Category Archives: Uncategorized

GE Agrees to Pay $200 Million Penalty to Settle SEC Enforcement Action for Disclosure Violations

Last month, General Electric agreed to pay a $200 million penalty to settle an SEC enforcement action arising from alleged disclosure violations concerning the company’s power and health insurance businesses.  According to the SEC’s order, between 2015 and 2017, GE did not disclose that the profits it reported for those segments were largely attributable to changes the company made to its accounting practices in order to mask significant challenges that those business lines were facing. … More

“Finders” Operating in Massachusetts Should Beware the SEC’s Proposed Relief

  • The SEC recently proposed to exempt certain finders from federal requirements to register as a broker
  • Massachusetts regulators are opposed to the relief and retain state remedies for unregistered broker activity

The SEC recently proposed to grant an exemption to certain “finders” who would otherwise be required to register as brokers under the Securities Exchange Act of 1934.… More

Primary Direct Listings

What you need to know about this IPO alternative

On December 22, 2020, the Securities and Exchange Commission (SEC) approved a NYSE rule that permits an issuer, at the time of an initial listing on the NYSE, to conduct a primary offering as part of a direct listing without conducting a firm commitment underwritten offering.  On the same date, Nasdaq submitted a substantially similar rule proposal that would,… More

SEC Brings First Enforcement Action Against Issuer for Disclosures About Financial Effects of COVID-19

On December 4, 2020, the SEC brought its first case charging a public company, The Cheesecake Factory, with making misleading disclosures about the effects of COVID-19 on its business operations and financial condition.  The agency has made explicit since January that it is closely focused on this issue, and its settled action against The Cheesecake Factory, which agreed to pay a $125,000 penalty, signals that it will target issuers for failing to provide fulsome disclosure about the negative impacts of the pandemic.… More

SEC Adopts Amendments to Rule 14a-8 Eligibility Standards for Submission of Shareholder Proposals

The Securities and Exchange Commission (SEC) adopted amendments to Exchange Act Rule 14a-8, effective January 4, 2021 increasing the economic interest of the shareholder/proponent for eligibility to submit a shareholder proposal for inclusion in an issuer’s proxy statement for its shareholders’ meetings. A link to the adopting release as published in the Federal Register on November 4, 2020 is available here.

These are the first significant amendments to Rule 14a-8 in over 35 years.… More

SEC Targets Issuers and Officers for Disclosure Violations Through Data Analytics

Just before the close of its fiscal year, the Securities and Exchange Commission (SEC) brought three noteworthy financial reporting cases against issuers that resulted from the agency’s increasingly sophisticated use of risk-based data analytics to detect disclosure violations.  On September 28, 2020, the SEC filed settled actions against two issuers, as well as two officers of one of them, for falsifying their reported earnings per share (EPS).  These actions,… More

SEC Amends Whistleblower Rules

On September 23, 2020, the Securities and Exchange Commission (SEC), in a 3-2 vote, approved several significant amendments to, and interpretive guidance on, the rules governing its whistleblower program.  Most controversially, the SEC adopted the position that it has discretion to reduce the largest whistleblower awards based upon their size.  The amendments, first proposed in 2018, have generated substantial opposition from the Are Whistleblowers in Legal Danger?plaintiffs’ bar and within the Commission,… More

SEC Amends “Accredited Investor” Definition

On August 26, 2020, the Securities and Exchange Commission (“SEC”) amended the definition of “accredited investor,” one of the principal tests for determining eligibility for participation in private placements of securities. The amendments are designed to identify more effectively the institutional and individual investors that have the knowledge and expertise to participate in private placements, not only based on measures of income or net worth, but also based on defined measures of professional knowledge,… More

SEC Focus on Executive Perk Disclosure Continues

In June 2020, the Securities and Exchange Commission settled charges with insurance company Argo Group International Holdings, Ltd. for failing to disclose perks and benefits received by its former chief executive officer.  Per the SEC order, Argo failed to report over $5.3 million in perks that its CEO received between 2014 and 2018 in violation of federal securities law. These benefits included personal use of corporate aircraft, helicopter trips,… More

SEC Revises Financial Statement Disclosure Requirements for Acquisitions and Dispositions

The SEC recently amended its disclosure requirements for historical and pro forma financial statements arising from acquisitions and dispositions.[1] While the revisions are fairly technical, overall they should reduce disclosure burdens and make it easier for public companies to pursue these transactions. The revisions also provide a useful reminder that public companies must sometimes disclose financial information even for very small acquisitions and should therefore strive to obtain reliable financial statements in every acquisition.… More

Nasdaq Provides Limited Relief to Facilitate Near-Term Capital Raising

The Nasdaq Stock Market has adopted a new rule, Rule 5635T, intended to provide limited, temporary relief from the requirement to obtain stockholder approval for certain capital-raising transactions during the COVID-19 pandemic. Although the rule will be effective only until June 30, 2020, it should provide welcome relief to Nasdaq-listed companies eager to raise funds as quickly as possible to maintain operations during the pandemic.

Ordinarily, a public company seeking to issue more than 20% of its outstanding shares at a below-market price (other than in an underwritten public offering for cash) would have to obtain stockholder approval for the issuance.… More

COVID-19 Related Due Diligence for Life Sciences Companies

Equity Capital Markets are quiet right now given the COVID-19 pandemic. Less than a handful of IPOs priced last week and IPO activity is down almost 20% on a year over year basis. Life sciences initial public offerings have been a rare bright spot in an otherwise dim market.

The investment banks underwriting these transactions have had to expand their due diligence questions in light of the COVID-19 pandemic and the way it has transformed the economy,… More

SEC gives Issuers Added Flexibility to Adjust Annual Meetings in Light of COVID-19

As efforts to contain the spread of COVID-19 gain steam, companies may consider whether to hold a virtual annual meeting rather than a traditional in-person meeting.

To that end, the SEC staff has offered public companies flexible options to switch to a virtual meeting (or otherwise reschedule or relocate a meeting), even if they have already filed proxy materials and given notice of the meeting at a particular time,… More

SEC Amends “Accelerated Filer” and “Large Accelerated Filer” Definitions

On March 12, 2020, the SEC announced that it has adopted amendments to the “accelerated filer” and “large accelerated filer” definitions to “more appropriately tailor the types of issuers that are included in the definitions, thereby reducing unnecessary burdens and compliance costs for certain smaller issuers while maintaining investor protections.”

The amendments will exempt smaller reporting companies (SRCs) with less than $100 million in annual revenues from the requirement that their outside auditors attest to,… More

And the beat goes on . . . Nasdaq comments on the shutdown

Proving that where there’s a will, there’s a way, the U.S. capital markets continue to push forward as the political stalemate at the heart of the federal government shutdown continues.  A temporary solution to the shutdown appears to be at hand but in the spirit of “then what?” we want to keep you up to date.  Acknowledging the obstacles created by its inability to review registration statements and declare them effective during the course of the shutdown,… More

2019 10-K and Proxy Season: A couple of reminders

During this ever-lengthening government shutdown, it’s easy to forget that 2018 was a big year for changes to the SEC’s disclosure regime, which companies will need to keep in mind as they prepare their 2019 10-Ks and proxy statements.  In particular, in August, the SEC adopted its Disclosure Updates and Simplification rules, which eliminated some duplicative, outdated and  overlapping disclosure requirements (see our post here), and in June it adopted amendments to the smaller reporting company definition,… More

Regulators increase scrutiny of ICO advertising

Although the SEC has been focusing substantial enforcement attention on companies that are conducting illegal coin or token offerings, it has not stopped there.  This blog post by our partner Neil Austin makes clear that the SEC and other regulators are paying attention to illegal advertising or promotion of these offerings by celebrities and other endorsers.  By now it should be crystal clear that anyone considering an ICO or other token offering should be seeking comprehensive legal advice about how to conduct the offering without tripping over a host of legal requirements.… More

Government Shutdown: SEC Impact

In light of the risk of an imminent government shutdown, now is a good time to review the SEC’s “Operations Plan under a Lapse in Appropriations and Government Shutdown.” While the Operations Plan only covers a total government shutdown and not a partial shutdown (which occurred in 2013), the Operations Plan notes that:

  • the SEC’s EDGAR system will remain fully functional as long as funding for the contractor remains available through permitted means;…
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