The Division of Corporation Finance of the Securities and Exchange Commission recently issued a letter that for the first time granted no-action relief for the use of notice and access for a proxy statement in a M&A transaction. The no-action letter, SAIC, Inc. (avail. Apr. 27, 2012), involved the upcoming merger of a holding company into its operating subsidiary to eliminate the holding-company structure. The Division has routinely granted no-action relief from various securities law provisions in similar circumstances. For example, the Division has routinely permitted a post-merger company to take into account the pre-merger company’s SEC reporting history in determining its eligibility to use Form S-3.
Archives for May 2012
Risk Factors in IPO Registration Statements of Emerging Growth Companies
Nearly eight weeks after the Jumpstart Our Business Startups Act (“JOBS Act”) was signed into law, the first group of Emerging Growth Companies (each, an “EGC”), as defined in Section 101 of the JOBS Act, have publicly filed registration statements to the SEC that include EGC-specific risk factors. In a May 21, 2012 post on The Corporate Counsel blog, Broc Romanek identified nine such companies:
NYSE Proxy Fee Advisory Committee Releases Report on Proxy Distribution Fees
On May 16, the Proxy Fee Advisory Committee, formed by the New York Stock Exchange in September 2010 to review the fee structure for proxy distribution fees, released its report and recommendations for changes to the fees banks and brokers charge public companies for forwarding proxy materials to shareholders who hold stock in “street name.” The Committee, which includes issuers, broker-dealers and investors, recommended changes to increase the transparency of the fee structure and streamline proxy fees into three basic categories: a nominee fee, a processing fee and a preference management fee (akin to the former “incentive fee”). The Committee’s recommendations also replace the large/small issuer distinction with respect to processing fees with a more gradual tiered fee structure, reduce the fees charged in connection with managed accounts by half, and subject notice and access fees to regulation under the proxy fee structure. The Committee estimates that its recommendations will result in a 4% decrease in the overall proxy distribution fees paid by public companies.
Conflict Minerals: House Holds Hearing on Costs and Consequences of Dodd-Frank Conflict Minerals Rules
On May 10, the International Monetary Policy and Trade Subcommittee of the House Committee on Financial Services held a hearing to address the costs and consequences of Dodd-Frank Section 1502, which requires the SEC to issue conflict minerals disclosure rules. The subcommittee, chaired by Rep. Gary Miller (R-Calif.), examined whether Section 1502 may impose substantial compliance costs on U.S. companies while failing to serve its intended purpose of curbing militia violence in the Democratic Republic of Congo. Led by Chairman Miller, some congressmen expressed concern that Section 1502 has resulted in a de facto embargo on conflict minerals from the Congo, as companies increasingly source minerals from other regions to avoid the disclosure obligations of Section 1502. Others, including Rep. Gwen Moore (D-Wis.) and Rep. David Scott (D-Ga.), asserted that, as long as U.S. companies and consumers are funding violence in the Congo, the U.S. must take action to address the crisis in the region. The witnesses were similarly divided on these issues. Mvemba Dizolele, a visiting fellow at Stanford University’s Hoover Institution, and Dr. Laura Seay, an assistant professor of political science at Morehouse College, indicated that Section 1502 does not address the sources of militia funding or the causes of the conflict, while Bishop Nicolas Djomo Lola, a Catholic bishop from the Congo, stated that mining is the primary source of funding for the militias. In addition, Frank Vargo of the National Association of Manufacturers, Stephen Lamar of the American Apparel & Footware Association, and Steve Pudles, Chairman of the Board of IPC – Association Connecting Electronics Industries and CEO of Spectral Response LLC, testified about the high costs of implementation of the conflict minerals rules by U.S. companies. They urged that the rules include a phase-in period, flexibility in the due diligence process, and a temporary, “indeterminate origin” category of conflict minerals that issuers may use while the infrastructure necessary to trace conflict minerals supply chains is under development. While an SEC representative did not testify at the hearing, SEC Chairman Schapiro last indicated, in early March, that the SEC expects to issue its final conflict minerals rules by the middle of the year.