This week we highlight a report by the EY Center for Board Matters that analyzes how boards, executives, investors, regulators and other governance stakeholders are planning for and responding to cybersecurity threats. The observations conclude that the depth and nature of cybersecurity-related disclosures vary widely, suggesting there is opportunity for enhancement in how cybersecurity risks, cybersecurity risk management frameworks and board oversight are communicated.
The U.S. Securities and Exchange Commission (SEC) released its Shareholder Proposals: Staff Legal Bulletin 14J on Rule 14a-8 earlier this week (available here), following its November 2017 Staff Legal Bulletin 14I (available here and discussed here).
This most recent Staff Legal Bulletin provides additional guidance on the types of board analysis that a company may provide to support a conclusion that a shareholder proposal can be excluded from the company’s proxy statement pursuant to the “ordinary business” exclusion under Rule 14a-8(i)(7), particularly on the basis that a shareholder proposal seeks to “micromanage” a company, or may be excluded on the basis that the proposal is not significantly related to the company’s business under Rule 14a-8(i)(5).
Institutional Shareholder Services (ISS) recently released the results of its “2018 Governance Principles Survey” and previewed potential changes to it’s 2019 proxy voting policies. Among other things, given input and direction from investors, ISS is expected to recommend voting against, or withholding votes from, the chair of the nominating committee of the board of directors of any public company with no female directors, which we refer to as the “Common Sense Policy.” If implemented, the Common Sense Policy would represent a shift from ISS’s current, disclosure-based strategy of calling out all-male boards in proxy research reports.
On September 30, Governor Jerry Brown (D) signed a new California law requiring female presence on boards of public companies headquartered in California.
Under SB-826, all public companies listed on a major U.S. stock exchange and headquartered in California must have one woman on their board by the end of 2019 and, by the end of 2021, two women if the board has five directors, and three women if the board has six or more directors. Companies will be deemed to be in compliance with the law if female directors hold the requisite number of board seats during any portion of the calendar year. Companies that fail to comply could be fined - $100,000 for the first violation and $300,000 for each subsequent violation.
The U.S. Securities and Exchange Commission (SEC) recently published in the Federal Register its July 24, 2018 proposed amendments to the Regulation S-X financial disclosure requirements for guaranteed and secured debt securities in registered offerings, SEC Release No. 33-10526. The proposal developed from the SEC’s Disclosure Effectiveness Initiative and is intended to reduce the costs and burdens of conducting guaranteed or secured debt offerings, thereby reducing the cost of capital and improving investor protection in public registered bond offerings.
If adopted, the proposed changes would amend Rules 3-10 and 3-16 of Regulation S-X and relocate part of Rule 3-10 and all of Rule 3-16 to new Rules 13-01 and 13-02. Comments on the proposed rules should be submitted to the SEC by December 3, 2018. In addition, issuers and their advisors will want to consider the proposed amendments when preparing debt provisions in bond indentures for new guaranteed or secured debt securities, including provisions that have historically been designed to avoid triggering the existing requirements.
On September 25, 2018, the staff of the Division of Corporation Finance (the SEC Staff) of the Securities and Exchange Commission (SEC) released Compliance and Disclosure Interpretation 105.09 (C&DI 105.09), which clarifies the effectiveness of the SEC’s Final Rule, “Disclosure Update and Simplification” (the Disclosure Simplification Rules). The Disclosure Simplification Rules, which the SEC adopted on August 17, 2018, are intended to simplify disclosure for companies by eliminating certain redundant, duplicative, overlapping, outdated or superseded disclosure requirements. Among other changes, the Disclosure Simplification Rules added a requirement that quarterly reports on Form 10-Q include information regarding changes in shareholders’ equity and the amount of dividends per share for each class of shares. Disclosure of this information is already required in annual reports on Form 10-K.
Akin Gump has issued an alert highlighting court rulings, SEC statements and other regulations and requirements involving cryptocurrency that have been issued and developed in 2018.
Click here to read the full alert.
As the U.S. Securities and Exchange Commission (SEC) stated previously, it is continuing to scrutinize and commence enforcement actions against companies, advisors and investors involved in the offering of cryptocurrencies and related activities.
According to a recent report published by Lex Machina, securities litigation in general and those that are related to blockchain, cryptocurrency or bitcoin specifically, showed a marked increase during the first two quarters of 2018 as compared to 2017. The total number of securities cases that referenced “blockchain,” “cryptocurrency” or “bitcoin” in the pleadings tripled in the first half of 2018 alone compared to 2017.