Regulation Changes

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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

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.

FAQ #1

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

On March 20, 2019, nearly a year and a half after proposing them, the SEC adopted amendments to disclosure requirements for reporting companies, as mandated by the 2015 Fixing America’s Surface Transportation Act (the “FAST Act”).  The amendments are a part of an ongoing effort by the SEC to simplify and modernize disclosure obligations.  According to the SEC’s press release, the amendments are expected “to benefit investors by eliminating outdated and unnecessary disclosure and making it easier for them to access and analyze material information.”

Among many other items, the amendments address the following topics:

  • Greater Flexibility When Filing Under Item 601 of Regulation S-K
    • Omission of Immaterial Schedules and Exhibits—The amendments revise Item 601 of Regulation S-K to expand the ability of registrants to omit immaterial schedules and similar attachments to required exhibits, which previously was only available to schedules and exhibits to acquisitions agreements being filed under Item 601(b)(2).

Continue Reading SEC Amendments Help Streamline Reporting for Public Companies

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

On December 18, 2018, the SEC issued a request for public comment soliciting input on the nature, content and timing of earnings releases and quarterly reports of companies that are obligated to file reports with the SEC as well as the relationship between the periodic reports that reporting companies must provide and the earnings releases that they choose to distribute. With this request for comment, the SEC is seeking to continue the ongoing dialogue about whether the current reporting regime and practices of reporting companies is overly burdensome or contributing to “short-termism”.

Commenting on the matter, SEC Chairman, Jay Clayton, said “[t]here is ongoing public debate regarding the effects of mandated quarterly reports and the prevalence of optional quarterly guidance.”  “Our markets thirst for high-quality, timely information regarding company performance and material corporate events.  We recognize the importance of this information to well-functioning and fair capital markets.  We also recognize the need for companies and investors to plan for the long term.  Our rules should reflect these realities.  I look forward to receiving thoughtful comments as we think about ways to encourage long-term investment in our country.”Continue Reading SEC Request for Comment on Earnings Releases and Periodic Reports

On August 17, the SEC adopted amendments intended to simplify and update the disclosure of information to investors and reduce compliance burdens for companies without significantly altering the total mix of information available to investors.  The amendments are effective 30 days after their publication in the Federal Register.

The amendments eliminate certain:

  • Redundant and duplicative requirements, which require substantially similar disclosures as GAAP, International Financial Reporting Standards (IFRS) or other SEC disclosure requirements.
  • Overlapping requirements, which are related to, but not the same as GAAP, IFRS or other SEC disclosure requirements.
  • Outdated requirements, which have become obsolete as a result of the passage of time or changes in the regulatory, business or technological environment.
  • Superseded requirements, which are inconsistent with recent legislation, more recently updated SEC disclosure requirements, or more recently updated GAAP.

Continue Reading SEC Adopts Amendments to Simplify and Update Disclosure Requirements

On July 24, the SEC proposed amendments to Rule 3-10 of Regulation S-X for guarantors and issuers of guaranteed securities registered or being registered, as well as the financial disclosure requirements in Rule 3-16 of Regulation S-X for affiliates whose securities collateralize securities registered or being registered.  Here is the proposing release.  The proposed changes are intended to provide investors with material information given the specific facts and circumstances, make the disclosures easier to understand, and reduce the costs and burdens to registrants.  The proposal will be subject to a 60-day public comment period.
Continue Reading SEC Proposes to Simplify Guarantor and Pledgor Disclosures in Registered Debt Offerings

On March 23, 2018, President Trump signed into legislation the Consolidated Appropriations Act of 2018, also known as the “omnibus spending package.” Included in Title VIII therein is legislation titled the Small Business Credit Availability Act (SBCAA) that includes certain regulations under the federal securities laws impacting business development companies (BDCs).  Among other items, the SBCAA allows BDCs to incur significantly more debt and rely on relaxed SEC communication and offering rules that were previously available to operating companies.
Continue Reading Recent Legislation Means Good News for Business Development Companies

With the potential for a significant change in the corporate tax rate (35% to 20%) this month as a result of the tax bill in Congress, we are re-posting a potential sleeper issue that could arise for some companies in their Q4 and FYE results. If a tax bill is enacted with a lower corporate…

We thought you may find of interest prepared remarks by SEC Chairman Jay Clayton at the annual Government-Business Forum on Small Business Capital Formation held on November 30, 2017, where he stated, “In the coming months I anticipate that the Commission will consider adopting rules to expand the definition of ‘smaller reporting company’ to permit additional companies to avail themselves of scaled disclosure requirements.” A full transcript of the speech is available at the SEC’s website.

Proposed Rules Would Change Qualifications for Smaller Reporting Companies

As you may recall, in July 2016 the SEC voted to propose amendments that would increase the financial thresholds in the “smaller reporting company” definition. The proposed rules would enable a company with less than $250 million of public float to provide scaled disclosures as a smaller reporting company, as compared to the $75 million threshold under the current definition. The SEC did not, however, propose to increase the $75 million threshold in the “accelerated filer” definition.Continue Reading SEC Chairman Clayton Expects New Rules on Smaller Reporting Company Definition Soon

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

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