SEC Guidance

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Yesterday, the SEC charged TherapeuticsMD Inc., a pharmaceutical company headquartered in Boca Raton, Florida, with violations of Regulation FD based on its sharing of material, nonpublic information with sell-side research analysts without also disclosing the same information to the public.  The SEC’s order finds that on two separate occasions in 2017, TherapeuticsMD selectively shared material information with analysts about the company’s interactions with the U.S. Food and Drug Administration (FDA).

As detailed in the SEC’s order, on June 15, 2017, one day after a publicly-announced meeting with the FDA about a new drug approval, TherapeuticsMD sent private messages to sell-side analysts describing the meeting as “very positive and productive.”  TherapeuticsMD’s stock price closed up 19.4% on heavy trading volume the next day.  At that time, the company had not issued a press release or made any other market-wide disclosure about the meeting.Continue Reading Recent SEC Enforcement Action Drives Home the Importance of Regulation FD Policies and Training

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:

On May 3, 2019, the SEC proposed amendments to its rules and forms which would revise the disclosure requirements for financial statements relating to acquisitions and dispositions of businesses. We believe that most aspects of the proposed amendments, if adopted in current form, are thoughtful revisions to existing rules and will be beneficial to public companies, although we believe that a couple of aspects of the proposed amendments noted below may bear reconsideration by the SEC.

Key aspects of the proposed amendments include the following:

  • Updating the significance tests by:
    • increasing the significance threshold for a disposed business (triggering the requirement to file pro forma financials) from 10% to 20% (mirroring the existing percentage threshold for acquired businesses).
    • revising the “income test” in the definition of “significant subsidiary” under Regulation S-X, particularly to include a revenue as well as (after-tax) income component to such test, which will eliminate anomalies existing under the current rules (which do not include a revenue component) when a registrant has net income close to zero and a filing may be triggered even where a registrant is much larger than an acquired or disposed company.
    • revising the “investment test” in the definition of “significant subsidiary” under Regulation S-X, including to provide that the purchase price in an acquisition or disposition (which is the numerator in such test) will be compared to the equity value of the registrant rather than (as under the current rules) to the book value of the total assets of the registrant.
    • expanding the use of pro forma financial information in measuring significance, which may provide added flexibility to registrants in determining significance under certain circumstances.

Continue Reading SEC Proposes Rule Amendments to Revise Financial Statement Requirements for Acquisitions and Dispositions

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

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

Last month, the Securities and Exchange Commission (SEC) held its annual SEC Speaks Conference in Washington, D.C. We have summarized several significant insights conveyed by SEC Staff that are instructive for counsel handling investigations by the SEC’s Enforcement Division.

Continue reading to learn more about:

  • Herrera and Waiver of Work Product Protections
  • Further Insight on

…

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

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

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

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

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