On November 15, 2017, the Securities and Exchange Commission Division of Enforcement released its annual report detailing its priorities for the coming year and evaluating enforcement actions that occurred during Fiscal Year 2017.   The Report captures the SEC during a period of transition and provides insight into changes in the SEC’s approach to enforcement actions and a glimpse into its priorities for the coming year.  The following summarizes key shifts from FY 2016, outlines the Enforcement Division’s current priorities, and, in view of its stated focus on the conduct of investment professionals and protection of retail investors, provides guidance to the investment management industry as it gears up for the coming year.

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Just as companies are starting to gear up for the 2018 proxy season, on November 1, 2017, the staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) released new guidance on shareholder proposals that seems to indicate the Staff will be taking a more company-friendly approach in its review of no-action letter requests.

Specifically, Staff Legal Bulletin No. 14I (“SLB 14I”) clarifies the scope and application of two grounds for excluding a shareholder proposal from a company’s proxy statement – the “ordinary business” exception (Rule 14a-8(i)(7)) and the “economic relevance” exception (Rule 14a-8(i)(5)) – and provides guidance on proposals submitted on behalf of shareholders (“proposals by proxy”) and the use of graphs and images in proposals. The following is a summary of the guidance.

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On November 2, 2017, the much anticipated Tax Cuts & Jobs Act was introduced in the U.S. Congress. The bill has been amended twice, on November 3 and November 6.

This memorandum sets forth a few key observations about the proposed bill, as amended, that may be relevant to M&A transactions. It must be emphasized, however, that the bill is likely to go through many additional changes before it becomes law, if ever.

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The recently proposed Tax Cuts and Jobs Act (the “Act”) includes executive compensation tax reforms that, if enacted, would have significant implications for the way in which companies structure their compensation programs.

The Act was introduced in the U.S. House of Representatives on November 2, 2017, and may undergo significant revisions as part of the legislative process in the House, and the U.S. Senate is expected to propose tax reform legislation shortly that may not be identical to the House’s bill, even though an identical bill could facilitate enactment without the need for a joint committee to reconcile differences.

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Last month, we published a blog post explaining the basis for our view that Regulation G does not require a GAAP reconciliation when M&A disclosure documents present the management projections used by financial advisors to opine on the financial fairness of merger consideration.  We argued that these projections are not the type of information that Regulation G was adopted to police and that, in view of the bases in Delaware case law and Regulation M-A for including disclosure of these projections, they should be considered exempt from the reconciliation requirements of Regulation G and Item 10(e) of Regulation S-K.  Accordingly, we urged the SEC staff to provide guidance confirming our view.   Continue Reading New SEC Interpretation Helps Limit Reg G as an Enabler of Merger Litigation

The New York City Commission on Human Rights (the “CCHR”) recently released guidance on the New York City salary history law (the “Law”) in the form of frequently asked questions. The guidance clarifies several aspects of the Law, including the application of the Law in the context of corporate acquisitions and the ability of employers to inquire about forfeited deferred compensation and unvested equity.

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As the implementation of China’s first comprehensive cybersecurity law (the “CCL”) progresses, concern is mounting in the international business community regarding the law’s expansive scope, prescriptive requirements and lack of clarity on a range of critical issues. Vocalizing such concern, on September 25, 2017, the United States government asked China to halt its implementation of the CCL and highlighted potential issues with the CCL to members of the World Trade Organization. Since the CCL’s passage, several regulations have been released by the principal agency responsible for its implementation that were intended to implement the provisions of the CCL, but in some cases appear to have further expanded its scope while leaving some critical questions unanswered. In the face of such uncertainties, foreign companies operating in China are advised to familiarize themselves with the requirements of the CCL and its implementation rules and adopt measures to enhance their preparedness for the full implementation of the CCL.

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For additional coverage of topics related to cybersecurity and privacy, we invite you to subscribe to our Cybersecurity and Privacy Watch blog, here.

On September 12, 2017, Governance Watch and Cleary Gottlieb Steen & Hamilton LLP hosted a panel discussion on “Recent Whistleblower Issues.”  Participants in the panel discussion included Matthew Solomon, a partner at Cleary Gottlieb and former Chief Litigation Counsel at the SEC’s Division of Enforcement; Emily Pasquinelli, Deputy Chief of the SEC’s Office of the Whistleblower; David Huntley, Chief Compliance Officer of AT&T; and Steven Durham, a Partner at Labaton Sucharow LLP who specializes in plaintiffs-side whistleblower representations.  The panelists discussed issues critical to U.S. public companies and foreign private issuers relating to federal whistleblower programs.  Below are the key takeaways from the discussion. Continue Reading Recent Whistleblower Issues: Key Takeaways from the Conference Board’s Governance Watch Webcast

On September 21, 2017, the Securities and Exchange Commission (“SEC”) issued helpful guidance to assist companies in complying with the CEO/median employee pay ratio disclosure requirement (the “Rule”) under Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K. The guidance also addresses the issue of SEC enforcement action in respect of pay ratio disclosure.

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The German M&A market has fared well over the summer. The Bain/Cinven consortium successfully closed its takeover bid for Stada at the second attempt. Linde shareholders can now accept the exchange offer to merge with Praxair and the Hong Kong-based CK Group wins out in the bidding for smart-metering specialist ista. Toward the end of the third quarter, TyssenKrupp and Tata Steel announce their intention to enter into a steel joint venture. Fortum is working on the takeover of Uniper. Continue reading.