With Chair Jay Clayton and Corp Fin Director Bill Hinman now in office for several months, the SEC seems to be gaining traction in a number of areas of interest to
public companies.

Pay Ratio Disclosures

As we noted in a Gunster E-Alert, on September 21, the SEC issued interpretations to assist companies in preparing the pay ratio disclosures called for under Item 402(u) of Regulation S-K.  The consensus (with which we agree) is that the interpretations will make it much easier for companies to prepare their ratios and related disclosures and hopefully to reduce litigation exposure associated with those disclosures.

Comment Letters

Second, Corp Fin will be modifying the process for reviewing and issuing comment letters.  The changes result from a recent review of the comment process discussed in a September 13 report and are as follows:

  • developing a process to trace all comments to examiner and reviewer reports before issuing comment letters;
  • establishing a mechanism to ensure that the Staff uploads all examiner and reviewer reports before issuing comment letters; and
  • providing guidance on how examiners and reviewers should document oral comments provided to companies during disclosure reviews.

(Hats off to Randi Morrison of the Society for Corporate Governance for bringing this to our attention.)

I note that the last time Corp Fin tweaked its comment letter process (I believe under the aegis of then-Corp Fin Director Meredith Cross), the changes were very positive.

Small and Emerging Companies

The SEC’s Advisory Committee on Small and Emerging Companies met on September 13.   As outlined in its draft report, the Committee is making a number of recommendations to the SEC to benefit those companies and the capital-raising process in general.  The recommendations include:

  • providing more regulatory certainty for finders, private placement brokers and platforms that are not registered as broker-dealers;
  • expanding the definition of “accredited investor” to take into account measures of sophistication, regardless of income or net worth;
  • conforming the disclosure requirements applicable to Smaller Reporting Companies to those applicable to Emerging Growth Companies; and
  • preempting state regulation of secondary trading in securities of Tier 2 Regulation A issuers that are current in their ongoing reports.

Of course, there is no assurance that the Advisory Committee’s recommendations will be considered, much less adopted.  So as is the case with the SEC’s Regulatory Flex Agenda, Rulemaking Petitions submitted to the SEC and other initiatives, it’s wise not to expect too much too soon – if ever.

Watch this space for further details!