SEC Money Fund Rules Adopted

The SEC has adopted the much-debated new rules for institutional prime and municipal money funds.

Key elements include:

  1. Money funds will carry a net asset value (NAV) to emphasize that the value is not constant as was the prior marketing positioning.
  2. Money funds can impose liquidity fees and gates (limitations on redemptions) if necessary.
  3. The funds will carry enhanced diversification, disclosure and stress testing requirements.
  4. The IRS will release a new simplified treatment to enable investors to track gains and losses and avoid wash sales.

Detractors of these new rules suggest that sophisticated Wall Street investors will avoid the liquidity gates by quickly redeeming capital prompting a “rush for the door” behavior.

Click here to read the new SEC rules.

Click here to read the New York Times “Dealbook” article.

SEC’s Proxy Advisory Guidance Reinforces Current Rules

The SEC’s recently issued guidance regarding investment advisor’s responsibilities in proxy voting and the role of proxy advisory firms disappointed some companies and legal professionals for failing to reign in proxy advisory firms.

Proxy advisory firms have been steadily gaining influence among institutional investors which threatens companies’ longstanding advantage (see my posts – Proxy Advisors’s Success Draws Attention, Silent Majority Speaks and Herding Cats).

The SEC’s guidance reiterated the current rules, not changing them.

The trend, raising proxy advisory firms’ influence in corporate proxy issues, therefore, is likely to continue.

Click on the links below for the SEC Guidance and an article in the online magazine “FierceCFO”.

Click here to go to the SEC Guidance article.

Click here to go to the online magazine “FierceCFO” article.

The New Neutral

The New Neutral is the name for our near-term economic future according to William Gross, founder and Chief Investment Officer of PIMCO, one of the largest of investment funds.

He and his investment team pride themselves on discerning the big trends and avoiding herd mentality when plotting the course of PIMCO fund investments.

After prematurely calling the end of the era of interest rate declines and predicting a more rapid rebound in interest rates, Gross is now predicting a new trend, “The New Neutral”.  In this environment, he suggests the US economy is in for a period of market stability with moderate to low returns (broadly, bonds returning 3-4% and stocks 4-5%) with relatively lower volatility.

Of course, he points out that the US economy is subject to impacts from our major trading partners and specifically calls out the risk of Japan’s current economic policy.

While his reputation as an economic wizard has been tarnished, his predictions, in my view, still merit consideration.

Excerpt

In 2014, the tide may be turning again as demographics, fear of another Lehman, or just income-starved insurance companies and similarly structured liability-influenced institutions, reach for anything they can get. The era of income may be, at the margin, replacing the era of capital gains, despite artificially low current yields.

Click here to read the PIMCO article.

I admit, my posts predicting a slow growth environment were also premature. Click here.

US Supreme Court Maintains Securities Fraud Status Quo

The US Supreme Court has essentially maintained the status quo in corporate securities fraud litigation.

The Court had taken up for consideration a lower court case which overturned the 25 year precedent, set in Basic v Levinson that aids plaintiff’s counsel in obtaining class certification. (Click here for background on the issue and the case.)

Statistics show that once a class is certified, a high percentage of corporate defendants settle rather than go to trial.

Hopes were high among corporate executives and their legal advisers (potential “defendants”) that the Court would even the playing field by raising the bar which plaintiff’s counsel must meet to obtain class certification.

The defendants’ small victory is that the Court made uniform among the lower courts the procedure that defendants can challenge, at the class certification stage, a key assumption that fraudulent information provided by the defendants impacted the defendant’s stock price.

Click here for ReedSmith’s summary on this case.

Proxy Season Recap 2014

There are valuable lessons to be learned from the 2014 proxy season.

Georgeson, the proxy solicitor, and Latham & Watkins, the law firm, have produced a valuable webinar to efficiently inform us of “takeaways” and trends from the proxy season.

LogoGeoLatham

Click here to go to the webcast

Topics

• Executive Compensation Developments, including updates on this year’s Say on Pay votes, proxy injunction and other executive compensation lawsuits, ISS and Glass Lewis practices and SEC rules

• Evolving Trends in Shareholder-Investor Engagement, including newly recommended protocols and differing investor approaches for making a difference over the long term

• Issues of Increasing Concern to Investors, including director qualifications, tenure and board structure; environment and social issues; and the hottest shareholder proposals

• Activist Investors, including preparing for and responding to their latest playbooks

Speakers
Jim Barrall, Partner, Latham & Watkins LLP
Rhonda Brauer, Senior Managing Director – Corporate Governance, Georgeson
Steven Stokdyk, Partner, Latham & Watkins LLP

Sponsors

Latham & Watkins LLP is a leading global law firm dedicated to working with clients to help them achieve their business goals and overcome legal challenges anywhere in the world. The firm has earned considerable market recognition based on a record of landmark matters and a unified culture of innovation and collaboration. From a global platform of offices covering the world’s major financial, business and regulatory centers, the firm’s lawyers help clients succeed. For more information, visit www.lw.com.

Georgeson is the world’s leading provider of strategic proxy and corporate governance advisory services to corporations and shareholder groups working to influence corporate strategy. For over half a century, Georgeson has specialized in complex solicitations such as hostile and friendly acquisitions, proxy contests and takeover defenses. The firm also provides issuers with expertise in corporate events solutions such as post-merger unexchanged holder programs and information agent services. For more information, visit www.georgeson.com.

 

Questions
michele.bravo@lw.com |
+1.213.892.3054

SEC Trends for Public Companies

This webinar will include practical tips to help your company avoid SEC trouble.

Latham & Watkins, the law firm, has produced valuable webinars which are well worth the time (which is not universal with webinars, in my opinion).

LathamLogo

Please join Latham & Watkins for a complimentary webcast discussing SEC trends for public companies in the areas of accounting and financial fraud.

Click here to go to the webinar.

Topics

• The Re-Tooled SEC – A smarter SEC takes on big data analytics

• The New Era of Creative and Aggressive Enforcement – The “broken windows” approach to enforcement and the lower bar for SEC actions

• Hitting and Avoiding the SEC’s Radar Screen – Practical tips for avoiding compliance issues and enforcement action

Speaker
John Sikora, Partner, Latham & Watkins LLP (Chicago), former SEC Assistant Director in Enforcement and the Asset Management Unit

Sponsor
Latham & Watkins LLP is a leading global law firm dedicated to working with clients to help them achieve their business goals and overcome legal challenges anywhere in the world. The firm has earned considerable market recognition based on a record of landmark matters and a unified culture of innovation and collaboration. From a global platform of offices covering the world’s major financial, business and regulatory centers, the firm’s lawyers help clients succeed. For more information, visit www.lw.com.

REGISTER HERE

A confirmation message will be sent to your email address with instructions for logging on to the webcast.
Questions
michele.bravo@lw.com
+1.213.891.3054

M&A Deal Term Study by Practical Law

CvrImgPractical Law, the Thomson Reuters online resource for corporate legal information, produced its yearly study of M&A deal terms.

Practical Law also produced a valuable webinar describing a portion of its survey results.

This material is most useful for M&A professionals but may also be helpful to corporate executives active in M&A.

Click here to go to the webinar at Practical Law.

Click here to go to Practical Law to review their service offerings.

 

D&O Coverage for Subpeona Response Costs

I found this article both interesting and an easy read of a important topic.  It’s something that corporate executives and board members should know.

In summary, insurers may challenge whether the cost of responding to a subpoena is a covered cost under a company’s D&O policy.  This article (click here) by Benjamin Tievsky on Law360 describes the risk and how to reduce it by careful drafting of your policy.

Activist’s Big Ally

BlackrockLogoActivists have an ally in Blackrock Inc., which reportedly manages $4 trillion in assets.

An excerpt from Blackrock’s recent Annual Report,

Better Governance Means Better Performance

Our fiduciary duty to our clients leads us to use the ownership position we hold in companies around the world to protect their interests by advocating for good corporate
governance. Through direct engagement with management teams and effective use of our proxy voting power, we work to ensure the strong leadership and prudent management that we believe ensures sustained performance and better returns on our clients’ investments.”

Blackrock has been using its position as a large corporate shareholder to influence change.  As reported in the New York Times “Dealbook”, Chairman and CEO, Laurence Fink, sent a letter to the heads of the S&P 500 companies recommending that the companies focus on actions to promote sustainable growth vs short-term fixes.

Click here to read the NYTimes “Dealbook” article which includes a link to the Blackrock Annual Report.

Court Finds Conflicts in Rural/Metro Sale

WarningSignThe Delaware Court of Chancery has found the Board of Directors of Rural/Metro Corporation breached its fiduciary duties to its shareholders in its 2011 sale.  The Court also found the company’s lead adviser liable for aiding and abetting the breach.

The Rural Board was subject to undisclosed conflicts and failed to probe the company’s lead adviser for additional potential conflicts.

This case and prior high profile cases of conflict, such as the Del Monte and El Paso cases, should alert boards to be vigilant.

Click here to go to an article by White & Case, the law firm on JDSupra, the online legal magazine or click on the download button below.