Several noteworthy developments have occurred following the September 6, 2019 announcement by the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (“SEC") regarding two significant procedural changes for responding to Exchange Act Rule 14a-8 no-action requests that will be applicable to no-action requests regarding shareholder proposals submitted for annual meeting to be held in 2020. That announcement indicated that the Staff may now respond orally instead of in writing to shareholder proposal no-action requests and that the Staff may now more frequently respond by declining to state a view on whether or not it concurs that a company may properly exclude a shareholder proposal under Rule 14a-8.
EDGAR Updates Change Filer Password Requirements and Increase Character Length of Certain Cover Page Tags
Everyone Jump In! All Issuers Will Be Allowed to “Test-the-Waters”
On September 26, 2019, the SEC announced (available here) that it has adopted a new rule, Rule 163B (available here) under the Securities Act of 1933, that allows all issuers to “test-the-waters." This accommodation, which had previously been available only to emerging growth companies (EGCs), allows issuers and authorized persons (e.g., underwriters) to engage in discussions with, and provide written offering material to, certain institutional investors prior to, or following, the filing of a registration statement, to determine market interest in potential registered securities offerings. Rule 163B will become effective 60 days after publication in the Federal Register.
SEC Staff Announces Significant Changes to Shareholder Proposal No-Action Letter Process
On September 6, 2019, the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (“SEC") announced[1] two significant procedural changes for responding to Exchange Act Rule 14a-8 no-action requests that will be applicable beginning with the 2019-2020 shareholder proposal season:
SEC Issues New Guidance for Proxy Advisors and Investment Advisers Engaged in the Proxy Voting Process
On August 21, 2019, the Securities and Exchange Commission (the Commission) issued two releases (the Releases) regarding two elements of the proxy voting process that are influenced by proxy advisory firms: proxy voting advice issued by proxy advisors (available here) and proxy voting by investment advisers who use that proxy voting advice (availablehere). The guidance, in the words of Commissioner Elad L. Roisman, “reiterate[s] longstanding Commission rules and positions that remain applicable and very relevant in today’s marketplace."
SEC Issues Interpretations Clarifying Inline XBRL Rules
On August 20, 2019, the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (“SEC") issued nine new Compliance and Disclosure Interpretations (“C&DIs") regarding Interactive Data (available here), addressing many of the technical compliance issues surrounding the Inline XBRL rules, particularly with respect to common questions related to the exhibit index and cover page tagging. The C&DIs also address compliance by early or voluntary filers and foreign private issuers. The Inline XBRL rules went into effect for calendar year-end large accelerated filers when filing their second quarter Form 10-Q.
Desktop Calendar of SEC Deadlines for 2020 Now Available
This is a smart time of year to confirm plans for SEC reporting and capital markets transactions in 2020. To assist public companies in keeping track of the various filing deadlines, we have prepared a desktop reference calendar that sets forth filing deadlines for many SEC reports. To assist companies with planning capital markets transactions, including IPOs, our calendar also provides the staleness dates (i.e., the last date financial statements may be used in a prospectus or proxy statement without being updated).
SEC August 21 Open Meeting To Address Issues Related To Proxy Advisory Firms
The SEC announced that it will hold an open meeting on Wednesday, August 21, 2019 at 10:00 AM eastern time. There are two matters on the agenda, available here, which, although not specifically referring to proxy advisory firms, appear to address reliance on voting recommendations issued by such firms, and the conditions such firms must satisfy to rely on an exemption from the proxy rules.
SEC Proposes to Modernize Disclosures of Business, Legal Proceedings, and Risk Factors
On August 8, 2019, the Securities and Exchange Commission (“SEC") announced that it voted to propose amendments to Regulation S-K (available here) seeking to modernize and simplify the required disclosures by public companies, investment advisors, and investment companies (the “Proposed Amendments"). The Proposed Amendments form part of the SEC’s ongoing efforts to simplify disclosure requirements, and, with the exception of Legal Proceedings, emphasize a more flexible, principles-based approach as opposed to prescriptive requirements. “The world economy and our markets have changed dramatically in the more than 30 years since the adoption of our rules for business disclosures by public companies. Today’s proposal reflects these significant changes, as well as the reality that there will be changes in the future," said Chairman Jay Clayton. “I applaud the staff for their efforts to modernize and improve our disclosure framework, including recognizing that intangible assets, and in particular human capital, often are a significantly more important driver of value in today’s global economy. The proposals reflect a thoughtful mix of prescriptive and principles-based requirements that should result in improved disclosures and the elimination of unnecessary costs and burdens."
Technical Points to Keep in Mind When Filing Upcoming Forms 10-K, 10-Q, and 8-K
As we discussed in a prior client alert (available here), in March 2019, the Securities and Exchange Commission (the “SEC") adopted a number of changes to modernize and simplify disclosure requirements (the “Final Rules"). While many of these changes went into effect on May 2, 2019, the SEC adopted phased compliance dates for the requirements to tag data on the cover pages of Forms 10-K, 10-Q, 8-K, 20‑F, and 40-F in Inline XBRL. The Final Rules set forth the following compliance dates (which mirror the compliance dates for operating companies to implement the general Inline XBRL requirements):