Thomson Reuters Law Firm Memo Survey: Q4 2015

Thursday, February 11, 2016 - 13:32

The Q4 2015 Law Firm Memo Survey is the second installment in our periodic series surveying law firm memoranda to identify trends in corporate, securities, and other areas of transactional law. To prepare the survey, our Experts On-Call reviewed 169 memos from 22 large law firms. The results are grouped broadly by practice area and listed in order of frequency of coverage.

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21 memoranda

Proxy-voting advisors Institutional Shareholder Services (ISS) and Glass Lewis spent Q4 2015 preparing for the 2016 proxy season. No fewer than twenty-one law firm memos chronicled every twist and turn of the process. On September 28th, ISS released the results of its annual survey of institutional investors.1 Fried Frank observed that ISS “considers the [survey] results … when formulating proposed amendments to its Proxy Voting Guidelines,” and the results, therefore, “may be a prelude to changes” to the Guidelines.2

One month later, ISS issued draft amendments to its Proxy Voting Manual for comment.3 Weil Gotshal warned that the draft “may not be the final word,” because “in past years, [ISS] has announced … policy changes that were not presented for draft review.”4

At the end of November, ISS and Glass Lewis issued final amendments to their voting guidelines.5 Paul Weiss remarked that the amendments were “not as extensive as in prior years,” but included some “significant updates.”6 Sullivan & Cromwell noted that while the final ISS rules failed to address proxy access, the executive summary promised “an ‘FAQ’ document” addressing proxy access bylaws.7

The ISS proxy access FAQ was issued in December.8 Davis Polk noted that the FAQ describes a review process that accounts for “the complex nature” of and “evolving standards for” proxy access bylaws.9

  1. ISS Releases Results of Annual Global Voting Policy Survey, Institutional Shareholder Services Inc. Press Release, Sep. 28, 2015
  2. ISS Annual Global Policy Survey: Highlights from the 2015-2016 Results, Fried Frank Harris Shriver & Jacobson LLP, Oct 13, 2015
  3. Institutional Shareholder Services Launches 2016 Benchmark Policy Consultation, Institutional Shareholder Services Inc. Press Release, Oct. 26, 2015
  4. Heads Up for the 2016 Proxy Season: ISS Spotlight on Director Overboarding, Unilateral Board Actions and Compensation at Externally-Managed Companies, Weil, Gotshal & Manges LLP, Oct. 27, 2015
  5. ISS Releases 2016 Benchmark Policy Updates, Institutional Shareholder Services Inc. Press Release, Nov. 20, 20152016 Proxy Season – North America Guidelines Now Available, Glass, Lewis & Co., LLC Press Release, Nov. 24, 2015
  6. ISS and Glass Lewis Publish 2016 U.S. Voting Policies, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Nov. 23, 2015
  7. 2016 Proxy Season Developments: ISS Announces 2016 Policy Changes and Expected December Release of Proxy Access FAQs; Both ISS and Equilar/Glass Lewis Open Peer Submission Window, Sullivan & Cromwell LLP, Nov. 24, 2015
  8. S. Proxy Voting Policies and Procedures (Excluding Compensation-Related), Frequently Asked Questions, Institutional Shareholder Services Inc. Website, Dec. 18, 2015
  9. ISS Issues FAQs on Voting Policies, Including Proxy Access, Davis Polk & Wardwell LLP, Dec. 21, 2015



20 memoranda

On December 4th, President Obama signed the Fixing America’s Surface Transportation, or “FAST,” Act.1 DLA Piper noted that while the FAST Act is “primarily focused” on transportation infrastructure, it also includes “significant changes to the U.S. federal securities laws … aimed at streamlining capital formation.”2

Favorite FAST Act topics included sections 71001 – 71003 which, as Debevoise & Plimpton observed, seek to improve “the ability of EGCs [emerging growth companies] to access public capital markets,”3 and section 76001 which adds a new section 4(a)(7) to the Securities Act of 1933. DLA Piper cautioned that while “a number of commentators have suggested that Section 4(a)(7) codifies the ‘section 4(a)(1½)’ exemption’ … there are important differences.”

  1. Fixing America’s Surface Transportation Act, PL 114-94, 129 Stat 1312 (2015)
  2. FAST Act eases resale of unregistered securities and adds new accommodations for emerging growth companies: top points, DLA Piper LLP, Dec. 21, 2015
  3. The “FAST” Act: Additional EGC Flexibility and Roadmap for Reform of Regulation S-K, Debevoise & Plimpton LLP, Dec. 7, 2015



13 memoranda

On October 22nd, SEC Staff Legal Bulletin 14H unveiled new interpretations of Rule 14a-8.1 Gibson Dunn noted that SLB 14H establishes a “dramatically different” and “highly subjective” test for when the SEC will concur with an issuer’s assertion that a shareholder proposal may be excluded from a company’s proxy statement because it conflicts with a management proposal.2 Simpson Thacher observed that the new test will “likely to result in many fewer no-action requests premised on Rule 14a-8(i)(9).”3 SLB 14H also interprets the “ordinary business” exclusion in Rule 14a8-(i)(7), which, as Morrison Forester reminded readers, was the subject of a “recent Third Circuit Court of Appeals decision in Trinity Wall Street v. Wall Mart Stores, Inc. … [raising] … some questions as to the proper framework for analysis under [the] Rule.”4 Simpson Thacher noted that while SLB 14H’s reading of the ordinary business exclusion “reached the same conclusion” as the Third Circuit, the SEC’s approach was “meaningfully different.”

  1. SEC Division of Corporation Finance Staff Legal Bulletin No. 14h, 2015 WL 6503673, Oct. 22, 2015
  2. SEC Staff Reverses Longstanding Precedent on Exclusion of Conflicting Shareholder Proposals Rule; Affirms Business as Usual on Ordinary Business Rule, Gibson, Dunn & Crutcher LLP, Oct. 26, 2015
  3. SEC’s Division of Corporation Finance Issues Guidance on Rule 14a-8’s “Directly Conflicting” and “Ordinary Business” Exclusions, Simpson Thacher & Bartlett LLP, Oct. 27, 2015
  4. New Staff Legal Bulletin and Proxy Voting Guidelines Released Ahead of the 2016 Proxy Season, Morrison & Foerster LLP, Dec. 4, 2015; Trinity Wall St. v. Wal-Mart Stores, Inc., 792 F.3d 323 (3d Cir. 2015)


11 memoranda

SEC Rule 18f-4, proposed on December 11th,1 in the words of Skadden Arps, “significantly modifies” the way registered investment companies use derivatives.2 WilmerHale characterized proposed Rule 18f-4 as rescinding “nearly 30 years of Commission and staff guidance … currently relied upon by most mutual funds.”3 Jay G. Baris of Morrison & Forester objected to increases in the “scope and complexity of the responsibilities of investment company fund directors,” noting that the rule, though only 11 pages long, was lodged in a proposing release of “more than 400 pages and 864 footnotes.”4 WilmerHale also wondered whether the Rule, if enacted, “may … force a large number of funds to choose between liquidating … and registering as commodity pools.”

  1. Use of Derivatives by Registered Investment Companies and Business Development Companies, 80 FR 80884-01 (Dec. 28, 2105)
  2. SEC Proposes Rule Regarding the Use of Derivatives by Registered Investment Companies and Business Development Companies, Skadden, Arps, Slate, Meager & Flom LLP, Dec. 18, 2015
  3. SEC Proposes New Framework for Regulating Funds’ Use of Derivatives and Leverage, Wilmer Cutler Pickering Hale and Dorr LLP, Dec. 21, 2015
  4. Fund Board Views, Derivatives rule proposal; more work for overburdened fund directors, Dec. 14, 2015 (available on Morrison & Forester LLP website)




Nine memoranda

On November 30th, the UK Serious Fraud Office entered into a deferred prosecution agreement with ICBC Standard Bank plc settling charges that the bank failed to prevent employees from bribing government officials in Tanzania.1 As part of the agreement, SEC and DOJ investigations into the same charges were also settled.2 Jones Day noted the “increased cooperation between law enforcement agencies and regulators on each side of the Atlantic.”3 White & Case decried the “convoluted and tortuous process” of obtaining a UK DPA.4 WilmerHale observed that allowing corporate wrongdoers to avoid prosecution poses a “political danger for the SFO,” while the ICBC case was “unlikely” to cause “public or political discontent.”

  1. SFO agrees first UK DPA with Standard Bank, Serious Fraud Office Press Release, Nov. 30, 2015
  2. Standard Bank to Pay $4.2 Million to Settle SEC Charges, Securities and Exchange Commission Press Release, Nov. 30, 2015
  3. Important New Principles Emerge from UK’s First-Ever Deferred Prosecution Agreement and US DOJ Declination, Jones Day, Dec. 2015
  4. Deferred Prosecution Agreements: Would you really want one? White & Case LLP, Dec. 14, 2015
  5. UK’s Serious Fraud Office Secures First Deferred Prosecution Agreement, Wilmer Cutler Pickering Hale and Dorr, Dec. 1, 2015



Six memoranda

On November 30th, the Delaware Supreme Court affirmed a Chancery Court decision holding financial advisor RBC Capital Markets liable for aiding and abetting a breach of duty by Rural/Metro Corporation’s board of directors.1 Shearman & Sterling observed that the decision was one of a recent “spate … closely scrutinizing financial advisor conflicts.”2 Sullivan & Cromwell noted that under the decision, advisors “are not free to act in a manner … contrary to the interests of the board,” while the board “cannot relinquish” its obligation to oversee its advisors.3

  1. RBC Capital Markets, LLC v. Jervis, 2015 WL 7721882 (Del. Nov. 30, 2015)
  2. Delaware Supreme Court Decision in Rural/Metro Affirms $76 million Judgment Against Third-Party Advisor for Aiding and Abetting Breaches of Fiduciary Duty by Board, but Rejects Suggestion of ‘Gatekeeper’ Duties, Shearman & Sterling LLP, Dec. 4, 2015
  3. RBC Capital Markets, LLC v. Jervis: Delaware Supreme Court Affirms Financial Advisor Liability for Aiding and Abetting Unreasonable Sale Process, Sullivan & Cromwell LLP, Dec. 7, 2015


Six memoranda

On October 15th, Sidley Austin noted that two recent CFTC orders1 had “affirmatively asserted that Bitcoin and other virtual currencies” are commodities.2 While the CFTC’s assertion “by itself” was, in the words of Debevoise & Plimpton, “no surprise,”3 Sidley found it “noteworthy” that the CFTC likened Bitcoin to “a precious metal or physical asset” rather than currency. Latham & Watkins opined that the orders “evidence US regulators’ appetite to investigate fraud and other violations linked to cryptocurrency,” and advised readers to “implement strict internal controls … and … comply with relevant regulatory requirements” for cryptocurrency transactions.4



  1. In re Coinflip, Inc., d/b/a/ Derivabit, et al., CFTC No. 15-29, Comm. Fut. L. Rep. P 33538, 2015 WL 5535736 (Sept. 17, 2015)In the Matter of TeraExchange LLC, CFTC No. 15-33 Comm. Fut. L. Rep. P 33546, 2015 WL 5658082 (Sept. 24, 2015)
  2. CFTC Asserts Jurisdiction Over Bitcoin Derivatives, Sidley & Austin LLP, Oct. 15, 2015
  3. In Two Recent Orders, CFTC Holds that Bitcoins Are Commodities, Debevoise & Plimpton LLP, Oct. 5, 2015
  4. Enforcement Trends in Cryptocurrency, Latham & Watkins LLP, Dec. 9, 2015

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