Glass Lewis recently posted its comprehensive 2020 voting guidelines, which are summarized on the first page of the 2020 voting guidelines as well as on the Glass Lewis blog. Among other things, the 2020 voting guidelines update Glass Lewis’ voting guidance regarding excluded shareholder proposals. The updates are in response to the September 2019 guidance by the Staff of the Division of Corporation Finance (the Staff) regarding potential oral rather than written responses to 14a-8 no-action letter requests, as further outlined in recent our blog post.

As a general matter, Glass Lewis believes companies should only exclude a shareholder proposal when the Staff has explicitly concurred with a company’s argument for the exclusion of such shareholder proposal.

Staff Declines to Articulate a View on the Exclusion of a Shareholder Proposal

In instances where the Staff has declined to provide a view on whether the shareholder proposal is ripe for exclusion, Glass Lewis believes such a shareholder proposal should be included in the company’s proxy statement. In the event a company excludes such a shareholder proposal from its proxy statement, Glass Lewis will likely recommend that shareholders vote against the members of the company’s governance committee.

Continue Reading Glass Lewis Issues Policy Changes Regarding Excluded Shareholder Proposals

On November 5, the Securities and Exchange Commission (SEC) in a 3-2 decision voted to propose amendments to rules governing shareholder proposals in companies’ proxy statements.  These proposed amendments – which seek to revise Rule 14a-8’s eligibility requirements, one-proposal limit, and resubmission thresholds – follow on the heels of recent guidance issued by the Staff of the Division of Corporation Finance related to the no-action letter process for shareholder proposals.

The press release announcing the proposed changes noted that the changes are part of the SEC’s ongoing focus on improving proxy access and the ability of shareholders to exercise their rights to vote. SEC Chairman Jay Clayton commented in the release that the proposed changes are designed to “facilitate constructive engagement by long-term shareholders in a manner that would benefit all shareholders and our public capital markets.”  Not without controversy though, the rule revisions are receiving criticism from shareholder advocacy groups, while business-minded groups like the U.S. Chamber of Commerce have come out in support of the proposed changes.

Eligibility Requirements for Shareholders

The current eligibility requirements require that a shareholder proponent hold at least $2,000 or 1% of a company’s securities for at least a year to be eligible to submit a proposal.  The proposed revisions, eliminate the 1% threshold and replace the $2,000 threshold with the following three alternatives:

Continue Reading SEC Proposes to Modernize Shareholder Proposal Thresholds and Certain Procedural Elements of Rule 14a-8

Register for the November 19th WebinarPlease join the Bass, Berry & Sims Corporate & Securities Practice Group for a series of complimentary webinars exploring various public company – related securities law issues. These quarterly CLE programs will be an extension of this blog and will feature timely and practical guidance to SEC disclosure counsel on key topics of interest.

The second Securities Law Exchange webinar, hosted by Bass, Berry & Sims attorneys Jay Knight and Michael Rivera, will feature guest presenter Scott Hodgdon, Senior Managing Counsel, Securities & Governance at Boston Scientific Corporation.

Jay and Scott will discuss recent SEC developments, including best practices and lessons learned from recent changes under the FAST Act and the SEC’s new rule that extends “testing-the-waters” to all issuers. Michael will review recent SEC guidance and enforcement actions impacting public companies.

WEBINAR DETAILS

Title: Recent SEC Reporting Developments and Enforcement Insights

Date: Tuesday, November 19, 2019  Time: 12:00 PM Central Standard Time

Approved for one hour General Tennessee CLE credit. Certificate of completion available upon request, which can be used to obtain CLE in other jurisdictions.

Who Should Attend

  • Outside and in-house counsel
  • Public company finance and SEC reporting personnel
  • Compliance officers
  • Other interested professionals

For more information, please contact Lauren Parkhurst.

In June of this year, the SEC issued a concept release that reviews the framework for exempt offerings, including several exemptions from registration under the Securities Act of 1933 that facilitate capital raising.  The concept release seeks comment on possible ways to simplify, harmonize and improve this exempt offering framework to expand investment opportunities while maintaining appropriate investor protections and promote capital formation.

To date, approximately 161 commentators have submitted letters to the SEC, and the SEC has posted memos related to seven meetings between SEC officials and outside parties concerning the rulemaking.  As a former Staffer that did a stint in the Office of Rulemaking, I can appreciate the hard work that is involved in summarizing all these letters and meetings.  (I actually had the job of summarizing comment letters in connection with a rulemaking I was involved with while on Staff.  It is actually very beneficial for the Staff to hear various viewpoints and expertise on any rulemaking, but it is also a tedious task that takes a lot of Staff hours and, for me at least, a very large spreadsheet!)

Continue Reading ABA Securities Committee Comments on SEC’s Concept Release on Private Offerings Harmonization

Register for the Corporate & Securities Counsel Public Company Forum on December 12Bass, Berry & Sims invites you to join us for our inaugural Corporate & Securities Counsel Public Company Forum on Thursday, December 12.

This half-day program will feature timely and practical guidance on the latest developments in corporate and securities matters impacting public company in-house counsel.

Panel discussion topics will include:

  • Upcoming proxy season
  • Financial reporting and disclosure considerations
  • Corporate governance developments
  • Insights from public company general counsel
  • SEC priorities and developments
  • Recent M&A trends and 2020 outlook

Pending approval, this half-day program will provide four hours of general CLE credit in Tennessee. This half-day program will be held Thursday, December 12, from 12:00 – 5:00 p.m., at the office of Bass, Berry & Sims in Nashville, Tennessee.

The Corporate & Securities Counsel Public Company Forum is intended for in-house counsel, public company finance and SEC reporting personnel, compliance officers, and other interested professionals. For more information, please contact Lauren Parkhurst.

About Our Corporate & Securities Practice

The Bass, Berry & Sims Corporate & Securities Practice encompasses mergers and acquisitions, capital markets transactions, corporate governance and shareholder activism. We serve as primary corporate and securities counsel to approximately 35 public companies and have counseled on 150 deals ranging in size from $20 million to more than $15 billion over past two years. Learn more here.

The recent SEC enforcement action against ADT Inc. for its failure to comply with the SEC’s equal prominence requirements applicable to non-GAAP financial measures, as outlined in our recent blog post, is a clear reminder that public companies need to continue to be vigilant about the SEC’s non-GAAP financial measure rules.  Also, the Staff has continued to focus on non-GAAP compliance in its comment letters, with non-GAAP financial measures being one of the leading areas of Staff comment over the last couple of years.

There are different layers of the SEC’s non-GAAP financial measures rules which apply to public companies in varying circumstances, depending on the nature of the public disclosure.  Comprehensive knowledge regarding which level of the SEC’s non-GAAP financial measure rules applies to any particular disclosure is a key component when assessing legal considerations and risk in connection with the disclosure of non-GAAP financial measures.

Continue Reading Navigating the Maze: Which SEC Rules Apply to Your Non-GAAP Financial Measure Disclosures

It’s been a busy late summer and early fall for the Staff of the Division of Corporation Finance (the Staff) as it relates to shareholder proposals and the Staff’s historical involvement in the no-action process related to those proposals.

On September 6, 2019, the Staff, focusing on how it could most efficiently and effectively provide guidance where appropriate regarding shareholder proposals, announced that it was changing its practices in this important area.  Historically, issuers that were seeking to exclude a shareholder proposal from their proxy statement on the grounds that the SEC’s proxy rules permitted such exclusions sought formal, written no-action relief from the Staff of the Division of Corporation Finance.

These no-action letters issued by the Staff would inform the issuer whether or not the Staff would recommend that the SEC’s Enforcement Division take action against the issuer for excluding a particular shareholder proposal.

Continue Reading SEC Staff Policy Change on 14a-8 Process; May Choose to Respond Orally Rather than in Writing

We recently wrote a three-part article series for Corporate Counsel highlighting recent trends warranting review by public companies and consideration as to whether to update their insider trading policies and training.

  • Part One offered practical guidance on mitigating risks associated with employees who may inadvertently share confidential information with others. As the benefits of remote work options increasingly pull the workforce out of the office, companies face risks from employees removing sensitive company documents from the secure confines of their offices and company databases. Because information removed from the safety of a corporate office or database is susceptible in many ways to being taken and misused by bad actors, it is important for in-house counsel to take steps to ensure their insider trading policies and training cover this area.

Continue Reading Insider Trading Policies and Training: Time for a Refresher?

On September 26, 2019, the SEC voted to adopt a new rule that extends a “test-the-waters” accommodation—currently a tool available only to emerging growth companies (EGCs)—to all issuers.  The rule will become effective 60 days after publication in the Federal Register.

The new rule and related amendments under the Securities Act of 1933 would enable all issuers (and its authorized representatives, including underwriters) to engage in test-the-waters communications with certain institutional investors regarding a contemplated registered securities offering prior to, or following, the filing of a registration statement related to such offering. These communications would be exempt from restrictions imposed by Section 5 of the Securities Act on written and oral offers prior to or after filing a registration statement and would be limited to qualified institutional buyers (QIBs) and institutional accredited investors (IAIs).

New Rule 163B

New Securities Act Rule 163B will permit any issuer, or any person authorized to act on its behalf, to engage in oral or written communications with potential investors that are, or are reasonably believed to be, QIBs or IAIs, either prior to or following the filing of a registration statement, to determine whether such investors might have an interest in a contemplated registered securities offering.  The rule is non-exclusive and an issuer may rely on other Securities Act communications rules or exemptions when determining how, when, and what to communicate about a contemplated securities offering.

Continue Reading SEC Adopts New Rule to Allow All Issuers to “Test-the-Waters”

At the end of last year, in an enforcement action brought by the Division of Enforcement of the Securities and Exchange Commission (SEC) against ADT Inc. (ADT), reporting companies were reminded that the SEC continues to focus on noncompliant use of non-GAAP financial measures.

The SEC found that ADT disclosed non-GAAP financial measures in two earnings releases without presenting the most directly comparable GAAP figure with “equal or greater prominence,” as required by Item 10(e) of Regulation S-K.

Continue Reading SEC Enforcement Activity – A Reminder Regarding the “Equal or Greater Prominence” Presentation Requirement of Item 10(e)