On August 25, 2023, the SEC issued new compliance and disclosure interpretations (C&DIs) related to (i) the December 2022 Rule 10b5-1 amendments and (ii) the related issuer disclosure requirements. The full text of the Rule 10b5-1 amendment C&DIs and the issuer disclosure C&DIs is available here and here, and our December 2022 blog post regarding the Rule 10b5-1 amendments is available here.… More
Key Takeaways:
Introduction
In August 2000, the Securities and Exchange Commission (“SEC”) adopted Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which, among other things, established an affirmative defense to a charge of transacting in a security on the basis of material nonpublic information (“MNPI”) for trades executed pursuant to a binding arrangement entered into at a time when a person was not in possession of material non-public information about the issuer of the security or the security itself. … More
REMINDER: 2022 Nasdaq Board Diversity Disclosure and D&O Questionnaires
As issuers prepare for the end of the 2021 calendar year and the beginning of the 2022 proxy season, many will soon begin circulating director and officer questionnaires. Nasdaq-listed issuers should consider including new questions regarding the diversity of their directors now. To assist listed issuers, Nasdaq has provided sample questions for inclusion in director and officer questionnaires.… More
As if issuers needed a reminder that it’s always the right time to be thinking about board composition, earlier this month, the SEC approved new Nasdaq rules that will require companies listed on that exchange to collect and report information about the diversity of their boards of directors. Under new Nasdaq Listing Rules 5605(f) and 5606, Nasdaq-listed companies will be required to publicly disclose on their websites or in their annual reports or proxy statements board-level diversity statistics using a template promulgated by Nasdaq and to explain why they do not have at least two (or one in the case of a company with five or fewer directors) diverse directors.… More
On March 26, 2020, the SEC announced that it is providing additional temporary relief to market participants in light of the COVID-19 pandemic. The relief covers (i) parties needing to file a Form ID to gain access to the EDGAR system and (ii) certain company filing obligations under Regulation A and Regulation Crowdfunding.
Temporary Relief from Form ID Notarization Requirement
To use the SEC’s EDGAR system to make required filings,… More
On March 25, 2020, the SEC’s Division of Corporation Finance published CF Disclosure Guidance: Topic No. 9, which provides the Division’s views regarding public companies’ reporting and other obligations under the federal securities laws in light of the current COVID-19 outbreak.
While acknowledging the rapidly evolving and unpredictable nature of the COVID-19 outbreak and the targeted disclosure relief recently provided by the SEC,… More
Following the SEC’s announcement on March 4, 2020 that it was providing conditional relief to public companies affected by COVID-19 for their filing obligations under the federal securities laws, many companies have availed themselves of this relief. 
In addition, several companies have already identified risks related to COVID-19 that are material to their businesses and investors, often noting that the full impact of the global pandemic remains uncertain.… More
Issuers would be well-advised to take note of the SEC’s recently announced $200,000 settlement of an enforcement action brought against Florida-based TherapeuticsMD, Inc., less for the legal issues involved, which present a very straightforward application of Regulation FD, than as a reminder that regulators regularly review analysts’ reports and will not hesitate to investigate and prosecute apparent violations of disclosure rules.
The SEC’s enforcement action focused on two occasions during the summer of 2017 on which TherapeuticsMD executives provided non-public information to sell-side analysts regarding the status of the company’s efforts to achieve FDA approval for its then-leading drug candidate. … More
I
n 2018, the SEC adopted rules requiring the use of Inline eXtensible Business Reporting Language, often referred to as XBRL, for filings including financial statement information and fund risk/return summary information. The Inline XBRL requirements recently became effective (in connection with filing a Form 10-Q for a fiscal period ending on or after June 15, 2019) for operating companies that are large accelerated filers that prepare their financial statements in accordance with U.S.… More
The SEC recently proposed revisions to Regulation S-K to streamline public companies’ disclosures of their business operations, risk factors and legal proceedings. The proposed revisions affect Items 101(a) and (c), 103 and 105 of Regulation S-K.
Among other changes, the proposed rules would revise the requirements related to the general business description by adopting:
The SEC staff has issued supplemental guidance regarding its new rules for the redaction of confidential information from certain exhibits, which take effect today. See our blog post here for more detail on the new rules.
Consistent with prior practice, a company redacting information from a material contract must:
On March 20, 2019, the SEC amended its disclosure requirements to ease reporting burdens for most public companies. While no individual change is particularly noteworthy, the aggregate impact of the changes should generally simplify the reporting process. A few changes will require modest additional disclosures. The most significant changes are:
This past Boxing Day, the SEC delivered another reminder that it remains intensely focused on public companies’ disclosure of non-GAAP financial measures. In an agreed cease-and-desist order released on December 26, 2018, ADT Inc. (ADT) agreed to pay a $100,000 fine to settle an accusation that it failed to comply with Item 10(e) of Regulation S-K. Item 10(e) requires, among other things, that any disclosure of a non-GAAP financial measure in an SEC filing must be accompanied by disclosure of the most directly comparable GAAP financial measure with equal or greater prominence. … More
The Securities and Exchange Commission has finally adopted new rules that will require public companies to include in proxy statements for their annual meetings a description of their hedging policies and practices applicable to employees and directors. These rules were called for by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 but weren’t proposed until February 2015. The new rules will apply to proxy and information statements with respect to the election of directors during fiscal years beginning on or after July 1,… More
Last week, the SEC staff published new compliance and disclosure interpretations clarifying some of the inner workings of exemptions for certain cross-border business combinations, exchange offers and rights offerings. These exemptions are available for specified transactions involving foreign companies whose US ownership falls below 40% or 10% of total ownership, with the latter group being afforded significantly greater relief. When the SEC originally adopting these exemptions, it sought to induce parties to include US investors in transactions where they would typically be excluded in order to avoid the burdens of complying with US securities laws.… More
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
Related-party transactions are often easy to spot: the company is on one side of a contract, and a director or officer, or a company they control, is on the other side. But some transactions are less obvious.
The SEC recently brought a settled proceeding against John D. Schiller, Jr., the former CEO of Energy XXI Ltd., a now-defunct Nasdaq-listed issuer, for failing to disclose millions in personal loans from companies that did business with EXXI or the owners of those companies.… More
On August 17, the SEC adopted amendments to its rules and regulations to simplify public company disclosures by eliminating duplicative, outdated or overlapping requirements. Most of the changes are highly technical, and in many cases SEC rules will still require substantially the same disclosure, although perhaps in a new location. Some of the minor but helpful changes for most companies include:
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
Every day it seems there is another outcry over excessive executive compensation at public companies. This year, for the first time, public companies are disclosing ratios of CEO compensation to median employee compensation, and both the media and politicians are quick to highlight pay ratios in excess of 1,000-to-one as evidence of everything that is wrong with executive compensation.
Yet these complaints have a certain air of unreality to them,… More
As noted in our earlier post Pre-IPO Companies can have disclosure obligations too, a recent Rule 701 enforcement action by the SEC has served as a reminder of the pitfalls that exist for private companies with increasing valuations and robust equity compensation programs. Happily, some relief is on the way based on a provision included in the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act.… More
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
A recent SEC enforcement action should serve as a potent reminder to pre-IPO and other private companies that SEC rules sometimes impose affirmative disclosure obligations on private companies that offer and sell securities to their employees.
Most well-advised start-ups and other emerging companies know that they need an exemption from the registration requirements of the Securities Act of 1933 in order to grant options or issue other equity awards to their employees.… More