Regulation Changes

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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

The Staff of the various Securities Exchange Commission (SEC) divisions, including the Division of Corporation Finance, issued an announcement on March 24, 2020, which provides some flexibility to registrants seeking to satisfy the record retention requirement in Rule 302(b) of Regulation S-T that the registrant retain the manually signed documents.

Rule 302(b) of Regulation S-T requires that each signatory to documents electronically filed with the SEC “manually sign a signature page or other document authenticating, acknowledging or otherwise adopting his or her signature that appears in typed form within the electronic filing.”  Such documents must be executed before or at the time the electronic filing is made.  Further, electronic filers must retain such documents for a period of five years and furnish copies to the SEC or its staff upon request.Continue Reading SEC Staff Provides Relief to “Manual Signature” Retention Requirement in Light of COVID-19 Concerns

Jay Knight (far right) discusses disclosure challenges for public companies at the 2020 Securities Regulation Institute.

The Bass, Berry & Sims Corporate & Securities Practice Group kicked off the new year by participating as a sponsor of the 47th Annual Securities Regulation Institute, which is held annually in San Diego by Northwestern University. Jay Knight, head of the firm’s Capital Market Subgroup, was featured as a speaker in a well-attended panel discussing recurring disclosure challenges faced by public companies and their advisors. Each year, the conference draws SEC staffers and many of the leading practitioners of the public company industry, and the keynote speaker for this year’s conference was SEC Commissioner Jay Clayton.

Our key takeaways from the conference follow:
Continue Reading Five Key Takeaways from the 2020 Securities Regulation Institute

With many year-end companies working on initial drafts of their 2020 proxy statements, we thought it might be worth sending a quick reminder of two recent rule changes – briefly summarized below – that will (modestly) impact this year’s proxy statement.

  • Compliance with Section 16(a) of the Exchange Act: Item 405 of Regulation S-K previously required companies to disclose information about late Section 16 filings under the caption “Section 16(a) Beneficial Ownership Reporting Compliance.” As part of the recent FAST Act amendments, the disclosure header is now “Delinquent Section 16(a) Reports” and companies are encouraged to exclude this heading altogether when they have no Section 16(a) delinquencies to report.  Since this is one item that is typically specifically incorporated by reference into Part III of Form 10-K, to the extent the heading is retained, companies should also update the header cross-reference in the Form 10-K.

    Continue Reading Proxy Statement Rule Change Reminders for 2020

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

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

It’s been a busy late summer and early fall for the Staff of the Division of Corporation Finance (the Staff) as it relates to shareholder proposals and the Staff’s historical involvement in the no-action process related to those proposals.

On September 6, 2019, the Staff, focusing on how it could most efficiently and effectively provide guidance where appropriate regarding shareholder proposals, announced that it was changing its practices in this important area.  Historically, issuers that were seeking to exclude a shareholder proposal from their proxy statement on the grounds that the SEC’s proxy rules permitted such exclusions sought formal, written no-action relief from the Staff of the Division of Corporation Finance.

These no-action letters issued by the Staff would inform the issuer whether or not the Staff would recommend that the SEC’s Enforcement Division take action against the issuer for excluding a particular shareholder proposal.Continue Reading SEC Staff Policy Change on 14a-8 Process; May Choose to Respond Orally Rather than in Writing

We recently wrote a three-part article series for Corporate Counsel highlighting recent trends warranting review by public companies and consideration as to whether to update their insider trading policies and training.

  • Part One offered practical guidance on mitigating risks associated with employees who may inadvertently share confidential information with others. As the benefits of remote work options increasingly pull the workforce out of the office, companies face risks from employees removing sensitive company documents from the secure confines of their offices and company databases. Because information removed from the safety of a corporate office or database is susceptible in many ways to being taken and misused by bad actors, it is important for in-house counsel to take steps to ensure their insider trading policies and training cover this area.

Continue Reading Insider Trading Policies and Training: Time for a Refresher?

The Staff of the Securities and Exchange Commission (the Staff) issued a Public Statement regarding the probable transition away from the London Inter-bank Offered Rate (LIBOR) after December 31, 2021, as a result of the expectation that a number of private-sector banks currently reporting information used to establish LIBOR will cease to do so after 2021 when their reporting commitment ends.

As a result, the publication of LIBOR may cease immediately following the end of 2021 or may result in LIBOR’s regulator determining that the quality of the LIBOR metric has diminished such that it is no longer representative of its underlying market.Continue Reading Managing LIBOR Transition – SEC Considerations

From the Bass, Berry & Sims Blog Network
From the Bass, Berry & Sims Blog Network

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