In our 2018 SEC year in preview post, we called attention to an expected increase in SEC cybersecurity enforcement action. The SEC has certainly lived up to the billing throughout 2018, which was the first full year in existence for the SEC’s new Cyber Unit. In particular, the Cyber Unit and the SEC’s Enforcement Division focused on three types of enforcement actions: (1) stopping unregistered and/or fraudulent trading of digital assets,… More
The SEC’s Division of Corporation Finance has posted helpful FAQs about the impact of the government shutdown on registration statements for public offerings. During the shutdown, the SEC will not declare registration statements effective, but companies still have several options that may enable them to pursue their offerings.
Well-known seasoned issuers can continue to file automatically effective registration statements, and companies with already effective shelf registration statements should be able to complete a takedown unless the terms of the offering would require the issuer to file a post-effective amendment.… More
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in August, the SEC adopted its Disclosure Updates and Simplification rules, which eliminated some duplicative, outdated and overlapping disclosure requirements (see our post here), and in June it adopted amendments to the smaller reporting company definition,… More
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
Schultz “Jason” Chan, former director of biostatistics at Akebia Therapeutics, Inc. (Nasdaq: AKBA), was sentenced to three years in prison following his conviction for insider trading. Chan was convicted of providing material non-public information about Akebia to former Merrimack Pharmaceuticals (Nasdaq: MACK) employee Songjiang Wang. Wang was also convicted of insider trading based on providing material non-public information about Merrimack to Chan; Wang is set to be sentenced on November 13,… 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
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
A recent case offers a fresh reminder that directors must satisfy their fiduciary obligations when setting their own compensation.
In a derivative action against the non-employee directors of OvaScience, Inc., a stockholder alleged that the non-employee directors had breached their fiduciary duties and wasted corporate assets by paying themselves excessive compensation. In 2015, for example, all of OvaScience’s non-employee directors received compensation of at least $300,000 (substantially all of which represented the fair value of equity awards granted during the year),… 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