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OTC PINK Companies Now Qualify For Equity Line Financing

Without fanfare, the issuance of guidance, or any other formal notice, the SEC quietly changed its policy related to the filing of an at-the-market resale registration statement for an equity line financing by OTC Pink listed companies. To be clear, an OTC Pink listed company may now utilize a re-sale registration statement on Form S-1 for an equity line financing transaction, pursuant to which the securities may be sold by the investor, into the market, at market price. This results in a dramatic shift, for the better, for OTC Pink companies in the world of capital markets.

Background

Rule 415 sets forth the requirements for engaging in a delayed offering or offering on a continuous basis. Under Rule 415 a re-sale offering may be made on a delayed or continuous basis other than at a fixed price (i.e., it may be priced at the market). It is axiomatic that for a security to be sold at market price, there must

August 24, 2021

SEC Denies Expert Market – For Now

As the compliance date for the new 15c2-11 rules looms near, on August 2, 2021, in a very short statement, the SEC shot down any near-term hope for an OTC Markets operated “expert market.” The SEC short statement indicated that a review of the proposed exemptive order that would allow the expert market is not on its agenda in the short term. The SEC continued that “[A]ccordingly, on September 28, 2021, the compliance date for the amendments to Rule 15c2-11, we expect that broker-dealers will no longer be able to publish proprietary quotations for the securities of any issuer for which there is no current and publicly available information, unless an existing exception to Rule 15c2-11 applies.”

The statement acts as a great segue for a review as to just what those exceptions may be. In addition, this blog will discuss the OTC Markets proposed expert market and finish with a broader refresher on the new 211 rules including the

August 17, 2021

SPAC Nasdaq Listing Standards

I’ve written quite a bit about SPAC’s recently, but the last time I wrote about SPAC Nasdaq listing requirements, or any attempted changes thereto, was back in 2018 (see HERE). Since that time, Nasdaq has a win and recently a loss in its ongoing efforts to attract SPAC listings.

Background on SPACs

Without reiterating my lengthy blogs on SPACs and SPAC structures (see, for example, HERE and HERE), a special purpose acquisition company (SPAC) is a blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, or other business combination transaction with an unidentified target. Generally, SPACs are formed by sponsors who believe that their experience and reputation will facilitate a successful business combination and public company.

The provisions of Rule 419 apply to every registration statement filed under the Securities Act of 1933, as amended, by a blank check company that is issuing securities which fall within the definition of

August 10, 2021

Digital Asset Securities – Progress For Broker Dealers

In December 2020, the SEC issued a statement and request for comment regarding the custody of digital asset securities by broker-dealers. The Statement and request for comment sets forth suggestions for complying with the Customer Protection Rule and lists certain requirements that a broker-dealer could comply with to ensure that it would not be subject to an enforcement proceeding for violation of the Customer Protection Rule.

Two months later, in February 2021, the SEC Division of Examinations issued a risk alert focused on digital asset securities. These statements were the first hitting head on the topic of digital asset custody since an August 2019 joint statement by the SEC and FINRA on the custody of digital assets (see HERE) and October 2019 joint statement by the SEC, FinCEN and the CFTC (see HERE).

The SEC and FINRA have been discussing issues of custody related to tokens and digital assets for years. For example, issues surrounding the custody

August 3, 2021

SEC Spring 2021 Regulatory Agenda

The first version of the SEC’s semiannual regulatory agenda and plans for rulemaking under the current administration has been published in the federal register. The Spring 2021 Agenda (“Agenda”) is current through April 2021 and contains many notable pivots from the previous SEC regime’s focus. The Unified Agenda of Regulatory and Deregulatory Actions contains the Regulatory Plans of 28 federal agencies and 68 federal agency regulatory agendas. The Agenda is published twice a year, and for several years I have blogged about each publication.

The Agenda is broken down by (i) “Pre-rule Stage”; (ii) Proposed Rule Stage; (iii) Final Rule Stage; and (iv) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to be completed in a 12-month time frame jumped up to 45 items since Fall, which had only 32 items. Some of the new items are a revisit

July 27, 2021

NYSE Annual Compliance Guidance Memo And Amended Rules

In January, NYSE Regulation sent out its yearly Compliance Guidance Memo to NYSE American listed companies. Although we are already halfway through the year, the annual letter has useful information that remains timely. As discussed in the Compliance Memo, the NYSE sought SEC approval to permanently change its shareholder approval rules in accordance with the temporary rules enacting to provide relief to listed companies during Covid. The SEC approved the amended rules on April 2, 2021.

Amendment to Shareholder Approval Rules

The SEC has approved NYSE rule changes to the shareholder approval requirements in Sections 312.03 and 312.04 of the NYSE Listed Company Manual (“Manual”) and the Section 314 related party transaction requirements. The rule changes permanently align the rules with the temporary relief provided to listed companies during Covid (for more on the temporary relief, see HERE

Prior to the amendment, Section 312.03 of the Manual prohibited certain issuances to (i) directors, officers or substantial shareholders (related parties),

July 20, 2021

Nasdaq Board Diversity Proposal

Nasdaq has long been a proponent of environmental, social and governance (ESG) disclosures and initiatives, having published a guide for listed companies on the subject over six years ago (see HERE). In December 2020, Nasdaq took it a step further and proposed a rule which would require listed companies to have at least one woman on their boards, in addition to a director who is a racial minority or one who self-identifies as lesbian, gay, bisexual, transgender or queer. Companies that don’t meet the standard would be required to justify their decision to remain listed on Nasdaq. To help facilitate the proposed rule, Nasdaq has also proposed to offer a complimentary board recruiting solution. A final decision on the proposals is expected this summer.

The SEC recently extended the consideration period and will either approve or disapprove the proposal by August 8, 2021. The newest Regulatory Flex Agenda which was published last week and will be a topic

July 13, 2021

SEC Rules Requiring Disclosures for Resource Extraction Companies

As required by the Dodd-Frank Act, in December 2020, the SEC adopted final rules requiring require resource extraction companies to disclose payments made to foreign governments or the U.S. federal government for the commercial development of oil, natural gas, or minerals. The last version of the proposed rules were published in December 2019 (see HERE )The rules have an interesting history. In 2012 the SEC adopted similar disclosure rules that were ultimately vacated by the U.S. District Court. In 2016 the SEC adopted new rules which were disapproved by a joint resolution of Congress. In December 2019, the SEC took its third pass at the rules that were ultimately adopted.

The final rules require resource extraction companies that are required to file reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) to disclose payments made by it or any of its subsidiaries or controlled entities, to the U.S. federal government or foreign governments

July 6, 2021

ESG – The Disclosure Debate Continues

The ESG debate continues, including within the SEC and amongst other regulators and industry participants. Firmly in support of ESG disclosures, and especially climate change matters, is SEC Chair Gary Gensler and Commissioner Allison Herren Lee, while opposing additional regulation is Commissioners Eliad L. Roisman and Hester M. Peirce. Regardless of whether new regulations are enacted (I firmly believe they are forthcoming), like all SEC disclosure items, the extent of disclosure will depend upon materiality.

Materiality

The U.S. Supreme Court’s definition of materiality is that information should be deemed material if there exists a substantial likelihood that it would have been viewed by the reasonable investor as having significantly altered the total mix of information available to the public [TSC Industries, Inc. v. Northway, Inc.]. The concept of materiality represents the dividing line between information reasonably likely to influence investment decisions and everything else.

Rule 405 of the Securities Act defines “material” as “[T]he term material, when

June 29, 2021

A Resolution For SPAC Warrant Accounting

On April 12, 2021, the SEC effectively chilled SPAC activity by announcing that it had examined warrant accounting in several SPACs and found that the warrants were being erroneously classified as an asset. The SEC identified two accounting issues, one related to the private placement warrants and the other related to both the private placement and public warrants. These companies were required to restate previously issued financial statements to reclassify warrants as liabilities, and the ripple effect began. Overnight SPAC management teams, accountants and auditors were scrambling to determine if a restatement was required (in most cases it was) and in-process SPACs were put on hold or at least delayed while market participants tried to figure out the meaning of the SEC guidance and how to address it.

The timing of the statement was interesting as well; most calendar year end SPACs had just filed their Form 10-K for FYE 2020 requiring a slew of 8-Ks to disclose non-reliance on

June 22, 2021

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Laura Anthony

OTC PINK Companies Now Qualify For Equity Line Financing

SEC Denies Expert Market – For Now

SPAC Nasdaq Listing Standards

Digital Asset Securities – Progress For Broker Dealers

SEC Spring 2021 Regulatory Agenda

NYSE Annual Compliance Guidance Memo And Amended Rules

Nasdaq Board Diversity Proposal

SEC Rules Requiring Disclosures for Resource Extraction Companies

A Resolution For SPAC Warrant Accounting

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Recent News

OTC PINK Companies Now Qualify For Equity Line Financing

SEC Denies Expert Market – For Now

SPAC Nasdaq Listing Standards

Digital Asset Securities – Progress For Broker Dealers

SEC Spring 2021 Regulatory Agenda

NYSE Annual Compliance Guidance Memo And Amended Rules

Nasdaq Board Diversity Proposal

SEC Rules Requiring Disclosures for Resource Extraction Companies

A Resolution For SPAC Warrant Accounting

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