Posts Tagged ‘Daniel Gallagher’

SEC Commissioner, Law Professor Wrongfully Accuse SRP of Securities Fraud

Posted by Jonathan R. Macey, Yale Law School, on Monday December 15, 2014 at 4:17 pm
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Editor’s Note: Jonathan R. Macey is the Sam Harris Professor of Corporate Law, Corporate Finance & Securities Law at Yale University. This post analyzes the arguments in a paper by SEC Commissioner Daniel M. Gallagher and Stanford law School Professor Joseph A. Grundfest, described in a post by Professor Joseph Grundfest (available on the Forum here) and a post by Wachtell Lipton (available on the Forum here).

Here is something that one does not see every day. In their recent paper “Did Harvard Violate Federal Securities Law? The Campaign Against Classified Boards of Directors” posted on December 10, 2014, a sitting Commissioner of the Securities and Exchange Commission and a former SEC Commissioner accuse the Shareholder Rights Project at Harvard Law School (SRP) of violating the anti-fraud provisions of the securities laws. The alleged fraud occurred when institutional investors represented by the SRP proposed shareholder resolutions encouraging shareholders in U.S. public companies to vote to de-stagger their companies’ boards.

In this submission I present my analysis of this paper, concluding that the SRP proposals were not fraudulent or misleading and that the aggressive application of the anti-fraud provisions of the securities laws advanced by the authors of the “Did Harvard Violate Federal Securities Law?” would be inconsistent with the law and, by the authors’ own admission, inconsistent with the current policy and practice of the staff of the Securities and Exchange Commission.

…continue reading: SEC Commissioner, Law Professor Wrongfully Accuse SRP of Securities Fraud

Current and Former SEC Commissioners Question Legality of Harvard Declassification Proposals

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on Monday December 15, 2014 at 9:20 am
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Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, Theodore N. Mirvis, and George T. Conway III.

Today’s Wall Street Journal reports that a current SEC Commissioner and a former SEC Commissioner (now a law professor) have published a lengthy paper challenging the scholarly bona fides—and legality—of the recent efforts by the Harvard Law School Shareholder Rights Project (SRP) to cause major American corporations to declassify their boards of directors. During the past three proxy seasons, the Harvard SRP has promulgated numerous stockholder-sponsored precatory resolutions calling for declassification of companies with staggered boards, and has succeeded in causing 98 companies to remove their staggered structure and have all their directors stand for election annually.

…continue reading: Current and Former SEC Commissioners Question Legality of Harvard Declassification Proposals

Did Harvard Violate Federal Securities Law?

Posted by Joseph Grundfest, Stanford Law School, on Monday December 15, 2014 at 9:19 am
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Editor’s Note: Joseph A. Grundfest is the W. A. Franke Professor of Law and Business at Stanford University Law School.

SEC Commissioner Daniel Gallagher and I just posted on SSRN a new paper, titled Did Harvard Violate Federal Securities Law? The Campaign Against Classified Boards of Directors. The abstract of the paper summarizes it as follows:

The Harvard Shareholder Rights Project (“Harvard SRP”) has, on more than 120 occasions, invoked SEC Rule 14a-8 to propose precatory shareholder resolutions calling for the de-staggering of corporate boards of directors (the “Harvard Proposal”), and claims to have contributed to de-staggering at approximately 100 of America’s largest publicly traded corporations. The Harvard Proposal relies on a summary of academic research that portrays staggered boards as categorically detrimental to shareholder interests, and cites only one study reaching a contrary conclusion, while dismissing that study’s analysis.

…continue reading: Did Harvard Violate Federal Securities Law?

Why Commissioner Gallagher is Mistaken about Disclosure of Political Spending

Posted by Lucian Bebchuk, Harvard Law School, and Robert J. Jackson, Jr., Columbia Law School, on Monday November 10, 2014 at 9:04 am
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Editor’s Note: Lucian Bebchuk is Professor of Law, Economics, and Finance at Harvard Law School. Robert J. Jackson, Jr. is Professor of Law at Columbia Law School. Bebchuk and Jackson served as co-chairs of the Committee on Disclosure of Corporate Political Spending, which filed a rulemaking petition requesting that the SEC require all public companies to disclose their political spending, discussed on the Forum here. Bebchuk and Jackson are also co-authors of Shining Light on Corporate Political Spending, published last year in the Georgetown Law Journal. A series of posts in which Bebchuk and Jackson respond to objections to an SEC rule requiring disclosure of corporate political spending is available here.

Last week, Securities and Exchange Commissioner Daniel Gallagher took the unusual step of publishing a letter to the editor of the New York Times expressing his opposition to the SEC even considering companies’ disclosure of political spending. In his letter, the Commissioner vows “to fight to keep” the subject off the SEC’s agenda. As explained below, however, his letter fails to provide a substantive basis for his vehement opposition to transparency in corporate spending on politics.

…continue reading: Why Commissioner Gallagher is Mistaken about Disclosure of Political Spending

Commissioner Gallagher Offers Advice to Public Companies on Handling Proxy Advisors

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday September 7, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Yafit Cohn, Associate at Simpson Thacher & Bartlett LLP, and is based on a Simpson Thacher memorandum.

Commissioner Daniel M. Gallagher of the Securities and Exchange Commission (“SEC”) authored a working paper, published last month by the Washington Legal Foundation, regarding the outsized power and influence of proxy advisory firms. [1] In his paper, Commissioner Gallagher provides his view of the most important aspects of Staff Legal Bulletin No. 20 (“SLB 20”), in which the SEC staff recently “moved toward addressing some of the serious issues” resulting from the emergence of proxy advisory firms as a dominant player in American corporate governance. Notably, Gallagher also offers some critical advice to public companies engaging with proxy advisory firms.

…continue reading: Commissioner Gallagher Offers Advice to Public Companies on Handling Proxy Advisors

Outsized Power & Influence: The Role of Proxy Advisers

Posted by Daniel M. Gallagher, Commissioner, U.S. Securities and Exchange Commission, on Friday September 5, 2014 at 9:00 am
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Editor’s Note: Daniel M. Gallagher is a Commissioner at the U.S. Securities and Exchange Commission. The following post is based on a Washington Legal Foundation working paper by Mr. Gallagher; the complete publication, including footnotes, is available here.

Shareholder voting has undergone a remarkable transformation over the past few decades. Institutional ownership of shares was once negligible; now, it predominates. This is important because individual investors are generally rationally apathetic when it comes to shareholder voting: value potentially gained through voting is outweighed by the burden of determining how to vote and actually casting that vote. By contrast, institutional investors possess economies of scale, and so regularly vote billions of shares each year on thousands of ballot items for the thousands of companies in which they invest.

…continue reading: Outsized Power & Influence: The Role of Proxy Advisers

The Importance of the SEC Disclosure Regime

Posted by Daniel M. Gallagher, Commissioner, U.S. Securities and Exchange Commission, on Tuesday July 16, 2013 at 10:03 am
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Editor’s Note: Daniel M. Gallagher is a Commissioner at the U.S. Securities and Exchange Commission. The following post is based on Commissioner Gallagher’s remarks to the Society of Corporate Secretaries and Governance Professionals, which are available here. The views expressed in the post are those of Commissioner Gallagher and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

The SEC is first and foremost a disclosure agency. As stated on the Commission’s website: “[t]he laws and rules that govern the securities industry in the United States derive from a simple and straightforward concept: all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it.” [1] The federal corporate disclosure regime was established by Congress and serves as a cornerstone of the Commission’s tripartite mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. The underlying premise of the Commission’s disclosure regime is that if investors have the appropriate information, they can make rational and informed investment decisions. This is not to say that the disclosure regime was meant to guarantee that investors receive all information known to a public company, much less to eliminate all risk from investing in that company. Instead, the point has always been to ensure that they have access to material investment information. One of the underpinnings of this approach is the expectation that through this disclosure regime, companies and their management benefit from the oversight and interaction with the companies’ owners. President Franklin D. Roosevelt, in a message to Congress encouraging the enactment of the Securities Act, also noted that a mandatory disclosure regime “adds to the ancient rule of caveat emptor, the further doctrine, ‘let the seller also beware.’ It puts the burden of telling the whole truth on the seller. It should give impetus to honest dealing in securities and thereby bring back public confidence.” [2]

…continue reading: The Importance of the SEC Disclosure Regime

The Role of Governments and Proxy Advisory Firms in Corporate Governance

Posted by Daniel M. Gallagher, Commissioner, U.S. Securities and Exchange Commission, on Tuesday June 4, 2013 at 9:33 am
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Editor’s Note: Daniel M. Gallagher is a Commissioner at the U.S. Securities and Exchange Commission. The following post is based on Commissioner Gallagher’s remarks at the 12th European Corporate Governance & Company Law Conference in Dublin, Ireland. The full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Gallagher and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I am delighted to be able to participate in this conference, and especially proud as an Irish-American that it is being held in conjunction with Ireland’s Presidency of the Council of the European Union. This conference is particularly valuable because it provides a forum for executives, directors, investors, and policy makers to have a frank and productive dialogue on important corporate governance issues.

I would like to talk about the increasing role that governments – particularly, in the United States, the federal government – play in corporate governance as well as the increasingly prominent influence of proxy advisory firms on how companies are governed and on how shareholders vote. These changes have led to, among other things, new limitations and requirements being imposed on boards of directors and companies. And while the resulting costs to investors are easily apparent, the purported benefits are harder to discern. Although today I will for the most part discuss these issues as they apply to U.S. companies, I note that there is a related trend in Europe. As such, I hope that my comments may help inform your approach to regulating corporate governance as well.

…continue reading: The Role of Governments and Proxy Advisory Firms in Corporate Governance

Challenges Facing Compliance Officers

Posted by Daniel M. Gallagher, Commissioner, U.S. Securities and Exchange Commission, on Friday April 26, 2013 at 9:22 am
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Editor’s Note: Daniel M. Gallagher is a Commissioner at the U.S. Securities and Exchange Commission. The following post is based on Commissioner Gallagher’s remarks at the 2013 National Compliance Outreach Program for Broker-Dealers in Washington, DC, which are available here. The views expressed in the post are those of Commissioner Gallagher and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

First, let me thank you all for taking part in today’s program. Events like this are an invaluable tool for regulators and market participants alike — not least of all because we get to see who the early frontrunners are for the next America’s Funniest Compliance Officer contest. As I’m sure you all know, that’s a real contest that was last held in 2011, although, given that there were only a handful of contestants who turned out to compete, maybe it’s more likely that none of you knew. In case you missed it, the winner brought down the house with a joke about a priest, an Irishman, a Frenchman and Rule 15a-6. It was hysterical — not Reg. M hysterical, but still hysterical.

All joking aside, it is essential that we as regulators and you as compliance officials continue to engage in this type of open dialogue and coordination to promote a robust culture of compliance across the securities industry. Indeed, your work is key to enhancing the Commission’s ability to protect investors and ensure that the markets in which they put their capital to work remain fair and efficient, a result which is in all of our best interests.

…continue reading: Challenges Facing Compliance Officers

Emerging Challenges for Regulating Global Capital Markets

Posted by Daniel M. Gallagher, Commissioner, U.S. Securities and Exchange Commission, on Wednesday March 27, 2013 at 3:00 pm
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Editor’s Note: Daniel M. Gallagher is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Gallagher’s keynote address at the Symposium on Building the Financial System of the 21st Century: An Agenda for Europe and the United States. The full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Gallagher and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

We in America have been blessed with a wonderful combination of geography, natural resources, and free market principles. These and other factors have allowed our economy and our financial system, including our capital markets, to thrive in the post-World War II era.

Although the United States has suffered its share of financial crises, most recently the one that erupted in 2008, our free market economy and robust capital markets have conferred an enviable prosperity on our people over a period of many years, and few in America can remember a time when the United States did not have strong and competitive capital markets.

However, the very strength and resilience of our capital markets could lead us to fall into the trap of believing that we are somehow entitled to such prosperity. Indeed, such a sense of complacency may well have taken root in our government and may threaten to jeopardize that prosperity. The reality is that we live in a world in which we must be constantly vigilant — sometimes taking affirmative action, but more often choosing not to act — in order to preserve the vitality of our markets.

An important part of my job, and that of my colleagues on the Commission, is to ensure that America’s capital markets remain strong, vibrant, and competitive. That’s not just good for U.S. investors, but also for other investors around the world. And, conversely, the rise of robust capital markets in other parts of the world has the potential to benefit the United States and the American people as well.

…continue reading: Emerging Challenges for Regulating Global Capital Markets

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