Securities Regulation and Corporate Governance


Direct Listing Update: Revised Proposal for Primary Offerings

On December 3, 2019, Gibson Dunn published A Current Guide to Direct Listings discussing, among other things, a proposal submitted to the U.S. Securities and Exchange Commission (SEC) by the New York Stock Exchange (NYSE)that would permit a privately-held company to conduct a direct listing in connection with a primary offering. On December 6, 2019, the NYSE withdrew its proposal (as reported in An Interim Update on Direct Listing Rules) and was expected t...

An Interim Update on Direct Listing Rules

On December 3, 2019, Gibson Dunn published A Current Guide to Direct Listings discussing, among other things, a proposal submitted to the U.S. Securities and Exchange Commission (SEC) on November 26, 2019 by the New York Stock Exchange (NYSE) that would permit a privately held company to conduct a direct listing in connection with a primary offering, potentially creating a new on-r...

A Current Guide to Direct Listings

Direct listings have increasingly been gaining attention as a means for a private company to go public. In our most recent memo available here, we provide a summary of the current requirements for direct listings on the NYSE and Nasdaq and of NYSE’s recent proposal to amend its direct listing rules to allow primary offerings through the NYSE in conjunction with direct listings. We also explore the potential benefits and risks associated with direct listings.

A direct listing refers to the listing of a privately held company’s stock for trading on a national stock exchange (either the NYSE or Nasdaq) without conducting an underwritten offering, spin-off or transfer quotation from another regulated stock exchange. Under current stock exchange rules, direct listings involve a company effectively going public through the registration of a secondary offering with, the SEC. Existing shareholders, such as employees and early-stage investors, whose shares are registered for resale are able to sell their shares on the applicable exchange, but are not ...

Division of Corporation Finance Unveils Further Details on Its Process for Responding to Shareholder Proposal No-Action Requests

​On November 21, 2019, the Division of Corporation Finance (the “Division" or “Staff") of the Securities and Exchange Commission (“SEC") provided additional detail on how it will process responses to shareholder proposal no-action requests under Rule 14a-8.  As discussed in our prior posts, available here and here, in September 2019 the Division announced that, starting with the 2019-2020 shareholder proposal season, it may respond orally instead of in writing to some no-action requests, and in some cases its response may indicate that it is declining to state a view on whether a proposal satisfies the requirements of Rule 14a-8 or is properly excludable.

On November 21, the Division updated its Rule 14a-8 landing page, providing additional clarity around the first aspect of the September announcement; namely, the Staff's process for responding to no-action requests.[1]  The updated landing page, available here,[2] now links to a new document entitled the 2019-2020 Shareholder Proposal No-Action Response chart (the “Response Chart")[3], which will list the no-action requests to which the Division has responded, in reverse chronological order (with the most recent responses listed first).  The Response Chart presents:
(i)         the name of the company that submitted the no-action request,
(ii)        the name of the shareholder proponent,
(iii)      the date the company initially submitted the no-action request, which will include a hyperlink to all correspondence submitted by the company and the proponent,
(iv)      the regulatory bases asserted by the company to exclude the proposal,
(v)       whether or not the Staff concurred that the shareholder proposal may be excluded and, if applicable, the basis on which the Staff concurred, or whether the Staff declined to state a view on the no-action request,
(vi)      the date of the Staff's response, and
(vii)     whether or not the Staff has set forth its view in a written response (in which case, the response will be linked).[4]

The Response Chart does much to alleviate concerns over the Division's new approach for responding to no-action reques...

Developments Regarding Changes to SEC Staff’s Shareholder Proposal No-Action Responses

Several noteworthy developments have occurred following the September 6, 2019 announcement by the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (“SEC") regarding two significant procedural changes for responding to Exchange Act Rule 14a-8 no-action requests that will be applicable to no-action requests regarding shareholder proposals submitted for annual meeting to be held in 2020.  That announcement indicated that the Staff may now respond orally instead of in writing to shareholder proposal no-action requests and that the Staff may now more frequently respond by declining to state a view on whether or not it concurs that a company may properly exclude a shareholder proposal under Rule 14a-8.

Following the Staff's announcement, a coalition of investor-related organizations sent William Hinman, Director of the SEC's Division of Corporation Finance, a letter on September 19, 2019 criticizing the change in process.[1]  The letter asked that the Staff “rescind this change in process" or, if it does not, at least take certain steps “to reduce the level of uncertainty and conflict resulting from the new approaches."  The steps requested in the letter include using the new response options sparingly “until the implications are better understood," describing the criteria for when the Staff will use the new response options, signaling early in the process if the Staff will use one of the new response options (and clarifying if the Staff will wait until after the proponent has responded to make that decision), and maintaining visibility when the Staff uses one of the new response options (for example, indicating on the SEC's website any oral decisions and providing the same information to both parties).    

Subsequent remarks by the Staff have begun to provide additional specificity regarding these shareholder proposal no-action request procedural changes and the Staff's rationale for implementing the changes.  For example, in late September, Mr. Hinman indicated that the changes were driven by the Staff trying to think of “a new and creative approach" in responding to no-action requests.[2] 

With respect to oral responses, he indicated that they generally will be used for more routine matters (such as failure to provide ownership proof) and confirmed that the Staff will reflect those responses on the SEC's website in “real time" showing whether or not the Staff concurs that a shareholder proposal may be excluded.  With respect to no-action requests where the Staff declines to state a view, he commented that the Staff may t...

EDGAR Updates Change Filer Password Requirements and Increase Character Length of Certain Cover Page Tags

​On September 30, 2019, the Securities and Exchange Commission (the “SEC") went live with EDGAR Release 19.3 (announcement available here) and made related changes to the EDGAR Filer Manual (announcement available here).  Two notable changes are summarized below. 

Change to EDGAR Password Requirements

Filers, including Section 16 filers, will now be requested to provide twelve character passwords instead of eight character passwords when logging into both the EDGAR Filing Website and the EDGAR Online Forms Management Website.  Current filers who do not update their password to twelve characters will be prompted to update it each time they log in.  We have confirmed with the staff of EDGAR Filer Support that current filers who do not update their password when prompted will not be prevented from logging in successfully.  However, EDGAR passwords expire annually and should be changed before the expiration date.  Any filers who have not already updated their password by the time they otherwise expire will be required to create a password that satisfies the new requirements before being permitted to log in to EDGAR.

To change their password, filers will need to be logged into the EDGAR Filing Website or the EDGAR Online Forms Management Website and follow the procedure described in Section 4.1.3 of Volume 1 of the EDGAR Filer Manual.  This procedure requires filers to enter their CIK number and Password Modification Authorization Code (“PMAC").  If filers do not know their PMAC, they must generate a new set of EDGAR access codes using the EDGAR Filer Management Website.

This update will not impact the requirements for other EDGAR access codes (e.g., the PMAC, passphrase, CIK Confirmation Code (“CCC")).[1]  

Update Allowing for More Characters in Security Titles

Companies subject to cover page tagging requirements must tag certain information relating to their securities that are registered pursuant to Sections 12(b) or 12(g) of the Securities Exchange Act of 1934, including the title of such securities.  When making their most recent Form 10-Q filings, many compan...

Everyone Jump In! All Issuers Will Be Allowed to “Test-the-Waters”

On September 26, 2019, the SEC announced (available here) that it has adopted a new rule, Rule 163B (available here) under the Securities Act of 1933, that allows all issuers to “test-the-waters." This accommodation, which had previously been available only to emerging growth companies (EGCs), allows issuers and authorized persons (e.g., underwriters) to engage in discussions with, and provide written offering material to, certain institutional investors prior to, or following, the filing of a registration statement, to determine market interest in potential registered securities offerings. Rule 163B will become effective 60 days after publication in the Federal Register.

In connection with the adoption of Rule 163B, SEC Chairman Jay Clayton noted in a public statement (available here) that Rule 163B will provide “both Main Street and institutional investors with more opportunities to invest in public companies." This is consistent with one of the tenets of the SEC's current Strategic Plan (discussed in our prior blog post available here) to increase the number of public companies for the benefit of Main Street investors.

The SEC initially proposed a new rule allowing all issuers to test-the-waters (the “Proposed Rule") on February 19, 2019 (available here, and discussed in our prior blog post available here). Rule 163B in the form adopted by the SEC is largely consistent with the Proposed Rule, with few exceptions.  

Among other things, the SEC noted the following:

  • All issuers – including non-reporting issuers, EGCs, non-EGCs, well-known seasoned issuers and investment companies (including registered investment companies and business development companies) – and “persons authorized to act on behalf of" the issuers – including issuers' investment bankers and other advisors – are eligible to engage in oral or written communications with potential investors that the issuers reasonably believe are qualified institutional buyers or institutional accredited investors.
  • 163B communications will be c...
SEC Staff Announces Significant Changes to Shareholder Proposal No-Action Letter Process

On September 6, 2019, the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (“SEC") announced[1] two significant procedural changes for responding to Exchange Act Rule 14a-8 no-action requests that will be applicable beginning with the 2019-2020 shareholder proposal season:

  • Oral Response by Staff:  The Staff may now respond orally instead of in writing to shareholder proposal no‑action requests.  The Staff's oral response will inform both the company and the proponent of its position with respect to the company's asserted Rule 14a-8 basis for exclusion expressed in the no-action request.  The Staff stated that it intends to issue a written response letter to a no‑action request “where it believes doing so will provide value such as more broadly applicable guidance about complying with Rule 14a-8."
  • No Definitive Response by Staff:  The Staff may now more frequently decline to state a view on whether or not it concurs that a company may properly exclude a shareholder proposal under Rule 14a‑8.  Importantly, the Staff stated that if it declines to state a view on any particular no-action request, the interested parties should not interpret that position as indicating that the proposal must be included in the company's proxy statement.  Instead, the Staff stated that in these circumstances, the company requesting exclusion may have a valid legal basis to exclude the proposal under Rule 14a-8.

In the announcement, the Staff also reiterated that—in the situations described in prior Staff Legal Bulletins[2]—it continues to find an analysis by the board of directors useful when a company seeks to exclude a proposal on grounds of either ordinary business (Rule 14a-8(i)(7)) or economic relevance (Rule 14a-8(i)(5)).  The Staff also noted that parties continue to be able to seek formal, binding adjudication on the merits of Rule 14a-8 issues in...

SEC Issues New Guidance for Proxy Advisors and Investment Advisers Engaged in the Proxy Voting Process

​​On August 21, 2019, the Securities and Exchange Commission (the Commission) issued two releases (the Releases) regarding two elements of the proxy voting process that are influenced by proxy advisory firms: proxy voting advice issued by proxy advisors (available here) and proxy voting by investment advisers who use that proxy voting advice (available here).  The guidance, in the words of Commissioner Elad L. Roisman, “reiterate[s] longstanding Commission rules and positions that remain applicable and very relevant in today's marketplace."

In the Releases, the Commission provided:

  • a Commission interpretation that the provision of proxy voting advice by proxy advisory firms generally constitutes a “solicitation" under federal proxy rules and new Commission guidance about the availability of exemptions from the federal proxy rules and the applicability of the proxy anti-fraud rule to proxy voting advice; and

  • new Commission guidance intended to facilitate investment advisers' compliance with the fiduciary duties owed to each client in connection with the exercise of investment advisers' proxy voting responsibilities, including in connection with their use of proxy advisory firms.

​​​Notably, the Releases are not subject to notice and comment and will instead become effective upon publication in the Federal Register.

We discuss the Releases in greater detail in our client alert (available here).​

Thanks to associate Geoffrey Walter in Washington, D.C. for his assistance in preparing this summary and the related client update.

Desktop Calendar of SEC Deadlines for 2020 Now Available

​This is a smart time of year to confirm plans for SEC reporting and capital markets transactions in 2020. To assist public companies in keeping track of the various filing deadlines, we have prepared a desktop reference calendar that sets forth filing deadlines for many SEC reports. To assist companies with planning capital markets transactions, including IPOs, our calendar also provides the staleness dates (i.e., the last date financial statements may be used in a prospectus or proxy statement without being updated).

You can download a PDF of the 2020 SEC Filing Deadlines calendar at the link below.

Gibson Dunn provides a range of other helpful resources on our website, from a guidebook for companies considering their initial public offering to illustrative timelines for securities offerings by existing public companies. For access to these and other resources and publications, please see Gibson Dunn's Capital Markets Practice Center.

For more information about current developments and trends in securities regulation, corporate governance and executive compensation, sign up for Gibson Dunn's Securities Regulation and Corporate Governance Monitor.  

Special appreciation for the contributions of Monika Kluziak, associate in our Houston office, and Matthew Ross, summer associate in our Houston office.

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Current thoughts on development and trends in securities regulation, corporate governance and executive compensation published by Gibson Dunn.

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