1. The SEC ordered a stay of its proxy access rules, here, on a motion filed by The Business Roundtable and the U.S. Chamber of Commerce, which also filed a joint petition for review of  rules with the D.C. Circuit Court, here. The effectiveness of both Rule 14a-11, mandating inclusion of shareholder director nominees in specified circumstances, and Rule 14a-8, allowing shareholder bylaw amendments to expand proxy access, is stayed pending action by the D.C. Circuit Court. The petition for review challenges the rules based on alleged violations of the Administrative Procedure Act and the First and Fifth Amendments to the U.S. Constitution. Goodness knows whether some extraordinary maneuvering will get these rules back on track for the 2011 proxy season, but it seems likely that the prior deadline (if you mailed your last annual meeting proxy materials on or after March 13, 2010, the rules applied to you) is moot and that calendar year-end public companies will enjoy another year’s grace.
  1. Most law firms have taken the view that the timelines specified in Rule 14a-11, which dictate the notice period for shareholder director nominees, trump advance notice bylaw provisions, which meant that these provisions would need to be amended to exclude 14a-11 proposals like they exclude properly brought 14a-8 proposals. Hold your horses, says Cooley LLP, here, which cites an SEC staff member’s suggestion that 14a-11 proposals are subject to advanced notice restrictions despite the specific timeline in the rules. It’s fair to say the staff member’s conclusion seems "odd" given the history of the provision and what it’s intended to achieve; of course, if you roll the dice on your advanced notice provision, here’s hoping you’re not the test case for a shareholder suit challenging exclusion of its director nominee.
  1. The SEC published its schedule of Dodd-Frank related rulemaking, here (see also the NERA Economic Consulting list of rulemaking and studies, here). Noteworthy is the suggestion that much of the disclosure and governance requirements likely will not be in place until the 2012 proxy season. An exception is the "say on pay" and the "say on say-on-pay frequency," with respect to which the SEC will soon adopt implementing rules but which are required in proxy statements for meetings after January 21, 2011 irrespective of SEC rules.
  1. The SEC also lauds its progress on implementing Dodd-Frank, here. Among its achievements to date:
  • Conforming changes to its rules and forms that implement Dodd-Frank’s permanent exclusion of auditor attestation requirements for non-accelerated filer internal control reports, here.
  • Rescission of rules that provided bounties for reporting insider trading that led to the recovery of civil penalties, here. The rules were rescinded because Dodd-Frank deleted Section 21A(e) of the Securities Exchange Act, the statutory basis for the rules, and adopted a broader bounty program under new Section 21F of the Act.
  • Final rule removing from Regulation FD the exemption for credit rating agencies, here. Because no SEC discretion was involved in implementing the language of Dodd-Frank, no public comment was sought on the rule. Chalk this up in Congress’s column of "fixing problems that aren’t" – most credit agencies are not, as they once might have been, "investment advisors" that are captured by regulation FD's, so the specific exemption for credit agencies likely wasn’t necessary to begin with. In any case, signing confidentiality agreements with rating agencies, which will quickly become "standard" if it isn’t already, gets you out of Regulation FD problems.
  • Proposed rules to exclude "family offices" – those managing their own families’ financial portfolios – from regulation under the Investment Advisers Act of 1940, here.
  • Proposed rules for enhanced disclosures by issuers of asset-backed securities, here and here.
  • Proposed rules to mitigate conflicts of interest involving security-based swaps, see press release here, and adopted a final interim rule requiring reporting of security-based swaps entered into before passage of Dodd-Frank, here.
  1. Congress has already corrected a Dodd-Frank misstep, deleting the broad confidentiality provisions and SEC exemption from FOIA under Section 929I but clarifying when the SEC can use existing FOIA Exemption 8 to keep matters confidential, here. This despite the SEC’s assurance that it would only use its broad exclusion for good (see staff guidance, here).
  1. A brief overview of the enforcement outlook under Dodd-Frank, largely a summary of the views of presenters at a recent audio conference, is available here.
  2. For a brief respite from Dodd-Frank commentary, consider the Treasury Department’s Two Year Retrospective on the TARP, here, in which it states that "by objective measures, TARP worked."
  3. The SEC issued guidance on the presentation of liquidity and capital resource disclosure in MD&A, here, and simultaneously issued proposed rules to enhance disclosure about short-term borrowings, here. Generally, the proposed rules seek to let investors know whether short-term borrowings reported at the end of a reporting period accurately reflect the company’s liquidity and investment risk, and whether they are consistent with amounts during the reporting period. Or, as commentators have more concisely put it, the rules address "balance sheet window dressing."
  4. In SRO news (that’s "self regulating organization," like stock exchanges or FINRA):
  • The SEC approved the NYSE’s rules disallowing discretionary broker voting on executive compensation matters, here, and Nasdaq’s similar rules, here.
  • The SEC approved new FINRA Rule 5131, originally submitted WAY back in 2003 when it was still NASD, here. The rule is intended to curb abuses in how underwriters allocated and distributed IPO shares, including bans on "quid pro quo allocations," threatening to withhold shares for excessive compensation, and "spinning," allocating shares to directors or executives of the issuer, essentially as kickbacks. (Dear Lord – were people actually doing this stuff in the dot.com days?)
  • A NYSE independent commission published its list of 10 Core Corporate Governance Principles last month, here. Nothing surprising, but it was interesting to note the report’s focus on shareholder responsibility (Principle 3) and its concern with unregulated proxy advisory services (Principle 8).
  1. The SEC’s Division of Corporation Finance updated its Financial Reporting Manual as of June 30, 2010, so it doesn’t include Dodd-Frank changes, here. (You can search the report for "/10" to find the updated sections.)
  2. The PCAOB published its observations of auditor failures during the economic crisis, here. Count on your auditor, and perhaps your audit committee, increasing its focus on the aspects of your financial statements noted in the report.
  3. Shearman & Sterling published its eighth annual survey of director and executive compensation for the 100 largest public companies, here, in which it notes the trend toward consolidation, rather than innovation, of compensation practices. S&S’s report follows that of Towers Watson’s bulletin on the flatness of director pay in 2009 over 2008, here.
  4. In litigation news:
  • The European Court of Justice recently held that attorney-client privilege can’t be formed with an in-house lawyer, at least in the specific type of case before the Court. Analysis of the Court’s decision in Akzo Nobel v. Euro Commission is here.
  • A summary of the 15 SEC enforcement actions you should know about, according to the Deputy Director of the SEC’s Enforcement Division, is here.
  • The U.S. Second Circuit held in In re DHB Industries, Inc. Derivative Litigation that a settlement agreement that includes a release and indemnification for liability under the clawback provision of SOX Section 304 is uneforceable, because it that would vitiate the ability of the SEC and the Justice Department to enforce the provision against a CEO and CFO. See here.
  • The Delaware Chancery Court, in Airgas, Inc. v. Air Products & Chemicals, Inc., here, held valid a bylaw amendment that advanced Airgas’s annual shareholder meeting by about eight months to facilitate a speedier takeover of its staggered board. The Court spends most of its time analyzing what "annual" and "full term" mean before concluding that the bylaw amendment was valid under the Delaware General Corporation Law and under Airgas’s charter. The Court also suggests how one might better draft staggered board provisions. For us, though, the most important takeaway is to consider making the shareholder supermajority requirement apply to any bylaw change not approved by the board, not just specified changes as Airgas’s bylaws did.
  • The Delaware Supreme Court upheld the Chancery Court’s decision in Selectica, Inc. v. Versata Enterprises, Inc., here, a case that keeps commentators buzzing, mostly because it involves the first ever triggering of a poison pill and the first decision on a pill designed to protect net operating losses.
  1. Finally, a note on blogging. While it’s pure Americana to both aspire to be and hate the super rich, or even those slightly better off than you, it’s disheartening to see the backlash against the unfortunate Chicago law professor whose post on Truth on the Market, "We are the Super Rich," eventually led to his public apology, sort of (here), and his exodus from the blogging world. Sure, it may have been ill-advised to decry the Obama Administration’s tax policies by citing that you already pay more in taxes than most people earn and that increased taxes might force you to give up your lawn guy and your housecleaner, but personal attacks? Goodness. (Of course, it’s not without some sour grapes we note that this client alert has failed to inspired the same kind of passion from its readership. Rest assured that our editors will resort to attacks on world religions, lengthy and vitriolic discussions about what should or should not be built at Ground Zero, or (gasp!) politics if that’s what it takes to gain a little notoriety, because apparently corporate governance and securities law is not doing it for us.)