1. SECURITIES EXCHANGE COMMISSION RULES AND NEWS
    1. JOBS Act: Draft Registration Statements To Be Filed on EDGAR Started October 1st

On September 26, 2012  the SEC announced that draft registration statements can be filed on Edgar starting Monday, October 1st using submission form types DRS and DRS/A. This is a significant logistical development for those emerging growth companies and foreign private issuers that qualify for a confidential SEC Staff review. These companies can choose to continue to use the SEC’s secure email system for an unspecified period of transition time rather than use Edgar. The SEC will announce later when use of Edgar for draft registration statements will be mandatory.

  1. SEC’s Filing Fees Going Up 19% for Fiscal Year 2013

The SEC issued its 7th fee advisory for the year (along with this methodology) Right now, the filing fee rate for Securities Act registration statements is $114.60 million (the same rate applies under Sections 13(e) and 14(g)). Under the fee advisory, this rate will rise to $136.40 per million, an increase of 19%.  The new fees will go into effect on October 1, 2012.

  1. Corporation Finance Updates Financial Reporting Manual

On October 15, 2012, Corporation Finance indicated that it has updated its Financial Reporting Manual for a JOBS Act note and clarification of guidance related to proxy statement requirements for the disposal of a business, auditor association with amounts from inception, the application of PCAOB auditor requirements in a reverse merger, reporting requirements in a reverse acquisition with a non-shell company, and other changes.

  1. NYSE RULES AND NEWS
    1. On September 25, 2012, the NYSE filed with the Securities and Exchange Commission a proposed rule change to modify listing rules for compensation committees to comply with Rule 10C-1 under the Exchange Act and make other related changes.
  2. NASDAQ RULES AND NEWS
    1. Nasdaq’s Compensation Committee Proposal

On September 25, 2012, Nasdaq filed with the Securities and Exchange Commission a proposed rule change to modify the listing rules for compensation committees to comply with Rule 10C-1 under the Exchange Act and make other related changes.  Individuals have 21 days to comment once the proposals are published in the Federal Register.

  1. GENERAL DEVELOPMENTS
    1. PwC issues 2012 Annual Corporate Director Survey and Shearman & Sterling issues 2012 Trends in Corporate Governance of the Largest US Public Companies.

PwC’s survey findings include:

Board Composition and Behavior

  • Questioning board performance. Nearly one-third of directors believe someone on their board should be replaced. Diminished performance because of aging and lack of expertise were cited as the two primary reasons.
  • Finding new directors. When seeking new board members, 91 percent of directors say they take suggestions from other directors, with 11 percent considering investor input for candidates. A quarter consider racial and gender diversity as “very important.”
  • Reconsidering board leadership. About half of boards that have a combined CEO and Chair position are already discussing splitting the role at their next CEO succession.
  • Self-evaluations prompt changes. Two-thirds of directors (66 percent) made changes during the last 12 months as a result of their full-board or committee self-evaluations.
  • Continuing director education. Over half of directors (52 percent) believe some form of annual board education should be required. Of those with this belief, over 40 percent had less than four hours of outside training last year, and 21 percent did none at all.
  • Time commitments increase. More than half of directors say the amount of time they spent on board work rose last year. Two-thirds of those increased their hours over 10 percent, and one-fifth more than 20 percent.

Executive Compensation

  • Voices that influence compensation. Directors rate the following groups as “very influential” or “influential” when it comes to their boards’ decisions about executive compensation: 86 percent cite compensation consultants, followed closely by the CEO (79 percent), and then institutional investors (54 percent).
  • Responding to say-on-pay. In the second year of say-on-pay, 64 percent of companies took some action to address voting results: 41 percent modified compensation disclosures, 29 percent made compensation more performance-based and 23 percent worked more closely with proxy advisory firms. Two percent of directors indicated that their companies decreased executive compensation.
  • The influence of proxy advisory firms. Over 60 percent of directors estimate that proxy advisory firms have more than a 20 percent influence on proxy voting at their company. Almost half of directors rate quality of the firms’ work as “fair” or “poor.”

Strategy Oversight

  • More time wanted on strategy. Strategic planning topped the board’s “wish list,” with over 75 percent of directors saying they want to devote more time to it, up from 60 percent of directors who wanted to do so last year.
  • Getting the right information. Two-thirds are satisfied with the customer satisfaction research management provides, while nearly 72 percent are satisfied with information about employee values and satisfaction. However, a number of boards do not receive any information about either customers or employee satisfaction (20 and 16 percent, respectively); and 21 percent are dissatisfied with competitive intelligence.
  1. FINRA’s New Rule 5123 Effective December 3, 2012

On September 5, 2012, FINRA announced a December 3, 2012 effective date for new FINRA Rule 5123 (Private Placements of Securities. Upon effectiveness of the Rule, FINRA members that sell certain securities in private placement transactions under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D to individual, non-institutional investors who do not meet limited exemption criteria will be required to file the offering documents used, or file a notice stating no offering document was used, with FINRA within 15 days after the date of first sale. FINRA members also will have to file any material amendments to any filed offering document within 15 days after the date of first sale made using the amended document. All filings made under FINRA Rule 5123 will be confidential and submitted electronically through the FINRA Firm Gateway system.

FINRA Rule 5123 will not apply to many of the most common private placement transactions, including (i) sales pursuant to Rule 144A or Regulation S, (ii) sales to qualified institutional buyers (QIBs), institutional accredited investors, qualified purchasers, employees and affiliates (as defined in FINRA Rule 5123) of the issuer, eligible contract participants, or knowledgeable employees (as defined in the Investment Company Act), even if sales are made pursuant to Section 4(a)(2) or Rule 506, and (iii) sales of certain investment grade, non-convertible debt or preferred securities or certain short-term debt securities. Additionally, the filing required by FINRA Rule 5123 is a “notice” filing only. FINRA will not conduct any pre-sale review or clearance of any private placement offering documents.”