Regulation S-K

Financial Reporting Manual Updated

On January 30, 2023, the SEC’s Division of Corporation Finance updated its Financial Reporting Manual (“Manual”). The latest update is dated as of December 31, 2022. Although we attorneys like to leave the accounting to the accountants, the Financial Reporting Manual is a go to resource for all practitioners and is generally one of the many resources always open on my desktop.

As the preamble to the Manual states, it was originally created as internal guidance to the SEC staff. In 2008, in an effort to increase transparency of informal staff interpretations, the SEC posted a version of the Manual to its website. The SEC continues with its usual disclaimers that the manual is not formal guidance and that they can change their interpretations or views at any time, etc. Regardless, we all use it as a resource and in my years of experience, have never had the SEC take a counter-position to the Manual’s guidance unless there has been

March 21, 2023

SEC Proposed Mandatory Climate Disclosure Rules – Part 4

On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about greenhouse gas emissions (GHG), climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.

The proposed rules, which are heady and complex, initially only allotted for a 39-day comment period. Considering the size (490-page rules release), scope, complexity and ramifications, the marketplace pushed back on such a short window. On May 9, 2022, the SEC extended the comment period through June 17, 2022, and all aspects of the industry are weighing in. Other than the small but powerful group of environmental activists and institutional investors that influenced the proposed rule, the vast majority of the commenters believe the

June 14, 2022

SEC Proposed Mandatory Climate Disclosure Rules – Part 3

On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.

The proposed rules would include a phase-in period for all registrants, with the compliance date dependent on the registrant’s filer status, and an additional phase-in period for Scope 3 greenhouse gas emissions disclosure.

June 7, 2022

SEC Proposed Mandatory Climate Disclosure Rules – Part 2

On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.

In last week’s blog, I provided some background and

May 31, 2022

SEC Proposes New Rules For SPACs – Part 6

On March 30, 2022, the SEC proposed rules related to SPAC and de-SPAC transactions including significantly enhanced disclosure obligations including related to financial projections, making a target company a co-registrant when a SPAC files an S-4 or F-4 registration statement associated with a business combination, and aligning de-SPAC transactions with initial public offering rules. In addition, the SEC has also proposed rules that would deem any business combination transaction involving a reporting shell company, including but not limited to a SPAC, to involve a sale of securities to the reporting shell company’s shareholders. The new rules would amend a number of financial statement requirements applicable to transactions involving shell companies.

In addition, the SEC has proposed a new safe harbor under the Investment Company Act of 1940 (‘40 Act’) that would provide that a SPAC that satisfies the conditions of the proposed rule would not be an investment company and therefore would not be subject to regulation under the

May 17, 2022

Disclosure Considerations Related To The Conflict In The Ukraine

In addition to being a tragedy, the Russian attack on the Ukraine has disrupted businesses around the world, caused a spike in oil prices and raised disclosure issues for public companies as we are firmly in 10-K and proxy season.. In addition to the obvious disruption of business in both the Ukraine and Russia, the U.S. and many other European countries have imposed significant sanctions against Russia that may also impact companies and U.S. capital market participants. No fewer than three of my clients have been directly affected by the conflict from the extreme of having to close an entire division to the less impactful certain non-collectability of receivables.

Disclosure requirements will depend upon the specific facts and circumstances of a particular company, but key areas that may need attention are risk factors, description of business and management’s discussion and analysis (MD&A).

Risk Factors

In August 2020, the SEC adopted final amendments to Item 105 – Risk Factors

March 8, 2022

SEC ReOpens Comment Period For Pay Versus Performance

On January 27, 2022, the SEC re-opened the comment period on proposed rules under the Dodd-Frank Act requiring disclosure of information reflecting the relationship between executive compensation actually paid by a company and the company’s financial performance (“Pay vs. Performance”). The rules were previously proposed in April 2015, and have languished since then (see HERE). In addition to re-opening the comment period on the 2015 proposed rules, the SEC has expanded the proposal to include additional performance metrics.

The SEC administration under Gary Gensler has been actively tacking compensation and insider trading related issues recently 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).

Background

Section 953(a) of the Dodd-Frank Act added Section 14(i) to the Securities Exchange Act of 1934

February 22, 2022

Climate Disclosure Guidance

Ahead of the imminent publication of updated climate disclosure rules, the SEC has published a sample comment letter providing companies with guidance as to the regulator’s current focus and expectations under the rules. The last official SEC guidance on climate-related guidance was published in 2010; however, the SEC, and individual top brass, have been vocal about the need for updated regulations. In that regard, in March 2021, the SEC published a statement requesting public input on climate change disclosures. It is expected that either a rule proposal or temporary final rules are forthcoming. For more information on differing views following the March 2021 request for public comment, including from regulators, industry groups and individual SEC Commissioners, see HERE.

In 2010 as today, companies were and are required to report material information that can impact financial conditions and operations (see most recent amendments to MD&A disclosures: HERE). In addition to MD&A, climate-change-related disclosures, including risks and opportunities, may

October 12, 2021

ESG Disclosures – A Continued Discussion

In a series of blogs, I have been discussing the barrage of environmental, social and governance (ESG) related activity and focus by capital markets regulators and participants. Former SEC Chair Jay Clayton did not support overarching ESG disclosure requirements. However, new acting SEC Chair Allison Herron Lee has made a dramatic change in SEC policy, appointing a senior policy advisor for climate and ESG; the SEC Division of Corporation Finance (“Corp Fin”) announced it will scrutinize climate change disclosures; the SEC has formed an enforcement task force focused on climate and ESG issues; the Division of Examinations’ 2021 examination priorities included an introduction about how this year’s priorities have an “enhanced focus” on climate and ESG-related risks; almost every fund and major institutional investor has published statements on ESG initiatives; a Chief Sustainability Officer is a common c-suite position; independent auditors are being retained to attest on ESG disclosures; and enhanced ESG disclosure regulations are most assuredly forthcoming.

April 6, 2021

SEC Final Rule Changes For Exempt Offerings – Part 4

On November 2, 2020, the SEC adopted final rule changes to harmonize, simplify and improve the exempt offering framework. The new rules go into effect on March 14, 2021. The 388-page rule release provides a comprehensive overhaul to the exempt offering and integration rules worthy of in-depth discussion. As such, like the proposed rules, I am breaking it down over a series of blogs with this fourth blog discussing the changes to Regulation A. The first blog in the series discussed the new integration rules (see HERE). The second blog in the series covered offering communications (see HERE). The third blog focuses on amendments to Rule 504, Rule 506(b) and 506(c) of Regulation D (see HERE.

Background; Current Exemption Framework

The Securities Act of 1933 (“Securities Act”) requires that every offer and sale of securities either be registered with the SEC or exempt from registration. Offering exemptions are found in Sections 3 and 4 of the

February 23, 2021

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Regulation S-K

Financial Reporting Manual Updated

SEC Proposes New Rules For SPACs – Part 6

SEC ReOpens Comment Period For Pay Versus Performance

SEC Final Rule Changes For Exempt Offerings – Part 4

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