Securities Exchange Act of 1934 Archives

SEC Adopts Final Pay Versus Performance Rules

by Thomas P. Conaghan, Andrew Liazos, Eric Orsic, Heidi J. Steele and Brian Tratner | Sep 15, 2022 | Executive Compensation, Fiduciary and Investment Issues, Retirement Plans

On August 25, 2022, the US Securities and Exchange Commission (SEC) adopted final rules to implement the pay versus performance disclosure requirement mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Dodd-Frank Act added Section 14(i) to the Securities Exchange Act of 1934, which directs the SEC to adopt rules that require registrants to clearly disclose the relationship between executive compensation actually paid and the registrant’s financial performance. More than 12 years after US Congress passed the Dodd-Frank Act, the SEC has adopted Item 402(v) of Regulation S-K to put these disclosure requirements into effect in time for the 2023 proxy season.

Capital Markets & Public Companies Quarterly: Expanding Relief under Smaller Reporting Company, Reg A+ and Rule 701, SEC Enforcement of Cybersecurity Disclosures and Other News

by Eric Orsic, Gary Emmanuel, Heidi J. Steele, Mark J. Mihanovic, Robert H. Cohen, Thomas P. Conaghan, Thomas J. Murphy and William Hadler | Aug 2, 2018 | Executive Compensation

During the previous quarter, the SEC acted to expand the number of companies that may rely on the “smaller reporting company” scaled disclosure regime and Congress directed revisions to the Regulation A+ and Rule 701 exemptions. The SEC also took enforcement action on a major cybersecurity breach, reinforcing its recent interpretive guidance on the subject. The director of the SEC Division of Corporation Finance also spoke on how blockchain assets may or may not constitute securities, and the 9th Circuit created a circuit split related to securities litigation after a tender offer.

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District Court Dismisses Shareholder Claim That Equity Award Share Withholding Triggers Section 16(b) Liability

by Andrew Liazos | Aug 22, 2017 | Employee Benefits, Executive Compensation

A United States District Court recently dismissed a claim that an insider’s election to satisfy an income tax obligation by having shares withheld from the delivery of an award constituted a non-exempt sale of shares back to the issuer for purposes of Section 16(b) of the Securities Exchange Act of 1934 ( Exchange Act), unless the share withholding was required, rather than merely permitted. While an encouraging development, this decision is now on appeal to the Fifth Circuit and there are similar unresolved complaints in other jurisdictions. Until this matter is resolved, public companies should continue to consider what steps are appropriate to avoid Section 16 exposure and to review this situation with their executive officers.

The Quandary of Publicly-Traded Employer Stock in a 401(k) Plan

by McDermott Will & Emery | Jun 20, 2017 | Benefit Controversies, Employee Benefits, Employee Stock Ownership Plans (ESOPs), Fiduciary and Investment Issues, Retirement Plans

Offering employer stock in a 401(k) plan investment lineup can seem like a win-win situation. It can enable employees to become company owners—real, skin-in-the-game, participants in their employer’s economic future—through a simple deferral election. The U.S. Supreme Court has even recognized the value of employer stock funds, confirming that Congress sought to encourage their creation through provisions and standards contained in the Employee Retirement Income Security Act of 1974 (“ERISA”).

However, in the wake of a series of high-profile employee lawsuits seeking recovery against Enron, Lehman Brothers, and other employers for losses from 401(k) investments in employer stock, such funds can—almost as easily—seem a recipe for disaster. This article examines the quandary that employer stock funds pose for plan sponsors, who must navigate ERISA’s careful balance of (1) ensuring fair and prompt enforcement of employee rights under employer-provided retirement plans while (2) encouraging employer creation of these plans.

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Originally published in Bloomberg Law, May 25, 2017

District Court Dismisses Shareholder Claim that Equity Award Share Withholding Triggers Section 16(b) Liability

by Andrew Liazos, Eric Orsic and Thomas P. Conaghan | Jun 13, 2017 | Benefit Controversies, Employee Benefits, Employment, Executive Compensation

A US District Court recently dismissed a claim that an insider’s election to satisfy an income tax obligation by having shares withheld from the delivery of an award constituted a non-exempt sale of shares back to the issuer for purposes of Section 16(b) of the Exchange Act, unless the share withholding was required, rather than merely permitted.

While an encouraging development, this decision is now on appeal to the US Court of Appeals for the Fifth Circuit and there are similar unresolved complaints in other jurisdictions. Until this matter is resolved, public companies should continue to consider what steps are appropriate to avoid Section 16 exposure and to review this situation with their executive officers.

Read the full article.