Capital Markets Compass – December 2021: Other Recent Developments

• On December 15, the Securities and Exchange Commission (SEC) proposed amendments to its disclosure rules regarding an issuer's repurchases of its equity securities, often referred to as buybacks. The proposed rules would require an issuer (including a foreign private issuer) to publicly furnish via EDGAR a new Form SR before the end of the first business day following the day the issuer executes a share repurchase. Form SR would require disclosure identifying the class of securities purchased, the total amount purchased, the average price paid, and the aggregate total amount purchased on the open market in reliance on certain safe harbors under the Securities and Exchange Act of 1934, as amended (the Exchange Act). The proposed rules also would require issuers to provide additional periodic disclosure regarding buybacks, including the issuer's objective and rationale for the buyback, the process used to determine the amount of the buyback, any policies and procedures relating to officer or director purchases and sales of securities during a repurchase program, and whether any repurchases are conducted pursuant to a 10b5-1 plan.
• On December 14, the SEC Division of Corporation Finance (the Division) announced that it would be discontinuing its 2018-implemented policy under which some Rule 14a-8 shareholder proposal no-action requests receive an oral response only. The staff noted, "Beginning with the publication of this announcement, we will return to our prior practice and the staff will once again respond to each shareholder proposal no-action request with a written letter, similar to those issued in prior years. Our response letters will be posted publicly on the Division's website in a timely manner."
• On December 2, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the Holding Foreign Companies Accountable Act. The rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the Public Company Accounting Oversight Board is unable to inspect or investigate (each, a Commission-Identified Issuer). The final amendments require each Commission-Identified Issuer to submit documentation to the SEC establishing that, if true, it is not owned or controlled by a governmental entity in the public accounting firm's foreign jurisdiction. The amendments also require a Commission-Identified Issuer that is a "foreign issuer," as defined in Exchange Act Rule 3b-4, to provide certain additional disclosures in its annual report for itself and any of its consolidated foreign operating entities. If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December 31, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal year ended December 31, 2022.
• On November 17, the SEC adopted final rules requiring parties in a contested election to use universal proxy cards that include all director nominees presented for election at a shareholder meeting. The rule changes will give shareholders the ability to vote by proxy for their preferred combination of board candidates, similar to voting in person. The final rules will require dissident shareholders and registrants to provide shareholders with a proxy card that includes the names of all registrant and dissident nominees, and will apply to all non-exempt solicitations for contested elections other than those involving registered investment companies and business development companies (Regulated Funds). The SEC ultimately decided to exclude Regulated Funds from the final rules after considering various comments, many of which focused on the unique structure of Regulated Funds and the differences between Regulated Funds and operating companies. Compliance will be required for any shareholder meeting involving a contested director election held after August 31, 2022.
• Also on November 17, the SEC proposed amendments to its proxy voting advice rules in response to investor concerns that the current rules may inhibit the timeliness and independence of proxy voting advice. The proposed amendments would rescind the following two conditions to the availability of two exemptions from the proxy rules' informational and filing requirements available for proxy advisory firms, adopted in July 2020: (1) the firms must make their advice available to the companies that are the subject of their advice at or before the time that they make the advice available to their clients; and (2) the firms must provide their clients with a mechanism by which they can reasonably be expected to become aware of any written statements regarding the firms' proxy voting advice by registrants that are the subject of the advice. SEC Chairman Gary Gensler noted, "Proxy advice voting businesses play an important role in the proxy process. Their clients deserve to receive independent proxy voting advice in a timely manner."

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