KMK Law Corporate & Securities Blog

It is important for companies to take into consideration the following when preparing annual reports and proxy statements in 2020.

On December 18, 2019, the SEC announced it voted to propose amendments to the definition of “accredited investor” to add new categories of individuals and entities.

On December 19, 2019, the SEC issued guidance regarding the process for applying for confidential treatment of information filed with the SEC. The guidance offers an alternative to the SEC’s rules issued in April 2019 under Regulation S-K Item 601(b) permitting companies to file redacted material contracts without applying for confidential treatment of the redacted information provided the redacted information (i) is not material and (ii) would be competitively harmful if publicly disclosed.

On December 11, 2019, in response to the SEC’s rejection of its initial primary direct listing proposal, the NYSE filed a revised rule change proposal that would allow issuers to sell newly issued primary shares in a direct listing. A direct listing refers to the listing of a privately held company’s stock for trading on a national stock exchange without conducting an underwritten offering, spin-off or transfer quotation from another regulated stock exchange. The proposal would delay, until 90 trading days after the direct listing, the requirement that an issuer have 400 round lot holders at the time of listing.

As we explained in our September 2019 Snapshot, on August 21, 2019, the SEC issued new guidance regarding the role of proxy advisors in the proxy voting process. We expect this guidance to play an important role in the upcoming 2020 proxy season, as the SEC further defines the voting obligations of registered investment advisors and seeks to promote greater accountability on the part of the proxy advisory firms. Read more here.

On November 5, 2019, the SEC proposed amendments to certain procedural requirements and resubmission thresholds under the shareholder proposal rule of Rule 14a-8.

On November 5, 2019, the SEC proposed amendments to its rules governing proxy solicitations to require proxy advisors to provide to their clients more extensive disclosure of material conflicts of interest.

On October 16, 2019, the Division issued a bulletin providing guidance on certain issues arising under Exchange Act Rule 14a-8.  The bulletin addressed the “ordinary business” exception under Rule 14a-8(i)(7), which allows a company to exclude from its proxy statement certain proposals that “deal[ ] with a matter relating to the company’s ordinary business operations.” The applicability of the exception is based on (1) the subject matter of the proposal and (2) the degree to which the proposal involves the “micromanagement” of the company. A bulletin is not a rule ...

On September 26, 2019, the SEC adopted final rules permitting all companies to gauge market interest in registered offerings (including possible initial public offerings) through “testing the waters” by reaching out to certain institutional investors before filing a registration statement. Prior to these rules, only emerging growth companies had been able to engage in this activity under provisions of the JOBS Act. New Securities Act Rule 163B will allow any issuer to engage in oral or written communications with potential investors who are (or are reasonably believed to ...

On August 21, 2019, the SEC issued an interpretation and related guidance regarding the applicability of certain rules to proxy advisory firms.  The SEC interpretation imposes new regulatory oversight on proxy advisory firms that clarifies that proxy advisers are subject to Rule 14a-9 and the anti-fraud rules concerning materially false or misleading statements.

We expect proxy advisory firms will provide additional disclosures in in their reports in response to the guidance, such as:

• Explanations of the methodology used to formulate voting advice;
• Disclosures of peer group ...