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Ethics Webinar: Conflicts of Interest and Corporate Practice
Proxy Access Proposals
SEC Enforcement Actions Reach New High
SEC Modernizes Intrastate and Small Offerings
Enhance Your Practice
Law Firm Memos
The Business and Corporations Law Section eNews
is published by the Business and Corporations Law Section

Theresa Leets
Department of Business Oversight

Peter M. Menard

Business and Corporations Executive Committee Officers:

Barry Burten, Chair
James Coupe, Vice Chair/Treasurer
Candice Choh, Chair Marketing and Membership
Theresa Leets,  Co-Chair Programming
Peter M. Menard, Co-Chair Programming
Katherine Blair,  Secretary

Kevin L. Finch
Arash Khalili

Corporate Law Departments Section Representative
Lois M. Jacobs

Barristers Liaison
Jason R. Parnell

Department of Business Oversight Liaison
Theresa Leets


Ethics Webinar
Conflicts of Interest and Corporate Practice

Calendar now the first of the free 2017 “Hot Topics” webinar series to be held on January 12, 2017. Earn that hard to obtain ethics credit.

Sometimes spotting a conflict of interest is easy. But many times it is not. The Rules of Professional Conduct can be complicated, confusing, even counterintuitive. This webinar will provide a framework for thinking about conflicts, examine real-world issues faced by corporate lawyers, and help you to take much of the guesswork out of complying with the rules.

The program will start at 12:00 noon on Tuesday, January 12, 2017, and run for an hour with corresponding MCLE credit.

Speaker: John Throckmorton, Arnold & Porter

Proxy Access Proposals

In July 2016, the staff of the SEC declined a no-action request by H&R Block to exclude a shareholder proposal to amend selected terms of the company's existing proxy access bylaw. The company had sought to exclude the proposal in reliance upon Rule 14a-8(i)(10) on the grounds that proxy access had been "substantially implemented."

Under a line of no-action letters, the SEC generally has permitted companies that have not yet adopted proxy access to exclude a shareholder proposal seeking proxy access on the grounds that it has been "substantially implemented" where the company adopts a proxy access bylaw with generally acceptable thresholds for the key provisions, even if the company's bylaws contained additional or differing terms for secondary provisions.

In 2015, H&R Block adopted a proxy access bylaw in response to a shareholder proposal from James McRitchie. In 2016, Mr. McRitchie sought to change selected terms of the newly adopted proxy access bylaw, including: increasing the number of shareholders that could form a nominating group (unlimited versus a 20 shareholder limit in the existing bylaw); eliminating the limitation on renominating a person based on the number of votes received; counting loaned securities toward the threshold ownership percentage; and increasing the cap on board seats (the right to nominate the greater of two directors or 25% of the board versus up to 20% in the existing bylaw). In declining no-action relief, the SEC distinguished between a proposal seeking to implement proxy access and one seeking to change specific terms of an existing proxy access bylaw.

For a discussion of this and subsequent no-action requests to exclude shareholder proposals to amend existing proxy access bylaws, see "Law Firm Memos" below.

SEC Enforcement Actions Reach New High in FY 2016

The SEC has announced that it filed 868 enforcement actions in its fiscal year ended September 30, 2016, a new single year high.

The agency also obtained judgments and orders in 2016 totaling more than $4 billion in disgorgement and penalties, which is relatively the same as for fiscal years 2014 and 2015. The 2016 enforcement actions included the most ever cases involving investment advisers or investment companies and also reached new highs for Foreign Corrupt Practices Act-related enforcement actions and money distributed to whistleblowers in a single year. "By every measure the enforcement program continues to be a resounding success holding executives, companies and market participants accountable for their illegal actions," said SEC Chair Mary Jo White.

SEC Adopts Final Rules to Facilitate Intrastate and Regional Securities Offerings

The SEC has adopted final rules that modernize how companies raise money through intrastate and small offerings.

The final rules amend existing Securities Act Rule 147 to modernize the safe harbor under Section 3(a)(11) of the Securities Act. The amendment allows issuers to continue to use state law exemptions that are conditioned upon compliance with both Section 3(a)(11) and Rule 147. The final rules also establish a new intrastate offering exemption, Securities Act Rule 147A. Rule 147A is substantially the same as existing Rule 147, but permits offers to be made to out-of-state residents and is available to companies that are incorporated or organized out-of-state if their principal business operations are located in that state.

To facilitate capital formation through regional offerings, the final rules amend Rule 504 of Regulation D under the Securities Act to increase the aggregate amount of securities that may be offered and sold under that exemption in any 12 month period from $1 million to $5 million. The rules also apply the bad actor disqualifications to Rule 504 offerings to provide additional investor protection, consistent with other exemptions under Regulation D. In light of the increase in the size of the offering permitted by Rule 504, the final rules repeal Rule 505 of Regulation D.

Enhance Your Practice
Enhance Your Practice: Join the Executive Committee of the Business and Corporations Section

The Executive Committee of the Business and Corporations Section is seeking new members. Membership on the Executive Committee is a terrific forum to network with your fellow corporate law practitioners across the city. Membership on the committee affords unique opportunities to participate in the creation of law in your practice area, to get to know and be known by other practitioners, to work with the recognized leaders in your field, and to stay on the cutting edge of developments and practice techniques. For further information on the Section click here.

If you are interested, please contact

Law Firm Memos

The Supreme Court Reaffirms Dirks in Salman
Dorsey & Whitney LLP

In Salman v. United States, Supreme Court Holds that the Government Need Not Prove that an Insider Received a Pecuniary Benefit in Exchange for Tipping Inside Information
King & Spalding

Recent Developments in Proxy Access
Dorsey & Whitney LLP

Proxy Access Update—Momentum Continues to Build in 2016
Sidley Austin LLP

SEC Staff Permits Exclusion of Proxy Access "Revision" Proposal Due to "Substantial Implementation"
Simpson Thacher & Bartlett LLP

SEC Proposes Universal Proxy Cards for Contested Director Elections
Morrison & Foerster LLP

SEC Adopts Final Rules Regarding Intrastate and Regional Offerings
Morrison & Foerster LLP

SEC Amends Securities Act Rules 147 and 504 to Facilitate Intrastate and Regional Securities Offerings
O'Melveny & Myers LLP

SEC Enhances Exemptions for Local Offerings
Covington & Burling LLP

ISS and Glass Lewis Update Their Proxy Voting Guidelines for 2017
Morrison & Foerster LLP

Planning for Your Annual Shareholder Meeting: Selected Considerations for a Virtual-Only Meeting
Gibson, Dunn & Crutcher LLP

Court Rejects Challenge To Internal Affairs Doctrine
California Corporate & Securities Law Blog

When Non-Voting Shares Have the Right To Vote
California Corporate & Securities Law Blog


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