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C&DI

SEC Publishes New C&DI On Filing Fee Table And Inline XBRL

Back in fourth quarter 2023, the SEC published several new compliance and disclosure interpretations on various topics including cyber incident disclosure, proxy and information statements, the inclusion of securities in the filing fee exhibit, and Inline XBRL.  This blog is the last in a series of three covering the plethora of new C&DI.

Related to the filing fee table:

Question 239.02 and 240.17 – A well-known seasoned issuer registers securities on an automatic shelf registration statement and elects to defer payment of filing fees pursuant to Rule 456(b). The issuer subsequently files a prospectus supplement in connection with a pay-as-you-go deferred fee payment under Rules 456(b) and 457(r) that includes the required filing fee exhibit. Must the filing fee exhibit’s Table 1 list all the securities listed in the initial filing of the related registration statement or is Table 1 permitted to list only the securities being offered by the prospectus supplement as to which the fees are

SEC Publishes New C&DI On Pay Versus Performance Rules

For the second time since the adoption of the pay versus performance rules (Pay vs. Performance) in August, 2022 (see HERE), the SEC has published guidance via new compliance and disclosure interpretations (“C&DI”).  The SEC previously published 15 C&DI on the subject in February 2023 – see HERE.

The Pay vs. Performance rules require companies to provide a tabular disclosure of specified executive compensation and financial performance measures for their five most recently completed fiscal years in any proxy or information statement filed under Section 14 of the Exchange Act. With respect to the measures of performance, a company is required to report its total shareholder return (TSR), the TSR of companies in the company’s peer group, its net income, and a financial performance measure chosen by the company itself. Using the information presented in the table, companies are required to describe the relationships between the executive compensation actually paid and each of the performance measures, as well

SEC Publishes New C&DI On Rule 10b5-1

On August 25, 2023, the SEC published five new Compliance and Disclosure Interpretations (C&DI) on the recently effective Rule 10b5-1 amendments.  The new rules were adopted on December 14, 2022 (see HERE) to enhance disclosure requirements and investor protections against insider trading.  The amendments include updates to Rule 10b5-1(c)(1), which provides an affirmative defense to insider trading liability under Section 10(b) and Rule 10b-5. This is the second time the SEC has published guidance on the rules having issued three C&DI in May – see HERE.

The rule amendments updated the conditions to satisfy the 10b5-1 affirmative defense, including adding cooling-off periods before trading can commence under a Rule 10b5-1 plan and a condition that all persons entering into a Rule 10b5-1 plan must act in good faith with respect to the plan. The amendments also require directors and officers to include representations in their plans certifying at the time of the adoption of

Regulation FD

In addition to the rules and regulations governing the numerous mandatory disclosure obligations under the federal securities laws, the SEC also has several rules governing a company’s obligations vis-a-vis voluntary disclosures.  I have written several times about the use of non-GAAP financial measures (see HERE and the imbedded links therein), but it has been several years (10!) since I wrote about the rules and regulations that form a part of Regulation Fair Disclosure (“Regulation FD”).

Regulation FD, comprised of Exchange Act Rules 100-103, was first adopted in the year 2000 in response to concerns about selective disclosure to certain market participants, including a practice of having private calls with analysts, institutional shareholders and traders.  Regulation FD requires a company to make public disclosure in advance of an intentional disclosure of material non-public information or immediately following an inadvertent disclosure of such material information.

Regulation FD Rules

Exchange Act Rule 100 mandates that whenever a company or any person acting

SEC Publishes Guidance On Rule 10b5-1 Amendments

On May 25, 2023, the SEC published three new Compliance and Disclosure Interpretations (C&DI) on the recently effective Rule 10b5-1 amendments.  The new rules were adopted on December 14, 2022 (see HERE) to enhance disclosure requirements and investor protections against insider trading.  The amendments include updates to Rule 10b5-1(c)(1), which provides an affirmative defense to insider trading liability under Section 10(b) and Rule 10b-5.

The changes updated the conditions that must be met for the 10b5-1 affirmative defense, including adding cooling-off periods before trading can commence under a Rule 10b5-1 plan and a condition that all persons entering into a Rule 10b5-1 plan must act in good faith with respect to the plan. The amendments also require directors and officers to include representations in their plans certifying at the time of the adoption of a new or modified Rule 10b5-1 plan that: (i) they are not aware of any material nonpublic information about the issuer

SEC Issues Additional C&DI On Use Of Non-GAAP Measures

On December 13, 2022, the SEC issued seven new Compliance & Disclosure Interpretations (C&DI) related to the use of non-GAAP financial measures, the first new C&DI on the subject since 2018. Several of the new C&DI update or replace the language of prior existing C&DI.  The C&DI cover revenue recognition, misleading information and GAAP reconciliation, in some cases replacing a principles-based response with a more prescriptive approach.

The SEC permits companies to present non-GAAP financial measures in their public disclosures subject to compliance with Regulation G and Item 10(e) of Regulation S-K.  Regulation G and Item 10(e) require reconciliation to comparable GAAP numbers, the reasons for presenting the non-GAAP numbers, and govern the presentation format itself including requiring equal or greater prominence to the GAAP financial information.

GAAP continues to be and has consistently been criticized by the marketplace in general, with many institutional investors publicly denouncing the usefulness of the accounting standard.  Approximately 90% of companies provide

SEC Issues Additional Guidance Through New C&DI On The Use Of Universal Proxy Cards

On November 17, 2021, the SEC adopted final rules requiring parties in a contested election to use universal proxy cards that include all director nominees presented for election at a shareholder meeting (see HERE).  The original rules were proposed on October 16, 2016 (see HERE) with no activity until April, 2021, when the SEC re-opened a comment period (see HERE).

The rule adoption came with a flurry of rule amendments, proposals and guidance related to the proxy process, some of which reverses recent rules on the same subject, including amendments to the rules governing proxy advisory firms (see HERE) and additional proposed amendments to Rule 14a-8 governing shareholder proposals (see HERE).

The final rules require dissident shareholders and registrants to provide shareholders with a proxy card that includes the names of all registrant and dissident nominees. The rules apply to all non-exempt solicitations for contested elections other than those involving registered investment companies and business

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

SEC Issues C&DI On The Use Of Proxy Cards

Days before the universal proxy compliance deadline, the SEC issued 3 new compliance and disclosure interpretations (C&DI) addressing issues raised by the new rules.

BACKGROUND

On November 17, 2021, the SEC adopted final rules requiring parties in a contested election to use universal proxy cards that include all director nominees presented for election at a shareholder meeting (see HERE).  The original rules were proposed on October 16, 2016 (see HERE) with no activity until April, 2021, when the SEC re-opened a comment period (see HERE).

The rule adoption came with a flurry of rule amendments, proposals and guidance related to the proxy process, some of which reverses recent rules on the same subject, including amendments to the rules governing proxy advisory firms (see HERE) and additional proposed amendments to Rule 14a-8 governing shareholder proposals (see HERE).

The final rules require dissident shareholders and registrants to provide shareholders with a proxy card that includes the

Section 12(g) Registration

Unlike a Securities Act of 1933 (“Securities Act”) registration statement, a Securities Exchange Act of 1934 (“Exchange Act”) Section 12(g) registration statement does not register securities for sale or result in any particular securities becoming freely tradeable.  Rather, an Exchange Act registration has the general effect of making a company subject to the Exchange Act reporting requirements under Section 13 of that Act.  Registration also subjects the company to the tender offer and proxy rules under Section 14 of the Act, its officers, directors and 10%-or-greater shareholders to the reporting requirements and short-term profit prohibitions under Section 16 of the Act and its 5%-or-greater shareholders to the reporting requirements under Sections 13(d) and 13(g) of the Act.

A company may voluntarily register under Section 12(g) at any time and, under certain circumstances, may also terminate such registration (see HERE).

In addition, unless an exemption is otherwise available, a company must register under Section 12(g), if as of the

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