Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

[Note:  Updates follow the table below.]


At this time, there are relatively few new items that need to be considered for the upcoming proxy and 10-K season.  Those involved with the SEC reporting process may want to review our publication “A Lawyer’s Guide to Proposed Lease Accounting Rules” and proposed changes to the auditor’s report, as well as this interactive checklist.

Item Status
Proxy Statements
1.  Update officer and director questionnaires.
  • Both the NYSE and NASDAQ have adopted rules for compensation committees of listed companies that require additional considerations when determining the independence of listed directors.  Smaller reporting companies are exempt.  The requirements are effective for the earlier of the first annual meeting after January 15, 2014, or October 14, 2014.  Questionnaires should be updated to solicit appropriate information.  Perhaps even more importantly, boards should also be prepared to implement this provision.
Effective.  See our thoughts on necessary updates here.
  • The SEC has adopted final rules related to “Disqualification of Felons and Other “Bad Actors” from Rule 506 Offerings.”  We would recommend all public companies, and especially those who plan to rely on Regulation D for private placements, to incorporate appropriate provisions into their questionnaires.  We also recommend that the questionnaire be completed by potential directors, potential executive officers and any other officer that may participate in a Regulation D offering.
Effective.  See possible updates here.
2.  Verify the Right Compensation Committee Charter is Included or Referenced in the Proxy Statement.  In connection with the NYSE and NASDAQ adoption of the rules for listed company compensation committees referenced above, most listed companies were required to amend their compensation committee charters by July 1, 2013. We recommend listed companies verify the correct charter is provided or referenced in response to Regulation S-K Item 407(e)(2) and Instruction 2 thereto. Effective.
3.  NASDAQ Listed Companies Will Have to Certify Compliance With the New Compensation Committee Rules.  NASDAQ Rule 5605(d)(6) requires NASDAQ listed companies to certify compliance with Rule 5605(d) no later than 30 days following the final implementation deadline applicable to the issuer.  The deadline is the earlier of the first annual meeting after January 15, 2014, or October 14, 2014.  We understand NASDAQ will provide a form for the certification. Effective.
4.  Revise Reference to Communications with Audit Committees in Audit Committee Report.  Item 407(d)(3)(i) of Regulation S-K(B) currently requires the audit committee to state whether “[t]he audit committee has discussed with the independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards , Vol. 1. AU section 380), 1 as adopted by the Public Company Accounting Oversight Board in Rule 3200T.”  On December 17, 2012, the SEC issued an order granting approval of proposed Rules on Auditing Standard No. 16, Communications with Audit Committees, and Related and Transitional Amendments to PCAOB Standards.  The existing reference to AS 61 in the audit committee report should be replaced with the reference to AS 16.  Effective.  While Item 407 has not been amended, you can see the SEC order approving the rule change here.
While there is nothing new on the say-on-pay rules, the following provisions are included because issuers are on different cycles. N/A
5.  Say-on-pay advisory vote: Whether issuers are required to include a say-on-pay advisory vote depends on what frequency the Board adopted in prior years after considering the shareholder advisory vote on frequency.  If a say-on-pay vote is included: Effective
  • Rule 14a-21(a):  Resolution for an advisory vote on compensation of named executive officers as disclosed pursuant to Item 402 of Regulation S-K.
  • Item 24 of Schedule 14A:  Required disclosure that advisory votes under 14A-21 are included pursuant to Section 14A of the Exchange Act and the general effect of each such vote.


  • Rule 14a-21(c):  Optional disclosure on golden parachutes to avoid subsequent vote or disclosures in connection with certain M&A transactions.  See SK Item 402(t) for disclosure requirements.


6.  Other say-on-pay disclosures where a prior vote was held: Effective
  • S-K Item 402(b)(1)(vii):  Disclose in the CD&A the extent to which previous shareholder say-on-pay votes has been considered.
  • Item 24 of Schedule 14A:  Disclose current frequency of shareholder advisory votes on executive compensation and when the next shareholder advisory vote will occur.


7.  Say-on-pay frequency vote Effective
  • Rule 14a-21(b):  A frequency vote must be held every six calendar years.  For most issuers the next frequency vote will be for the 2017 proxy season.  For smaller reporting companies it is likely the next vote would be for the 2019 proxy season.
  • Rule 14a-21(b): Resolution on advisory vote as to whether say-on-pay vote shall be held every one, two or three years.


  • Rule 14a-4(b)(3):  Form of proxy—must offer choice between 1, 2 or 3 years or abstain.


  • Form 8-K:  Item 5.07 of Form 8-K requires an 8-K filing within 150 days after any meeting including a frequency vote.
Form SD
1.   Conflict Minerals:  Final rules require certain companies to disclose their use of conflict minerals if those minerals are “necessary to the functionality or production of a product” manufactured by those companies.  Issuers must comply with the final rule for the calendar year beginning January 1, 2013 with the first reports due May 31, 2014. Effective.  The court rejected a challenge to the rules which is being appealed.
2.  Resource Extraction Issuers: The court vacated the resource extraction rules and the SEC did not appeal.  The SEC is expected to propose new rules. Awaiting SEC action.
Awaiting Further Action
1.   Pay for performance disclosures (Section 953 of the Dodd-FrankAct)

  • Demonstrate relationship between compensation actually paid and the financial performance of the issuer
No proposed rules have been published.  The SEC no longer publishes a proposed rulemaking time frame. The SEC may believe the current CD&A rules meet this Dodd-Frank requirement.
2.   Pay disparity ratio (Section 953 of the Dodd-FrankAct)

  • Annual compensation of CEO
  • Median total compensation of all employees other than the CEO
  • Ratio of median total compensation to CEO compensation
The SEC has published proposed rules which are not expected to be effective for most issuers in 2014.
3.   Clawback requirements  (Section 954 of the Dodd-FrankAct)

  • Disclosure of policy on incentive-based compensation based on financial information
  • Clawback in the event of an accounting restatement
No proposed rules have been published.  The SEC no longer publishes a proposed rulemaking time frame.
4.   Disclosure of hedging policy (Section 955 of the Dodd-FrankAct)

  • Disclose whether directors or employees are permitted to hedge company securities
No proposed rules have been published. The SEC no longer publishes a proposed rulemaking time frame.

Updates from original post

  •  A proposed form of updates to D&O questionnaires for the Rule 506 “bad actor” provisions can be found here.
  • Review new ISS policies.  This year’s updates relate principally to board responsiveness to shareholder proposals and tweaking the way the say-on-pay screen for pay-for-performance works.
  • Prepare to transition to the new COSO framework for evaluating internal control over financial reporting.  During the transition period companies should disclose which version of the COSO framework they are using.
  • Note that the NYSE amended its quorum requirement and proxy statement descriptions should be updated accordingly. The NYSE amended Section 312.07 of the Listed Company Manual to remove the requirement that the total votes cast on any proposal requiring shareholder approval under NYSE rules must represent over 50% in interest of all securities entitled to vote on the proposal.

Check frequently for updates on the JOBS Act, the Dodd-FrankAct and other important securities law matters.