Regulatory Relief

Electronic  Confirmations

On January 26th, the Securities and Exchange Commission (“SEC”)’s Division of Trading and Markets issued a no­action letter advising it will not recommend enforcement action under Rule 10b­10 of the Securities Exchange Act of 1934 against broker­dealers effecting repurchase transactions on behalf of their institutional customers that rely on MarketAxess’ electronic platform to satisfy confirmation delivery obligations to their institutional investors if all of the disclosures required by Rule 10b­10 are provided electronically.

Abbreviated Tender or Exchange Offers for Non­Convertible Debt Securities

On January 23rd, the SEC’s Division of Corporation Finance took a no­action position with respect to an abbreviated, five­day tender offer for non­convertible debt securities. The no­action relief supersedes the letters issued to Goldman, Sachs & Co. (March 26, 1986), Salomon Brothers Inc. (March 12, 1986), Salomon Brothers Inc. (October 1, 1990), and any similar letters relating to abbreviated offering periods in non­convertible debt tender offers. The no­action letter confirms that the Division of Corporation Finance will not recommend any enforcement action if an offeror conducts a tender offer for non­convertible debt securities, holds the tender offer open for at least five business days from and including the date the tender offer is first published by means of “immediate widespread dissemination,” and continues to hold open the tender offer for at least three business days from and including the date of the announcement of any material change in the offer other than a change in the consideration offered. Unlike the previously issued no­action position, the relief requires: (i) “immediate widespread dissemination” of offer materials; (ii) employs a business day instead of a calendar day construct; (iii) allows for offers to be made with Qualified Debt Securities; and (iv) eliminates the distinction between investment grade and non­investment grade debt securities.

Regulatory Guidance

Updated Volcker Rule Guidance

On January 29th, the Division of Trading and Markets updated its Volcker Rule guidance. The updated guidance adds two new questions and answers. The first question and answer addresses that banking entities must begin meeting the filing deadline of reporting metrics within 10 days of the end of each calendar month starting in August, 2015 such that the first reporting deadline is September 10th, 2015. The second discusses the Treasury Department’s Separate Trading of Registered Interest and Principal of Securities (“STRIPS”) program. Under the program, eligible Treasury securities are authorized to be separated into principal and interest components and transferred separately. Because these separate principal and interest components are backed by the full faith and credit of the United States, the components are exempt from the Volcker Rule. Volcker Rule FAQs.

New Compliance and Disclosure Interpretations

On January 23rd, the SEC’s Division of Corporation Finance added two new questions to its Compliance and Disclosure Interpretations (“CDI”). The first, Question 279.01, concerns Rule 905 under the Securities Act, which provides that any “restricted securities” under Rule 144 that are equity securities of a domestic issuer will continue to be deemed to be restricted securities notwithstanding that they were acquired in a resale transaction pursuant to Rule 901 or 904. The CDI clarifies that Rule 905 only applies to equity securities that, at the time of issuance, were those of a domestic issuer. Therefore, a holder of restricted securities, which were originally acquired from a foreign private issuer in a transaction described in Rule 144(a)(3) (other than Rule 144(a)(3)(v)), may resell those securities offshore pursuant to Rule 904 and without regard to Rule 905, if the issuer no longer qualifies as a foreign private issuer at the time of resale. The second, Question 118.01, concerns Rule 304(e) of Regulation S­T, which requires information filed with the SEC to be in a searchable form. The CDI notes that with regard to required disclosures, a filer may present required information using graphics that are not text­ searchable and still comply with Rule 304(e) if the filer also presents the same information as searchable text or in a searchable table within the filing. Any additional information that the filer chooses to include in the filing and that is not required to be disclosed may be presented graphically without a separate text­searchable presentation.

Other Developments

Proxy Voting Roundtable

The SEC will host a roundtable on February 19th, 2015 to explore ways to improve the proxy voting process. The roundtable will focus on universal proxy ballots and retail participation in the proxy process. The roundtable will be divided into two panels. The first panel will focus on the state of contested director elections and whether changes should be made to the federal proxy rules to facilitate the use of universal proxy ballots by management and proxy contestants. This panel also will discuss the state law, logistical, and disclosure issues presented by a possible universal proxy ballot process. The second panel will focus on strategies for increasing retail shareholder participation in the proxy process. This panel will discuss how technology might affect retail participation. In addition, this panel will discuss whether the format of disclosure could be improved to increase the engagement of shareholders and how the mechanics of voting could be improved to affect retail shareholder participation. The roundtable will be webcast live. SEC Press Release.

Advisory Committee to Vote on Accredited Investor Definition

The SEC’s Advisory Committee on Small and Emerging Companies will hold a public meeting by conference call on February 17th, 2015. The advisory committee plans to vote on recommendations regarding the definition of an “accredited investor.” The meeting will begin at 2:00 p.m. (ET) and live audio will be available on the SEC’s website. Written statements should be submitted on or before February 13th, 2015. SEC Release No. 33­ 9713; SEC Press Release. See also Transcript (December 17, 2014 meeting transcript).

Open Meeting

The SEC will hold an open meeting on February 4th, 2015 to consider whether to approve the 2015 budget of the Public Company Accounting Oversight Board (the “PCAOB”) and the related annual accounting support fee for the PCAOB under Section 109 of the Sarbanes­Oxley Act of 2002. Meeting Notice.

Numerical Pitfalls

On January 26th, Andrew Ross Sorkin, writing for DealBook, noted the difficulties confronting the SEC as it tries to implement the Dodd­Frank Act’s provision requiring firms to disclose their CEO’s compensation as a ratio of employee median pay. In doing so, Sorkin also discussed the potential pitfalls which accompany numerical comparisons in general. Numerical Pitfalls.

Whistleblower  Predictions

On January 23rd, the Risk & Compliance Journal provided whistleblower prognostications for 2015.

Whistleblower Predictions.

Staff Announcements.

The SEC announced that Erin E. Schneider has been named the Associate Regional Director for enforcement in the San Francisco office. The Commission also announced that Robert E. Rice, Chief Counsel to Chair Mary Jo White, will leave the agency at the end of February.