page:
The Office of Enforcement Liaison (OEL) coordinates matters between the Division of Corporation Finance and the Division of Enforcement. Such matters generally concern tips, complaints and referrals, delinquent filers, and revocation of registrations under Section 12(j) of the Exchange Act. In addition, OEL processes requests for waiver of “ineligible issuer” status, or so-called “WKSI waiver” requests, that may arise under Rule 405 of the Securities Act. “WKSI waiver” requests and related questions should be directed to John Madison. Delinquent filer questions should be directed to Hilda Garrett or Marva Simpson. Questions may be submitted to OEL by phone or online form.
It’s that first sentence above that creates the most work for OEL. The cases that the Enforcement Division brings that touch upon Corp Fin-like issue are among the most complex that Enforcement tackles. An accounting fraud case can take years to develop. And there are many more cases that Enforcement has in the pipeline than those that get brought to fruition. Congrats to Mary & Jennifer on their retirement! I’m sure they will both be be missed!
Carl Icahn: Back Online
Now that’s he’s being mentioned as one of Donald Trump’s advisors, Carl Icahn has launched a new website to express his views. We’ll see how long it lasts given that he’s 79. His old site “Icahn Report” faded after a few years after it’s ’08 launching – and his “Shareholders Square Table” was launched in 2013 and that seems gone now too..
Here’s an article about Carl’s warnings about the world…
Course Materials Now Available: Many Sets of Talking Points!
For the many of you that have registered for our Conferences coming up next Tuesday, October 27th, we have posted the “Course Materials” (attendees received a special ID/PW this week via email that will enable you to access them; note that copies will be available in San Diego). The Course Materials are better than ever before – with numerous sets of talking points comprising 130 pages of practical guidance (not counting the 130 pages of guidance from the related “Pay Ratio Workshop“). We don’t serve typical conference fare (ie. regurgitated memos and rule releases); our conference materials consist of originally crafted practical bullets and examples. Our expert speakers certainly have gone the extra mile this year! Here is some other info:
– How to Attend by Video Webcast: If you are registered to attend online, just go to the home page of TheCorporateCounsel.net or CompensationStandards.com to watch it live or by archive (note that it will take about a day to post the video archives after it’s shown live). A prominent link called “Enter the Conference Here” – on the home pages of those sites – will take you directly to today’s Conference (and on the top of that Conference page, you will select a link matching the video player on your computer: Windows Media or Flash Player).
Remember to use the ID and password that you received for the Conferences (which may not be your normal ID/password for TheCorporateCounsel.net or CompensationStandards.com). If you are experiencing technical problems, follow these webcast troubleshooting tips. Here are the conference agendas; times are Pacific.
– How to Earn CLE Online: Please read these FAQs about Earning CLE carefully to see if that is possible for you to earn CLE for watching online – and if so, how to accomplish that. Remember you will first need to input your bar number(s) and that you will need to click on the periodic “prompts” all throughout each Conference to earn credit. Both Conferences will be available for CLE credit in all states except for a few – but hours for each state vary; see the CLE list.
– Register Now:– There is still time to register for our upcoming pair of executive pay conferences – which starts on Tuesday, October 27th – to hear Keith Higgins, etc. If you can’t make it to San Diego to catch the program in person, you can still watch it by video webcast, either live or by archive. Register now.
– Registration for Attendance in San Diego – Walk-Ups Only: Starting tomorrow, you will no longer be able to register to attend in San Diego through this site (however, you still will be capable of registering online to watch by video at any time). You can still register to attend when you arrive in San Diego – you just need to bring payment with you to the conference and register in-person.
Don’t forget to check out our “Family Feud” Keynote Session as two families of top lawyers & consultants – “50 Shades of Clawbacks” v. “D’lectible” vie for the prize! Check out our realistic set!
By my count, there have been 97 Commissioners since the SEC was created in 1934. Of those there have been 12 women: Roberta Karmel; Barbara Thomas; Aulana Peters; Mary Schapiro (counted twice); Laura Unger; Cynthia Glassman; Annette Nazareth; Kathleen Casey; Elisse Walter; Mary Jo White and Kara Stein. Here’s the SEC’s list of Commissioners if you want to check my math. Overall, the percentage of women that have served on the Commission is about 12% – with the past few decades running at about a 20% rate.
So from that perspective alone, it’s exciting to see President Obama nominate two women yesterday to be added to the two that currently serve as Commissioners. That means – if confirmed by the Senate – the five Commissioners will be 80% female. Wow! Not sure any other federal agency can match that. Ever (or so I thought – the FTC has all women right now!).
The Republican nominee to replace Dan Gallagher is Hester Peirce, a researcher at George Mason’s Mercatus Center and a former Senate Banking Committee staffer (where she worked with current Commissioner Piwowar). As I’ve blogged before, it helps to obtain the Senate’s confirmation when you nominate one of their own. Hester also used to work at the SEC – she served as a staffer for SEC Commissioner Paul Atkins. I moderated a panel with Hester on it a few years back at our annual executive pay conference.
The Democratic nominee to replace Luis Aguilar is also local to DC. Professor Lisa Fairfax has been teaching at George Washington Law School since ’09; before that she served as a Professor at the U. of Maryland in Baltimore. This NY Times article comments on Lisa not being a “revolving door” nominee – and the fact that she would be only the third black Commissioner…
PCAOB Warns of Deficiencies in Auditor Risk Assessments
As noted in this article, the PCAOB issued a report last week warning about significant deficiencies it is seeing in auditor’s assessment of risks in their clients. The report details concerns about how auditors are implementing Auditing Standards #8-15, known collectively as the “risk assessment standards.”
SEC Brings More Reg M/Short Selling Enforcement Actions
Last week, the SEC announced enforcement actions against six firms for short selling violations, including more than $2.5 million in sanctions – and it barred one firm from participating in stock offerings for one year. This follows similar actions against 23 firms in 2013…
Meanwhile, the NYSE has submitted this petition for rulemaking to the SEC in an effort to have the SEC create a short-sale activity reporting and disclosure regime applicable to institutional investment managers. This follows the NYSE’s 2013 rulemaking petition advocating a more timely mandatory reporting and disclosure of long positions under Section 13(f).
We have posted the transcript for our recent webcast: “Regulation A/A+: Developing Market Practices.” There are many out there doing webcasts – but as far as I can tell, no one takes the time to produce the nicely cleaned-up transcripts like we do. Here’s an excerpt from this webcast’s transcript – with some factoids from Jean Harris of Greenberg Traurig:
The revised Reg. A, Reg. A+, became effective June 19, 2015. Looking at filings since that date, as of last week, there have been 28 filings and 13 private draft filings according to Sebastian Gomez Abero, Chief of Corp Fin’s Office of Small Business Policy. The filings are equally split between Tier 1 and Tier 2. Three have been qualified, one of which had filed before the June effective date of the amended rule.
Sampling the 11 that were filed in September, three filed for around $50 million, three for around $20 million, two for $5 million, one $10 million, one for $1 million and one not yet disclosed.
The $1 million filing is a Tier 2 offering that proposes to allow online shoppers to “earn” shares based on how much they shop. So it is intended to have many investors at very small amounts, just the type of registration that would be difficult if not limited to one or two states. One Tier 2 for $50 million is an unlisted REIT acquiring single tenant buildings, again an offering that would require registration in the states but for the preemption for Tier 2. A bio medical company is using W.R. Hambrecht in a best efforts offering. This is a good example of a company using Tier 2 where it is not sure it can get listed, although it is applying, and will be OTC if not. Were it to file as an emerging growth company, it would have to file with the states.
According to Sebastian, they are seeing a wide variety now that the dollar amount is increased. Reg. A used to be used primarily by local banks or S&Ls usually selling within one state. He indicated every review group has touched a Reg. A offering. They are seeing more real estate related than any other industry group. He also indicated more are being filed with legal counsel. Looking at a sampling of filings, one is a local bank opening a branch in a county in Indiana and intends to offer to residents of that county and the surrounding area. One is for secured notes backed by a pool of short-term real estate loans made to borrowers who are rehabbing houses and selling them. One is building cottages for adults with disabilities around a common club house. One is for cultivating medical marijuana; another is planning on providing facilities for the cultivation of marijuana. They will build and then lease the facilities to licensed marijuana growers and dispensary owners. Another is a soccer club.
Meanwhile, as noted in this MoFo blog, the OTC Markets Group has released updated guides outlining the application process to join their OTCQX Best Market and OTCQB Venture Market trading platforms for companies conducting offerings under Tier 2 of Regulation A+.
IPOs: First “Public Benefit Corporation” Takes the Plunge
As noted in this blog, a few companies have gone public as “Certified B Corporations” (see this blog about Etsy’s filing) – and we now have the first company to file for its IPO as an actual Delaware “public benefit corporation” (PBC). Earlier this month, Laureate Education, a global network of degree-granting higher education institutions, filed a Form S-1 for an IPO led by first tier underwriters…
Risk Factors: The Invalidated EU Data Security Safe Harbor
Pretty interesting dialogue went on recently in the “Q&A Forum” (#8569) about whether companies should be considering a new Risk Factor to cover the EU court’s invalidation of US-EU data privacy safe harbor. I’ll let you peruse the responses to see what you think. And don’t forget our “Risk Factors Disclosure Handbook“…
Corp Fin is in the process of combining the two examination groups devoted to reviewing filings made by financial service firms – AD Offices 7 and 12. So there will now be 11 AD groups; not 12. This restructuring unwinds a small piece of the moves that then-Corp Fin Director Meredith Cross made five years ago by reverting back to having only one banking group. The Assistant Director of AD7 stays the same – Dieter King – as Suzanne Hayes moves over as Assistant Director of AD1 to fill the slot opened up by Jeffrey Riedler’s retirement. Our own “Corp Fin Organization Chart” has been updated for all of these moves…
United’s CEO & The Tricky Disclosure of Health Issues
This WSJ article brought the sad news that the new United Continental Holdings CEO had a heart attack last Thursday. It also raises the tricky disclosure issue about how many details do investors deserve to know. I’ve blogged several times about my own thoughts on this challenging topic (those blogs are linked to from this one). Here’s an excerpt from the WSJ article:
United, in a brief statement early Friday afternoon, said it had been “informed by Oscar’s family that he was admitted to the hospital on Thursday and we will provide further details as appropriate. In the meantime, we are continuing to operate normally.” United declined to comment further on Friday.
Companies whose leaders experience serious illnesses face a delicate balance between investors’ right to know and the desire to protect the executives’ privacy—one that boards often struggle with, management experts said. Apple Inc. long kept co-founder Steve Jobs’s health issues under wraps, even during his two extended medical leaves. Apple board members never disclosed the specific reasons for the absences, decisions that raised the ire of some shareholders. Mr. Jobs died in 2011 after battling pancreatic cancer. More recently, Goldman Sachs Group chief Lloyd Blankfein disclosed a lymphoma diagnosis last month shortly after receiving the news from his doctor. He said he planned to continue working through treatment.
Robert Robins, a retired Tulane University professor of political science who has studied how companies handle executive illness, said United should divulge more detail than was included its brief statement. Mr. Munoz and his fellow directors have an ethical obligation “to be fully candid with shareholders about the nature of his illness and the prospects for his returning to his job,’’ Mr. Robins said. United’s general counsel, Brett Hart, was previously at Sara Lee Corp. when, in May 2010, the food company said CEO Brenda Barnes was taking a temporary medical leave. Sara Lee didn’t provide details about its likely duration or underlying cause, and some shareholders complained about the level of disclosure. Nearly a month later, the food maker said Ms. Barnes had suffered a stroke. She soon stepped down. United didn’t respond to a request to speak to Mr. Hart.
United’s directors Friday were hoping to find out more information about Mr. Munoz’s condition soon, then decide whether the airline requires an interim leader, the person familiar with the situation said. Depending on how long Mr. Munoz is disabled, “there are a few [United] executives who could be interim [CEO] for a short period of time,” this person added. “It could be a mild heart attack, and he could be back in two weeks,” the person said.
Here’s a note from Lawrence Heim of Elm Sustainability Partners:
Not ones to cry wolf, we had a bit of a shock at the ThomsonReuters Governance and Risk Seminar we participated in this morning. One of the sessions included a representative from the FBI’s International Corruption Unit. Just to be clear, this is the US Federal Bureau of Investigation. The topic was current enforcement of the Federal Corrupt Practices Act (“FCPA”). We asked if matters such as conflict minerals, human rights abuses and human trafficking were on their radar screen, expecting a blank stare or an overly-general “non-answer answer.” Instead, a direct – and rather unnerving answer – was given. To summarize:
– The FBI has already identified linkages between known instances of FCPA violations/concerns (corruption, doing business in ”low integrity countries”) and human trafficking/human rights abuses. Human rights matters are of current interest to them.
– FBI’s FCPA enforcement resources have grown dramatically in recent years.
– FBI has unlimited global reach for FCPA compliance enforcement.
– Conflict minerals experts would do well to have at least a basic understanding of FCPA.
We don’t know what that all means just yet, but we do think it adds another dimension of risk to the SEC filings, compliance status and supplier relationships.
On September 30, the House Financial Services Committee approved, by a vote of 32 to 25, H.R. 414, the Burdensome Data Collection Act, following committee consideration and a mark-up session. Given that the bill is only one paragraph long, there was not too much to mark up. The bill will now go to a full vote of the House. The bill would repeal Section 953(b) of Dodd-Frank, the pay-ratio provision, and make any regulations issued pursuant to it of no force or effect.
Any of this sound familiar? It should. The very same bill was introduced in 2011, but went nowhere. (See this news brief.) With President Obama still holding the veto pen and a substantial constituency supporting the pay-ratio provision, a different result seems unlikely this time.
Europe: Director Duties & Liabilities
This 31-page “Guide to Directors’ Duties & Liabilities” was released last week by the European Confederation of Directors’ Associations. See the heading entitled “Comply-or-explain needs more explanation.” I guess that caption is tongue-in-cheek…
As noted in this blog, the FASB issued two exposure drafts last week that address the use of materiality to help companies eliminate unnecessary disclosures in their financials. In addition, the exposure drafts are an attempt to have the FASB’s conceptual framework become better aligned with the legal concept of “materiality” established by the US Supreme Court.
The exposure drafts are part of the FASB’s disclosure framework project – and address the use of materiality in two ways:
– Helping companies use discretion when determining which disclosures in notes to financial statements should be considered “material,” and
– Helping FASB understand the reporting environment in which it sets accounting and reporting standards.
The Business Roundtable has a new white paper that argues that the materiality standard for determining disclosure obligations best protects investors and facilitates the capital markets…
PCAOB Auditor Inspections Will Focus on Three Areas
Last week, as noted in this blog, the PCAOB issued this “Staff Inspection Brief” to highlight the three general areas that it will focus on going forward during inspections: auditing internal control over financial reporting; assessing and responding to risks of material misstatement; and auditing accounting estimates, including fair value measurements. These are among the most common areas where inspectors found significant deficiencies in the past several years. In addition, PCAOB inspectors consider the current economic environment and related developments in their reviews. For example, economic uncertainty stemming from the financial crisis and the sluggish global economy has in the past factored into the audits and the areas selected for inspection.
Hat tip to the Society of Corporate Secretaries for noting how the PCAOB recently posted an updated Standard-Setting Agenda – and that based on comments received on its reproposal, the Staff anticipates recommending that the audit engagement partner disclosure be required on the new PCAOB form that was proposed as an alternative to disclosure in the auditor’s report. By the way, I just calendared this new webcast: “Audit Committees in Action: The Latest Developments.”
Coming? Disclosure Simplification for Smaller Companies
As noted in this Cooley blog, at last month’s meeting of the SEC’s Advisory Committee on Small and Emerging Companies, the Committee approved a set of recommendations in an effort to harmonize the jumble of rules that apply to the various categories of small companies and expanding the application of the small-company disclosure accommodations generally. Funny because I was just reliving some old memories with Brian Lane yesterday about the “Disclosure Simplification Project” that came out in 1996…
See this interview for a perspective of the disclosure effectiveness project underway related to accounting & the financials…
Last week, I posted a poll to see how folks were reacting to the NYSE’s new “release of material information” policy. The poll results show that 27% of companies plan to make earnings announcements before 7 am – while 35% will do so after 4 pm (25% said they’ll make them when they want). In addition, I got this note from a member:
We talked to the NYSE’s “Market Watch” team yesterday and confirmed that while the decision whether to halt prior to 9:30 in connection with the issuance of material news is made by the company, the determination as to whether the news is actually “material” will be made by the company and the Market Watch team together – and the NYSE won’t implement a pre-market halt unless the Exchange Staff agrees with the company’s own materiality assessment. As a result, the factors that are relevant to whether an earnings release is material would be jointly considered by the company and the NYSE. In determining whether to halt trading, the NYSE asks that companies consider whether earnings are coming “near expectations” or whether there is a big beat or miss. So the NYSE will halt between 7:00 and 9:30 if (1) the company and the NYSE agree that the news is material and (2) the company requests a halt. If those two conditions are met, the NYSE will halt trading.
There is no change to practice during trading hours. Remember that the NYSE doesn’t halt a stock after news has been issued, so trading volatility after 9:30 in response to a release issued before the NYSE opens would never give rise to a halt. The only situation that perhaps the NYSE would halt trading in those circumstances would be if it was clear that the original earnings release was inadequate and either misstated or omitted material information and an additional release was necessary.
The NYSE Proposes to Significantly Increase Its Annual Listing Fees
Recently, the NYSE filed a proposed rule change with the SEC to amend the NYSE Listed Company Manual effective January 1, 2016 to increase annual listing fees. As noted in this Fried Frank memo, the minimum annual fee for a company’s primary class of equity securities is currently the greater of $45,000 or $0.001 per share. The proposed hike would increase the minimum annual fee to the greater of $52,500 or $0.001025 per share – roughly a 17% increase. For example, a company with 100 million shares of its primary class of equity securities will pay an annual fee of $102,500 per year in 2016.
Transcript: “Evolution of M&A Executive Pay Arrangements”
We have posted the transcript for our DealLawyers.com webcast: “Evolution of M&A Executive Pay Arrangements.”
Following up on my series of blogs about fake SEC filings, here’s an excerpt from this WSJ article:
Two more companies were targets of apparently fake securities filings, this time Kraft Heinz Co. and Phillips 66. Two separate filings that said they were submitted by Loreto M. Zamora on behalf of LMZ & Berkshire Hathaway Co. to the Securities and Exchange Commission on Thursday morning claimed to hold at least 10% stakes in both Kraft Heinz and Phillips 66.
Both companies told The Wall Street Journal that the filings are fraudulent and they have contacted the SEC. Warren Buffett, whose Berkshire Hathaway Inc. owns stakes in the food and energy companies, said in an email that he has never heard of Mr. Zamora.
Transcript: “Whistleblowers: What Companies Are Doing Now”
We have posted the transcript for our popular webcast: “Whistleblowers: What Companies Are Doing Now.”
Yesterday, in a far-reaching judgment, the EU’s Court of Justice declared the European Commission’s 2000 US safe harbor decision invalid. I’ve never seen so many law firm memos come out so fast. For once, I’m not gonna post 50 of them – just these ones in our “Privacy Rights” Practice Area…
Smaller Company Capital Formation: House Passes Two Bills
As noted in this MoFo blog by Carlos Juarez, the House passed two bills yesterday relating to the promotion of capital formation by smaller companies, H.R. 1525 and H.R. 1839:
– H.R. 1525 is the “Disclosure Modernization and Simplification Act of 2015,” which directs the SEC to issue regulations permitting issuers to submit a summary page on annual and transition report form, 10-K, if each item on that page cross-references electronically or otherwise the material contained in form 10-K to which the item relates. It also requires the SEC to revise regulation S-K and to study ways to modernize and simplify the requirements.
– H.R. 1839 is the “Reforming Access for Investments in Startup Enterprises Act of 2015,” which would amend the Securities Act of 1933 to exempt certain transactions involving purchases by accredited investors, and for other purposes, codifying Section 4(a)(1)(½).
