As discussed in this PubCo post from February, a California bill, SB 826, addressing the issue of board gender diversity, has been making its way through the California legislature. On Sunday, Governor Jerry Brown signed that bill into law. Interestingly, one factor apparently influential in his decision to sign the bill was the recent hearing in Washington. As you may have heard, the legislation requires, as Brown phrases it, a “representative number” of women on boards of public companies, including foreign corporations with principal executive offices located in California. Will other states now follow suit? Will corporations incorporated in other states observe its provisions or challenge the application of this California law?
In January, as discussed in this PubCo post, Nasdaq proposed to modify the listing requirements in Rule 5635(d) to
(i) change the definition of market value for purposes of the shareholder approval rule and
(ii) eliminate the requirement for shareholder approval of issuances at a price less than book value but greater than market value.
In August, Nasdaq filed Amendment No. 1, which clarified certain terms. The SEC has just approved the proposed rule change, as amended, on an accelerated basis.
You may have noticed that there’s still no effective date for the new Disclosure Update and Simplification, which was adopted in August. (See this Cooley Alert.) The new amendments are scheduled to become effective 30 days after publication in the Federal Register, but at this point, the release has not been published. The reason for the delay is anyone’s guess. In the meantime, however, questions have arisen about when filers may be expected to comply with certain financial statement requirements in the new amendments for purposes of upcoming Forms 10-Q.
The specter of the possible imposition of mandatory universal proxy has long been with us. The SEC apparently considered requiring universal proxies back in 1992 and, in 2014, the Council of Institutional Investors filed a rulemaking petition asking the SEC to reform the proxy rules to facilitate the use of universal proxies in proxy contests. Then, in 2016, the SEC proposed amendments to the proxy rules that would have mandated the use of universal proxy cards in contested elections. And there it sat. With the change of administrations in the White House, followed by the change of administrations at the SEC, the proposal for universal proxy fell off the SEC’s near-term agenda and was relegated to the long-term agenda. Moreover, disfavored by House Republicans, universal proxy would have been prohibited by various bills, including the Financial Choice Act of 2017 (which passed the House but not the Senate). (See this PubCo post.) Then, in July of this year, “several people familiar with the matter” advised Reuters that SEC Chair Jay Clayton “has in fact shelved the proposal.” (See this PubCo post.) The specter of mandatory universal proxy had been transfigured into more of a spectral presence.
Here’s a reminder from the SEC: interim financial statements included in Forms 10-Q are required to be “reviewed” by outside auditors. On Friday, in a first enforcement proceeding of its kind, the SEC announced charges against five companies that had filed their 10-Qs with their quarterly financial statements prior to review by their independent external auditors.
The SEC has now provided relief for companies and persons directly or indirectly affected by Hurricane Florence and its aftermath. Here is the Order and the related press release (as well as interim final temporary rules related to Reg Crowdfunding and Reg A).
ISS has posted the results of its most recent Governance Principles Survey, which can sometimes guide future ISS policies. The key areas of focus were auditors and audit committees, director accountability and track records, board gender diversity and the principle of one-share one-vote.