Posts Tagged ‘Latham’

Takeaways from the Past Year of SEC Private Equity Enforcement

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday December 17, 2014 at 9:02 am
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Editor’s Note: The following post comes to us from John J. Sikora, partner in the Litigation Department at Latham & Watkins LLP, and is based on a Latham & Watkins publication authored by Mr. Sikora and Nabil Sabki.

After a year of “first ever” actions targeting private equity, fund managers should be vigilant, even about seemingly small issues.

In reviewing the results of SEC Enforcement’s fiscal year that ended on September 30, the agency congratulated itself on its comprehensive approach to enforcement and its “first-ever” cases. Private equity fund managers should consider a number of important takeaways.

The SEC Continues to Pursue a Broken Windows/Zero Tolerance Approach

Although the Enforcement Division announced a record number of enforcement actions, and the largest aggregate financial recovery, 2014, unlike in years past, did not include a headline-grabbing case such as Enron, Worldcom or Madoff. More recently, the agency has chosen to emphasize its pursuit of smaller cases as a way of improving compliance in the industry. SEC Chair Mary Jo White and Enforcement Director Andrew Ceresney have each touted the agency’s “broken windows” approach to enforcement. A “broken windows” strategy means that the SEC will pursue even the smallest violations on the theory that publicly pursuing smaller matters will reduce the prevalence of larger violations. Ceresney has described “broken windows” as a zero tolerance policy. This past year illustrated the agency’s commitment to applying enforcement sanctions to what some might consider “foot fault” incidents. For example, in September 2014, the SEC announced a package of three dozen cases involving a failure to promptly file Section 13D and Section 13G reports, as well as Forms 3 and 4. Many of the filers charged were just days or weeks late in disclosing their positions. In announcing the cases, Ceresney emphasized that inadvertence was not a defense to late filings.

…continue reading: Takeaways from the Past Year of SEC Private Equity Enforcement

Hushmail: Are Activist Hedge Funds Breaking Bad?

Editor’s Note: Mark D. Gerstein is a partner in the Chicago office of Latham & Watkins LLP and Global Chair of that firm’s Mergers and Acquisitions Group. This post is based on a Latham & Watkins M&A Commentary by Mr. Gerstein, Bradley C. Faris, Timothy P. FitzSimons, and John M. Newell. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Increasingly, some activist hedge funds are looking to sell their stock positions back to target companies. How should the board respond to hushmail?

The Rise and Fall of Greenmail

During the heyday of takeovers in the 1980s, so-called corporate raiders would often amass a sizable stock position in a target company, and then threaten or commence a hostile offer for the company. In some cases, the bidder would then approach the target and offer to drop the hostile bid if the target bought back its stock at a significant premium to current market prices. Since target companies had fewer available takeover defenses at that time to fend off opportunistic hostile offers and other abusive takeover transactions, the company might agree to repurchase the shares in order to entice the bidder to withdraw. This practice was referred to as “greenmail,” and some corporate raiders found greenmail easier, and more profitable, than the hostile takeover itself.

…continue reading: Hushmail: Are Activist Hedge Funds Breaking Bad?

Read Before Whistleblowing: What Every Lawyer Needs to Know

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday November 14, 2013 at 9:29 am
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Editor’s Note: The following post comes to us from Robert J. Malionek, partner and member of the Litigation Department at Latham & Watkins LLP, and is based on a Latham Client Alert by Mr. Malionek and Keith A. Cantrelle.

In wake of ethics opinion, lawyers in New York—if not elsewhere—must think hard before considering whether to participate in the Dodd-Frank Whistleblower Award Program.

A recent SEC whistleblower award of $14 million may offer a persuasive incentive for lawyers to blow the whistle on a client’s perceived wrongdoing. However, a subsequent ethics opinion from the Committee on Professional Ethics of the New York County Lawyers’ Association will give lawyers pause. As the SEC whistleblower award program gains momentum, New York lawyers may be well-advised to wait for the courts to determine whether the SEC’s rules can pre-empt state rules of professional conduct.

…continue reading: Read Before Whistleblowing: What Every Lawyer Needs to Know

Can Attorneys Be Award-Seeking SEC Whistleblowers?

Editor’s Note: Lawrence A. West is a partner focusing on securities-related enforcement maters at Latham & Watkins LLP. This post is based on a Latham & Watkins primer by Mr. West, Abigail E. Raish and Eric R. Swibel; the full publication, including endnotes and chart of Relevant Rules of the Fifty States and the District of Columbia, is available here.

This is a primer on attorneys as award-seeking SEC whistleblowers. It digests the relevant law and explains how it applies in real situations. That law includes the SEC attorney conduct and whistleblower award rules and each state’s ethics rules applicable to attorney disclosure. Fully assessing a particular situation will often require referring to the relevant rules for each state that might come into play for a particular lawyer in a particular situation. We therefore include information about choice of law and a chart summarizing the relevant rules in each of 51 US jurisdictions.

Our hope is that with this primer close at hand, attorneys and companies will not only be equipped to spot issues and apply the law, but will also understand how limited the circumstances are that will allow a lawyer to disclose confidential information to the SEC without client consent and seek a monetary award. This is true even though the SEC has expanded the circumstances allowing disclosure beyond those recognized in many states.

We will end with steps companies can take to deal with risks related to attorneys who are actual or would-be whistleblowers.

…continue reading: Can Attorneys Be Award-Seeking SEC Whistleblowers?

Dealing with the SEC’s Focus on Protecting Whistleblowers

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday March 11, 2013 at 8:20 am
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Editor’s Note: The following post comes to us from Lawrence A. West, partner focusing on securities-related enforcement maters at Latham & Watkins LLP, and is based on a Latham & Watkins client alert by Mr. West, William R. Baker, and Eric R. Swibel. The full publication, including footnotes, is available here.

As a public company executive officer or general counsel, how should you deal with a disgruntled employee who is or could be an award-seeking SEC whistleblower?

The short answer is, of course, very carefully. For the longer answer, read on.

The SEC’s Cultivation of Whistleblowers

Corporate managers and the SEC tend to have very different views of employees complaining of possible violations. Corporations frequently have painful experiences with troubled employees who see violations that don’t exist. Although the SEC has had similar internal experiences, when it comes to employees of public companies and financial institutions, the SEC is, in the first instance, inclined to believe the employee and not the company.

The Commission and its enforcement staff are unabashedly enthusiastic about rewarding and protecting individual whistleblowers. Congress did not impose the whistleblower award provisions in the Dodd-Frank Act on the Commission. The Commission asked for those provisions, because it believes that many companies are not adequately policed by themselves or their auditors or attorneys, and will not willingly self-report possible violations of the federal securities laws.

…continue reading: Dealing with the SEC’s Focus on Protecting Whistleblowers

Section 13(r) Disclosure Guidance for Public Companies

Posted by Brian Breheny, Skadden, Arps, Slate, Meagher & Flom LLP, on Thursday February 21, 2013 at 9:10 am
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Editor’s Note: Brian V. Breheny is a partner at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on an Eight Law Firm Consensus Report by Gibson, Dunn & Crutcher LLP; Hogan Lovells US LLP; Latham & Watkins LLP; Mayer Brown LLP; Morrison & Foerster LLP; O’Melveny & Myers LLP; Skadden, Arps, Slate, Meagher & Flom LLP; and Weil, Gotshal & Manges LLP.

Starting in February 2013, the Iran Threat Reduction and Syria Human Rights Act (the “Threat Reduction Act”) will impose new reporting requirements on U.S. domestic and foreign companies that are required to file reports with the U.S. Securities and Exchange Commission (the “SEC”) pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). In particular, Section 219 of the Threat Reduction Act added new Section 13(r) to the Exchange Act. Under Section 13(r), Annual Reports on Form 10-K, Annual Reports on Form 20-F and Quarterly Reports on Form 10-Q filed pursuant to Exchange Act Section 13(a) must include disclosure of contracts, transactions and “dealings” with Iranian and other entities. Section 13(r) is effective beginning with reports with a due date after February 6, 2013.

The Staff of the Division of Corporation Finance of the SEC (the “SEC Staff”) has provided helpful guidance on implementation of these new requirements in Exchange Act Compliance and Disclosure Interpretations Questions 147.01-147.07 (available at http://www.sec.gov/divisions/corpfin/guidance/exchangeactsections-interps.htm). However, many questions remain, and the following questions and answers represent the consensus views of the undersigned law firms.

None of the firms subscribing to this report intends thereby to give legal advice to any person. The undersigned firms recommend that counsel be consulted with respect to matters addressed in this report. The answers below may need to be modified based upon unique facts and circumstances.

…continue reading: Section 13(r) Disclosure Guidance for Public Companies

Building Relationships with Your Shareholders Through Effective Communication

Posted by James D.C. Barrall, Latham & Watkins LLP, on Tuesday November 13, 2012 at 10:06 am
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Editor’s Note: James D. C. Barrall is a partner at Latham & Watkins LLP and co-chair of the Benefits and Compensation Practice. This post is based on a Latham & Watkins Corporate Governance Commentary.

Introduction

In recent years, shareholders of US public companies have increasingly invited dialogue with management, sometimes even demanding personal interaction with directors. This trend is part of a new paradigm in the corporate governance realm. Historically, despite some management engagement with shareholders, companies have seen little in the way of direct dialogue between shareholders and members of the board of directors. For most public companies, governance strategies have seldom included systematic engagement with shareholders beyond quarterly earnings calls, investor conferences and traditional investor relations efforts.

That was then, this is now. More than ever before, institutional shareholders are aggressively exerting their influence in the name of holding companies and management accountable. Emboldened (or pressured) by recent events — high-profile corporate governance and executive compensation controversies, the financial collapse and public criticism of pay disparities — these shareholders increasingly seek to influence board-level decisionmaking, often deploying incendiary buzzwords such as “corporate mismanagement,” “excessive risk taking,” “pay-for-failure” and the like. All told, the new paradigm represents a significant shift for most public companies.

In this Commentary, we discuss:

  • The current state of corporate governance and signposts along the way to the existing state of affairs
  • How and when public companies can benefit from shareholder engagement
  • The components of an effective shareholder engagement program

…continue reading: Building Relationships with Your Shareholders Through Effective Communication

Giving Good Guidance: What Every Public Company Should Know

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday November 8, 2012 at 10:04 am
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Editor’s Note: The following post comes to us from Alexander F. Cohen, partner and co-chair of the national office of Latham & Watkins LLP. This post is based on a Latham & Watkins client alert by Mr. Cohen, Nathan AjiashviliJeff G. HammelSteven B. StokdykKirk A. Davenport II, and Joel H. Trotter; the full publication, including footnotes and annex, is available here.

Every public company must decide whether and to what extent to give the market guidance about future operating results. Questions from the buy side will begin at the IPO road show and will likely continue on every quarterly earnings call and at investor meetings and conferences between earnings calls. The decision whether to give guidance and how much guidance to give is an intensely individual one. There is no one-size-fits-all approach in this area. The only universal truths are (1) a public company should have a policy on guidance and (2) the policy should be the subject of careful thought.

The purpose of this post is to provide an updated discussion of the issues that CEOs, CFOs and audit committee members should consider before formulating a guidance policy.

…continue reading: Giving Good Guidance: What Every Public Company Should Know

Pan-European Short Selling Regulation

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday October 9, 2012 at 9:08 am
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Editor’s Note: The following post comes to us from Stephen P. Wink, partner in the Corporate Department at Latham & Watkins LLP. This post is based on a Latham & Watkins client alert by Mr. Wink, Vladimir Maly and Gitanjali P. Faleiro; the full document, including complete footnotes, is available here.

I. Introduction and Overview

As previously described in our memorandum on the pan-European short selling regulation [1], the European Commission (the Commission) adopted a proposal on September 15, 2010 to harmonize the regulation of short sales and credit default swaps across the European Union. [2] On March 14, 2012, the European Parliament and the Council of the European Union (the Council) each voted to adopt the proposed regulation, after including a number of significant amendments (the Regulation). [3]

The Regulation has been in force since March 25, 2012 (a day after it was published in the Official Journal) and is due to become ‘directly’ effective in the EU Member States (each a Member State) on November 1, 2012. [4] As such, the Regulation will become law in each Member State in its own right without the need for domestic implementing measures. On September 13, 2012 the European Securities and Markets Authority (ESMA) published its first edition of Q&A on the ‘Implementation of the Regulation on short selling and certain aspects of credit default swaps,’ in response to frequently asked questions posed by market participants, market regulators and the general public. [5] On September 17, 2012, ESMA published its consultation paper on the Regulation’s exemption for market making activities and primary market operations.

The Regulation brings to an end the current fragmented approach to shortsale restrictions across Member States and also establishes a ‘preventive regulatory framework’ to be used in ‘exceptional circumstances’ for ‘temporary’ periods.

…continue reading: Pan-European Short Selling Regulation

Defining Pay in Pay for Performance

Posted by Matteo Tonello, The Conference Board, on Friday October 5, 2012 at 8:58 am
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Editor’s Note: Matteo Tonello is managing director of corporate leadership at the Conference Board. This post is based on an issue of the Conference Board’s Director Notes series by James D.C. Barrall, Alice M. Chung and Julie D. Crisp, attorneys at Latham & Watkins LLP; the full issue, including footnotes, is available for download here.

Why 2012 Was the Year of Pay for Performance

Whether the pay of a company’s CEO and other executive officers is aligned with the company’s performance has been the single most important and controversial executive pay issue for U.S. public companies since the advent of mandatory say-on-pay votes under the Dodd-Frank Act, which applied to most U.S. public companies in 2011; smaller reporting companies will face these votes and issues in 2013. As we wrote in our Director Notes “Proxy Season 2012: The Year of Pay for Performance,” 2012 was indeed the year of “pay for performance.” This has been proven by the over 2,000 say-on-pay vote results reported through September 5, 2012.

The stage for the 2012 pay-for-performance debate was set in 2011, when Institutional Shareholder Services Proxy Advisory Services (ISS), which is widely regarded as the most influential U.S. proxy adviser, applied a crude two-step test to assess pay for performance in making its say-on-pay voting recommendations.

Generally, under its 2011 test, ISS concluded that a pay-for-performance “disconnect” existed if:

…continue reading: Defining Pay in Pay for Performance

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