On July 2, the SEC announced that The Dow Chemical Company agreed to settle charges related to the company’s inadequate perquisites disclosure in SEC filings by paying a civil penalty in the amount of $1.75 million, hiring an independent consultant to evaluate and recommend changes to the company’s policies and procedures relating to perquisites disclosure, and implementing such changes.

The SEC’s order finds that from 2011 through 2015, Dow did not ensure that approximately $3 million in executive perquisites were adequately evaluated and disclosed as “other compensation” in the Compensation Discussion & Analysis (CD&A) section of its annual proxy statements. These authorized but undisclosed perquisites included personal use of the Dow aircraft and other expenses.

Continue Reading Recent SEC Enforcement Action Reminds Companies that Perquisite Disclosure Does Not Hinge on Business Purpose

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).

Continue Reading President Trump Signs Act That Has Major Impact on Regulation A+

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.

Continue Reading Form S-3: To File or Not to File, That is the Question . . .

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 SEC staff
  • The screening and review process for registration statements
  • Periodic reports and proxies
  • Recent areas of focus
  • Current developments at the Commission and staff

I appreciated the positive feedback on the presentation and have posted the PowerPoint for our readers’ benefit.

Click to view the presentation.

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

Bass, Berry & Sims attorneys Britt Latham and Brian Irving authored an article that was published in The D&O Diary that outlined and discussed the most important trends and developments related to SEC investigations and enforcement proceedings impacting the industry this past year and likely to impact the industry in the coming year. The article includes a discussion of lessons learned from the first year of the Trump administration.

The authors also point to disgorgement as another topic with a changing landscape, with the Supreme Court ruling in Kokesh v. SEC that disgorgement claims are subject to a five-year statute of limitations for enforcing fines, penalties or forfeitures.

Continue Reading Britt Latham and Brian Irving Outline SEC Enforcement Trends under Trump Administration

The U.S. Securities and Exchange Commission (SEC) issued a Valentine’s Day notice to public companies yesterday that the SEC will be holding an open meeting on Wednesday, February 21, 2018, at 10:00 a.m. EST to consider, among other things, “whether to approve the issuance of an interpretive release to provide guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents.”

Continue Reading SEC Calendars Open Meeting to Consider Issuing an Interpretive Release on Cybersecurity Disclosures

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 tax rate (e.g., new 20% rate), companies will need to recalculate their deferred tax assets and deferred tax liabilities on their balance sheets based on the new rate as the assets and liabilities need to be adjusted in the period of enactment. Any charges would flow through to the companies’ income statements.

Read more about the potential sleeper issue and how it will likely affect your company here.

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

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, that could help facilitate raising capital.”

The full article, “House Panel Approves Bill Lifting Reg A+ IPO Limit To $75M,” was published by Law360 on November 16, 2017, and is available online.