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."
Over the last week, Cogent Communications Group became a three-time loser with 46% support in ’14 (Form 8-K) as the company also failed in ’11 (39%) and ’13 (34%). And FirstMerit (Form 8-K) also failed with 41% support – that company also failed in ’12 (47%). Hat tip to Karla Bos for the news!
More on our “Proxy Season Blog”
We continue to post new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Shareholder Proposals: A Uniform Voting Calculus
– SEC Asking Companies More about Overseas Taxes
– Shareholder Proposals: Banks Asked to Identify Risk-Takers & Their Comp
– Updated “Sample Time & Responsibility Proxy Season Schedule”
– Corp Fin Comment Letter Trends: Stock Compensation
– AICPA’s New Conflict Minerals Audit Guidance
Here’s a 2-minute video about the 27 great ways that Intel enhances the usability of its 2014 proxy statement (78 pages, with assistance from Addison):
Spring Break: What DC Tourism Looks Like
I’ve headed out on spring break vaca and Dave will run this blog for the remainder of the week. Here’s a 1-minute video that is my slide show of DC tourists enjoying the cherry blossoms & other popular landmarks:
Yesterday, Corp Fin issued 2 new CDIs – and one revised CDI – on instrastate offerings. As Joe Wallin blogged, they are important because they relate to state-level equity crowdfunding, and how to conduct a state-level equity crowdfunding offering without falling into federal law. Here they are:
Meanwhile, SEC Commissioners Aguilar and Stein each delivered a speech at the NASAA’s annual conference this week…
Drafting Disclosure: Can a Robot Do Your Job?
I like the idea of Rosie from the Jetson’s banging out a prospectus. Except perhaps when it’s real. The consulting arm of Seyfarth Shaw has announced “Disclosure Dragon” software that “automates, expedites and standardizes the development of a private placement memorandum (or other required disclosure documents depending on the type of offering) and supporting exhibits.” The announcement notes that further legal review is required – but that it could save up to 80% of the costs involved.
I’m not convinced there is much in the way of costs for creating crowdfunding documents anyways. From what I hear, under many state crowdfunding statutes, out-of-pocket legal costs will be less expensive than a what a SCOR costs today. Thoughts?
State Crowdfunding Laws: If You Build It…
Hat’s off to Davis Wright Tremaine’s Joe Wallin who drafted a crowdfunding bill on his own and blogged about it – and before you know it, Washington State’s Governor was signing it into law! Here are some FAQs on Washington’s new law – and Bill Carleton maintains this web page with many state laws on crowdfunding…
A lot of attention was paid to this Bloomberg article covering a long-time SEC trial lawyer’s speech at his retirement party (also see this American Lawyer story, which might have been the first). That article spawned others (here is one, another – and another) – which caused even my wife to ask me questions.
Here are five things I wondered when I read it:
1. Who is Jim Kidney? – I never heard of him nor did other old-time alumni that I spoke to. I know Stephen Crimmins is cited in the article, speaking highly of him – but the name still draws a blank.
2. How Did Bloomberg Get the Remarks? – The typical farewell party is a fun occasion – and often sad too if the person is well-liked. I have never seen an actual speech reduced to writing until I obtained Meredith Cross’ remarks delivered at Paula Dubberly’s farewell party that I blogged about a few months ago. I actually got my hands on the text of Jim’s speech too!
3. Why Did Bloomberg Bother With the Story? – In my opinion, these type of speeches never are newsworthy. Except perhaps in trade blogs like this. But I guess we live in a different era of journalism now (some of the reporting was over-the-top, reading much more into the speech than the Bloomberg piece). I note that the remarks are from someone who spent 30 years on the staff but was never promoted to a senior manager position. So it’s kinda funny that this is news on the scale of a speech by the SEC Chair.
4. Does the SEC Still Have a Reputation Problem? – The meat is what James said, not who he is. Clearly, more enforcement cases should have – and still should be – brought in the wake of the ’08 financial crisis. So I can see how this minor thing becomes big news. And many people are applauding James for being frank. But we don’t know all the facts, that’s for sure. There are reasons that cases aren’t brought aggressively, typically because of bad law. Here’s the latest interview with SEC Chair White about her new vision for Enforcement, including the news that she only sleep four hours per night…
5. How Come I Didn’t Get the Scoop? – I need to work harder…
Of course, the best farewell speech stories are the ones that don’t deal with any substance. Like the time the guy got so drunk he could hardly speak. That might happen occasionally when someone retires from a private sector job, but I’ve only seen it once at a SEC party (and I’ve been to over 100). They typically are a “low flow” affair…
NYSE Proposal: Relaxation of Director Independence for Spin-Offs
In this blog, Oliver Rust of Duane Morris explains how the NYSE has proposed to relax its bright line director independence tests in limited circumstances, so that “a director may be deemed independent of a company that has been the subject of a spin-off transaction regardless of the fact that such director or his employer had a relationship with the former parent of such spun-off company.”
European Commission Proposes Revised Shareholder Rights Directive
Yesterday, the European Commission proposed a revised shareholder rights directive. It’s a biggie that has something in there for everyone, including binding say-on-pay and proxy advisory firm reform. We’ll be posting memos in our “Europe” Practice Area.
This “Citizen’s Summary” is a unique concept – explaining the proposal for the masses. In particular, see the bottom of the page -they thought of everything except designating hashtags…
As someone with a job that is constantly trying to ensure diversity on my webcast panels, etc., I am keenly aware that we still have a long way to go in our profession. Racial diversity is woeful – I’m not sure if we’ve made much progress since SEC Chair Arthur Levitt highlighted this problem over 15 years ago. But even gender diversity is still an issue, including in the boardroom.
I am trying out a unique networking experience – “The Women’s 100 Conference” – that will be held in DC on Monday, June 2nd. Glad to say that it sold out without me having to market it – but I did recently have a handful of cancellations if you are interested (and I have a waiting list too in case others drop). Here’s the framework for how it will work & the agenda. The attendees are a good mix of law firm, in-house, investors and regulators.The cost is only $195. Email me if you are interested. And no, I won’t be in the room due to my maleness…
With the first annual disclosures due on June 2nd, many are scrambling to figure out how to best fill out their first Form SD, etc. – so we are hosting this special webcast – “Conflict Minerals: Tackling Your 1st Form SD” – at 1 pm eastern today, featuring WilmerHale’s Meredith Cross and Morrison & Foerster’s David Lynn. Tune in to get up-to-speed now…
The Corporate Counsel: Special “Salute to Women” Supplement
In connection with “The Women’s 100 Conference,” I had a group of respected and experience practitioners share their stories with me – and combined those stories in this special March-April Supplement to The Corporate Counsel. We are sharing this Supplement for free as part of our salute. The articles include:
– No More Masks – by Heidi Wilson
– A Fine Career: Becoming a Lawyer – by Prof. Roberta Karmel
– Where Are All the Women M&A Dealmakers? – by Diane Holt Frankle
– My Career Reflections – by Cheryl Sorokin
– Diversity One: One Step, One Action, One Impact – by Sylvia Groves
More on “The Mentor Blog”
I continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Political Contributions By the S&P 500: Stats
– Court: Form 8-K Is Not Exclusive Source of Disclosure Obligations
– SEC Drops Nearly 20% of Probes Against Individuals After Wells Notices
– FINRA Proposes Changes to Corporate Financing Rules
– Canada Proposes Broad Governance Reform
– Audit Committee Survey: Disclosure, Risk Oversight and Other Issues
Yesterday, Corp Fin issued 9 new FAQs, mainly dealing with obtaining an independent private sector audit (known as an “IPSA”) of the conflict minerals report. This is a second set of FAQs, that comes nearly one year after the first set of 12.
With the first annual disclosures due on June 2nd, many are scrambling to figure out how to best fill out their first Form SD, etc. – so we are hosting this special webcast – “Conflict Minerals: Tackling Your 1st Form SD” – at 1 pm eastern tomorrow, featuring WilmerHale’s Meredith Cross and Morrison & Foerster’s David Lynn. Tune in to get up-to-speed now…
Shareholder Proposals: Reform Debate Intensifies
Last week, I blogged about SEC Commissioner Gallagher’s speech wanting to reopen the can of worms that is the shareholder proposals rule. Then Nasdaq’s General Counsel – Ed Knight – weighed in with similar emotions in this WSJ op-ed. Now CII Director Ann Yerger has penned her own WSJ op-ed taking issue with Knight’s op-ed. And here is a piece from As You Sow…
Speaking of CII, it has sent its second letter to the SEC about interim vote tallies. This letter expresses a concern about Broadridge’s decision to not disclose interim voting tallies to shareholder proponents. Learn more in this Gibson Dunn blog – and this 4-minute video explains generally what this issue is all about…
Here’s a 2-minute video showing the 20 great ways that Western Union enhances the usability of its 2014 proxy statement (with assistance from DG3):
This Wednesday! Join Dave Lynn & Meredith Cross for this last minute webcast – “Conflict Minerals: Tackling Your 1st Form SD” – as folks are scrambling to figure out how to best fill out their first Form SD…
We continue to post new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– ISS Study Examines Voting In Europe
– Declassified Boards: Updated Shareholder Rights Project’s Results
– Shareholder Proposals: The Latest Stats
– ISS Releases 2013 Review of ESG Proposals
– Vanguard Sends Tailored Letters to 350 Companies
– Shareholder Proposals: Largest Companies Get More Than Fair Share
– Delaware: 10% Shareholder Requesting Shareholder Meeting – Who Has Burden of Persuasion?
Use of video is growing like mad – and I believe the use of video in SEC filings will explode over the next decade as a disclosure tool. I’ve been surprised how many practitioners don’t realize that the SEC dealt with the issue of how to file video – and other forms of multimedia – on EDGAR nearly 20 years ago. Since EDGAR can’t directly accommodate multimedia, it’s a workaround solution – but the guidance does exist. In this 90-second video, I explain how multimedia can be filed on the SEC’s EDGAR as part of a SEC filing.
How Do You Make a SEC Filing That Has QR Codes?
A while back, I posted this podcast on how QR codes can be leveraged for shareholder communications. As noted during the podcast, QR codes have been used already in glossy annual reports and proxy statements – typically on the back cover (see an example in this video). A member asked how one goes about filing something with the SEC if it has a QR code? Here’s my ten cents:
When used, QR codes should be included in the glossy part of the annual report – not the part incorporated into the Form 10-K, so the QR code is “furnished,” not “filed” – to avoid the problems associated with Rules 106 (ie. Edgar submissions shouldn’t contain executable code unless only in PDFs) and 304 of Regulation S-T (ie. need to provide fair and accurate narrative description of any graphic or image when filed).
Preliminary Proxy Statements: Corp Fins Gives More Foreign Issuer Relief!
For the second time, Corp Fin has issued interpretative guidance under Rule 14a-6 based on foreign law. In this letter, Corp Fin states that Aon – and any other issuers organized in England and Wales – may file a definitive proxy statement without filing a preliminary proxy statement for certain matters subject to an annual stockholder vote under the laws of England and Wales. The first of these letters went out a few months ago relating to the laws of Curacao…
I just posted these recent survey results on D&O Questionnaires and director independence:
1. Regarding the level of information that we request from directors in connection with their professional and personal affiliations (excluding immediate family member information):
– We ask each director to submit a list (at least annually) of their professional and personal affiliations – 43%
– We do not request a list of their affiliations, but ask specific questions related to the NYSE/SEC independence rules and have them confirm that there are no related issues – 50%
– Other – 5%
2. Regarding the level of information that we request from directors for their immediate family members:
– We ask each director to submit a list (at least annually) of their entire immediate family – 8%
– We ask each director to submit a list (at least annually) of their entire immediate family, including certain other information (such as the place of employment and/or job title) – 23%
– We define “immediate family members” and provide a list of the company’s subsidiaries and then ask each director to list any immediate family members doing business with these entities – 14%
– We define “immediate family members” and provide a list of the company’s subsidiaries and then ask each director to confirm that there are no related issues – 19%
– We do not request a list related to the immediate family members, but ask specific questions related to the NYSE/SEC independence rules and have them confirm that there are no related issues – 37%
– Other – 0%
3. Regarding the method(s) of due diligence review that we perform for director independence:
– We rely solely on each director to alert us to any potential independence issues – 28%
– We conduct a review (at least annually) of our accounts payable and receivable for ALL professional/personal affiliations (excluding immediate family member relationships) provided by our directors – 9%
– We conduct a review (at least annually) of our accounts payable and receivable for ALL transactions related to professional/personal affiliations and immediate family member relationships provided by our directors – 21%
– We conduct a review (at least annually) of our accounts payable and receivable for certain transactions related to professional/personal affiliations and/or immediate family member relationships; however, we only perform such a review of selected affiliations/relationships (i.e., we may not conduct a detailed review of certain relationships, such as that in connection with an immediate family member who is employed by Wal-Mart and not in an executive position) – 12%
– All – or some combination – of the above – 29%
Please take a moment to anonymously participate in our “Quick Survey on Pay Ratios” and our “Quick Survey on Proxy Drafting Responsibilities & Time Consumed.”
Transcript: “The SEC Staff on M&A”v
We have posted the DealLawyers.com transcript for the recent webcast: “The SEC Staff on M&A.”
Evaluating Your Board Evaluation Practices
In this podcast, Sylvia Groves of Governance Studio explains how corporate secretaries can evaluate their board, committee & director evaluation practices – and identify opportunities for improvement, including:
– Why should the board conduct an evaluation?
– What are the common components of an evaluation?
– What are some of the best practices in board evaluations?
– How can directors’ concerns about discoverability and liability be addressed?
– How can corporate secretaries ensure that the evaluation being used is really adding value – and not just wasting their directors’ time?
– How can you get a copy of Governance Studio’s tool to evaluate your board evaluation practices?
Not sure why Rep. Paul Ryan chose the SEC as an example of a federal agency with “duplication, hidden subsidies, and large bureaucracies” in his budget plan released yesterday, but he did. This is the 4th year in a row that Ryan has proposed a plan – but the first time he has focused on the SEC specifically. Remember that the SEC is not only deficit neutral and doesn’t count against the new-fangled Congressional budget caps, but is an independent agency that brings in more money to the US Treasury than it costs. Ryan’s proposal doesn’t specify exactly how much he would cut from the SEC (rather there are budget cuts for a group of agencies as a whole on pages 38-39).
This blog is nonpartisan – but the following blurb copied from pages 39-40 of the budget is worth analyzing since Ryan is a key member of Congress and a potential Presidential candidate (below each section is commentary from me):
Ryan: As of March 2013, the SEC had 3,950 full-time employees, and an average salary across the agency of over $155,000. SEC’s budget has risen by more than 45 percent since fiscal year 2007. If the President’s fiscal year 2015 budget request were granted, SEC’s budget would grow by another 26 percent in just one fiscal year.
Me: Remember how Congress wanted the SEC to grow like wildfire in the wake of the financial crisis? Back in 2010, they wanted the Staff to grow by 20% quickly. That pipe dream was quickly crushed by a series of long hiring freezes and a sequester that got made permanent. Meanwhile, the SEC oversees 25k market participants directly – and work indirectly on behalf of millions and millions of investors.
As for average salary, it is true that a GS-15, Step 10 in the DC area makes $155k. Most Staffers are now professionals as the SEC’s clerical staff has been cut to the bare minimum. But compare the pay of the average SEC Staffer to the pay on Wall Street. Peanuts! And let’s all read Michael Lewis’ “Flash Boys” and compare notes about how a defunded SEC is supposed to match wits without the modern technology that Chair White has requested as part of this budget cycle.
Ryan: There is a long paragraph lifted from a House Financial Services report about “in the run-up to the financial crisis and its aftermath, the SEC repeatedly failed to fulfill any part of its mission.” Madoff, Allen Stanford, etc.
Me: Blaming the SEC for the financial crisis seems like revisionist history. Blaming cops for crimes committed by others. If the SEC couldn’t handle supervising Wall Street, etc. before the financial crisis with the resources it had, how will it handle them better going forward with far fewer? At what point does the SEC get slashed so much that it will be completely ineffectual – with the result that there will be no more trust in the market?
Ryan: This resolution questions the premise that more funding for the SEC means better, smarter regulation. Adding reams of regulations to the books and scores of regulators to the payrolls will not provide greater transparency, consumer protection, and enforcement for increasingly complex markets.
Me: Since Dodd-Frank – and then the JOBS Act – nearly every rulemaking resource at the SEC has been devoted to implementing new regulations dictated by Congress. Congress is the one guilty of adding more regulations – some of them not so “better and smart” (eg. conflict minerals). Ryan acknowledges this as he thinks Dodd-Frank should be overturned.
Ryan: Instead, the SEC should streamline and make more efficient its operations and resources; defray taxpayer expenses by designating self-regulatory organizations (subject to SEC oversight) to perform needed examinations of investment advisors; and enhance collaboration with other agencies, such as the Commodity Futures Trading Commission, to reduce duplication, waste, and overlap in supervision. Ultimately, the committees of jurisdiction will establish the specific policies.
Me: I’m not even sure what to make of this paragraph. The last sentence really confuses me. Is Ryan saying that Congressional committees should be setting policy for an “independent” agency? Not only does that seem to violate the Constitution’s “separation of powers” doctrine, but it’s just plain scary as Congress clearly doesn’t have the knowledge (or time) to oversee the market like the SEC.
Let’s slash the SEC’s budget – but then create new SROs that will cost much more than what we slashed? As we learned the hard way before (eg. AICPA in charge of auditing standards), SROs tend to be ineffective because they are captured regulators. The SEC-CFTC overlap argument is old, tired and doesn’t have a lot of heft – the Venn diagram probably looks close to this.
SEC Chair White Testifies Over 2015 Budget Request
Yesterday, SEC Chair White testified in support of its $1.7 billion budget request for next year – under which the SEC hopes to hire 639 new Staffers and bring in new technology. Here’s the SEC’s budget justification plan.
I’ve been posting memos recapping last week’s SEC cybersecurity roundtable in our “Cybersecurity” Practice Area. And I’ve created this 1-minute video of a sober reenactment of the roundtable:
