Corporate & Securities Blog

On September 21, 2017, the Securities and Exchange Commission (SEC) issued interpretive guidance on the CEO pay ratio rule. Simultaneously, the SEC’s Division of Corporation Finance issued guidance on calculation of the pay ratio and updated C&DIs related to the new guidance. Together, these issuances strongly suggest that the SEC is not modifying or deferring the effectiveness of the rule and that it will be in place for the upcoming 2018 proxy season.

Beginning on July 10, 2017, the Securities and Exchange Commission’s (“SEC”) Division of Corporation Finance will accept nonpublic draft registration statements from all issuers relating to IPOs and initial registrations under Section 12(b) of the Securities Exchange Act of 1934 (“Exchange Act”).

The U.S. Securities and Exchange Commission (“SEC”) has adopted new rules making it easier for investors to find exhibits to an issuer’s public filings. Currently, issuers submit electronic filings to the SEC using the Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”), which include exhibits that are incorporated by reference to earlier filings. Investors are therefore required to search through earlier filings in order to find these exhibits, such as material contracts, articles of incorporation, and other material documents.

Protecting and encouraging whistleblowers has been a priority for the U.S. Securities and Exchange Commission (“SEC”) and its enforcement division. The SEC recently announced enforcement actions against two companies for their use of restrictive language in severance agreements that required departing employees to waive their rights to any monetary recovery under Rule 21F-17 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The rule, promulgated under the Dodd-Frank Act, is part of the SEC’s whistleblower program and is intended to prohibit employers from interfering with an employee’s right to report potential securities law violations to the SEC.

On November 2, 2016, the Securities and Exchange Commission (“SEC”) published new guidance in the form of a Compliance and Disclosure Interpretation (“C&DI”) on the requirement that registrants submit copies of their annual report to the SEC for information purposes.

Many calendar year-end companies are beginning to prepare for annual meetings and related proxy soliciting activities. As part of that preparation, companies are turning to recent SEC rules, regulations, and policy updates. This advisory provides some reminders and updates for companies as they prepare for the 2017 proxy season.

On December 4, 2015 President Obama signed into law the Fixing America’s Surface Transportation Act (the “FAST Act”) which, despite its name, includes a number of provisions designed to facilitate capital formation and modernize and simplify certain disclosure obligations under federal securities laws. The changes were effective immediately. 

A new tool to raise capital is now available for small business and startup owners who may have previously believed that raising funds through selling an interest in their business to be too cumbersome or expensive.   

On August 5, 2015, the Securities and Exchange Commission approved its final “Pay Ratio Disclosure” rules as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rules require annual disclosure of the ratio of a reporting company’s principal executive officer’s total annual compensation to the median of the total annual compensation of all its employees. Most public companies will be required to make the pay ratio disclosure following their first full fiscal year beginning on or after January 1, 2017. Specifically, for a calendar-year reporting company, the first pay ratio disclosure must be made in the proxy statement for its 2018 annual meeting. 

This week, the SEC released proposed rules intended to implement Section 955 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), which would require SEC reporting companies to disclose in their annual meeting proxy statements whether the company permits its employees (including officers) and directors to hedge equity securities of the company.