Capital Markets

Report Of Government-Business Forum On Small Business Capital Formation

On July 28, 2022, the SEC released its report from the 41^st Annual Government-Business Forum on Small Business Capital Formation. The report provides a summary of the forum proceedings, including the recommendations developed by participants for changes needed to the capital raising framework and the SEC’s responses to the recommendations. The forum featured panelists and discussions on (i) empowering entrepreneurs with tools to navigate capital raising; (ii) hometown entrepreneurship, including how entrepreneurs can thrive outside of traditional capital raising hubs; (iii) how emerging fund managers are diversifying capital; and (iv) what to know and how to think ahead in the small cap world. The forum had a focus on diversity, including panel speakers and discussion topics. A clear message across the board is that women- and minority-owned businesses face the biggest challenges in the capital markets.

Background

The SEC’s Office of the Advocate for Small Business Capital Formation launched in January 2019 after being created by Congress pursuant

August 23, 2022

SEC Adopts Amendments To Tighten Shareholder Proposals

Following a tense period of debate and comments, on September 23, 2020, the SEC adopted amendments to Rule 14a-8 governing shareholder proposals in the proxy process. The proposed rule was published almost a year before in November 2019 (see HERE). The amendment increases the ownership threshold requirements required for shareholders to submit and re-submit proposals to be included in a company’s proxy statement. The ownership thresholds were last amended in 1998 and the resubmission rules have been in place since 1954. The new rules represent significant changes to a shareholder’s rights to include matters on a company’s proxy statement.

Shareholder proposals, and the process for including or excluding such proposals in a company’s proxy statement, have been the subject of debate for years. The rules have not been amended in decades and during that time, shareholder activism has shifted. Main Street investors tend to invest more through mutual funds and ETF’s, and most shareholder proposals come from

November 10, 2020

SEC Proposed To Modernize Auditor Independence Rules

As is usual, there are times where I find there are fewer current events to write about in the world of capital markets and I go back to the basics of this regulatory regime I find so fascinating, and others where I have 30 current topics in my writing queue and then a global pandemic occurs adding daily new topics to my list and poof! – six months goes by. Although they were bumped down the list, many of the proposed and completed regulatory changes, and other events, that were on the list remain worthy of attention.

In December 2019, the SEC proposed amendments to codify and modernize certain aspects of the auditor independence framework. The current audit independence rules were created in 2000 and amended in 2003 in response to the financial crisis facilitated by the downfall of Enron, WorldCom and auditing giant Arthur Andersen, and despite evolving circumstances have remained unchanged since that time. The new rules

October 6, 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

August 25, 2020

SEC Statements On Capital Markets Amid Covid-19

Chair Clayton Testimony

Market Monitoring and Regulatory Coordination

Despite the extraordinary volumes and volatility we have seen

July 28, 2020

SEC Proposed Rule Changes For Exempt Offerings – Part 5

On March 4, 2020, the SEC published proposed rule changes to harmonize, simplify and improve the exempt offering framework. The SEC had originally issued a concept release and request for public comment on the subject in June 2019 (see HERE). The proposed rule changes indicate that the SEC has been listening to capital markets participants and is supporting increased access to private offerings for both businesses and a larger class of investors. Together with the proposed amendments to the accredited investor definition (see HERE), the new rules could have as much of an impact on the capital markets as the JOBS Act has had since its enactment in 2012.

The 341-page rule release provides a comprehensive overhaul to the exempt offering and integration rules worthy of in-depth discussion. I have been breaking the information down into a series of blogs, with this fifth and final blog focusing on amendments to Regulation Crowdfunding.

To review the first blog

June 23, 2020

SEC Proposed Rule Changes For Exempt Offerings – Part 4

The 341-page rule release provides a comprehensive overhaul to the exempt offering and integration rules worthy of in-depth discussion. I have been breaking the information down into a series of blogs, with this fourth blog focusing on amendments to Regulation A other than integration and offering communications which

June 16, 2020

SEC Proposed Rule Changes For Exempt Offerings – Part 3

The 341-page rule release provides a comprehensive overhaul to the exempt offering and integration rules worthy of in-depth discussion. I have been breaking the information down into a series of blogs, with this third blog focusing on amendments to Rule 504, Rule 506(b) and 506(c) of Regulation D other

May 26, 2020

Relief For Persons Affected By The Coronavirus

Last week I published a blog summarizing the relief granted by the SEC for public companies and capital markets participants impacted by the coronavirus (Covid-19) (see HERE). Just as Covid-19 rapidly evolves, so have the regulators response. The SEC has now expanded the relief and issued guidance on public company disclosures related to Covid-19.

While we work to complete the usual filings while in quarantine, a new conversation is starting to develop at a rapid pace. That is, the conversation of opportunity and the accelerating of a more technologically driven economy than ever before. Businesses and service providers must stay nimble and ready to serve the ever changing needs of entrepreneurs and the capital markets – I know we are!

Extension in SEC Reporting Filing Deadlines

On March 25, 2020, the SEC extended its prior conditional relief order such that periodic filings that would have been due from between March 1 and July 1, 2020 can avail themselves of

March 31, 2020

Shifting Capital Markets; Bank of America’s Merrill Lynch Exits the Penny Stock Business

There is a strange dichotomy building in the capital markets and what some are calling a clearing firm crisis. At the same time that the world of penny stocks and low-priced securities is on shaky ground with regulators and market participants, the U.S. is trying to regenerate the IPO marketplace, and a whole world of cryptocurrency investments and global trading continues to flourish. However, the IPO market cannot flourish for small companies if stockholders cannot clear their securities and sell into a secondary market. Recently, penny stocks have experienced a one-two punch that leaves me, and many of my colleagues, wondering how the marketplace will respond and evolve. Furthermore, as the inevitable birth of securities tokens and an actual licensed operational securities token exchange looms on the near-term horizon, it is clear we are at the precipice of experiencing fundamental changes in the capital markets.

Background on Penny Stocks

Penny stocks and low-priced securities have always been considered speculative and

October 23, 2018

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Report Of Government-Business Forum On Small Business Capital Formation

SEC Adopts Amendments To Tighten Shareholder Proposals

SEC Proposed To Modernize Auditor Independence Rules

A COVID IPO

SEC Proposed Rule Changes For Exempt Offerings – Part 5

SEC Proposed Rule Changes For Exempt Offerings – Part 4

SEC Proposed Rule Changes For Exempt Offerings – Part 3

Relief For Persons Affected By The Coronavirus

Shifting Capital Markets; Bank of America’s Merrill Lynch Exits the Penny Stock Business

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