SEC Report on ICOs and Token Sales – “If It Sounds Too Good to be True…”

On July 25, 2017, the SEC issued an investigative report to advise those who have used or may consider using a virtual organization or capital raising entity that uses distributed ledger or blockchain technology to facilitate capital raising that these activities are subject to U.S. federal securities laws. The SEC also released an investor bulletin to educate and caution potential investors about this new and growing type of capital raising.… More

Direct Listing – Alternative to an IPO?

The New York Stock Exchange recently re-filed a proposal to permit direct listings, where private companies list a class of shares without an IPO or other registered offering.  The rule change was likely prompted by apparent market interest in such a path to “going public” coupled with the NYSE’s belief that its rival, The Nasdaq Stock Market, already permits direct listings.

If approved by the SEC,… More

SEC Expands Confidential Filing Process

Effective today, July 10, 2017, the SEC’s Division of Corporate Finance will accept draft registration statements for review on a confidential basis from an expanded group of issuers. The confidential submission process, which was formerly limited to IPOs by emerging group companies, or EGCs, is now available to most issuers and also in conjunction with follow‑on offerings in the first year after the IPO or an initial listing on a stock exchange.… More

Happy 5th Anniversary to the JOBs Act—EGCs Should Prepare for New Disclosure Obligations

The JOBs Act was signed into law on April 5, 2012 and created Emerging Growth Companies, or EGCs, which are eligible to comply with reduced disclosure and other requirements under the federal securities laws.

The definition of an EGC, which in general is a company with annual gross revenues of less than $1 billion during its most recent fiscal year, is expansive.   Over 80% of IPOs since the JOBs Act have been completed by EGCs. … More

Nasdaq Stockholder Approval of Equity Compensation—Trap for the Unwary

Public companies commonly use their equity as a component of incentive compensation awarded to their executives and other employees.

Under Nasdaq Listing Rule 5635(c), prior stockholder approval is generally required before a listed company may issue shares under an equity compensation plan or other arrangement.  To satisfy this requirement, public companies typically adopt and obtain stockholder approval of an incentive plan that provides for a reserve of shares that may be issued pursuant to various enumerated types of awards.… More

Return to Sender—No Need to Mail Your Glossy Annual Report to the SEC This Year

The Staff has confirmed that the (often forgotten) requirement that public companies mail seven copies of their glossy annual report to the SEC may be satisfied by posting an electronic version of the report on the company’s corporate website.  The report must remain accessible for at least one year after posting.

Public companies are already required to post proxy materials, which include proxy statements on Schedule 14A,… More

Don’t Forget Your Say on Frequency Proposal

Decisions, decisions.

Instead of requiring an annual “say on pay” vote, rules implemented pursuant to the Dodd‑Frank Act require that an advisory vote on executive compensation occur at least once every three years.  To further complicate matters, at least once every six years stockholders must also be given an opportunity to vote separately on whether the “say on pay” vote should occur every year, every other year or every three years.… More

Newly Public Companies May Face Immediate Governance Challenges

Investor advocates are turning the spotlight on the corporate governance practices of newly public companies that they regard as hostile to shareholder interests.  In connection with their IPOs, most companies adopt customary defensive measures to protect themselves from activist investors, who might otherwise take advantage of their typically smaller market capitalizations to try to seize control of the company.  These measures often include a classified board of directors, whose terms are staggered over three years. … More

Relying on Last Year’s Risk Factors is Risky

The SEC routinely advises companies drafting risk factors to start from a blank sheet of paper and avoid boilerplate.  As with many best practices, this recommendation is often aspirational.

Most companies do, however, take care in reviewing last year’s risk factors to make any necessary updates and additions.  As public companies prepare their annual reports on Form 10-K for fiscal 2016, they should consider the blank sheet of paper and think carefully about how their business risks are likely to change in 2017 as a result of the new political environment.… More

The Most Wonderful Time of the Year…Updating Your Annual D&O Questionnaires

Public companies listed on NASDAQ are now required to disclose annually certain payments (if any) made by third parties to their directors or director nominees.

D&O questionnaires related to the annual meeting of stockholders should include a question to determine whether there are any agreements, arrangements or understandings between a director or director nominee and any person (other than the company) relating to compensation or other payments (including non-cash payments) in connection with the director’s or director nominee’s service or candidacy as a director.