Financial Services Weekly News - November 2016

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Editor's Note

Voting Matters. Next week, we head to the polls to elect a new president of the United States and other government representatives. Voting is important because it allows registered citizens to cast their vote for leaders that they believe will make better choices for our nation. Voting matters in the context of selecting corporate leaders, too. This past week, the Securities and Exchange Commission (the SEC) voted to propose amendments to the proxy rules that would require parties in contested director elections to use universal proxy cards. The proposed rules would require the company and the dissident to provide shareholders with a universal proxy card that includes the names of both company and dissident nominees. Some view the rule proposal as a means to level the playing field for shareholders to have the freedom of choice to vote for their preferred candidates, which may be a combination of company and dissident nominees. This and other matters, including a client alert providing an update on the SEC’s response to proxy access no-action letter requests, are covered below.

Regulatory Developments

Client Alert: SEC Proposes Rules on Universal Proxy and Voting Options

The SEC has proposed amendments to its proxy rules that would require the use of universal proxy cards in contested director elections, and would change the rules governing disclosure of shareholder voting options and standards in both uncontested and contested director elections. For more information, view the client alert issued by Goodwin’s Public Companies Practice.

OCC Announces Office of Innovation and Responsible Innovation Framework

On October 26, the Office of the Comptroller of the Currency (OCC) advanced its initiative to address the growing number of nonbank financial technology companies (FinTechs) providing financial products and services by announcing a series of recommendations and decisions for implementing a responsible innovation framework. Chief among these recommendations and decisions is the OCC’s decision to establish an Office of Innovation (Office), which will be headed by a Chief Innovation Officer with permanent staff initially located in New York, San Francisco and Washington. The OCC will also expand its outreach programs and “office hours” in other technology hubs, such as Austin, Boulder, Raleigh-Durham and Seattle. The Office will serve as a central point of contact; establish an outreach and technical assistance program for banks and nonbanks, including FinTechs; conduct awareness and training activities within the OCC to ensure a well-informed staff evaluates and supervises new products and services; encourage coordination and facilitation to improve decision-making related to innovation-related requests through clear response expectations, time frames, and workflows; establish an innovation research function to ensure the OCC learns about and understands the evolving financial technology landscape and its impact on the banking system; and promote interagency collaboration among domestic and international regulators for purposes of information-sharing and consistency among regulatory regimes. The OCC expects the Office to commence operations the first quarter of 2017.

Enforcement & Litigation

Client Alert: Antitrust Authorities to Prosecute Criminally Anticompetitive Hiring and Compensation Agreements

The United States federal antitrust authorities announced last week that companies who have in place formal or informal hiring or compensation agreements with competitors may now face criminal prosecution. This is a notable departure from the agencies’ previous enforcement efforts in these areas which were prosecuted civilly, and means that those involved in establishing or facilitating such agreements now face the prospect of incarceration, in addition to the already substantial fines and penalties imposed today. Human resource executives or others involved in hiring or compensation decisions who may have such agreements in place with their competitors should immediately consider ceasing participation in these agreements. For more information, view the client alert issued by Goodwin’s Antitrust & Competition Practice.

Client Alert: Update on SEC Proxy Access No-Action Letters

Recent SEC responses to no-action requests involving shareholder proposals seeking initial adoption of a proxy access bylaw confirm that the SEC staff is continuing to evaluate company requests to exclude these proposals from the company’s proxy statement on the basis of “substantial implementation” under Rule 14a-8, consistent with the staff’s position during late 2015 and 2016. Companies are likely to continue to be able to exclude these proposals if they have adopted, or propose to adopt, a proxy access bylaw that includes ownership threshold and holding period standards that are at least as favorable as those included in the proxy access shareholder proposal. On the other hand, SEC no-action responses published in July, September and October 2016 indicate that companies are unlikely to receive no-action relief from the SEC staff for exclusion of shareholder-proposed amendments to an existing proxy access bylaw on the basis of substantial implementation, although this result may depend on the specific provision of the company’s proxy access bylaw and the specific shareholder-proposed amendment. For more information, view the client alert issued by Goodwin’s Public Companies Practice.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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