Securities Regulation and Corporate Governance


ISS Proposes and Opens Comment on Draft 2022 Voting Policy Updates

Yesterday, the proxy advisory firm Institutional Shareholder Services (“ISS") proposed and published for comment voting policy changes for the 2022 proxy season.  There are five proposed updates that would apply to U.S. companies, including two related to “Say on Climate" proposals and a third related to climate issues.

In addition, ISS is proposing (starting in 2023) to begin issuing negative voting recommendations for directors at all companies with multi-class stock structures.  Companies that went public before 2015 would no longer be grandfathered under ISS policy.  ISS is requesting comment on whether to take a similar approach for companies that have other “poor" governance practices—specifically, a classified board, or the requirement of a supermajority vote to amend the governing documents. 

The proposed U.S. policy changes are available here and are summarized below.  Comments on the proposals can be submitted by e-mail to until 5 p.m. ET on November 16, 2021.  ISS will take the comments into account as part of its policy review and expects to release final changes to its voting policies by or around the end of November.  It is important to note that ISS's final 2022 proxy voting policies may reflect additional changes, beyond those on which ISS is soliciting comment.  The final voting policies will apply to shareholder meetings held on or after February 1, 2022, except for policies subject to transition periods.

Comments submitted to ISS may be published on its website, unless requested otherwise in the body of email submissions.

The proposals for U.S. companies address:

1.     Climate-Related Management and Shareholder Proposals.  In 2021, both shareholders and management have submitted Say on Climate proposals at companies that are considered “high impact" as well as at companies that would not be considered “high impact" from a greenhouse gas emissions (“GHG") emissions perspective.  ISS is proposing voting p...

Recent SEC Amendments Bring Changes to Filing Fee Disclosure and Payment Methods

On October 13, 2021, the Securities and Exchange Commission (the “SEC") adopted amendments to modernize filing fee disclosure for certain forms and schedules, as well as update payment methods for fees related to these filings. The final rule highlighted three primary goals of the amendments: (i) update disclosure requirements related to filing fees in order to provide more certainty to filers that the proper fee was calculated and facilitate the SEC staff's review of such fee; (ii) modernize the payment method for filing fees and reduce the cost and burden on processing fee payments; and (iii) permit filers to reallocate previously paid filing fees in more situations than what was previously permitted. An overview of these changes is provided below. The amendments also contained certain technical, conforming and clarifying changes related to filing fee-related instructions and information.

The amendments will become effective January 21, 2022, with the changes to fee payment methods becoming effective May 31, 2022. The requirements for filing fee disclosures will be phased in over time as summarized below.

Forms and Schedules Impacted by the Amendments

                The amendments affect the following Securities Act forms: Form S-1, Form S-3, Form S-4, Form S-8, Form S-11, Form F-1, Form F-3 and Form F-10.  The amendments also affect the following Exchange Act schedules: Schedule 13E-3, Schedule 13E-4F, Schedule 14A, Schedule 14C, Schedule TO and Schedule 14D-1F. 

Amendments to Fee Table Location, Structure, and Content

                Location. The amendments require that fee-bearing forms include an attached exhibit with two to three tables encompassing all fee-related information. This a change from the former requirement of a single fee table on the cover page of each form.

                Structure. The amendments require that all required information for a fee calculation be provided in a structured format of Inline XBRL as provided by new Rule 408 of Regulation S-T. The amendments relating to these structure changes will be phased in over time based on filer status. Large accelerated filers must comply with the new structure for filing...

Now Available: SEC Desktop Calendar for 2022

​To continue assisting US companies with planning for SEC reporting and capital markets transactions into 2022, we offer our annual SEC Desktop Calendar. This calendar provides both the filing deadlines for key SEC reports and the dates on which financial statements in prospectuses and proxy statements must be updated before use (a/k/a financial staleness deadlines).

You can download a PDF of Gibson Dunn's SEC Desktop Calendar for 2022 at the link below.

Gibson Dunn has a preeminent capital markets practice.  Our capital markets group is consistently ranked among the top firms for ​complexity and value of the capital markets matters in which we are involved, both domestically and internationally. Through our regular participation in a variety of IPOs and other offerings, Gibson Dunn has access to a wealth of transaction data, market intelligence and practical, actionable experience. We offer clear advice on risks and opportunities. For access to resources, publications and replays of webcasts, please visit Gibson Dunn's Capital Markets Practice Center.

Gibson Dunn is consistently recognized as having one of the leading Securities Regulation and Corporate Governance practices in the United States.  We regularly represent public and private companies of all sizes on a variety of disclosure, accounting and securities regulation issues, as well as on shareholder activism.  We also advise senior management, boards of directors and their audit, compensation, governance and special committees on a wide range of issues relating to board and committee operation, fiduciary duties, conflicts of interest and relationships with shareholders. This group includes a deep bench of lawyers who are dedicated to specific areas of securities regulation, governance and disclosure practices. Our SRCG-dedicated lawyers work seamlessly with our Capital Markets lawyers to deliver the highest quality service and forward-thinking advice on the latest developments. For more information and resources about current developments in securities regulation, corporate governance and executive compensation, please visit Gibson Dunn's

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PCAOB Adopts Final Rule on the Holding Foreign Companies Accountable Act

By Michael Scanlon, David Lee, David Ware, and Maggie Zhang

On September 22, 2021, the Public Company Accounting Oversight Board (the “PCAOB") adopted a final rule (the “Final Rule") implementing the Holding Foreign Companies Accountable Act (the “HFCAA"), which became law in December 2020 and prohibits foreign companies from listing their securities on U.S. exchanges if the company has been unavailable for PCAOB inspection or investigation for three consecutive years.  The Final Rule (available here) requires U.S. Securities and Exchange Commission (the “SEC") approval before it goes into effect.

In May 2021, the SEC adopted interim final amendments (the “Amendments", available here) to certain forms, including Forms 20-F and 10-K, to implement the disclosure and submission requirements of the HFCAA.  In June 2021, the Senate passed the Accelerating Holding Foreign Companies Accountable Act (the “AHFCAA"), which, if signed into law, would reduce the time period for the delisting of foreign companies under the HFCAA to two consecutive years, instead of three years.

Three aspects of the HFCAA and the PCAOB's Final Rule should be kept in mind: 

1. China and Hong Kong – The Two Jurisdictions Where Registrants Currently Run the Risk of Delisting. The HFCAA requires the SEC to identify registrants (each, a “Commission-Identified Issuer") that have retained a registered public accounting firm to issue an audit report where that registered public accounting firm has a branch or office that:

  • ​​Is located in a foreign jurisdiction; and 
  • The PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction.

 As reflected on the PCAOB's website, the PCAOB is currently unable to inspect or investigate accounting firms due to a position of the local authority in only two jurisdictions: China and Hong Kong.

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SEC Staff Scrutiny of Climate Change Disclosures Has Arrived: What to Expect And How to Respond


Recently, the SEC's Division of Corporation Finance has issued a number of comment letters relating exclusively to climate-change disclosure issues.  The letters we have seen to date comment on companies' most recent Form 10-K filings, including those of calendar year companies who filed their Form 10-K more than 6 months ago, and have been issued by a variety of the Division's industry review groups, including to companies that are not in particularly carbon-intensive industries.  Many of the climate change comments appear to be drawn from the topics and considerations raised in the SEC's 2010 guidance on climate change disclosure, as reflected in the sample comments that we have attached in the annex to this alert. We expect this is part of a larger Division initiative because the letters are similar (although not identical), contain relatively generic comments, and have been issued in close proximity to one another.  Accordingly, it is reasonable to expect that additional comment letters will be issued in the coming weeks and months.

The issuance of these comments and their focus comes as no surprise given the SEC's Chair and several commissioners have indicated that climate change disclosures are a priority.  As detailed in Gibson Dunn's client alert of June 21, 2021, the SEC also recently announced its anticipated rulemaking agenda, which includes a near-term focus on rules that would prescribe climate change disclosures. On September 22, the SEC acknowledged the recent wave of comment letters issued to registrants on climate change disclosures and published a sample comment letter on its website available here.

Observations and Practical Considerations

Companies should not view this initiative, or even the receipt of such a comment letter, as a mandate to include wide-ranging climate-related data and disclosures in future Form 10-K filings.  However, the comments serve as a useful reminder that, as part of a company's disclosure controls and procedures, climate-related information should be carefully considered for possible inclusion in a company's periodic reports.  

Companies that receive climate-related comments should consider the following points when responding:

  • Focus on applicable Form 10-K disclosure requirements. ​ Companies should bear in ...
New York Stock Exchange Further Amends Related Party Transaction Approval Rules

On August 19, 2021, the New York Stock Exchange (“NYSE”) proposed an amendment to Section 314.00 of the NYSE Listed Company Manual (the “NYSE Manual”), the NYSE’s related party transaction approval rule.  The proposal follows the NYSE’s recent amendments to Section 314.00, approved by the Securities and Exchange Commission (the “SEC​) on April 2, 2021, which had amended the rules to, among other things, require “reasonable prior review and oversight” of related party transactions and had defined related party transactions (for companies other than foreign private issuers) to be those subject to Item 404 of the SEC’s Regulation S-K, but “without applying the transaction threshold of that provision.” For foreign private issuers, the previous amendments had defined related party transactions to be those subject to disclosure under Form 20-F, but “without regard to the materiality threshold of that provision.”  As a result of those amendments, NYSE-listed companies were faced with the prospect of potentially presenting immaterial transactions, or transactions in which related parties’ interests were immaterial, before their independent directors for approval.

In its latest proposal, the NYSE noted that the prior amendment had been intended to “provide greater clarity as to the types of transactions that were specifically subject to review and approval under the rule” but that “[i]n the period since the adoption of that amendment, it has become clear to the Exchange that the amended rule’s exclusion of the applicable transaction value and materiality thresholds is inconsistent with the historical practice of many listed companies, and has had unintended consequences.”  As such, the NYSE’s latest amendments to Section 314.00 “provide that the review and approval requirement of that rule will be applicable only to transactions that are required to be disclosed after taking into account the transaction value and materiality thresholds set forth in Item 404 of Regulation S-K or Item 7.B of Form 20-F, respectively, as applicable.”  Notably, Item 404 of Regulation S-K only requires disclosure of transactions where the amount involved is greater than $120,000 and in which the related person “had or will have a direct or indirect material interest” in the transaction.  T...

What Can We Expect from the SEC with COP26 Around the Corner?

Climate change matters and related calls for regulation are in headlines daily. On August 9, 2021, the UN's Intergovernmental Panel on Climate Change (IPCC) published the first major international assessment of climate-change research since 2013. The IPCC report will inform negotiations at the 2021 UN Climate Change Conference, also known as COP26, beginning on October 31, 2021 in Glasgow. 

Chair Gary Gensler of the Securities and Exchange Commission (SEC) has made climate change headlines of his own in recent weeks. On July 16, 2021, Chair Gensler appointed Mika Morse to the newly created role of Climate Counsel on his policy staff, further demonstrating the importance of climate policy to the SEC's agenda. In addition, the Reg Flex Agenda includes “Climate Change Disclosure" – whether to “propose rule amendments to enhance registrant disclosures regarding issuers' climate-related risks and opportunities." (See our client alert on the Reg Flex Agenda here.) Chair Gensler has also been very active on Twitter. On July 28, 2021, he posted a video on his Twitter feed addressing the question: “What does the SEC have to do with climate?". 

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Direct Listings on Nasdaq May Include Primary Capital Raise

​In May, the SEC issued an order (here) approving a proposal by The Nasdaq Stock Market LLC (Nasdaq) permitting primary offerings in connection with a direct listing. This allows companies that are going public through a direct listing to raise proceeds in the direct listing, similar to an IPO. This development follows the SEC's prior approval of a similar rule proposed by the New York Stock Exchange (NYSE) that also permits primary capital raises in connection with a direct listing. See Gibson Dunn's Current Guide to Direct Listings (here) and Nasdaq's Direct Listing page (here) for more information.

The key elements of the final Nasdaq rules are similar to the basic tenets of the NYSE's rules. Under Nasdaq's approved rule, to conduct a primary offering in connection with a direct listing, the aggregate market value of publicly held shares immediately prior to listing together with the market value of shares sold in the opening auction must total at least $110 million (or $100 million, if the company has stockholders' equity of at least $110 million), with such market value calculated using a price per share equal to the lowest price of the range established in the related prospectus. For purposes of this calculation, shares purchased by officers, directors and >10% holders in the opening auction are allowed to be included (these shares would not otherwise qualify as “publicly held").  The approved rule (1) requires that all shares to be offered in a primary direct listing be sold within the price range specified in the applicable registration statement, and (2) calculates the value of the listing company's shares based on the minimum price set forth in the range within the registration statement. Nasdaq's approved rule also requires that the offering price in the primary offering remain below the highest price set forth in the registration statement's price range.

Direct listing practice is evolving and presents novel risks. Companies contemplating a direct listing encounter a number of open questions, some of which are highlighted here. Any company considering a direct listing is encouraged to carefully consider the risks and benefits in consultation with counsel and financial advisors. Members of the Gibson Dunn Capital Markets team are available to discuss strategy and considerations as the rules and practice concerning direct listings evolve. Gibson Dunn will also continue to update its Current Guide from time to time to further describe the applicable rules and provide commentary as practices evo...

SEC Staff Issues Cautionary Guidance Related to Business Combinations with SPACs

​There were more initial public offerings (“IPOs") of special purpose acquisition companies (“SPACs") in 2020 alone than in the entire period from 2009 until 2019 combined, and in the first three months of 2021, there have been more SPAC IPOs than there were in all of 2020. All of these newly public SPACs are looking for business combinations and many private companies are or will be considering a combination with a SPAC as a way to go public.

After an IPO, a SPAC has a limited amount of time to acquire a target company. Many of these business combinations move quickly and a private company becomes a public reporting company in a relatively short period of time. It is important for sponsors, target companies and investors to be aware of some of the special attributes of SPACs and the post-business combination public company.

On March 31, 2021, the staff of the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (the “SEC") issued a statement addressing certain accounting, financial reporting and governance issues related to SPACs and the combined company following a SPAC business combination.

Shell Company Restrictions

Before contemplating a business combination, both SPACs and their target companies must consider the following limitations that arise from the SPAC's status as a Shell Company:

  • Target Financial Statements in 4 Business Days: The financial statements for the acquired business must be filed within four business days of the completion of the business combination (See Item 9.01(c) of Form 8-K). The registrant is not entitled to use the 71-day extension under Item 9.01(c).
  • No Incorporation by Reference in Form S-1 for 3 Years: The combined company will not be eligible to incorporate by reference Exchange Act reports, or proxy or information statements filed pursuant to Section 14 of the Exchange Act, until three years after completion of the business combination. (See General Instruction VII.D.1(b) to Form S-1.)
  • No Form S-8 until 60 days after filing current Form 10 information: The combined company will not be eligible to use Form S-8 for the registration of compensatory securities offerings until at least 60 calendar days after the combined ...
SEC Chair Lays Out a Climate- and ESG-Oriented Agenda and Calls for Comments on Mandatory Climate-Related Disclosure Rules

On March 15, 2021, the Acting Chair of the Securities and Exchange Commission (SEC), Allison Herren Lee, gave a speech entitled “A Climate for Change: Meeting Investor Demand for Climate and ESG Information at the SEC,"[1] in which she sets forth a near-term regulatory agenda for the SEC that centers on climate and Environmental, Social, and Governance (ESG) topics. On the same day, she also jump-started the regulatory process toward adopting potentially extensive new disclosure requirements for public companies on climate-change matters by issuing a request for comments on 15 broad issues.[2]

The SEC's ESG-Oriented Rulemaking Agenda.

In her speech, Acting Chair Lee proclaimed climate and ESG issues to be “front and center for the SEC." This is due to what Chair Lee referred to as “ESG integration" over the past decade – in other words, a shift in investor focus toward the use of climate and ESG risk analysis in investment decision-making. Chair Lee stated:

ESG factors often represent a core risk management strategy for portfolio construction. That's because investors, asset managers responsible for trillions in investments, issuers, lenders, credit rating agencies, analysts, index providers, and other financial market participants have observed their significance in terms of enterprise value. They have embraced sustainability factors and metrics as significant drivers in decision-making, capital allocation, and pricing.

As a result, Chair Lee stated that the SEC is “taking a holistic look at all of the ways climate and ESG intersect with our regulatory framework." In that context, she set forth the following topics as potential areas for SEC regulatory action in the coming years:

  • Adopting a mandatory comprehensive ESG disclosure framework for reporting companies aimed at producing “consistent, comparable, and reliable data...
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