On August 17, 2018, the Securities and Exchange Commission (the “Commission") adopted several dozen amendments (available here) to “simplify compliance without significantly altering the total mix of information" (the “Final Rules"). In Release No. 33-10532, the Commission characterized the amended requirements as redundant, duplicative, overlapping, outdated or superseded, in light of subsequent changes to Commission disclosure requirements, U.S. GAAP, IFRS and technology developments.
Miscellaneous
The SEC Continues to Modernize and Adapt to the Times
The Securities and Exchange Commission (“the Commission”) recently adopted two rule amendments in its latest effort to synchronize Commission policies with the rapidly developing digital age.
The SEC’s Proposed Transaction Fee Pilot for US Equity Securities
In March 2018, the Securities and Exchange Commission (“SEC”) issued a proposed rule, Rule 610T of Regulation NMS (the “Proposal”), which would create a Transaction Fee Pilot for National Market System (“NMS”) stocks (the “Pilot”). The Pilot recently received renewed attention as a result of an email sent by the New York Stock Exchange (“NYSE”) to listed issuers expressing concerns the NYSE has regarding the Pilot.
SEC Significantly Expands Confidential Review of Registration Statements
Will Allow Confidential Submission of All Registration Statements for IPOs, Spin-Offs and Most Offerings Within 12 Months of an IPO or Spin-Off The Securities and Exchange Commission (“SEC”) announced[1] on Thursday that its the Staff of the Division of Corporation Finance (the “Staff”) will soon allow all companies to submit initial public offering (“IPO”) draft registration statements for confidential review. This change expands a benefit previously reserved for Emerging Growth Companies (“EGCs”), and is specifically aimed at encouraging more companies to enter the public market. The SEC also announced that it will review draft registration statements submitted by non EGCs that omit financial statements that the issuer reasonably believes will not be required when the registration statement is filed publicly, and indicated a willingness to discuss expedited reviews with issuers and their advisors.
SEC Eliminates Need for Affirmative “Tandy” Representations from Issuers
On October 5, 2016, the Staff in the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “SEC”) announced that it will no longer require companies to make so-called Tandy representations in their filing review correspondence.
When the Tail Wags the Unicorn: SEC Chair Voices Concerns About Pre-IPO Investments
On March 31, SEC Chair Mary Jo White gave a keynote address at Stanford University in which she discussed some of the SEC’s emerging priorities with respect to pre-IPO stage companies, private capital markets and fintech. According to Chair White, the SEC is paying particular attention to the risks of fraud and investor confusion that can arise when companies choose to stay private longer.
NASDAQ Proposes Disclosure of Third-Party Compensation for Directors and Nominees
NASDAQ has proposed changes to its listing standards to require disclosure of third-party compensation arrangements for directors and nominees. After withdrawing an initial proposal on this subject, NASDAQ has revised the proposal, and it has been published in the Federal Register for public comment. Comments are due on or before April 26, 2016. The proposal is available here, and a redline showing proposed changes to the rule text begins on page 21 of the document. Under amendments NASDAQ is proposing to Rule 5250(b), NASDAQ companies would have to disclose all agreements and arrangements between any director, or director nominee, and any third party that provide for compensation or other payments in connection with the individual’s candidacy or service as a director. The proposed rule would be construed broadly to apply to both compensation and other forms of payment, such as health insurance. The disclosure requirement would not apply to reimbursement of expenses incurred in connection with serving as a nominee. The proposal also addresses the following aspects of the proposed disclosure requirement:
SEC Files Fraud Charges Against Public Biotechnology Company and its Officers for Alleged Materially Misleading FDA-Related Disclosures
On March 29, 2016, the SEC announced that it had filed fraud charges in U.S. federal court against AVEO Pharmaceuticals, Inc. (“AVEO”), a Massachusetts-based biotechnology company, and three of its former executives. The complaint alleges that AVEO and its former Chief Executive Officer, Chief Financial Officer and Chief Medical Officer violated the antifraud provisions of the federal securities laws by misleading investors about the company’s communications with the FDA during the approval process for tivozanib, AVEO’s leading product candidate being developed as a treatment for kidney cancer. According to the complaint, the FDA raised concerns to AVEO in a May 2012 pre-NDA, or New Drug Application, meeting related to the survival rates of patients receiving tivozanib during AVEO’s first clinical trial of tivozanib relative to patients receiving the other compound, sorafenib, being used as a comparator in the trial. An NDA is the formal process by which a company seeks FDA approval of a new pharmaceutical for commercialization. In the pre-NDA meeting, FDA staff recommended that AVEO conduct a second clinical trial. The SEC alleged in its complaint that, for more than eleven months following the FDA’s recommendation of a second clinical trial, AVEO and the officers named in the complaint concealed from investors the extent of the FDA’s concerns about tivozanib and its recommendation that the company conduct a second clinical trial. Among other charges, the SEC alleged that:
“FAST” Act Legislation Enacted — Potentially Significant Impact on Capital Markets
On December 4, 2015, President Obama signed into law the Fixing America’s Surface Transportation Act, known as the “FAST Act.” This five-year transportation bill also includes a number of provisions related to securities laws and capital-raising measures. The key securities law provisions of the FAST Act are summarized as follows: Reforming Access for Investments in Startup Enterprises:
NASDAQ Issues FAQ Relaxing Historical Position on Net Share Settled Convertible Securities
In a change that we believe has gotten little attention to date, in March 2015 NASDAQ updated its publicly available “Frequently Asked Questions” relating to the application of NASDAQ’s shareholder approval rules to net share settled convertible securities issued in private placements.