U.S. National Archives
U.S. National Archives

If you have ever had to search for an exhibit originally filed with the SEC years ago, you know it can take forever, particularly when the exhibit consists of an original document that has been amended several times, each amendment having been separately filed.

You will soon have to search no more, because the SEC is about to make it easier for you.  On March 1, the SEC adopted a final rule requiring public companies to include a hyperlink to each exhibit listed in the exhibit index to all filings subject to Item 601 of SEC Regulation S-K.  The rule will take effect on September 1 for most companies.  (“Smaller reporting companies” and companies that are neither “large accelerated filers” nor “accelerated filers” and that submit filings in ASCII get a one-year reprieve.)

Continue Reading The missing (hyper) link

Internet Archive Book Images
Internet Archive Book Images

As noted in a recent post, the future of SEC regulation – and perhaps even of the SEC itself – is uncertain in the wake of Donald Trump’s election.  However, the SEC Staff, a smart, decent and hardworking group, continues to stick to its knitting despite the turmoil.

The most recent example of the Staff’s diligence is a “Report on Modernization and Simplification of Regulation S-K – As Required by Section 72003 of the Fixing America’s Surface Transportation Act”.  The Report was issued on Thanksgiving Eve, and it’s no turkey.  Don’t be put off by the incredibly long title or by the fact that SEC regulations have nothing to do with Surface Transportation.  The Report provides a good summary of some actions impacting Reg S-K that have been taken to date, and the Staff’s recommendations for actions down the road (assuming there is a road).

Here are some of the highlights of things that may be on the come: Continue Reading SEC Staff’s Thanksgiving Gift: No Turkey

6650058825_a23c5c0d35_qIn the midst of the chaos of the presidential election, vicious attacks from Senator Warren, and goodness knows what else, the SEC continues to crank out requests for comment, rules and interpretations.

It’s the latter category that has attracted our attention lately, as the Staff has focused on some technical matters that securities counsel have been pondering for a while.

401(k) plans with a self-directed “brokerage window”

First, in September, the SEC published updated Compliance and Disclosure Interpretations, including one on 401(k) plans that feature a so-called “brokerage window”.  It’s been generally assumed that if a plan does not include an employer stock fund in which employee funds can be invested, Securities Act registration is not required.  This CDI says “maybe not” – if the plan (a) permits employer and employee contributions to be invested through a self-directed “brokerage window”, and (b) the plan does not prohibit investments in employer stock through the window, registration may be required.

Continue Reading The SEC Keeps On Keeping On

3003307653_f29d6e3b0c_zIf you’ve been reading our posts (and probably even if you haven’t), you should know by now that the SEC has launched a “disclosure effectiveness” initiative and has already taken actions to make some disclosures more “effective”.  One such action was the publication of a 341-page “concept” release asking hundreds of questions about whether and how to address a wide range of disclosure issues.  More recently, the SEC has proposed rule changes that would eliminate some particularly pesky disclosure burdens.

Continue Reading Moving Rapidly into the 90s

Photo by Ryan Smith
Photo by Ryan Smith

On July 14, the SEC Staff published a new Compliance and Disclosure Interpretation clarifying when an investor who may not be entirely passive may nonetheless remain eligible to file a beneficial ownership report on Schedule 13G rather than Schedule 13D.  Anyone who has tried to dance on the head of that pin will be relieved, particularly given the far greater disclosure burdens associated with the latter filing.

All other things being equal, the rules specify that a shareholder may file on the less burdensome Schedule 13G only if it acquired or is holding the subject equity securities with neither the purpose nor effect of changing or influencing control of the issuer.  However, the rules are not clear as to whether some actions (or an intent to engage in those actions) may make the 13G unavailable.

Continue Reading To 13G or not to 13G

The United Kingdom has a new Prime Minister.  Her name is Theresa May, and she’s a member of the

Photo by Scott P
Photo by Scott P

Conservative Party.  Remember that, because what you are about to read will probably lead you to think otherwise.

In a speech made a couple of days before Ms. May became Prime Minister, she said that she would pursue the following actions if she were to become Prime Minister: Continue Reading What happens in England

Photo by brennahRO
Photo by brennahRO

In recent years, the SEC – frequently due to Congressional mandates – has reduced the amount of disclosure that smaller public companies must provide.  Most recently, on June 27, the SEC proposed yet another rule that would reduce disclosure burdens by enabling more companies to qualify as “smaller reporting companies,” or “SRCs.”

The proposal would expand the definition of SRCs to cover registrants with less than $250 million in public float and registrants with zero public float if their revenues were below $100 million in the previous year.

If your company is not currently an SRC and you are wondering what relief you might get if you were, the proposing release lays it out in an easy-to-read table: Continue Reading Smaller gets bigger

4532941987_9004c36616_mIn a June 27 speech to the International Corporate Governance Network, SEC Chair Mary Jo White engaged in a bit of full disclosure herself:

“I can report today that the staff is preparing a recommendation to the Commission to propose amending the rule to require companies to include in their proxy statements more meaningful board diversity disclosures on their board members and nominees where that information is voluntarily self-reported by directors.”

As noted in her remarks, the SEC adopted the current disclosure requirements on board diversity in 2009.  However, the requirements were added to other board-related disclosure requirements at the last minute, when it was reported that Commissioner Aguilar refused to support the other requirements unless diversity disclosure was also mandated.  As a result, the diversity requirements were never subjected to public comment, did not define “diversity,” and seemed to require disclosure only if the company had a diversity “policy”.   When companies failed to provide the disclosure because they had no policy, the SEC clarified that if diversity was a factor in director selection then, in fact, the company would be deemed to have a policy, thus requiring disclosure.

Continue Reading Coming soon to an SEC filing near you: board diversity (but not sustainability…for now)

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Photo by Rachita Singh

A little over two years ago, the Council of Institutional Investors (“CII”) asked the SEC to review its proxy disclosure rules related to director compensation received from third parties, which we had blogged about here. At the time, the CII was concerned that the existing proxy rules did not capture compensation that may be paid to directors serving on the board of a public company by a third party, such as a private fund or an activist investor, which are typically referred to as “golden leashes.”

In its letter to the SEC, the CII cited concerns that compensation under golden leash arrangements is not generally covered by the existing proxy disclosure rules, but could be material to investors due to the potential conflicts of interest arising under such arrangements. We had noted many of these issues in a prior blog post discussing the performance-based compensation arrangements of hedge fund-nominated directors for the boards of Hess Corporation and Agrium, Inc. in 2013. As we predicted would be the case, nothing really transpired on this topic in the wake of the CII’s request. That is until recently, when Nasdaq filed a proposed rule change, subsequently approved by the SEC, attempting to address this issue. Continue Reading Nasdaq-listed companies must now disclose director “golden leash” arrangements

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© Michael Sutton-Long

In recent weeks, the SEC has given public companies some new menu items, including the following:

  • On June 1, the SEC adopted an “interim final rule” that permits companies to include a summary of business and financial information in Annual Reports on Form 10-K.  The rule implements a provision of the Fixing America’s Surface Transportation Act, or FAST Act, in keeping with the new trend to give statutes names that someone thinks make nifty acronyms. (Of course, the connection between this rule and surface transportation remains a mystery.)
  • On June 13, the SEC issued an order permitting companies to file financial statement data in a format known as “Inline XBRL” rather than filing such data in exhibits to a filing.

Here is a quick review of these new menu items.

The new, improved 10-K summary – The rule permitting a 10-K summary is interesting in several respects.  First, companies have long been able to provide summaries; in other words, there doesn’t seem to have been any reason for the “new” rule.  Second, as noted, it permits but does not require the use of summaries; thus, companies that have not provided summaries in the past and don’t want to now don’t have to. Continue Reading The SEC’s summer menu