Tag: SEC Division of Corporation Finance
What happened with no-action requests this proxy season?
According to “SEC No Action Statistics to May 1, 2024” from the Shareholder Rights Group, this proxy season, the SEC staff “has nearly doubled the number of exclusions” of shareholder proposals compared with 2023; that is, relative to the prior year, the staff has issued almost twice the number of letters indicating that it would not recommend enforcement action if the company excluded the proposal from its proxy statement. While that surge reflects primarily a “sharp increase” in the number of requests for no-action filed by companies, importantly, the article indicates that it also reflects an increase in the relative proportion of no-action requests granted. From November 1, 2023 to May 1, 2024, the article reports, the SEC has granted company requests for no-action regarding shareholder proposals about 68% of the time (excluding requests withdrawn), compared with 56% at the same point last year. Notably, the article reports, that percentage (68%) is fairly comparable to the average exclusion rate (69%) during the prior administration (2017 to 2020). Since the issuance of SLB 14L in 2021, the staff has come in for criticism for applying a revised approach to evaluating no-action requests that some market participants considered perhaps a bit too generous to proponents of proposals, leading to an excess of overly prescriptive proposals presented at shareholder meetings. As the article suggests, has this criticism led to a moderation of that approach?
What happened at the Corp Fin Workshop of PLI’s SEC Speaks 2024?
At the Corp Fin Workshop last week, a segment of PLI’s SEC Speaks 2024, the panel focused on disclosure review, a task that occupies 70% of Corp Fin attorneys and accountants. The panel discussed several key topics, looking back to 2023 and forward to 2024. Some of the presentations are discussed below.
Corp Fin staff advice on “eligible sell-to-cover” transactions under Rule 10b5-1
Many thanks to thecorporatecounsel.net blog for posting this memorandum to the ABA’s Joint Committee on Employee Benefits from three members of that committee regarding their informal discussions with SEC staff about a couple of questions that have arisen about the scope of the exception for “sell-to-cover” transactions under Rule 10b5-1.
Corp Fin updates guidance on extensions of confidential treatment orders—again
To start the new year, Corp Fin has posted an updated version of Disclosure Guidance: Topic No. 7, Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b-2. The guidance addresses procedures for CTRs that were submitted, not under the streamlined approach adopted in 2019 (see this PubCo post), but rather under the old traditional process that continues in use to a limited extent. The revamped guidance—which, as always, is just that and not intended to be binding—explains that the guidance has been generally updated, but the focus is on changes made regarding alternatives for confidential treatment orders that are about to expire. The processes for obtaining extensions have gone through a number of permutations. Under this newest update, the guidance provides that different extension procedures apply depending on whether the CT order was initially granted more or less than three years ago. The prior version of this guidance, adopted in 2021, pegged the type of extension procedure available to a fixed date (October 15, 2017) rather than to a rolling three-year period. But the version before that did use a rolling three-year period. Go figure.
Corp Fin releases more new CDIs on pay versus performance
Yesterday, Corp Fin released yet another group of new and revised CDIs, these relating to pay-versus-performance disclosure. (See this PubCo post.) Several of the new CDIs address issues regarding peer groups and some provide advice about handling transitions in company status. A couple of the CDIs revise responses that Corp Fin provided in the February and October PVP CDIs. Summaries are below, but each CDI number is linked to the CDI on the SEC website, so you can easily read the version in full.
Happy Thanksgiving!
Some highlights of the 2023 PLI Securities Regulation Institute
This year’s PLI Securities Regulation Institute was a source for a lot of useful information and interesting perspectives. Panelists discussed a variety of topics, including climate disclosure (although no one shared any insights into the timing of the SEC’s final rules), proxy season issues, accounting issues, ESG and anti-ESG, and some of the most recent SEC rulemakings, such as pay versus performance, cybersecurity, buybacks and 10b5-1 plans. Some of the panels focused on these recent rulemakings echoed concerns expressed last year about the difficulty and complexity of implementation of these new rules, only this time, we also heard a few panelists questioning the rationale and effectiveness of these new mandates. What was the purpose of all this complication? Was it addressing real problems or just theoretical ones? Are investors really taking the disclosure into account? Is it all for naught? Pay versus performance, for example, was described as “a lot of work,” but, according to one of the program co-chairs, in terms of its impact, a “nothingburger.” (Was “nothingburger” the word of the week?) Aside from the agita over the need to implement the volume of complex rules, a key theme seemed to be the importance of controls and process—the need to have them, follow them and document that you followed them—as well as an intensified focus on cross-functional teams and avoiding silos. In addition, geopolitical uncertainty seems to be affecting just about everything. (For Commissioner Mark Uyeda’s perspective on the rulemaking process presented in his remarks before the Institute, see this PubCo post.) Below are just some of the takeaways, in no particular order.
New Corp Fin intake system for no-action requests related to shareholder proposals
Corp Fin has announced a new intake system for requests from companies for no-action positions from the staff regarding companies’ intentions to exclude shareholder proposals under Rule 14a-8. In the announcement, Corp Fin indicates that Rule 14a-8 submissions and related correspondence must now be submitted using Corp Fin’s online shareholder proposal form, available at https://www.sec.gov/forms/shareholder-proposal, and that emailed materials will no longer be accepted. The announcement—and the form itself—emphasize that staff responses to these requests are only “informal, non-binding staff views” regarding exclusion of shareholder proposals.
SEC approves changes to modernize beneficial ownership reporting [updated]
[This post revises and updates my earlier post primarily to reflect the contents of the adopting release.]
Last week, without an open meeting, the SEC adopted rule amendments governing beneficial ownership reporting under Exchange Act Sections 13(d) and 13(g), updating Reg 13D-G to “require market participants to provide more timely information on their positions to meet the needs of investors in today’s financial markets.” Commissioner Hester Peirce dissented. In essence, the amendments accelerate the filing deadlines for Schedules 13D and 13G. The adopting release also clarifies the disclosure requirements of Schedule 13D with respect to derivative securities and provides guidance on the definition of “group” formation. In addition, the amendments require that these Schedules be filed in XBRL, and to that end, the SEC made a number of technical changes to Reg S-T. The adopting release also discusses the changes that had been proposed, but that, in response to comment, were not adopted, including proposed changes to the rules that would have deemed certain holders of cash-settled derivative securities to be beneficial owners of the reference covered class, and proposed rule amendments that would have addressed formation of a group and provided two new exemptions. Instead, the SEC is amending Schedule 13D to clarify that interests in derivative securities must be disclosed and, in the adopting release, provides guidance on those two topics. According to SEC Chair Gary Gensler, the “adoption updates rules that first went into effect more than 50 years ago. Frankly, these deadlines from half a century ago feel antiquated….In our fast-paced markets, it shouldn’t take 10 days for the public to learn about an attempt to change or influence control of a public company. I am pleased to support this adoption because it updates Schedules 13D and 13G reporting requirements for modern markets, ensures investors receive material information in a timely way, and reduces information asymmetries.”
SEC approves changes to modernize beneficial ownership reporting
Yesterday, without an open meeting, the SEC adopted rule amendments governing beneficial ownership reporting under Exchange Act Sections 13(d) and 13(g), updating Reg 13D-G to “require market participants to provide more timely information on their positions to meet the needs of investors in today’s financial markets.” Commissioner Hester Peirce dissented. In essence, the amendments accelerate the filing deadlines for Schedules 13D and 13G. The adopting release also provides guidance on the definition of “group” formation. According to SEC Chair Gary Gensler, “[t]oday’s adoption updates rules that first went into effect more than 50 years ago. Frankly, these deadlines from half a century ago feel antiquated….In our fast-paced markets, it shouldn’t take 10 days for the public to learn about an attempt to change or influence control of a public company. I am pleased to support this adoption because it updates Schedules 13D and 13G reporting requirements for modern markets, ensures investors receive material information in a timely way, and reduces information asymmetries.”
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