KMK Law Corporate & Securities Blog

Yesterday, the SEC decided to stay the effectiveness of the proxy access rules pending resolution of a petition for review filed in connection with this lawsuit filed by the Business Rountable and U.S. Chamber of Commerce.  As a result, proxy access will not take effect in 2010 and its potential applicability to the 2011 proxy season is in limbo.

The Business Roundtable and U.S. Chamber of Commerce have filed a lawsuit in the U.S. Court of Appeals for the D.C. Circuit to invalidate the SEC’s recently-adopted proxy access rules. 

This week, the SEC adoped final rules on proxy access which will require companies to provide certain shareholders or shareholder groups the opportunity to nominate candidates for boards of directors and to include information in the company's proxy materials about, and the ability to vote for, these shareholder nominees.

The Dodd-Frank Wall Street Reform and Consumer Protection Act immediately revised the net worth test for determining whether an individual investor is an “accredited investor” for purposes of Regulation D and Section 4(6) of the Securities Act of 1933. Specifically, as revised, prospective investors can no longer include the value of their primary residence for purposes of satisfying the $1 million net worth test. Historically, many investors have relied on the value of their homes for purposes of qualifying as an accredited investor. This immediately effective provision applies to offerings that are already in progress, including those that have had initial closings.

On July 20, 2010, the Financial Accounting Standards Board issued a new Exposure Draft of a proposed Statement, Contingencies (Topic 450), Disclosure of Certain Loss Contingencies. The FASB has proposed various amendments to Topic 450, formerly known as FASB Statement No. 5, in response to investor concerns about the inadequacy of information currently available regarding the likelihood, timing and amount of future cash flows associated with loss contingencies.

The Senate recently passed the Consumer Financial Protection Act of 2010 and, like the House financial reform legislation passed back in December, it has a lot to say on corporate governance and executive compensation.

As part of its recently adopted Final Rules on Proxy Disclosure Enhancements, the SEC added a new Item 5.07 to Form 8-K.  Item 5.07 requires a company to report the results of voting at any shareholders meeting within four business days after the meeting at which the vote was held.

As approved by the SEC, the revised rules (more fully described in this SEC Release) basically conform the NYSE corporate governance listing standards to the requirements of Item 407 of Regulation S-K and to Form 8-K by eliminating duplicative disclosure requirements currently included in the NYSE standards and directly incorporating the Item 407 requirements.

On December 16, 2009, the SEC voted to approve final rules on proxy disclosure and solicitation enhancements which had been initially proposed by the SEC in July 2009. As stated in the SEC's adopting release the new rules will be effective February 28, 2010, meaning they will apply to the 2010 proxy season for substantially all calendar year issuers.

While we continue to monitor all of the regulations and rule changes proposed by the SEC as well as the different and overlapping versions of legislation proposed in Congress, we know that at least one rule proposal has been approved and will be in effect on January 1, 2010.