Of particular interest as private capital markets activity continues to grow, the “accredited investor" definition is one of the principal tests for determining who is eligible to participate in investment opportunities presented by the private capital markets. On August 26, 2020, the SEC announced that it adopted amendments to the definitions of “accredited investor" in Rule 501, as well as the definition of “qualified institutional buyer" in Rule 144A, each under the Securities Act of 1933. These amendments are part of the SEC’s ongoing efforts to simplify, harmonize and improve the framework for securities offerings that are not registered with the SEC under the Securities Act (for more information on this initiative, see our prior Monitor post here).
SEC To Consider Adopting Changes to Regulation S-K and Definitions of Qualified Investors in Private Placements: Public Meeting on August 26
What are you doing at lunchtime on August 26? The SEC has announced that it will hold a webcast public meeting to discuss its broader efforts to (1) modernize and improve the SEC’s disclosure framework in light of the changes in our capital markets and domestic and global economy, and (2) simplify, harmonize, and improve the exempt offering framework under the Securities Act to promote capital formation and expand investment opportunities while maintaining and enhancing appropriate investor protections.
SEC Issues Guidance Regarding Submission of Supplemental Materials and Confidential Treatment Requests in Light of COVID-19 Concerns
On August 4, 2020, the Division of Corporation Finance (the “Division") of the Securities and Exchange Commission (the “SEC") issued guidance relating to the submission of supplemental materials and information subject to Rule 83 confidential treatment requests in light of COVID-19 concerns (available here). The Division is providing a temporary secure file transfer process for the submission of supplemental materials pursuant to Securities Act Rule 418 and Exchange Act Rule 12b-4, including supplemental materials subject to a Rule 83 confidential treatment request. This secure file transfer process is a temporary accommodation to the SEC’s rules and procedures for receiving confidential information (as discussed in a prior client alert, available here), due to ongoing health and safety concerns related to COVID-19.
SEC Staff provides additional disclosure guidance related to COVID-19 impact
Due to the ongoing assessment of the impact of COVID-19 on companies’ operations, liquidity and capital resources and overall economic and market conditions, companies should take special care in preparing for their quarterly reporting. To aid in this effort, the staff (the “Staff") of the Securities and Exchange Commission (“SEC") has posted a new set of questions that companies should consider in evaluating whether certain disclosures should be included in their earnings release and, in light of its potential materiality, in the management discussion and analysis (“MD&A") included in the periodic reports (e.g., the Form 10-Q for second quarter 2020).
Key Considerations for Issuers and Auditors Regarding Going-Concern Analysis
Issuers in the United States and their auditors have related, but distinct, obligations to evaluate on a periodic basis whether there is substantial doubt about the issuer’s ability to continue as a going concern. In normal times, this evaluation, conducted with an appropriate level of diligence, results as to almost all major public companies in the conclusion that there is no substantial doubt about the entity’s ability to meet its obligations in the months to come.
Nasdaq Provides Temporary Exemption from Certain Shareholder Approval Requirements in Response to COVID-19
On May 4, 2020, the SEC announced (available here) that it has immediately approved proposed rule changes by The Nasdaq Stock Market LLC (“Nasdaq") that provide listed companies with a temporary exception from certain shareholder approval requirements under the Nasdaq Rules (the “Rules") through and including June 30, 2020 (available here).
SEC Releases COVID-19 FAQs to Provide Guidance on Disclosure Requirements and Form S-3
The SEC Division of Corporation Finance staff (the “Staff") has released a list of FAQs on COVID-19 for registrants (available here) that provides guidance on required disclosures under the SEC’s COVID-19 Order and the application of such order to Form S-3 filings. The FAQs and responses provided by the Staff as of May 5, 2020 are summarized below—please follow the link above to read the full text of the FAQs.
Now Available: COVID-19 Resources for Public Companies
Recognizing that public companies continue to be inundated with developing disclosure and governance requirements due to the COVID-19 pandemic, Gibson Dunn has created a list (with hyperlinks) of recent publications, releases, guidance, updates, and other useful resources from the SEC, PCAOB, NYSE, Nasdaq, proxy advisory firms, institutional investors, various state governors, and other relevant entities. This list will be updated as new resources are released. The most current version can be accessed by clicking here.
NYSE and Nasdaq Propose Temporary Waivers of Certain Market Capitalization and Trading Price Listing Requirements
In light of the market downturn and similar to action taken in the Great Recession, the NYSE and Nasdaq have proposed temporary waivers of certain market capitalization and trading price listing requirements.
PCAOB Update – PCAOB Seeks Input on CAMs and Comments on Emerging Markets
Over the past several days, the PCAOB has taken a number of steps to make clear that it remains active during the COVID-19 crisis. For example, after issuing only one settled enforcement order during the first three months of 2020, the PCAOB has issued two settled orders in the past week. Both concerned smaller firms, but they serve to demonstrate that the Board is still carrying out its enforcement mandate.