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SEC Clarifies the Application of Regulation FD to Social Media Disclosures
Since the announcement of the investigation by the SEC of the CEO of Netflix, Inc. for a July 2012 Facebook post celebrating a company milestone, there has been considerable uncertainty as to whether companies can use social media outlets, like Facebook and Twitter, to communicate with investors without violating Regulation Fair Disclosure (“Regulation FD”). On April 2, 2013, the SEC addressed this uncertainty by issuing a Report of Investigation (the “Report”) in which it clarified the rules applicable to companies releasing information to the public through social media. The Report indicates that the SEC is amenable to the increased use of social media outlets by companies while also reinforcing the applicability of Regulation FD to any such disclosures. Regulation FD contains the federal securities regulations requiring public companies to disclose material, non-public information to investors in a manner reasonably designed to achieve effective broad and non-exclusionary distribution to the public… Continue Reading
Final SEC Rule Regarding Listing Standards for Compensation Committees and Amendment to Proxy Disclosure Rules
The SEC issued a Final Rule, as required by the Dodd-Frank Act, that requires securities exchanges to adopt listing standards to address the independence of compensation committee members and the committee’s authority to retain compensation advisers, consideration of the independence of compensation advisers, and responsibility for the appointment, compensation and oversight of the work of any compensation adviser. Each national securities exchange and national securities association must provide the SEC its proposed rule changes that comply with the Final Rule no later than 90 days after the Final Rule’s publication in the Federal Register. Each national securities exchange and national securities association must have final rules or rule amendments that comply with the Final Rule approved by the SEC no later than one year after publication in the Federal Register. Once an exchange’s new listing standards are in effect, a listed company must meet the standards in order for its… Continue Reading
JOBS Act FAQs Regarding Disclosure Exemption for Emerging Growth Companies
As previously reported, the JOBS Act exempts an “emerging growth company” from certain executive compensation reporting requirements. Recent SEC FAQs provide additional guidance regarding the scaled down reporting requirements. An emerging growth company may amend its registration statement that was initially filed prior to April 5, 2012 to provide the scaled disclosure by either a pre-effective amendment to a pending registration statement or in a post-effective amendment. In addition, an emerging growth company that completed its initial public offering after December 8, 2011 and prior to April 5, 2012 may file its next periodic report using the scaled disclosure provisions. Finally, an emerging growth company may decide to comply with some of the scaled disclosure provisions and some of the regular disclosure requirements if it does not want to comply with all of the scaled disclosure provisions. The SEC’s FAQs can be found here.
SEC Sues to Recover Bonuses and Stock Profits of “Innocent” Former Executives
The Securities and Exchange Commission (“SEC”) sued the former CEO and CFO of an Austin-based company for failure to reimburse the company for cash bonuses, incentive and equity-based compensation (“SOX 304 compensation”) and profits received from sales of company stock during the 12-month periods following the issuance of the company’s inaccurate quarterly and annual financial statements, which were later restated. The company was required to restate its financial statements due to a fraudulent scheme by two sales executives to overstate the company’s revenues and earnings. The SEC did not allege the former CEO and CFO participated in the wrongful conduct; however, the SEC alleged they were still required to reimburse the company for the SOX 304 compensation and stock sale profits they received following the filing of the inaccurate statements. The SEC complaint can be found here.
SEC Updates CD&Is Re: Advisory Votes on Executive Compensation
The Securities and Exchange Commission posted examples of advisory vote descriptions that would be (or would not be) consistent with the requirement that shareholders be given an advisory vote to approve the compensation paid to a company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K. For example, on its proxy card, the company can describe the advisory vote as “Advisory vote to approve named executive officer compensation,” but not “To hold an advisory vote on executive compensation,” because the latter description is ambiguous. The SEC regularly posts questions and answers with its interpretations of the registration and reporting provisions of Sections 12, 13 and 15 of the Exchange Act. The SEC’s updated Q&A and examples can be found here.
Securities and Exchange Commission Issues No Action Letter on 401(k) Plan Fee Disclosure Rules
The Securities and Exchange Commission issued a no action letter providing that information provided by a plan administrator to participants and beneficiaries will be treated as a communication satisfying the requirements of Rule 482 if the information is required by and complies with the Department of Labor’s fee disclosure regulation. The letter is available here.
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