On August 25, 2023, the staff of the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (the “SEC") issued five new Compliance and Disclosure Interpretations (“C&DIs") regarding the SEC’s recent Exchange Act Rule 10b5-1 amendments. The new C&DIs address how to calculate the required cooling-off period; how 401(k) plans interact with the Rule 10b5-1 affirmative defense in certain circumstances; when the Rule 10b5-1 check box on Form 4 applies; and when disclosure of plan adoption and termination is required.
Disclosure
Summary of Public Company Cybersecurity Disclosure Rules
On July 26, 2023, the Securities and Exchange Commission (“SEC” or “Commission”), in a 3-to-2 vote, adopted a final rule requiring the disclosure of material cybersecurity incidents and cybersecurity risk management, strategy, and governance by public companies, including foreign private issuers. A two-page summary of the final rule is attached for your reference.
Form 10-Q Updates and Reminders
As many companies prepare their quarterly reports on Form 10-Q for the quarter ended June 30, 2023, we offer the following observations and reminders regarding new disclosure requirements taking effect for this reporting period, as well as risk factor considerations that may be relevant to upcoming Form 10-Q reporting. For convenience, this publication also includes a summary of certain upcoming compliance dates for public companies.
Data Verification Period for New ISS Environmental & Social Disclosure QualityScore Questions Open from July 10 until July 21, 2023; Companies Should Log On Soon and Validate Their Information
A data verification period for Institutional Shareholder Services’ (ISS) new Environmental & Social Disclosure Quality Score questions opened for companies on July 10, 2023 and will remain open until July 21, 2023. The data verification process reflects a comprehensive update to ISS’s Environmental & Social Disclosure QualityScore scoring methodology, which ISS previewed in April 2023 and elaborated on in a June 2023 announcement.
New Vote Reporting Disclosures Required on Form N-PX – Vote Reports Now Extend to All 13F Filers – No Longer Limited to Registered Funds
In November 2022, the Securities and Exchange Commission (“SEC”) adopted amended rules that update the existing reporting requirements on Form N‑PX and create new Form N‑PX reporting requirements for institutional investment managers.[1] The purpose of these amendments is to increase transparency surrounding proxy voting records. Prior to the adoption of this new rule, registered investment management companies (“Funds”), such as mutual funds and exchange traded funds, were required to publicly report their annual proxy voting records on Form N‑PX.
New SEC Staff Guidance on Rule 10b5-1 Amendments and Summary of Compliance Dates
On May 25, 2023, the staff of the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (the “SEC") issued three new Compliance and Disclosure Interpretations (“C&DIs") on the SEC’s recent Rule 10b5-1 amendments. The new C&DIs re-affirm prior statements made by Staff members regarding effective dates for required new disclosures and the operation of the cooling-off period when entering into back-to-back trading plans. We summarize below the C&DI and the compliance dates for new rules relating to Rule 10b5-1, Section 16 and share repurchases.
SEC Enforcement Action Highlights Importance of Non-GAAP Policies and Disclosure Controls and Procedures
On March 14, 2023, the SEC charged DXC Technology Co. (“DXC") with making material misstatements with respect to its non-GAAP financial performance measures, stating that, DXC “negligently misclassif[ied] tens of millions of dollars of expenses as [transaction, separation and integration-related (“TSI")] costs and improperly exclude[ed] them in its reporting of non-GAAP measures." The SEC’s order also found that DXC, and specifically its controllership function and disclosure committee, failed to maintain “adequate" disclosure controls and procedures relating to DXC’s non-GAAP disclosures, citing the following shortcomings:
SEC Publishes C&DIs Addressing Tender Offer Issues
On March 17, 2023, the staff of the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission released over thirty questions and answers in the form of Compliance and Disclosure Interpretations (“C&DIs") addressing various tender offer issues.
SEC Updates Non-GAAP C&DIs
On December 13, 2022, the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission announced an update to its Compliance and Disclosure Interpretations (“C&DIs”) on Non-GAAP Financial Measures under Questions 100.01, 100.04 – 100.06, and 102.10(a)(b)(c). Many of the changes memorialize positions the Staff has taken in comment letters or provide additional detail about those positions.
Now Available: SEC Desktop Calendar for 2023
To continue assisting US companies with planning for SEC reporting and capital markets transactions into 2023, we offer our annual SEC Desktop Calendar. This calendar provides both the filing deadlines for key SEC reports and the dates on which financial statements in prospectuses and proxy statements must be updated before use (a/k/a financial staleness deadlines).