On November 1, 2017, the Division of Corporation Finance (Division) of the Securities and Exchange Commission (SEC) released Staff Legal Bulletin No. 14I (SLB No. 14I) to offer guidance on the scope and application of Rules 14a-8(i)(7) and 14a-8(i)(5), each of which provide a substantive basis for excluding shareholder proposals from a company’s proxy materials for shareholder meetings. SLB No. 14I also discusses a new policy requiring documentation when shareholders submit “proposals by proxy,” along with the Division’s views on the use of graphs and images in the supporting statements for shareholder proposals.
On November 2, 2017, the House of Representatives released the first draft of the Tax Cuts and Jobs Act (the Bill), which could result in the most significant overhaul of the U.S. federal tax system since 1986. Subsequently, two substantive amendments were introduced by the Chairman of the House Ways and Means Committee. While the Bill is expected to change substantially and the Senate version remains to be unveiled, the Bill provides certain indications as to how tax reform may affect investment funds and asset managers. Significant aspects can be summarized as follows:
On October 23, 2017, the Securities and Exchange Commission (“SEC”) unanimously approved (the “Approval Release”) the Public Company Accounting Oversight Board’s (“PCAOB”) proposal to adopt a new auditing standard, AS 3101, The Auditor’s Report on an Audit of Financial Statements When Auditor Expresses an Unqualified Opinion, and related amendments to other auditing standards. As discussed in the Approval Release, the PCAOB adopted the new standard in final form on June 1, 2017, subject to SEC approval, following a PCAOB concept release, proposal and reproposal process beginning in 2011.
This week we highlight a speech by Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement, on cybersecurity and retail investor protection. In her remarks, she addresses the key priorities of the Enforcement Division in its allocation of resources, including its focus on retail investors, cyber-related issues, the conduct of investment advisers and broker-dealers, financial fraud and disclosure issues, and insider trading.
On October 11, 2017, the National Association of Insurance Commissioners and the Stanford Cyber Initiative held a joint conference on various topics related to cyber insurance. Below are key takeaways and hot topics discussed by the panelists:
- Companies are becoming increasingly interested in brand/intellectual property coverage to mitigate intangible harm. Some panelists expressed that this is the biggest unmet need in cyber insurance. They suggested one way to address this gap may be to add a special BIPD component to cyber policies.
- There is a rising demand among small and medium-sized businesses (SMB) for cyber insurance that panelists attributed to an increasing realization that a single breach can be catastrophic. While SMBs do not have access to the same range of coverage as larger companies, the industry is working to identify a sustainable method to provide services at palatable rates.
- Panelists reported that they are running models where 100 percent loss is assumed, which is transforming the way they consider and map risk. Some panelists suggested cyber policies should be structured and priced similarly to terrorism-risk programs.
- Pricing of cyber policies was a reoccurring theme throughout the conference, with all of the panelists seeming to agree that the price of policies is currently too low and that insurance companies should do more to incentivize quality cyber practices through differential pricing. One panelist promoted the idea of forcing companies to reduce unnecessary complexity in their systems to reduce price, while another suggested that insurance companies price policies based, in part, on a real-time analysis of the cyber health of the entity from an external perspective.
This week we highlight a survey on current trends in cross-border M&A by the Brunswick Group. The survey polled more than 100 M&A lawyers, bankers and advisors across North America, Europe and Asia and found that leading dealmakers are optimistic that softness in cross-border M&A will soon reverse.
On October 17, 2017, the Staff of the Securities and Exchange Commission (SEC) issued new Non-GAAP Financial Measures Compliance and Disclosure Interpretations (C&DI) that clarify when financial forecasts used in connection with a business combination transaction are considered non-GAAP measures subject to Item 10(e) of Regulation S-K and Regulation G.
On October 11, 2017, the U.S. Securities and Exchange Commission (SEC) voted to adopt proposed amendments to Regulation S-K that are intended to modernize and simplify certain disclosure requirements and related rules and forms. Below are some of the notable proposed changes; included at the end of a brief description of each proposal is the affected rule.