California Secretary of State publishes “report” about SB 826, California’s new board gender diversity mandate—UPDATED
This post updates an earlier post on this topic to reflect information from a conversation with a knowledgeable representative of the California Secretary of State’s office. He was able to provide some insight about their process and clarify why some apparent inconsistencies were not really inconsistent.
As reported on thecorporatecounsel.net blog, the California Secretary of State has published on its website two spreadsheets, dated July 1, 2019, which apparently together constitute its mandated “report” under SB 826, California’s new board gender diversity mandate. The first spreadsheet identifies 537 companies that the Secretary’s office views as subject to SB 826. The next spreadsheet identifies 184 companies that were apparently in compliance with the board gender diversity mandate as of that date. According to the “methodology,” this data was based on information available for the review period from January 1 to June 30, 2019 in California and SEC filings, as well as information from the NYSE, Nasdaq and miscellaneous other online resources. An updated report will be published on March 1, 2020.
California Secretary of State publishes “report” about SB 826, California’s new board gender diversity mandate
As reported on thecorporatecounsel.net blog, the California Secretary of State has published on its website two spreadsheets, dated July 1, 2019, which apparently together constitute its mandated “report” under SB 826, California’s new board gender diversity mandate. The first spreadsheet identifies 537 companies that the Secretary’s office views as subject to SB 826. The next spreadsheet identifies 184 companies that were apparently in compliance as of that date. According to the “methodology,” this data was based on information available for the period from January 1 to June 30, 2019 in California and SEC filings, as well as information from the NYSE, Nasdaq and miscellaneous other online resources. An updated report will be published on March 1, 2020. My own extremely brief spotcheck, however, revealed that these lists are not exactly, um, accurate. (But see this update.)
SEC approves Nasdaq proposal to improve liquidity
The SEC has approved, on an accelerated basis, the recent Nasdaq proposal (as amended by new amendment no. 3) to revise its initial listing standards to improve liquidity in the market. (See this PubCo post.) Prior to the amendments, under the initial listing rules, to list its equity on any Nasdaq tier, a company was required to have a minimum number of publicly held shares, calculated to include restricted securities. Nasdaq proposed, among other things, to revise the initial listing criteria to exclude “restricted securities” from the calculations of a company’s publicly held shares, market value of publicly held shares and round lot holders, given that restricted securities are not freely transferable and are generally illiquid. To that end, the Nasdaq proposal added new definitions for “restricted securities,” “unrestricted publicly held shares” and “unrestricted securities.” As a result of these changes, only securities that are “freely transferable will be included in the calculation of publicly held shares to determine whether a company satisfies the Exchange’s initial listing criteria under these rules.” No changes were proposed to the continued listing requirements. To allow companies adequate time to complete in-process transactions based on the existing rules, the changes will become effective 30 days after approval (July 5) by the SEC (August 4).
Rulemaking petition seeks to rein in stock buybacks
Almost 20 organizations, including the AFL-CIO and Public Citizen, have filed a rulemaking petition with SEC “to revise Rule 10b-18 to curb manipulative practices by firms and encourage corporations to fairly compensate American workers.” In essence, the petition seeks to repeal Rule 10b-18 and requests that the SEC “undertake a rulemaking to develop a more comprehensive framework for regulating stock repurchase programs that would deter manipulation and protect American workers.” In light of the almost—dare I say it—“bipartisan” interest in reviewing the practice of stock buybacks, will the SEC decide that it’s worth taking a look?
Corp Fin roundtable on short-termism scheduled for July 18
The SEC has just announced that the planned Corp Fin roundtable on short-termism will be held on July 18, 2019. In originally announcing the roundtable in May, SEC Chair Jay Clayton observed that the needs of “Main Street investors” have changed; they now have a longer life expectancy, and, in light of the shift from the security of company pensions to 401(k)s and IRAs, they now have greater responsibility for their own retirements. As a result, “Main Street investors are more than ever focused on long-term results.” However, from time to time, they also “need liquidity. In other words, at some point, long-term investors do become sellers. The SEC’s disclosure rules should reflect and foster these needs—long-term perspective and liquidity when needed.” To that end, the goal of the roundtable is not just to discuss the problems associated with short-termism, but also to promote “further dialogue on the causes of and potential solutions to the issue.”
Tips on CAMs at PLI panel
An article in the Federal Securities Law Reporter reports on some tips gleaned from a discussion of, what else, “critical audit matters” on a PCAOB panel at PLI’s 34th Midyear SEC Reporting and FASB Forum. The new auditing standard for the auditor’s report (AS 3101), which requires CAM disclosure, will be effective for audits of large accelerated filers for fiscal years ending on or after June 30, 2019.
Will a new SCOTUS decision affect the SEC’s new confidentiality process?
If you thought a case, just decided last week by SCOTUS, involving a claim against the VA by a veteran who had been denied benefits (Kisor v. Wilkie) seemed far afield from the securities laws (but really could have a significant impact—see this PubCo post), a case decided last Monday might trigger a similar reaction. Food Marketing Institute v. Argus Leader Media involved an effort by a South Dakota newspaper to obtain from the Department of Agriculture, under the Freedom of Information Act, the names and addresses of retail stores participating in SNAP, the national food-stamp program. The result in the case, which broadened the definition of “confidentiality” under FOIA Exemption 4, will make it substantially easier for parties to claim “confidentiality” under FOIA, preventing disclosure of their information.
Now the question arises as to what, if any, its impact will be on the confidentiality process in connection with filings with the SEC. Had the case been decided on, say, March 19, it could, theoretically, at least, have had a fairly substantial effect: in seeking confidential treatment at that point, companies were required to submit a confidential treatment request (CTR) that stated the grounds for objection to disclosure, analyzing the applicable exemption under FOIA. But, in an interesting turn of events, on March 20, the SEC adopted new rules for confidentiality that streamlined the process, but no longer required submission of a CTR and no longer directly adverted to FOIA Exemption 4. Instead of referring to Exemption 4, ironically, the new rules expressly recite certain requirements for claims of confidentiality drawn from Exemption 4, including one that was tossed out by SCOTUS in the decision. (See this PubCo post.) Accordingly, whether the decision will have any significant impact on the SEC’s process for seeking confidentiality will really depend on whether the SEC elects to take up the issue.
FASB to consider delaying required adoption dates of new standards for some companies
As reported in Bloomberg, FASB will soon be considering whether the mandatory adoption dates for major new accounting standards should be delayed for small public companies and privately held businesses. According to the article, testimony from some small business finance professionals at a recent meeting of the Financial Accounting Standards Advisory Council indicated that, while they may be comfortable following the same rules as bigger companies, smaller companies “don’t have the same resources as large public companies so they need extra time to implement significant new accounting rules.” However, there seemed to be a fair amount of pushback from some commentators at the meeting, which could impact FASB’s decision.
SCOTUS keeps agency deference alive in Kisor v. Wilkie. But is it just a “stay of execution”?
Today, SCOTUS decided Kisor v. Wilkie, an important case that raised the question of whether to overrule the decades-long deference of courts to the reasonable interpretations by agencies (such as the SEC) of their own ambiguous regulations, often referred to as Auer deference (or Seminole Rock deference, referring to Auer’s antecedent). SCOTUS, with Justice Kagan writing the majority opinion (with Chief Justice Roberts as the swing vote), said no. Justice Gorsuch (and three other Justices) would overturn Auer. According to Gorsuch, the majority’s decision was “more a stay of execution than a pardon.”
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