In addition to the proposed changes to NYSE listing fees, the SEC also posted notice of a proposed NYSE rule change to Section 907.00 of the Listed Company Manual. Companies that list on the Exchange after the rule is approved by the Commission will be eligible to sign up for an expanded list of “complimentary products & services” for 4 years after listing, which include:
– Market Intelligence – Replacing the current offering of “market surveillance,” in light of the fact that the NYSE’s contracted service providers now provide additional info to track investor views and how they change over time
– Web-hosting & Web-casting – Combining two separate services, since the NYSE’s service providers now aggregate them as a single option
– Board of Directors Platform
– Virtual Event Platform
– ESG Tools
– News Distribution Products & Services
If approved, the rule change also would give companies more flexibility to select different levels of services – subject to a maximum overall value of services used. Eligible new listings & eligible transfers with a global market cap of $400 million or more can get:
Products & services with a maximum combined value of approximately $125k annually, consisting of: (i) web-hosting & web-casting, (ii) news distribution, and (iii) a selection among market intelligence, market analytics, board of directors platform, virtual event platform, or ESG products & services.
Companies below a $400 million market cap are limited to:
(i) web-hosting & web-casting, (ii) market analytics, and (iii) news distribution.
The Exchange would extend its existing complimentary whistleblower hotline services from 24 to 48 months for all new listings.
For currently listed companies, the “Tier One” group – companies with more than 270 million shares outstanding – can get (i) web-hosting & web-casting, and (ii) a selection from the other services, up to an annual value of $75k. Tier Two is too complicated for this blog.
Comments are due 21 days after publication in the Federal Register – here’s the form.
This recent “SEC Institute” blog highlights an example disclosure (pg. 44) from a company that transitioned to sequential quarterly analysis in its MD&A. It’s worth bookmarking if you’re considering making this switch in the future, and your filing for Q1 could be a logical time to do it.
Looking ahead to your Form 10-K, members of our site should also flip through the transcript from our recent webcast, “MD&A and Financial Disclosures: What To Do Now.” Sonia Barros, Raquel Fox, Partner, Mark Kronforst, Dave Lynn, Partner and Lona Nallengara – all very accomplished former SEC Staffers and current practitioners – discussed what to do now that the mandatory compliance date has arrived for the SEC’s amended MD&A rules. Our 102-page “MD&A Handbook” is also a great resource as questions arise.
I recently recorded an illuminating conversation with Cas Sydorowitz – the Global Head of Georgeson – and Hannah Orowitz – the Senior Managing Director and Head of US ESG for Georgeson. In the 39-minute episode, we discuss:
1. Expectations for the 2022 AGM season in the US, particularly considering the surprises we saw during the 2021 proxy and annual meeting season
2. Early trends for shareholder proposals
3. Changes in voting behaviour of traditional investors – and what they are most likely to focus on
4. Whether the record-breaking level of negotiated proposals in the 2021 season is the ‘new normal’
5. How the new SEC guidance on Rule 14a-8 will impact shareholder proposals during the 2022 proxy season and beyond
6. What impact COP26 and the formation of the International Sustainability Standards Board may have on companies in 2022
7. Following COP26, there was a rapid uptake of asset managers signing The Net Zero Asset Managers Initiative, which includes BlackRock, Vanguard, States Street and at least 220 others. What might that mean for 2022?
8. Predictions for activism in 2022, in light of environmental issues playing a role in a successful proxy contest, and activists’ cooperation with NGO proponents (e.g., Ceres and As You Sow)
I’ve blogged a few times about the impact that retail investors could begin to have on proxy voting – here’s a write-up from last spring about how increasing retail involvement could make voting outcomes less predictable, particularly if they take on a “gaming” aspect akin to the meme-stock frenzy. Now, investors’ wait for an easy way to actually do this is over: the new “iconik” app will encourage users to crowdsource their voting power, along with offering commission-free trading. The app’s website includes this “voting agreement & revocable proxy,” along with this summary of what the founders hope to accomplish:
– On iconik, people run campaigns to help make changes at publicly traded companies. Campaigns can be about almost anything, from better corporate governance to increasing share value (and everything in-between).
– Simply purchase shares and delegate your voting rights to the campaign organizer. You will always own the shares, but now those voting rights are going towards something that matters.
Because fractional shares may not include voting rights, shareholders who want maximum voting power need to buy individual stocks. So, that could prevent this from taking off in force. But as I wrote a few months ago, many retail investors today feel like they’re more likely to vote and care about E&S issues. iconik’s CEO was inspired by the meme stock rally, and he’s banking on the possibility that retail investors are willing to sacrifice diversification for influence.
This DealBook article notes that the platform launched with two active campaigns. One is targeting Meta (Facebook) – to shut down hate speech on the platform. The other is going after JPMorgan Chase – to stop lending to fossil fuel companies.
iconik likely isn’t going to be the only game in town here when it comes to crowdsourcing voting activities. In late summer, I noted that Robinhood acquired Say Technologies, which appeared to be a play into the voting & engagement space. Stay tuned.
With the end of 2021 fast approaching, there is no time like the present to reflect on where we have been in 2021. It has been quite a year!
It wasn’t 2020. One of the main things that 2021 had going for it was that it wasn’t 2020. For a long list of reasons, last year at this time we had all had enough of 2020, and we were looking to 2021 with a great deal of optimism. Can you recall that brief late Spring 2021 respite from the relentless spread of COVID-19 when we thought that Summer 2021 was going to be the best summer ever? At least we had that time, which alone makes 2021 an improvement over 2020. While it is hard to get our hopes up, maybe we will finally see some semblance of “back to normal” in 2022?
The Great Resignation. Much was made in 2021 of “The Great Resignation,” as people realized en masse that life was too short and they needed to get themselves a new job or pursue some other passion. While the trend began in 2020, it really seemed to accelerate in 2021. Having been someone who has changed jobs a few times in his career, I can definitely understand the underlying feelings behind The Great Resignation, particularly in the midst of the pandemic when many of us have reevaluated our priorities. With so much focus on human capital these days, the challenge for public companies will be disclosing how this trend has affected them and addressing their specific plans for retaining and attracting workers.
The Tip of the Iceberg. Towards the end of 2021, we saw the regulatory engines fire up at the SEC under the leadership of SEC Chair Gary Gensler, which has exposed just the tip of the iceberg of a broad and aggressive regulatory agenda. At this time last year, we were frantically picking through an avalanche of 11th hour rulemaking that had been adopted under former SEC Chair Jay Clayton’s leadership, and now some of those rules are already in the process of being undone. What is certain is that we will see a great deal of activity on the rulemaking front in 2022 that will definitely reshape a number important areas of public company disclosure and governance.
Climate and ESG Take Center Stage. It is not as if we were not talking about climate and ESG back in 2020 (and before), but in 2021 those topics seemed to dominate every conversation. The SEC, for its part, has clearly signaled that the topics of climate and human capital are at the top of its agenda, and demonstrated to us that they mean business on climate and ESG with an Enforcement task force and climate comment letters from the Division of Corporation Finance. We very well may look back and say that 2021 was the turning point on how public companies address these topics from a governance and disclosure perspective.
Our Resources. I am proud to have been a part of the fantastic team here, providing you with so many great resources that were hopefully useful for keeping up with all of the developments in 2021. I am excited to be blogging again here on TheCorporateCounsel.net, recording the Deep Dive with Dave podcast, updating the Executive Compensation Disclosure Treatise, contributing to The Corporate Counsel and The Corporate Executive, and participating in our conferences and webcasts. I hope we were able to keep you informed about all of the developments in 2021, and provide you with the analysis and insight that you can’t find elsewhere. In 2022, I will celebrate 15 years working on these publications – where did the time go?
I wish you all the best for the holiday season and I hope you have a great 2022!
– Dave Lynn
Programming Note: This blog will be off tomorrow, back next week.
In the latest Deep Dive with Dave podcast, John and I talk about the topics we cover in the November-December 2021 issue of The Corporate Counsel. We discuss the annual season items that you should keep in mind as we go into the annual reporting and proxy season, review the SEC’s universal proxy rules and address Staff Legal Bulletin 14L. Thanks for listening to the Deep Dive with Dave podcast!
– Dave Lynn
Programming Note: This blog will be off tomorrow, back next week.
Earlier this week, the SEC announced that it had brought charges against yet another hacking ring accused of accessing earnings releases prior to issuance and trading based on the information obtained through the hack. The earnings announcements were accessed by hacking into the systems of two filing agent companies before the announcements were made public. In the complaint, the SEC alleges that the insider trading scheme yielded $82 million in profits during a period from February through August 2020.
As has been the case with many of the Division of Enforcement’s recent cases, the Staff credits powerful analytical tools for helping to make the case against the defendants. The complaint notes:
The trades by the Trader Defendants were disproportionately focused around the earnings announcements of publicly-traded companies that used the Servicers to make their EDGAR filings, as compared to earnings announcements where the required EDGAR filings were not made through the Servicers. Indeed, statistical analysis shows that there is a less than one-in-one-trillion chance that the Trader Defendants’ choice to trade so frequently on earnings events tied to the EDGAR filings of the Servicers’ public company clients would occur at random.
This latest hacking scheme points to the vulnerability of material nonpublic information when it is stored in the cloud prior to making the EDGAR filing. Despite all of the efforts to maintain the security of the systems used to process and store this information, sophisticated hackers can often find a way in. Unfortunately, there is not much that companies can do to protect themselves in this situation, other than to try to minimize the time that the submission is on the filing agent’s system. This is no doubt not the last of these schemes that the SEC will find with its sophisticated trading surveillance methods.
I may be slow on the uptake here, but I just started wondering what the heck is going on with my telephone that has not been working for the past week or so. Apparently, my telephone is one of many casualties of the “Log4Shell” vulnerability, which has been wreaking havoc across the technology world for almost two weeks now. As Emily notes over on the Mentor Blog, Log4Shell is a piece of ubiquitous code that TechCrunch has called the “bug that’s breaking the internet.”
Now, having been someone who lived through the infamous Y2K vulnerability, which was billed as potentially ending modern civilization as we know it, I tend to take that sort of statement with a big grain of salt. However, as we grind through this holiday week, the last thing we need is for the Log4Shell problem to continue gather steam and give us something other than the Omicron variant to worry about. The Mentor Blog notes these critical steps that companies should take, as highlighted in this recent DLA Piper memo:
Legal team to communicate with vendors and service providers to determine whether Log4j software is used in their products, whether Log4j software has been patched, whether Log4Shell has impacted their systems/services/products and if so, the status of remediation. Review vendor contracts for notice rights and indemnity obligations and take appropriate action to preserve contractual and other remedies
Legal team to print a hard copy of the cyber insurance policy
Legal and InfoSec teams to print hard copies of the incident response plans and playbooks and notify members of the incident response team to be on standby in the event they need to be activated
If InfoSec team detects unauthorized activity, activate IR plans and get legal involved to conduct privileged investigation
Legal and InfoSec teams to stay current on Log4Shell threats.
Note that we have plenty of other resources addressing cybersecurity threats available in our “Cybersecurity” Practice Area.
The November-December issue of The Corporate Executive has been sent to the printer (email sales@ccrcorp.com to subscribe to this essential resource). It’s also available now online to members of TheCorporateCounsel.net who subscribe to the electronic format – an option that many people are taking advantage of in the “remote work” environment. The issue includes articles on:
• SEC Reopens Comment Period for Compensation Clawback Rules
• ISS and Glass Lewis Update Proxy Voting Guidelines
• Accounting Rules Now Allow Private Companies to Use Section 409A Methodology
• A Blast from the Past: The SEC Issues Guidance on “Spring-Loaded” Awards
SEC Commissioner Elad Roisman released a statement yesterday indicating his plan to resign his position by the end of January 2022. Roisman has served as a Commissioner since September 2018, and served as acting Chairman for a brief time from December 2020 to January 2021. Commissioner Roisman joined the SEC from the U.S. Senate Committee on Banking, Housing, and Urban Affairs, where he served as Chief Counsel. He had also served as Counsel to SEC Commissioner Dan Gallagher, and worked at NYSE Euronext and Milbank. Commissioner Roisman’s statement gives no indication of what he plans to do next.
