On August 20, 2019, the SEC staff published new interpretations in the form of Compliance and Disclosure Interpretations regarding Inline XBRL, which affirmed the guidance we previously posted about the new exhibit 104 cover page tagging requirements.
The new interpretations are numbered as Questions 101.01 through 101.09 at this link.Continue Reading SEC Publishes Interpretations about Inline XBRL and Exhibit 104 (Cover Page Interactive Data File)
Note: We updated this post (originally posted last week) to add new frequently asked questions about when to reference Exhibit 104 in Form 8-Ks and about the phase-in schedule for all companies.
Question: In a Form 8-K, are you required to explicitly reference Exhibit 104 in the Exhibit Index?
Answer: In discussions with SEC Staff within the SEC’s Division of Corporation Finance, we received the following guidance related to a registrant’s Exhibit 104 reference obligation in 8-Ks:
While monitoring SEC comment letters, we recently came across the batch of SEC comment letters issued to Uber Technologies, Inc. in connection with its IPO registration statement that was declared effective on May 9, 2019. The company’s response letters (with SEC comments repeated as is customary) are available below:
Presented below are five interesting takeaways from the letters that may have general application:Continue Reading 5 Interesting Takeaways from Uber Technologies’ IPO SEC Comments
Note: We updated this post (originally posted last week) to add a new frequently asked question about expanded hyperlinking.
The questions and answers below address certain interpretive issues on the SEC’s new hyperlink requirements effective May 2, 2019. For more on the SEC’s amendments, see our previous post that details the rule changes.
Question: The new rules will require registrants to include an active hyperlink to information incorporated by reference into a registration statement or report if such information is publicly available on EDGAR “at the time the registration statement or form is filed.”
How does this new requirement apply to information incorporated by reference from one item to another within the same filing? Continue Reading Updated: FAQ on Expanded Hyperlinking
There have certainly been many developments in securities claims jurisdiction in the past several years, particularly in the area of “exclusive forum” provisions contained in charters or bylaws. Exclusive forum provisions typically provide that a certain court (e.g., the Delaware Court of Chancery) is the sole and exclusive forum for certain types of litigation involving the company. These provisions are often tested in the courts, especially when they seem to be in conflict with controlling precedent. For example, in 2018 in Cyan v. Beaver Cty. Empls. Ret. Fund, the United States Supreme Court concluded that federal law did not bar state courts from adjudicating class actions alleging only claims under the 1933 Act, and it also prohibited the removal of such class actions from state to federal court.
Following Cyan, several Delaware companies attempted to avoid litigating 1933 Act class actions in state court by adopting charter-based federal forum provisions, which required stockholders to file any claim under the 1933 Act in federal court. Those efforts to circumvent the consequence of Cyan, however, failed when in a December 2018 case (Sciabacucchi v. Salzberg), the Delaware Court of Chancery rejected use of these federal forum provisions. The court reasoned that Delaware corporations could only adopt forum-selection provisions for “internal-affairs claims.” According to the Delaware Court of Chancery, “a 1933 Act claim is external to the corporation.” Therefore, because 1933 Act claims are external to Delaware corporations, charter provisions requiring a federal forum for 1933 Act class actions brought by corporation shareholders were invalid under Delaware law.
Notwithstanding the above related to the 1933 Act class actions, federal courts continue to have “exclusive jurisdiction” to hear claims brought under the 1934 Act as a result of Section 27(a) of that law.Continue Reading Exclusive Forum Provisions in Charters and Bylaws: An Area of Frequent SEC Comment
As it is proxy season for calendar year companies, many of which are filing preliminary proxy statements that are subject to screening by the SEC Staff, I thought it might be helpful to publish answers to a few common questions about this process.
Yes, in my experience the screening process for preliminary proxies is a little different than the process for a review of registered transactions. For registration statements, the Staff will call you at some point with a screening decision because in most cases they will need to take the filing effective, which requires more interaction between you and the Staff (i.e., acceleration request, etc.) In comparison, if you file a preliminary proxy and you have not heard from the Staff within 10 calendar days from the date of your filing, you are free to file the definitive proxy, print and mail at that point—you don’t have to call the Staff to confirm that they are not going to review the filing.Continue Reading 5 FAQs on Proxy Screening Procedures
This week the SEC proposed to expand the “test-the-waters” accommodation—currently available to emerging growth companies (EGCs)—to all issuers, including investment company issuers. The proposed rule and related amendments under the Securities Act of 1933 would enable all issuers (and its authorized representatives, including underwriters) to engage in test-the-waters communications with certain institutional investors regarding a contemplated registered securities offering prior to, or following, the filing of a registration statement related to such offering. These communications would be exempt from restrictions imposed by Section 5 of the Securities Act on written and oral offers prior to or after filing a registration statement and would be limited to qualified institutional buyers (QIBs) and institutional accredited investors (IAIs).
In the SEC’s press release announcing the action, SEC Chairman Jay Clayton said, “Extending the test-the-waters reform to a broader range of issuers is designed to enhance their ability to conduct successful public securities offerings and lower their cost of capital, and ultimately to provide investors with more opportunities to invest in public companies.” Chairman Clayton added, “I have seen first-hand how the modernization reforms of the JOBS Act have helped companies and investors. The proposed rules would allow companies to more effectively consult with investors and better identify information that is important to them in advance of a public offering.”
Under proposed Securities Act Rule 163B:Continue Reading SEC Proposes to Expand “Test-the-Waters” to All Issuers
The American Law Institute (ALI) approved a new project last month – Restatement of the Law, Corporate Governance. Over 25 years ago, the ALI approved and published the Principles of Law, Corporate Governance and this new project will examine the evolution of corporate governance over the last 25 years and reflect the current state of…
An SEC comment letter exchange recently made public serves as a helpful reminder to consider Section 5 of the Securities Act when structuring a PIPE (private investments in public equity) transaction. In a PIPE, a public company issues securities to one or more accredited investors in a private placement exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, or the safe harbor thereunder provided by Regulation D. Since the securities in a PIPE offering are initially “restricted securities” within the meaning of the Securities Act, investors cannot freely resell their securities until a holding period under Rule 144 has lapsed or a registration statement has been filed.
PIPE transactions often include registration rights whereby the issuer agrees to file a resale registration statement with the SEC within an agreed-upon period. The crux of the Section 5 issue in PIPEs often hinges on the timing of the investment decision in the private offering, including whether commitments are in place from all investors, subject only to conditions outside their control so that there is no further investment decision after the filing of the registration statement, and the investors have market risk at the time that the resale registration statement is filed. In other words, the “sale” in the private offering is completed prior to filing the registration statement. As discussed in the comment letter exchange below, other related factors include whether the private offering closes prior to, or after, the filing of the registration statement and when the shares to be resold were actually issued to the purchaser.Continue Reading How to Avoid Running a PIPE into Section 5 Problems: A Recent SEC Comment Letter Example
With the government partially shut down, the SEC is following its operations plan during a shutdown, which entails an extremely limited number of staff members available to respond to emergency situations involving market integrity and investor protection, including law enforcement. While EDGAR will accept registration statements, offering statements and other filings during the shutdown, the SEC is neither screening nor reviewing filings during the shutdown. This means the Staff is not be able to declare registration statements effective nor qualify Form 1-A offering statements.
Continue Reading Removing the Delaying Amendment – An Example
