Capital Markets & Public Companies Quarterly: Changes to SEC Review of Shareholder Proposals, Expansion of Testing-the-Waters, Regulation FD Enforcement Action, Applicability of Proxy Rules to Proxy Advisors and Risks Associated with LIBOR Transition

McDermott Will & Emery

In the third quarter of 2019, the SEC Staff announced major changes to the standard no-action request review and response process relating to shareholder proposals. In addition, the SEC expanded the availability of “testing-the-waters” accommodations to all companies. The SEC also settled an enforcement action for violations of Regulation FD, signaled further scrutiny of the activities of proxy advisory firms, and provided guidance on how market participants should assess and disclose the impact of the anticipated transition away from the LIBOR benchmark.


SEC Announces Changes to Shareholder Proposals No Action Letter Process

On September 6, 2019, the Staff of the Division of Corporation Finance of the US Securities and Exchange Commission (SEC) announced two major changes to the Rule 14a-8 no-action process for shareholder proposals for inclusion in the annual proxy statement.

  • The Staff Response May Be Oral, not Written: Starting with the next shareholder proposal season (e., 2019-2020), the Staff’s response to a no-action request relating to the exclusion of a shareholder proposal from a company’s proxy statement may be oral, not in writing. The Staff will only provide a written no-action letter “where it believes doing so will provide value, such as more broadly applicable guidance about complying with Rule 14a-8.”
  • The Staff May Decline to Take a Position: Going forward, in responding to an incoming argument by a company that it is justified in excluding a shareholder proposal, the Staff may respond that it “concurs, disagrees or declines to state a view” with the company’s basis for exclusion of the proposal from the company’s proxy statement. If the Staff declines to take a position on the argument, the Staff advised that parties should not interpret such a decision as an indication that the proposal must be included in the proxy statement and reminded parties that all other remedies remain available as before, including seeking the judgment of a court.

To be clear, the Staff’s new policy does not change the fact that a company seeking to exclude a shareholder proposal must file a no-action request letter with the SEC. The request must state the procedural or substantive basis for the exclusion and must follow the applicable procedural requirements under the federal securities laws.

The practical outcome of the Staff’s announcement on any given proposal or proxy season remains to be seen. In the long term, however, the new policy is expected to result in fewer written no-action letters issued by the Staff, ultimately decreasing the body of published precedent-interpreting rules governing the shareholder proposal process. As uncertainty grows, public companies may need to consider other remedies in addition to or instead of seeking no-action relief for the exclusion of certain proposals. The pressure to “negotiate away” shareholder proposals (i.e., getting the proponent to withdraw the request) will likely increase. Public companies may also choose to face certain shareholder proposals head-on by including them in the company’s proxy materials.

SEC Expands “Test-the-Waters” Communications to All Companies

On September 26, 2019, the SEC adopted a final Rule 163B, as well as related amendments to existing rules, that would allow all companies to engage in “test-the-waters” communications with certain qualified investors. As discussed in our prior On the Subject regarding the proposed rule, “test-the-waters” communications that comply with the new rule would not need to be filed with the SEC and would not need to include cautionary legends. The SEC adopted the proposed rule in its entirety except for clarifying revisions.

“Test-the-waters” communications are oral or written communications that occur either prior to, or following, the filing of a registration statement related to a contemplated offering with investors that are Qualified Institutional Buyers, as defined by Rule 144A, or Institutional Accredited Investors, defined as an institutional investor that is an “accredited investor” under Rule 501 of Regulation D. Prior to the new rule and amendments, “test-the-waters” communications were only permissible for emerging growth companies. The new rule is in line with other administrative and congressional initiatives to liberalize such communications and encourage additional participation in the public markets.

Although the new rule expands use of these accommodations to all companies, companies subject to Regulation FD would need to evaluate if such communications would trigger disclosure obligations. Also, communications made in reliance on the rule would still be considered “offers” subject to Section 12(a)(2) of the Securities Act in addition to the anti-fraud provisions of the federal securities laws.

For our prior commentary on proposed Rule 163B, see our On the Subject.

SEC Brings Enforcement Action for Violations of Regulation FD

On August 20, 2019, the SEC issued a settled enforcement action for violations of Section 13(a) of the Exchange Act and Regulation Fair Disclosure (Regulation FD) thereunder by TherapeuticsMD, Inc., a pharmaceutical company with shares traded on NASDAQ. The action provides details of selective disclosures of material non-public information related to the company’s meeting with the Food and Drug Administration (FDA) concerning the potential approval of a candidate drug. The action states that members of management disclosed the details of the meeting and subsequent interactions with the FDA to research analysts and that such disclosures were either provided to analysts before the company made broader market-wide disclosures or that analysts were provided with details of the interactions that were not disclosed to the broader market. In addition, while not dispositive of the SEC staff’s decision to bring an enforcement action, the Staff noted that at the time of these disclosures TherapeuticsMD did not have policies or employee training relating to compliance with Regulation FD.

As of late, Regulation FD enforcement actions have been infrequent, but the current action acts as a reminder that companies must comply with its disclosure requirements. Companies should control the distribution of any material, non-public information or information that may be construed as such, and only provide such information to those with a “need to know.” For this reason, public companies should maintain policies and procedures to ensure that all public disclosures of such information meet the requirements of Regulation FD and other applicable securities laws.

For additional commentary on the SEC’s Regulation FD enforcement action, see our On the Subject.

SEC Issues Interpretation Regarding Applicability of Proxy Rules to Proxy Advisors

On August 21, 2019, the SEC issued an interpretation and related guidance regarding the applicability of the rules governing proxy solicitation to proxy voting advice. In the guidance, the SEC reiterated guidance provided by the staff of the Divisions of Investment Management and Corporation Finance in Staff Legal Bulletin No. 20 (SLB 20) that proxy voting advice provided by proxy advisory firms is generally considered a “solicitation” under federal proxy rules because the voting recommendations or advice constitute a “communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.” In the guidance, the SEC clarified that such proxy voting advice constitutes a solicitation even if the recommendations provided are based on voting guidelines established by the persons receiving the recommendation, such as an investment advisor.

Most notably, the SEC’s guidance signaled that it may propose amendments to Rule 14a-2(b) of the Exchange Act, which is often relied upon by proxy advisory firms as an exemption from the information and filing requirements of the federal proxy rules. Under the rule, subject to other requirements of the rule, a proxy advisory firm that does not solicit the power to act as proxy for those receiving its recommendations, but instead limits its activities to distributing reports containing such recommendations, is not required to meet other information and filing requirements applicable to proxy solicitations.

In addition, the SEC used the guidance to emphasize that, as solicitations, proxy advisor recommendations remain subject to the anti-fraud provisions under Rule 14a-9, prohibiting solicitations that contain statements that, at the time and in light of the circumstances under which such statement is made, are false or misleading with respect to a material fact. Accordingly, proxy advisory firms must consider whether they need to disclose any underlying facts, assumptions, limitations and other information on which they base their advice or recommendation.

In recent years, institutional investors and investment advisers have increasingly relied on advice and recommendations provided by proxy advisory firms, a practice that has become subject to heightened scrutiny due to its significant influence on proxy voting. The SEC interpretation comes on the heels of last year’s Roundtable on the Proxy Process, at which the SEC solicited comments on the US proxy system, including the role and regulation of proxy advisory firms. As discussed in our prior quarterly update, in the lead up to the Roundtable, the SEC staff of the Division of Investment Management withdrew prior guidance that permitted investment advisers’ to rely on recommendations provided by third-party proxy advisory firms for purposes of adopting “policies and procedures” that are reasonably designed to ensure that client securities are voted in the best interest of the client, as required by Rule 206(4)-6 promulgated under the Investment Advisers Act of 1940. On August 21, 2019, the SEC also issued guidance related to this topic, reiterating the requirement that investment advisors comply with Rule 206(4)-6 and signaled that investment advisors take more control of their voting policies and practices to ensure that they reasonably understands their client’s objectives and make voting determinations in the client’s best interest.

SEC Staff Publishes Statement Regarding Risks Related to Transition Away from LIBOR

On July 12, 2019, the SEC’s Division of Corporation Finance, Division of Investment Management, Division of Trading and Markets, and Office of the Chief Accountant issued a joint statement regarding potential risks to the financial markets and financial market participants resulting from the expected transition away from LIBOR as a standard benchmark for global interest rates. The Staff noted that when current reporting commitments end in 2021, many private banks are expected to cease their reporting contributions to the benchmark and, as a result, LIBOR could cease publication or its quality could degrade such that it is no longer a suitable standard rate.

The joint statement includes guidance from each of the Divisions regarding the most pertinent considerations for market participants regulated by such Division. Guidance provided by the Division of Corporation Finance primarily focused on public disclosures regarding the risks that public companies face as a result of this transition. The Staff reminds public companies to review their periodic reporting and other public disclosures to ensure that they are materially accurate given the expected changes to LIBOR. The Staff specifically called on public companies to consider their disclosures relating to risk factors, management’s discussion and analysis, board risk oversight, and financial statements as those for which the transition will most likely trigger required disclosure. The Staff urged companies to disclose their progress toward risk identification and mitigation as well as any material impact that LIBOR’s expected discontinuation may have on their financial results. In addition, the statement provides market participants with resources for alternative benchmarks and contract language that will endure the pending transition.

Written by:

McDermott Will & Emery

McDermott Will & Emery on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.