A new Compliance and Disclosure Interpretation (C&DI) affords companies relief from the requirement to file seven hard copies of the annual report to shareholders with the Securities and Exchange Commission (SEC). Under the C&DI, which was issued yesterday, companies may now satisfy this requirement by posting the annual report on their corporate websites, as long as it remains available on the site for one year. The C&DI is available here and excerpted below.
ISS Data Verification Period Open Until November 11 for New ISS QualityScore
ISS Data Verification Period Open Until November 11 for New ISS QualityScore
Today proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) opened the data verification period for its corporate governance rating system, which was formerly known as QuickScore. ISS also announced that it has revised and rebranded the rating system, which will now be referred to as QualityScore. QualityScore is the successor to ISS’s QuickScore, which in turn succeeded ISS’s Governance Risk Indicators (“GRId”) and Corporate Governance Quotient (“CGQ”) benchmarking tools.
SEC Corp Fin Staff Releases Guidance on CEO Pay Ratio Disclosure
| On October 18, the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) released five Compliance and Disclosure Interpretations (“C&DIs”) addressing new Item 402(u) of Regulation S-K regarding CEO pay ratio disclosure. |
SEC Eliminates Need for Affirmative “Tandy” Representations from Issuers
On October 5, 2016, the Staff in the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “SEC”) announced that it will no longer require companies to make so-called Tandy representations in their filing review correspondence.
Recent SEC Comment Letters Addressing Non-GAAP Financial Disclosures
Since the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) released updated guidance addressing the use of non-GAAP financial measures on May 17, 2016, the Staff has made public over 200 comment letters sent to companies relating to non-GAAP disclosures. The below chart summarizes the major topics addressed in those comment letters and the frequency with which each topic appears.
ISS Releases Survey for 2017 Policy Updates
Institutional Shareholder Services (“ISS”) today launched its annual global policy survey. Each year, ISS solicits comments in connection with the review of its proxy voting policies. At the end of this process, in November 2016, ISS will announce its updated proxy voting policies applicable to 2017 shareholders’ meetings. ISS will publish the results from the policy survey and use them to inform its voting policy review. The survey includes questions on several governance and compensation matters relevant to U.S. companies, as follows:
Schedule 13G “Passive” Investor Status – When Being A Little Active Is Still Passive!
On Thursday, July 14, 2016, the Staff in the Division of Corporation Finance posted a new C&DI on Section 13(d) that provides stockholders (and issuers) with some helpful insights, and perhaps greater clarity, on when significant stockholders can engage in a dialogue with management and still remain on Schedule 13G. As many practitioners know, Schedule 13G (the “short form” for reporting beneficial ownership of equity positions of 5% or more) often requires an affirmative certification from the reporting person(s) that the securities were not acquired, and are not held, with the purpose or effect of changing or influencing control of the issuer. This is commonly referred to as the “passive” investor certification which is set forth at the end of Schedule 13G, directly above the signature line.
SEC Proposes Amendments to Update and Simplify Disclosure Requirements As Part of Overall Disclosure Effectiveness Review
At its July 13, 2016 open meeting, the Securities and Exchange Commission (the “Commission”) voted to propose amendments to certain disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded in light of subsequent changes to Commission disclosure requirements, U.S. Generally Accepted Accounting Principles (“GAAP”), International Financial Reporting Standards (“IFRS”), and technology. The release approved by the Commission (the “Proposing Release”) is part of the disclosure effectiveness review being conducted by the Commission’s staff (the “Staff”). It is also part of the Commission’s work to implement the Fixing America’s Surface Transportation (FAST) Act, which, among other things, requires the Commission to eliminate provisions of Regulation S-K that are duplicative, overlapping, outdated, or unnecessary.
NASDAQ Proposes Disclosure of Third-Party Compensation for Directors and Nominees
NASDAQ has proposed changes to its listing standards to require disclosure of third-party compensation arrangements for directors and nominees. After withdrawing an initial proposal on this subject, NASDAQ has revised the proposal, and it has been published in the Federal Register for public comment. Comments are due on or before April 26, 2016. The proposal is available here, and a redline showing proposed changes to the rule text begins on page 21 of the document. Under amendments NASDAQ is proposing to Rule 5250(b), NASDAQ companies would have to disclose all agreements and arrangements between any director, or director nominee, and any third party that provide for compensation or other payments in connection with the individual’s candidacy or service as a director. The proposed rule would be construed broadly to apply to both compensation and other forms of payment, such as health insurance. The disclosure requirement would not apply to reimbursement of expenses incurred in connection with serving as a nominee. The proposal also addresses the following aspects of the proposed disclosure requirement:
When the Tail Wags the Unicorn: SEC Chair Voices Concerns About Pre-IPO Investments
On March 31, SEC Chair Mary Jo White gave a keynote address at Stanford University in which she discussed some of the SEC’s emerging priorities with respect to pre-IPO stage companies, private capital markets and fintech. According to Chair White, the SEC is paying particular attention to the risks of fraud and investor confusion that can arise when companies choose to stay private longer.