SEC approves T+2

by Cydney Posner

At an open meeting this morning, the SEC voted to adopt an amendment to Rule 15c6-1 under the Exchange Act to shorten the standard settlement cycle for most broker-dealer transactions from three business days after the trade date (T+3) to two business days (T+2), unless otherwise expressly agreed to by the parties at the time of the transaction. According to the press release, the “amended rule is designed to enhance efficiency, reduce risk, and ensure a coordinated and expeditious transition by market participants to a shortened standard settlement cycle.”   September 5, 2017, which follows a long weekend, has been set as the compliance date.  Continue reading

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European Parliament approves conflict minerals rules for the EU

by Cydney Posner

Last week, the  European Parliament approved, by a vote of 558 to 17 with 45 abstentions, new rules on conflict minerals, 3TG—tin, tungsten, tantalum and gold.  Proceeds from the sale of conflict minerals, which are used in the production of products such as mobile phones, cars and jewelry, are sometimes used to finance armed conflict in high-risk areas. The rules are designed to prevent the sale of conflict minerals from continuing to fuel this violence.  According to the press release, the rules impose supply chain due diligence requirements based on the OECD Guidance on companies importing 3TG into the EU. The rules are expected to cover up to 95% of imports as of January 1, 2021.  Following the European Parliament vote, the EU conflict minerals regulation will be finalized when formally approved by EU member countries and published in the EU Official Journal and will go into effect in 2021.

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Just as the U.S. seeks to roll back regulations, the European Parliament adopts new corporate governance rules

by Cydney Posner

Just when the U.S. is looking at how to roll back its regulations on corporations (among others) (see, e.g., this PubCo postthis PubCo post and this PubCo post), the rest of the world seems to be headed in the opposite direction.  On Tuesday, the EU Parliament approved a Shareholder Rights Directive, which introduces, among other things, the concept of binding say-on-pay votes for companies listed in EU markets (over 8,000 of them). The Directive also includes some interesting measures intended to impede short-termism.  According to the press release fact sheet issued by the European Commission, the Directive must still be adopted by the European Council (expected shortly) and, assuming adoption, will become effective two years thereafter. Continue reading

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BlackRock sets its priorities for board engagement

by Cydney Posner

Asset management firm BlackRock (reportedly the largest, with $5.1 trillion under management) has identified its “Investment Stewardship” priorities for 2017-2018, intended to help companies prepare for engaging with BlackRock. Among the hot topics are governance (including board composition and diversity), corporate strategy for long-term value creation in light of shifting assumptions, executive pay linked to long-term strategy, climate risk disclosure and human capital management.  According to BlackRock, its engagement process is designed to be constructive, and its goal is “to build mutual understanding and ask probing questions, not to tell companies what to do. Where we believe a company’s business or governance practices fall short, we explain our concerns and expectations, and then allow time for a considered response.” However, Blackrock’s approach is not limited to engagement; although, as a long-term investor, the firm will be “patient” as companies work to address concerns, in the absence of progress, BlackRock “will not hesitate to exercise our right to vote against management recommendations.” Continue reading

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Say farewell to the conflict minerals case, Nat’l Ass’n of Mfrs. v. SEC

by Cydney Posner

The parties to the conflict minerals case have filed in the D.C. District Court a “Joint Status Report,” which requests that the Court enter a final judgment in accordance with the decision of the Court of Appeals.  As a result, it will be case closed for National Association of Manufacturers v. SEC, which decided that the requirement in the conflict minerals rule to disclose whether companies’ products were “not found to be DRC conflict free” violated companies’ First Amendment rights.    Continue reading

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SEC committee discusses multi-class common with unequal voting rights

by Cydney Posner

An interesting topic of discussion at a meeting last week of the SEC’s Investor Advisory Committee was “unequal voting rights of common stock” — the trend over the last decade (plus) for a small number of IPO companies, particularly tech companies, to offer low-vote or, more recently, no-vote common shares to the public. (Of course, the concept of dual class common with unequal voting rights is not novel at all.  Many companies, particularly some that are family run, have in decades past had a class of common shares with 10:1 voting rights, not to mention the highly respected Berkshire Hathaway with a class holding voting rights of 10,000:1.)  The debate centered around whether these measures are a legitimate effort to protect companies from the pressures of short-termism exerted by hedge fund activists or are a mechanism that causes shareholders to cede power without providing accountability.  Of course, the answer depends on where you sit. Continue reading

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State Street Global Advisors talks the talk on board gender diversity, but will it walk the walk?

by Cydney Posner

Happy International Women’s Day!

In this press release, State Street Global Advisors, which manages $2.47 trillion in assets, announced, on the eve of International Women’s Day, that it is “calling on the more than 3,500 companies [in which] State Street invests on behalf of clients, representing more than $30 trillion in market capitalization to take intentional steps to increase the number of women on their corporate boards.” According to State Street’s president and CEO, diversity is important to good governance:  “A key contributor to effective independent board leadership is diversity of thought, which requires directors with different skills, backgrounds and expertise.” Although State Street’s preferred approach is to encourage change through active engagement, it may well use stronger measures, including voting against directors. According to the WSJ, State Street plans to “send letters about gender diversity this week to the heads of the more than 700 Russell 3000, FTSE 350 and S&P/ASX 300 companies with no women on their boards.” Continue reading

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