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]
Securities Regulation
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.
SEC Desktop Calendar 2024 – Now Available
To continue assisting US companies with planning for SEC reporting and capital markets transactions into 2024, 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).
Preparing for a Potential Government Shutdown: Initial Impacts on SEC Operations
A looming partial shutdown of the federal government is on track to occur at 12:01 a.m. ET on Sunday, October 1, 2023, if Congress is unable to reach agreement on legislation funding the government. The SEC Division of Corporation Finance (the “Division”) announced that in the event of a government shutdown, the SEC’s “activities will be extremely limited” and specifically, that it would not be able to accelerate the effectiveness of registration statements. The Division advised that, to the extent possible, registrants with pending registration or offering statements that have satisfied the requirements to request acceleration of the effective date should consider requesting effectiveness or qualification while the Division continues its normal operations.
EDGAR Next: SEC Proposes Changes to EDGAR Filer Access and Account Management Procedures
Following a request for comment on the topic in 2021, on September 13, 2023, the Securities and Exchange Commission (“SEC") proposed amendments to Rules 10 and 11 of Regulation S-T and Form ID regarding potential technical changes to Electronic Data Gathering, Analysis, and Retrieval System (“EDGAR") filer access and account management (referred to by the SEC as “EDGAR Next").
Another Batch of SEC Staff Guidance on Rule 10b5-1 Amendments
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.