Over the past few years, I have blogged twice about Loyal3. Loyal3 is a platform that helps companies build their brands with their customers by facilitating stock sales to customers with no fees (Loyal3 makes its money from companies selling the stock; not from investors, as explained in this TechCrunch blog). The 1st time I blogged, it was about Loyal3’s customer stock ownership plans – the 2nd time was about offering stock via mobile devices and its 1st participation in an IPO overseas.
Now, Loyal3 is mentioned in the Form S-1 for the IPO of Santander Consumer USA, as 2% of the shares have been reserved to be sold through Loyal3’s platform (note that 3% of the offering is also reserved for a directed share program). Here’s an excerpt from the 6th Amendment to the Form S-1:
The LOYAL3 platform is designed to facilitate participation of individual purchasers in initial public offerings in amounts of between $100 and $10,000. Any purchase of our common shares in this offering through the LOYAL3 platform will be at the same initial public offering price, and at the same time, as any other purchases in this offering, including purchases by institutions and other large investors.
Individual investors in the United States who are interested in purchasing common shares in this offering through the LOYAL3 platform may go to LOYAL3’s website for information about how to become a customer of LOYAL3, which is required to purchase common shares through the LOYAL3 platform. The LOYAL3 platform is available fee-free to investors, and is administered by LOYAL3 Securities, Inc., which is a U.S.-registered broker-dealer unaffiliated with our company. Sales of our common stock by investors using the LOYAL3 platform will be completed through a batch or combined order process typically only once per day. The LOYAL3 platform and information on the LOYAL3 website do not form a part of this prospectus.
Here’s Loyal3’s web page on the IPO. It includes a short video featuring Santander Consumer USA’s CEO & CFO, who also are selling shareholders in the IPO (here’s the free writing prospectus filed with the video’s script). Loyal3 has been tweeting the basics about its involvement in the IPO (eg. enrollment period ended on Monday), including answering questions from potential investors.
SCOTUS Briefs Filed: Halliburton Fraud-on-the-Market Case
As posted on the SCOTUS Blog, a number of briefs have been filed in Halliburton Co. v. Erica P. John Fund, No. 13-317, the case in which Supreme Court will decide whether to abandon the “fraud on the market” presumption of reliance that has facilitated class-actions brought under Section 10(b) and Rule 10b-5. CII filed this brief today!
A lot of interesting analysis in the briefs – like this blog from Prof. John Coffee. The case will be argued on March 5th – a decision likely will be handed down in June. Halliburton is the most important securities case that the Court has heard in a long time…
Here’s an Akin Gump blog about the last two days of Senate hearings on security breaches…
Transcript: “Pat McGurn’s Forecast for 2014 Proxy Season”
We have posted the transcript for our recent webcast: “Pat McGurn’s Forecast for 2014 Proxy Season.”
With the deadline for companies to verify the factual information pertaining to them looming – this Friday – for ISS’ QuickScore 2.0, this updated alert from Gibson Dunn includes answers to questions that they asked ISS. And that resulted in ISS posting an updated technical document over the weekend. Note that ISS’s new approach may drive companies to expand their new director 8-Ks to include information addressing their independence, so that the information gets picked up by QuickScore – as noted at the end of the Gibson Dunn memo…
Preliminary Proxy Statements: Corp Fins Gives Novel Foreign Issuer Relief!
For the first time, Corp Fin has issued interpretative guidance under Rule 14a-6 based on foreign law. In this letter, Corp Fin states that Schlumberger – and any other issuers organized in Curacao – 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 Curacao.
Meanwhile, the SEC has put a draft of their 5-year strategic plan out for comment. The Corp Fin-related stuff begins on page 27…
SEC Issues 20 Stop Orders in a Single Day!
As I’ve blogged before, it’s rare that the SEC issues a stop order to stop the effectiveness of a pending registration statement. That’s why it’s notable that the SEC issued 20 of them yesterday relating to purported mining companies who had filed registration statements with allegedly false information (all of the companies are believed to be controlled by one dude – my favorite name is the “Chum Mining Group”)…
Here’s news from this blog by Davis Polk’s Ning Chiu & Alan Denenberg:
At the recent Securities Regulation Institute, Keith Higgins, the head of the SEC Division of Corporation Finance, indicated that the SEC staff will be looking for less detailed disclosure in the S-1 regarding a company’s historical practice and grant by grant valuation description for establishing the fair value of the company’s common stock in connection with stock-based compensation in IPO registration statements.
Currently, companies provide lengthy discussions of how stock was valued and ultimately the difference between the estimated IPO price and the historical fair value of stock at various points in time as private companies. Companies disclose in MD&A the analysis to support their judgments and estimates regarding the valuations. Staff comments often request a description of significant intervening events within the company and changes in assumptions as well as weighting and selection of valuation methodologies employed that explain the changes in the fair value of common stock up to the filing of the registration statement. The questionable value of the disclosure was raised in the SEC’s own report examining its disclosure requirement, which we discussed here, noting that commenters recommended eliminating or reducing this disclosure, arguing the information is not significant to investors.
It appears that going forward, the SEC staff will no longer require or expect the level of detail that companies have been providing, and instead a few paragraphs describing the historical valuation methodology and what it will be post-IPO will be considered sufficient. However, the SEC staff will still expect a more thorough discussion in the comment letter in order to help the staff ensure that it agrees that the accounting is correct.
Meanwhile, Akin Gump’s Paul Gutermann blogs about “The Business of Climate Change: Disclosure of “Stranded Assets”…
Interview: SEC Enforcement Director Andrew Ceresney
Newly installed as the sole chief of the SEC’s Division of Enforcement with the departure of former co-chief George Canellos, Andrew Ceresney recently gave this interview to the Washington Post. The interview includes commentary on the hot topic of no admission of wrongdoing in settlements.
This is a policy that US District Judge Jed Rakoff has been among the most vocal critics of. As noted in this Bloomberg article, Judge Rakoff has questioned this policy in a lawsuit again.
Meanwhile, the SEC has posted a report detailing its enforcement actions for 2013…
Pretty funny Bloomberg piece about a penny stock that went up 900% based on mistaken impressions of what President Obama meant in his State of the Union address. Meanwhile, former SEC Chair Mary Schapiro has changed her role at Promontory Financial Group so that she is no longer working as a consultant…
Our February Eminders is Posted!
We have posted the February issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!
Spanking brand new. This comprehensive “Regulation FD Handbook” provides a heap of practical guidance about how to deal with a topic that you deal with regularly. This one is a real gem – 113 pages of practical guidance.
The Lead Up to Halliburton! Amicus Briefs & More…
As this Akin Gump blog notes, there is no shortage of arguments from the defense bar in Halliburton v. Erica P. John Fund (No. 13-317), a Supreme Court case that may be the most significant securities decision to come out of the Court in decades. In the last few weeks, the Halliburton Petitioners’ merits brief was followed by 11 amicus curiae briefs, each arguing that the fraud-on-the-market presumption of reliance should be overturned for a myriad of reasons.
Here are all filings for this case, posted on the SCOTUS Blog. Here’s a blog by Lane Powell’s Claire Loebs Davis on the case’s status – and Professor John Coffee weighs in on this blog.
Over on the “Proxy Season Blog,” I blogged a few weeks ago about a new type of shareholder proposal seeking “enhanced confidential voting” requirements that would go beyond current ballot-secrecy rules and prevent companies from seeing running tallies, except in some cases such as picking directors. This article notes that John Chevedden and Jim McRitchie have filed versions of a similar proposal submitted to Centurylink at half a dozen companies or so.
I noted that this turns the interim vote tally debate on its head as these “confidential policy” proposals seek to prevent companies from seeing interim tallies. The debate last year centered on whether shareholder proponents can gain access – the ability for companies to have access was never in doubt. I also gave an update on how Broadridge is still debating its current policy.
The new news is that Omnicom Group has sued John Chevedden in US District Court – SDNY over one of these proposals, challenging the proposal on 4 exclusion bases: violates New York law, vagueness, materially misleading and is ordinary business. Here’s the complaint – and here’s the notice to Corp Fin that the company will sue rather than go through the no-action process. A growing trend as I have blogged before…
Here are the latest survey results about deferred compensation election timing:
1. Do you have a deferred compensation plan, which includes company stock, for outside directors?
– Yes – 77%
– No – 23%
2. Do you have a deferred compensation plan, which includes company stock, for executives?
– Yes – 48%
– No – 52%
3. Our deadline for allowing outside directors to make stock-based elections for the following year, if your fiscal year-end is December 31 is:
– October 1 – October 31 – 11%
– November 1 – November 15 – 5%
– November 15 – November 30 – 16%
– December 1 – December 15 – 21%
– December 15 – December 31 – 37%
– Earlier in year – 11%
4. Our deadline for allowing executives to make stock-based elections for the following year, if your fiscal year-end is December 31 is:
– October 1 – October 31 – 15%
– November 1 – November 15 – 0%
– November 15 – November 30 – 23%
– December 1 – December 15 – 15%
– December 15 – December 31 – 23%
– Earlier in Year – 23%
5. Do you allow your outside directors to make such an election near year-end for the following year, when they likely have access to year-end earnings projections and results?
– Yes – 50%
– No – 50%
6. Do you allow your executives to make such an election near year-end for the following year, when they likely have access to year-end earnings projections and results?
– Yes – 43%
– No – 57%
Please take a moment to anonymously participate in our “Quick Survey on Conflict Minerals” and “Quick Survey on D&O Questionnaires and Director Independence.”
Transcript: The Latest Developments: Your Upcoming Proxy Disclosures”
I have posted the transcript for the recent CompensationStandards.com webcast: “The Latest Developments: Your Upcoming Proxy Disclosures.”
A few days ago, ISS posted the technical document for QuickScore 2.0. Companies now have until the end of February 7th to verify their data.
ISS will release its new ratings on February 18th, including them in proxy research reports issued to its clients. While the prior generation of QuickScore ratings remained static between annual meetings, ISS now will update its ratings on an on-going basis throughout the year. Here are more details about QuickScore 2.0 from Davis Polk and Wachtell Lipton…
Transcript: “The ‘Former” Corp Fin Staff Speaks”
We have posted the transcript for our recent webcast: “The ‘Former” Corp Fin Staff Speaks.”
Webcast: “How to Sell a Division: Nuts & Bolts”
Tune in tomorrow for the DealLawyers.com webcast – “How to Sell a Division: Nuts & Bolts” – during which Bass Berry’s Page Davidson, WilmerHale’s Stephanie Evans and Kaye Scholer’s Joel Greenberg will walk us through the nuts & bolts of selling a division.
I have more than ten cents on this topic – so I will roll out my thoughts in a series of blogs. This first one deals with how this project should start out. As drafters of disclosure, we tend to be focused on the endgame first – how to change the existing disclosure requirements.
But to make this project useful, I think it’s better to pretend that we are operating with a clean slate. What if there were no disclosure requirements yet? So we would be adopting them for the first time. In my mind, these would be the three issues that should be dealt with in that scenario – these are similar to the 4 issues identified in the SEC’s recent Regulation S-K study:
1. What would investors like to made aware of about a company before they invest (or as existing investors deciding whether to sell)?
2. How should investors be made aware that disclosure has been made? Or in what ways should companies “deliver” that disclosure (ie. make it available)?
3. In what ways should companies “file” their disclosure so that investors can rest assured that it really is the company that made the disclosure? And perhaps this is also necessary for liability purposes?
If these are the three issues that should be considered from the outset, the length of a disclosure document really doesn’t come into play except as a consequence of the higher level decisions that are made. And perhaps as a function of #2 above if there are concerns about nuggets being buried. Given that a tweet of 140 characters might well have more influence on a company’s stock price than a Form 10-K – and the fact that few investors read disclosure documents linearly – I do think a primary focus on document length is misguided (although I also don’t believe the impact on stock price is the true measure of a disclosure’s value – but it is a factor). Let me know what you think. I’ll dig deeper in future posts…
Disclosure Reform: SEC Commissioner Gallagher Weighs In
Recently, SEC Commissioner Gallagher delivered this speech on disclosure reform. His thoughts seem to be:
– Do disclosure reform in pieces rather than try to overhaul it all at once
– Eliminate non-material disclosure requirements
– Reduce # of Form 8-K triggering events
– Reduce redundancy by providing guidance when disclosure is not needed
– Streamline proxies & registration statements with more incorporation by reference
– More data tagging like XBRL
– Use of core filing for one-time disclosures
– Only provide significant interpretive guidance from Commission level, not Corp Fin
Reg Flex Act: CEO/CFO Certifications Under Review for Smaller Companies
Last week, the SEC published a list of rules required to be reviewed 10 years after their adoption for their impact on smaller companies in accordance with the Regulatory Flexibility Act. This list includes rules from 2002, so you have CEO/CFO certifications under Section 302 of Sarbanes-Oxley and mandated EDGAR for foreign private issuers on the review list. Comments can be submitted within 30 days after publication in the Federal Register…
Webcast: “Alan Dye on the Latest Section 16 Developments”
Tune in tomorrow for the Section16.net webcast – “Alan Dye on the Latest Section 16 Developments” – to hear Alan Dye of Section16.net and Hogan Lovells discuss the most recent updates on Section 16, including new SEC Staff interpretations and Section 16(b) litigation.
Since last year’s Apple court decision on unbundling (and unbundling litigation has spilled over into other contexts), Corp Fin has focused more on this tricky topic through the comment process. On Friday, Corp Fin issued these three CDIs to clarify its unbundling positions under Rule 14a-4(a)(3):
– Question 101.01: charter amendment reducing dividend rate of preferred holders and extending maturity date
– Question 101.02: charter amendment changing common stock’s par value and eliminating provisions for preferred stock, as well as declassifying the board
– Question 101.03: omnibus plan amendment increasing shares reserved for issuance, increasing max amount payable to a single employee, adding restricted stock to types of award eligible to be granted and extending plan’s term
SEC Issues Auditor Independence Section 21(a) Report In Wake of KPMG Settlement for Violating Rules
On Friday, the SEC reached a settlement with KPMG for violations of its auditor independence rules, with KPMG agreeing to pay $8.2 million without admitting guilt. Here’s a Bloomberg article entitled “Is the SEC Going Easy on General Electric?” that notes “the SEC didn’t name the clients, which is odd, because the agency has in other auditor-independence cases.”
At the same time, the SEC issued a Section 21(a) report about the scope of the auditor independence rules, cautioning auditors that they’re not permitted to loan their staff to audit clients in a manner that results in the staff acting as employees of those companies. This reflects the fact pattern of the KPMG case.
Webcast: “Exclusive Forum Bylaws: What Now?”
Lot of caselaw developments in the exclusive forum bylaws arena! Now what should you do? Tune in tomorrow for the webcast – “Exclusive Forum Bylaws: What Now?” – featuring Wilson Sonsini’s David Berger, Chevron’s Lydia Beebe, Davis Polk’s Ning Chiu and Bill Kelly and Wachtell Lipton’s Ted Mirvis.
Yesterday, Corp Fin issued two new CDIs related to Rule 506 offerings commenced prior to September 23, 2013, the effective date of the new Rule 506(c) exemption. This blog by Blank Rome’s Melissa Murawsky summarizes them…
Big Four Auditors Lose Initial Work Papers Decision In Chinese Affiliates Case
Two days ago, an administrative law judge issued this 112-page initial decision, sanctioning the Chinese affiliates of the Big Four auditors for willfully refusing to produce their work papers to the SEC related to China-based companies. For this violation of Section 106 of Sarbanes-Oxley, the sanctions included censure and a six-month total practice ban. If you read the initial decision, you will see that the ALJ was quite harsh in its commentary of the Big 4 affiliates (eg. “Such behavior does not demonstrate good faith, indeed, quite the opposite – it demonstrates gall.”).
The Chinese affiliates announced that they plan to appeal the decision to the SEC – which will conduct a de novo review – and then federal court if they lose again. The sanctions could have the effect of keeping any Chinese company from the US markets. The ALJ’s sanctions are not effective pending determination of the anticipated appeal. The timing of all this is explained in this Skadden memo…
Here’s an interesting Economist article that challenges current thinking about accountants, including a chart about the likelihood of auditors being replaced by computers!
Nasdaq Gets Regulatory Approval for “Nasdaq Private Market”
Here’s news from this blog by MoFo’s Nilene Evans:
In March 2013, Nasdaq and SharesPost announced Nasdaq Private Market (NPM), a joint venture intended to create a preeminent marketplace for private growth companies. The road to full regulatory approval has been long but in January 2014, FINRA approved the registration as a broker-dealer of NPM Securities, LLC, a Nasdaq OMX Group brokerage unit, a necessary first step to the launch of NPM itself.
In its broker-dealer FINRA profile, NPM Securities said that it is in “the process of registering with the SEC as an alternative trading system assisting in the matching of buyers and sellers in primary and secondary offerings of the securities of privately held companies.” The profile also revealed that NPM is owned 75% by Nasdaq OMX and the balance by SharesPost.
Here is an interesting blog that describes the “2012 Rittenhouse Rankings Culture & Culture Survey,” which is a ranking of the transparency of the annual letters to shareholders from the CEO that are included in glossy annual reports. I didn’t dig into the criteria – so I can’t vouch for the value of the rankings. But I can point out the importance of usability – and storytelling – when drafting disclosure, as recently covered in this blog (and related video)…
Congress: SEC’s Tech Budget Slashed in Half
Per this Washington Post article, Congress approved the SEC’s budget with a $50 million reduction in the agency’s funding for technology – this will force the SEC to scale-back its project for monitoring real-time trading data and its review of company financial statements. Ah, the life of an “independent agency”…
According to this Bloomberg article, one rogue employee in the SEC’s NYC office has caused the SEC to examine the stock holdings of 3400 staffers for compliance with the agency’s ethics rules…
This January-February Issue of the Deal Lawyers print newsletter was just sent to the printer and is a special “looking forward, looking back” issue which includes 9 articles from some of the most prominent members of the M&A bar:
1. 10 Most Influential M&A Developments of this Millennium
– by Barbara Borden & Jennifer Fonner DiNucci
2. Where Are All the Women M&A Dealmakers?
– by Diane Holt Frankle
3. Modernization of Corporate Law in the Fly-Over States
– by Phil Garon
4. A New Era for Management Compensation in Change-in-Control Transactions
– by Michael Katzke & Henry Morgenbesser
5. The Future of Mergers
– by Marty Lipton
6. The Impact of the Internet on Deal Lawyering: Some Reflections
– by Brian McCarthy
7. Important Trends in Cross-Border M&A for US Professionals: 1990-2013
– by Phillip Mills
8. Special Negotiating Committees & the Delaware Bar
– by Gil Sparks
9. Other People’s Money: The Evolution of Dealing with Financing Execution Risk in LBO & Strategic Mergers
– by Robert Spatt
If you’re not yet a subscriber, try a 2014 no-risk trial to get a non-blurred version of this issue on a complimentary basis.
