On July 17, 2018, the U.S. House of Representatives overwhelmingly passed, by a vote of 406-4, bipartisan financial reform legislation titled the “JOBS and Investor Confidence Act of 2018," frequently referred to as JOBS Act 3.0. The JOBS Act 3.0 builds upon the 2012 Jumpstart Our Business Startups (“JOBS") Act, and on the Fixing America’s Surface Transportation Act (the “FAST Act"), which was enacted in 2015 and is commonly referred to as JOBS Act 2.0.
SEC Amends “Smaller Reporting Company” Definition to Expand Access to Scaled Disclosure Accommodations
On June 28, 2018, the United States Securities and Exchange Commission (the “SEC") approved amendments to the definition of a “smaller reporting company" (a “SRC"). These amendments will expand the number of registrants qualifying for SRC scaled disclosure accommodations in their SEC filings. These scaled disclosure accommodations include, among other things, reduced required business, financial and executive compensation disclosures. A chart briefly summarizing the SRC disclosure accommodations is attached as Exhibit A.
The SEC Identifies Priorities in Draft Strategic Plan Through 2022
On June 19, 2018, the Securities and Exchange Commission (the “SEC") published a draft strategic plan outlining the SEC’s priorities through 2022 (the “2018 Plan"). In the 2018 Plan, the SEC elected to pursue three goals, emphasizing investors, innovation and performance, each of which is summarized below. The 2018 Plan focuses on the “Main Street" investor, responds to new market developments, such as the growth of cryptocurrencies, and improves the regulator’s use of data and analytics.
The SEC Continues to Modernize and Adapt to the Times
The Securities and Exchange Commission (“the Commission”) recently adopted two rule amendments in its latest effort to synchronize Commission policies with the rapidly developing digital age.
The SEC’s Proposed Transaction Fee Pilot for US Equity Securities
In March 2018, the Securities and Exchange Commission (“SEC”) issued a proposed rule, Rule 610T of Regulation NMS (the “Proposal”), which would create a Transaction Fee Pilot for National Market System (“NMS”) stocks (the “Pilot”). The Pilot recently received renewed attention as a result of an email sent by the New York Stock Exchange (“NYSE”) to listed issuers expressing concerns the NYSE has regarding the Pilot.
SEC Corp Fin Staff Releases New Compliance and Disclosure Interpretations on Proxy Rules and Schedules 14A/14C
On May 11, the Division of Corporation Finance (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”) released new Compliance and Disclosure Interpretations (“C&DIs”) regarding the proxy rules and Schedules 14A and 14C. These C&DIs replace the Staff’s previous interpretations published in the Proxy Rules and Schedule 14A Manual of Publicly Available Telephone Interpretations and the March 1999 Supplement to the Manual of Publicly Available Telephone Interpretations (collectively, the “Telephone Interpretations”).
Strengthening U.S. Public Capital Markets – Recommendations from SIFMA Report
On April 27, 2018, the Securities Industry and Financial Markets Association (“SIFMA”), the leading industry group representing broker-dealers, banks and asset managers, along with other securities industry related groups, released a report called “Expanding the On-Ramp: Recommendations to Help More Companies Go and Stay Public” (the “Report”). In response to the decline in the number of IPOs and the number of public companies generally in the United States over the last twenty years, the Report provides recommendations aimed at reducing perceived impediments to becoming and remaining a public company. As the Report notes, the United States is now home to only about half the number of public companies that existed 20 years ago. This decline is believed to have had adverse repercussions for the American economy generally, and the jobs market specifically. In addition, the growth of private capital markets at the expense of public capital markets has raised concerns that individual investors are being marginalized. More specifically, as many of the most innovative companies in the U.S. stay private longer and raise significant amounts of capital privately, the returns generated by such companies appear to accrue disproportionally to institutional, high net worth and other similar investors.
SEC Expands Prior Guidance on Non-GAAP Financial Forecasts in the M&A Context
As discussed in our October 17, 2017 post, the SEC’s Division of Corporation Finance (the “Staff”) addressed an open question as to whether the disclosure of forecasted financial measures used in connection with a business combination transaction is subject to Item 10(e) of Regulation S-K and Regulation G.
New Twist for Old Shareholder Proposal Tactic
Each year some public pension funds and other institutional shareholders voluntarily file with the U.S. Securities and Exchange Commission (SEC) a Notice of Exempt Solicitation under Exchange Act Rule 14a-6(g). This rule requires a person who owns more than $5 million of a company’s securities and who conducts an exempt solicitation of the company’s shareholders (in which the person does not seek to have proxies granted to them) to file with the SEC all written materials used in the solicitation. However, these funds also file these Notices, which appear on EDGAR as “PX14A6G” filings, typically to respond to a company’s statement in opposition to a shareholder proposal included in the proxy statement or to otherwise encourage (but not solicit proxies from) shareholders to vote a specific way on shareholder proposals, say on pay proposals and in “vote no” campaigns.
S&P 500 Pay Ratio Disclosures: Emerging Trends
As the 2018 proxy season is now gaining full speed, the first group of the required CEO-to-median employee pay ratio disclosures have made their eagerly-awaited debut. Gibson Dunn has been tracking all required pay ratio disclosures by S&P 500 and Fortune 100 companies and, while still early, there are a number of key observations and emerging trends from the filings to date.