A few days ago, the DOJ brought an enforcement action against ValueAct for failing to comply with the HSR waiting period requirements. Here’s an excerpt from this great memo by Davis Polk’s Arthur Golden, Tom Reid and Laura Turano (& other memos are being posted in our “Shareholder Engagement” Practice Area):
We believe that this case will be important to watch because of the types of statements and actions by ValueAct that are cited by the DOJ as evidence of an intent to influence the business decisions of both companies. For example, the complaint identifies internal discussions at ValueAct regarding proposing changes to Halliburton’s executive compensation plan, and a meeting between ValueAct and Halliburton’s CEO during which ValueAct detailed its preferred approach to executive compensation, commented on Halliburton’s current compensation plan and proposed specific changes to the plan, as evidence of an intent to influence the business decisions of Halliburton. While this may have been part of a broader demonstration of lack of investment intent, it does seem to be (by itself) a typical subject of discussion with investors who do not seek to influence management or major corporate actions.
Although the ValueAct complaint will cause those shareholder activists who buy shares with an intention to engage with management and other shareholders to consider more carefully whether they are required to file for HSR clearance rather than rely upon the protection of the “passive investment” exemption, the practical impact of this may be limited. Some shareholder activists do not rely on the investment intent exemption but instead structure their investments so as to not be made by a special purpose entity that would exceed the “size of person” threshold (thus enabling the entity to buy up to $312.6 million of shares before a filing would be required) and split their investments across multiple special purpose entities to avoid an HSR filing while they acquire large stakes in the target company.
But, the ValueAct complaint should serve as a reminder to institutional investors that have traditionally considered themselves to be passive investors for HSR purposes. In the past, we have noted how institutional investors, which have typically engaged in quiet outreach, are taking an increasingly active and public role on corporate governance matters, and we have observed that the line between shareholder activists and institutional investors is blurring. Once an institutional or similar traditionally passive investor crosses the line—either by cooperating with shareholder activists in certain situations or by taking an increasingly assertive role with its portfolio companies—such an institution will have to examine whether it can claim to have a truly “passive” intent at the time of any future share purchases. It is important to note that this determination is often not a “one time” consideration given the frequent portfolio rebalancing and other holding changes of traditional institutional investors. For example, if the investor loses its “investment intent,” the subsequent acquisition of any additional shares may require a filing if the investor’s total holdings will exceed the applicable HSR threshold. Although an HSR filing, in the absence of substantive antitrust issues, is unlikely to significantly delay the strategy of a shareholder activist or a traditional institutional investor, it does involve notification of the target company, could chill cooperation among shareholder activists and institutional investors somewhat and certainly adds an important compliance component to their planning.
DOJ Kicks Off FCPA Enforcement Pilot Program
A few days ago, the DOJ’s Fraud Section released this “guidance memorandum” containing three initiatives, including an FCPA Pilot Program that will reduce fine beyond what is now available under the US Sentencing Guidelines for companies that voluntarily disclose possible FCPA violations, fully cooperate and implement timely and appropriate remediation. We’re posting related memos in our “FCPA” Practice Area.
Conflict Minerals: What You Can Learn from Our CY15 IPSAs & Auditability Reviews
In addition to the two blogs I posted this week on our “Proxy Season Blog” about Apple’s Form SD, check out this blog by Elm Sustainability Partners about what they learned from their IPSAs and auditability Reviews…
Here’s something that Locke Lord’s Stan Keller & I recently wrote:
Confirmation.com is an electronic centralized service available to audit firms to outsource the audit confirmation process. This service is now being offered to process audit response letters. Under it, audit firms send audit letter requests to – and receive audit letter responses from – law firms of an auditor’s clients using the Conformation.com portal.
There are several issues that law firms have identified with this process (some real, some perhaps imagined) – and it’s a work in progress. A threshold concern for a law firm is the “terms of use” that the site purports to impose on users of the system. In its most recent form, several aspects of the “terms of use” present issues. It’s possible for law firms to individually negotiate these – but a more practical approach is for the bar as a whole to work with Confirmation.com to come up with acceptable standard terms.
Another concern is getting comfortable that the request for confidential information is coming from – or is authorized – by the client. This can be addressed by an actual signed (albeit electronic) request from the client on the portal – or by a confirmatory email from the client (which might be done as a standing authorization). Also of concern is the confidentiality of the audit response letter on a third-party system (particularly when the letter describes loss contingency matters).
Confirmation.com considers its portal to be a mere conduit for transmission of information to the auditor – but unlike the mails or a delivery service, the information remains on the portal. The site also indicates that the security of its portal has been approved by a third-party rating service – and one might suspect it is no less secure than a law firm’s own servers. Finally, the question has been asked whether supplying the information to a third-party portal might affect the attorney-client privilege. However, most commenters believe that since the portal is not an intended recipient, this should not be a problem.
There are two aspects of the new system: one is for receipt of requests and the other is for transmission of law firm responses. The issues identified don’t necessarily relate to both aspects. Thus, if there is concern over confidentiality of responses, a request could be received through the portal – and the response could be handled the old-fashioned way. Some audit firms and companies appear to prefer the convenience of a centralized request system – and law firms may face pressure to accommodate those preferences. Indeed, for law firms that use a centralized approach for handling audit response requests, there can be advantages participating in the new electronic system because requests can more easily be directed to a designated person or group within the law firm.
For now, however, until the issues have been resolved, particularly concerns with the “terms of use,” many law firms are declining to participate for both requests and responses – instead, they are asking for requests directly from clients and responding with letters sent directly to the auditors. This may change over time.
I’m heading to Montreal tomorrow for the ABA Business Law Section’s Spring Meeting – the “Audit Responses Committee” meets on Saturday morning at 10 am & Confirmation.com is on the agenda. Come on out…
Recently, the SEC settled an enforcement action against a company, its senior officers, audit engagement partner and consultant, due to alleged failures to “properly implement, maintain, and evaluate” internal controls over financial reporting. Here are three takeaways:
1. Listen to Your Consultants…But the Buck Stops with You – Management must give careful consideration to input from consultants, among other sources. However, management maintains ultimate responsibility for ICFR assessment, so management should not rely upon a consultant’s conclusions when it possesses knowledge suggesting that there may be a material weakness in the ICFR.
2. Heed the Rules – Management must properly evaluate the severity of any internal control deficiencies and correctly apply the standards codified by the SEC in determining the ICFR’s effectiveness. In particular, the SEC’s recent action reminds us that:
– The “presence of an actual error is not a prerequisite to concluding that a material weakness exists.” Rather, management must consider “whether there is a reasonable possibility that a material misstatement will not be timely detected or prevented.”
– The effectiveness of ICFR must be assessed as of the end of the fiscal reporting period, and thus, “[p]lanned or anticipated remedial efforts are irrelevant to the analysis.”
3. Documentation is Key – Management must create and maintain adequate documentation supporting any conclusions regarding the severity of any ICFR deficiency and the effectiveness of the company’s ICFR.
Transcript: “FAST Act – Gearing Up”
We’ve posted the transcript for our recent webcast: “FAST Act: Gearing Up.”
Here’s a blog by Gibson Dunn’s Ron Mueller, Sean Feller and Krista Hanvey (also see these memos on CompensationStandards.com):
On March 30, 2016, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) 2016-09, which amends ASC Topic 718, Compensation-Stock Compensation, to require changes to several areas of employee share-based payment accounting.
In an effort to simplify share-based reporting, among other things, the update revises requirements in the following areas:
– Minimum Statutory Withholding: The new standard permits share-based withholding up to the maximum statutory tax rates, whereas currently an employer may only withhold up to the minimum statutory tax rate without causing the award to be classified as a liability.
– Accounting for Income Taxes – The revised standard will require recording the tax effects of share-based payments at settlement or expiration on the income statement, whereas ASC 718 previously provided for tax benefits in excess of compensation cost and tax deficiencies to be reported in equity to the extent of any previous excess benefits, and then to the income statement. Under the new rule excess tax benefits are also to be classified with other operating income tax cash flows as an operating activity.
– Forfeitures – Whereas accruals of compensation cost are currently based on the number of awards that are expected to vest, the revised standard allows an entity to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur.
– Intrinsic Value Accounting for Private Entities: Under the update, nonpublic entities will be permitted to make a one-time accounting policy election to switch from measuring all liability-classified awards at fair value to intrinsic value.
With respect to share-based withholding on equity awards, ASC Topic 718 currently provides that equity awards cannot provide for share withholding in excess of an employer’s minimum statutory withholding requirements in order to qualify for equity treatment under the rule. As revised, the rule will now permit withholding up to the maximum statutory tax rate without causing the award to be classified as a liability. In addition, cash paid by an employer when directly withholding shares for tax-withholding purposes should now be classified as a financing activity.
For public companies, the new rules will become effective for annual reporting periods beginning after December 15, 2016, and interim reporting periods within such annual period. For all other entities, the new rules will take effect for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.
In light of the new accounting rules, companies will want to review their equity compensation plans and award agreements to determine if they will allow for withholding up to the statutory maximum. In connection with this, issuers that are subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, should review their award agreements with any Section 16 officers and, in order to obtain the exemption under Rule 16b-3 for share withholding in excess of amounts that were previously allowed, may need to provide for compensation committee approval of any new terms that allow for share-based withholding above what was previously authorized.
Transcript: “Key Steps to an Effective Compensation Committee”
We’ve posted the transcript for our recent CompensationStandards.com webcast: “Key Steps to an Effective Compensation Committee.”
According to this note, the Senate Banking Committee will vote on the two SEC Commissioner nominees this Thursday…
FINRA is seeking comment on proposed amendments to FINRA rules shortening the securities settlement cycle to two days. The rulemaking notice cites a September 2015 letter in which SEC Chair White responded to industry groups expressing her strong support for industry efforts to shorten the trade settlement cycle to T+2 and urging the industry to continue to pursue the necessary steps towards achieving T+2 by the third quarter of 2017. SEC Chair White also indicated that she instructed SEC staff to develop a proposal to amend Exchange Act Rule 15c6-1(a) to require settlement no later than T+2.
Exchange Act Rule 15c6-1 currently establishes “regular way” settlement as occurring no later than T+3 for all securities, except for government securities and municipal securities, commercial paper, bankers’ acceptances, or commercial bills. In anticipation of the SEC’s changes to Rule 15c6-1 to facilitate settlement no later than T+2 and to ensure that FINRA acts in concert and conformity with the impending rule changes by other self-regulatory organizations, or SROs, FINRA is proposing definitional changes to its rules pertaining to securities settlement by, among other things, amending the definition of “regular way” settlement as occurring on T+2. The proposed technical changes would implement the anticipated rule changes of the SEC and the other SROs.
The Municipal Securities Rulemaking Board, or MSRB, has also filed a rule proposal with the SEC to define regular-way settlement for municipal securities transactions as occurring on a two-day settlement cycle.
As noted in this MoFo blog by Anna Pinedo, SEC Chair White recently delivered this speech out at Stanford that addressed a broad range of issues affecting the technology sector, including how many private companies defer their IPOs, rely on exempt offerings to raise capital and rely on private secondary markets to create liquidity for shareholders.
A current feature of the pre-IPO financing market that puts these questions in sharp (and local) relief is one that has gathered considerable attention recently – unicorns. Of course, this audience knows that I am speaking not of the creatures of fantasy, but of private start-up firms with valuations that exceed $1 billion. By one count, there are nearly 150 unicorns worldwide, many based here in Silicon Valley. And, they do not appear to be an endangered species. One survey shows that there were 52 unicorn financings in the last three quarters of 2015 compared to 37 such financings over the 12 months that ended in March 2015.
Beyond the hype and the headlines, our collective challenge is to look past the eye-popping valuations and carefully examine the implications of this trend for investors, including employees of these companies, who are typically paid, in part, in stock and options. These are areas of concern for the SEC and, I hope, an important focus for entrepreneurs, their advisers, as well as investors.
At the SEC, the questions we are asking do not fundamentally differ from the questions we ask about all transactions. They include whether the information supplied to investors is accurate and complete – that is, whether it accurately reflects the performance and prospects of the company. Making sure that is so becomes more compelling when the transactions are smaller and the investors are more retail. And, for those involved in advising, investing and nurturing unicorns, there is an important related question – how do $1 billion valuations affect all of the relevant investors – both those investing in the unicorn round, and those that came before and after, whether in private or public transactions.
It is axiomatic that all private and public securities transactions, no matter the sophistication of the parties, must be free from fraud. Exchange Act Section 10(b) and Rule 10b-5 apply to all companies and we must be vigorous in ferreting out and punishing wrongdoers wherever they operate. In the unicorn context, there is a worry that the tail may wag the horn, so to speak, on valuation disclosures. The concern is whether the prestige associated with reaching a sky high valuation fast drives companies to try to appear more valuable than they actually are.
Nearly all venture valuations are highly subjective. But, one must wonder whether the publicity and pressure to achieve the unicorn benchmark is analogous to that felt by public companies to meet projections they make to the market with the attendant risk of financial reporting problems. And, yes that remains a problem. We continue to see instances of public companies and their senior executives manipulating their accounting to meet various expectations and projections.
CII Targets Newly-Public Companies on Governance
As noted in this press release, CII has adopted a new policy for IPOs to ensure they have sound governance frameworks, such as a “one share, one vote” structure, simple majority vote requirements, independent board leadership and annual elections for directors.
REITs: Corp Fin Issues Game Changing Rule 144 Guidance
Recently, as noted in this Bass Berry memo (& these other memos), Corp Fin issued Rule 144 interpretive guidance for the common situation involving the exchange of operating partnership (OP) units into shares of the parent REIT. The interpretive guidance provides that, under certain conditions, the holding period for REIT common stock acquired upon an exchange of units in the REIT’s OP commences upon the unit holder’s acquisition of the OP units, rather than at the time the REIT common stock is acquired. The Staff’s guidance provides long-awaited relief to REITs structured as umbrella partnerships or “UPREITs” that seek to issue OP units as part of their consideration for real estate acquisitions through their OPs.
Here’s the intro from this Willis Towers Watson memo about a proposed settlement in the Espinoza lawsuit (this is the Facebook case that I’ve blogged about before and Mike Melbinger has blogged about a few times – but it’s worth blogging about again, particularly since the court approved the settlement a few days ago):
A recent settlement agreement in litigation challenging the compensation paid to a company’s outside directors is attracting considerable attention. The settlement in the Espinoza case (C.A. No. 9745, Del. Ch.) was filed in a shareholder lawsuit alleging that a company’s board had breached its fiduciary duties, committed corporate waste and caused unjust enrichment by paying excessive compensation to non-employee directors. Among its most notable provisions, the proposed settlement calls for the company to obtain shareholder approval of the pay of its outside directors.
Here’s the key takeaways from the memo:
This lawsuit and the proposed settlement serve as yet another reminder that companies should be diligent in developing and periodically evaluating their non-employee director compensation programs. Recall that two other recent Delaware cases (Seinfeld v. Slager and Calma v. Templeton) also involved challenges to non-employee director compensation. In both of those cases, the Delaware Chancery Court denied summary judgment and required the cases to be reviewed under the entire fairness standard (instead of the business judgment rule) because the companies’ equity plans did not impose “meaningful limits” on director compensation. (For more on those cases, see “Delaware Ruling on ‘Excessive’ Director Pay Offers Guidance for Avoiding Future Litigation,” Executive Pay Matters, June 4, 2015.)
While Calma and Seinfeld focus on the content of the shareholder-approved plan (i.e., were there meaningful limits on director compensation in the plan such that shareholders could understand the magnitude of compensation to be paid), Espinoza focuses on the approval process.
While the factual circumstances surrounding Espinoza were unique, the settlement still serves as a reminder that companies should evaluate the limits in their plans with respect to the amount of compensation that directors can award to themselves. If the plan does not impose any “meaningful limits” on director compensation, the company should consider adding them. Companies may also consider whether benchmarking their director cash and equity compensation programs against their peer group is warranted and, if so, they need to be certain that the peer group is appropriate.
Furthermore, companies should review their committee charters and make changes to the process for evaluating and approving director compensation, if necessary. Shareholder ratification of a self-dealing transaction (such as when directors award themselves pay) must be accomplished formally by a vote or by written consent in order to shift the standard of review from the entire fairness standard to the more favorable business judgment rule.
XBRL: SEC Staff Issues Custom Axis Tags Guidance
As noted in this blog, the SEC’s DERA (Division of Economic and Risk Analysis) has issued “Staff Observations” about custom axis tags. This is the second time that DERA has published something like this – the last time was in July 2014 about XBRL exhibits…
Our April Eminders is Posted!
We have posted the April issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!
Here’s the survey results about drafting proxy statements, glossy annual reports & Form 10-Ks:
1. At our company, the lead for drafting our proxy statement is (ie. running the master):
– Corporate secretary’s department – 28%
– Legal department – 67%
– Accounting department – 0%
– IR department – 0%
– Outside counsel – 5%
– None of the above – 0%
2. At our company, the lead for drafting our glossy annual report is:
– Corporate secretary’s department – 8%
– Legal department – 5%
– Accounting department – 5%
– IR department – 33%
– Outside counsel – 0%
– None of the above – 49%
3. At our company, the lead for drafting our 10-K is:
– Corporate secretary’s department – 10%
– Legal department – 10%
– Accounting department – 77%
– IR department – 0%
– Outside counsel – 3%
– None of the above – 0%
4. At our company, the lead group for conducting our disclosure committee meetings for our proxy statement is:
– Corporate secretary’s department – 24%
– Legal department – 53%
– Accounting department – 8%
– IR department – 0%
– Outside counsel – 3%
– None of the above – 13%
5. At our company, the lead group for conducting our disclosure committee meetings for our 10-K and 10-Q is:
– Corporate secretary’s department – 8%
– Legal department – 22%
– Accounting department – 65%
– IR department – 3%
– Outside counsel – 3%
– None of the above – 0%
When It Hits The Fan: Who Signs the CEO/CFO Certifications
The toughest questions arise in the CEO/CFO certification area when the company is in turmoil and the CEO and CFO are suddenly fired – without immediate replacements. This MarketWatch article by Francine McKenna tackles those issues – and cites our “CEO/CFO Certifications Handbook” in the process!
I’m very excited for the unveiling of Tesla’s Model 3 today!
Corp Fin Updates Financial Reporting Manual (For FAST Act, Etc.)
Recently, Corp Fin updated its Financial Reporting Manual to update guidance on significance testing for equity method investments, conform guidance for the FAST Act, and add guidance relating to the implementation of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (as amended by Accounting Standards Update No. 2015-14) and IFRS 15, Revenue from Contracts With Customers.
The soap opera continues. On Monday, the US Supreme Court denied certiorari to a constitutional challenge about how the SEC uses its administrative law judges for enforcement cases (the Bebo case involved Article II’s Appointment clause). Some lower courts had issued preliminary injunctions while SCOTUS was presented with the opportunity to rule on this case. I guess Mark Cuban’s amicus curiae brief wasn’t persuasive. The SEC still has outstanding proposed changes from last September about its ALJ framework – so I imagine those changes will now move forward.
One member wrote in: “This is a very good decision for investors and the SEC. This issue is simply one of venue chasing. Both the plaintiff & defense bar have chased around trying to find the most favorable venues in the past, without any regard for justice. Why would someone think the SEC should be precluded from doing the same?” What are your thoughts – weigh in via the poll below…
Particularly given regulators’ aversion to external auditor-provided tax services, this new study: “The Role of Auditors, Non-Auditors, and Internal Tax Departments in Corporate Tax Aggressiveness” (full study available for purchase) is noteworthy. Among other things, the study found that companies preparing their own tax returns or having them prepared by a firm other than their auditor claim about 30% more aggressive tax positions than companies using their own auditor as the tax preparer, and Big 4 tax preparers in particular are linked to less tax aggressiveness when they are the auditor than when they are not the auditor.
As discussed further in this CFO.com article, the rationale is that the company’s external auditor has much more at risk (i.e. much more to lose) than either the company or another external preparer by taking an aggressive stance:
The study, based on data from S&P 1,500 companies, offers a rationale: “With the joint provision of audit and tax services, auditor preparers bear greater costs, relative to other preparer parties, if a position is overturned due to a tax audit and court action.” The study notes that auditors bear at least two types of risk that do not apply to other preparer types: (1) the risk of a financial reporting restatement due to an audit failure; and (2) reputation risk, in that an auditor’s work is more visible and sensitive to the firm’s leadership. In short, having more to lose than other preparers, auditors tend to be less aggressive in advancing tax-benefit claims.
The findings are worthy of consideration in the context of other concerns – primarily, auditor independence – that regulators have raised about the auditor’s provision of tax services.
Almost half of auditors’ 530 new going concern warnings for fiscal 2014 were issued relative to companies filing for an IPO rather than established companies, according to this recent MarketWatch post on 2015 filings. And the top two reasons auditors cite for giving such an opinion – “net losses since inception” or an “absence of significant revenues” – apply to pre-development stage companies. The post cites research that purportedly shows that over half of companies that filed for bankruptcy between 2000 and 2009 had received going concern warnings from their auditors the prior year.
We 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:
– Exchanges Get Guidance on Sustainability Disclosure Standards
– Whistleblowers: Speak Now or Get a Smaller Piece
– Audit Committees: Comments to SEC Urge, At Most, Principles-Based Reporting
– Insider Trading: Holiday Card to Directors (With Compliance Reminder)
– Top 10 Mistakes in Selecting D&O Insurance
Not surprisingly (based on my own in-house experience), a positive corporate culture apparently boosts company performance (i.e., higher profits) over time, but company performance doesn’t translate to a positive corporate culture. That’s according to this WSJ article, reporting results from a recent study (abstract here) on the relationship between culture and sales at 95 auto dealerships over a period of six years. Companies that performed well financially reportedly scored low on employee surveys used to evaluate culture, and companies that showed no improvement in culture became less profitable over time.
CIOs/CISOs Pressured to Unleash IT Projects Prematurely
According to this recently published Trustwave Security Pressures Report, a concerning 77% of more than 1,400 IT security professionals worldwide (83% in the US) are pressured to unveil IT projects that aren’t security-ready.
Additional noteworthy key findings based on a late 2015 survey include:
Board Burden: 40% of respondents feel the most pressure in relation to their security program either directly before or after a board meeting – 1% higher than how they feel after a major data breach hits the headlines.
Skills Gap: Shortage of security expertise has climbed from the 8th biggest operational pressure facing security pros to the 3rd biggest – behind advanced security threats and adoption of emerging technologies.
Under Pressure: 63% of respondents felt more pressure to secure their organizations in 2015 compared to the prior 12 months, and 65% expect to feel additional pressure this year. Those numbers grew 9% and 8%, respectively, vs. last year’s report.
Moved to Managed: The number of respondents who either already partner or plan to partner with a managed security services provider rose from 78% in last year’s report to 86% this year.
See the report’s conclusions and recommendations aimed at tempering the pressures and enhancing security, and oodles of additional resources in our “Data Security” Practice Area.
More on “The Mentor Blog”
We 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:
– Six Tips for Board Cybersecurity Oversight
– Small Business Administration Launches Cybersecurity Webpage
– Audit Committee Agenda: Non-GAAP Measures
– Factors That Characterize a World-Class Ethics & Compliance Program
– Top 10 Most Commonly Missed Proxy Statement Items
It is with sadness that I report that Randi Morrison will be leaving us in a few days. She’s been toiling for the Society of Corporate Secretaries most of the week for the past year – but now she will be their full-time staffer. Randi has been working with me for well over five years – first as a volunteer and then as my right-hand woman.
Randi is a unique individual in our field – her enthusiasm for all things governance, securities and compliance-related is absolutely unparalleled. When you see Randi at a conference, she is sitting up straight – soaking in every nuance for hours on end. Her spark inspired me at a time when this job was becoming “old hat.” Her fingerprints are all over some of the best content on this site – the hundreds of Handbooks & Checklists for starters. She won’t be far away – but I will miss her dearly all the same! Good luck Randi!
Proxy Access: Corp Fin Provides Further Clarity on “Substantially Implemented”
Here’s some of the work that Randi is doing for the Society – she’s the lead author for its weekly alert, which included this gem a few days ago: As discussed in this new Goodwin Procter memo, another series of no-action letters issued by the SEC’s Division of Corporation Finance since our last report appear to make clear that companies may use Rule 14a-8(i)(10) to exclude proxy access shareholder proposals on “substantially implemented” grounds provided that the ownership threshold and holding period sought by the proposal and already implemented by the company are the same, despite differences in other proxy access terms. Each of the 15 no-action letters that were granted from February 26th – March 17th based on Rule 14a-8(i)(10) included a 3% ownership threshold and 3-year holding period, but the company’s proxy access right and the shareholder proposal differed as to the shareholder director nominee cap and aggregation (for purposes of attaining the ownership threshold).
The memo includes a table summarizing the principal terms of the company provisions and shareholder proposals, as well as a detailed summary in the Appendix.
House Committee Passes 10 Capital Access Bills
This MoFo blog by Carlos Juarez notes that the House Financial Services Committee passed ten bills yesterday relating to facilitating access to capital and the reduction of regulatory burden on smaller reporting companies…
Disclosure Effectiveness Project: Concept Release Coming on Wednesday, April 13th!
Yesterday, the SEC announced that they will hold an open meeting on Wednesday, April 13th to decide “whether to issue a concept release seeking comment on modernizing certain business and financial disclosure requirements in Regulation S-K.” This follows the “request for comment” that the SEC put out about Regulation S-X last September. This open meeting was originally scheduled for March 30th but then got pushed back two weeks…
