Protecting Your Company in an Insider Trading Investigation

Join us on January 22 for a panel discussion to explore steps that can be taken before and during an insider trading investigation to minimize legal and reputational risk. Learn about the current enforcement environment, lessons learned from local experiences and recent cases, tips for interacting with investigators, and best practices for insider relations and public communications when an investigation is initiated.  

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ISS Issues FAQs on Two Voting Policies

ISS recently issued FAQs addressing two of its 2015 proxy season policy updates, namely its new equity plan scorecard approach and its policy on independent board chair proposals. These FAQs offer insight and additional detail on how these new polices will be applied. The equity plan scorecard FAQs set forth the complex point system that ISS will apply when analyzing an equity plan up for shareholder vote. In particular, ISS sets forth how points will be allocated amongst 13 distinct factors in three key areas (plan cost, plan features and grant practices). According to ISS, “a score of 53 or higher (out of a total 100 possible points) generally results in a positive recommendation for the proposal (absent any overriding factors).” The independent board chair FAQs offer additional detail on the holistic approach that ISS will use when assessing a shareholder proposal in this area, including a company’s board leadership structure, governance practices and performance.  

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Delaware Court Upholds Forum Use Restrictions in Books and Records Demand

A recent decision by the Delaware Supreme Court provides companies another tool to control the forum for costly stockholder derivative litigation. In United Technologies Corp. v. Treppel, the court affirmed the authority of Delaware courts to limit the litigation forum where information obtained in a books and records action can be used. Previously, Delaware courts have held that companies can enforce bylaws that require stockholder lawsuits to be brought in Delaware, even if those provisions were adopted without stockholder consent. In this case, United Technologies would permit a stockholder demand to inspect books and records, provided that the stockholder agreed that any claim arising out of or relating to the inspection be brought in a Delaware court.  

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SEC Proposes Amendments to Exchange Act Registration Requirements

As mandated by the JOBS Act, the SEC recently proposed changes to the thresholds for registration, termination of registration and suspension of reporting under Section 12(g) of the Exchange Act. The proposals would, among other things, amend applicable rules: (1) to reflect new thresholds established by the JOBS Act, (2) to apply the accredited investor definition in Rule 501(a) of the Securities Act to determinations of record holders under the Exchange Act, and (3) to exclude securities held by persons who received them in exempt transactions under an employee compensation plan when calculating holders of record for Exchange Act registration requirements.  

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Vanguard Calls for Shareholder Liaison Committees at U.S. Public Companies

In an interview with the Financial Times, Vanguard CEO Bill McNabb revealed that Vanguard was asking the U.S. companies in which it invests to establish shareholder liaison committees in an effort to improve corporate governance. In the interview, McNabb said, “Directors are standing in on behalf of owners – that’s an important concept – yet there are many independent directors who have never met an investor.” Public companies should continue to assess their own shareholder engagement efforts in light of emerging best practices.  

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The Ticker shares recent developments in SEC compliance, capital markets, corporate governance, executive compensation and other matters important to public companies and their officers and directors. It is published by Fredrikson & Byron’s Public Companies Group.