Nick Grabar

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On May 31, 2018, Cleary Gottlieb submitted a comment letter to MSCI regarding its public consultation on the treatment of unequal voting structures in the MSCI Equity Indexes.  Cleary’s letter asserts that the approach in the proposal is highly problematic, arguing that the composition of broad equity market indexes is the wrong mechanism to address…

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

Last year Cleary Gottlieb published a blog post and an alert memorandum highlighting the SEC staff’s renewed focus on whether the use of non-GAAP financial measures (NGFMs) by domestic registrants complies with the requirements of Regulation G.  Recently, a number of plaintiff-stockholders of target companies in M&A transactions have brought purported class actions in federal court alleging that the “Forecasts” section in M&A disclosure documents violates Regulation G.  In support of these M&A disclosure related claims, plaintiffs have been citing our post and memo about these SEC staff initiatives, which relate to earnings releases and periodic reports, even though our prior publications did not address the application of Regulation G to M&A disclosure documents.
Continue Reading Setting the Record Straight: Regulation G Does Not Apply to Non-GAAP Financial Projections in M&A Transactions

The review of financial regulation under the new administration has its first victim.  On February 3, the Senate passed a resolution under the Congressional Review Act that disapproves the SEC’s rule on resource extraction payments. The House of Representatives had already passed the resolution, so the SEC’s rule is no longer in effect.

The target of the joint resolution is a rule requiring each SEC reporting company engaged in commercial development of oil, natural gas or minerals to file annual disclosures on payments it makes to governments.  The rule has already had a tortured history, which left it vulnerable to action under the Congressional Review Act (CRA).
Continue Reading Congress Rolls Back SEC Resource Extraction Payments Rule

On May 17, 2016, the Division of Corporation Finance of the Securities and Exchange Commission (the “SEC”) released new and updated Compliance and Disclosure Interpretations (“C&DIs”) on the use of non-GAAP financial measures (“NGFMs”).  The release of the C&DIs follows a series of recent speeches by SEC Chair Mary Jo White, Chief Accountant James Schnurr and other staff that expressed concerns over prevalent and liberal use of NGFMs.  The C&DIs signal a tightening of the SEC’s policy toward NGFMs and renewed SEC focus on their use.
Continue Reading SEC Releases New Guidance on Non-GAAP Financial Measures

The SEC stepped back into the proxy access arena on February 12, 2016, with a volley of 18 no-action letters on a single day that sharply reduced uncertainty about an important tactical point.

At issue was the circumstances under which a company with an existing proxy access bylaw can exclude a shareholder proxy access proposal based on “substantial implementation” under Rule 14a-8(i)(10).  Of the 18 companies, 14 adopted a bylaw after receiving a shareholder proxy access proposal for the 2016 proxy statement, and then sought to exclude the shareholder proposal.  That tactic was tried only once in 2015, by General Electric; there, the sole distinction between the adopted bylaw and the proposal was that the adopted bylaw imposed a limit (20) on the number of shareholders who may form a group, while the shareholder proposal simply referred to “a group of shareholders,” and the SEC granted no-action relief.
Continue Reading Proxy Access: The SEC Re-enters the Arena

Companies in the mining and oil and gas industries are increasingly subject to requirements to disclose the payments they make to governments.  In December 2015, the U.S. Securities and Exchange Commission published its proposed rule on the disclosure of “resource extraction payments,” implementing a directive of the Dodd-Frank Act of 2010.  The Commission, under pressure…

On Friday, December 18, ISS issued new guidance on how a board implements a majority-supported shareholder proposal for a proxy access bylaw.  The guidance is contained in its Frequently Asked Questions on U.S. Proxy Voting Policies and Procedures.

This guidance identifies situations in which ISS may recommend votes against a company’s individual directors, nominating/governance committee members, or the entire board, based on the specific provisions of a company’s enacted proxy access bylaw.
Continue Reading ISS Releases Guidance on Proxy Access

On December 11, 2015, the Securities and Exchange Commission issued a proposed rule on disclosure of resource extraction payments, over two years after a federal court vacated a prior version of the rule.  The new proposal is similar in many ways to the SEC’s original rule, adopted in August 2012 – in large part because the SEC is implementing a detailed congressional directive contained in Section 1504 of the 2010 Dodd-Frank Act.  However, in addition to addressing the deficiencies the court found in the original rulemaking, the SEC has made other notable changes to reflect global developments in transparency for resource extraction payments, particularly in the European Union and Canada.
Continue Reading Resource Extraction Payments – The SEC Tries Again