Today the U.S. Securities and Exchange Commission ("SEC") adopted amendments to its proxy rules to permit shareholders to include their director candidates in a company’s proxy materials–commonly referred to as "proxy access." The vote on the amendments was 3-2, with Commissioners Casey and Paredes dissenting due to numerous concerns, including that the proxy access rules encroach on state corporate law and interfere with private ordering by companies and their shareholders.
FASB Extends by 30 Days the Period for Comment on Proposed Changes to U.S. Accounting Standards Governing Loss Contingencies
On August 18, 2010, the Financial Accounting Standards Board ("FASB") announced that it is extending by 30 days to September 20, 2010 the deadline for comments on the FASB’s proposed amendments to the U.S. accounting standards governing the disclosure of loss contingencies, including litigation-related contingencies. Given the broad scope of the FASB’s proposed modifications and the challenges they would pose to financial statement preparers, we encourage companies who have not already commented on the proposal to submit comments by the new deadline.
Delaware Court of Chancery Issues Important Poison Pill Opinion
On August 11, 2010, the Delaware Court of Chancery issued an important opinion in the area of stockholder rights plans, or poison pills. Vice Chancellor Strine’s opinion in Yucaipa American Alliance Fund II, L.P. v. Riggio et al., 2010 WL 3170806 (Del. Ch. Aug. 11, 2010), reaffirms Delaware’s traditional deference to a board’s well-informed and well-reasoned implementation of antitakeover measures, and gives meaningful guidance to boards and their advisors in the implementation of poison pills and other defensive measures in the face of a potential unsolicited change in control situation.
SEC Chairman Schapiro Announces Process for Commenting in Advance on Dodd-Frank Rulemaking
On July 27, 2010, U.S. Securities and Exchange Commission ("SEC") Chairman Mary L. Schapiro announced that the SEC is implementing a new process designed to make it easier for the public to provide comments as the SEC undertakes the process of adopting rules required under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act"), which President Obama signed into law last week. The SEC established the new process in order to provide expanded opportunity for public comment and greater transparency and accountability.
U.S. Regulatory Reform Heads to the Implementation Phase
Dodd-Frank Wall Street Reform and Consumer Protection Act Signed by the President
On July 21, 2010, President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, the most sweeping financial reform legislation in over a generation. The law was largely the product of public consternation and anxiety following the 2008 financial crisis and subsequent recession. The signing of the bill does not, however, mark the end of the process for this round of financial reform and regulation. Despite the President’s comments yesterday that the new law "provides certainty to everybody, from bankers to farmers to business owners to customers," the reality is that Dodd-Frank leaves to regulators the task of conducting pivotal studies, defining core terms, and drafting comprehensive rules, regulations and exceptions that will answer many central and currently open questions raised by the legislation. And so, short of reaching our destination, we have just embarked on the second leg of a long journey.
Securities and Exchange Commission Issues Concept Release Seeking Public Comment on U.S. Proxy System
The principal mechanism for U.S. shareholder participation in corporate governance is being comprehensively scrutinized by the Securities and Exchange Commission (the "SEC") for the first time in almost thirty years. On July 14, 2010, the SEC issued a concept release seeking public comment on numerous fundamental aspects of the U.S. proxy system (the "Concept Release"). Noting concerns from both issuers and investors, the SEC proposes to examine the integrity and efficiency of the proxy system as a whole. Although it is not presented as a rulemaking proposal, the Concept Release will likely lead to significant SEC rulemaking in the coming years. Given the wide range of parties with vested interests in the proxy system, members of the corporate community should strongly consider participating in the dialogue related to this important area by submitting comments to the SEC, either individually or through collective means.
Executive Compensation, Corporate Governance and Other Securities Disclosure Provisions in the Dodd-Frank U.S. Financial Regulatory Reform Act
On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act," available here), the most far-reaching financial regulatory reform legislation in decades. The Act affects not only the financial services industry but also all public companies. This Memorandum focuses on the Act’s executive compensation, corporate governance and other securities disclosure provisions applicable to public companies. This Memorandum also discusses the steps that public companies should consider taking now in light of the Act’s provisions. We have included as Exhibit A a chart listing the provisions described in this Memorandum and as Exhibit B the statutory text of these provisions. [1]
The Dodd-Frank Act Reinforces and Expands SEC Enforcement Powers
During the midst of the financial crisis, the continued existence, much less powers, of the Securities and Exchange Commission were in doubt. But in the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Commission emerged with expanded jurisdiction over hedge funds, credit ratings agencies, and governance of public companies, among other areas.
Financial Accounting Standards Board Issues Proposed Amendments to U.S. Accounting Standards Governing Loss Contingencies
On July 20, 2010, the Financial Accounting Standards Board ("FASB") issued an exposure draft (the "Exposure Draft") containing proposed amendments to Accounting Standards Codification Topic 450-20 (formerly Financial Accounting Standard No. 5), the U.S. Generally Accepted Accounting Principles ("U.S. GAAP") provision dealing with the disclosure of loss contingencies. The proposal would require enhanced disclosure of qualitative and quantitative information about loss contingencies, including litigation-related contingencies.
Restructuring in SEC Division of Corporation Finance
On July 16, 2010, the U.S. Securities and Exchange Commission (the "SEC") announced that the Division of Corporation Finance (the "Division") will create three new specialized offices that are intended to focus the Division’s resources on critically important institutions and financial products.