Associate Aartie Manansingh co-authored this article.
1. SEC Chair Mary Jo White Delivers Speech on Disclosure Reform
SEC Chair May Jo White recently delivered a speech regarding reporting rules and suggested that regulators review whether investors are faced with “information overload” and whether investors are better served by streamlined disclosures. “I am raising the question . . . as to whether investors need and are optimally served by the detailed and lengthy disclosures about all of the topics that companies currently provide in the reports they are required to prepare and file with us,” White said before the National Association of Corporate Directors. “We must continuously consider whether information overload is occurring as rules proliferate and as we contemplate what should and should not be required to be disclosed going forward.” The full remarks can be accessed here.
2. Nasdaq Files SEC Rulemaking Petition Seeking “Models & Methodologies” Disclosure
On October 8, Nasdaq filed a petition with the SEC seeking more disclosure about how proxy advisors disclose their models and methodologies. Relatively little is known about the policies and methodologies proxy advisory firms use to determine the recommendations on proxy votes that many investors rely on. Nasdaq also petitioned to mandate public disclosure of any and all business relationship that give rise to conflicts of interest with respect to proxy advisory firms.
3. SEC Approves Proxy Distribution Fee Changes
On October 14, the SEC approved a new proxy distribution fee framework. The result should be lower reimbursement costs for companies, depending on their circumstances. The NYSE’s revised proposal was based on recommendations by its Proxy Fee Advisory Committee. The changes include, for a five-year test period a one-time, supplemental fee of 99¢ for each new account that elects, and each full package recipient among a brokerage firm’s accounts that converts to, electronic delivery while having access to an enhanced brokers’ internet platform. The new structure eliminates fees for managed accounts that hold five or fewer shares of an issuer’s securities, and reduces the incentive fee for suppression of print material in managed accounts (now to be called a “preference management fee”) to half the rate charged for other accounts. The SEC release may be found here.
4. SEC Issues Proposal On Crowdfunding
On October 23, the SEC voted to propose rules that would implement Title II of the JOBS act to permit companies to offer and sell securities through crowdfunding. Kelley Drye has authored a client advisory on the topic.
5. Mark Kronsforst Named Chief Accountant in Division of Corporation Finance
On October 10, the SEC announced that Mark Kronforst has been named chief accountant of its Division of Corporation Finance.
6. SCOTUS Considers Scope of Preclusion of State Law Securities Fraud Class Actions Under Federal Law
On October 6th, the Supreme Court heard oral arguments in Chadbourne & Parke LLP v. Samuel Troice in which the Court is expected to clarify the scope of preclusion under the Securities Litigation Uniform Standards Act (“SLUSA”) of state-law securities fraud class actions. SLUSA amends portions of the Securities Act of 1933 and the Securities Exchange Act of 1934 to preempt certain class actions that allege fraud under state law “in connection with the purchase or sale” of securities. Such lawsuits cannot be filed in state or federal court.The Court will likely resolve a circuit split and determine when an alleged misrepresentation is sufficiently related to the purchase or sale of a covered security to satisfy the “in connection with” requirement for SLUSA to preclude state-law class actions.