Regulation S-K

SEC Eliminates The “Tandy Letter”

On October 5, 2016, the SEC Division of Corporation Finance (CorpFin) announced that, effective immediately, it would no longer require companies to include “Tandy” letter representations in comment letter response or registration acceleration requests addressed to the SEC.

Background

Beginning in the 1970s the SEC began to require an affirmative statement from the company acknowledging that the company cannot use the SEC’s comment process as a defense in any securities-related litigation. Named after the first company required to provide the affirmations, this language is referred to as a “Tandy” letter. By 2004 the “Tandy” letter was required in all comment letter responses to the SEC as well as registration acceleration requests. The “Tandy” portion of a response was required to be agreed to by the company itself, so if the response letter was on attorney letterhead, a signature line was required to be included for the company or the company could submit a separate letter. The Tandy language for an

December 20, 2016

Yahoo Hacking Scandal And Obligations Related To Cybersecurity

On September 26, 2016, Senator Mark R. Warner (D-VA), a member of the Senate Intelligence and Banking Committees and cofounder of the bipartisan Senate Cybersecurity Caucus, wrote a letter to the SEC requesting that they investigate whether Yahoo, Inc., fulfilled its disclosure obligations under the federal securities laws related to a security breach that affected more than 500 million accounts. Senator Warner also requested that the SEC re-examine its guidance and requirements related to the disclosure of cybersecurity matters in general.

The letter was precipitated by a September 22, 2016, 8-K and press release issued by Yahoo disclosing the theft of certain user account information that occurred in late 2014. The press release referred to a “recent investigation” confirming the theft of user account information associated with at least 500 million accounts that was stolen in late 2014. Just 13 days prior to the 8-K and press release, on September 9, 2016, Yahoo filed a preliminary 14A filing with

December 6, 2016

SEC Issues Proposed Amendments To Item 601 Of Regulation S-K Related To Exhibits

On August 31, 2016, the SEC issued proposed amendments to Item 601 of Regulation S-K to require hyperlinks to exhibits in filings made with the SEC. The proposed amendments would require any company filing registration statements or reports with the SEC to include a hyperlink to all exhibits listed on the exhibit list. In addition, because ASCII cannot support hyperlinks, the proposed amendment would also require that all exhibits be filed in HTML format.

This newest proposed rule change to Regulation S-K is part of the SEC Division of Corporation Finance’s Disclosure Effectiveness Initiative. At the end of this blog, I include an up-to-date summary of the proposals and request for comment related to the ongoing Disclosure Effectiveness Initiative.

Background

September 20, 2016

SEC Requests Comment On Changes To Subpart 400 To Regulation S-K

On August 25, 2016, the SEC requested public comment on possible changes to the disclosure requirements in Subpart 400 of Regulation S-K. Subpart 400 encompasses disclosures related to management, certain security holders and corporate governance. The request for comment is part of the ongoing SEC Division of Corporation Finance’s Disclosure Effectiveness Initiative and as required by Section 72003 of the FAST Act.

Background

The topic of disclosure requirements under Regulations S-K and S-X as pertains to financial statements and disclosures made in reports and registration statements filed under the Exchange Act of 1934 (“Exchange Act”) and Securities Act of 1933 (“Securities Act”) has come to the forefront over the past couple of years. The purpose of the Disclosure Effectiveness Initiative is to assess whether the business and financial disclosure requirements continue to provide the information investors need to make informed investment and voting decisions.

Regulation S-K, as amended over the years, was adopted as part of a uniform disclosure initiative

September 13, 2016

SEC Issues Proposed Regulation S-K And S-X Amendments

On July 13, 2016, the SEC issued a 318-page proposed rule change on Regulation S-K and Regulation S-X to amend disclosures that are redundant, duplicative, overlapping, outdated or superseded (S-K and S-X Amendments). The proposed rule changes follow the 341-page concept release and request for public comment on sweeping changes to certain business and financial disclosure requirements issued on April 15, 2016. See my two-part blog on the S-K Concept Release HERE and HERE.

The proposed S-K and S-X Amendments are intended to facilitate the disclosure of information to investors while simplifying compliance efforts by companies. The proposed S-K and S-X Amendments come as a result of the Division of Corporation Finance’s Disclosure Effectiveness Initiative and as required by Section 72002 of the FAST Act. Prior to the issuance of these S-K and S-X Amendments, on June 27, 2016, as part of the same initiative, the SEC issued proposed amendments to the definition of “Small Reporting Company” (see

August 9, 2016

SEC Proposes Amendments To Definition Of “Small Reporting Company”

On June 27, 2016, the SEC published proposed amendments to the definition of “smaller reporting company” as contained in Securities Act Rule 405, Exchange Act Rule 12b-2 and Item 10(f) of Regulation S-K. The amendments would expand the number of companies that qualify as a smaller reporting company and thus qualify for the scaled disclosure requirements in Regulation S-K and Regulation S-X. The rule change follows the SEC concept release and request for public comment on sweeping changes to the business and financial disclosure requirements in Regulation S-K. Throughout the SEC Concept Release, it referenced the scaled and different disclosure requirements for the different categories of company and affirmed that it was evaluating and considering changes to the eligibility criteria for each.

If the rule change is passed, the number of companies qualifying as a smaller reporting company will increase from 32% to 42% of all reporting companies.

The proposed rule change follows the SEC Advisory Committee on

July 12, 2016

SEC Issues Concept Release On Regulation S-K; Part 2

On April 15, 2016, the SEC issued a 341-page concept release and request for public comment on sweeping changes to certain business and financial disclosure requirements in Regulation S-K (“S-K Concept Release”). This blog is the second part discussing that concept release. In Part I, which can be read HERE, I discussed the background and general concepts for which the SEC provides discussion and seeks comment. In this Part II, I will discuss the rules and recommendations made by the SEC and, in particular, those related to the 100, 200, 300, 500 and 700 series of Regulation S-K.

Background

The fundamental tenet of the federal securities laws is defined by one word: disclosure. In fact, the SEC neither reviews nor opines on the merits of any company or transaction, but only upon the appropriate disclosure, including risks, made by that company. However, excessive rote immaterial disclosure can dilute the material important information regarding that particular company and have the

May 17, 2016

SEC Issues Concept Release On Regulation S-K; Part 1

This is the first blog in a two-part series on the S-K Concept Release. In this Part I, I will discuss the background and general concepts for which the SEC provides discussion and seeks comment. In Part II of the series I will discuss the rules and recommendations made by the SEC and, in particular, those

May 3, 2016

Responding To SEC Comments

Background

The SEC Division of Corporation Finance (CorpFin) reviews and comments upon filings made under the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”). The purpose of a review by CorpFin is to ensure compliance with the disclosure requirements under the federal securities laws, including Regulation S-K and Regulation S-X, and to enhance such disclosures as to each particular issuer. CorpFin will also be cognizant of the anti-fraud provisions of the federal securities laws and may refer a matter to the Division of Enforcement where material concerns arise over the adequacy and accuracy of reported information or other securities law violations, including violations of the Section 5 registration requirements. CorpFin has an Office of Enforcement Liason in that regard.

CorpFin’s review and responsibilities can be described with one word: disclosure!

CorpFin selectively reviews filings, although generally all first-time filings, such as an S-1 for an initial public offering or Form 10 registration under

March 29, 2016

SEC Gives Insight On 2016 Initiatives

SEC Chair Mary Jo White gave a speech at the annual mid-February SEC Speaks program and, as usual, gave some insight into the SEC’s focus in the coming year. This blog summarized Chair White’s speech and provides further insight and information on the topics she addresses.

Consistent with her prior messages, Chair White focuses on enforcement, stating that the SEC “needs to go beyond disclosure” in carrying out its mission. That mission, as articulated by Chair White, is the protection of investors, maintaining fair, orderly and efficient markets, and facilitating capital formation. In 2015 the SEC brought a record number of enforcement proceedings and secured an all-time high for penalty and disgorgement orders. The primary areas of focus included cybersecurity, market structure requirements, dark pools, microcap fraud, financial reporting failures, insider trading, disclosure deficiencies in municipal offerings and protection of retail investors and retiree savings. In 2016 the SEC intends to focus enforcement on financial reporting, market structure, and the

March 8, 2016

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Regulation S-K

SEC Eliminates The “Tandy Letter”

Yahoo Hacking Scandal And Obligations Related To Cybersecurity

SEC Issues Proposed Amendments To Item 601 Of Regulation S-K Related To Exhibits

SEC Requests Comment On Changes To Subpart 400 To Regulation S-K

SEC Issues Proposed Regulation S-K And S-X Amendments

SEC Proposes Amendments To Definition Of “Small Reporting Company”

SEC Issues Concept Release On Regulation S-K; Part 2

SEC Issues Concept Release On Regulation S-K; Part 1

Responding To SEC Comments

SEC Gives Insight On 2016 Initiatives

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