UPDATE: On Friday, April 8, 2011, the SEC published its contingency Plan of Operations on its federal government shutdown page in preparation of a federal government shutdown due to the budget impasse. All updates and announcements regarding SEC operations during the potential shutdown will be posted on the same page. Gibson Dunn’s client alert originally distributed on April 6 follows below. On Tuesday, April 5, 2011, the Obama administration and Congressional leaders announced that they had failed to reach a budget agreement, which could lead to a partial shutdown of the federal government if no budget bill or continuing resolution is approved by the close of business on Friday, April 8, 2011. The U.S. Securities and Exchange Commission (“SEC”) is likely to be significantly affected by any shutdown due to the budget impasse.
Social Media and the Federal Securities Laws
New York partner Lois Herzeca is the author of "Social Media and the Federal Securities Laws" [PDF] published in the April 4, 2011 issue of BNA’s Securities Regulation & Law Report.
SEC Proposes Rules on Compensation Committee Independence and the Role of Compensation Consultants and Other Advisers
On March 30, 2011, the Securities and Exchange Commission (the “SEC”) voted unanimously to propose rules implementing Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) relating to: (1) compensation committee member independence; (2) compensation consultant and other adviser independence; and (3) compensation committee authority to retain, and disclosure regarding use of, compensation consultants and other advisers. In our July 21, 2010 client memorandum, available here, we describe in detail Section 952 of the Dodd-Frank Act, which added a new Section 10C to the Securities Exchange Act of 1934 (the “Exchange Act”).
Protectionism and Paternalism at the UK Takeover Panel — Part II
The Panel Holds Its Ground — An Analysis of Some of the Key Proposals
Introduction — The Panel Stands Firm
In late November 2010, we published an article on the policy statement of the UK Panel on Takeovers and Mergers (Panel) which set out the ground work for changes to the rules governing the conduct of public takeovers in the UK as embodied in the UK Code on Takeovers and Mergers (Code)[1]. Last week, the Panel published a public consultation paper (PCP 2011/1) which sets out the detailed proposed amendments to the Code[2] as trailed in our earlier article. In summary, notwithstanding an outcry from seasoned market participants (in particular the advisory community) on some of the proposed changes which are perceived as having a detrimental impact on the openness of the UK M&A market, disappointingly, the Panel has not shifted from its position as set out late last year on the fundamentals/principles of its new approach on key areas such as the ‘put up shut up’ (PUSU) regime and offeree protection arrangements. We examine below certain critical features of some of these proposed changes.
SEC Proposes to Readopt Existing Beneficial Ownership Rules as They Apply to Swaps
Last week the U.S. Securities and Exchange Commission (the "SEC") proposed to maintain–for now, at least–the current reporting rules under Sections 13(d) and 16 of the Securities Exchange Act of 1934 (the "Exchange Act") as they apply to security-based swap transactions. The SEC issued the proposal to preempt any uncertainty that may arise when Section 13(o)–which was added to the Exchange Act by Section 766 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act")–becomes effective on July 16, 2011. Specifically, because new Section 13(o) may require the SEC to adopt new rules to regulate security-based swaps, the SEC has proposed readopting the portions of Rules 13d-3 and 16a-1 that apply to security-based swaps to maintain the regulatory status quo. The SEC’s proposed rules are the same as the existing rules in all respects.
SEC Targets Directors Who Ignore Red Flags
In the past two weeks, the U.S. Securities and Exchange Commission (“Commission”) announced enforcement actions against four independent directors at two publicly traded companies. While these actions reflect the Commission’s interest in bringing actions against these types of directors, they are consistent with the Commission’s historical practice of pursuing cases against independent directors only when it believes that they personally have engaged in violative conduct or have repeatedly ignored significant red flags One of the actions was brought as an administrative proceeding instead of as a complaint in federal court and illustrates how the Commission will choose to use some of its new enforcement powers under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).
The Model Business Corporation Act and Corporate Governance: An Enabling Statute Moves Toward Normative Standards
Washington, D.C. partner John Olson and associate Aaron Briggs are the authors of "The Model Business Corporation Act and Corporate Governance: An Enabling Statute Moves Toward Normative Standards" [PDF] published in the Winter 2011 issue of Law and Contemporary Problems.
Germany to Ban “Stealth Takeover” Strategies
On February 11, 2011, the German Parliament approved the bill for the so-called "Investor Protection and Capital Markets Improvement Act" (Anlegerschutz- und Funktionsverbesserungsgesetz) which is part of the ongoing legislative activity responding to the financial crisis. The bill is now referred to the second chamber of the Parliament and is expected to enter into force in April.
U.S. SEC Extends the Customer Identification Program No-Action Letter for Broker-Dealers and Changes the Terms
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").
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.