On February 9, 2022, the Securities and Exchange Commission (the “Commission”) announced a proposed rule to shorten the standard settlement cycle for most broker-dealer transactions from two business days after the trade date (“T+2″) to one business day after the trade date (“T+1″), while soliciting comments regarding challenges and possible approaches to achieving settlement by the end of trade date (“T+0″).
Securities Regulation
Now Available: Considerations for Preparing Your 2021 Form 10-K
As we do each year, we offer our observations on new developments and recommended practices for calendar-year filers to consider in preparing their Form 10-K. This alert reviews the recent amendments to Regulation S-K adopted by the U.S. Securities and Exchange Commission (“SEC”) and discusses how public companies are reacting to these new requirements.
SEC Proposes Rules on Insider Trading, Rule 10b5-1 and Share Repurchases
On December 15, 2021, the Securities and Exchange Commission (“SEC” or “Commission”) held a virtual open meeting where it considered four rule proposals, including two that are particularly pertinent to all public companies: (i) amendments regarding Rule 10b5-1 insider trading plans and related disclosures and (ii) new share repurchase disclosures rules.
Recent SEC Amendments Bring Changes to Filing Fee Disclosure and Payment Methods
On October 13, 2021, the Securities and Exchange Commission (the “SEC”) adopted amendments to modernize filing fee disclosure for certain forms and schedules, as well as update payment methods for fees related to these filings. The final rule highlighted three primary goals of the amendments: (i) update disclosure requirements related to filing fees in order to provide more certainty to filers that the proper fee was calculated and facilitate the SEC staff’s review of such fee; (ii) modernize the payment method for filing fees and reduce the cost and burden on processing fee payments; and (iii) permit filers to reallocate previously paid filing fees in more situations than what was previously permitted. An overview of these changes is provided below. The amendments also contained certain technical, conforming and clarifying changes related to filing fee-related instructions and information.
Now Available: SEC Desktop Calendar for 2022
To continue assisting US companies with planning for SEC reporting and capital markets transactions into 2022, 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).
PCAOB Adopts Final Rule on the Holding Foreign Companies Accountable Act
On September 22, 2021, the Public Company Accounting Oversight Board (the “PCAOB“) adopted a final rule (the “Final Rule“) implementing the Holding Foreign Companies Accountable Act (the “HFCAA“), which became law in December 2020 and prohibits foreign companies from listing their securities on U.S. exchanges if the company has been unavailable for PCAOB inspection or investigation for three consecutive years. The Final Rule (available here) requires U.S. Securities and Exchange Commission (the “SEC“) approval before it goes into effect.
SEC Staff Scrutiny of Climate Change Disclosures Has Arrived: What to Expect And How to Respond
Recently, the SEC’s Division of Corporation Finance has issued a number of comment letters relating exclusively to climate-change disclosure issues. The letters we have seen to date comment on companies’ most recent Form 10-K filings, including those of calendar year companies who filed their Form 10-K more than 6 months ago, and have been issued by a variety of the Division’s industry review groups, including to companies that are not in particularly carbon-intensive industries. Many of the climate change comments appear to be drawn from the topics and considerations raised in the SEC’s 2010 guidance on climate change disclosure, as reflected in the sample comments that we have attached in the annex to this alert. We expect this is part of a larger Division initiative because the letters are similar (although not identical), contain relatively generic comments, and have been issued in close proximity to one another. Accordingly, it is reasonable to expect that additional comment letters will be issued in the coming weeks and months.
What Can We Expect from the SEC with COP26 Around the Corner?
Climate change matters and related calls for regulation are in headlines daily. On August 9, 2021, the UN’s Intergovernmental Panel on Climate Change (IPCC) published the first major international assessment of climate-change research since 2013. The IPCC report will inform negotiations at the 2021 UN Climate Change Conference, also known as COP26, beginning on October 31, 2021 in Glasgow.
Direct Listings on Nasdaq May Include Primary Capital Raise
In May, the SEC issued an order (here) approving a proposal by The Nasdaq Stock Market LLC (Nasdaq) permitting primary offerings in connection with a direct listing. This allows companies that are going public through a direct listing to raise proceeds in the direct listing, similar to an IPO. This development follows the SEC’s prior approval of a similar rule proposed by the New York Stock Exchange (NYSE) that also permits primary capital raises in connection with a direct listing. See Gibson Dunn’s Current Guide to Direct Listings (here) and Nasdaq’s Direct Listing page (here) for more information.
SEC Staff Issues Cautionary Guidance Related to Business Combinations with SPACs
There were more initial public offerings (“IPOs") of special purpose acquisition companies (“SPACs") in 2020 alone than in the entire period from 2009 until 2019 combined, and in the first three months of 2021, there have been more SPAC IPOs than there were in all of 2020. All of these newly public SPACs are looking for business combinations and many private companies are or will be considering a combination with a SPAC as a way to go public.