Category: SEC

SEC: On December 18, 2015, the SEC issued a 118-page report on the definition of “Accredited Investor” (the “Report”). The report follows the March 2015 SEC Advisory Committee on Small and Emerging Companies (the “Advisory Committee”) recommendations related to the definition. The SEC is reviewing the definition of “accredited investor” as directed by the Dodd-Frank Act, which requires that the SEC review the definition as relates to “natural persons” every four years to determine if it should be modified or adjusted…

Oct172017

SEC Chief Accountant Speaks On Initial Coin Offerings (ICO’s)

On September 11, 2017, the SEC Chief Accountant, Wesley R. Bricker, gave a speech before the AICPA National Conference on Banks & Savings Institutions. The bulk of the speech was similar to Mr. Bricker’s June 2017 speech before the 36th Annual SEC and Financial Reporting Institute Conference, summarized HERE. However, one topic that was new, and interesting enough to spark this blog, was related to initial coin offerings (ICO’s). Note that offers and sales of digital coins, cryptocurrencies or tokens using distributed ledger technology (DLT) or blockchain have become widely known as ICO’s.

As the capital markets become more and more focused on all things blockchain, including ICO’s, secondary token trading, and disruptive changes made possible by distributed ledger technology (DLT), which is inevitably transforming capital market processes, the SEC is fronting a wave of questions and concerns on the subject. On July 25, 2017, the SEC issued a report on an investigation related to an

Oct032017

SEC Provides Regulatory Relief To Hurricane Victims

On September 28, 2017, the SEC announced interim final temporary rules (“Exemptive Order”) to provide relief to publicly trading companies, investment companies, accountants, transfer agents, municipal advisors and others affected the Hurricanes Harvey, Irma and Maria.  In addition to the interim rules, the SEC urges others not covered by the relief but affected in their ability to provide information to the SEC or shareholders to contact the SEC to seek relief on a case-by-case basis.

Interim Final Temporary Rules

Generally the due date for Exchange Act reports for companies relying on the Exemptive Order shall be October 10, 2017 for those affected by Hurricane Harvey, October 19, 2017 for those affected by Hurricane Irma, and November 2, 2017 for those affected by Hurricane Irma.  As such, companies with such extended due dates may also file an additional extension on Form 12b-25 on those dates, and benefit from an additional five days for a Form 10-Q and 15 days for a

Sep262017

The SEC Provides Further Guidance On Financial Statement Requirements In Registration Statements

On August 17, 2017, the SEC issued guidance on financial statement requirements for confidential and public registration statement filings by both emerging growth companies (EGC) and non-emerging growth companies. The new Compliance and Disclosure Interpretations (C&DI’s) follow the SEC’s decision to permit all companies to submit draft registration statements, on a confidential basis (see HERE). The newest guidance is in accord with the SEC’s announced policy to take active measures to promote the U.S. IPO market and small business capital-raise initiatives.

Earlier in the summer, the SEC expanded the JOBS Act benefit available to emerging growth companies, to be able to file confidential draft registration statements, to all companies. Confidential draft submissions are now available for all Section 12(b) Exchange Act registration statements, initial public offerings (IPO’s) and for secondary or follow-on offerings made in the first year after a company becomes publicly reporting.

Title I of the JOBS Act initially allowed for confidential draft submissions of registration

Sep192017

SEC Monitors Impact of Hurricanes On Capital Markets

As I wrote this blog I continued to have no power at my home after one week, though thankfully it has returned by publication date. Living in South Florida, our firm has felt and seen the devastating impact of Hurricane Irma on the state and send our thoughts and wishes to all affected by both Irma and Hurricane Harvey in Texas.

On September 13, 2017, the SEC issued a press release confirming that it is closely monitoring the effects of both Irma and Harvey on the capital markets. In particular, the SEC is working to make sure that investors have access to their securities accounts and evaluating the need for extending filing deadlines for reporting companies. Furthermore, the SEC is watching for and will keep investors updated via alerts on storm-related scams.

Despite the announcement that the SEC is monitoring the markets and considering extending filing deadlines, no specific broad-based relief has been granted. As has been done historically, I

SEC
Sep122017

SEC Announces Regulatory Agenda

In July 2017 the SEC posted its latest version of its semi-annual regulatory agenda and plans for rulemaking with the U.S. Office of Information and Regulatory Affairs. The agenda is as interesting for what’s on it, as for what isn’t. The semi-annual list only contains 33 legislative action items that the SEC intends to propose or finalize in the next 12 months. The fall 2016 list contained 62 items. As further discussed in this blog, the list does not include proposals on executive compensation, or many other Dodd-Frank mandated rules.

In the preamble to the list it indicates that it was completed in March, when Michael Piwowar was acting Chair of the SEC. Chair Jay Clayton and now Commissioner Michael Piwowar have been publicly like-minded, with a goal of directing the SEC towards assisting in small and emerging business growth and capital raise activities, while remaining tough on fraud. A summary of Chair Clayton’s first public speech as head of

Sep052017

OTCQB Sets New Requirements F​or Change Of Control Events

On June 30, 2017, the OTC Markets Group published amendments to the OTCQB standards related to the processing and reporting of change in control events. The new rules went into effect on July 31, 2017.

OTC Markets has been initiating a series of changes related to the OTCQB including amending the qualification requirements to allow quotation by companies that follow its alternative reporting standard (“Alternative Reporting Standard”) which went effective on May 18, 2017. For a review of the new qualification changes, see my blog HERE.

Highlights of Changes 

The OTCQB has added a new Section 2.4 to the OTCQB Standards published by OTC Markets.  The OTCQB Standards include a comprehensive summary of admission and eligibility requirements, application processes, initial and ongoing disclosure requirements, continued eligibility requirements, fees and removal processes.

Section 2 of the OTCQB Standards set forth the continued OTCQB Eligibility requirements, and includes the new Section 2.4 related to change in control events.

A “change in

Aug292017

FINRA Proposes Expansion Of The OTCBB

In August 2016, FINRA quietly requested comment on a proposal to expand the now largely dormant OTC Bulletin Board quotation service (“OTCBB”) as a backup inter-dealer quotation system for OTC Equity securities. As part of the proposal, the OTCBB would be renamed and branded as the Over the Counter Display Facility or “ODF.” Previously, on October 7, 2014, the SEC published a release instituting proceedings to determine whether to approve FINRA’s request to delete the rules related to, and the operations of, the OTCBB. My blog on the proposal can be read HERE.

However, on March 12, 2015, FINRA withdrew the proposed rule change and request to delete the OTCBB. Although the March 12, 2015 withdrawal did not cite reasons, in its new request for comment, FINRA indicates it withdrew the proposal in response to SEC staff requests that FINRA continue to operate alternative quotation facility.

Since that time the OTCBB has remained largely relatively dormant. According

Aug222017

FINRA Issues New Guidance On Communications With The Public, Including Social Media

In April 2017 FINRA issued Regulatory Notice 17-18 providing additional guidance on the use of social media and digital communications by member firms and persons associated with member firms. The guidance specifically relates to FINRA Rule 2210 – Communications with the Public, and supplements previously issued guidance in Regulatory Notices 10-06 and 11-39, published in 2011. The new guidance is in the form of FAQ’s and concentrates on the areas of recordkeeping, third-party posts and hyperlinks to third-party sites.

I have previously written about the SEC’s guidance on social media use by companies, including as a method for communications with investors and the public. The most recent blog is HERE and includes hyperlinks to prior blogs, including a three-part summary of the SEC Guidance on Social Media and Websites for Company Announcements and Communications.

Brief Overview of Rule 2210

FINRA Rule 2210 governs communications by FINRA member firms and associated persons, including: (i) institutional communications – including any written or

Aug152017

SEC Issues Report on Initial Coin Offerings (ICO’s)

On July 25, 2017, the SEC issued a report on an investigation related to an initial coin offering (ICO) by the DAO and statements by the Divisions of Corporation Finance and Enforcement related to the investigative report (the “Report”). On the same day, the SEC issued an Investor Bulletin related to ICO’s. Offers and sales of digital coins, cryptocurrencies or tokens using distributed ledger technology (DLT) or blockchain have become widely known as ICO’s. For an introduction on DLT and blockchain, see HERE.

The basis of the report is that offers and sales of digital assets, including cryptocurrencies, are subject to the federal (and state) securities laws. From the highest level, the nature of a digital asset must be examined to determine if it meets the definition of a security using established principles (see HERE). In addition, all offers and sales of securities must either be registered with the SEC or there must be an available exemption

Aug082017

An Introduction To Distributed Ledger Technology (Blockchain Technology)

On July 13, 2017, FINRA held a Blockchain Symposium to assess the use of distributed ledger technology (DLT) in the financial industry, including the maintenance of shareholder and corporate records. DLT is commonly referred to as blockchain. The symposium included participation by the Office of the Comptroller of Currency, the US Commodity Futures Trading Commission (CFTC), the Federal Reserve Board and the SEC.

FINRA also published a report earlier in the year discussing the implications of DLT for the securities industry. Delaware, Nevada and Arizona have already passed statutes allowing for the use of DLT for corporate and shareholder records. This is the first in many blogs that will discuss DLT as this exciting new era of technology continues to unfold and impact the securities markets. In this blog I will discuss FINRA’s report published in January 2017 and in the next in the series, I will summarize the recent SEC investigative report on initial coin offerings and conclusion