Governance & Compliance Insider

Ninth Circuit Rejects Decisions of Five Other Circuits: Exchange Act Section 14(e) Does Not Require Scienter

Thomas O. Gorman

Scienter has been a critical element of a claim based on Exchange Act Section 10(b) in an SEC enforcement action since the Supreme Court’s decision in Aaron v. SEC, 446 U.S. 680 (1980). It has also been a key element in private damage actions based on the cause of action implied under Section 10(b) and Rule 10b-5 since Ernst & Ernst v. Hochfelder, 425 U.S....

Recent Developments in Auditor Tenure and Independence

Nicole H. Strydom

Last month, over 35% of General Electric Co.’s shareholders voted against ratification of KPMG LLC as GE’s auditor. This high level of opposition (for some context, last year’s votes against KPMG were at a mere 5.7%) comes in the wake of GE’s recent accounting issues and criticism from proxy-advisory firms. More specifically, the SEC is currently investigating some of GE’s accounting practices, including its need...

Failure to Disclose Leads to $35 Million Penalty in the Yahoo! Cybersecurity Breach

Cam C. Hoang

The Securities and Exchange Commission (the “SEC”) announced Tuesday that Altaba, the entity formerly known as Yahoo! Inc., has agreed to pay a $35 million penalty to settle charges that it misled investors by failing to disclose one of the world’s largest data breaches in which hackers stole personal data relating to hundreds of millions of user accounts. According to the SEC’s order, within days...

Disclosure Implications of the Tax Cuts and Jobs Act

Cam C. Hoang

As companies prepare their Form 10-K and proxy statement disclosures, they will be challenged with disclosing the impact of the Tax Cuts and Jobs Act on performance results for the purposes of financial reporting as well as for compensation measurement. Here is a short list of issues to be aware of. Form 10-K Disclosure Implications of Tax Reform: Sections in the MD&A likely to be...

SEC Staff provides Guidance for Public Companies on Tax Cuts and Jobs Act

Jason Brenkert

On December 22, 2017, the Securities and Exchange Commission announced publication of staff guidance for issuers, auditors, and others to ensure timely public disclosures of the accounting impacts of the Tax Cuts and Jobs Act (the “TCJA”), which was enacted on December 22, 2017. Specifically, the staff of the Office of the Chief Accountant and the Division of Corporation Finance issued the following interpretations: Staff...

Discretionary Equity Awards to Directors Subject to “Entire Fairness” Standard of Review

Kimberley R. Anderson

Human nature being what it is, the law, in its wisdom, does not presume that directors will be competent judges of the fair treatment of their company where fairness must be at their own personal expense.[1] According to the Delaware Supreme Court in In re Investors Bancorp, Inc. Stockholder Litigation, when equity awards are granted to directors under a stockholder-approved equity incentive plan that gives...

Upcoming CLE Seminar: Preparing for the 2018 Proxy Season

Kimberley R. Anderson

On Tuesday, December 12, Dorsey will present our annual review of developments and disclosure requirements for the upcoming proxy season, including practical advice on how to prepare your proxy statement and annual report in 2018. Click here for more information or to register to attend in-person or via webinar: https://sites-dorsey.vuture.net/76/665/november-2017/12-12-preparing-for-the-2018-proxy-season(2).asp.

Do You Need a Risk Factor for Proposed U.S. Federal Income Tax Reform?

Kimberley R. Anderson

Tax reform efforts by Congress are ongoing, and the substance of the tax bills remains fluid. However, for foreign corporations with U.S. operations, there are some specific potential risks to consider, such as additional limitations on the deductibility of interest, the migration from a “worldwide” system of taxation to a territorial system, and the use of certain border adjustments. Foreign corporations with U.S. operations may...

Annual Report Reminders for Foreign Private Issuers

James Guttman

There are a couple of recent developments that we would like to remind issuers to keep in mind for their upcoming annual reports. Foreign private issuers who prepare their financial statements in accordance with the International Financial Reporting Standards (“IFRS”) will be required to file their annual audited financial statements in XBRL format in respect of any period ending after December 15, 2017 (i.e., for...

CEO Pay Ratio Rule Will Not Be Delayed

Cam C. Hoang

At last Friday’s ABA annual meeting, Bill Hinman (with the standard disclaimer that he is speaking for himself and not on behalf of the SEC) confirmed that the SEC will not be delaying implementation of the CEO pay ratio rule, which will require most public companies to report the pay ratio in their 2018 proxy statements, for the first fiscal year beginning on or after...