ON Securities

SEC Reverses Course on Rule 144 Holding Periods for Donees and Pledgees

Alan Gilbert — Wed, 22 May 2013 21:26:50 -0600

The SEC’s Division of Corporation Finance issued 15 new Compliance and Disclosure Interpretations (C&DIs) last week. Two of the C&DIs I found noteworthy relate to the inapplicability of Rule 144 holding periods when a non-affiliate of the issuer acquires shares from an affiliate by gift or through foreclosure of a pledge, and the shares were control securities (not restricted securities) in the affiliate's hands. These new interpretations represent a welcome...

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Private Secondary Markets: Contrast With Listed Company Regulation

Alan Gilbert — Tue, 02 Apr 2013 19:22:30 -0600

In the emergence of secondary markets for private company stock, the latest development is Nasdaq’s sponsorship of a private secondary market. These markets allow privately held companies (sometimes with hundreds of stockholders) to have the benefits of a liquid market in their securities without subjecting themselves to the restrictions of an exchange listing. At the same time, Nasdaq and the other stock exchanges have been imposing even more governance requirements and restrictions on...

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The Readers' Guide to Annual Meeting Lawsuits

Martin Rosenbaum — Tue, 19 Feb 2013 20:56:58 -0600

As an increasing number of companies have been hit (or threatened) by shareholder derivative lawsuits prior to their annual meeting, the number of articles, posts and other materials discussing these cases has also increased. A few of these articles, discussed below, should be on the reading list for anyone who might be faced with defending one of these actions. The annual meeting lawsuits are filed after the mailing of the proxy statement, seeking to enjoin the shareholder vote or votes based...

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New SEC "Lost Securityholder" and "Paying Agent" Rules May Add to Compliance Costs

Paul Chestovich — Thu, 10 Jan 2013 19:16:27 -0600

On December 21, 2012, the SEC issued new rules requiring broker-dealers to search for holders of securities with whom they have lost contact. The new rules also require broker-dealers and other “paying agents” to provide notice to persons who have not negotiated checks received on account of securities they beneficially own. The new rules may make it easier as a practical matter for states to lay claim to “unclaimed property” held by broker-dealers and paying agents. In...

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It's Time to Review Procedures for Insiders' Rule 10b5-1 Trading Plans

Martin Rosenbaum — Mon, 17 Dec 2012 22:42:37 -0600

Recent news reports make it clear that now is a good time for public company compliance officers to review their company’s procedures for approval of insiders’ Rule 10b5-1 trading plans. If you are not looking at your practices in this area, it’s possible that a regulatory authority or media reporter will soon be taking a close look. Rule 10b5-1, adopted in 2000, provides insiders with an affirmative defense to charges of insider trading if the trades are made pursuant to a...

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ISS Weighs In On Public Company Hedging and Pledging Activities

Alan Gilbert — Tue, 04 Dec 2012 23:17:44 -0600

Over the past few years, there has been an increasing focus on public company insider hedging and pledging activities. Institutional shareholders and proxy advisory firms have been pressuring public companies to disclose their policies on hedging and pledging. Under the Dodd Frank Act, enacted in 2010, Congress charged the SEC with adopting rules regarding disclosure of this activity in SEC filings. However, the SEC has not yet proposed or adopted rules implementing this mandate. ...

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New Brand of "Sue-on-Pay" Litigation Targets Annual Meetings

Martin Rosenbaum — Thu, 15 Nov 2012 11:44:58 -0600

Call it “Sue-on-Pay – The Sequel.” In 2011, several public companies faced lawsuits after losing their Say-on-Pay shareholder advisory votes on executive compensation mandated by the Dodd-Frank Act. As reported in this prior post, a few of these first generation “Sue-on-Pay” lawsuits resulted in settlements, while many since that time have been dismissed. However, in early 2012, a new round of compensation-related lawsuits began, and these lawsuits use...

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Conflict Minerals Rules May Foster Corporate Social Responsibility

Martin Rosenbaum — Thu, 30 Aug 2012 14:48:47 -0600

Last week, the SEC adopted final rules (PDF) under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (PDF), requiring reporting companies to disclose their use of so-called “conflict minerals” that originated in the Democratic Republic of the Congo (DRC) or a nearby country. These minerals, which include tantalum, tin, gold and tungsten, are used in computers, cell phones, cameras, automotive and aerospace components, medical devices, jewelry and...

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Program Provides Update on Dodd-Frank Act Requirements

Martin Rosenbaum — Wed, 25 Jul 2012 23:19:30 -0600

This month, I participated in an executive compensation program for the Twin Cities Chapter of Financial Executives International (FEI). In “A Perspective on Executive Compensation After Dodd-Frank”, compensation consultant Eric Gonzaga of Grant Thornton LLP and I gave an update on Dodd-Frank Act requirements, including new and upcoming SEC rules, and Eric gave his perspective on the latest trends in performance-based compensation – see our presentation materials here...

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Will Final Rules on Compensation Committee Advisers Lead to Engaging Independent Counsel?

Martin Rosenbaum — Sun, 01 Jul 2012 20:37:21 -0600

On June 20, 2012, the SEC adopted final rules (PDF) under Section 952 of the Dodd-Frank Act (Section 10C of the Securities Exchange Act of 1934), covering independence standards for compensation committees of listed companies and their advisers. In themselves, the new rules are not too exciting. Consistent with Section 10C, the rules require the national securities exchanges, such as the New York Stock Exchange and Nasdaq, to adopt listing standards on these topics. The final rules raise some...

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Say-on-Pay Update: How Does 2012 Compare With 2011?

Martin Rosenbaum — Thu, 07 Jun 2012 21:29:14 -0600

It’s June, and the crush of annual meetings is, for the most part, finished. For most companies, this has been the second year in which a Say-on-Pay vote – an advisory shareholder vote on the company’s executive compensation – has been required under the Dodd-Frank Act. This is a good time to look at the shareholder votes to see if there has been a major change from 2011. Semler Brossy’s latest Say-on-Pay Results report (PDF) reveals that not much has changed...

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Responding to the Yahoo Resume Debacle

Martin Rosenbaum — Tue, 15 May 2012 21:42:20 -0600

As reported by Bloomberg this week, Scott Thompson, the CEO of Yahoo since January, was forced to resign after it was discovered that he did not in fact obtain one of the college degrees listed in Yahoo’s reports. To make matters worse, a discrepancy was also discovered in the reported educational background of Patti Hart, the Chair of Yahoo’s Governance Committee and the search committee that evaluated Thompson. She will not seek re-election at the Yahoo annual meeting this...

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Perspectives on Citigroup's Negative Say-on-Pay Vote

Martin Rosenbaum — Tue, 01 May 2012 19:41:16 -0600

As the 2012 proxy season kicks into high gear, Citigroup’s negative Say-on-Pay vote a couple of weeks ago remains the big story. Because of Citigroup’s size and prominence, the vote received a lot of commentary in newspapers and blogs. As Mark Borges pointed out in the Proxy Disclosure Blog on CompensationStandards.com (subscription site): This turns out to be Citigroup's fourth "Say on Pay" vote since 2009 - the first two were as a participant in the Troubled Asset...

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What Should Public Companies Know About the JOBS Act?

Martin Rosenbaum — Mon, 16 Apr 2012 21:44:36 -0600

On April 5, 2012, President Obama signed the Jumpstart Our Business Startups (JOBS) Act (PDF), which increases the ability of companies to access capital without registration under the Securities Act and encourages initial public offerings of "emerging growth companies." For those of you who have only received 500 law firm alerts about the JOBS Act and are anxious to read your 501st, you should review the Maslon Legal Alert, which is refreshingly short. The JOBS Act focuses mainly on...

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Say-on-Pay Votes: New Resources Make It Easy to Keep Score

Martin Rosenbaum — Sun, 01 Apr 2012 21:34:15 -0600

The Semler Brossy compensation consulting firm is publishing a very useful resource for those of us who want to “keep score” on the results of Say-on-Pay votes in 2012. “2012 Say on Pay Results” is a weekly publication of the cumulative results of Say-on-Pay shareholder advisory votes at Russell 3000 public companies. The most recent report includes the following stats: The majority of companies continue to pass Say-on-Pay in 2012 with substantial shareholder...

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Risky Business: What If the CEO Has a Risky Hobby?

Martin Rosenbaum — Thu, 22 Mar 2012 21:58:18 -0600

The death of Steven Appleton, the CEO of Micron Technologies, in the crash of his experimental plane last month highlighted the issues faced by companies whose CEOs have risky hobbies. What are the board’s duties in that situation? And what disclosure issues are presented? In a Wall Street Journal article last week, “Executive No-Fly Zone?”, Joann Lublin pointed out that, in these cases, many boards of directors would like to prevent the CEOs from flying stunt planes. In the...

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Survey Results Reveal Attitudes About Pay Equity Disclosure

Martin Rosenbaum — Thu, 08 Mar 2012 22:13:02 -0600

According to a recent survey about the “pay equity” disclosures that will be required in future public company proxy statements, most respondents believe the requirement will be fairly burdensome, but many respondents haven’t spent much time figuring out specifically how their companies will comply. Broc Romanek reported on the results of the survey, conducted by TheCorporateCounsel.net, today in the Advisors’ Blog on CompensationStandards.com (subscription...

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The Psychology of Equity Awards - A Compensation Consultant's View

Martin Rosenbaum — Thu, 23 Feb 2012 21:29:01 -0600

This time of year, many public companies are drafting the Compensation Discussion and Analysis section of their proxy statement, including a description of how the company’s executive compensation program aligns the interests of executives with those of shareholders. But do the elements of compensation always have the desired effect? Not according to one compensation consultant. Jim Sillery of Buck Consultants today gave an entertaining presentation to the Twin Cities Chapter of the...

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Incentive Design Study Sheds Light on Compensation Practices

Martin Rosenbaum — Thu, 16 Feb 2012 21:56:53 -0600

As we approach the second proxy season featuring Say-on-Pay votes, public companies are under increasing pressure to describe how executive pay is tied to company performance. The compensation consulting firm James F. Reda & Associates recently issued its “Study of 2010 Short- and Long-Term Incentive Design Criterion Among Top 200 S&P 500 Companies” (PDF). This study provides a good snapshot of the types of practices large companies used in 2010 (reported in 2011 proxy...

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Facebook IPO Includes Insider-Friendly Corporate Governance Provisions

Martin Rosenbaum — Thu, 02 Feb 2012 16:35:53 -0600

As nearly everyone knows by now, Facebook, Inc. filed its initial registration statement yesterday with the SEC, leading toward an initial public offering. As the filing reveals, Facebook’s corporate structure includes some corporate governance provisions that founder Mark Zuckerberg and other insiders are certain to “Like”. In a post on the DealBook Blog, “A Big Bet on Zuckerberg,” Steven Davidoff reports that Facebook, Inc. is structured to give Zuckerberg a...

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