On November 3, 2010, the U.S. Securities and Exchange Commission ("SEC") proposed a rule to implement the new whistleblower program mandated by Section 922 of the Dodd-Frank Act. The proposed rule establishes standards and procedures pursuant to which the SEC would reward whistleblowers who provide high quality tips to the agency that lead to successful SEC enforcement actions. The SEC’s press release is available here: http://sec.gov/news/press/2010/2010-213.htm. The full 181-page proposal is available at http://www.sec.gov/rules/proposed/2010/34-63237.pdf.[1]
UK Government Publishes Consultation Paper on Proposed New Regulatory Landscape
In a previous alert published in July, The UK’s Blueprint for Financial Regulation, we looked at the UK Government’s proposals for an overhaul of the UK financial regulatory infrastructure. These proposals were issued upon the initiation of the new Government, aimed at addressing a systemic failure in the UK domestic regime to recognise and respond in a timely and adequate manner to the global financial crisis.
FASB Announces Deferral of Plan to Adopt Changes to Loss Contingency Disclosure Standard
In an important development for U.S. public companies, the Financial Accounting Standards Board (the "FASB") announced at a meeting today that it is deferring plans to adopt proposed amendments to the accounting standards governing the disclosure of loss contingencies, including litigation-related contingencies. The FASB issued an exposure draft on July 20, 2010 (the "Exposure Draft") that contained its proposed modifications to the standards. With its Exposure Draft, the FASB had indicated that it planned to adopt the final standard so that it would be effective for periods ending after December 15, 2010. As a result of today’s action, however, the proposed effective date for the modifications contained in the Exposure Draft has been deferred, pending further deliberations. The FASB suggested that it will revisit the effective date and the Exposure Draft generally after the staff has completed its comment letter review and any revisions to the project plan; the FASB noted that it planned to conduct its additional deliberations before the end of 2010.
EU AIFM Directive – An Update
The curtain is slowly closing on the era of (relatively) light regulation of Alternative Investment Funds in Europe. Key developments flowing from a meeting of European Finance Ministers on 19 October to discuss the ‘AIFM Directive’ include agreement on a slightly less onerous regime for depositaries and confirmation that there will eventually be a ‘passport’ regime allowing marketing of non-EU Funds on a pan-European basis. Although progress has been made, we are nonetheless concerned that the overall effect of the Directive will be to render meaningless over time the distinction between alternative funds marketed to professional investors and the (higher cost) retail funds established under the UCITS regime.
SEC Proposes Rules for Say-on-Pay and Say-on-Golden-Parachute Votes
On October 18, 2010, the Securities and Exchange Commission ("SEC") proposed rules, available here, to implement the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") relating to: (1) shareholder advisory votes on executive compensation ("say-on-pay"); (2) shareholder advisory votes on the frequency of say-on-pay votes ("say-on-frequency"); and (3) shareholder advisory votes on compensation arrangements in connection with significant corporate transactions ("say-on-golden-parachutes"). The proposal includes transition provisions that companies may rely on until final rules are adopted. The SEC also proposed rules, available here, relating to disclosure by institutional investment managers of their proxy voting on executive compensation and other matters. Both rule proposals were issued pursuant to Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which we described in detail in our July 21, 2010 client memorandum, available here. Comments on the proposed rules should be submitted on or before November 18, 2010.
French Banking and Financial Regulation Bill: Summary of Main Provisions
On October 11, 2010, the French Parliament adopted the French Banking and Financial Regulation Statute (loi de regulation bancaire et financière).
The 100 page long Statute contains provisions significantly amending existing laws and regulations regarding, inter alia, (i) the activities and liabilities of credit rating agencies, (ii) short selling and naked short sales, (iii) temporary holding of shares before shareholders’ meetings, and (iv) mandatory takeovers.
Bombay High Court Holds That Public Listed Company Shares Can Be Subjected to Preemptive Rights
On September 1, 2010, a division bench of the Bombay High Court held that consensual preemptive arrangements between shareholders in a public listed company do not violate the principle of free transferability of shares enshrined in section 111A of the Indian Companies Act, 1956 (“Companies Act“). In its 103-page opinion in the case of Messer Holdings Limited v. Shyam Ruia (Appeal No. 855 of 2003), the High Court overruled its previous decision in the case of Western Maharashtra Development Corporation v. Bajaj Auto [2010] 154 CompCas 593 (Bom) where it had taken a contrary view.
Delaware Court of Chancery Issues Important Opinion for Corporations with Staggered Boards
On October 8, 2010, the Court of Chancery of Delaware issued an important opinion, Airgas, Inc. v. Air Products & Chemicals, Inc. (Del. Ch. Oct. 8, 2010), with significant implications for public corporations with staggered boards. The decision arose out of the ongoing takeover battle by Air Products for control of Airgas, Inc. At Airgas’s 2010 annual meeting, held last September 15, Air Products successfully obtained all three board seats that were up for election on Airgas’s nine-member staggered board. In addition, holders of 45.8% of the shares entitled to vote at the annual meeting approved a bylaw amendment, proposed by Air Products, which would cause Airgas’s annual meeting to be held each year in the month of January as opposed to August, when Airgas’s annual meetings had historically been held. Adoption of the proposed bylaw means that Airgas’s 2011 annual meeting will take place barely four months after Airgas’s 2010 annual meeting was held, and Air Products will have the opportunity to replace a majority of Airgas’s staggered board in the space of four months. Airgas filed suit and moved to declare the bylaw amendment invalid.
Repeal of Credit Ratings Agency Exemption from Regulation FD
On September 29, 2010, the SEC amended Regulation FD to remove the express exemption for disclosures of material non-public information to credit rating agencies (former Rule 100(b)(2)(iii) of Regulation FD), as required under Section 939B of the Dodd-Frank Act. This amendment became effective upon its publication in the Federal Register on October 4, 2010.
Dodd-Frank’s “Say-on-Pay” Provisions
Orange County of counsel David C. Lee and associate Brian D. O’Neill are the authors of "Dodd-Frank’s ‘Say-on-Pay’ Provisions" [PDF] published in the October 2010 issue of Insights.