A recent SEC order found that two executives of Cheetah Mobile Inc. engaged in illegal insider trading when selling shares under a purported 10b5-1 trading plan. The SEC found that they established the plan after learning of a significant drop-off trend in advertising revenues from the company’s largest advertising partner (the AdPartner) that the company had not yet disclosed. They then sold 96,000 American Depository Shares under the plan and avoided losses of approximately $203,290 and $100,127, respectively, by making those sales prior to disclosure of the trend and its effect.
This post is based on an article by Cathryn R. Benedict and Philip B. Wright, Excise Tax on Share Repurchases: A Provision Searching for Its Purpose, 63 Tax Mgmt. Memo. No. 19 (Sept. 12, 2022).
As discussed in our November 17, 2021 post, management of public companies are required to use universal proxy cards for shareholder meetings involving most election contests held after August 31, 2022. This means that both companies and activists have to include all director nominees on their respective proxy cards. The new SEC rules also require inclusion of “against” and “abstain” voting options where permitted by state law. A detailed description of the new rules is contained in the above-linked post.
More than seven years after their original proposal, the SEC adopted new rules requiring companies to disclose metrics reflecting the relationship between executive compensation actually paid and the company’s financial performance. Mandated by the Dodd-Frank Act in 2010, the rules were passed on August 25, 2022 by a divided 3-2 vote.
All Nasdaq-listed companies must now disclose a board diversity matrix by the later of (1) August 8, 2022, or (2) the date the company files its proxy statement for the 2022 annual meeting of shareholders (or, if companies do not file proxy statements, in their annual report on Form 10-K or 20-F). Companies may provide the disclosure in their proxy statement (or if companies do not file a proxy, on Form 10-K or 20-F), or on the company’s website. Nasdaq’s website provides examples of acceptable and unacceptable disclosures.
It has now been 20 years since the historic collapse of WorldCom, Inc. (“WorldCom” or the “Company”). A review of the WorldCom collapse yields some continuing lessons for corporate counsel.