Corp Fin has announced a “realignment” of its disclosure program “to promote collaboration, transparency and efficiency,” effective yesterday. As part of the new realignment, companies have been reassigned to one of seven new industry-focused offices.
You may recall that, earlier this month, Corp Fin announced that it had revisited its approach to responding to no-action requests to exclude shareholder proposals. In essence, under the new policy, the staff may respond to some requests orally, instead of in writing, and, in some cases, may decline to state a view altogether, leaving the company to make its own determination. (See this PubCo post.) Now, five investor organizations—Council of Institutional Investors, US SIF (Forum for Sustainable and Responsible Investment), Interfaith Center on Corporate Responsibility, Ceres and Shareholder Rights Group—have written to Corp Fin Director William Hinman to “express major concerns” regarding the new approach to Rule 14a-8 no-action requests and to ask that it be rescinded. Why? The organizations contend that the new policy “reduces transparency and accountability, increases the burden on investors, and could increase conflict between companies and their investors.”
As foreshadowed by Corp Fin Director Bill Hinman at an event in July put on by the U.S. Chamber of Commerce (see this PubCo post), Corp Fin has announced that it is revisiting its approach to responding to no-action requests to exclude shareholder proposals. In essence, the staff may respond to some requests orally, instead of in writing and, in some cases, may decline to state a view altogether, leaving the company to make its own determination. How will companies respond?
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.”
The SEC’s new rules related to confidential treatment (part of FAST Act Modernization and Simplification of Regulation S-K) became effective today, April 2, when the adopting release was published in the Federal Register. With that in mind, Corp Fin has posted some guidance under the very descriptive title, New Rules and Procedures for Exhibits Containing Immaterial, Competitively Harmful Information, to help companies comply with the new confidential treatment process, discussed below. The remainder of the release (other than provisions related to data-tagging, which will be phased in) will become effective on May 2. (For a summary of the new rules, see this PubCo post, which, since the initial posting, has been revised and updated.)
In remarks today in London at the 18th Annual Institute on Securities Regulation in Europe, Corp Fin Director William Hinman discussed the application of a “Principles-Based Approach to Disclosing Complex, Uncertain and Evolving Risks,” specifically addressing Brexit and sustainability. With regard to Brexit disclosure, Hinman offers a very useful cheat sheet of good questions to consider in crafting appropriately tailored disclosure.
The issue of mandatory arbitration bylaws is a hot potato—and a partisan one at that (with Rs tending to favor and Ds tending to oppose). And in this no-action letter issued yesterday to Johnson & Johnson—granting relief to the company if it relied on Rule 14a-8(i)(2) (violation of law) to exclude a shareholder proposal requesting adoption of mandatory arbitration bylaws—Corp Fin successfully passed the potato off to the State of New Jersey. Crisis averted. However, the issue was so fraught that SEC Chair Jay Clayton felt the need to issue a statement supporting the staff’s hands-off position: “The issue of mandatory arbitration provisions in the bylaws of U.S. publicly-listed companies has garnered a great deal of attention. As I have previously stated, the ability of domestic, publicly-listed companies to require shareholders to arbitrate claims against them arising under the federal securities laws is a complex matter that requires careful consideration,” consideration that would be more appropriate at the Commissioner level than at the staff level. However, as Clayton has previously indicated, mandatory arbitration is not an issue that he is anxious to have the SEC wade into at this time. To be sure, if the parties really want a binding answer on the merits, he suggested, they might be well advised to seek a judicial determination.