Topic: Proxy Statements

SEC Continues to Grapple with Mandatory Arbitration Hot Potato

The Securities and Exchange Commission has again had to confront how to react to a mandatory arbitration provision that would have the effect of denying investors the ability to pursue federal securities law claims as a class action in a federal court.  Mandatory arbitration provisions are controversial as a policy, legal and political matter and have presented the SEC with challenges. 

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SEC Issues New C&DIs Regarding Disclosure of Board Qualifications and Diversity Characteristics

On February 6, 2019, the SEC staff issued two new identical C&DIs that apply to Item 401 of Regulation S-K, Question 116.11, and Item 407 of Regulation S-K, Question 133.13.  The new interpretation provides guidance on disclosure when a director or a director nominee voluntarily provide self-identified diversity characteristics, such as their race, gender, ethnicity, religion, nationality, disability, sexual orientation, or cultural background, and the director or nominee has consented to disclosure of these diversity characteristics.

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SEC’s New Rules on Hedging Disclosure

On December 18, 2018, the Securities and Exchange Commission (the “SEC”) adopted final rules requiring companies to disclose in proxy or information statements for the election of directors any practices or policies regarding the ability of directors or employees to engage in certain hedging transactions with respect to company equity securities. New Rule 407(i) of Regulation S-K follows the SEC’s proposal with some modifications reflecting commenter suggestions.

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Corp Fin Issues New Staff Legal Bulletin on Excluding Shareholder Proposals

On October 23, 2018, the Division of Corporation Finance (the “Division”) of the Securities and Exchange Commission issued Staff Legal Bulletin No. 14J (available here) (“SLB No. 14J”), which provides the Division’s latest views on the scope and application of the “economic relevance” exception (Rule 14a-8(i)(5)) and the “ordinary business” exception (Rule 14a-8(i)(7)) to shareholder proposals submitted under Rule 14a-8.

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Locke Lord QuickStudy: SEC Amends Rule 701 TO Increase Disclosure Threshold and Seeks Comment on Further Changes for Compensatory Awards

On July 18, the Securities and Exchange Commission adopted an amendment to Rule 701 increasing the threshold that triggers the Rule’s disclosure requirements. As background, Rule 701 provides an exemption from the registration requirements of the Securities Act for offers and sales of securities (including securities issuable under stock options and restricted stock units) by private companies (i.e., companies not subject to the reporting requirements under the Exchange Act) to their employees, officers, directors, consultants and advisors under compensatory benefit plans.

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Locke Lord QuickStudy: SEC Sanctions Inadequate Perk Disclosure and Sends Message

On June 2, 2018, the U.S. Securities and Exchange Commission (“SEC”) announced that The Dow Chemical Company (“Dow Chemical”) agreed to settle charges related to its inadequate disclosure of executive perquisites in SEC filings by paying a $1.75 million civil penalty, hiring an independent consultant to evaluate and recommend changes to the company’s policies and procedures relating to perquisites disclosure, and implementing the recommended changes.

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