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 sporadic occasion of law firms coming together to issue a white paper on a topic that could use consensus perhaps has spread to the academic world. Except the professors don’t seek a consensus view – they seek a retraction. This statement from 34 senior corporate professors urge SEC Commissioner Gallagher and Professor Grundfest to withdraw their allegations against Harvard and the Shareholder Rights Project (see my latest blog about this battle). I wonder if this banding of professors will become a new trend…
Poll Results: The Longest 10-K Filed in 2014? 2000 Pages
Recently, I ran this poll asking you to guess how many pages were in the longest Form 10-K filed during 2014 – the page count included exhibits. About 20% got the correct answer: Hertz Global Holdings’ 10-K filed on March 19th, weighing in at just under 2,000 pages (47% guessed too low; 33% too high). There are many other interesting stats about filings made last year in this blog from footnoted.com…
Legal Opinions for Registration Statements: SEC Enforcement Activity
This blog by Allen Matkins’ Keith Bishop is interesting. The blog is about a recent SEC enforcement action against a lawyer for allegedly issuing a false legal opinion in support of registration statements filed by multiple shell companies. Here’s an excerpt from the blog:
The opinion doesn’t say that the lawyer investigated and examined the issuer (as the SEC’s order alleges) – it says that she examined “such records . . . as I have deemed relevant and necessary to examine for the purposes of this opinion.” The SEC’s charging order also omits the following language from the attorney’s opinion: “In expressing this opinion I have relied, as to any questions of fact upon which my opinion is predicated, upon representations and certificates of the officers of the Company.”
This is significant because the crux of the SEC’s order appears to be that the issuers did not actually receive any consideration for the issuance of shares. In issuing “fully paid” opinions, lawyers typically rely upon certificates. See, e.g., Legal Opinions in Business Transactions, Corporations Committee of the State Bar of California Business Law Section (May 2005, rev. Oct. 2007) (“To confirm ‘full payment’ an opinion giver generally obtains an officers’ certificate to the effect that the Company has received the consideration called for by the directors in approving the issuance of the shares.”). The SEC’s order, however, does not allege that the attorney failed to obtain an officer’s certificates in support of her opinions. If she did obtain certificates, is the SEC claiming that attorneys have an obligation to investigate factual matters contained in certificates upon which the attorney expressly states that she relied? “Vor dem Gesetz steht ein Türhüter“
However, I was far more distressed to see the following statement in the SEC’s announcement because it completely misapprehends the responsibilities of lawyers in private practice: “Attorneys and auditors have a serious obligation as gatekeepers to protect the integrity of our markets, and the individuals we’ve charged in this case failed the investing public in their roles,” said Sanjay Wadhwa, Senior Associate Director for Enforcement in the SEC’s New York Regional Office.”
Attorneys are most emphatically not gatekeepers – they are advisors to, and advocates for, their clients. See A Washington Fable For Our Time.
Last week, as noted in this article, the GOP passed the package of bills in HR 37 that got defeated a few weeks ago. This time, only a simple majority was needed to pass – and the House voted 271-154 to pass HR 37 (entitled the “Promoting Job Creation and Reducing Small Business Burdens Act“). Among other things, the bill includes a number of JOBS Act-like changes (see more in this MoFo memo):
– Aligns Exchange Act 12(g) threshold for savings and loan holding companies
– Clarifies the termination of EGC status
– Requires a study of XBRL requirements that may exempt XBRL for many companies
– Permits issuers to submit a summary page on Form 10-K
– Requires a Regulation S-K study intended to simplify disclosure requirements
But as noted in this blog, it’s uncertain whether this bill will pass the Senate. And then as noted in this blog, the White House issued a formal veto threat because the bill also delays part of the Volker Rule effectiveness until July 21, 2019. So the chances of this becoming law are slim at this time…
Congress: Broader Subpoena Power for Committee Chairs – Impact on the SEC?
Egads. The last thing Congress needs is more power to force government employees to come and participate in the theater known as Congressional hearings. But, as noted in this WSJ article, the number of GOP chairs empowered to issue subpoenas without holding a committee vote first is expected to double to 12 by the end of the month. Last Tuesday, the House Financial Services Committee voted to allow Chair Jeb Hensarling (R. Texas) to send a subpoena without a committee vote – so expect to see a steady line of SEC Staffers headed to the Hill as part of the GOP push to pare back Dodd-Frank, etc. Learn more about this change in this memo…
Don’t forget to take advantage of our free “Job Board” – to either post job openings or your profile if you’re looking for a new gig…
The SEC Does Not Care about Its Injunctions
David Smyth of BrooksPierce recently wrote this interesting blog entitled “The SEC Does Not Care about Its Injunctions.” Here’s an excerpt:
It won’t surprise you to learn that the U.S. Code includes this provision: “A court of the United States shall have power to punish by fine or imprisonment, or both, at its discretion, such contempt of its authority . . . as . . . [d]isobedience or resistance to its lawful writ, process, order, rule, decree, or command.” It’s right there at 18 U.S.C. § 401(3). District courts also have inherent power to enforce compliance with their orders through civil contempt. E.g., Roadway Express, Inc. v. Piper, 447 U.S. 752, 764-65 (1980).
Meanwhile, the SEC’s enforcement staff works pretty hard to seek and obtain injunctions against its defendants. They’re odd injunctions. They don’t command someone to avoid particular behavior. In addition to ordering disgorgement and civil penalties, they just order defendants to do what the securities laws already require them to do – that is, obey the law. Some federal trial and appellate courts don’t love these injunctions, finding them overly vague under Rule 65. But they are what they are, and it takes a lot of effort to get them.
So . . . True or False: Having gotten those injunctions from a federal court, the SEC doesn’t really care if defendants violate them. True! If you are such a defendant, and you agree or are compelled not to violate specific provisions of the federal securities laws – as the law itself already requires – the SEC will not seek to have you held in contempt of court if you go ahead and violate those provisions anyway. It might sue you again for new things it thinks you did, but contempt related to the old injunction? Bygones. The past is the past.
Tune in today for the always entertaining webcast – “Pat McGurn’s Forecast for 2015 Proxy Season” – when Davis Polk’s Ning Chiu and Gunster’s Bob Lamm join Pat McGurn of ISS (the proxy season expert) to recap what transpired during the 2014 proxy season and what to expect for 2015. Please print off this deck before the program. And yes, we will discuss proxy access…
Isn’t It Strange That the US Gets to Fine a French Company for Bribery Not In The US?
This DOJ announcement last month that a French company – Alstom – agreed to pay $772 million in a Foreign Corrupt Practices Act case made my head twirl. $772 million! And the DOJ brought a FCPA case against a non-US company for bribery that didn’t take place in the US! See this Forbes article for more…
Poll: How Would You Treat a Proxy Access Shareholder Proposal?
Pretend you are at a company that received a proxy access shareholder proposal – and that you’re the ultimate decision-maker about how to handle it. What would you do? Answer via this anonymous poll:
On Friday – after the SEC’s closing bell of 5:30 pm – the SEC issued a statement (and Corp Fin posted this reconsideration letter to Whole Foods), prompting me to post my first-ever nighttime blog. Now I find myself blogging on a holiday. Here are the top 5 questions that I have been fielding:
1. How Big a Deal Is This? – Certainly it’s bigger than Tiny Courtney Lee. For companies dealing with counterproposals – proxy access or otherwise – it’s huge because they have challenging decisions to make right now. Looking at the bigger picture, it could be monumental as the future of the 14a-8 process might be in play. That might be an exaggeration – and hopefully it is – but perhaps the house of cards falls down if companies begin to routinely exclude proposals without consulting the Corp Fin Staff if they comfortably believe a proposal fits an exclusion. At the end of the day, this isn’t likely to come about for a host of reasons, including the expense of litigating and the threat of SEC’s Enforcement Division getting into the fray. Not to mention earning the ire of shareholders and proxy advisors. But it is a possibility.
2. Has the SEC Ever Done This Before? – There have been a handful of Commission reversals of Corp Fin Staff positions in the shareholder proposal arena over the years. This situation isn’t that – at least, not yet. But even the SEC taking a proxy season off to ponder a reversal isn’t unprecedented either. As noted in this memo, the SEC took a similar approach in ’07 with Hewlett-Packard’s shareholder proposal after the AFSCME v. AIG court decision because the Staff hadn’t yet firmed up its views (this was the 1st proxy access shareholder proposal after the 2nd Circuit handed down its decision nullifying part of the SEC’s proxy access rule). As I recall, H-P decided to include the proposal in its proxy statement rather than exclude without no-action relief. But it’s a rare occurrence. I went back to review the Cracker Barrel saga in the early ’90s and I believe employment-related proposals under (i)(7) played out like this too, with the SEC taking a powder for a season (see pages 149-150 of my “Shareholder Proposal Handbook“).
Bear in mind that the appeals process for shareholder proposals is vague as there are no formal procedures (as covered on pages 39-41 of my Handbook). Also note that it’s unclear if this was a decision by Chair White alone or a majority of Commissioners.
3. Can Companies with Counterproposals Just Exclude Them & See If They’re Sued By the Proponent? – Companies with counterproposals appear to have 5 options:
1. Exclude the shareholder proposal but also not include their own proposal (not likely to be chosen as it completely flouts the law)
2. Exclude the shareholder proposal after seeking declaratory relief from a court & include their own proposal
3. Exclude the shareholder proposal without court relief & include their own proposal
4. Include the shareholder proposal & include their own proposal too
5. Include the shareholder proposal but not include their own proposal
Let’s deal with the 2nd & 3rd options. Here’s a paragraph from one law firm memo I saw:
“It is important to note that companies are not required to obtain no-action relief from the staff in order to exclude a proposal under Rule 14a-8. The relevant SEC rule, Rule 14a-8(j), requires only that the company “file its reasons” with the SEC no later than 80 calendar days before it files its definitive proxy statement. Furthermore, the SEC staff has expressly confirmed that “the staff’s no-action responses to Rule 14a-8(j) submissions reflect only informal views. The determinations reached in these no-action letters do not and cannot adjudicate the merits of a company’s position with respect to the proposal. Only a court such as a U.S. District Court can decide whether a company is obligated to include shareholder proposals in its proxy materials.”
The traditional thinking has been that companies don’t exclude a shareholder proposal unless they get no-action relief from the Corp Fin Staff. But there have been cracks in that thinking in recent years as a smattering of companies have sought declaratory relief from a court instead of following the Staff process – or even going as far as excluding a proposal without seeking court relief either – so there is precedent for going forward without no-action relief. Note that Rule 14a-8 doesn’t require that a company obtain a favorable no-action response. And then there’s the recent matter of Trinity v. Wal-Mart, where the Staff granted no-action relief to the company – but the proponent then won in court to compel inclusion. In other words, the court overturned Corp Fin’s decision – so the value of obtaining a no-action response perhaps has become somewhat tainted. [As noted in this blog, that court decision currently is being appealed.]
Early rumblings from over the weekend indicate some companies may take one of the 2nd or 3rd routes. The 2nd route has litigation risk and would entail proponents incurring litigation costs if they sued to compel inclusion of their proposals. The 3rd route ensures that the company will incur litigation costs even if the proponent doesn’t. There probably isn’t much of a SEC enforcement risk as there have been law suits in recent years that illustrate how the SEC is unlikely to take action in the shareholder proposal area. That, of course, could change – but unlikely given the SEC’s statement on Friday. Both of these routes are tempting because the law (and courts unfamiliar with shareholder proposals) appear to favor companies (to fully explain this sentence would take a whole series of blogs; the counterproposal area is much more challenging than you would think – it’s not black and white like it appears on its face).
But I urge caution for companies tempted to step into the morass. Think of what your shareholders will think (and do) if the company starts excluding proposals without going through any sort of regulatory or judicial process. And perhaps even a bigger risk is what ISS and Glass Lewis do. A few years ago, as noted in this blog, Kinetic Concepts pointed to a court ruling that KBR won and said they wouldn’t include a shareholder proposal because the circumstances were similar, so they didn’t bother asking for a no-action letter. ISS then said they would recommend voting against the entire board. Kinetic capitulated and adopted the proposal. If ISS still maintains the same position, this should be determinative in my opinion. You don’t want your board under siege. The key is to engage your shareholders and see what they want you to do. Don’t exclude a shareholder proposal by only engaging with your advisors.
4. Can Companies Include the Counterproposals But Also Include Their Own Proposal To Give Shareholders an Alternative? – Yes, they can – this is option #4 from above. And it’s something that shareholders might view as a preferable alternative. There would be a few things to think about, with a primary one being what to do if both proposals garner a majority vote? In that scenario, I imagine the company proposal would be considered implemented because it’s binding and the shareholder proposal would be precatory – even if the shareholder proposal received more votes than the company proposal. But the optics of that aren’t good if the shareholder proposal majority winds up being higher than the company’s proposal majority. This is uncharted territory and needs to be thought through before you file your proxy statement as the disclosure should be fulsome about the possible voting outcomes.
Other disclosure considerations include: Would the company include a statement in opposition of the proponent’s proposal – or would it use its own proposal for that purpose (or also allow the proponent to include a statement in opposition to the company’s proposal). How would the proxy card look (and don’t forget to give Broadridge a head’s up to ensure their systems can handle that)? I presume management would put its proposal first.
5. Does the SEC’s New Position Impact Counterproposals That Aren’t Proxy-Access Related? – The answer here is “yes.” There are a bunch of other (i)(9) letters beyond proxy access (eg. special meeting and pro rata vesting proposals) and it looks like those are collateral damage for this proxy season. According to this Gibson Dunn blog, there are 49 no-action requests pending that argue for exclusion under Rule 14a-8(i)(9), 41 of which assert (i)(9) as the only basis for exclusion. All (i)(9) requests are impacted by the SEC’s statement – not just the proxy access ones – based on this language in the SEC’s statement: “we will express no views on the application of Rule 14a-8(i)(9) during the current proxy season.” In fact, the SEC’s announcement doesn’t even mention proxy access proposals specifically…
Tomorrow’s Webcast: “Pat McGurn’s Forecast for 2015 Proxy Season”
Tune in tomorrow for the always entertaining webcast – “Pat McGurn’s Forecast for 2015 Proxy Season” – when Davis Polk’s Ning Chiu and Gunster’s Bob Lamm join Pat McGurn of ISS (the proxy season expert) to recap what transpired during the 2014 proxy season and what to expect for 2015. And yes, there will be discussion about proxy access. Please print off this deck before the program…
Some folks just lost their 3-day weekend. I have never blogged twice in a day – but figured I won’t be blogging until Tuesday and this SEC Statement (repeated below) – and this reconsideration letter from Corp Fin to Whole Foods – were just released:
Statement from Chair White Directing Staff to Review Commission Rule for Excluding Conflicting Proxy Proposals
Chair Mary Jo White
The Commission’s proxy rules enable shareholders to submit proposals for inclusion in a company’s proxy materials for a vote at a shareholder meeting, subject to certain procedural and substantive exclusions. One of the exclusions, Exchange Act Rule 14a-8(i)(9), allows a company to exclude a shareholder proposal that “directly conflicts” with a management proposal. Due to questions that have arisen about the proper scope and application of Rule 14a-8(i)(9), I have directed the staff to review the rule and report to the Commission on its review.
Announcement of the Division of Corporation Finance Related to Exchange Act Rule 14a-8(i)(9) for Current Proxy Season
In light of Chair White’s direction to the staff to review Rule 14a-8(i)(9) and report to the Commission on its review, the Division of Corporation Finance will express no views on the application of Rule 14a-8(i)(9) during the current proxy season.
I’ve heard great feedback from those that have checked out the archived video of the “Usable Proxy Workshop” that I recently posted. One of the panels was entitled “Video as a Disclosure Tool” – and I think we will see an increasing use of video this proxy season. As it stands, about 25% of the Fortune 100 use video in their annual reports (here’s a 2013 list).
I love the way that Cognex puts the forward-looking information to the right of the box housing the video, rather than starting the video with the disclaimer – as that is a huge turn-off for viewers…
Video Annual Reports: Tout Your Story
If you watch the archive of the “Video as a Disclosure Tool” panel (or you read my checklist on the topic), you will learn the importance of using a “story” when making your videos. But if you bother to improve your disclosures, don’t forget to market them. Use your company’s Facebook page and Twitter feed to mention them at least several times over a 2-3 week period. And consider even sending a press release like this one from Marriott…
When I blogged earlier this week about the 16 companies who have filed no-action requests related to shareholder proposals seeking proxy access, I forgot to mention the growing phenomena of some companies taking the “group” concept out of management’s proxy access proposal. It started with Whole Foods, who was the first to limit the “group” of shareholders who can submit a director nominee to one. In other words, under this framework, there is no group that can band together to meet the ownership threshold in a company’s access framework – a single shareholder has to pass muster.
Not all of the 16 companies battling proxy access shareholder proposals limit groups to a single shareholder – some limit the group to 10 (and some have no maximum). But some do follow Whole Foods lead and kill the group concept entirely with a “1 shareholder” limit (see the chart near the bottom of this CII alert). This is another way how some of these management proposals differ from the shareholder proposals submitted by the NY Comptroller and others. This new wrinkle is sure to draw the ire of some shareholders – it will be interesting to see if there is any fallout. Here’s a blog by Davis Polk’s Ning Chiu about Vanguard’s latest policy on proxy access proposals…
2nd Circuit Splits With 9th: MD&A Omissions Can Be Actionable in Section 10(b) Claims
Here’s an excerpt from this blog about an MD&A case by Kevin LaCroix:
On January 12, 2015, the Second Circuit ruled – in Stratte-McClure v. Morgan Stanley – “as a matter of first impression” for the appellate court, that a failure to make a disclosure required by Item 303 of Reg. S-K is an omission that can serve as a basis for a Section 10(b) securities fraud claim, but only if the other requirements to state a Section 10(b) claim – such as materiality and scienter – have been met. In ruling that a failure to make an Item 303 disclosure can state an actionable Section 10(b) claim, the Second Circuit reached a different conclusion on the issue than did the Ninth Circuit in an October 2014 decision on the same question.
– Retention Awards at Acquired Companies
– Delaware Chart: Determining the Likely Standard of Review for Board Decisions
– Respecting Boilerplate: Liability, Party & Enforcement Provisions
– More on “Anatomy of a Proxy Contest: Process, Tactics & Strategies”
If you’re not yet a subscriber, try a 2015 no-risk trial to get a non-blurred version of this issue on a complimentary basis.
I often get asked about examples of trendy disclosures (particularly since I started making videos highlighting usable proxies). Here are some of the better disclosures I have seen this year about shareholder engagement – they stood out for various reasons (detail provided around process, detail provided around feedback & changes made, discussed in letter to shareholders from the board, design/format, etc.). Some companies were doing general outreach and some were acting in response to low say-on-pay votes:
Learn more about shareholder engagement by tuning in today for the webcast – “Governance Roadshows: In-House & Investor Perspectives” – during which Vanguard’s Sarah Goller, BlackRock’s Michelle Edkins, Morrow & Co’s Bill Ultan and Global Governance Consulting’s Susan Wolf will discuss the latest engagement practices – including provide practice pointers about what works – and what doesn’t. And check out this excellent E&Y memo from May that discusses high level trends around engagement disclosures. Over 50% of the S&P 500 had some sort of engagement disclosure this year…
Survey: Gap between Investor & Corporate Director Views
This PwC report compares findings of two surveys conducted in the summer – one of which was an investor survey and the other was a director survey. This new report cites notable differences in opinion, such as:
– Investors are much more skeptical than directors about impediments to replacing underperforming directors.
– Investors are more skeptical about overcoming board diversity challenges. 85% of investors believe there are impediments to increasing gender diversity compared to just 14% of directors.
– Board composition and performance are receiving increased scrutiny. Both investors and directors sense this trend and express even more concern about lower levels of voting support for director nominees than last year.
– 99% of directors say they understand their company’s risk appetite at least moderately well, compared to only 61% of investors who believe they do.
Webcast: “The Latest Developments: Your Upcoming Proxy Disclosures”
Tune in tomorrow for the CompensationStandards.com webcast – “The Latest Developments: Your Upcoming Proxy Disclosures” – to hear Mark Borges of Compensia, Alan Dye of Hogan Lovells and Section16.net, Dave Lynn of CompensationStandards.com and Morrison & Foerster and Ron Mueller of Gibson Dunn discuss all the latest guidance about how to overhaul your upcoming disclosures in response to say-on-pay-including the latest SEC positions-and the other compensation components of Dodd-Frank, as well as how to handle the most difficult ongoing issues that many of us face.
Recently, I blogged about how SEC Commissioner Dan Gallagher and former SEC Commissioner Joe Grundfest wrote a paper attacking Harvard’s “Shareholder Rights Project” (also see this Davis Polk blog). As a rebuttal, Professor Macey wrote this blog that analyzes errors in the paper. Then Grundfest responded – and Macey responded to that. And then another blog from Grundfest (endorsed by Gallagher) – and a last response from Macey. All interesting stuff.
Even more interesting is this DealBook piece which really gets into the nitty gritty of the personalities involved and whether a sitting Commissioner should be writing about potential securities law violations in a law review piece.
But I want to get to more of a procedural issue – prejudgement by an administrative agency. Does Commissioner Gallagher’s comments in his co-authored paper now preclude him from participating in deliberations on related issues? In other words, must he be recused? For starters, at the end of his blog about this issue, Keith Bishop wonders:
Daniel Gallagher is a sitting Commissioner and his co-authorship of this paper could lead arguments that he must disqualify himself should the issue actually come before the Securities and Exchange Commission. It is unlikely that it would because SEC enforcement would take form of a civil enforcement action before an Article III judge. The most famous case dealing with claims of prejudgment in administrative proceedings is Cinderella Career & Finishing Schools, Inc. v. FTC, 425 F.2d 583, 591 (D.C. Cir. 1970) which enunciated the following test:
“The test for disqualification has been succinctly stated as being whether “a disinterested observer may conclude that [the agency] has in some measure adjudged the facts as well as the law of a particular case in advance of hearing it.” Gilligan, Will & Co. v. SEC, 267 F.2d 461, 469 (2d Cir.), cert. denied, 361 U.S. 896, 4 L. Ed. 2d 152, 80 S. Ct. 200 (1959).”
Then Professor Tamar Frankel wrote this blog entitled “Did Commissioner Gallagher Violate SEC Rules?,” which includes this excerpt:
I am unaware of any case in which a sitting SEC Commissioner released a paper accusing particular individuals or organizations of legal violations, and urging enforcement action and/or private suits against them, or used such public accusations as an instrument for urging other Commissioners or the SEC staff to change their policy. In a recent comment to the New York Times, Harvey Pitt brought up as a possible precedent a 1974 speech by then-Commissioner A.A. Sommer who expressed concerns about “going-private” transactions. However, Sommer’s speech (available on the SEC website here) did not mention (let alone accuse) any particular individuals or organizations (the only mention of any names in the Speech is in footnote citations to past court cases). There is a big difference between discussing general policy problems, which SEC Commissioners should be doing, and attacking or urging actions against particular individuals and organizations, which SEC Commissioners should not be doing.
I want to emphasize that this isn’t my area of expertise. But as I understand it, the standard for recusals is a bit vague. It’s closely intertwined with the factual question of whether a comment or remark constitutes prejudgement or bias. And it’s also fundamentally different for matters of general regulatory policy (e.g. rules) and “specific matters” (e.g. enforcement action).
Jack Katz, longtime former Secretary of the Commission, notes:
It seems to me that the recusal question is a very tricky one that in large measure could depend on how the issue is submitted to the Commission. The central issue may concern the application of the “prejudgement” doctrine. Prejudgement arises on specific matters/adjudications where the Commission must act on the basis of the record in the proceeding (“on the record” proceedings). Typically, this is an enforcement administrative proceeding, although it can also be hearings on registrations/licensings, revocations or exemptive actions. It is not limited to formal hearings before an ALJ. If a Commissioner has reached a decision on a “specific” matter before the record has been submitted, then he or she is said to have pre-judged the case and may not participate.
This doctrine is fundamentally different if the matter is not a “specific” question or issue, but rather a matter of general applicability, such as a rule-making. In these areas, it is accepted that Commissioners may have pre-existing opinions or views on the correct interpretation of the law that may influence how they vote. So ultimately, the issue may turn on how this is presented to the Commission.
For some SEC-related precedent, consider the 1988 Eighth Circuit case – Antoniu v. SEC – concerning SEC Commissioner Charles Cox. This was a prominent insider trading case at the time and Commissioner Cox gave a speech discussing the need for different levels of sanctions for inadvertent violators and indifferent violators. Cox referred to this insider trader, who had been enjoined, as an indifferent violator. Unfortunately, Cox had forgotten that there was a pending “follow-on” administrative proceeding to bar the guy that was on appeal to the Commission. Shortly after the speech, the SEC became aware of the problem and Cox had to recuse himself. The court was concerned that the SEC never formally recorded a date when he was recused – and so the SEC couldn’t demonstrate that he had never participated in the pending appeal. This law review article by Prof. Douglas Michael – who was Cox’s counsel at the time and who wrote that speech for Cox – does a nice job of explaining this case…
Meanwhile, in this blog, Keith Bishop delves into the issue of whether the Shareholder Rights Project was providing “legal advice” to its institutional investor clients (also see this follow-up blog by Keith about how the SRP website was changed in the wake of his initial blog)…
Tune in tomorrow for the webcast – “Governance Roadshows: In-House & Investor Perspectives” – during which Vanguard’s Sarah Goller, BlackRock’s Michelle Edkins, Morrow & Co’s Bill Ultan and Global Governance Consulting’s Susan Wolf will explain governance roadshows – including provide practice pointers about what works – and what doesn’t.
Corp Fin Updates Financial Reporting Manual (Been a While)
Yesterday, Corp Fin indicated that it recently updated its Financial Reporting Manual to conform it to the issuance of Accounting Standards Update No. 2014-17, Business Combinations (Topic 805): Pushdown Accounting, a consensus of the FASB Emerging Issues Task Force and rescission of SAB Topic 5.J. Think it’s been nearly a year since the last change…
More action since I blogged about the spate of companies seeking no-action relief on counterproposal grounds (Rule 14a-8(i)(9)) last Monday. I’ll start with this blog by Michael Levin of “The Activist Investor” about his views on access – and here’s Michael’s letter to NY Times’ Gretchen Morgenson about her column.
Then we have CII sending letters to Whole Foods and the other companies who plan to include their own proposals on the ballot, arguing that they set unreasonably high barriers to shareowner nominations and urging that the “3%/3 years” formula should be the standard. In addition, CII has written this letter to the SEC seeking a different approach from the Staff in processing this type of no-action request.
Here’s a list of the 16 companies that have sought no-action relief on proxy access so far (including links to their no-action requests; also see Ning Chiu’s chart):
Dodd-Frank: Technical Corrections Bill Fails to Pass (For Now)
In all my reporting on Congressional activity last week, I forgot to mention that Congress failed to pass the Dodd-Frank corrections bill last week (HR 37). It was due to an oddity of the need for a two-thirds vote needed for passage – normally it just requires a majority vote, but the GOP used a voting procedure for non-controversial measures that uses the higher two-thirds standard and Democrats didn’t vote for the law, as noted in this Bloomberg article. HR 37 would have delayed the Volcker Rule and would have exempted emerging growth companies and small business with revenues under $250 million from XBRL requirements – as well as require the SEC to simplify Regulation S-K. My guess is that a new bill will accomplish these things and pass soon enough…
The SEC has issued a notice to hold an open Commission meeting to propose rules for securities-based swaps on Wednesday (and as noted in this blog, Congress has passed legislation which provides that swap end-users do not have to provide initial and variation margin for uncleared swaps as previously required by Dodd-Frank). But nothing about pay ratio rules being adopted…
Rock Party Weekend: Section 16 Workshop
As you can tell from this 6-second video, our inaugural “Section 16 Workshop” included some play amongst real work. Our 2nd workshop – in San Francisco on June 8th – is nearly sold out. Act fast if you want to attend…
