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In the latest installment of the Dave & Marty radio show, Marty and I are in Manhattan discussing the DC Court of Appeals decision in the proxy access case and the implications for the SEC. We also date ourselves yet again with a discussion of our favorite songs from The Allman Brothers Band.

Upcoming Changes to S-3 Eligibility: Staff Relief Possible?

A few weeks back, Broc blogged about the changes to Form S-3/F-3 eligibility adopted by the SEC in response to Section 939A of the Dodd-Frank Act, which directed the SEC to remove credit ratings from its rules and forms. The changes go into effect on September 2, however the rules provide for a 3 year “grandfathering” period whereby issuers with a reasonable belief that they would have been eligible under the old criteria can continue to use the Form. Under the new criteria, S-3/F-3 is available for:

1. An issuer that has issued (within 60 days of the registration statement filing date) at least $1 billion of non-convertible securities other than common equity ( e.g., debt, preferred), in primary offerings for cash (not exchange offers) registered under the Securities Act (excluding, e.g., Rule 144A, Reg. S offerings) over the last 3 years; or
2. An issuer that has outstanding (again within 60 days of the filing date) at least $750 million of the same securities referenced above; or
3. The issuer is a wholly-owned subsidiary of a WKSI; or
4. The issuer is a majority-owned operating partnership of a REIT that qualifies as a WKSI.

Some have expressed concern that, despite the SEC’s efforts to address commenters’ concerns and keep as many issuers on S-3/F-3 as possible, there are still some investment grade debt issuers who will be excluded going forward, once the grandfathering period comes to an end. We heard from the Staff at the ABA Annual Meeting last week that they would be amenable to considering requests for relief from any issuers who would otherwise lose their status as a result of the changes to the Forms. We also heard from the Staff that issuers relying on the grandfathering provision should generally not be concerned about the need to obtain consents from rating agencies when they are providing required disclosure concerning the reasonable belief that the issuer would have satisfied the investment grade eligibility criteria if it were still in effect (i.e., by referencing the issuer’s rating, the actual or anticipated rating for the securities or the belief that the securities would be rated “investment grade”).

The bottom line here seems to be that the Staff is going to be somewhat flexible in implementing these particular Dodd-Frank Act-mandated rule changes, so give them a call if you have a concern.

Director Pay Climbs a Bit and Shifts More to Equity

More and more these days, I get questions about director compensation issues, perhaps reflecting the trend toward making director pay more complicated than the old days of cash retainers and meeting fees. As noted in this recent study of 2010-2011 director pay conducted by the NACD and Pearl Meyer & Partners, director pay recently rose 5% at larger firms and 20% smaller firms, with an increasing emphasis on equity compensation in the form of full value shares.

– Dave Lynn