SEC Rule Proposal Would Permit Public Offerings in “Private Placements” and Facilitate Capital Formation

As required by the JOBS Act, the U.S. Securities and Exchange Commission has proposed rules to eliminate the prohibition on general solicitation and general advertising in private placements exempt from registration by Rule 506 under the Securities Act of 1933, as long as all purchasers of the securities are accredited investors. The elimination of the prohibition on general solicitation and general advertising will result in issuers being able to attract a wider variety of investors with less cost. Increased competition for quality investments could also improve terms for issuers, reducing their cost of capital.

The firm’s client alert regarding the SEC’s proposal may be accessed here.

SEC Report to Congress On Decimalization: Prelude or Punt?

On July 20, 2012, as required by Section 106 of the JOBS Act, the SEC released its study on the effects of decimalization (i.e., the trading and quoting of securities in increments of $.01) on initial public offerings and the liquidity of small-cap and middle-cap company securities.

In conducting its study, the SEC took a three-pronged approach consisting of (a) a review of empirical studies regarding tick size and decimalization, (b) participation in discussions held as part of a meeting of the SEC Advisory Committee on Small and Emerging Companies concerning the impact of market structure on small- and mid-cap companies and on IPOs, and (c) a survey of tick-size conventions in non-US markets.

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Update on Say-on-Pay Developments

There have been 40 failed say-on-pay votes thus far in 2012. Shareholders have disapproved executive compensation systems at companies such as Big Lots (31% approval), Cooper Industries (30%), Simon Property Group (27%), Pitney Bowes (35%) and Chiquita Brands (20%). Sometimes support from ISS is not enough – shareholders at Safety Insurance Group (42%) failed to approve a say-on-pay proposal even with an approval recommendation from ISS.

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Political Spending Stockholder Resolution Early Returns – Low Vote/High Settlement

Perhaps not surprising in an election year, the hottest trend in stockholder proposals this proxy season has been submission of resolutions focused on political spending. As reported in this Washington Post article, the Sustainable Investments Institute, a Washington nonprofit that tracks stockholder resolutions, found that approximately one-third of stockholder resolutions this proxy season related to political spending disclosure. In general, these resolutions focus on disclosure of all political spending using corporate funds, including payments made to 501(c)(4) trade organizations that engage in lobbying or political campaigning.

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Give Us Your Tired, Your Poor, Your Companies Seeking Capital… The JOBS Act: A New Path to Prosperity or an Opening for Securities Fraud?

After years of (perhaps excessive) regulation aimed at promoting transparency and accountability, the JOBS Act, signed by the President and overwhelmingly passed by Congress, undoes many of these requirements for companies that have the least experience in providing appropriate information upon which an investor can base its investment decision. It may also open the gateway for investors who arguably aren’t armed with the financial knowledge to protect themselves – they may just put it all on red and let it ride.

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Chancellor Strine’s El Paso Opinion Critical of CEO and Goldman Sachs, Provides Guidance on M&A Conflicts of Interest

Chancellor Strine rebuked Goldman Sachs and El Paso CEO Doug Foshee on the record and agreed with disgruntled shareholders that the sale process was likely tainted by breaches of fiduciary duty, but in the end, the Chancellor declined to enjoin a stockholder vote on the proposed $31 billion acquisition of El Paso by Kinder Morgan.

The opinion, issued February 29, 2012 in the case of El Paso Corporation Shareholder Litigation in the Chancery Court of Delaware, has been widely cited and discussed for its criticism of Goldman Sachs and Foshee for maintaining conflicts of interest through the negotiation process with Kinder Morgan. In that regard, the opinion is instructive to conscientious boards, management and professionals.

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Is the STOCK Act Headed to the President’s Desk?

According to today’s Wall Street Journal, it appears that Congress will agree on a version of the Stop Trading on Congressional Knowledge Act of 2012 (the “STOCK Act”) in the next week. So far, each of the House and the Senate has passed a version of the STOCK Act, with one of the most notable differences in the Senate and House versions centering around the treatment of “political intelligence firms,” which gather information about pending legislation for their clients, typically hedge funds and other market participants. The Senate bill requires political intelligence firms to register and report on their activities in a manner similar to lobbyists but the House bill does not. According to The Wall Street Journal article, the Senate intends to pass the House version of the bill, which means that the political intelligence firm registration provisions will not make it into the final bill.

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SEC Commissioners Comment on Political Expense Disclosure

As a follow-up to our post of February 7th regarding increased stockholder interest in the disclosure by public companies of their political expenditures and activities, we note that in a speech to securities law practitioners on February 24, 2012, SEC Commissioner Luis A. Aguilar called for the SEC to adopt rules requiring public companies to provide uniform and consistent disclosure of their corporate political expenditures. “Requiring transparency for corporate political expenditures cannot wait,” Commissioner Aguilar stated, citing the SEC’s responsibility to “ensure that investors are not left in the dark while their money is used without their knowledge or consent.”

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FTC Revises HSR Filing Thresholds

The Federal Trade Commission has made its annual adjustments to the thresholds for determining whether a transaction is reportable under the Hart-Scott-Rodino Antitrust Improvements Act. Under HSR, transactions that satisfy specified thresholds may not be closed until the earlier of the date on which a waiting period of 30 days (subject to extension if additional information is requested) has expired after the filing of the required notification or early termination of the waiting period is granted. The new thresholds, which apply to any transaction that closes on or after February 27, 2012, are as follows: Continue reading “FTC Revises HSR Filing Thresholds”

Shareholder Pressure Increases for Disclosure of Lobbying Activities and Other Political Expenditures

Investors and shareholder activists have become increasingly focused on the oversight and disclosure of political expenditures by public companies since the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission, which invalidated restrictions on certain corporate political spending. Because the 2012 presidential election is expected to be a hotly contested race funded by record levels of political spending, the public’s interest in political and lobbying expenditures by public companies is intensifying and merits a careful review of recent trends in the policies and disclosure practices of public companies with respect to their political spending.

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