On January 11, 2011, the U.S. Securities and Exchange Commission ("SEC"), in consultation with the Department of the Treasury, Financial Crimes Enforcement Network ("FinCEN"), again extended the Bank Secrecy Act ("BSA") Customer Identification Program ("CIP") no-action letter (initially issued in 2004) relating to broker-dealer reliance on SEC registered investment advisers ("RIAs"). As previously, the extension was granted at the request of the Securities Industry and Financial Markets Association ("SIFMA").
Topic: Corporate Governance
Delaware Chancery Court Upholds Airgas Poison Pill
On February 15, 2011, the Delaware Court of Chancery issued an important opinion upholding the continued vitality of the poison pill as an appropriate defensive measure for companies faced with takeover proposals deemed inadequate by the target’s board of directors. Chancellor Chandler’s 158 page decision in Air Products & Chemicals, Inc. v. Airgas, Inc. C.A. No. 5249-CC (Del. Ch. 2011) held that the maintenance of a poison pill by the Airgas board of directors was a reasonable response to an all cash, non-coercive, $70 per share tender offer by market rival Air Products & Chemicals, Inc. Despite the fact that Air Products’ tender offer had been public for more than a year–during which time Air Products won a proxy contest to place three directors on Airgas’s staggered board–and that Airgas stockholders were sophisticated and well-informed, the Court concluded that the Airgas board "acted in good faith and in the honest belief" that the $70 per share offer was inadequate, and therefore did not breach a fiduciary duty by failing to redeem the company’s poison pill. The Court highlighted the fact that the independent directors appointed pursuant to Air Products’ successful proxy efforts "changed teams" once they were appointed to the Airgas board–that is, Air Products’ own nominees voted to maintain the poison pill that prevented the tender offer from going forward.
7th Annual Webcast Briefing on Challenges in Compliance and Corporate Governance
While compliance professionals struggle to balance developing, implementing and monitoring effective compliance programs with the reality of shrinking resources and budgets, the risks involved in non-compliance are higher than ever. Join our experienced securities law, corporate governance, white collar defense and investigations, and government contracts attorneys as they discuss practical approaches for avoiding potential pitfalls and developing strong compliance programs in today’s challenging environment.
SEC Adopts Say-on-Pay Rules
At an open meeting held on January 25, 2011, the Securities and Exchange Commission (“SEC”) voted to approve rules to implement the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) relating to shareholder advisory votes on executive compensation (“say-on-pay”), shareholder advisory votes on the frequency of conducting say-on-pay votes (“say-on-frequency”) and shareholder advisory votes on compensation arrangements in connection with significant corporate transactions (“say-on-golden-parachutes”). The SEC did not address its proposed rules regarding disclosure by institutional investment managers of their votes on say-on-pay, say-on-frequency and say-on-golden-parachutes proposals but indicated at the open meeting that it will do so in the coming month. The final rules, adopted by a vote of 3 to 2, with Commissioners Casey and Paredes dissenting, were issued pursuant to Section 951 of the Dodd-Frank Act.
Delaware Supreme Court Reverses Court of Chancery Opinion Concerning Corporations with Staggered Boards
On November 23, 2010, in Airgas, Inc. v. Air Products & Chemicals, Inc., — A.3d —-, 2010 WL 4734305 (Del. Nov. 23, 2010), the Delaware Supreme Court reversed last month’s decision of the Court of Chancery, Airgas, Inc. v. Air Products & Chemicals, Inc., No. 5817-CC, 2010 WL 3960599 (Del. Ch. Oct. 8, 2010), regarding the scheduling of Airgas’s annual meeting and its potential effect on Airgas’s staggered board. The Supreme Court’s decision invalidates an amendment to Airgas’s bylaws backed by Air Products and holds that the "Annual Meeting Term Alternative" adopted by Airgas to define the length of its directors’ terms provides for a three-year term for each director.
Protectionism and Paternalism at the UK Panel on Takeovers and Mergers
On 1 June 2010 the UK Panel on Takeovers and Mergers (Panel), issued a ‘Green’ Consultation Paper[1] on the Review of Certain Aspects of the Regulation of Takeover Bids in the UK (Green Paper). This Green Paper was issued following an announcement earlier in the year by the Panel that it would review certain rules of the UK Code on Takeovers and Mergers (Code) in the lights of widespread commentary and public discussion following the acquisition of Cadbury PLC by Kraft Foods Inc. in Q1 2010. On 21 October 2010[2], the Code Committee of the Panel issued a statement setting out its findings following this initial consultation period which involved reviewing nearly 100 responses from a broad range of commerce, industry and practice including academics, trade union representatives and the professional advisory community (Response Statement).
SEC Proposes New Dodd-Frank Whistleblower Rule
New York partner Barry Goldsmith and Washington, D.C. partners Eugene Scalia, Amy Goodman and associate Daniel H. Ahn are the authors of "SEC Proposes New Dodd-Frank Whistleblower Rule" [PDF] published in the November 2010 issue of Insights.
U.S. SEC Proposes and Seeks Comment on New Dodd-Frank Whistleblower Rule
On November 3, 2010, the U.S. Securities and Exchange Commission ("SEC") proposed a rule to implement the new whistleblower program mandated by Section 922 of the Dodd-Frank Act. The proposed rule establishes standards and procedures pursuant to which the SEC would reward whistleblowers who provide high quality tips to the agency that lead to successful SEC enforcement actions. The SEC’s press release is available here: http://sec.gov/news/press/2010/2010-213.htm. The full 181-page proposal is available at http://www.sec.gov/rules/proposed/2010/34-63237.pdf.[1]
UK Government Publishes Consultation Paper on Proposed New Regulatory Landscape
In a previous alert published in July, The UK’s Blueprint for Financial Regulation, we looked at the UK Government’s proposals for an overhaul of the UK financial regulatory infrastructure. These proposals were issued upon the initiation of the new Government, aimed at addressing a systemic failure in the UK domestic regime to recognise and respond in a timely and adequate manner to the global financial crisis.
SEC Proposes Rules for Say-on-Pay and Say-on-Golden-Parachute Votes
On October 18, 2010, the Securities and Exchange Commission ("SEC") proposed rules, available here, to implement the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") relating to: (1) shareholder advisory votes on executive compensation ("say-on-pay"); (2) shareholder advisory votes on the frequency of say-on-pay votes ("say-on-frequency"); and (3) shareholder advisory votes on compensation arrangements in connection with significant corporate transactions ("say-on-golden-parachutes"). The proposal includes transition provisions that companies may rely on until final rules are adopted. The SEC also proposed rules, available here, relating to disclosure by institutional investment managers of their proxy voting on executive compensation and other matters. Both rule proposals were issued pursuant to Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which we described in detail in our July 21, 2010 client memorandum, available here. Comments on the proposed rules should be submitted on or before November 18, 2010.