(800) 341-2684

Call Toll Free

Contact us

Online Inquiries 24/7

Laura Anthony Esq

MAKE VALUED ALLIANCES

SEC

2022 Annual Report Of The Office Of The Advocate For Small Business Capital Formation

The Office of the Advocate for Small Business Capital Formation (“Office”) has published its Annual Report for fiscal year 2022 (“Report”).  The Report is delivered to the Committee on Banking, Housing, and Urban Affairs of the U.S. Senate and the Committee on Financial Services of the U.S. House of Representatives directly by the Office, without review or input from the SEC at large.

Background

The SEC’s Office of the Advocate for Small Business Capital Formation launched in January 2019 after being created by Congress pursuant to the Small Business Advocate Act of 2016 (see HERE).  The mission of the Office is to advocate for pragmatic solutions to accessing capital markets and business growth.

The Office has the following functions: (i) assist small businesses (privately held or public with a market cap of less than $250 million) and their investors in resolving problems with the SEC or self-regulatory organizations; (ii) identify and propose regulatory changes that would benefit small businesses

Human Capital Disclosures

In August 2020, the SEC adopted final amendments to Item 101 of Regulation S-K including adding a requirement for disclosures related to “human capital” (see HERE).  The new rule applies to Form 10-Ks and registration statements filed after November 8, 2020.  This blog will not only discuss how companies are navigating their human capital disclosures, but also the push to add more prescriptive disclosure requirements to the rules, which the SEC is considering.  Amendments to the rule are currently included on the SEC’s regulatory agenda although as of now, the SEC has not published a proposal.

Drill Down on Human Capital Disclosure

Item 101(c)(2) of Regulation S-K now requires that a company discuss, in its Form 10-K and in registration statements, the following information to the extent material to an understanding of the business: “[A] description of the registrant’s human capital resources, including the number of persons employed by the registrant, and any human capital measures or objectives that

Proposed Rules On Cybersecurity Disclosure

Earlier this year, the SEC published proposed rules on cybersecurity risk management, strategy, governance and incident disclosure by public companies.  Although the comment period has passed, a final rule has not yet been issued.  As of now, cybersecurity disclosures are encompassed within the general anti-fraud provisions including the requirement to disclose “such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading” as well SEC guidance last updated in 2018 (see HERE).

The proposed amendments would require, among other things, current reporting about material cybersecurity incidents and updates about previously reported cybersecurity incidents. The proposal also would require periodic reporting about a company’s policies and procedures to identify and manage cybersecurity risks; the company’s board of directors’ oversight of cybersecurity risk; and management’s role and expertise in assessing and managing cybersecurity risk and implementing cybersecurity policies and procedures. The proposal would further

Cannabis Trade Association Makes Plea For National Exchange Listings

The American Trade Association for Cannabis and Hemp (ATACH) has published a policy paper urging the Nasdaq and New York Stock Exchange to allow U.S. cannabis operators that “touch the plant” to list on their respective Exchanges.  The current prohibition to listing is purely discretionary and not because of any regulatory action by the SEC or any other U.S. regulatory authority.  The policy paper, published November 7, 2022, outlines very convincing arguments for allowing U.S. operators to list on the National Exchanges.

The policy paper notes that up until now, the National Exchanges have refused to list these companies while cannabis remains federally illegal out of concerns that they could be charged with aiding and abetting violations of the U.S. Controlled Substances Act (“CSA”) or with money laundering by the receipt of listing fees.  As of the time of the publication of the policy paper, cannabis is legal in 37 states, D.C. and U.S. territories.  The ATACH rightfully asserts that

Termination Of Registration Under Section 12 Of The Exchange Act

A public company with a class of securities registered under Section 12 or which is subject to Section 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) must file Section 13 reports with the SEC (10-K, 10-Q and 8-K).  A company registers securities under Section 12 by filing an Exchange Act registration statement such as on Form 10, Form 20-F or Form 8-A.  A company becomes subject to Section 15(d) by filing a registration statement under the Securities Act of 1933, as amended (“Securities Act”) such as a Form S-1 or F-1.  The Section 15(d) reporting requirements are scaled down from the full Exchange Act reporting requirements for a company with a class of securities registered under Section 12.

I have previously written about suspending the duty to file reports under Section 15(d) and the related question of determining voluntary reporting status (see HERE).  This blog addresses the termination of registration under Section 12.

Terminating

SEC Adopts Final Executive Compensation Clawback Rules

One year after reopening the comment period, and seven years after first publishing proposed rules, on October 26, 2022, the SEC adopted final rules on listing standards for the recovery of erroneously awarded incentive-based executive compensation (“Clawback Rules”).  The Clawback Rules implement Section 954 of the Dodd-Frank Act and require that national securities exchanges require disclosure of policies regarding and mandating clawback of compensation under certain circumstances as a listing qualification. The proposed rules were first published in July 2015 (see HERE) and have moved around on the SEC semiannual regulatory agenda from proposed to long-term and back again for years.

The final rules require a listed issuer to file the policy as an exhibit to its annual report and to include disclosures related to its recovery policy and recovery analysis where a recovery is triggered. New Exchange Act Rule 10D-1 directs national securities exchanges and associations to establish listing standards that require a listed company to: (i) adopt

SEC Proposed Changes To The Definition Of A “Dealer”

Following a continuous stream of litigation against small-cap and penny stock convertible debt lenders, the SEC has proposed some statutory changes to the definition of a “dealer” under the Exchange Act.  The SEC’s enforcement attack on convertible debt lenders began in 2017 and has been decried by industry participants as regulation by enforcement which, unfortunately, is not resulting in judicial orders or settlements offering clear guidance (see HERE).  Also, unfortunately, the proposed new rules, which were published in March 2022 and are likely to reach final rule stage this year, still do not help small-cap investors navigate the regulatory highway.

The rule is intended to require certain proprietary or principal traders and liquidity providers to register as either a dealer or government securities dealer as applicable.  The proposed rules would amend Exchange Act Rules 5a5-4 and 3a44-2 to enhance the definition of “as part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Exchange Act.

Proposed Rules

The SEC Drafts Strategic Plan For Fiscal Years 2022-2026

On August 24, 2022, the SEC released its draft strategic plan for the fiscal years 2022 to 2026 and sought public comment on same.  The three primary goals set forth in the plan include: (i) protecting working families against fraud, manipulation, and misconduct; (ii) developing and implementing a robust regulatory framework that keeps pace with evolving markets, business models, and technologies; and (iii) supporting a skilled workforce that is diverse, equitable, inclusive, and is fully equipped to advance agency objectives.

To achieve these goals, the SEC intends to use of market and industry data to prevent, detect, and prosecute improper behavior.  The SEC also seeks to modernize design, delivery, and content of disclosures to investors so they can access consistent, comparable, and material information while making investment decisions.

These statements are very broad, but even at face value, the different focus of the SEC as compared to the last plan published in 2018 is clear.  In 2018 the three primary

SEC Adopts Pay Versus Performance Disclosure Rules

Following seven years of “will they or won’t they,” on August 25, 2022, the SEC adopted final rules requiring information reflecting the relationship between executive compensation actually paid by a company and the company’s financial performance (“Pay vs. Performance”).  The rules were initially proposed in April 2015, and then languished for years (see HERE). On January 27, 2022, the SEC re-opened the comment period and expanded the proposal to include additional performance metrics (see HERE).

The SEC administration under Gary Gensler has been actively tackling compensation and insider trading related issues, including re-visiting executive compensation clawback rules (see HERE); publishing new guidance on disclosures and accounting for spring-loaded compensation awards (see HERE); proposing amendments to Rule 10b5-1 insider trading plans (see HERE); and proposing new share repurchase program disclosure rules (see HERE).

The amendments require companies to provide a table disclosing specified executive compensation and financial performance measures for their five most recently completed

Categories

Contact Author

Laura Anthony Esq

Have a Question for Laura Anthony?