On June 18, 2019, the Securities and Exchange Commission issued a concept release (available here) announcing that it isseeking comment on “possible ways to simplify, harmonize, and improve the exempt offering framework to promote capital formation and expand investment opportunities while maintaining appropriate investor protections.”
Securities Regulation
SEC Tweaks Revised Form 8-K and 10-Q Cover Pages
As a result of amendments adopted by the Securities and Exchange Commission (SEC) on March 20, 2019 (available here, and discussed in our client alert available here), several SEC form cover pages were changed, effective May 2, 2019, including: Form 10-K, Form 10-Q, Form 8-K, Form 20-F, and Form 40-F.
SEC Proposes to Improve Disclosures Relating to Acquisitions and Dispositions of Businesses
On May 3, 2019, the Securities and Exchange Commission announced (available here) proposed changes to existing disclosure requirements in connection with acquisitions and dispositions of businesses. The proposed rules (available here) are intended to: (1) improve financial disclosures regarding the acquisition and disposition of businesses, (2) facilitate more timely access to capital, and (3) reduce the complexity and compliance costs related to such disclosures.
SEC Streamlines Procedure for Confidential Treatment Extensions
On April 16, 2019, the Division of Corporation Finance (the “Division") of the Securities and Exchange Commission (“SEC") announced streamlined procedures for confidential treatment extensions for material contracts where the Division has previously granted confidential treatment (available here). These procedures were announced in light of the recently adopted redacted exhibit rules that permit registrants to redact confidential information from certain exhibits without filing a confidential treatment request (for more on the redacted exhibit rules, see our related prior client alert and blog post). Under the SEC’s rules, a registrant that has previously obtained a confidential treatment order for a material contract must file an extension application under Securities Act Rule 406 or Exchange Act Rule 24b-2 to continue to protect such confidential information from public release prior to the expiration of the existing order. Of note, a registrant cannot use the SEC’s recently adopted redacted exhibit rules to refile a redacted material contract that was granted confidential treatment under the old rules, but instead must rely on the confidential treatment extension process.
SEC Issues Guidance Relating to New Rules and Procedures for Redacting Confidential Information
On April 1, 2019, the Division of Corporation Finance (the “Division”) of the Securities and Exchange Commission (the “SEC”) issued guidance relating to the recently adopted rules and procedures that permit registrants to redact confidential information from certain exhibits without filing a confidential treatment request (available here). The guidance provides additional information on the Division’s process for reviewing redacted information and certain matters relating to the transition to the new rules and procedures.
SEC Proposes Offering Reforms for BDCs and Registered Closed-End Funds
The Securities and Exchange Commission (the “Commission") on March 20 proposed rule amendments (collectively, the “Proposal") to improve access to capital and facilitate investor communications by business development companies (“BDCs") and registered closed-end funds (collectively, the “affected funds").[1]
SEC Continues to Modernize and Simplify Disclosure Requirements
On March 20, 2019, the Securities and Exchange Commission (SEC) adopted amendments (available here) to modernize and simplify disclosure requirements for public companies, investment advisors, and investment companies (the Final Rules). The Final Rules form part of the SEC’s ongoing efforts to simplify disclosure requirements. The Final Rules are largely consistent with the proposed amendments outlined in the SEC’s October 11, 2017 proposing release (available here, and discussed in our client alert available here).
NYSE Amends Shareholder Approval Rule
On March 20, 2019, the SEC approved changes to the NYSE’s shareholder approval rule. The changes amend the price requirements that companies must meet to qualify for exceptions to the shareholder approval requirements under NYSE’s rule 312.03(b) (related party issuances) and 312.03(c) (the 20% rule). The NYSE changes are comparable to changes made to Nasdaq’s 20% shareholder approval rule in September 2018.
SEC Proposes Long-Awaited Expansion of “Test-the-Waters” to All Issuers – Use With Caution
On February 19, 2019, the Securities and Exchange Commission (the “SEC") proposed a new rule that would allow all issuers to engage in “testing the waters." Specifically, the SEC proposed an exemption (the “Proposed Rule") to certain provisions of Section 5 of the Securities Act of 1933 (the “Securities Act") commonly referred to as “gun-jumping" provisions. This exemption would permit any issuer or authorized person (e.g., an underwriter) to engage in oral or written communications with potential investors that the issuer reasonably believes are qualified institutional buyers (“QIBs") or institutional accredited investors (“IAIs"). Currently, this exemption to the gun-jumping provisions is only available to emerging growth companies (“EGCs"). The SEC believes that the Proposed Rule may “help issuers better assess the demand for and valuation of their securities," which may in turn “enhance the ability of issuers to conduct successful offerings and lower their cost of capital." This goal is consistent with the SEC’s overall effort to increase the number of public companies and reduce the regulatory burden of capital raising.
Developments on Public Company Disclosures Regarding Board and Executive Diversity
On February 6, 2019, the staff (Staff) of the Division of Corporation Finance of the Securities and Exchange Commission (SEC) issued two new identical Compliance and Disclosure Interpretations (C&DIs). The C&DIs address disclosure that the Staff expects public companies to include in their proxy statements and other SEC filings regarding “self-identified diversity characteristics" with respect to their directors and director nominees. In addition, legislation was introduced in both the U.S. House of Representatives and the U.S. Senate that would require public companies to annually disclose the gender, race, ethnicity and veteran status of their directors, director nominees, and senior executive officers.