Tag: SEC


SEC Proposal on Resource Extraction Payments

Nicolas Grabar and Sandra L. Flow are partners in the New York office of Cleary Gottlieb Steen & Hamilton LLP. This post is based on a Cleary Gottlieb memorandum. The complete publication, including footnotes and Annex, is available here.

On December 11, 2015, the Securities and Exchange Commission (the “Commission”) issued a proposed rule (the “Proposed Rule”) on disclosure of resource extraction payments, more than two years after a federal court vacated a prior version of the rule. The Proposed Rule is similar in many ways to the Commission’s original rule, adopted in August 2012 (the “2012 Rule”)—in large part because the Commission is implementing a detailed congressional directive contained in Section 1504 of the 2010 Dodd-Frank Act. However, in addition to addressing the deficiencies the court found in the original rulemaking, the Commission has made other notable changes to reflect global developments in transparency for resource extraction payments, particularly in the European Union and Canada.

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2016 Proxy Season: Engagement, Transparency, Proxy Access

Howard B. Dicker is a partner in the Public Company Advisory Group of Weil, Gotshal & Manges LLP. This post is based on a Weil publication; the complete publication, including footnotes and appendix, is available here. Related research from the Program on Corporate Governance includes Lucian Bebchuk’s The Case for Shareholder Access to the Ballot and The Myth of the Shareholder Franchise (discussed on the Forum here), and Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

While shareholders have a wide spectrum of views on corporate objectives, the time horizon for realizing these objectives and environmental, social and governance (ESG) issues, there is an emerging consensus that—regardless of size, industry or profitability—public companies must achieve greater accountability to their shareholders, through engagement and transparency, than ever before. Corporate engagement and transparency now take two forms: direct dialogue, increasingly involving directors, and enhanced proxy statement and other public disclosure that sheds light on the company’s strategy and the performance of its board, board committees and management, demonstrates responsiveness to shareholder ESG concerns, and justifies the composition of the board in light of the company’s present needs. Throughout this post, we offer practical suggestions about “what to do now” to meet shareholder expectations about engagement and transparency and to address a host of other new developments for the 2016 proxy season.

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In re Lions Gate: Corporate Disclosure of Securities Enforcement

David M.J. Rein is a partner in the Litigation Group at Sullivan & Cromwell LLP . This post is based on a Sullivan & Cromwell memorandum by Mr. Rein and Jacob E. Cohen. The complete publication, including footnotes, is available here.

On January 22, 2016, the United States District Court for the Southern District of New York (Judge John Koeltl) dismissed In re Lions Gate Entertainment Corp. Securities Litigation, a putative securities fraud class action lawsuit, brought under Section 10(b) of the Securities Exchange Act of 1934. The complaint alleged that the company should have disclosed publicly the pendency of a Securities and Exchange Commission (“SEC”) investigation, the company’s intention to settle with the SEC and the company’s receipt of a so-called “Wells Notice”—i.e., a letter from the SEC Enforcement Division staff informing the company that it “has decided to recommend that the Commission bring an enforcement proceeding.”

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Crowdfunding and the Digital Shareholder

Andrew A. Schwartz is an Associate Professor at University of Colorado Law School. This post is based on Professor Schwartz’s recent article published in The Minnesota Law Review, available here.

After several years of delay, Internet-based securities crowdfunding is finally poised to go live this year thanks to the SEC’s recent issuance of Regulation Crowdfunding. Through crowdfunding, people of modest means will for the first time be legally authorized to make investments that are currently offered exclusively to “accredited” (wealthy) investors. This democratization of entrepreneurial finance sounds great in theory, but will it work in practice? Will non-accredited investors really buy unregistered securities in speculative startups, over the Internet, with only the barest form of disclosure? The conventional wisdom among most legal scholars is, basically, no. In their view, securities crowdfunding is doomed to failure for myriad reasons, including fraud, [1] costs, [2] dilution, [3] adverse selection, [4] opportunism, [5] and more. [6]

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U.S. Uncleared Swap Margin, Capital, and Segregation Rules

Annette Nazareth is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP, and a former commissioner at the U.S. Securities and Exchange Commission. The following post is based on a Davis Polk visual memorandum; the complete publication, including charts, is available here.

U.S. prudential regulators (the OCC, Federal Reserve, FDIC, FCA and FHFA) and the CFTC have finalized uncleared swap margin, capital and segregation requirements (the “PR rules,” and “CFTC rules,” respectively, and the “final rules,” collectively).* The PR rules apply to swap entities that are prudentially regulated by a U.S. prudential regulator (“PR CSEs”). The CFTC rules apply to swap entities that are regulated by the CFTC and that are not prudentially regulated (“CFTC CSEs”). In this memorandum, “covered swap entities” refers to PR CSEs and CFTC CSEs, together.

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White Collar and Regulatory Enforcement: What to Expect In 2016

John F. Savarese is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum.

One way in which we expect the white-collar/regulatory enforcement regime in 2016 to continue last year’s pattern is that the government’s appetite for extracting enormous fines and penalties from settling companies will likely continue unabated. However, as we discuss below, the manner in which well-advised companies facing criminal or serious regulatory investigations will seek to mitigate such fines and sanctions will likely change in some important respects in 2016. The reason for this expected change is that U.S. Deputy Attorney General Sally Yates announced late in 2015 that DOJ was formalizing a requirement that, in order to get “any” cooperation credit, companies must come forward with all available evidence identifying individuals responsible for the underlying misconduct subject to investigation.

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Calculating SEC Civil Money Penalties

Jonathan N. Eisenberg is partner in the Government Enforcement practice at K&L Gates LLP. This post is based on a K&L Gates publication by Mr. Eisenberg.

In addition to going to court to seek sanctions, the Securities and Exchange Commission may impose civil money penalties in its own administrative proceedings on any person who violates or causes a violation of the securities laws. [1] Unlike district courts, administrative law judges do not have authority to base penalties on respondents’ pecuniary gains resulting from violations. [2] Instead, under the various penalty statutes, maximum penalties in administrative proceedings are based on “each act or omission” violating or causing a violation of the securities laws. Currently, the maximum penalties for each act or omission violating the securities laws are:
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PCAOB Adopts Disclosure Rule

Avrohom J. Kess is partner and head of the Public Company Advisory Practice at Simpson Thacher & Bartlett LLP. This post is based on a Simpson Thacher memorandum by Mr. Kess and Yafit Cohn.

On December 15, 2015, the Public Company Accounting Oversight Board (“PCAOB”) issued a new rule and related amendments to its auditing standards that require accounting firms to disclose, in a new PCAOB form, specified information regarding the engagement partner and other accounting firms that participated in the audit. [1]

The PCAOB’s New Rule

The PCAOB’s final rule requires accounting firms to disclose, on Form AP, Auditor Reporting of Certain Audit Participants, the following information for each completed issuer audit:

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Proposed Rule on Registered Funds’ Use of Derivatives

David C. Sullivan is partner in the Investment Management practice at Ropes & Gray LLP. This post is based on a Ropes & Gray publication by Mr. Sullivan, Tim Diggins, George Raine and Sarah Clinton.

On December 11, 2015, the SEC issued its long-anticipated release (the “Release”) proposing Rule 18f-4 (“the “Proposed Rule”) under the 1940 Act regarding the use of derivatives and certain related instruments by registered investment companies (collectively, “funds”). The stated objective of the Release is to “address the investor protection purposes and concerns underlying section 18 [of the 1940 Act] and to provide an updated and more comprehensive approach to the regulation of funds’ use of derivatives” in light of the increased participation by funds in today’s large and complex derivatives markets.

We provide an executive summary of the Proposed Rule and other aspects of the Release below and, in the Appendix of the complete publication, we discuss the Proposed Rule in more detail.

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FAST Act Amendments to the U.S. Securities Laws

Nicolas Grabar is a partner at Cleary Gottlieb Steen & Hamilton LLP focusing on international capital markets and securities regulation. This post is based on a Cleary Gottlieb publication by Mr. Grabar, Les Silverman, and Andrea M. Basham.

On December 4, 2015, President Obama signed into law the Fixing America’s Surface Transportation Act (the “FAST Act”), which, among other legislation in its 1300+ pages, includes several bills designed to facilitate the offer and sale of securities. In this post we focus on two of those bills. The first provides additional accommodations related to the SEC registration process for emerging growth companies (“EGCs”), a category of issuer established by the Jumpstart Our Business Startups Act (the “JOBS Act”) in 2012. The second creates a non-exclusive safe harbor under Section 4 of the Securities Act of 1933, as amended (the “Securities Act”) for resales of securities that meet the conditions of the safe harbor.

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