Please help me celebrate ten years of blogging by emailing me a picture of your favorite, your coolest or your tackiest deal cube (or send more than one!). I will post your photo with the others in our swank “Deal Cube Museum” – either keeping you anonymous or posting it with attribution, up to you – ahead of pitting the various pictures I receive in brackets and allowing y’all to vote for your favorite in a NCAA March Madness like tournament. I have 30 so far – need 30 more!
All good fun. Any deal cube picture will do – it doesn’t have to be lucite either (and each picture should be of a single cube, not your wall of them). They all can’t be the best – I need mundane ones too. And think of it as a blog birthday present when you email it to broc@naspp.com. Here is what I remember what someone at my old law firm said back in the day: “Those things are just plastic pieces of junk to me, but man some in the firm are more proud of the cubes than their own kids!” I know many of you feel the same and are clinging on to those bad boys! I stupidly threw out two boxes of them about a decade ago save one. And don’t forget to send pics of old ones, it’s a great way to remember firms that have passed into history – there will be special recognition of the oldest one that I can find…
Yes, I know Corp Fin issued more JOBS Act FAQs yesterday – #18-41 in the series – but it’s my birthday party and I’ll beg if I want to…fuller coverage of that on Monday…
To get you in the mood, here is a picture courtesy of Jessica Pearlman of K&L Gates showing off her lovely cupboard:
And you can tell that Bob Lamm of Pfizer has been doing this for a while with his display:
A few days ago, this NY Times article caught my eye about a three-year old site called “Kickstarter” that mainly had been used to raise funds for quirky projects but has now grown to help more serious entrepreneurs conduct fundraising for their innovative gadgets, etc. What blew me away is how a few guys raised a million bucks overnight for a digital watch they had invented – in particular, them going to the bar and coming back that evening to find out how much more they had raised in a few hours. They have now raised $7 million and counting.
Given that the JOBS Act was only recently enacted (but remember the SEC’s warning that it needs to adopt rules to implement the new crowdfunding exemption before the floodgates open), I turned to Scott Miller of Ellenoff Grossman & Schole who knows more than me about crowdfunding for some analysis of how Kickstarter operates. Here’s what Scott said:
Kickstarter, to date, has been operating based on the general belief that contributors are not purchasing securities (i.e. a profit interest in any of the companies in which they contribute funds) under the current methods used to raise funds on Kickstarter and similar funding sites. These fund sourcing sites do not purport to be an intermediary for a company’s offer and sale of its securities, but instead companies only agree to provide contributors with something of value, in consideration for their contributions – in this case a Pebble wristwatch. Based on the assumption that such transactions do not constitute investments in securities, it does not appear to be regulated under U.S. securities laws.
Now that new crowdfunding laws are scheduled to go into effect sometime within the next 245 days, crowd sourcing sites like Kickstarter will need to be more aware of the methods used to raise funds on their sites to assure that they are not subject to regulation under the crowdfunding laws, or, if necessary, that the sites are properly registered and all transactions are conducted in compliance with applicable crowdfunding laws.
Interestingly, even though the article was written after the JOBS Act was signed into law by the President, there is no mention, in the article, of these new crowdfunding provisions. It is possible that the author of the article, as well as Kickstarter and similar crowd sourcing sites, are not yet convinced that crowdfunding, as provided under the provisions of the JOBS Act, will become a viable means of raising capital. For starters, it limits the total amount a company can raise during any 12-month period to $1 million, which is $6 million less than the amount of funds raised by the watch company through Kickstarter.
Also, if the digital watch company – Pebble – had been able to raise $1 million pursuant to the equity crowdfunding laws included in the JOBS Act, at the time these funds were raised, it would have been required to have audited financial statements and also be required to make certain disclosures to the SEC. Finally, Kickstarter, or any other funding portal through which the funds were raised, would be required to register with the SEC. It appears that those with an interest in providing services as funding portals under the new crowdfunding laws, including existing crowd sourcing sites like Kickstarter, are going to wait for a final determination of the registration requirements, before making any decisions on whether to register with the SEC as a funding portal.
The PCAOB’s New Interactive Registered Auditor Database
A few days ago, the PCAOB updated its site to allow various sorting of registered auditors, such as firm location and type of audit firm practice.
Mailed: March-April Issue of “The Corporate Counsel”
We just mailed the March-April Issue of The Corporate Counsel and it includes pieces on:
– Analysis of the Jumpstart Our Business Startups Act
– Shareholder Proposal Eligibility Issues After Staff Legal Bulletin No. 14F
– Resignation or Retirement of Principal Officer and Appointment of Successor–Including Both Events in One Form 8-K
– Exclusive Forum Bylaws–Challenged in Delaware
– Hart-Scott-Rodino Act Developments–The DOJ and FTC Get Our Attention
– The SEC Staff (Again) Defends the Anti-Waiver Provisions of the 1933 and 1934 Acts
– The Latest on Regulation D
– SEC Backs “Primary Purpose” Test for Determining Whether Benefit is a Perquisite
– Confidential Treatment Requests–“Conditional” Issuer Consent to Release of Information
– More Staff Guidance on S-3 Waiver Requests
Act Now: Get this issue rushed to when you try a 2012 No-Risk Trial today.
We have posted the survey results regarding when companies begin their blackout periods (there are results from 10 other surveys in our “Blackout Periods” Practice Area), repeated below:
1. Our blackout period begins:
– More than two days after quarter end – 6.4%
-1-2 days after quarter end – 2.6%
– Exactly at quarter end – 9.0%
-1-7 days before quarter end – 6.4%
– 8-14 days before quarter end – 17.9%
-15-21 days before quarter end – 35.9%
– 22-31 days before quarter end – 16.7%
– More than 31 days before quarter end – 5.1%
2. When our blackout period begins, we:
– Send an email to impacted insiders reminding them of the blackout – 69.2%
– Send a hard copy to impacted insiders reminding them of the blackout – 1.3%
– Don’t send any type of reminder – 29.5%
Please take a moment to participate in this “Quick Survey on HSR & Executives’ Acquisitions from Equity Compensation Plans ” – and this “Quick Survey on Audit Committees and Earnings Releases .”
How Might a “Comply or Explain” Regulatory Framework Work in Practice?
Recently, this Accountancy Age article notes that the UK’s Financial Reporting Council examined 60 annual reports to see how companies in the United Kingdom were doing since the country adopted a voluntary “comply or explain” corporate governance code in 2010. The upshot is captured in this excerpt from the article:
It found that companies’ explanations for not following the code were “sometimes rather perfunctory”. Put bluntly, some companies are blowing corporate governance a raspberry.
Webcast: “LLCs: Understanding Capital Account and Allocation Concepts for M&A”
Tune in tomorrow for the DealLawyers.com webcast – “LLCs: Understanding Capital Account and Allocation Concepts for M&A” – to hear Tarik Haskins of Morris Nichols, Andy Immerman of Alston & Bird and Chris Rosselli of Alston & Bird explain the capital account and tax implications of how LLCs are being used in deals today. Here are Course Materials you should print in advance…
– Lona Nallengara, Deputy Director (Legal), SEC’s Division of Corporation Finance
– Steve Bochner, Partner, Wilson Sonsini Goodrich & Rosati
– Michael Kaplan, Partner, Davis Polk & Wardwell
– Dave Lynn, Editor, TheCorporateCounsel.net and Partner, Morrison & Foerster
– Joel Trotter, Partner, Latham & Watkins
Say-on-Pay: Up to 7 Failures and 35 Companies Filing Supplemental Materials So Far
Over the past week, there have been a flurry of failed say-on-pays (as Mark Borges has beaten me to the punch reporting) and the total for 2012 is now 7. As noted in our list, the latest ones are: NRG Energy (45%); Ryland Group (40%); Cooper Industries (30%); and FirstMerit Bank (47%).
The astounding news – according to the list on page 14 of Semler Brossy’s latest recap of say-on-pay results – is that 35 companies so far have filed additional soliciting material to voice displeasure with a recommendation from either ISS or Glass Lewis!
That’s an overwhelming number considering that ISS has recommended “against” only 43 companies so far (as noted on page 2)! Although the number of failed SOPs is roughly in line with last year’s results, the percentage of companies filing supplemental materials compared to negative recommendations from the proxy advisors is off-the charts…
Law School Survey Shows Tough Job Market at Large Firms
I’ve often blogged about how the SEC is lacking the resources it needs. This CFA Institute blog does a great job listing all kinds of great facts, of which these are just a few:
– SEC budget of $1.321 billion is 99.99% smaller than the markets it is supposed to protect
– SEC budget is equal to $1 for every $14,329 that it is charged with protecting
– SEC’s recent additional budgetary request amounts to an additional $0.13 for every $1,000,000 it supervises
– Citibgroup’s profits of $11.1 billion, equivalent to 7.4 more SECs.
– Citibgroup’s total assets of $1,873.9 billion, equivalent to 1,417.5 more SECs.
– Citigroup disposed of assets last year that were worth more than the SEC’s entire budget
– Other budget item of “Recreational and sporting services” is $4.2 billion, or 217.9% larger than the SEC budget.
– Other budget item of “Fish and wildlife service” is $1.6 billion, or 21.1% larger than the SEC budget
– Ray Dalio of Bridgewater Associates earned $3.9 billion in 2011, equivalent to 1.9 more SECs
– Carl Icahn of Icahn Capital Management earned $2.5 billion, equivalent to 89% of another SEC
– James Simons of Renaissance Technologies earned $2.0 billion, equivalent to 51.4% of another SEC
Diversity Tone at the Top
In this podcast, Jim Gauss of Witt/Kieffer discusses how senior leaders can encourage diversity in the workplace, including:
– What is the current state of diversity in healthcare organizations?
– Why is diversity in leadership so critical at this stage in healthcare reform?
– How can healthcare organizations’ board members play a role in promoting diversity in their institutions?
– What are the best methods for CEOs to approach diversity issues within their organizations?
In response to my blog this week about the fireworks at Wells Fargo’s annual shareholders meeting (1000 demonstrators, few dozen arrests), I’ve gotten a number of interesting responses. Although some report that a coalition of unions and other organizations calling itself the “99% Power” intends to target more than 200 meetings, although only a few dozen companies are listed on “The99Power.org.”
Some members suggested the use of virtual shareholder meetings would allow companies to dodge such a problem (a notion I will rebut some other time, but see yesterday’s blog). Some welcomed the challenge – some quivered in their boots. Some journalists even contacted me because they had been frozen out of recent shareholder meetings and wondered if that was legal (more on this later too).
For those planning your annual meeting and it is likely to be the target of demonstrations, I urge you to review the transcripts of the numerous webcasts I have held over recent years on “Conduct of the Annual Meeting” including the great one I held last month (these transcripts are posted in our “Annual Stockholders’ Meetings” Practice Area). You want to be prepared – but not overreact either.
In addition, wunderkind tabulator Carl Hagberg has graciously posted these excerpts from his most recent issue of the “Shareholder Service Optimizer” on his site:
A Revamped Nasdaq Website: Access to Many Useful Materials
From Suzanne Rothwell, Several years ago, I participated in a webcast on this site with Mike Emen, Senior Vice President, Nasdaq’s Listing Qualifications Department. At that time, Mike mentioned that he was starting to do the legwork to revamp how the Nasdaq rules were posted, add more FAQs and exemption/interpretative letters and generally make information more available online regarding listing standards, corporate governance and compliance requirements to assist companies and their advisors. All this – and more – has been accomplished. In addition, Nasdaq currently is in the process of changing hard-copy listing and other filing/notification forms to electronic submissions.
Given so many changes to the Nasdaq website, some practitioners are having trouble finding the location of these materials. In our “Nasdaq Guidance” Practice Area, we have linked to all of the primary materials. One of these is the “Nasdaq OMX Listing Center,” where a user can create an account in order to complete and electronically submit required forms. The Center now supports the electronic submission of Corporate Governance Certifications and Listing Agreements. Listing Applications, Listing of Additional Shares (LAS) Notification Forms and Requests for Rule Interpretations.
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:
– Proxy Advisors Vary Greatly In Withhold Recommendations
– Labor Fund to Challenge Omission of Auditor Rotation Proposals
– Even More on “Benchmarking the Number of ‘Executive Officers'”
– Director Troubles: What Now?
– H-P Gives Activist Shareholder Board Seat
– Online Annual Meetings Begin to Click
– Doing Diligence for Related Person Transactions: How Far Do You Go?
– California: New Law Requires Contractors to Comply with SEC Conflict Minerals Reporting Obligations
– Reaching Out to Largest Investors Prior to Annual Meeting
Over the years, I have wavered – yes, even flip-flopped – over whether allowing companies to hold virtual annual shareholder meetings (ie. without any physical audience) is a good idea. More recently, I had gotten comfortable with the notion that it might be okay for companies that know that their meeting will be held without any controversy. The problem is how do companies really know this when so much of their vote comes in typically within the last 48 hours or so?
So now we have the news that Martha Stewart Living Omnimedia intends to hold its meeting as a virtual one – as noted in its proxy statement – complete with an online shareholders forum, as noted in these additional soliciting materials. And even though the company is a controlled one – by Martha Stewart herself and family – I can’t help but think this is a problem given Mark Borges’ blog that the company is the target of a shareholder class action lawsuit alleging that the company’s disclosure for a proposal to increase the share reserve of its omnibus stock plan was inadequate (plaintiff is seeking an injunction to prevent the company from bringing the proposal to a vote at its annual meeting in late May). A company with a controversy should have its management team and board available to face interested shareholders once a year…
In case you missed it, I blogged about the “Big Fireworks at Wells Fargo Annual Shareholders Meeting” on our “Proxy Season Blog” yesterday (by the way, Wells Fargo shareholder voted against the proxy access proposal on the company’s ballot – first one to go to a vote this season). And as noted in this Davis Polk blog, expect more Occupy Wall Street demonstrations at annual meetings this season…
Our New “Disclosure Deadlines Handbook”
Spanking brand new. Posted in various Practice Areas on the site, this comprehensive “Disclosure Deadlines Handbook” is 103 pages long and addresses these subject areas:
– Form 8-K
– Periodic Reports
– Proxy Materials & Annual Meetings
– Smaller Reporting Company Status
– Confidential Treatment Requests
– Regulation FD
– Exchange Act Registration
– Public Offerings
– Deregistration
– Schedule 13D & Schedule 13G
– Dividends, Stock Splits & Other Related Corporate Actions
SEC Chair Schapiro on SEC Rulemaking & Economic Analysis
Last week, SEC Chair Mary Schapiro gave this interesting testimony before a House Subcommittee about how the agency is grappling with the challenges of economic analysis in the wake of the proxy access court decision. As this WSJ article notes, the Staff must now abide by an internal 17-page document that provides rulemaking guidelines and that:
The agency also is hiring 17 new staff with economics doctoral degrees, which would nearly double the number of Ph.D. economists already on staff to assist with rule-writing, Schapiro said. The agency seeks to hire an additional 20 economists for the fiscal year beginning Oct. 1, she added.
And as noted in this Reuters article, Chair Schapiro noted that the SEC wouldn’t be revisiting the proxy access rulemaking anytime soon. That should be no surprise given all the JOBS Act and Dodd-Frank rulemaking still on Corp Fin’s plate. And here is more testimony from Chair Schapiro that she delivered yesterday about the status of the agency’s rulemaking and how many more Staffers they need going forward, etc.
As noted in this recent NY Post article, Georgeson has been subpoenaed in the investigation regarding an ISS employee allegedly selling shareholder voting data.
A few weeks ago, MSCI – the owner of ISS – confirmed that an ISS employee tipped off a proxy solicitor to votes by ISS clients. As explained in this Form 8-K, the employee told MSCI “that he provided information to a proxy solicitor over a number of years about how a number of ISS’s clients voted their proxies. The employee has stated that the proxy solicitor in question provided him with meals and tickets to various events.” MSCI believes “the employee communicated the vote information by using his personal email accounts and by telephone and that he acted alone in gathering this information and communicating it.” The employee was terminated by ISS on March 26th and MSCI says it has been cooperating with the SEC and DOJ.
Recently, some commentators have applied ISS’s policies to its parent’s – MSCI – practices and been critical, such as this Reuters article and Exequity alert.
Companies Get Some “Larger Trader Rule” Relief from SEC
Last year, I blogged about how Section 13(h) of the ’34 Act was amended by Dodd-Frank to include “large trader” reporting requirements and that the SEC’s final rules to implement this Section didn’t include an exception for operating companies that trade as part of ordinary course balance sheet management activities. As noted in this Davis Polk memo, the SEC adopted a permanent exemption last week to provide companies (and underwriters) with some relief…
– What is your goal with SECWhistleBlowerAdvocate.com?
– Any surprise reactions to it?
– How do you screen whistleblowers when they approach you? How do you do diligence?
– Do you ever contact the company to check on the whistleblower’s story?
As the bloggers on CompensationStandards.com were quick to point out, Citigroup was hit with a say-on-pay lawsuit within two days of the revelation that it had failed to garner majority support for say-on-pay at its annual shareholders meeting last week. In fact, Citi’s Form 8-K reporting the vote results was filed on Friday – and the complaint was filed in the US District Ct.- SDNY on Thursday. The lawsuit was filed before the 8-K!
On April 5, 2012, the Jumpstart Our Business Startups (JOBS) Act was signed into law. The Act requires the Commission to adopt rules to implement a new exemption that will allow crowdfunding. Until then, we are reminding issuers that any offers or sales of securities purporting to rely on the crowdfunding exemption would be unlawful under the federal securities laws.
Note that the SEC brought this enforcement case the week after the JOBS act was signed. In that case, the SEC charged a Silicon Valley man who raised millions for two Internet start-ups by falsely promising investors that his companies were on the verge of undergoing successful IPOs and were well on their way to becoming the “next Google.” With crowdfunding, look for these types of cases to swamp the SEC…
Lot of wild stuff going on, like the Wal-Mart revelations I blogged about yesterday on “The Mentor Blog.” Then yesterday, the SEC brought a fraud case against the former CEO of CalPERS – and as the complaint notes, another California fund refused to engage in the same activity as this CEO did. Based on the allegations in the complaint, there seems to have been serious fiduciary violations to the investors in CalPERS Fund, in addition to the fraud charges brought by the SEC. See Keith Bishop’s blog analyzing the situation.
SEC Approves Nasdaq Proposal for Alternatives to $4 Minimum Bid Price Test
As noted in this Cooley alert, last week the SEC issued this order approving a change to Nasdaq’s Capital Market listing standards to allow companies to list at $2 or $3 instead of the current $4 price. This allows companies that currently qualify for Amex to list on Nasdaq instead. Senior Nasdaq Staffers will be talking about this development – among many others – during the upcoming webcast. “Nasdaq Speaks ’12: Latest Developments and Interpretations.”
– Lily Brown, Senior Special Counsel to the Director, SEC’s Division of Corporation Finance
– Bob Dow, Partner, Arnall Golden Gregory
– John Jenkins, Partner, Calfee Halter
– Dave Lynn, Editor, TheCorporateCounsel.net and Partner, Morrison & Foerster
– David Miller, Partner, Faegre Baker Daniels
Then tune in next Wednesday, May 2nd, for the companion webcast: “The New World of IPOs: Dissecting the JOBS Act” – Corp Fin Deputy Director Lona Nallengara was just added to the panel – as we all try to get a handle on a number of murky areas in a quickly evolving marketplace, as intimated in this recent WSJ article.
Corp Fin Issues MD&A Guidance for Smaller Financial Institutions
On Friday, Corp Fin issued the latest in its “CF Disclosure Guidance Topic” series with “Topic No. 5: Smaller Financial Institutions.” This guidance provides a long laundry list of what the Staff is seeking from small financial institutions in MD&A.
SEC’s Stop Orders Will Run Through Edgar Again
As noted in this announcement, the SEC will ensure that stop orders will appear in a company’s Edgar stream rather than just show up on the agency’s “administrative orders” page.
