On December 17, 2014, the SEC proposed amendments to revise the rules that govern the thresholds for registration and deregistration under Exchange Act Section 12(g). These amendments would change Exchange Act Rules 3b-4, 12g-1, 12g-2, 12g-3, 12g-4, 12g5-1 and 12h-3, as well as Securities Act Rule 405, to further implement the JOBS Act mandate that was partially reflected in the text of Exchange Act Section 12(g) upon the JOBS Act’s passage.
SEC Delays Action Date for Internal Pay Ratio Final Rules
In its most recently published regulatory rulemaking agenda, the SEC delayed its final action date for issuing rules to implement the internal pay ratio disclosure requirement in Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The rulemaking agenda previously provided that the SEC intended to issue final rules no later than October 2014, but now has rolled that date back to October 2015. The rulemaking agenda sets forth the SEC’s rulemaking priorities for the coming year, but does not establish deadlines and may not even reflect the order in which rulemaking will be undertaken, meaning that the Commission could still adopt final internal pay ratio rules prior to October 2015. Based on the proposed internal pay ratio rules, the final rules are projected to apply to the first full year following the effective date, meaning that if final rules become effective in 2015, the rules would first apply to 2016 compensation and the internal pay ratio disclosures would need to be included in companies’ 2017 proxy statements. However, the Commission could revise these provisions in its final rules to require earlier or allow for a later compliance date. The SEC likewise extended the final action dates for proposing rules under the other compensation-related provisions of the Dodd-Frank Act dealing with clawbacks, pay-for-performance disclosure, and director and employee hedging disclosure from October 2014 to October 2015.
ISS TO LAUNCH NEW “QUICKSCORE 3.0”
Last week, proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) released information about the updated version of its corporate governance benchmarking tool, ISS Governance QuickScore 3.0 (“QuickScore 3.0”), which will launch on November 24, 2014. Companies should take certain actions now and in early November to prepare for the launch of new QuickScore 3.0, as discussed below. QuickScore 3.0 includes both new data points and updates to existing data points for U.S. companies. ISS is expected to release the details of these changes later this week, but below is a summary of the changes we have been able to determine based on the preliminary information released by ISS.
SEC Approves PCAOB’s New And Amended Standards On Related Party Transactions And Significant Unusual Transactions
Earlier this week the SEC approved, without amendment, the PCAOB’s new auditing standards that expand audit procedures required to be performed with respect to three important areas: (1) related party transactions; (2) significant unusual transactions; and (3) a company’s financial relationships and transactions with its executive officers (including executive compensation). The standards also expand the required communications that an auditor must make to the audit committee related to these three areas and amend the standard governing management representations that the auditor is required to periodically obtain. See SEC Release No. 34-73396, Order Granting Approval of PCAOB’s Proposed Rules on Auditing Standard No. 18, Related Parties, Amendments to Certain PCAOB Auditing Standards Regarding Significant Unusual Transactions (October 21, 2014), available at http://www.sec.gov/rules/pcaob.shtml.
ISS Provides Additional Information on New Proxy Voting “Scorecard” Approach for Evaluating Equity Compensation Plan Proposals at 2015 Shareholder Meetings
Today, proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) provided additional information on its plans to implement a new “scorecard” approach to evaluating equity compensation plan proposals at U.S. shareholder meetings and requested comments on its proposed policy change. This is one of two significant proposals ISS announced today that would impact U.S. companies for the 2015 proxy season, with the other proposed policy change relating to voting recommendations on independent chair proposals (which we discuss here). Companies considering seeking shareholder approval of equity plans at shareholder meetings in 2015 should consider these proposed changes now to the extent they want ISS to recommend votes “For” the equity plan.
ISS Announces Proposed Changes to Proxy Voting Policy on Independent Chair Shareholder Proposals Voted on at 2015 Shareholder Meetings
Today, the proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) announced proposed changes to its voting policy on independent chair shareholder proposals and opened the comment period until October 29, 2014, to solicit feedback on the changes. This is one of two significant proposals ISS announced today that would impact U.S. companies for the 2015 proxy season.
ISS Releases Survey for 2015 Policy Updates
Institutional Shareholder Services Inc. (“ISS”), the most influential proxy advisory firm, today launched its 10th annual global policy survey. Each year, ISS solicits comments in connection with its review of its proxy voting policies. At the end of this process, in November 2014, ISS will announce its updated proxy voting policies applicable to 2015 shareholders’ meetings.
House Financial Services Committee Approves Eight Bills Affecting Securities Regulation
Earlier this summer, on May 22, 2014, the Financial Services Committee of the House of Representatives approved eight bills relating to issuer disclosures, public and private capital raising, the liquidity of restricted securities and SEC regulations generally. These bills, if enacted into law, would incrementally ease the many burdens imposed by the current securities regulatory regime.
PCAOB Adopts Auditing Standards Governing Related Parties, Significant Unusual Transactions And Financial Relationships With Executive Officers
The Public Company Accounting Oversight Board (“PCAOB”) yesterday adopted new and amended auditing standards that expand audit procedures required to be performed with respect to three important areas: (1) related party transactions; (2) significant unusual transactions; and (3) a company’s financial relationships and transactions with its executive officers. The standards also expand the required communications that an auditor must make to the audit committee related to these three areas. They also amend the standard governing representations that the auditor is required to periodically obtain from management.
SEC Issues Guidance on the Use of Social Media and the Intrastate Offering Exemption
Solicitations using Social Media
During a webcast earlier this year, our partner Jim Moloney, who formerly worked in the SEC’s Office of Mergers & Acquisitions (“OM&A”), spoke with the current Chief of OM&A, Michele Anderson. On that webcast, Ms. Anderson acknowledged that “social media is here to stay,” noting that the Commission was “trying to find a way to make it work.” Following the webcast, the SEC’s Division of Corporation Finance (“Corp Fin”) posted a new round of Securities Act Compliance and Disclosure Interpretations (“C&DIs”) that approved hyperlinking to legends or required statements in satisfaction of the requirements of Rules 134, 165 and 433 in certain situations. Under three new interpretations, Corp Fin clarified that an electronic communication containing a hyperlink to a legend (or a required statement in the Rule 134 context) would be acceptable so long as: