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2014 Proxy Season

Following are some topics that public companies may want to consider in preparation for the 2014 proxy season.

Shareholder Proposals

The 2013 proxy season reflected a continued increase in the number of shareholder proposals submitted to public companies, while the SEC no-action relief process resulted in fewer successful efforts of public companies to exclude shareholder proposals from proxy statements compared to recent years.  However, public companies appear to be having success in negotiating with shareholders as an increased number of shareholder proposals were withdrawn prior to the stockholder meeting in 2013 compared to prior years.  Common shareholder proposals in 2013 included (i) proposals to appoint an independent board chair, (ii) proposals to declassify classified boards of directors (and dismantle other similar protective provisions), and (iii) proposals to increase the diversity of the board of directors.  Shareholder proposals for 2014 are expected to include (i) elimination of super-majority provisions to amend by-laws, (ii) proxy access, (iii) ability of stockholders to act by written consent and/or call special meetings, and (iv) social and environmental proposals related to political contributions, human rights policies and environmental sustainability.  In its 2014 Policy Update, ISS stated that (a) starting in 2014 it will review the responsiveness of a board to any shareholder proposal that receives one year of a majority of votes cast in support (rather than the previous triggers of either two years of a majority of votes cast in a three-year period or one year of a majority of shares outstanding); (b) ISS has adopted a case-by-case approach, including a list of factors for analysts to consider, for assessing board implementation of prior successful shareholder proposals, and (c) ISS provided analysts with broader discretion when determining which directors to hold accountable in the event the level of responsiveness to shareholder proposals is found to be insufficient.  Among the changes for 2014 related to board action on successful shareholder proposals is that ISS will consider in the case-by-case analysis the board’s rationale provided in the proxy statement for not adopting a shareholder proposal.Continue Reading Client Alert – Considerations for 2014 Proxy Season and Beyond

On July 10, 2013, the SEC adopted the amendments required under the JOBS Act to Rule 506 that would permit issuers to use general solicitation and general advertising to offer their securities, subject to certain limitations. In addition, the SEC amended Rule 506, as required by the Dodd-Frank Act, to disqualify felons and other bad actors from being able to rely on Rule 506. The long-awaited new rules will allow issuers that are permitted to rely on Rule 506 to more widely solicit and advertise for potential investors, including on the Internet and through social media.

The SEC also adopted an amendment to Rule 144A that provides that securities may be offered pursuant to Rule 144A to persons other than qualified institutional buyers, provided that the securities are sold only to persons that the seller and any person acting on behalf of the seller reasonably believe are qualified institutional buyers.Continue Reading SEC Eliminates the Prohibition on General Solicitation for Rule 506 and Rule 144A Offerings

In McDaniel v. Wells Fargo Investments, LLC, Nos. 11-17017, 11-55859, 11-55943, 11-55958, 2013 WL 1405949 (9th Cir. Apr. 9, 2013), the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of four class action lawsuits filed by employees against brokerage firms Wells Fargo, Bank of America, and Morgan Stanley. In separate lawsuits, the employees alleged that the brokerage firms’ policies prohibiting employees from opening outside self-directed trading accounts violates Section 450(a) of the California Labor Code, which prohibits employers from forcing its employees to patronize his or her employer. The Ninth Circuit held that the California statute is preempted by the Section 15(g) of the Securities Exchange Act of 1934 (the “1934 Act”), 15 U.S.C. § 78o(g), which requires brokerage firms to take measures reasonably designed to prevent employees from engaging in insider trading. This case of first impression in California reassures brokerage firms that compliance with the securities laws will not violate California labor laws.Continue Reading Ninth Circuit Holds that Federal Securities Laws Preempt California Labor Code’s Ban on Forced Patronage at Brokerage Firms

Most public companies use Broadridge for shareholder voting tasks related to their annual meetings. Due to a new interpretive position being taken by the SEC, Broadridge recently informed its clients of a technical change in its online, mobile and telephonic voting platforms that may adversely affect obtaining favorable shareholder votes, particularly from retail investors.Continue Reading Technical Change by Broadridge May Impact Retail Voting at Upcoming Annual Meetings

Certain NASDAQ rules and interpretive material relating to the disclosure requirements surrounding a listed issuer’s non-compliance with the NASDAQ’s listing standards were amended effective December 3, 2012. Under the amended rules, an issuer that receives a notification of deficiency from the NASDAQ concerning non-compliance with continued listing standards must issue a more detailed public announcement. If an issuer fails to provide the required disclosure in a timely manner or if the disclosure is deficient or misleading, the NASDAQ is authorized to issue its own public disclosure.Continue Reading NASDAQ Listed-Issuers Subject to New Rules Relating to Disclosure of Non-compliance with Listing Standards

At last!  We now have official guidance in one place from the United States Department of Justice and the Securities and Exchange Commission regarding the Foreign Corrupt Practices Act (“FCPA”).  A lengthy memorandum was released November 14, 2012, accompanied by a joint press conference.  Here is a link to the memo: http://www.sec.gov/spotlight/fcpa/fcpa-resource-guide.pdfContinue Reading DoJ and SEC Issue Long-Awaited FCPA Guidance

On August 22, 2012, the SEC adopted its final rule related to conflict minerals required by Congress under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), which will require all public companies to implement complex new controls and procedural mechanisms, and in certain cases, conduct supply chain due diligence that could lead to new public disclosures.
Continue Reading Navigating the SEC’s Recent Conflict Minerals Rules: Threading the Needle Through Complex Controls and Procedures and Complying with New Disclosure Requirements

On August 22, 2012, the SEC adopted disclosure rules required by Sections 1502 and 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act related to conflict minerals and payments by issuers engaged in resource extraction.

The new rules on conflicts minerals disclosures will apply to all SEC reporting companies for which the identified conflict minerals are “necessary to the functionality or production” of a product manufactured or contracted to be manufactured by the issuer. We will be providing more detailed summaries of these rules in future posts.Continue Reading SEC Adopts Dodd-Frank Rules Regarding Conflict Minerals and Payments by Resource Extraction Issuers and Defers Rules for Implementation of JOBS Act Elimination of Ban on General Solicitation until August 29

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) for adopting regulations required by section 952 of the Reform Act, the Securities and Exchange Commission (the “SEC”) on June 20, 2012 issued a press release and published final rules (Release No. 33-9330) (the “Final Rules”) for compensation committee and compensation adviser independence requirements.Continue Reading SEC Adopts New Rules Calling For Greater Independence Standards For Compensation Committees And Their Advisers

On April 5, 2012, President Obama signed the Jumpstart Our Business Startups (JOBS) Act, enacting it into law. The JOBS Act is intended to make it easier for smaller and earlier stage companies to raise capital and also to revitalize the U.S. market for initial public offerings, which has been in decline since the beginning of the last decade.

The provisions of the JOBS Act represent a watershed change to the laws and regulations governing capital raising for private companies. Some of the provisions – such as the “IPO on-ramp” provisions and the increase in the number of holders triggering mandatory registration and public reporting under the Securities Exchange Act of 1934, are effective immediately. Others, including the new crowdfunding exemption, the removal of the ban on general solicitation for offerings under Rule 506 to accredited investors and Rule 144A to QIBs, and the new exemption modeled on Regulation A, will require SEC rulemaking before they come into force.

We have previously blogged about the original House version of the Act and the changes the Senate adopted, which changes were enacted into law. This article discusses the full Act as enacted.Continue Reading President Obama Signs JOBS Act: Landmark Reform for Small and Emerging Growth Companies Now Law