October 9, 2013

1. The SEC extended the comment period for Regulation D "process rules" to November 4, 2013, perhaps after recognizing that in many ways, the proposed rules make Regulation D worse for issuers. See here. In the meantime, the SEC published a host of items to help people out, including:
   • An investor alert, here, that told investors to brace themselves for September 23, the effective date of the SEC rule allowing general solicitations under new Rule 506(c);
   • Another investor alert, here, that explains what "accredited investor" means; and
   • A summary of the "bad actor" disqualifications rules effective September 23, here, purportedly as a small entity compliance guide (but it serves as an "any" entity compliance guide).
2. The SEC proposed the "pay ratio" disclosure rules, here, that were required by Dodd-Frank over three years ago. The comment period ends December 2. Although the SEC received over 22,860 prepublication comment letters about pay ratio disclosure, additional comments should be plentiful because these almost certainly are the dumbest of the Dodd-Frank mandated rules. To its credit, the SEC did at least try to make the disclosure less costly, if not less dumb. Generally, the proposed rules require that a company disclose its CEO's annual compensation, median annual total compensation for employees except the CEO (that's "median," not "average"), and the ratio. (Mathematically: X, Y and X/Y, where X = a lot and Y = much less.) The proposed rules allow statistical sampling and estimates to identify a "median employee" (based on, say, W-2 income) whose total compensation would then be calculated, and require that a company briefly disclose its methodology and identify estimates. Summaries of the proposed rules are here, here and here. The disclosure would be made in a company's annual report or proxy statement, and the disclosure may first be required in proxy statements filed in 2016, covering 2015 compensation, which should give everyone time to figure out what to do once final rules are published. (Spoiler alert: Whatever the form of the final rules, the gist of disclosures will read as follows, only with modestly expensive and time-consuming analysis surrounding it: "Our CEO makes a lot of money. It is a lot more money than the rest of our employees make. Some of them don't make very much at all. It is probably more money than you make too, and his annual salary might even be more money than you will ever make in your lifetime. But on an hourly basis our CEO still makes far less than Alex Rodriguez or Angelina Jolie, and it is just as silly to compare his salary to theirs as it is to compare his salary to the workers in our mail room. But we wanted to make sure you knew that not all of our workers make as much as our CEO.")
3. The SEC will pay a whistleblower upwards of $14 million, according to a final order, here, late last month. That data point will almost certainly make companies and possible whistleblowers perk up and take more notice of the SEC's still relatively nascent Office of the Whistleblower, which previously disclosed a $50,000 award to a whistleblower in 2012 and another 2013 award that is expected to total about $125,000. Some characterize the award and the measures the SEC took to preserve the anonymity of the soon to be wealthy whistleblower as a "game changer," see, e.g., here and here. Information about the award is available here.
4. Capital markets are all atwitter about the latest social networking IPO, see here. There really isn't much interesting to say about the IPO of a company that has consistently lost money but that promises huge returns if it can monetize its user base by sending spam ads without alienating them and selling user data. (Honestly, if this were the late '90s, the company's name would be "TwitTer.Com, Inc.") But Twitter's valuation is high, and comparisons to Facebook's IPO are obvious. Twitter's registration statement is available here, and commentary about the Twitter IPO is here and here.
5. Finally, as the Federal Government shutdown persists, note that it's apparently business as usual at the SEC, at least for a few more weeks, see here. The SEC's plan of operations if Congress doesn't renew appropriations is here. Ominously, the SEC's plan was silent about what will happen if Twitter wants to complete its IPO while the SEC was out. But darned if the SEC didn't subsequently address that possibility here. For those who aren't Twitter, a summary of how the shutdown may already be affecting us is here.