As previously reported on our Securities Regulation and Corporate Governance Monitor (available here and here), on May 28, 2024, the standard settlement cycle for most broker-dealer transactions will be shortened from “T+2″ to “T+1,” subject to certain exceptions. The SEC approved this change in its rule amendments to Rule 15c6-1(a) under the Exchange Act adopted on February 15, 2023.
Securities Regulation
SEC Division of Corporation Finance Director Erik Gerding Offers Guidance on Form 8-K Disclosure of Cybersecurity Incidents
As detailed in our client alert, the SEC adopted cybersecurity disclosure rules on July 26, 2023 that require disclosure of material cybersecurity incidents under new Item 1.05 of Form 8-K. If a company determines that a cybersecurity incident is material, it is required to disclose the incident within four (4) business days of such determination. In addition, such determination is required to be made “without unreasonable delay after discovery of the incident.”
Reminder For Resource Extraction Issuers: Form SD Due September 2024
As previously reported on our Securities Regulation and Corporate Governance Monitor on December 16, 2020 (available here), the Securities and Exchange Commission (the “SEC") adopted the final rule (available here) requiring additional disclosures by public companies that engage in the commercial development of oil, natural gas or minerals. Under the final rule, domestic or foreign “resource extraction issuers" are required to annually disclose information about certain payments made to foreign governments or the U.S. federal government on Form SD.
Fifth Circuit Stay of the SEC’s Climate Disclosure Rule Dissolved
On March 21, 2024, the Judicial Panel on Multidistrict Litigation randomly selected the U.S. Court of Appeals for the Eighth Circuit to hear all cases challenging the Securities and Exchange Commission’s final climate disclosure rule. Within the first ten days after the rule’s issuance, nine petitions were filed, in six different circuits, challenging the rule.
Recent SEC Enforcement Action Underscores Importance of Timely Filing of 13D/G Beneficial Ownership Reports
On March 1, 2024, the SEC announced an enforcement action against an investment advisory firm (“Investor"), stemming from its failure to promptly convert from a Schedule 13G to 13D after forming a “control" purpose within the meaning of Section 13(d) of the Exchange Act and Rule 13d-1 thereunder.[1]
Fifth Circut Strikes Down SEC’s New Buyback Disclosure Rule
On December 19, 2023, the Fifth Circuit vacated the SEC’s Share Repurchase Disclosure Modernization rule (the “Repurchase Rule") in its entirety. The Repurchase Rule, discussed further in our Client Alert, would have required companies to disclose objectives or rationales and certain additional information for all share repurchases conducted during the quarter on Form 10-Q and Form 10-K and required quarterly disclosure regarding a company’s adoption or termination of any Rule 10b5-1 trading plans.
SEC Stays Effectiveness of New Buyback Disclosure Rule; Fifth Circuit Denies SEC’s Request for Additional Time to Correct Rules
On November 22, 2023, the SEC announced that it had issued an order indefinitely postponing the effectiveness of the Share Repurchase Disclosure Modernization rule (the “Repurchase Rule"), pending further SEC action. At the same time, the SEC asked the Fifth Circuit for additional time to respond to the court’s order that the SEC correct deficiencies in the Repurchase Rule by November 30. The court denied that motion on November 26. As a result, the SEC has until November 30 to correct the deficiencies the court had found with the SEC’s rulemaking, after which we expect the court will consider a renewed motion from the petitioners to vacate the Repurchase Rule.
Division of Corporation Finance Offers New Guidance on Application of the SEC’s Universal Proxy Rules Ahead of the 2024 Proxy Season
As discussed in our previous client alert, the universal proxy rules that went effective on August 31, 2022 require proxy cards distributed by both public companies and nominating shareholders in contested director elections to include both sides’ director nominees, such that shareholders casting their vote can “mix-and-match" nominees from each of the company’s and the dissident’s slate of director nominees.
SEC Exempts Rule 144A Debt Issuances From Rule 15c2-11 Information Requirements
On October 30, 2023, the Securities and Exchange Commission (the “Commission") issued an Order exempting brokers and dealers from the requirements of Rule 15c2-11(g) (the “Rule") under the Securities Exchange Act of 1934, as amended, with respect to fixed-income securities that are sold in compliance with the safe harbor in Rule 144A (the “Rule 144A") under the Securities Act of 1933, as amended, for resales to Qualified Institutional Buyers (“QIBs"). As a result, issuers of Rule 144A fixed-income securities will not have to publish public information in order for brokers to quote their securities and facilitate trading.
SEC Rolls Out Enforcement Sweep Against Delinquent Filers Ahead of Recent 13D/G Amendments
Late last month, shortly before adopting amendments to Regulation 13D/G, the Securities and Exchange Commission (“SEC") announced civil charges against several officers, directors, and major shareholders of public companies for failing to satisfy their timely reporting obligations. The SEC also charged the affiliated public companies for contributing to the reporting failures by insiders.