I don’t know very much about the federal budget process, but I do know that any budget proposed by the White House – regardless of its occupant – isn’t worth spending time on, and that by the time the budget is passed, it often looks
I don’t look at my RSS feed or my Twitter account until I’m finished with my day’s work, so it wasn’t until last night that I read Broc Romanek’s blog post announcing his retirement from thecorporatecounsel.net. He’s already received a number of gracious and, I am sure, sincere paeans, including from my friend and mentee…
Although Dodd-Frank was enacted in 2010, the rule needed to implement one of its provisions – the requirement to disclose hedging policies – only recently took effect. In fact, for calendar-year companies, 2020 will be the first year in which the proxy statement will have…
In recent years, the SEC has made a number of incremental changes to make disclosures more effective – not only more meaningful and user-friendly for investors, but also helpful to those of us who prepare disclosures for our companies and clients.
The drive to make disclosures more effective seems to have kicked into a higher gear with the August 8 issuance of a proposal that may result in the most significant changes in the disclosure rules in more than 30 years. The proposal would modify some key provisions of Regulation S-K, and in doing so would move considerably closer to a principles-based approach to disclosure. Some details follow.…
Continue Reading Disclosure effectiveness goes into high gear
I recently came across an article reporting that the interim president of a state university system had failed to report a number of corporate board seats on his ethics forms. That got me thinking about the forms he may have been asked to complete, which in turn got me thinking about D&O questionnaires.
Getting directors and officers to accurately complete and return questionnaires in a timely manner is one of the most frustrating tasks faced by corporate secretaries. Years ago, I was speaking at a program for aspiring corporate governance nerds, when a young aspirant asked me if I had the secret to getting this task done. If memory serves me correctly, my response was to the effect that if I had the answer to her question, I could retire.
However, I sometimes think that people who circulate questionnaires are their own worst enemies. For example, a recent study reported that D&O questionnaires averaged 40 pages and 65 questions. That means that some, perhaps many, questionnaires are far longer. It’s unrealistic to expect someone with a life – much less a day job – to devote the amount of time necessary to complete a 40-page (or longer) questionnaire, particularly when many questions don’t lend themselves to simple “yes” or “no” answers.…
Continue Reading The lowly D&O questionnaire
As our readers know, I am irritated by Congress’s penchant for naming bills so as to create nifty acronyms. And for including provisions that have nothing to do with the name or the acronym. However, I can better put up with these irritants when the legislation – and SEC regulations implementing the legislation – create a good result.
Such is the case with the FAST Act. It stands for “Fixing America’s Surface Transportation Act,” and despite its acronymic name and its questionable connection to securities law, it contained some provisions to make disclosures more effective and the process by which disclosures are made somewhat easier.
These benefits were engraved in stone by the SEC on March 20, when it adopted a series of rules under the FAST Act. The rules provide for the following types of relief:…
Continue Reading Disclosure effectiveness on a FAST track (get it?)
SEC Rule 701 exempts non-reporting companies from registering securities offered or sold to employees, officers, directors, partners, trustees, consultants, and advisors under compensatory benefit plans or other compensation agreements. As discussed in an earlier post, under the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) passed by Congress in 2018, the threshold for the aggregate sales price of securities sold during any consecutive 12-month period that triggers additional disclosure requirements under Rule 701 was increased from $5 million to $10 million. What may have gone unnoticed was that the SEC has adopted final rules to implement EGRRCPA and has published a concept release “soliciting comment on possible ways to modernize rules related to compensatory arrangements in light of the significant evolution in both the types of compensatory offerings and the composition of the workforce since the Commission last substantively amended these rules in 1999.”
Continue Reading The SEC modernizes exempt compensatory offerings (with more changes in the works)
As securities lawyers know, disclosure is generally regarded as the best disinfectant. However, in a recent enforcement action, the SEC determined that disclosure is not always enough. Specifically, when it comes to internal controls over financial reporting, or ICFR, companies need to actually fix the problems they disclose.
In the action, the SEC cited…
On December 19, 2018, the SEC adopted final rules allowing reporting companies to rely on the Regulation A exemption.
How did we get here?
The SEC adopted a new – and greatly improved – Regulation A, known as Reg A+, in 2015. As noted in previous posts (see here and here) Reg A, provides an exemption from registration under the Securities Act for smaller public offerings, but for many years was seldom used due to cost restraints and small financing caps. The 2015 amendments, adopted in response to the JOBS Act, remedied these shortcomings, updating Reg A to make it a more viable capital-raising tool.
The main benefits of Reg A+ include the following:
- Companies can raise up to $50 million every 12 months via two overlapping tiers.
- Tier 1: offerings of up to $20 million in a 12-month period.
- Tier 2: offerings of up to $50 million in a 12-month period.
- Insiders can sell their shares in a Reg A+ offering.
- Investors in a Reg A+ offering have immediate liquidity – they can sell their shares once the offering is completed and don’t have to hold them for a period of time.
- Some Reg A+ offerings are exempt from state securities or “blue sky” laws.
- Some Reg A+ offerings are easier to list on an exchange.
- Reg A+ can be used for merger and acquisition transactions.
Following a tweet from the President last August, the SEC has begun the process of reviewing the existing quarterly reporting regime and will be further exploring possible changes that may ease administrative and other burdens on public companies. Specifically, the President “asked the SEC to study!” whether less frequent reporting for publicly traded companies would “allow greater flexibility and save money.” This is not a new issue on the SEC’s radar screen, but it has recently regained traction– the SEC issued a concept release in 2016 soliciting public comments more specifically on reporting frequency and the current quarterly reporting process.
The request for comments, which can be viewed here, asks for public input on several questions related to the existing reporting regime. One of the more interesting questions on which the SEC is seeking input is whether the practice of public companies issuing forward earnings guidance places undue pressure and focus on short-term results and negatively impacts long-term results. Several commentators have expressed concern on this issue over the years and believe management teams with a longer-term view would be better stewards of investor capital. Many of the other specific questions asked by the SEC in its request for comments relate directly to the current reporting process and whether changes could be made that balance the interests of investors while making the reporting process more efficient, including, among other things:…
Continue Reading SEC seeks public comments on quarterly reporting for public companies