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Search Results for: FAST Act – Page 5

SEC Supports FINRA’s Rule 6490 Authority Over Corporate Actions

March 10, 2015

In two recent administrative decisions, the SEC has upheld FINRA’s broad authority under Rule 6490 to approve and effectuate corporate actions by public companies trading on the OTC Markets.  One of FINRA’s mandates is to protect investors and maintain fair and orderly markets and like broker-dealers, it acts as a gatekeeper in the small-cap industry.  FINRA exercises its powers though the direct regulation of its member broker-dealer firms, but also through its Office of Fraud Detection and Market Intelligence, which monitors the trading activity and press releases of issues in the marketplace and conducts related investigations.  FINRA works with the SEC as a front line in the detection, investigation and assistance with the prosecution of issuers. 

Recently, through its power under Rule 6490, as more fully explained below, FINRA has, with the support of the SEC, expanded its impact on the small-cap marketplace by conducting in-depth reviews of issuers in conjunction with the processing of corporate actions, and denying such

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SEC Issues Several Proposed Rule Changes Pertaining To JOBs Act

January 6, 2015

ABA Journal’s 10th Annual Blawg 100

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On December 18, 2014, the SEC published proposed rule amendments to implement portions of Title V and Title VI of the JOBS Act by amending rules promulgated under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”).  The proposed amendments will revise the Section 12(g) rules to reflect the new, higher shareholder thresholds for triggering registration requirements and for allowing the voluntary termination of registration or suspension of reporting obligations.  The proposed rules also make similar changes related to banks, bank holding companies, and savings and loan companies. 

The proposed rules establish the time for determining accredited status for purposes of calculating shareholders of record and the corresponding application of the registration and deregistration rules.  In particular, the proposed rules set the last day of the fiscal year as the relevant calculation moment effectively imposing an obligation on issuers to obtain, and investors to give, updated representations following an initial

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Will the Disclosure Modernization and Simplification Act of 2014 Simplify Reporting Requirements for ECG’s and Smaller Reporting Companies?

December 23, 2014

ABA Journal’s 10th Annual Blawg 100

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In early December the House passed the Disclosure Modernization and Simplification Act of 2014, which will now go to the Senate for action—or inaction, as the case may be.

The bill joins a string of legislative and political pressure on the SEC to review and modernize Regulation S-K to eliminate burdensome, unnecessary disclosure with the dual purpose of reducing the costs to the disclosing issuer and ensure readable, material information for the investing public.

The Disclosure Modernization and Simplification Act of 2014, if passed, would require the SEC to adopt or amend rules to: (i) allow issuers to include a summary page to Form 10-K; and (ii) scale or eliminate duplicative, antiquated or unnecessary requirements in Regulation S-K.  In addition, the SEC would be required to conduct yet another study on all Regulation S-K disclosure requirements to determine how best to amend and modernize the rules to reduce costs and burdens while

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Private Offering Rule Changes Since JOBS Act

December 2, 2014

ABA Journal’s 10th Annual Blawg 100

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As the end of 2014 approaches, I find myself reflecting on the significant successes and failures in the private offering arena since the enactment of the Jumpstart our Business Startups Act (“JOBS Act”) on April 5, 2012.  Some provisions under the JOBS Act became law without further rule-making action on the part of the SEC; others took time to pass; and significantly, Title III Crowdfunding, the most anticipated change in capital market access, has completely stalled.  This blog is a summary of the in-depth detailed blogs I’ve previously written on each of these topics with some added commentary.

506(c) – The Elimination of the Prohibition Against General Solicitation and Advertising in Private Offerings to Accredited Investors; Broker-Dealer Exemption for 506(c) Funding Websites

The enactment of new 506(c) resulting in the elimination of the prohibition against general solicitation and advertising in private offerings to accredited investors has been a slow but sure success.  Trailblazers

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Risk Factor Disclosures For Reporting Public Companies 

November 18, 2014

ABA Journal’s 10th Annual Blawg 100

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 A risk factor disclosure involves a discussion of circumstances, trends, or issues that may affect a company’s business, prospects, operating results, or financial condition.  Risk factors must be disclosed in registration statements under the Securities Act and registration statements and reports under the Exchange Act.  In addition, risk factors must be included in private offering documents where the exemption relied upon requires the delivery of a disclosure document, and is highly recommended even when such disclosure is not statutorily required.

The Importance of Risk Factors

Risk factors are one of the most often commented on sections of a registration statement.  The careful crafting of pertinent risk factors can provide leeway for more robust discussion on business plans and future operations, and can satisfy a wide arrange of SEC concerns regarding existing financial and non-financial matters (such as potential default provisions in debt, dilution matters, inadvertent rule violations, etc.).

Although smaller reporting companies are

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PCAOB Amends Auditing Standards For Related-Party And Significant, Unusual Transactions

November 11, 2014

ABA Journal’s 10th Annual Blawg 100

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 On October 21, 2014, the SEC approved amendments to certain auditing standards that impact small cap companies that maintain GAAP compliant audits and file reports with the SEC under the Securities Exchange Act of 1934 (“Exchange Act”).  The SEC Order approved proposed rule changes that had been submitted to by the Public Company Accounting Oversight Board (the “PCAOB”) regarding the auditing standards for related party transactions and the standards regarding significant unusual transactions. 

The amended rules apply to all SEC audits including those for broker-dealers and go into effect for the audits for fiscal year ends beginning on or after December 15, 2014.

Related Party Transactions

The SEC has approved new Auditing Standard No. 18 (AU No. 18) setting forth guidance and procedures for auditors to use in identifying and evaluating related party transactions.  AU No. 18 is intended to strengthen requirements for identifying, assessing and responding to the risks of material misstatement

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SEC Filed Actions Against 19 Firms and One Individual Trader for Violation of Rule 105 of Regulation M

September 23, 2014

ABA Journal’s 10th Annual Blawg 100

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On September 16, 2014, the SEC filed actions against 19 firms and one individual trade for short selling violations in advance of public stock offerings in violation of Rule 105 of Regulation M.  The SEC has actively enforced Regulation M since its enactment in 1996.   Regulation M is designed to prevent stock manipulation during public offerings and Rule 105 particularly prohibits short selling of stock within five business days of participating in an offering for the same stock.  That is, you cannot short stock and cover your short by buying the same stock from the underwriter in a public offering.  Rule 105 prevents downward pressure on a company’s stock price during the offering process.

The SEC’s current investigation found that 19 firms and one individual trader charged in these latest cases engaged in short selling of particular stocks shortly before they bought shares from an underwriter, broker, or dealer participating in a follow-on

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The Sale of Unregistered Securities Must Satisfy Form 8-K Filing Requirements In a 3(a)(10) Transaction

August 5, 2014

Introduction and Background

Recently the Securities and Exchange Commission (“SEC”) has been taking action against public reporting companies for the failure to file a Form 8-K upon the completion of a transaction exempt under Section 3(a)(10) of the Securities Act of 1933, as amended (“Securities Act”).  The SEC has served a Wells notice on numerous companies for the failure to file such Form 8-K without any prior communication with such companies. Since enforcement actions for the failure to file a Form 8-K are very rare, it is my view that the SEC is concerned with the 3(a)(10) transaction itself.

A Wells notice, often referred to as a Wells letter, is a notice delivered by the SEC to persons and entities under investigation providing the opportunity to such persons and entities to present their position to the SEC prior to the commencement of an enforcement proceeding.  A Wells letter gives notice of the SEC’s intended charges and enforcement recommendation and

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Section 16 Insider Reporting and Potential Liability for Short-Swing Trading Practices

June 30, 2014

A public company with a class of securities registered under Section 12 or which is subject to Section 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) must file reports with the SEC (“Reporting Requirements”).  The required reports include an annual Form 10-K, quarterly Form 10Q’s and current periodic Form 8-K as well as proxy reports and certain shareholder and affiliate reporting requirements.

Last week, I wrote about the “certain shareholder” filing requirements under Sections 13d and 13g of the Exchange Act, Regulation 13D-G beneficial ownership reporting and related Schedules 13D and 13G.  This blog is a summary of the “certain shareholder and affiliate” reporting and related requirements under Section 16 of the Exchange Act.  In particular, all directors, executive officers and 10% stockholders (“Insiders”) of reporting companies are subject to the reporting and insider trading provisions of Section 16 of the Exchange Act.  At the end of the blog is a reference chart related to the

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Guide to Reverse Merger Transaction

March 18, 2014

What is a reverse merger?  What is the process?

A reverse merger is the most common alternative to an initial public offering (IPO) or direct public offering (DPO) for a company seeking to go public.  A “reverse merger” allows a privately held company to go public by acquiring a controlling interest in, and merging with, a public operating or public shell company.  The SEC defines a “shell company” as a publically traded company with (1) no or nominal operations and (2) either no or nominal assets or assets consisting solely of any amount of cash and cash equivalents.

In a reverse merger process, the private operating company shareholders exchange their shares of the private company for either new or existing shares of the public company so that

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