On December 4, 2015, President Obama signed into law the Fixing America’s Surface Transportation Act, known as the “FAST Act.” This five-year transportation bill also includes a number of provisions related to securities laws and capital-raising measures. The key securities law provisions of the FAST Act are summarized as follows: Reforming Access for Investments in Startup Enterprises:
Securities Regulation
FASB Votes to Approve New Lease Accounting Standard and Plans to Issue the New Standard in Early 2016
At a November 11, 2015 meeting, the Financial Accounting Standards Board (“FASB”) voted to proceed with final revised standards for lease accounting. The new standards would require lessees to record certain assets and liabilities for all leases with a term in excess of 12 months. This is a departure from existing accounting standards, which require balance sheet presentation only for leases classified as capital leases. This change is anticipated to have a significant impact on balance sheets for a broad swath of companies, potentially resulting in recognition of material amounts of lease-related assets and liabilities for many companies. Companies and their advisors should consider now whether the new standards will affect compliance with financial covenants in existing or future debt arrangements.
Corp Fin Issues New Guidance on Unbundling of Proposals
On October 27, 2015, the Division of Corporation Finance of the Securities and Exchange Commission (the “SEC”) issued two new Compliance and Disclosure Interpretations (“CDIs”) regarding the “unbundling” of certain proposals under Rule 14a-4(a)(3) of the Exchange Act in the context of mergers, acquisitions, and similar transactions. Federal proxy rules generally prohibit the grouping of separate matters into a single proposal submitted for shareholder approval. The rules provide that companies must separately submit — or “unbundle” — proposals to allow shareholders to vote on each matter. In connection with business combination transactions, acquiring companies have at times attempted to bundle several amendments to their organizational documents with the business combination when seeking shareholder approval of the transaction. The new CDIs clarify the Staff’s position with respect to this circumstance, requiring separate votes for the transaction and for any material amendment to the acquiror’s organizational documents. The new CDIs are available here.
SEC Adopts Final Crowdfunding Rules
On October 30, 2015, the Securities and Exchange Commission (the “SEC”) voted to adopt final rules permitting companies to offer and sell securities through crowdfunding. The new rules, a response to evolving methods of online fundraising for a variety of firms and projects, are meant to assist smaller companies with capital formation and provide additional protections to investors. We previously discussed the proposed crowdfunding rules here; the text of the final rules has not yet been issued, but a copy of the proposed rules is available here.
ISS Opens Comment Period for Draft 2016 Proxy Voting Policy Updates
Today Institutional Shareholder Services (“ISS”) proposed for comment three changes to its 2016 U.S. proxy voting policies. Comments on the proposed changes can be submitted via e‑mail to [email protected] by 6 p.m. ET on November 9, 2015. ISS will take the comments into account as part of its policy review and expects to release its final 2016 U.S. policy updates on November 18, 2015. We note that ISS’s final 2016 proxy voting policies, which will apply to shareholder meetings held on or after February 1, 2016, likely will reflect additional changes beyond these on which ISS has solicited comments.
NYSE Amends Rule on Release of Material News
The New York Stock Exchange (“NYSE”) has amended its rule on release of material news to the public, effective September 26, 2015. Most importantly, the amendments extend the pre-market hours during which companies must give notice to the NYSE before announcing material news, so that companies will have to notify the NYSE in connection with any announcements made at or after 7:00 a.m. Eastern time. The amendments also provide guidance about the release of material news after the close of trading, update the acceptable methods for releasing material news, and give the NYSE additional authority to halt trading in specific situations.
Massachusetts District Court Orders the SEC to Issue Final Resource Extraction Rule
On September 2, 2015, following a briefing by Oxfam America, Inc. (“Oxfam”) and the Securities and Exchange Commission (the “SEC” or the “Commission”), the U.S. District Court for the District of Massachusetts granted Oxfam’s motion for summary judgment and ordered the SEC to file with the Court within 30 days “an expedited schedule for promulgating the final [resource extraction] rule.
D.C. Circuit Issues Conflict Minerals Decision, but Uncertainty Remains
On August 18, 2015, following a panel rehearing, the U.S. Court of Appeals for the D.C. Circuit issued an opinion affirming its April 2014 decision in National Association of Manufacturers, et al. v. SEC, et al. (“NAM”) that the conflict minerals disclosure rule violates the First Amendment to the extent it requires companies to report that any of their products have “not been found to be ‘DRC conflict free.’” The NAM panel had granted a petition for rehearing in light of a July 2014 ruling in American Meat Institute v. U.S. Department of Agriculture (“AMI”), in which an en banc panel of the D.C. Circuit upheld the constitutionality of compelled speech in the form of Department of Agriculture rules requiring country-of-origin labeling for meat products and raised issues regarding the standard of review to be applied by the court in reviewing the First Amendment challenge in NAM. Because the opinion also addressed the appropriate standard of review to be applied by courts in reviewing compelled speech in the regulatory arena, the NAM panel saw fit to reconsider its decision in light of AMI.
FINRA FAQs on Research Conflict of Interest Rules
On May 27, 2015, FINRA issued a set of FAQs on its research conflict of interest rules. These FAQs further expand upon views expressed by FINRA in settlement agreements entered into by FINRA in December 2014 with ten investment banks in connection with the 2010 proposed IPO by Toys “R” Us (the “Settlement Agreements”).
SEC Publishes Interpretations regarding “Regulation A+”
On June 23, 2015, the Staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) published several new Compliance and Disclosure Interpretations (“Interpretations”) relating to rules and forms under the Securities Act of 1933, as amended (the “Securities Act”). These Interpretations address questions and considerations relating to “Regulation A+”, which was adopted by the SEC on March 25, and became effective last Friday, June 19.