After months of anticipation, on March 21, 2022, the U.S. Securities and Exchange Commission (SEC) voted 3:1 to propose climate change-related disclosure rules that would impact a company’s annual reports and registration statements.   As indicated previously by the Staff, the proposed climate-related disclosure framework is modeled partially on the Task Force on Climate-related Financial Disclosure’s (TCFD) recommendations and draws upon the Greenhouse Gas (GHG) Protocol.  (See our previous blog post discussing the Staff’s consideration of TCFD). The proposed rules, seemingly unprecedented in nature, are significantly more prescriptive rather than “principles-based” disclosure rooted in materiality, and intended to provide stakeholders with “consistent and comparable data.”

Continue Reading The SEC’s Proposed Climate Change Rules Are Out: Making Sense of 500+ Pages

Please join the Bass, Berry & Sims Corporate & Securities Practice Group for a series of complimentary webinars exploring various public company-related securities law issues. These CLE programs will be an extension of our Securities Law Exchange Blog and will feature timely and practical guidance for SEC disclosure counsel on key topics of interest.

In November 2021, the Securities and Exchange Commission (SEC) approved amendments to the federal proxy rules to, among other things, mandate the use of a universal proxy card in public solicitations involving director election contests.

Will the adoption of these rules embolden activists and change the game when it comes to proxy contests and other activist tactics? Are certain types of activists more likely to benefit from the changed rules than others? What should companies be doing now to prepare for the new regime?

The next installment of our public company webinar series features Scott Bell and Jay Knight, corporate & securities attorneys at Bass, Berry & Sims, discussing these and other issues relating to the universal proxy rules.

The webinar will cover the following topics:

  • Overview of the universal proxy requirement.
  • Proxy contests under the new regime.
  • Universal proxy’s influence on activist strategies and tactics.
  • What companies should be doing now to prepare.

Please join us Thursday, February 24 from 12:00 p.m. – 1:00 p.m. CT for this informative discussion. To register, please click here.

Continue Reading [WEBINAR] SEC’s New Universal Proxy Rules: Key Considerations & Next Steps to Prepare

Late last year, the Securities and Exchange Commission (SEC) adopted amendments to modernize the description of business, legal proceedings, and risk factor disclosures that registrants are required to make according to Regulation S-K.  An important component of these updates was the new requirement in Item 101 (Description of Business) of Regulation S-K to require registrants to make certain human capital disclosures to the extent material to an understanding of its business as a whole.

The new rule amended Item 101(c) to require registrants to provide “a description of the registrant’s human capital resources, including the number of persons employed by the registrant, and any human capital measures or objectives that the registrant focuses on in managing the business.” The disclosure is only required to the extent such information is material to the registrant’s business as a whole, and the SEC in the adopting release stated that each registrant’s disclosure “must be tailored to its unique business, workforce, and facts and circumstances.”

As a result of these amendments, along with disclosing the number of employees, companies must also consider how to comply with the new principle-based rule. The SEC intentionally did not define “human capital,” reasoning that the term “may evolve over time and may be defined by different companies in ways that are industry specific.” The adopted rule states that the required disclosures may include “measures or objectives that address the development, attraction and retention of personnel.” But the SEC made clear that these are just “examples of potentially relevant subjects, not mandates.” Thus, companies have broad discretion in deciding which human capital measures to disclose.

Continue Reading A Survey of Recent SEC Comment Letters on Human Capital Disclosures

Bass, Berry & Sims attorneys Kevin Douglas, Eric Knox and Sehrish Siddiqui were co-presenters alongside Stephanie Bignon, Assistant General Counsel, Delta Air Lines and Priya Galante, Vice President, Assistant General Counsel & Assistant Secretary, AutoZone at the Society for Corporate Governance’s Southeastern Chapter webinar earlier this month.

This program, titled, “Preparing for the Upcoming Proxy

In one of her first official actions as Acting Chair of the Securities and Exchange Commission (SEC or Commission), Allison Herren Lee reversed a major policy implemented by recently departed SEC Chairman Jay Clayton involving the SEC enforcement settlement process.  This decision could significantly impact the SEC settlement process by causing uncertainty for settling entities as to the business consequences of a settlement.  In a rare rebuke, two fellow SEC Commissioners promptly issued a statement decrying the Acting Chair’s decision.

Collateral Consequences of SEC Settlements

The federal securities laws contain provisions that impose restrictions on entities found to have violated certain statutes or regulations or that become subject to certain court-imposed injunctions or administrative orders.  These restrictions, commonly referred to as “collateral consequences,” range from prohibiting a settling entity (and possibly its affiliates) from taking advantage of certain exemptions under the federal securities laws to disqualifying an entity from engaging in specific business activities.  SEC settlements regularly trigger collateral consequences against settling SEC-regulated entities, like broker-dealers, hedge funds, investment advisers, and public companies.  For example, a public company issuer that settles with the SEC could be automatically disqualified from being considered a Well-Known Seasoned Issuer under Rule 405 of Regulation C.  Alternatively, a settlement could prohibit a settling investment adviser from providing advisory services to an investment company or from receiving cash fees for solicitations.

Given the serious collateral consequences an SEC settlement can trigger, and the fact that such consequences often are unrelated to the misconduct at issue in the corresponding SEC settlement, the SEC is authorized to grant disqualification waivers.  The SEC routinely grants waivers to prevent disproportionate and unintended consequences resulting from a settlement.

Continue Reading SEC Commissioners Square Off Over Enforcement Settlement Process

On November 17, 2020, the Securities and Exchange Commission (SEC) adopted rules (which are now effective) permitting electronic signatures for SEC filings, provided that certain procedures are followed.   There are potential advantages to the utilization of e-signatures by public companies in SEC filings, including from a facilitation perspective (particularly for filings such as registration statements and 10-Ks which need to be signed by a significant number of individuals) and a record-keeping perspective.

Overview of E-Signature Rules

Before the adoption of the SEC’s e-signature rules which recently became effective, SEC filings needed to be manually signed by the signatories to such filings, and public companies were required to retain such manual signatures for a period of at least five years (and provide such signatures to the SEC upon request).  The amendments to Regulation S-T resulting from these new rules allow for e-signatures instead of manual signatures (manual signatures will continue to be permitted as well) for SEC filings, provided that the following conditions are met:

  • The signatory must present a physical, logical, or digital credential that authenticates the signatory’s identity (this may involve a driver’s license, passcode or a credential chip on a workplace ID).
  • The signature process must provide for non-repudiation, which is defined as “assurance that an individual cannot falsely deny having performing a particular action” (this may involve public-key encryption tools provided by commercially available e-signature platforms).
  • The e-signature must be attached, affixed, or otherwise logically associated with the signature page or document being signed.
  • There must be a timestamp to record the date and time of the signature.


Continue Reading SEC Adopts New E-Signature Rules

Over the last few weeks, we have seen a flurry of activity concerning diversity in the boardroom. The Nasdaq Stock Market LLC (Nasdaq) proposed to the Securities and Exchange Commission (SEC) a new diversity rule and proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis each announced expanded diversity proxy voting guidelines. These developments continue a trend of increased investor focus on board diversity.

Nasdaq Proposes Diversity Requirement

Nasdaq filed a proposal this week that, if approved by the SEC (subject to certain exceptions), would ultimately require boards of Nasdaq-listed companies to have at least two diverse directors, consisting of at least one director whose self-identified gender is female and at least one director who self-identifies as either an underrepresented minority or LGBTQ+ (in each case as defined in the proposal).

If approved by the SEC, all Nasdaq-listed companies would be required to disclose certain statistical information regarding the diversity of their boards within one year of approval by the SEC (the Effective Date) and have at least one diverse director within two years of the Effective Date. Additionally, companies listed on the Nasdaq Global Select or Global Market tiers would be required to have at least two diverse directors within four years of the Effective Date and companies listed on the Nasdaq Capital Market would have to meet the same requirement within five years of the Effective Date. Companies failing to meet applicable requirements would have to provide to Nasdaq an explanation of their non-compliance. According to Nasdaq’s study, currently, more than 75% of its listed companies would not meet the requirements set forth under the proposed rule.

Continue Reading Focus on Boardroom Diversity Intensifies

On August 26, the SEC voted to adopt amendments to modernize the description of business (Item 101), legal proceedings (Item 103), and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K.  The amendments reflect the SEC’s continued movement to a principles-based, registrant-specific approach to disclosure.

As detailed below, some of the changes are rather significant, particularly the changes to the business disclosures and the requirement to have a new risk factor summary section of no more than two pages if the risk factors exceed 15 pages.  As a result, we expect most companies will need to make revisions and updates to their existing disclosures, specifically in connection with their Annual Report on Form 10-K where Items 101 and 105 of S-K are triggered. The rules are effective 30 days after their publication in the Federal Register.

The following table briefly summarizes the final amendments.  We have presented some practical takeaways following the table.

Continue Reading Practical Takeaways on SEC Amended Disclosure Requirements for Business Description, Legal Proceedings and Risk Factors under Regulation S-K

Today, June 30, is the reference date for calendar year-end companies to calculate next year’s filer status, as well as the aggregate market value of equity held by non-affiliates (i.e., public float) for purposes of inclusion in the annual report on Form 10-K to be filed in early 2021. In preparing these calculations, it is important each year for counsel to apply the definitions of public float and the relevant filer statuses to ensure that upcoming filings are made timely.

For calculating 2021 filer status, however, several of the definitions have changed. Earlier this year, the SEC adopted amendments adding a revenue element to the definitions of accelerated filer and large accelerated filer to exclude low revenue filers. While relatively straightforward in theory, the tests have proven rather complicated in practice. To assist companies in applying the amendments, the SEC has produced a Small Entity Compliance Guide. Although helpful, even this guide may prove difficult at times to follow.

Since most companies will start analyzing these changes today, this blog post is intended as a practical reminder of and gap-filling guide to the relevant changes for public companies. Generally, the amended definitions now include a carve-out for smaller reporting companies (SRC) with annual revenues less than $100 million in most recent audited annual financial statements.

Continue Reading Happy Filer Status Day! Remember to Check the New SEC Definitions for Accelerated Filer and Large Accelerated Filer

On March 2, the Securities Exchange Commission (SEC) adopted amendments that, among other things, significantly reduce the subsidiary guarantor financial statement requirements in periodic reports for companies that have registered debt that is guaranteed by subsidiaries. These changes are part of the SEC’s ongoing efforts to modernize and ease disclosure burdens for public companies.  The SEC hopes that these amendments will facilitate an increase in the number of registered (versus unregistered) debt offerings.

Although the amendments do not become effective until January 2021, in light of the relief offered, many companies are preparing to voluntarily comply with the amendments in advance of the effective date (which is expressly permitted by the SEC).

This alert briefly describes the changes to existing reporting requirements for subsidiary guarantors.  The SEC’s press release announcing the changes and full text of the final rule can be found here.

Continue Reading SEC Provides Welcome Relief from Reporting Requirements for Subsidiary Guarantors