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SEC Adopts Amendments To Accredited Investor Definition

The much anticipated amendments to the accredited investor definition and definition of qualified institutional buyer under Rule 144A were adopted by the SEC on August 26, 2020.  The amendments come almost five years after the SEC published a report on the definition of “accredited investors” ( see HERE)  and nine months after it published the proposed amendments (see HERE).  The rule changes also took into account the input and comment letters received in response to the SEC’s concept release and request for public comment on ways to simplify, harmonize and improve the exempt offering framework (see HERE).

As a whole industry insiders, including myself, are pleased with the rule changes and believe it will open up private investment opportunities to a wider class of sophisticated investors, while still maintaining investor protections.  As the SEC pointed out historically, individual investors who do not meet specific income or net worth tests, regardless of their financial sophistication, have been denied

Read More »

September 8, 2020

Nasdaq Rule Amendments 2020

In addition to the temporary rule changes and relief that Nasdaq has provided this year for companies affected by Covid-19 (see HERE and HERE), the exchange has enacted various rule amendments with varying degrees of impact and materiality.

In particular, over the last year Nasdaq has amended its delisting process for low-priced securities, updated its definition of a family member for the purpose of determining director independence and has clarified the term “closing price” for purposes of the 20% rule.  This blog discusses each of these amendments.

Delisting Process

In April 2020, the SEC approved Nasdaq rule changes to the delisting process for certain securities that fall below the minimum price for continued listing.  The rule change modifies the delisting process for securities with a bid price at or below $0.10 for ten consecutive trading days during any bid-price compliance period and for securities that have had one or more reverse stock splits with a cumulative ratio of

Read More »

September 1, 2020

A COVID IPO

On June 25, 2020, SEC Chair Jay Clayton gave testimony before the Investor Protection, Entrepreneurship and Capital Markets Subcommittee of the U.S. House Committee on Financial Services on the topic of capital markets and emergency lending in the Covid-19 era.  The next day, on June 26, Chair Clayton, William Hinman, Director of the Division of Corporation Finance, Dalia Blass, Director of the Division of Investment Management and Brett Redfearn, Director of the Division of Trading and Markets issued a public statement on the same topic but expanded to include efforts to ensure the orderly function of U.S. capital markets.

Chair Clayton Testimony

Chair Clayton breaks down his testimony over five topics including: (i) market monitoring and regulatory coordination; (ii) guidance and targeted assistance and relief; (iii) investor protection, education and outreach efforts; (iv) ongoing mission-oriented work; and (v) the SEC’s fiscal-year 2021 budget request.

Market Monitoring and Regulatory Coordination

Despite the extraordinary volumes and volatility we have seen in the

Read More »

August 25, 2020

SEC Spring 2020 Regulatory Agenda

In July 2020, the SEC published its latest version of its semiannual regulatory agenda and plans for rulemaking with the U.S. Office of Information and Regulatory Affairs. The Office of Information and Regulatory Affairs, which is an executive office of the President, publishes a Unified Agenda of Regulatory and Deregulatory Actions (“Agenda”) with actions that 60 departments, administrative agencies and commissions plan to issue in the near and long term.  The Agenda is published twice a year, and for several years I have blogged about each publication.

Like the prior Agendas, the spring 2020 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 has decreased to 42 items as compared to 47 on the

Read More »

August 18, 2020

SEC Final Amendments On Disclosures For Registered Debt Offerings

Writing a blog once a week during a time when almost daily events are publish-worthy means that some topics will be delayed, at least temporarily.  Back in March, the SEC adopted final amendments to simplify disclosure requirements applicable to registered debt offerings for guarantors and issuers of guaranteed securities, as well as for affiliates whose securities collateralize a company’s securities.  The proposed rule changes were published in the summer of 2018 (see HERE).

The amendments apply to Rules 3-10 and 3-16 of Regulation S-X and are aimed at making the disclosures easier to understand and to reduce the cost of compliance for companies.  The SEC also created a new Article 13 in Regulation S-X, renumbered Rules 3-10 and 3-16 to Rules 13-01 and 13-02, and made conforming changes to related rules in Regulations S-K and S-X and Securities Act and Exchange Act forms.

As stated in the SEC press release on the new rules, the amended rules focus on

Read More »

August 11, 2020

Nasdaq Proposed Rule Changes To Its Discretionary Listing And Continued Listing Standards

On April 21, 2020, the SEC Chairman Jay Clayton and a group of senior SEC and PCAOB officials issued a joint statement warning about the risks of investing in emerging markets, especially China, including companies from those markets that are accessing the U.S. capital markets (see HERE).  Previously, in December 2018, Chair Clayton, SEC Chief Accountant Wes Bricker and PCAOB Chairman William D. Duhnke III issued a similar cautionary statement, also focusing on China (see HERE).

Following the public statements, in June 2020, Nasdaq issued new proposed rules which would make it more difficult for a company to list or continue to list based on the quality of its audit, which could have a direct effect on companies based in China.

Nasdaq Proposed Rule Changes

On June 2, 2020, the Nasdaq Stock Market filed a proposed rule change to amend IM-5101-1, the rule which allows Nasdaq to use its discretionary authority to deny listing or continued listing

Read More »

August 4, 2020

SEC Statements On Capital Markets Amid Covid-19

On June 25, 2020, SEC Chair Jay Clayton gave testimony before the Investor Protection, Entrepreneurship and Capital Markets Subcommittee of the U.S. House Committee on Financial Services on the topic of capital markets and emergency lending in the Covid-19 era.  The next day, on June 26, Chair Clayton, William Hinman, Director of the Division of Corporation Finance, Dalia Blass, Director of the Division of Investment Management and Brett Redfearn, Director of the Division of Trading and Markets issued a public statement on the same topic but expanded to include efforts to ensure the orderly function of U.S. capital markets.

Chair Clayton Testimony

Chair Clayton breaks down his testimony over five topics including: (i) market monitoring and regulatory coordination; (ii) guidance and targeted assistance and relief; (iii) investor protection, education and outreach efforts; (iv) ongoing mission-oriented work; and (v) the SEC’s fiscal-year 2021 budget request.

Market Monitoring and Regulatory Coordination

Despite the extraordinary volumes and volatility we have seen

Read More »

July 28, 2020

SEC Further Comments On Emerging Markets

On April 21, 2020, the SEC Chairman Jay Clayton and a group of senior SEC and PCAOB officials issued a joint statement warning about the risks of investing in emerging markets, especially China, including companies from those markets that are accessing the U.S. capital markets.  On July 9, 2020, the SEC held an Emerging Markets Roundtable where Chair Clayton reiterated his concerns about emerging market investment risks.  Previously, in December 2018, Chair Clayton, SEC Chief Accountant Wes Bricker and PCAOB Chairman William D. Duhnke III issued a similar cautionary statement, also focusing on China (see HERE).

SEC and PCAOB Joint Statement

On April 21, 2020, SEC Chair Clayton, SEC Chief Accountant Sagar Teotia, SEC Division of Corporation Finance Director William Hinman, SEC Division of Investment Management Director Dalia Blass, and PCAOB Chairman William D. Duhnke III issued a joint public statement warning of the significant disclosure, financial and reporting risks of investing in emerging markets, and the limited remedies

Read More »

July 21, 2020

SEC Adopts Amendments To Accelerated And Large Accelerated Filer Definitions

In March, 2020 the SEC adopted amendments to the definitions of an “accelerated filer” and “large accelerated filer.”  The amendments were adopted largely as proposed in May 2019 (see HERE).

A company that is classified as an accelerated or large accelerated filer is subject to, among other things, the requirement that its outside auditor attest to, and report on, management’s assessment of the effectiveness of the issuer’s internal control over financial reporting (ICFR) as required by Section 404(b) of the Sarbanes-Oxley Act (SOX).  The JOBS Act exempted emerging growth companies (EGCs) from this requirement.  Moreover, historically the definition of a smaller reporting company (SRC) was set such that an SRC could never be an accelerated or large accelerated filer, and as such would never be subject to Section 404(b) of SOX.

In June 2018, the SEC amended the definition of an SRC to include companies with less than a $250 million public float (increased

Read More »

July 14, 2020

Proposed 2021 U.S. Budget

In February, the Office of Management and Budget released the proposed fiscal 2021 United States government budget.  The beginning of the Budget contains a message from President Trump delineating a list of key priorities of the administration including better trade deals, preserving peace through strength, overcoming the opioid crisis, regulation relief and American energy independence.  The budget has some notable aspects that directly relate to the capital markets and its participants.

SEC

As the federal government has been doing for all agencies, the 2021 Budget seeks to eliminate agency reserve funds.  Specifically regarding the SEC, the Budget cuts the SEC reserve by $50 million.  The reduction in reserve fund is thought to increase overall accountability as the SEC would need to go to Congress to ask for additional funds if needed, with an explanation, instead of just accessing a reserve account.  Reserve fund cuts are sent to the U.S. Treasury for deficit reduction.

However, the Budget also increases the

Read More »

July 7, 2020

Categories

Recent News

SEC Adopts Amendments To Accredited Investor Definition

September 8, 2020

The much anticipated amendments to the accredited investor definition and definition of qualified institutional buyer under Rule 144A were adopted by the SEC on August 26, 2020.  The amendments come almost five years after the SEC published a report on the definition of “accredited investors” ( see HERE)  and nine months after it published the proposed amendments (see HERE).  The rule changes also took into account the input and comment letters received in response to the SEC’s concept release and request for public comment on ways to simplify, harmonize and improve the exempt offering framework (see HERE).

As a whole industry insiders, including myself, are pleased with the rule changes and believe it will open up private investment opportunities to a wider class of sophisticated investors, while still maintaining investor protections.  As the SEC pointed out historically, individual investors who do not meet specific income or net worth tests, regardless of their financial sophistication, have been denied

Read More »

Read More...

Nasdaq Rule Amendments 2020

September 1, 2020

In addition to the temporary rule changes and relief that Nasdaq has provided this year for companies affected by Covid-19 (see HERE and HERE), the exchange has enacted various rule amendments with varying degrees of impact and materiality.

In particular, over the last year Nasdaq has amended its delisting process for low-priced securities, updated its definition of a family member for the purpose of determining director independence and has clarified the term “closing price” for purposes of the 20% rule.  This blog discusses each of these amendments.

Delisting Process

In April 2020, the SEC approved Nasdaq rule changes to the delisting process for certain securities that fall below the minimum price for continued listing.  The rule change modifies the delisting process for securities with a bid price at or below $0.10 for ten consecutive trading days during any bid-price compliance period and for securities that have had one or more reverse stock splits with a cumulative ratio of

Read More »

Read More...

A COVID IPO

August 25, 2020

On June 25, 2020, SEC Chair Jay Clayton gave testimony before the Investor Protection, Entrepreneurship and Capital Markets Subcommittee of the U.S. House Committee on Financial Services on the topic of capital markets and emergency lending in the Covid-19 era.  The next day, on June 26, Chair Clayton, William Hinman, Director of the Division of Corporation Finance, Dalia Blass, Director of the Division of Investment Management and Brett Redfearn, Director of the Division of Trading and Markets issued a public statement on the same topic but expanded to include efforts to ensure the orderly function of U.S. capital markets.

Chair Clayton Testimony

Chair Clayton breaks down his testimony over five topics including: (i) market monitoring and regulatory coordination; (ii) guidance and targeted assistance and relief; (iii) investor protection, education and outreach efforts; (iv) ongoing mission-oriented work; and (v) the SEC’s fiscal-year 2021 budget request.

Market Monitoring and Regulatory Coordination

Despite the extraordinary volumes and volatility we have seen in the

Read More »

Read More...

SEC Spring 2020 Regulatory Agenda

August 18, 2020

In July 2020, the SEC published its latest version of its semiannual regulatory agenda and plans for rulemaking with the U.S. Office of Information and Regulatory Affairs. The Office of Information and Regulatory Affairs, which is an executive office of the President, publishes a Unified Agenda of Regulatory and Deregulatory Actions (“Agenda”) with actions that 60 departments, administrative agencies and commissions plan to issue in the near and long term.  The Agenda is published twice a year, and for several years I have blogged about each publication.

Like the prior Agendas, the spring 2020 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 has decreased to 42 items as compared to 47 on the

Read More »

Read More...

SEC Final Amendments On Disclosures For Registered Debt Offerings

August 11, 2020

Writing a blog once a week during a time when almost daily events are publish-worthy means that some topics will be delayed, at least temporarily.  Back in March, the SEC adopted final amendments to simplify disclosure requirements applicable to registered debt offerings for guarantors and issuers of guaranteed securities, as well as for affiliates whose securities collateralize a company’s securities.  The proposed rule changes were published in the summer of 2018 (see HERE).

The amendments apply to Rules 3-10 and 3-16 of Regulation S-X and are aimed at making the disclosures easier to understand and to reduce the cost of compliance for companies.  The SEC also created a new Article 13 in Regulation S-X, renumbered Rules 3-10 and 3-16 to Rules 13-01 and 13-02, and made conforming changes to related rules in Regulations S-K and S-X and Securities Act and Exchange Act forms.

As stated in the SEC press release on the new rules, the amended rules focus on

Read More »

Read More...

Nasdaq Proposed Rule Changes To Its Discretionary Listing And Continued Listing Standards

August 4, 2020

On April 21, 2020, the SEC Chairman Jay Clayton and a group of senior SEC and PCAOB officials issued a joint statement warning about the risks of investing in emerging markets, especially China, including companies from those markets that are accessing the U.S. capital markets (see HERE).  Previously, in December 2018, Chair Clayton, SEC Chief Accountant Wes Bricker and PCAOB Chairman William D. Duhnke III issued a similar cautionary statement, also focusing on China (see HERE).

Following the public statements, in June 2020, Nasdaq issued new proposed rules which would make it more difficult for a company to list or continue to list based on the quality of its audit, which could have a direct effect on companies based in China.

Nasdaq Proposed Rule Changes

On June 2, 2020, the Nasdaq Stock Market filed a proposed rule change to amend IM-5101-1, the rule which allows Nasdaq to use its discretionary authority to deny listing or continued listing

Read More »

Read More...

SEC Statements On Capital Markets Amid Covid-19

July 28, 2020

On June 25, 2020, SEC Chair Jay Clayton gave testimony before the Investor Protection, Entrepreneurship and Capital Markets Subcommittee of the U.S. House Committee on Financial Services on the topic of capital markets and emergency lending in the Covid-19 era.  The next day, on June 26, Chair Clayton, William Hinman, Director of the Division of Corporation Finance, Dalia Blass, Director of the Division of Investment Management and Brett Redfearn, Director of the Division of Trading and Markets issued a public statement on the same topic but expanded to include efforts to ensure the orderly function of U.S. capital markets.

Chair Clayton Testimony

Chair Clayton breaks down his testimony over five topics including: (i) market monitoring and regulatory coordination; (ii) guidance and targeted assistance and relief; (iii) investor protection, education and outreach efforts; (iv) ongoing mission-oriented work; and (v) the SEC’s fiscal-year 2021 budget request.

Market Monitoring and Regulatory Coordination

Despite the extraordinary volumes and volatility we have seen

Read More »

Read More...

SEC Further Comments On Emerging Markets

July 21, 2020

On April 21, 2020, the SEC Chairman Jay Clayton and a group of senior SEC and PCAOB officials issued a joint statement warning about the risks of investing in emerging markets, especially China, including companies from those markets that are accessing the U.S. capital markets.  On July 9, 2020, the SEC held an Emerging Markets Roundtable where Chair Clayton reiterated his concerns about emerging market investment risks.  Previously, in December 2018, Chair Clayton, SEC Chief Accountant Wes Bricker and PCAOB Chairman William D. Duhnke III issued a similar cautionary statement, also focusing on China (see HERE).

SEC and PCAOB Joint Statement

On April 21, 2020, SEC Chair Clayton, SEC Chief Accountant Sagar Teotia, SEC Division of Corporation Finance Director William Hinman, SEC Division of Investment Management Director Dalia Blass, and PCAOB Chairman William D. Duhnke III issued a joint public statement warning of the significant disclosure, financial and reporting risks of investing in emerging markets, and the limited remedies

Read More »

Read More...

SEC Adopts Amendments To Accelerated And Large Accelerated Filer Definitions

July 14, 2020

In March, 2020 the SEC adopted amendments to the definitions of an “accelerated filer” and “large accelerated filer.”  The amendments were adopted largely as proposed in May 2019 (see HERE).

A company that is classified as an accelerated or large accelerated filer is subject to, among other things, the requirement that its outside auditor attest to, and report on, management’s assessment of the effectiveness of the issuer’s internal control over financial reporting (ICFR) as required by Section 404(b) of the Sarbanes-Oxley Act (SOX).  The JOBS Act exempted emerging growth companies (EGCs) from this requirement.  Moreover, historically the definition of a smaller reporting company (SRC) was set such that an SRC could never be an accelerated or large accelerated filer, and as such would never be subject to Section 404(b) of SOX.

In June 2018, the SEC amended the definition of an SRC to include companies with less than a $250 million public float (increased

Read More »

Read More...

Proposed 2021 U.S. Budget

July 7, 2020

In February, the Office of Management and Budget released the proposed fiscal 2021 United States government budget.  The beginning of the Budget contains a message from President Trump delineating a list of key priorities of the administration including better trade deals, preserving peace through strength, overcoming the opioid crisis, regulation relief and American energy independence.  The budget has some notable aspects that directly relate to the capital markets and its participants.

SEC

As the federal government has been doing for all agencies, the 2021 Budget seeks to eliminate agency reserve funds.  Specifically regarding the SEC, the Budget cuts the SEC reserve by $50 million.  The reduction in reserve fund is thought to increase overall accountability as the SEC would need to go to Congress to ask for additional funds if needed, with an explanation, instead of just accessing a reserve account.  Reserve fund cuts are sent to the U.S. Treasury for deficit reduction.

However, the Budget also increases the

Read More »

Read More...
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