SEC

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It’s early days, but I’m pleased to report that the optimism I expressed about the SEC in the aftermath of the 2024 election may have been warranted.  At a minimum, the actions taken by the SEC since January 20 demonstrate support for the issuer community, an interest in pursuing the traditional goals of the SEC, and a willingness to help those of us who advise clients with respect to SEC rules and the many interpretations of those rules.

What the Commissioners Are Saying

First, on January 27, Commissioner Hester Peirce spoke before the Northwestern Securities Regulation Institute.  Her remarks were witty (as always) and, for the most part, spot on, to the point that I considered copying them here.  (I haven’t, though I have copied some of her choice remarks below.)  I do take issue with a few of her remarks (also as always), including her view that a corporation’s singular focus should be on building value for shareholders; it seems to me that it is not possible to build value without focusing on other constituencies such as customers, suppliers, and – yes – even the community at large.  Those matters aside, Ms. Peirce made the following good points, among others:Continue Reading So Far, So Good

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Image by Gerd Altmann from Pixabay

For those of us who are unhappy or worse about the outcome of the 2024 presidential election, fearing (among other things) that we are about to enter a modern incarnation of the dark ages, I respectfully suggest that the time has come to light a candle rather than curse the darkness.

The candle is rather limited and simple: whatever else may happen during the next Trump administration, there’s a fair chance that those of us who practice securities law will find the SEC a lot more pleasant (or less unpleasant) to deal with.Continue Reading Lighting a Candle

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Image by Ryan F from Pixabay

For many years, I have urged companies to consider going beyond the bare minimum disclosures required by SEC rules – in appropriate circumstances, of course.  In my experience, providing more disclosure than what is specified in the rules can generate positive feedback or even praise from investors and other stakeholders.  And, in fact, many companies…

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Image by morzaszum from Pixabay

One of the things I learned as young securities lawyer was that securities offerings can be made only by prospectus.  Accordingly, one of the first things we did whenever we embarked on an IPO was to send a memo to our clients reminding them of the limitations imposed on communications under the securities laws and…

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Travel on corporate jets is alluring.  I’ve had the pleasure, and it really is a pleasure.  No TSA, nobody squishing you on both sides.  No worry about checked bags not getting there, and so on.  It’s no wonder that people love it so much.

However, there can be too much of a good thing.  My experience…

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Background

On October 26, 2022, the SEC adopted final clawback rules consistent with the requirements of the Dodd-Frank Act. The new rules direct the national securities exchanges to establish listing standards requiring companies to adopt, disclose, and enforce policies to recoup, or “clawback,” incentive-based compensation erroneously awarded to executive officers.  Based upon recent SEC action, listed companies will have until December 1, 2023 to adopt compliant clawback policies. The following summarizes some key provisions of the final rules and the decisions that companies will have to make as they finalize their policies by the deadline.

Adopting Compliant Policies 

Companies that do not have existing clawback provisions in place must adopt policies that comply with the standards established by the exchanges. Companies that have clawback provisions in place must determine if and how those policies differ from what is required and either modify their existing policies or adopt a new compliant policy on a stand-alone basis. Questions to help integrate or create compliant policies include: Continue Reading The SEC’s New Clawback Rules: The Devil’s in the Details (and There Are Lots of Details)

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The SEC recently enacted a new exemption from registration for brokers who provide certain services in M&A transactions. The new exemption, which became effective on March 29, 2023, largely confirms and codifies prior SEC guidance that was provided in a January 31, 2014 No Action Letter and will provide some comfort and certainty to qualifying M&A brokers and their advisors who work in this arena. However, it may require some M&A brokers to register with the SEC despite the fact that they were not previously required to do so.

The new exemption from SEC registration, which is contained in new Section 15(b)(13) of the 1934 Act, incorporates much of the language of the 2014 No Action Letter, but it imposes size limitations that were not contained in the 2014 No Action Letter. The SEC withdrew the 2014 No Action Letter on March 29, 2023.

Section 15(a) of the Securities Exchange Act of 1934 generally requires any person engaged in the business of carrying out securities transactions for other parties to register with the SEC. Such registration can be costly, intrusive, and time consuming, and it probably does not create a high level of additional consumer protection or benefits in the M&A context. This has consistently been an area of concern, however, since unregistered brokers can be subject to severe penalties such as monetary fines and disgorgement of fees that they have received. As a result, most M&A brokers and their advisors have relied on the 2014 No Action Letter to justify not registering with the SEC. This has largely been a successful strategy absent other disqualifying factors, but because no action letters can be reversed or changed, participants were unable to get totally comfortable.Continue Reading New SEC Exemption from Registration for M&A Brokers: A Positive Step, but Not for All