Latham & Watkins has recently issued this Client Alert on Vice Chancellor Strine’s recent decisions in Topps and Lear.  These two new opinions, also covered here and here, offer critical guidance to directors going through the acquisition process, and particularly boards contemplating going-private transactions.  The Alert offers clients a number of considerations to guide deal processes in the wake of these decisions, concluding that:

From a process perspective, in both Topps and Lear, the court expresses significant concern regarding the discussions between management and the successful bidder in advance of the board becoming aware of the bidder’s interest.  The consequences of leaving the bag early can be twofold:

–The court is likely to order additional disclosure if contacts between management and the private equity sponsor are not fully articulated, with attendant delay in the proxy solicitation process; and

–Such activities can play a significant role in changing the court’s perception of the process from one properly led by independent directors to one dominated by management and/or the interested directors, such that the entire process loses credibility.

More details on the implications of these decisions for directors and practitioners alike are described in the full Client Alert, which is available here.

Vice Chancellor Leo Strine last week produced another wonderfully detailed and thoughtful opinion, this time in In re The Topps Company Shareholders Litigation, the case challenging the proposed sale of Topps (think baseball cards) to a private equity firm run by Michael Eisner (think Disney).  There are already a number of descriptions and comments on the opinion (see, for example, here and here), and this case surely is significant even in its obvious ways.  While the Vice Chancellor grants a preliminary injunction halting the transaction in order to permit additional disclosure–a remarkably common remedy of late, as in Netsmart and Caremark, covered here and here–it takes the further and notable step of requiring the Topps board to free a competing bidder (Upper Deck, think baseball cards again) from a standstill agreement it had entered into with Topps during the go-shop period following execution of the Eisner merger agreement.

The Vice Chancellor is particularly critical of the board’s failure to pursue negotiations with Upper Deck once it became clear that Upper Deck could offer a transaction that would be significantly superior to the Eisner deal.  The court evidently concluded that this failure was likely driven–at least in part–by the fact that Eisner had given assurances that Topps’s incumbent managers (including the son of its founder) would continue in office after the merger, while the new bidder, Upper Deck, had made no such assurances.  On the other hand, Vice Chancellor Strine found that the original agreement with Eisner was a reasonable step for the board to take–a step that involved a 40-day go-shop period, a match right, a 3% termination fee for a superior bid accepted during the go-shop period, and a 4.6% termination fee for bids accepted after the go-shop period.  Most notably, the Eisner merger agreement permitted the board to pursue negotiations, even after the go-shop period, with a person the board concluded offered a reasonable probability of presenting a superior bid.

The lessons for M&A practitioners, however, aren’t what caught my attention here.  I was taken, rather, by the interesting and not altogether flattering light shed on the role of dissident directors.  In an environment in which proxy access tops the charts for corporate governance issues, a real-life example of how dissident directors actually performed in the heat of exploring a merger may say a great deal about the desirability of enhancing proxy access.  And the story in the Topps case, at least as told in the Vice Chancellor’s opinion, is not a strong testimonial in support of proxy access.  That story, and my analysis of its implications, follow below.

…continue reading: Topps and Bottoms: A Dubious Performance By Dissident Directors

For those interested in the vigorous debate among academics and practitioners on the virtues and vices of shareholder activism, Part V of Storming the Castle, Lawdragon’s recent profile on the discussion panels held last year here at Harvard as part of Professor Robert Clark’s and Vice Chancellor Leo Strine’s course Mergers, Acquisitions, and Split-Ups, is a real treat.  (I’ve encouraged readers to check out other parts of this fascinating piece in posts here, here, and here.)  In this Part–which Lawdragon has aptly entitled You Say Ph.D., I Say Toast–the piece gives a behind-the-scenes look at a clash among many of the major players in today’s shareholder activism debates.

The panel, entitled Stockholder Activism and M&A: Has Just Say No Become Always Say Yes?, featured Martin Lipton, of Wachtell, Lipton, Rosen & Katz; Jay Lorsch, of Harvard Business School; Lucian Bebchuk, from Harvard Law School; Josh Friedman of Canyon Capital Advisers; James Morphy, of Sullivan and Cromwell; and Ed Haldeman of Putnam Investments.  The discussion, which played to a packed house, began with Professor Bebchuk explaining his role in offering a proposed bylaw as a Computer Associates stockholder that would require a unanimous board vote in order to adopt a poison pill.  The CA board sought to exclude the proposal from the proxy under Rule 14a-8 on the ground that, if adopted, the bylaw would violate the DGCL.  Professor Bebchuk sought a declaration from Chancery that the bylaw, if adopted, would not violate the General Corporation Law; and although he did not reach the merits because the case was unripe, Vice Chancellor Lamb’s opinion strongly suggested that the bylaw could not be left off the proxy under Rule 14a-8.  The bylaw eventually got 41% of the shareholder vote, and CA eventually adopted a pill that shareholders can redeem under certain circumstances.

Aside from Professor Bebchuk, virtually no panelist at Has Just Say No Become Always Say Yes? thought this was a good thing.  Martin Lipton, who authored a two-page Memorandum that described this sequence of events as “very disturbing,” suggested that Professor Bebchuk’s analysis, while perhaps sound in theory, was rather disconnected from the daily realities faced by corporate boards.  “Lucian,” Lipton said, “has never met a board of directors that he trusts,” and thus has concluded that “the key to proper functioning of a corporation is to give shareholders a stick to club the board of directors” with.  Lipton also treated the audience to a description of his work in conceiving the poison pill, noting that his invention was not “designed to entrench management” but to “rest in the business judgment of the board of directors what should be done.”

James Morphy, head of Sullivan and Cromwell’s esteemed merger practice, also suggested that, while the proposed bylaw represented some “lofty ideas,” corporate law is often practiced “down in the weeds . . . on a daily basis.”  Even fellow academic Jay Lorsch, of Harvard Business School, suggested that CA’s directors acquiesced in a more shareholder-friendly version of the pill because they were “annoyed,” not because they were persuaded that the revised pill was in the interests of shareholders.  For his part, Professor Bebchuk insisted that the data we have on poison pills (and their use with effective staggered boards) suggests that their use reduces shareholder returns.

This panel had something for everyone interested in corporate governance: the debate on the social optimality of shareholder activism, the history and purpose of the very first poison pills, and the relationship between corporate law scholarship and practice.  The Lawdragon piece describing the debate is available here, and the Program on Corporate Governance has made video of the entire discussion available here.

(Editor’s Note: This post comes to us from John L. Reed of Edwards Angell Palmer & Dodge.  We thank John and his colleagues for allowing us to bring this insightful Memorandum to our readers.)

In North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, the Delaware Supreme Court, in a case of first impression, provided some clarity on the controversial issue of whether and to what extent creditors have the ability to assert fiduciary duty claims against directors.  The Supreme Court held, unequivocally, that “creditors of a Delaware corporation that is either insolvent or in the zone of insolvency have no right, as a matter of law, to assert direct claims for breach of fiduciary duty against [a] corporation’s directors.”  Rather, the court noted, creditors can protect their interests by asserting derivative fiduciary duty claims on behalf of an insolvent corporation or by asserting any applicable direct non-fiduciary duty-based claims.  In the opinion, the Court pointed out that the plaintiff asserted only a direct claim for breach of fiduciary duty and waived any basis to pursue such a claim derivatively. 

While the Gheewalla decision put to rest the issue of a creditor’s ability to pursue direct claims for breach of fiduciary duty, there remain unresolved questions about (1) whether the Delaware Supreme Court has modified the historical “insolvency” test under Delaware’s corporate law; (2) the rights and roles of creditors and the timing of derivative claims by creditors; and (3) exactly how directors are supposed to balance the competing interests of corporate constituencies when the company is insolvent but nonetheless operating. 

Those questions, and others, are discussed in a Memorandum available for readers here.  Below, I summarize some of the crucial considerations for directors of distressed companies in the future. 

…continue reading: Creditors Cannot Bring Direct Claims for Breach of Fiduciary Duty–But Substantial Questions Remain

David A. Katz and Laura A. McIntosh of Wachtell, Lipton, Rosen & Katz have released this Memorandum detailing several proxy-access and executive-compensation proposals voted on during this year’s proxy season.  The Memorandum offers a highly insightful analysis of the effects of shareholder activism on corporate governance, concluding that “the specific interventions that are the subject of recent stockholder proposals are becoming less justified as more companies move towards a majority-voting standard in the election of directors,” and thus that shareholder activists “would be wise . . . to let the current round of reforms play out rather than attempting to accelerate the pace of reform still further.”

The full Memorandum is available here.

Lawdragon’s recent six-part profile on the corporate law curriculum at Harvard, Storming the Castle, has offered readers fascinating insights on a series of panel discussions sponsored by the Program on Corporate Governance and hosted here in Cambridge as part of Mergers, Acquisitions, and Split-Ups, a new course taught by Professor Robert Clark and Vice Chancellor Leo Strine.  (I introduced readers to the Lawdragon piece in earlier posts here and here.)

Part IV of the profile, however–entitled Go Dick! Smile–is the showstopper.  That Part describes the panel on Spinoffs and Breakups: The Case of Time Warner, where opponents in the Carl Icahn/Time Warner proxy saga came before a packed room at Harvard Law to debrief the battle and its implications for the future of corporate governance.  Several of the major players in the proxy fight came to offer their perspective: Richard Parsons, CEO of Time Warner; Bruce Wasserstein, CEO of Lazard; Gene Sykes of Goldman Sachs; and Paul Cappuccio, Time Warner’s General Counsel. 

All four offered candid and insightful reflections on Icahn’s attempt to influence corporate decisionmaking at Time Warner.  After acquiring about 3.5% of Time Warner’s stock, Icahn–who thought the shares badly undervalued–asked Parsons to spin off Time Warner’s massive cable division and undertake a $20 billion share buyback program to boost the stock price.  When Parsons–and other major shareholders–resisted, Icahn retained Lazard, who promptly prepared a 343-page report recommending that the Time Warner board split the company in four and proceed with Icahn’s proposed buyback.  Although Time Warner eventually agreed to buy back nearly $20 billion in shares, the company successfully resisted Icahn’s proposed asset sales.  (Whether that result was good for shareholders, of course, remains to be seen.)

All of the panelists, along with Professor Clark and Vice Chancellor Strine, seemed to agree that Icahn’s tactics revealed that Parsons did not as close a bead on the pulse of the investor community as he might have.  But the speakers also seemed to conclude that the Time Warner/Icahn story points to some of the limits of the influence even a well-heeled shareholder activist can exert on a major public company: as Gene Sykes, who advised Time Warner, indicated, Icahn was only able to push Parsons as far as fellow investors would allow. 

Readers should absolutely check out the Lawdragon piece, available here, to see what lessons can be drawn from this rare and candid look inside a major proxy fight.  And if you’d like a firsthand look at the panelists and their debate, the Program on Corporate Governance has posted the video of the discussion here.

Michael Jensen has a new work on integrity. Co-authored with Werner Erhard and Steve Zaffron, the work is titled Integrity: a Positive Model that Incorporates the Normative Phenomena of Morality, Ethics and Legality. (This link is to the authors’ PowerPoint presentation on the subject which is available on SSRN; the paper itself wil be publicly released in the fall.) The paper will be presented at HLS at the end of October. 

As I mentioned last week, Lawdragon has recently published a six-part profile, Storming the Castle, that describes the innovative integration of insights from practice into the newest corporate law course offerings here at Harvard.  The profile emphasizes how Professor Robert Clark and Vice Chancellor Leo Strine, who last year co-taught Mergers, Acquisitions, and Split-Ups, populated their syllabus with both the doctrinal building blocks favored by professors and the pragmatic lessons practitioners have gleaned from decades of experience negotiating mergers.

Topics ranged from poison pills to shareholder activism, and rarely does a one-semester syllabus dare to cover so much ground.  But what truly made the course unique was the panel discussions, hosted by the Program on Corporate Governance, in which expert practitioners were invited to explain and defend their views before overflow crowds of students and faculty.

Part III of Lawdragon’s profile, A Friendly Tale of Hot Dogs and Trainwrecks, offers a fascinating description of the first panel presentation, which emphasized the notion that a merger functions, in many ways, as an extraordinary experience in contract negotiation.  (The role of contract law as an analytical tool for assessing mergers has been a frequent subject of courts and commentators alike.) The panelists included Richard Climan of Cooley Godward and Eileen Nugent and Lou Kling of Skadden Arps, each of whom brought decades of negotiating merger agreements–occasionally, apparently, with each other–to bear on the discussion. 

The Hot Dogs and Trainwrecks profile, available here, is a must-read, giving readers insights on the negotiation of the famed material-adverse-change clause and its implications for buyer’s remorse in the merger market. In addition, the Program on Corporate Governance has posted a video of the entire panel discussion here.

I can’t help but post a brief response to Carl Olson’s recent post about allowing shareholders to directly communicate with directors. Although I agree that many companies should be doing a better job of ensuring that directors hear the perspective of shareholders–and even hear directly from shareholders under certain circumstances–I think it is unreasonable and impractical for shareholders to have unfettered access to directors.

The reality is that most communications sent to directors are of a trivial nature and would distract directors from the valuable (and limited) attention they can give to overseeing the company. Do we really want directors reviewing emails and letters from shareholders, who might also be customers with petty complaints about a product or service being defective? Shareholders don’t have unfettered access to senior managers at a company; why should they have that kind of access to directors who serve on a part-time basis?

As for the role of corporate secretaries in the “vetting shareholder communications” process, I can tell you from first-hand experience–I know many of the folks that serve in this capacity, and serve on the National Board and as head of the Mid-Atlantic Chapter of the Society of Corporate Secretaries–that secretaries view their primary duty as one of serving directors, not senior management. Thus, if a shareholder sends a communication that truly deserves to be seen by independent directors, corporate secretaries will ensure that directors see it.

Moreover, for those companies listed on the NYSE, under Section 303A.03 of the NYSE’s Listed Company Manual (as clarified in FAQ D.1, issued by the NYSE Staff in January 2004), corporate secretaries are required to follow instructions from non-management directors regarding “what, when, and how they want to review” any communications sent to the directors. In other words, the corporate secretary isn’t permitted to make any independent decisions as to what communications the directors see–and, of course, can’t share any communications with management unless instructed to do so by the non-management directors. This seems to me to be the most reasonable approach to ensuring that shareholders can communicate with directors–and hopefully is a solution that addresses Carl’s concerns about inappropriate screening of valuable shareholder communications.

Paul Rowe, William Savitt, and I have just released Bebchuk’s “Case for Increasing Shareholder Power”: An Opposition.  The Article argues that the sweeping changes in corporate law proposed in Lucian Bebchuk’s The Case for Increasing Shareholder Power–in particular, vesting in shareholders the power to change the company’s charter and to authorize mergers–represent radical, risky changes in Delaware corporate law that would be both unwise and impractical.  In short, the case for Bebchukian revolution falls short.  The abstract describes the Article as follows:

This paper sets out the view that Lucian Bebchuk’s “case for increasing shareholder power” is exceedingly weak.  It demonstrates that Bebchuk’s proposed overthrow of core Delaware corporate law principles risks extraordinarily costly disruption without any assurance of corresponding benefit; that Bebchuk’s case is unsupported by any empirical data; that Bebchuk’s premise that corporate boards cannot be trusted to respect their fiduciary duty finds no resonance in the observed experience of boardroom practitioners (perhaps not surprisingly, as the proposal comes from the height of the ivory tower), and that its obsession with shareholder power is particularly suspect (if not downright dangerous) in light of the palpable practical problems of any shareholder-centric approach.

The full Article is available here.

Lawdragon has just published Storming the Castle, a six-part profile on the sweeping curricular changes that have generated unprecedented participation by practitioners in the newest offerings in corporate law coursework here at Harvard.  The profile offers a detailed look at Mergers, Acquisitions, and Split-Ups, a course co-taught by Professor Robert Clark and Vice Chancellor Leo Strine, and emphasizes the corporate governance events held last year at the law school as part of the course.  The first part of the article, which focuses on the course in general–and the influence of practitioners’ insights on the curriculum–is available here. 

Later this month, I will add details on the exciting events held on campus last year as part of the course, which featured expert panelists in nearly every field related to corporate governance.  We’ll also post videos of the panels and discuss Lawdragon’s coverage of the events.  In the meantime, our readers can find the full article here.

Corporate governance theory states that the directors of corporations represent the interests of stockowners.  But in practice directors are prevented from hearing from individual stockowners and their views on corporate matters.  Conscientious fulfillment of corporate duties is obviously impaired.

Longstanding corporate policies intentionally erect barriers for avenues of direct communication from stockowners to directors.  It’s not easy to contact a corporation’s directors through the corporate offices; they are almost never on the premises, their direct contact information is almost never made available by the corporation, and that information is usually not otherwise public.  Individual directors undoubtedly have direct business mailing addresses, telephone numbers, faxes, and e-mail addresses.  Directors have no legitimate excuse for not being available for input from the persons they are supposed to represent.  Those tens of thousands of dollars in directors’ fees should buy some reasonable access for stockowners.

Generally this lack of access is an unwritten rule of corporate practice.  However, Edison International was more explicit on page 14 of the proxy statement for its 2007 meeting:

…continue reading: Bringing Directors and Stockowners Together

Following up on yesterday’s post, The Daily Deal has also just published a profile of Steve Bainbridge. Also written by Dan Slater, that piece is available for our readers below.

The Contrarian
Stephen Bainbridge vs. Lucian Bebchuk: an intellectual battle

“Yes, accountability is important, but there are countervailing advantages to authority that people like Lucian Bebchuk don’t give credence to,” says Stephen Bainbridge, a corporate law professor at the University of California, Los Angeles, who’s waged an intellectual battle against Bebchuk in law reviews and on his well-read blog. “He’s too caught up with this image of American businessmen and women as rapacious people who must be controlled by activist shareholders.”

A graduate of Western Maryland College, Bainbridge, 48, got a master’s in biophysical inorganic chemistry at University of Virginia before checking in to UVA law school in 1982. “After a series of unfortunate lab accidents, my research adviser suggested I might be better off in a field that didn’t involve potentially explosive chemicals,” he says. Unlike Bebchuk, Bainbridge spent a two-year stint in practice, at Arnold & Porter LLP’s Washington office. There, he worked on a team supporting a Business Roundtable lobbying effort. In 1988, he joined the faculty at the University of Illinois College of Law. He moved to UCLA in 1996. “As I started doing my own research, I began to understand that the issue Berle and Means raised in the 1930s — that the separation between ownership and control is a problem we need to fix — is really the thing that makes the American corporation, which I regard as the greatest economic engine in our history, possible.”

…continue reading: The Daily Deal on Steve Bainbridge

The Daily Deal just published a detailed profile of Lucian Bebchuk. The profile, written by Dan Slater, runs as follows:

The Activist Professor
By converting his academic work on takeover defenses and executive comp into bylaw proposals at major corporations, Harvard’s Lucian Bebchuk has become an unlikely corporate governance star

At Home Depot Inc.’s 2006 shareholder meeting, its then-CEO, Robert Nardelli, wore his arrogance on his sleeve. Nardelli appeared at the meeting with two unidentified lackeys — presumably attorneys or public relations executives — and no board of directors. He ordered the erection of two digital timers and announced that questions would be limited to one person and one minute. The second speaker discussed his union’s proposal that shareholders be allowed an advisory vote on executive compensation and then covered the litany of Nardelli’s pay abuses: guaranteed bonuses, a $10 million loan that cost shareholders $21 million (after taxes) and so on. When the minute expired, Nardelli flatly recited the phrase he would use frequently that day. “The board recommends that you reject this proposal.”

Seven months later, on Jan. 4, 2007, Nardelli resigned, taking an exit package valued at about $210 million. That day, the board adopted a bylaw, submitted by Home Depot shareholder and Harvard Law School professor Lucian Bebchuk, which required approval of executive compensation by at least two-thirds of the board’s independent directors rather than a mere majority of the directors on the compensation committee.

The shareholder proposal at Home Depot is one of 14 that Bebchuk, a professor-cum-shareholder-activist, has made during the last two proxy seasons. While many law school professors agree that shareholder disenfranchisement in matters of corporate governance is a negative trend in need of a remedy, most are content to write law review articles and occasional op-eds that decry director primacy while extolling the virtues of a shareholder-first model. But Bebchuk is taking more direct action. Having converted his academic work on takeover defenses and executive compensation into specific (and binding) bylaw proposals, Bebchuk, much to the chagrin of such companies as American International Group Inc., Walt Disney Co., Exxon Mobil Corp. and Home Depot, is carrying his prescriptions directly to the boardroom — and demanding a vote.

…continue reading: The Daily Deal on Lucian Bebchuk

In North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, the Delaware Supreme Court settled a nagging question about corporate directors’ duties and liabilities to creditors, holding that “the creditors of a Delaware corporation that is either insolvent or in the zone of insolvency have no right, as a matter of law, to assert direct claims for breach of fiduciary duty against the corporation’s directors.”  The court explained:

[D]irectors owe their fiduciary obligations to the corporation and its shareholders. . . .  When a solvent corporation is navigating in the zone of insolvency, the focus for Delaware directors does not change: directors must continue to discharge their fiduciary duties to the corporation and its shareholders by exercising their business judgment in the best interests of the corporation for the benefit of its shareholder owners.

The Court therefore rejected Vice Chancellor Strine’s conclusion in Production Resources Group v. NCT Group, Inc. that creditors of an insolvent companies may bring direct claims against directors for breach of fiduciary duties.  However, the Court concluded that “the creditors of an insolvent corporation have standing to maintain derivative claims against directors on behalf of the corporation for breaches of fiduciary duties.” 

In reaching these conclusions, the Court’s position was closer to the one espoused by me and and Kelli Alces in our article, Directors’ Duties in Failing Firms, than to the theory espoused by Steve Bainbridge in Much Ado About Little? Directors’ Fiduciary Duties in the Vicinity of Insolvency.  Because I think that the differences between the papers help in understanding the Gheewalla opinion, I think it’s worth laying out our respective positions.

…continue reading: The Gheewalla Case: The Delaware Supreme Court Clarifies Directors’ Duties in Bankruptcy

Doubtless, the “zone of insolvency” is a scary place.  But it got a bit less scary, at least as to fiduciary claims against directors by creditors, when the Delaware Supreme Court affirmed the dismissal of a claim against the directors of Clearwire Holdings.  The decision, noted in this Memorandum, suggests an important refining of who-owes-what-duties-to-who when directors are in the “zone.”

The May 2007 issue of the Virginia Law Review is now out.  The issue includes The Myth of the Shareholder Franchise, by Lucian Bebchuk, and five responses to it.  The respondents put forward vigorous critiques to Bebchuk’s call for reforming corporate elections.

One response, The Many Myths of Lucian Bebchuk, is by Martin Lipton and William Savitt of Wachtell, Lipton, Rosen & Katz.  Lipton has previously participated in two high-profile exchanges with Bebchuk.  In 2002, Lipton published Pills, Polls, and Professors Redux in the University of Chicago Law Review, a response to Bebchuk’s article on The Case Against Board Veto in Corporate Takeovers.  And in 2003, Lipton and his partner Steven A. Rosenblum published Election Contests in the Company’s Proxy: An Idea Whose Time Has Not Come in The Business Lawyer, setting forth their objections to Bebchuk’s analysis in The Case for Shareholder Access to the Ballot.

A second response, Too Many Notes and Not Enough Votes: Lucian Bebchuk and Emperor Joseph II Kvetch About Contested Director Elections and Mozart’s Seraglio, is by Yale Law School professor Jonathan R. Macey.  In 2002, in The Business Lawyer, Macey published a critique of an article by Bebchuk and Allen Ferrell, A New Approach to Takeover Law and Regulatory Competition, which called for strengthening shareholder rights with respect to certain rules-of-the-game decisions.  Bebchuk and Ferrell responded with On Takeover Law and Regulatory Competition.

A third response, Professor Bebchuk’s Brave New World: A Reply to The Myth of the Shareholder Franchise, is by John F. Olson, a senior partner with Gibson, Dunn & Crutcher.

A fourth response, The Mythical Benefits of Shareholder Control, is by UCLA Law School professor Lynn A. Stout.  Stout has also responded to Bebchuk’s work in the past.  In 2002, she published Do Antitakeover Defenses Decrease Shareholder Wealth? in the Stanford Law Review, responding to The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence, and Policy, by Bebchuk and his Harvard colleagues John Coates and Guhan Subramanian.

The final response, The Stockholder Franchise is Not a Myth: A Response to Professor Bebchuk, is by E. Norman Veasey, retired Chief Justice of the Delaware Supreme Court.

Judging by the lengthy history of the debate on shareholder rights and the allocation of power between boards and shareholders, the last word on this subject may not have been spoken.

SEC Chairman Christopher Cox recently announced a new protocol for the negotiation of a monetary settlement by the agency’s enforcement staff.  In a pilot test, the staff will be required to get a green light from the Commission before starting to negotiate.  There is some uncertainty, to say the least, about how this will work, as this memo points out, including as to the established Wells process.