On March 22, 2016, the Division of Corporation Finance of the Securities and Exchange Commission (the “Staff”) issued a new Compliance and Disclosure Interpretation (C&DI) regarding how Rule 14a-8 shareholder proposals should be described on issuer proxy cards in compliance with Rule 14a-4(a)(3) of the Securities Exchange Act of 1934. This C&DI was issued in response to complaints the Staff received from shareholder proponents about the lack of specificity on some companies’ proxy cards.
One More Time! SEC Seeks to Re-Adopt Resource Extraction Disclosure Rules
On December 11, 2015, the Securities and Exchange Commission voted to propose a new rule implementing Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. That provision directs the SEC to promulgate rules requiring “resource extraction issuer[s]” (i.e., issuers that extract natural resources) to disclose payments they make to the U.S. government or foreign governments for the commercial development of oil, natural gas, or minerals. The SEC’s latest action follows a ruling by a federal district court in Massachusetts directing the SEC to expedite its promulgation of a new rule implementing Section 1504.
“FAST” Act Legislation Enacted — Potentially Significant Impact on Capital Markets
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:
Mark Your Calendars – Pending Deadlines for Submitting Updated Company Peer Group Information to ISS and Equilar/Glass Lewis
Institutional Shareholder Services (“ISS”) has announced that companies can provide it with updated information as to the company-selected compensation benchmarking peer group, beginning at 9 am EST on Tuesday, November 24, 2015. In addition, Equilar Inc.’s (“Equilar”) company-selected peer group update portal opened earlier this week. Since July 2012, Glass Lewis & Co., LLC (“Glass Lewis”) has been using peer groups generated by Equilar in its pay-for-performance analysis.
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.
SEC Staff Reverses Longstanding Precedent on Exclusion of Conflicting Shareholder Proposals Rule; Affirms Business as Usual on Ordinary Business Rule
On October 22, 2015, the Securities and Exchange Commission’s ("SEC" or "Commission") Division of Corporation Finance (the "Division") issued Staff Legal Bulletin No. 14H ("SLB 14H"), setting forth a dramatically different standard for when it will concur that a shareholder proposal that conflicts with a company proposal can be excluded from the company’s proxy statement under Rule 14a-8(i)(9). The Division also reaffirmed its views on the application of the "ordinary business" standard in Rule 14a-8(i)(7). SLB 14H is available here.
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.