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
SEC Amends Rules to Permit Existing Reporting Companies to Offer Securities Pursuant to Regulation A+; Updated and Revised Regulation A+ FAQs
In response to the mandate of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the Securities and Exchange Commission recently issued final rule amendments permitting companies reporting under Section 13 or 15(d) of the Securities Exchange Act to offer securities pursuant to the registration exemption Regulation A. Previously, offerings pursuant to Regulation A were expressly limited to non-reporting companies. The rule amendments also provide that, so long as the reporting company is current in its Exchange Act periodic reports, the reporting company has no additional periodic reporting obligations under Regulation A. These amendments became effective on January 31, 2019, upon publication in the Federal Register.
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SEC Request for Comment on Earnings Releases and Periodic Reports
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.”
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The ABA’s Annual Review of Federal Securities Regulation is Available Now
The most recent edition of The Business Lawyer, published by the ABA’s Business Law Section, includes its Annual Review of Federal Securities Regulation prepared by its Subcommittee on Annual Review from the Committee on Federal Regulation of Securities. The Review outlines significant developments in federal securities law and regulation in 2017. The Review is
President Trump Signs Act That Has Major Impact on Regulation A+
On May 29, 2018, President Trump signed the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Act”) into law. While much of the Act centers on regulatory relief for smaller financial institutions and community banks, Section 508 of the Act adopts a major change to Regulation A+. Prior to the Act, Regulation A+ was not available to an existing public company (i.e., a company reporting under Section 13 or 15(d) of the Securities Exchange Act of 1934). Section 508 of the Act directs the SEC to amend Regulation A+ to allow a public company to use Regulation A+ to offer its securities. However, Section 508 of the Act is not self-effecting, which means that, until the SEC adopts rules implementing Section 508, only non-public companies may use Regulation A+. In addition to allowing public companies to use Regulation A+, the Act also directs the SEC to amend its rules to say that a public company that conducts a Tier 2 offering will satisfy its Regulation A+’s periodic reporting obligations by complying with its existing reporting obligations under Section 13 or Section 15(d).
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Form S-3: To File or Not to File, That is the Question . . .
Public companies that engage in capital raising activities from time to time must consider whether it is advisable to have an effective shelf registration statement on Form S-3 on file in advance of raising capital, or whether to simply wait to file a Form S-3 until such time that the company desires to raise capital.
Background
As background, shelf registration statements may be utilized by public companies eligible to use Form S-3 (which generally requires, among other things, that an issuer have at least $75 million in non-affiliate common equity public float and have filed all required SEC reports over the last 12 months), to register the issuance of various classes of the company’s securities on a delayed or continuous basis, to be issued in public offerings from time to time, either by the issuer or selling security holders. At the time of an offering, these securities are then sold in a “take down” off the shelf utilizing a prospectus supplement describing (among other things) the terms of the offering and incorporating by reference information about the issuer. Shelf registration statements generally only remain effective for three years.
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Practical Tips for Interacting with the SEC Staff
I recently presented to the Corporate & Securities Law Committee of the Association of Corporate Counsel (ACC) on the topic entitled “Behind the SEC Curtain: Practical Tips for Interacting with the SEC Staff.”
The presentation offered practical tips from me, a former SEC staffer, on the following topics:
- How to interact with the
Impact of Raising Reg A+ IPO Limit to $75 Million
Recently, the house panel approved to raise the Reg A+ IPO limit to $75 million designed to bolster capital-raising efforts. The “moving up [to $75 million] could have a positive impact for smaller companies because it may attract some of the more traditional underwriters to the process. By attracting more sophisticated parties to the transaction,
Updated: FAQ on New SEC Rules on Exhibit Hyperlinks – Exhibit Indexes
Now that the SEC’s new rules on exhibit hyperlinks are live as of September 1, 2017, we have updated our March blog post with the frequently asked question below regarding exhibit indexes.
Where should we put the exhibit index now? Can we combine the list of exhibits and the exhibit index?
In connection with the SEC’s March 2017 amendments implementing the hyperlink requirement, the SEC also amended the rules pertaining to the placement of the exhibit index, which had previously required the exhibit index to “precede immediately the exhibits filed with such registration statement.” As amended, Rule 102(d) of Regulation S-T and Rule 601(a)(2) of Regulation S-K now require the exhibit index to “appear before the required signatures in the registrant statement or report.” Although exhibit index practice has varied, there is some ambiguity as to whether the new rules require a separate exhibit index before the signature page and the exhibits themselves. For example, while some companies are combining the exhibit table with the exhibit index and placing the latter before the signature page, others have been retaining a separate exhibit table and exhibit index and move the latter above the signatures.
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FAQs on SEC Regulation A+ Securities Offerings
Please note that the FAQs About Regulation A+ Securities Offerings was updated on June 28, 2018, to reflect changes associated with the Economic Growth, Regulatory Relief and Consumer Protection Act. Read more about those changes and get the updated publication here.
It seems that lately there has been a noticeable uptick in Regulation A+ activity, including several recent Reg A+ securities offerings where the stock now successfully trades on national exchanges. In light of this activity, we have published a set of FAQs about Regulation A+ securities offerings to help companies better understand this “mini-IPO” offering process, as well as pros and cons compared to a traditional underwritten IPO.
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