Category Archives: SEC Reporting

Victim of cyber-theft? Maybe you violated the Exchange Act, too

The SEC recently reminded public companies that they have an affirmative obligation to prevent cyber-theft and that failing to do so could mean that their internal controls are ineffective, a violation of the Securities Exchange Act of 1934.

In an October 16, 2018 investigative report describing recent cyber-related frauds against nine public companies, the SEC noted that public companies must maintain a system of internal accounting controls sufficient to provide reasonable assurance that “access to assets is permitted only in accordance with management’s general or specific authorization.” In each of the nine cases,… More

SEC staff clarifies new Form 10-Q requirement

Yesterday the SEC staff issued CD&I 105.09, which clarifies the date by which issuers must comply with the new requirement to present changes in stockholders’ equity in their interim financial statements.  Initially, there was concern that the requirement would be effective shortly before many companies would ordinarily file their Forms 10-Q for the quarter ending on September 30.  The new CD&I clarifies that the staff will not object if issuers comply with the new requirement for the first quarter that begins after the effective date of the new rule,… More

Many new smaller reporting companies eligible for disclosure relief in their next Form 10-Q

Companies that will qualify as “smaller reporting companies” for the first time under the SEC’s recently revised definition should consider whether to take advantage of the simplified reporting requirements that will become available to them on September 10, the effective date of the new rule. For example, a calendar-year issuer that qualified as a smaller reporting company as of June 29, 2018 (the last business day of its second fiscal quarter) can comply with the smaller reporting company disclosure requirements in its Form 10-Q for the third quarter of 2018. … More

SEC Enforcement Action Highlights Need for Careful Analysis of Perquisites and Personal Benefits

On July 2, 2018, the SEC brought a settled cease-and-desist proceeding against The Dow Chemical Company for failing to disclose approximately $3 million in executive perquisites, including personal use of company aircraft, in its proxy statements over five years.  The SEC concluded that Dow failed to adequately train key employees to ensure that the proper standard for perquisite disclosures was being applied and that Dow had inadequate processes and procedures to ensure proper reporting of perquisites.… More

SEC Adopts New Inline XBRL Formatting Requirements for Certain Reports and Registration Statements

On June 28, 2018, the SEC adopted amendments to its eXtensible Business Reporting Language, or XBRL, rules to require operating companies to use Inline XBRL format for financial statement information included in periodic and current reports and certain registration statements. The amendments also eliminate the requirement that companies post their financial statements in XBRL format on their websites.

To submit financial statements in Inline XBRL format,… More

SEC approves higher thresholds for smaller reporting companies

  Yesterday, the Securities and Exchange Commission approved changes to the definition of a “smaller reporting company,” or SRC, that will significantly increase the availability of the less burdensome, scaled disclosure requirements applicable to companies qualifying as SRCs .  The amendments increase the public float threshold for qualification as an SRC from less than $75 million to less than $250 million, in each case regardless of the company’s revenues.  In addition,… More

Increasing Access to Public Markets: Rule 3-13 Relief

In a series of recent public statements (most recently in February 2018), the SEC has encouraged companies to pursue relief under Rule 3-13 of Regulation S-X—the regulation that specifies the form and content of financial statements required by public companies. Pursuant to Rule 3-13, the SEC Staff may permit the omission of financial statements that are otherwise required under Reg S-X or the substitution of such required financial statements with other statements of comparable character.… More

SEC Staff Expands Non-GAAP Relief for Business Combinations

This week the SEC staff expanded relief for the disclosure of non-GAAP financial forecasts used in business combinations.

In these transactions, public companies routinely obtain fairness opinions from an investment bank regarding the value of the consideration to be paid to shareholders, and the fairness opinions normally rely on financial projections provided by the company.  These projections are often prepared in a way that varies from GAAP and,… More

Hyperlinks required for all filed exhibits

Effective September 1, 2017, public companies will be required to include hyperlinks to each exhibit listed in the exhibit index to a registration statement or report. Exhibits filed in eXtensible Business Reporting Language (XBRL) or exhibits filed with Form ABS-EE are excluded from this requirement. This requirement will make all exhibits to a filing, including those incorporated by reference from earlier filings, more easily accessible to investors. Companies should plan for additional review time,… 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

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

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.… More