Category: Securities
Corp Fin issues new compliance guide for smaller reporting companies
Corp Fin has just posted A Small Entity Compliance Guide for Issuers that summarizes the recent amendments to the definition of “smaller reporting company” and related amendments. (See this PubCo post and this Cooley Alert.) The Guide also provides some clarification regarding timing and transition to the new definition.
Cooley Alert: SEC Expands Eligibility for Smaller Reporting Company Status
And here for your weekend reading pleasure is another Cooley Alert: SEC Expands Eligibility for Smaller Reporting Company Status. Very relaxing!
Is XBRL already obsolete?
You’ve got to just love the irony: the SEC’s amendments mandating the use of Inline XBRL aren’t even effective yet, and experts at an accounting conference have declared XBRL “nearly useless as an investment tool,” and “all but unnecessary.”
Is it time to regulate proxy advisory firms?
The idea of regulating proxy advisory firms has been in the ether for quite some time, but it’s an idea that never quite comes to fruition. However, there seems to be a lot of chatter about this topic now, raising the question: is now the time? According to this paper, The Big Thumb on the Scale: An Overview of the Proxy Advisory Industry, from Stanford’s Rock Center for Corporate Governance, while proxy advisory firms influence institutional voting decisions and corporate governance choices to a material extent, it “is not clear that the recommendations of these firms are correct and generally lead to better outcomes for companies and their shareholders.” In that light, the paper suggests that some type of regulation of proxy advisory firms might be warranted to increase their transparency and improve the reliability of their recommendations.
Cooley Alert: SEC Amends Rule 701(e) and Issues Concept Release Regarding Rule 701 and Form S-8
Here’s some mighty fine reading: Cooley Alert: SEC Amends Rule 701(e) and Issues Concept Release Regarding Rule 701 and Form S-8.
Cooley Alert: SEC Adopts Mandatory Inline XBRL
For some riveting nighttime reading, you might want to take a look at our Cooley Alert, SEC Adopts Mandatory Inline XBRL. I’m sure you’ll find it both suspenseful and moving!
Are non-GAAP financial measures still problematic?
A couple of years ago, the SEC made a big push—through a series of staff oral admonitions and written guidance, as well as one enforcement action—toward requiring issuers to be more transparent and more consistent in the use of non-GAAP financial measures and to avoid altogether non-GAAP measures that were misleading. For example, companies were advised that they needed to present GAAP measures with equal or greater prominence relative to the non-GAAP measures. (See, e.g., this PubCo post.) And, as this article revealed, according to Audit Analytics, in 2016, over 25% of the companies in the S&P 500 index had shifted their presentations to put GAAP at the top of their quarterly earnings releases and 81% made GAAP numbers most prominent, compared with only 52% for the prior quarterly earnings releases. (See this PubCo post.) By the end of 2017, the SEC was apparently sufficiently satisfied with the response that the pendulum had swung back, and there was less staff focus and comment on non-GAAP financial measures. (See this PubCo post.) But is that really the end of the story? How “good” are the numbers that are fed to investors?
SEC to hold another proxy roundtable
SEC Chair Jay Clayton announced earlier this week that the SEC will be holding a roundtable to discuss the proxy process, date TBD. Potential topics include the voting process, retail shareholder participation, shareholder proposals, proxy advisory firms and technology and innovation. In 2010, the SEC issued a concept release soliciting public comment on whether the SEC should propose revisions to its proxy rules to address the infrastructure supporting the proxy system, so-called “proxy plumbing.” Back then, the SEC had decided that it was time to do some maintenance on the creaky old plumbing system. However, as then Commissioner Elisse Walter, quoting Kurt Vonnegut, commented at the 2010 open meeting to vote on the concept release: “It’s a flaw in the human character that everyone wants to build, but nobody wants to do maintenance.” That statement was more prophetic than she probably anticipated when she made it: nothing came of the concept release. Whether more results from this current effort remains to be seen.
Corp Fin issues two new CDIs on Notices of Exempt Solicitation
Corp Fin has issued two new CDIs related to the voluntary submission of Notices of Exempt Solicitation under Exchange Act Rule 14a-6(g). That rule requires any person who engages in an exempt solicitation pursuant to Exchange Act Rule 14a-2(b)(1) (i.e., without soliciting a proxy) and beneficially owns over $5 million of the class of securities subject to the solicitation to furnish or mail to the SEC a Notice of Exempt Solicitation. Rule 14a-103 requires the soliciting party to attach the written soliciting materials required to be submitted pursuant to Rule 14a-6(g)(1). Recently, some shareholders (think John Chevedden) have begun to submit these Notices voluntarily in what appears to be a way to publicly to express their views on proposals.
SEC Commissioner Stein takes aim at proposal to amend Rules 3-10 and 3-16
Even though the SEC did not have an open meeting to consider its new proposal to amend Rules 3-10 and 3-16 of Reg S-X (see this PubCo post), Commissioner Kara Stein decided nonetheless to release a public statement about the proposal. While she voted in favor of issuing the proposal, she had some serious reservations.
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