Earlier this month, in a bipartisan vote of 384 to 7, the U.S. House of Representatives passed the 8-K Trading Act of 2019.  A similar bill has been introduced in the Senate and given the bipartisan support in the House, is likely to pass in the Senate when considered.  The proposed law stems from academic research that suggests corporate insiders that trade around the filing of Forms 8-K regularly beat the market in the four days preceding the filing of a Form 8-K.

Basics of the 8-K Trading Act of 2019

The new law, when it becomes effective, requires the SEC to issue rules requiring issuers to establish and maintain policies, controls and procedures that are reasonably designed to prohibit executive officers and directors of issuers from purchasing, selling or otherwise transferring equity securities of the issuer, directly or indirectly, with respect to an event described in Items 1 through 6 of Form 8-K between the occurrence of the event and the filing or furnishing of the related 8-K.

Continue Reading House Passes Bill to Limit Trading by Insiders around Form 8-K Filings

This is a friendly reminder to our clients and friends that 2020 is a leap year, which means there is an extra day in the calendar: February 29, 2020.

Therefore, when updating your internal SEC reporting and proxy calendars, please keep this added day in mind.  For example, instruction G(3) of Form 10-K provides that the information required by Part III (Items 10, 11, 12, 13 and 14) may be incorporated by reference from the registrant’s definitive proxy statement, if such definitive proxy statement is filed with the Commission no later than 120 days after the end of the fiscal year covered by the Form 10-K.

In typical years, that 120-day date is April 30 for December 31 fiscal year end companies.  However, this year the cut-off date is Wednesday, April 29, 2020, as a result of leap day.

Continue Reading Don’t Forget: Update SEC Filing and Proxy Calendars for Leap Year 2020

Given the high profile nature of Boeing’s ongoing saga with the grounding of its 737 MAX aircraft, perhaps it should come as no surprise that the Securities Exchange Commission (SEC) Staff was particularly focused on the company’s disclosure of this issue in its recent review of Boeing’s SEC filings.

In monitoring SEC comment letters, we came across this SEC comment letter exchange with Boeing made public this week where the Staff questions the company about its commitments and contingencies footnote disclosures as required by Accounting Standards Codification (ASC) 450 – Contingencies.

Staff Requests More Disclosures in Contingency Footnote

In its Form 10-Q for the quarterly period ended June 30, 2019, Boeing discloses that it recorded in the second quarter an earnings charge of $5.6 billion, net of insurance recoveries of $500 million, in connection with “estimated potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays.”

Continue Reading SEC Staff Comments on Boeing’s 737 MAX Contingency Disclosure

The Bass, Berry & Sims Corporate & Securities Practice Group recently hosted another in a series of complimentary webinars exploring various public company-related securities law issues.

The most recent Securities Law Exchange webinar, Recent SEC Reporting Developments and Enforcement Insights, was held on November 19 and discussed recent developments from the Securities Exchange Commission (SEC), including best practices and lessons learned from recent changes under the Fixing America’s Surface Transportation (FAST) Act and the SEC’s new rule that extends “testing-the-waters” to all issuers. It also covered recent SEC guidance and enforcement actions impacting public companies.

Continue Reading Key Takeaways from Our Public Company SEC Reporting Webinar

Glass Lewis recently posted its comprehensive 2020 voting guidelines, which are summarized on the first page of the 2020 voting guidelines as well as on the Glass Lewis blog. Among other things, the 2020 voting guidelines update Glass Lewis’ voting guidance regarding excluded shareholder proposals. The updates are in response to the September 2019 guidance by the Staff of the Division of Corporation Finance (the Staff) regarding potential oral rather than written responses to 14a-8 no-action letter requests, as further outlined in recent our blog post.

As a general matter, Glass Lewis believes companies should only exclude a shareholder proposal when the Staff has explicitly concurred with a company’s argument for the exclusion of such shareholder proposal.

Staff Declines to Articulate a View on the Exclusion of a Shareholder Proposal

In instances where the Staff has declined to provide a view on whether the shareholder proposal is ripe for exclusion, Glass Lewis believes such a shareholder proposal should be included in the company’s proxy statement. In the event a company excludes such a shareholder proposal from its proxy statement, Glass Lewis will likely recommend that shareholders vote against the members of the company’s governance committee.

Continue Reading Glass Lewis Issues Policy Changes Regarding Excluded Shareholder Proposals

On November 5, the Securities and Exchange Commission (SEC) in a 3-2 decision voted to propose amendments to rules governing shareholder proposals in companies’ proxy statements.  These proposed amendments – which seek to revise Rule 14a-8’s eligibility requirements, one-proposal limit, and resubmission thresholds – follow on the heels of recent guidance issued by the Staff of the Division of Corporation Finance related to the no-action letter process for shareholder proposals.

The press release announcing the proposed changes noted that the changes are part of the SEC’s ongoing focus on improving proxy access and the ability of shareholders to exercise their rights to vote. SEC Chairman Jay Clayton commented in the release that the proposed changes are designed to “facilitate constructive engagement by long-term shareholders in a manner that would benefit all shareholders and our public capital markets.”  Not without controversy though, the rule revisions are receiving criticism from shareholder advocacy groups, while business-minded groups like the U.S. Chamber of Commerce have come out in support of the proposed changes.

Eligibility Requirements for Shareholders

The current eligibility requirements require that a shareholder proponent hold at least $2,000 or 1% of a company’s securities for at least a year to be eligible to submit a proposal.  The proposed revisions, eliminate the 1% threshold and replace the $2,000 threshold with the following three alternatives:

Continue Reading SEC Proposes to Modernize Shareholder Proposal Thresholds and Certain Procedural Elements of Rule 14a-8

Register for the November 19th WebinarPlease join the Bass, Berry & Sims Corporate & Securities Practice Group for a series of complimentary webinars exploring various public company – related securities law issues. These quarterly CLE programs will be an extension of this blog and will feature timely and practical guidance to SEC disclosure counsel on key topics of interest.

The second Securities Law Exchange webinar, hosted by Bass, Berry & Sims attorneys Jay Knight and Michael Rivera, will feature guest presenter Scott Hodgdon, Senior Managing Counsel, Securities & Governance at Boston Scientific Corporation.

Jay and Scott will discuss recent SEC developments, including best practices and lessons learned from recent changes under the FAST Act and the SEC’s new rule that extends “testing-the-waters” to all issuers. Michael will review recent SEC guidance and enforcement actions impacting public companies.

WEBINAR DETAILS

Title: Recent SEC Reporting Developments and Enforcement Insights

Date: Tuesday, November 19, 2019  Time: 12:00 PM Central Standard Time

Approved for one hour General Tennessee CLE credit. Certificate of completion available upon request, which can be used to obtain CLE in other jurisdictions.

Who Should Attend

  • Outside and in-house counsel
  • Public company finance and SEC reporting personnel
  • Compliance officers
  • Other interested professionals

For more information, please contact Lauren Parkhurst.

In June of this year, the SEC issued a concept release that reviews the framework for exempt offerings, including several exemptions from registration under the Securities Act of 1933 that facilitate capital raising.  The concept release seeks comment on possible ways to simplify, harmonize and improve this exempt offering framework to expand investment opportunities while maintaining appropriate investor protections and promote capital formation.

To date, approximately 161 commentators have submitted letters to the SEC, and the SEC has posted memos related to seven meetings between SEC officials and outside parties concerning the rulemaking.  As a former Staffer that did a stint in the Office of Rulemaking, I can appreciate the hard work that is involved in summarizing all these letters and meetings.  (I actually had the job of summarizing comment letters in connection with a rulemaking I was involved with while on Staff.  It is actually very beneficial for the Staff to hear various viewpoints and expertise on any rulemaking, but it is also a tedious task that takes a lot of Staff hours and, for me at least, a very large spreadsheet!)

Continue Reading ABA Securities Committee Comments on SEC’s Concept Release on Private Offerings Harmonization

Register for the Corporate & Securities Counsel Public Company Forum on December 12Bass, Berry & Sims invites you to join us for our inaugural Corporate & Securities Counsel Public Company Forum on Thursday, December 12.

This half-day program will feature timely and practical guidance on the latest developments in corporate and securities matters impacting public company in-house counsel.

Panel discussion topics will include:

  • Upcoming proxy season
  • Financial reporting and disclosure considerations
  • Corporate governance developments
  • Insights from public company general counsel
  • SEC priorities and developments
  • Recent M&A trends and 2020 outlook

Pending approval, this half-day program will provide four hours of general CLE credit in Tennessee. This half-day program will be held Thursday, December 12, from 12:00 – 5:00 p.m., at the office of Bass, Berry & Sims in Nashville, Tennessee.

The Corporate & Securities Counsel Public Company Forum is intended for in-house counsel, public company finance and SEC reporting personnel, compliance officers, and other interested professionals. For more information, please contact Lauren Parkhurst.

About Our Corporate & Securities Practice

The Bass, Berry & Sims Corporate & Securities Practice encompasses mergers and acquisitions, capital markets transactions, corporate governance and shareholder activism. We serve as primary corporate and securities counsel to approximately 35 public companies and have counseled on 150 deals ranging in size from $20 million to more than $15 billion over past two years. Learn more here.

The recent SEC enforcement action against ADT Inc. for its failure to comply with the SEC’s equal prominence requirements applicable to non-GAAP financial measures, as outlined in our recent blog post, is a clear reminder that public companies need to continue to be vigilant about the SEC’s non-GAAP financial measure rules.  Also, the Staff has continued to focus on non-GAAP compliance in its comment letters, with non-GAAP financial measures being one of the leading areas of Staff comment over the last couple of years.

There are different layers of the SEC’s non-GAAP financial measures rules which apply to public companies in varying circumstances, depending on the nature of the public disclosure.  Comprehensive knowledge regarding which level of the SEC’s non-GAAP financial measure rules applies to any particular disclosure is a key component when assessing legal considerations and risk in connection with the disclosure of non-GAAP financial measures.

Continue Reading Navigating the Maze: Which SEC Rules Apply to Your Non-GAAP Financial Measure Disclosures