Congratulations to Vanessa Fox, one of the Women in Tech we've profiled in the past. Vanessa has joined forces with RKG, a search and digital marketing agency, combining her enterprise-level search analytics platform with the fast growing agency. Some of the press around the deal can be found on Geekwire, Business Wire and RKG’s Blog.
Article prepared by and republished courtesy of our colleagues in the White Collar, Corporate Crime and Investigations practice group of DLA Piper; originally published here: http://www.dlapiper.com/investigative-crises-surviving-until-help-arrives-05-02-2013/.
The first minutes and hours after the government executes a search warrant, serves a subpoena, or otherwise lets you know you’re under investigation can be critical in determining the investigation’s eventual outcome. A company’s immediate response may make the difference between an investigation that goes nowhere and one that leads to the company’s demise.
This handbook outlines the key do’s and don’ts for company executives and in-house counsel during the initial period before counsel arrives. It covers in the most basic terms what to do when:
- The government executes a search warrant, either at corporate headquarters or a corporate facility.
- The government serves a grand jury or administrative subpoena requiring production of vast quantities of documents in a very short time.
- Government agents appear at a company’s manufacturing or other facility and start interviewing low-level employees.
- Company counsel learns that government agents have been contacting employees at home in order to interview them or serve grand jury subpoenas.
- Government agents show up unannounced at company headquarters and ask that a company executive speak with them “voluntarily.”
- A government contracting officer shows up at an otherwise routine audit with a small army of other government agents.
- OSHA agents arrive at a company facility immediately after an employee is seriously injured or killed in an explosion or industrial accident.
- A news reporter calls with questions about an allegedly nefarious company practice, drawing on information received from a whistleblower.
As we previously blogged, in June 2012 the SEC adopted final rules directing national securities exchanges to establish listing standards relating to compensation committees. The NYSE and Nasdaq have now done so.
In one of the worst kept secrets in the securities world, yesterday SEC Chair Mary Schapiro announced that she would step down on December 14, 2012, and President Obama announced that he intends to designate Elisse Walter, a current SEC Commissioner, as SEC Chair upon Ms. Schapiro’s departure. Ms. Walter will serve as SEC Chair until a long-term successor is found (who will require Senate confirmation), and she is able to serve in this role through next year (because she was previously confirmed by the Senate).
There are many articles describing Ms. Schapiro’s accomplishments during her tenure at the SEC and Ms. Walter’s experiences. Here are pieces from the USA Today, the NY Times, and the AP, among numerous others.
One of the interesting issues we are monitoring in connection with this SEC leadership change is the impact on pending SEC rulemaking initiatives. Ms. Walter, a Democrat, is one of five SEC Commissioners, and her departure to become SEC Chair will leave a 2-2 party line split among Commissioners until President Obama nominates a successor who is confirmed by the Republican-controlled Senate. The political and regulatory orientation of the new Commissioner may impact the SEC's direction on issues ranging from the pending rulemaking to permit general solicitation of accredited investors to the very large number of tardy Dodd-Frank Act-required rulemakings. In addition, although Ms. Walter is regarded as a close ally of Ms. Schapiro, Ms. Walter’s leadership as Chair of the SEC may impact its regulatory priorities on a day-to-day basis.
The SEC recently issued new rules requiring various disclosures concerning “conflict minerals” that originate in the Democratic Republic of the Congo (DRC) or an adjoining country.
After considering thousands of comments and conducting a public roundtable, the SEC adopted (by a narrow 3 – 2 vote) new rules and a new form relating to the use of conflict minerals. The new rules apply to substantially all issuers that file reports under Section 13(a) or Section 15(d) of the Exchange Act and impose additional disclosure requirements on issuers that use conflict minerals in, or to produce, their products. Because the rules apply broadly to public companies, they are also important for private companies with aspirations of becoming public.
The reporting requirements are based on a three-step analytic process, with each step building on the prior step. Depending on the outcome of the three-step analytic process, an issuer may have to submit a report to the SEC that includes a description of the measures it took to exercise due diligence on the conflict mineral’s source and chain of custody. To facilitate the new disclosure required by the rules, the SEC has also adopted a new Form SD.
Managing leadership succession in the misnomered “merger of equals” or the more common combination of two large public companies of different sizes can often be tricky. To the extent that both the buyer and the target agree that one or more members of a target’s management team are to transition to management positions in the combined company, merger contracts often specify who shall become what.
But such provisions are rarely drafted to be effective for any period of time beyond the closing. Further, buyers are loath to have a target’s stockholders become third-party beneficiaries to a merger contract between the buyer and the target and thereby give individual target stockholders, and the plaintiff law firms who may eagerly seek out such individual stockholders, standing in court to sue.
As a result, if management positions are not apportioned as contemplated in the merger contract, there is not necessarily anyone left following the closing to pursue the buyer. Buyers are equally hesitant to delegate authority over future management decisions to some sub-set of legacy target directors, an act which would thereby cede outsized power over management selection to a minority of the merged company’s board.
The circumstances in the merger of Duke Energy and Progress Energy – titans in the Southeastern energy production market – illustrate the awkwardness of such arrangements.
At a recent American Bar Association meeting, a senior Securities and Exchange Commission official reviewed various aspects of interest for public company reporting and compliance purposes. As is customary, such Staff comments were on a non-attribution basis and were represented to be personal views only and not those of the SEC as a whole. Nonetheless, such informal commentary continues to offer contextual perspective on both current matters and, equally important, indicates areas of less current significance at the SEC.
Last week the SEC adopted final rules directing national securities exchanges to establish listing standards relating to Compensation Committees. (You may recall that Section 952 of Dodd-Frank Wall Street Reform and Consumer Protection Act required the SEC to adopt such rules by July 1, 2011, which slipped a bit.)
Below is a short summary of what these new rules require:
In an interview for NACD Directorship magazine entitled Noteworthy Legal Issues for Pre-IPO and Small-Cap Directors, DLA Piper partner and colleague Peter M. Astiz, co-head of our Global Technology Sector Practice, provided updated information concerning director fiduciary duties, voting and control issues raised by FaceBook's structure, the JOBS Act and regulation under Sarbanes-Oxley. NACD Directorship magazine is published by the National Association of Corporate Directors. The article can be found here.
John Melloy’s article entitled “The Dictators of Silicon Valley: Facebook, Google Stripping Shareholder of Power” highlights an interesting trend among tech companies that have gone public in the past several years – implementing dual-class voting structures. The general idea behind these dual-class voting structures is to keep control in the hands of the individuals (usually the founders) who supposedly know what is best for the company and to shield a company from potential public company shareholder activism and hostile takeovers. Control is maintained by either giving the founder shares more votes per share than the shares issued to the public (or issuing non-voting shares to the public) – for example, founders would hold Class B common stock entitled to 10 votes per share, while the general public would hold Class A common stock entitled to one vote per share.