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SEC Advisory Committee On Small And Emerging Companies Explores Venture Exchanges, Private And Secondary Securities Trading and The NASAA Coordinated Review Program- Part I

May 5, 2015

The SEC Advisory Committee on Small and Emerging Companies (the “Advisory Committee”) was organized by the SEC to provide advice on SEC rules, regulations and policies regarding “its mission of protecting investors, maintaining fair, orderly and efficient markets and facilitating capital formation” as related to “(i) capital raising by emerging privately held small businesses and publicly traded companies with less than $250 million in public market capitalization; (ii) trading in the securities of such businesses and companies; and (iii) public reporting and corporate governance requirements to which such businesses and companies are subject.”

As previously written about, on March 4, 2015, the committee met and finalized its recommendation to the SEC regarding the definition of “accredited investor.” My blog on those recommendations can be read HERE. In addition to finalizing the accredited investor definition recommendation, at the March 4 meeting the Advisory Committee listened to presentations regarding and discussed several important and timely small business initiatives.

I’ve had the

Structuring The Private Placement Or Venture Deal – Part 2

June 18, 2019

Back in 2013 I wrote a series of blogs about preparing for and then structuring a private placement or venture deal. In today’s world where public markets are more difficult to access for smaller companies, it is a topic worth revisiting. There are three primary aspects to the private placement or venture capital arena. The first is getting dressed for the ball – i.e., preparing a company to be viewed and assessed by investors including the due diligence process; the second is determining valuation or deciding to avoid a determination through convertible instruments; and the third is structuring the deal itself.

In this two-part blog series I am discussing each of these aspects. This first part addressed pre-deal considerations including valuation considerations and can be read HERE. This part two discusses structuring and documenting the deal.

Structuring The Deal

Although structuring a private placement and negotiating with a venture capital group are very different, the underlying mechanics of investments

Structuring The Private Placement Or Venture Deal – Part 1

June 11, 2019

In this two-part blog series I will discuss each of these aspects. This first part addresses pre-deal considerations including valuation considerations. Part two will address structuring and documenting the deal.

Although structuring a private placement and negotiating with a venture capital group are very different, the underlying mechanics of investments are universal. In a venture capital

An Overview of Exemptions for Hedge Fund Advisors: Exemptions for Advisors to Venture Capital Funds, Private Fund Advisors with Less Than $150 Million in Assets Under Management, and Foreign Private Advisors – Part IV

September 17, 2013

The JOBS Act is not the only recent congressional act to change the landscape of hedge funds; the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) made significant changes as well.

In particular, the Dodd-Frank Act eliminated the oft relied upon exemption from registration for private hedge fund advisors for those advisors with fewer than 15 clients. While eliminating the private advisor exemption, Dodd-Frank created three new exemptions, which are the operable hedge fund advisor exemptions today. These exemptions are for:

(1) Advisors solely to venture capital funds;

(2) Advisors solely to private funds with less than $150 million in assets under management in the U.S.; and

(3) Certain foreign advisers without a place of business in the U.S.

Moreover, the

An Overview of Exemptions for Hedge Fund Advisors: Exemptions for Advisors to Venture Capital Funds, Private Fund Advisers with Less Than $150 Million in Assets Under Management, and Foreign Private Advisers – Part III

August 7, 2013

As the rules that will allow general solicitation and advertising for Rule 506(c) and 144A offerings near effectiveness, our firm has noticed a spike in inquiries related to small hedge funds and feeder funds. The JOBS Act is not the only recent congressional act to change the landscape of hedge funds; the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) made significant changes as well.

(1) Advisors

An Overview of Exemptions for Hedge Fund Advisors: Exemptions for Advisors to Venture Capital Funds, Private Fund Advisers with Less Than $150 Million in Assets Under Management, and Foreign Private Advisers – Part II

May 21, 2013

As the delayed JOBS Act rule changes become imminent, our firm has noticed a spike in inquiries related to small hedge funds and feeder funds.The JOBS Act is not the only recent congressional act to change the landscape of hedge funds; the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) made significant changes as well.

In particular, the Dodd-Frank Act eliminated the oft relied upon exemption from registration for private hedge fund advisors for those advisors with fewer than 15 clients.While eliminating the private advisor exemption, Dodd-Frank created three new exemptions, which are the operable hedge fund advisor exemptions today.These exemptions are for:

(1) Advisors solely to venture capital funds;

(2) Advisors solely to private funds with less than $150 million in assets under management in the U.S.; and

(3) Certain foreign advisers without a place of business in the U.S.

Moreover, the Dodd-Frank Private Fund Investment Advisers Registration Act of 2010 (the “Advisers Act“) imposed

An Overview of Exemptions for Hedge Fund Advisers: Exemptions for Advisers to Venture Capital Funds, Private Fund Advisers with Less Than $150 Million in Assets Under Management, and Foreign Private Advisers – Part I

May 16, 2013

As I have blogged about in the past, the JOBS Act will have a significant impact on hedge funds, and in particular smaller hedge funds. As the delayed rule changes become imminent, our firm has noticed a spike in inquiries related to small hedge funds and feeder funds. The JOBS Act is not the only recent congressional act to change the landscape of hedge funds; the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) made a significant impact as well.

In particular, the Dodd-Frank Act eliminated the oft-relied upon exemption from registration for private hedge fund advisers for those advisers with fewer than 15 clients. While eliminating the private adviser exemption, the Dodd-Frank created three new exemptions, which are the operable hedge fund adviser exemptions today. These exemptions are for:

(1) Advisers solely to venture capital funds;

(2) Advisers solely to private funds with less than $150 million in assets under management in the U.S.; and

(3) Certain

Structuring The Private Placement Or Venture Investment- Pre-Deal Considerations

April 17, 2013

I recently blogged about how to determine valuation in a start-up or development stage entity for purposes of structuring a prepackaged private placement, or for negotiating the venture capital transaction. I followed that blog with one explaining the various types of financial instruments that can be used for an investment.

Before a company can package a private placement offering or effectively negotiate with a venture or angel investor, it has to have its proverbial house in order. This blog circles back to the beginning discussing pre-deal considerations.

General

In order to successfully attract quality investors, a company must have its financial and legal house in order. I always advise my clients to act as if they are public, even if they never intend to go public. What is meant by that is to maintain proper corporate books and records. Draft and sign minutes of meetings of the board of directors, officers or committees. Keep systems in place to make

SEC Approves BX Venture Market

June 17, 2011

The SEC has recently approved the NASDAQ OMX Group, Inc.’s application to form the BX Venture Market (“BX Market”) as an alternative quotation medium to the OTCBB and OTC Markets, Inc. (including PinkSheets, OTCQB and OTCQX). The new BX Market will provide companies that do not otherwise qualify for an exchange listing, an opportunity to list their shares. The BX Market will compete with the OTCBB and the OTC Markets OTCQB and OTCQX (interestingly and as an aside, NASDAQ sold the OTCBB last year to a private buyer). The SEC has issued an in-depth order approving the application.

The OTCBB, OTCQB and OTCQX Alternative

The BX Market is marketing itself as a more transparent, better regulated, listing alternative to both the OTCBB and OTCQB and OTCQX. Presumably this means that companies trading on the BX Market would appear to have greater credibility than those on the OTCBB or OTCQB/QX. The BX Market will be run through joint ventures with NASDAQ

The 2017 SEC Government-Business Forum On Small Business Capital Formation Final Report

June 12, 2018

The SEC has published the final report and recommendations of the 2017 annual Government-Business Forum on Small Business Capital Formation (the “Forum”). As required by the Small Business Investment Incentive Act of 1980, each year the SEC holds a forum focused on small business capital formation. The goal of the forum is to develop recommendations for government and private action to eliminate or reduce impediments to small business capital formation. I previously summarized the opening remarks of the SEC Commissioners. See HERE.

The forum is taken seriously by the SEC and its participants, including the NASAA, and leading small business and professional organizations. Recommendations often gain traction. For example, the forum first recommended reducing the Rule 144 holding period for Exchange Act reporting companies to six months, a rule which was passed in 2008. In 2015 the forum recommended increasing the financial thresholds for the smaller reporting company definition, and the SEC did indeed propose a change

OTC Markets Makes Several Regulatory Recommendations

May 15, 2018

On March 8, 2018, Cromwell Coulson, CEO of OTC Markets Group, made a presentation to the SEC’s Investor Advisory Committee (“IAC”) as part of a panel on “Discussion of Regulatory Approaches to Combat Retail Investor Fraud.” During the meeting, Mr. Coulson discussed the most serious market risks and presented a list of 14 OTC Market’s regulatory recommendations to improve disclosure and combat these market risks.

A review of OTC Markets website on April 24, 2018 shows 10,469 traded securities, $1.1 billion volume, 7.2 billion share volume and 174,268 trades. In his remarks to the IAC, Mr. Coulson points out that 98% of the traded dollar volume of companies on OTC Markets make current information available. Echoing the SEC’s “Main Street investor” focus, he states that “[W]e have many stocks on our markets that are completely appropriate to be part of a diversified, long term, investment portfolio, of a main street investor; we also have speculative securities that are only

Going Public Transactions For Smaller Companies: Direct Public Offering And Reverse Merger

June 30, 2015

Introduction

One of the largest areas of my firms practice involves going public transactions. I have written extensively on the various going public methods, including IPO/DPOs and reverse mergers. The topic never loses relevancy, and those considering a transaction always ask about the differences between, and advantages and disadvantages of, both reverse mergers and direct and initial public offerings. This blog is an updated new edition of past articles on the topic.

Over the past decade the small-cap reverse merger, initial public offering (IPO) and direct public offering (DPO) markets diminished greatly. The decline was a result of both regulatory changes and economic changes. In particular, briefly, those reasons were: (1) the recent Great Recession; (2) backlash from a series of fraud allegations, SEC enforcement actions, and trading suspensions of Chinese companies following reverse mergers; (3) the 2008 Rule 144 amendments, including the prohibition of use of the rule for shell company and former shell company shareholders; (4) problems

SEC Has Approved A Two-Year Tick Size Pilot Program For Smaller Public Companies

June 16, 2015

On May 6, 2015 the SEC approved a two-year pilot program with FINRA and the national securities exchanges that will widen the minimum quoting and trading increments, commonly referred to as tick sizes, for the stocks of smaller public companies. The goal of the program is to study whether wider tick sizes improve the market quality and trading of these stocks.

The basic premise is that if a tick size is wider, the spread will be bigger, and thus market makers and underwriters will have the ability to earn a larger profit on trading. If market makers and underwriters can earn larger profits on trading, they will have incentive to make markets, support liquidity and issue research on smaller public companies. The other side of the coin is that larger spreads and more profit for the traders equates to increased costs to the investors whose accounts are being traded.

The tick size program includes companies that meet the following $3

SEC Congressional Testimony – Part 3

May 26, 2015

On three occasions recently representatives of the SEC have given testimony to Congress. On March 24, 2015, SEC Chair Mary Jo White testified on “Examining the SEC’s Agenda, Operations and FY 2016 Budget Request”; on March 19, 2015, Andrew Ceresney, Director of the SEC Division of Enforcement, testified to Congress on the “Oversight of the SEC’s Division of Enforcement”; and on March 10, 2015, Stephen Luparello, Director of the Division of Trading and Markets, testified on “Venture Exchanges and Small-Cap Companies.” In a series of blogs, I will summarize the three testimonies.

In this last blog in the series I am summarizing the testimony of Stephen Luparello, Director of the Division of Trading and Markets, on “Venture Exchanges and Small-Cap Companies.” The topic of venture exchanges and small-cap companies is of particular importance to me and my clients – it is the world in which we participate.

On May 5, 2015, I published a blog introducing and discussing the

SEC Congressional Testimony– Part II

April 28, 2015

SEC CONGRESSIONAL TESTIMONY – PART II

On three occasions recently, representatives of the SEC have given testimony to Congress. On March 24, 2015, SEC Chair Mary Jo White testified on “Examining the SEC’s Agenda, Operations and FY 2016 Budget Request”; on March 19, 2015, Andrew Ceresney, Director of the SEC Division of Enforcement, testified to Congress on the “Oversight of the SEC’s Division of Enforcement”; and on March 10, 2015, Stephen Luparello, Director of the Division of Trading and Markets, testified on “Venture Exchanges and Small-Cap Companies.” In a series of blogs, I will summarize the three testimonies.

In the first blog in the series, which can be read HERE, I summarized Mary Jo White’s testimony. This second blog in the series summarizes the testimony of Andrew Ceresney and in particular his words on the SEC’s enforcement focus for fiscal year 2016.

Andrew Ceresney, Director Division of Enforcement – Testimony to Congress

Mr. Ceresney began his testimony with a

SEC Congressional Testimony- Part I

April 14, 2015

On three occasions recently representatives of the SEC have given testimony to Congress. On March 24, 2015, SEC Chair Mary Jo White testified on “Examining the SEC’s Agenda, Operations and FY 2016 Budget Request”; on March 19, 2015, Andrew Ceresny, Director of the SEC Division of Enforcement, testified to Congress on the “Oversight of the SEC’s Division of Enforcement”; and on March 10, 2015, Stephen Luparello, Director of the Division of Trading and Markets, testified on “Venture Exchanges and Small-Cap Companies.” In a series of blogs, I will summarize the three testimonies. This first blog in the series summarizes the testimony of Mary Jo White.

Mary Jo White Testimony

On March 24, 2015, SEC Chair Mary Jo White gave testimony before the United States House of Representatives Committee on Financial Services. The testimony was titled “Examining the SEC’s Agenda, Operations and FY 2016 Budget Request.” As can be gleaned from the title, Mary Jo White was giving testimony in support

Chairman Atkins Talks Revitalizing American’s Markets

January 13, 2026

On December 2, 2025, SEC Chairman Paul S. Atkins gave a speech at the NYSE providing insight on his plans to revitalize the U.S. capital markets.

To set the stage, Chair Atkins begins with a discussion of the history of American innovation built on capitalism and how “the great leaps of American life were always produced by a willingness to tolerate and accept risks within a system that rewards those who take them. Our prosperity is no accident of history—nor is our primacy assured in the future. The twentieth century was a triumph of economic freedom over doctrines that sought to constrain it.” Unfortunately, recent years have seen a regulatory stifling of that innovation.

Chair Atkins notes that when he first left the SEC in the mid 1990’s, there were more than 7,000 companies listed on US exchange “from small-cap innovators to giants of industry.” However, that number has now fallen by approximately 40%. Chair Atkins points a finger directly

FINRA Has Launched An Investigation Into Broker Dealers’ With China Based Clients

January 6, 2026

In late October 2025, FINRA notified its members that it has launched an investigation into broker dealers that have worked on IPO’s involving small-cap companies based out of China. FINRA has specifically indicated that it is concerned with potential market manipulation.

FINRA’s investigation is the latest in a string of actions by US regulators and quasi governmental organizations concerned with access to U.S. markets by China based companies. In September, Nasdaq proposed to adopt additional listing criteria for companies primarily operating in China, including Hong Kong and Macau. The additional listing standards would require that all China based companies complete a minimum of a $25 million capital raise in a firm commitment public offering to go public on the Exchange (see HERE).

In June, 2025, the SEC published a concept release and request for comment on the definition of a Foreign Private Issuer (FPI) and related rules, clearly indicating that the prior definition is not suited to the

Mandatory Arbitration Provisions Are No Longer A Problem For The SEC

December 30, 2025

On September 17, 2025, the SEC reversed its previous position and issued a policy statement announcing that the presence of mandatory arbitration provisions in corporate documents, will not affect the SEC’s determination as to whether to declare registration statements effective.

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 the general anti-fraud provisions, all of which require disclosure of material information necessary to make required disclosures, not misleading. The standard for required disclosure is generally the materiality of the information. In TSC Industries, Inc. v. Northway, Inc., the U.S. Supreme Court defined materiality as information that would have a substantial likelihood of being viewed by a reasonable investor as

NASDAQ Expands Discretionary Authority To Block Listings For Small Cap Companies

December 23, 2025

On December 12, 2025, Nasdaq filed a proposal with the SEC to provide it with discretionary authority to refuse to deny initial listing applications, even where the applicant meets all stated listing requirements. This is yet another recent move by Nasdaq to prevent the listing, and continued listing, of low market cap companies in general; and Asian based foreign private issuers (FPIs) in particular, thought to be engaging in routine stock manipulation.

Although the publication is referred to as a “proposal,” it is effective immediately and applies to all companies currently in the application process.

Other recent Nasdaq initiatives include: (i) amendments to increase minimum listing standards for China based companies (see HERE) ; (ii) amendments to accelerate the suspension and delisting of a company that falls below any of the numeric listing requirements, including the bid price, market value of public float, equity, income and total assets/revenue requirements, and that has a Market Value of Listed Securities (“MVLS”)

Delaware Is No Longer The Only Option

December 16, 2025

In March 2025 Delaware completed its annual corporate updates to the Delaware General Corporation Law (“DGCL”) to provide certainty to key areas of Delaware corporate law (see HERE). The changes were expected to reduce the tide of redomestications to other states and reduce litigation risks for corporations and their boards of directors. However, the outflow of corporations has not reduced, rather the exit to other states, including Nevada and Texas, has only intensified, in what many are aptly referring to as DExit.

The agreed reasons for the DExit movement center around recent decisions by the Delaware Chancery Court, together with bolder corporate management (think Elon Musk) have had a significant impact on the topic. Seeing the opportunity, both Nevada and Texas have adopted management friendly amendments to their respective corporate statutes and both states have created dedicated Business Courts.

Moreover, Delaware is expensive all around. Both Nevada and Texas, for example, have significantly less expensive annual franchise taxes. Delaware

NASDAQ Proposes Amendments To Allow For The Trading Of Digital Assets

December 9, 2025

On September 8, 2025, in the newest in a series of proposed rule amendments, Nasdaq has proposed amendments to enable the trading of digital assets, including tokenized securities. The purpose of the rule change is to clearly establish that brokers and investors can trade tokens on the Exchange. To effectuate the amendment, Nasdaq is proposing to (i) add blockchain backed equities, including tokenized securities, to the definition of a “security,” (ii) update order entry and routing procedures to include tokenized securities; and (iii) update book processing to align tokenized securities with the same clearance and settlement priority as traditional securities.

Background

Over the years, U.S. equity markets have transformed to support technological innovations including, for example, moving from paper to electronic securities, shortening settlement cycles, instant price dissemination, and allowing for algorithmic electronic trading. Tokenization, which involves recording securities transactions using digital ledger blockchain technology, is such an innovation. Nasdaq believes that as long as the use of

SEC Issues A Concept Release On The Definition Of Foreign Private Issuer – Part 2

December 2, 2025

In June 2025 the SEC published a concept release and request for comment on the definition of a foreign private issuer (“FPI”). For a review of the current definition, information regarding SEC registration and reporting and Nasdaq corporate governance related to FPIs, see my three part blog HERE; HERE; and HERE.

FPI’s face unique challenges when accessing U.S. capital markets and as such over years the SEC has developed regulatory flexibilities allowing FPIs to follow the corporate governance rules of their home country and providing them with a modified disclosure regime. However, the SEC has noticed that the composition of FPI’s has changed over the last few decades and that most FPI’s almost exclusively trade in the U.S.

That is, at the time the current definition and accommodations for FPIs was established, the SEC through that most eligible FPI’s would be subject to meaningful disclosure and other regulatory requirements in their home country jurisdictions and

SEC Issues A Concept Release On The Definition Of A Foreign Private Issuer – Part 1

November 25, 2025

NASDAQ Proposes To Modify Listing Standards For OTC Traded SPACS

November 18, 2025

On August 22, 2025, Nasdaq proposed a modification to the listing rules to allow delisted SPAC’s to relist in conjunction with a business combination without being subject to the seasoning rule. The amendment will correct a potential unintended consequence of the seasoning rule while giving credence to the investor protections offered by the new SPAC/de-SPAC rules.

Background – Seasoning Rule and New SPAC Rules

Nasdaq, NYSE and NYSE American, all have a listing standard known as the seasoning rule. The seasoning rule is substantially the same for each exchange and provides that (paraphrasing the rule which is written slightly differently for each exchange):

A company that is formed by a reverse merger with a shell company, other than a listed SPAC, will only be eligible to submit an application for initial listing and thereafter qualify to be listed if immediately preceding the filing of the initial listing application the post business combination company:

(i) Has traded

Market Wrap-Up – Q3 2025

November 11, 2025

This edition of my market recap covers the third quarter of 2025. For a review of November and December 2024 see HERE; for October 2024 see HERE; for Q1 2025 see HERE; and for Q2 2025 see HERE.

Forty small cap ($30,000,000 and under) IPOs priced in the second quarter of 2025 (17 in July, 16 in August and 7 in September) – an uptick from Q2 2025. Below is a chart of relevant deal information for the third quarter IPOs.

Exchange	Offer Amount	Domestic/Foreign Issuer	Banker(s)

Nasdaq Capital	$9,375.000	Foreign	Cathay Securities, Inc.
Nasdaq Capital	$27,500,000	Domestic	The Benchmark Company; Roth Capital Partners
Nasdaq Capital	$5,500,000	Foreign	R.F. Lafferty & Co., Inc.
Nasdaq Capital	$6,500,000	Foreign	Joseph Stone Capital, LLC
Nasdaq Capital	$8,960,000	Foreign	Bancroft Capital, LLC
Nasdaq Capital	$6,000,000	Foreign	D. Boral Capital; Benjamin Securities, Inc.
Nasdaq Capital	$5,000,000	Foreign	Eddid Securities USA, Inc.
Nasdaq Capital	$8,000,000	Foreign	Bancroft Capital, LLC
Nasdaq

SEC Publishes CD&I On Filer Status Determination

November 4, 2025

On August 27, 2025, the SEC published a new compliance and disclosure interpretation (CD&I) providing guidance on when an issuer may become an accelerated or large accelerated filer after losing its status as a smaller reporting company.

New CD&I

New CD&I question 130.05 provides:

Question: An issuer is a smaller reporting company under the revenue test in paragraph (2) or (3)(iii)(B) of the “smaller reporting company” definition in Rule 12b-2. On the last business day of its second fiscal quarter of 2025, the issuer conducts its annual determination of smaller reporting company status and determines that it no longer qualifies as a smaller reporting company. When the issuer assesses its accelerated filer or large accelerated filer status, as of the end of fiscal year 2025, will this issuer become an accelerated filer or large accelerated filer?

Answer: No. When determining its accelerated filer or large accelerated filer status as of the end of its fiscal year, the issuer must

SEC Statement On Certain Protocol Staking Activities

October 28, 2025

On May 29, 2025, the SEC’s Division of Corporation Finance (“CorpFin”) issued a statement on certain protocol staking activities. In Particular, the statement addresses the staking of crypto assets that are intrinsically linked to the programmatic functioning of a public, permissionless network, and are used to participate in and/or earned for participating in such network’s consensus mechanism or otherwise used to maintain and/or earned for maintaining the technological operation and security of such network. The statement refers to proof-of-stake as “PoS” and the network as “PoS Networks.” The SEC previously issued a similar statement on proof-of-work mining activities – see HERE.

Protocol Staking

Networks rely on software programming (“protocols”) to reduce reliance on intermediaries, and which programming verifies transactions and provides settlement assurance to its users. Each protocol incorporates a “consensus mechanism” to enable unrelated computers on a network to agree on data and transactions on the network. Public, permissionless networks allow users to

NASDAQ Proposes To Modify Listing Standards For China Based Companies

October 21, 2025

On September 3, 2025, Nasdaq proposed to adopt additional listing criteria for companies primarily operating in China, including Hong Kong and Macau.

Background

Over the years U.S. capital markets regulators, including the SEC and Nasdaq, have been vocal about the risks in investing in China based companies due to poor disclosures and disclosure controls. In December 2020 the Holding Foreign Companies Accountable Act (“HFCA”) was adopted requiring foreign-owned issuers to certify that the PCAOB has been able to audit specified reports and inspect their audit firm within the last three years. If the PCAOB is unable to inspect the company’s public accounting firm for three consecutive years, the company’s securities are banned from trading on a national exchange. For my three part blog on the HFCA see HERE; HERE and HERE.

Despite the HFCA, the SEC has remained concerned about the quality of disclosures, including specific risks, involved with China based companies. Back in July 2023, the

Nasdaq Proposes To Accelerate Delisting For Companies That Fall Below Any Liquidity Standard And Have A Market Value Of Listed Securities Below $5 million

October 14, 2025

On September 3, 2025, Nasdaq proposed amendments to accelerate the suspension and delisting of a company that falls below any of the numeric listing requirements, including the bid price, market value of public float, equity, income and total assets/revenue requirements, and that has a Market Value of Listed Securities (“MVLS”) below $5 million. On the same day, Nasdaq proposed amendments to its liquidity listing standards for the Nasdaq Capital Market and Nasdaq Global Market to increase the minimum Market Value of Unrestricted Publicly Held Shares (“MVUPHS”) requirement for those companies listing under the net income standard from $5 million to $15 million (see HERE).

This follows a series of final and proposed rule amendments increasing liquidity standards and accelerating delisting processes for small cap listed companies including: (i) an April rule amendment requiring that MVUPHS can only be satisfied through IPO proceeds and that shares registered for resale may no longer be counted (see HERE); (ii) a recent

Nasdaq Proposes To Accelerate The Delisting Of $0.10 Stocks

October 7, 2025

Nasdaq Proposes To Increase Liquidity Requirements Under Net Income Listing Standard

September 30, 2025

On September 3, 2025, Nasdaq proposed amendments to its liquidity listing standards for the Nasdaq Capital Market and Nasdaq Global Market to increase the minimum Market Value of Unrestricted Publicly Held Shares (“MVUPHS”) requirement for those companies listing under the net income standard from $5 million to $15 million. This follows the April rule amendment requiring that MVUPHS can only be satisfied through IPO proceeds and that shares registered for resale may no longer be counted (see HERE). In addition to making it more difficult for small cap companies to complete a Nasdaq IPO, the proposed rule would eliminate the only material distinction and benefit to listing using the net income standard.

Background

To list its securities on Nasdaq, a company is required to meet: (a) certain initial quantitative and qualitative requirements and (b) certain continuing quantitative and qualitative requirements. The quantitative listing thresholds for initial listing are generally higher than for continued listing, thus helping to

SEC Spring 2025 Regulatory Agenda

September 23, 2025

The SEC has published its semi-annual Spring 2025 regulatory agenda (“Agenda”) and plans for rulemaking. The Agenda is published twice a year, and for several years I have blogged about each publication. Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.

The Agenda is broken down by (i) Prerule Stage; (ii) Proposed Rule Stage; (iii) Final Rule Stage; and (iv) Long-term Actions. The Prerule, Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. In what is the shortest Agenda I have seen, the number of items to be completed in a 12-month time frame is 23, down from 30 on the Fall 2024 Agenda

Rule 144 – A Deep Dive – Part 6 – Manner Of Sale & Form 144 Notice Filings

September 16, 2025

In this sixth and final installment of my series on Rule 144, I will continue discussing the various conditions for the use of the Rule covering manner of sale requirements and the filing of a Form 144 for affiliates. In the first installment, I provided a high-level review of Rule 144 – see HERE ; in the second, I discussed definitions including the impactful “affiliate” definition – see HERE; in the third I reviewed the current public information requirements – see HERE; in the fourth I covered holding periods – see HERE; and in the fifth I covered limitations on the amount of securities that can be sold – see HERE.

Conditions for Use of Rule 144

General

Rule 144 – A Deep Dive – Part 5 – Limitations On Amount Of Securities Sold

September 9, 2025

In this fifth installment of my series on Rule 144, I will continue discussing the various conditions for the use of the Rule, covering limitations on the amount of securities that may be sold. In the first installment, I provided a high-level review of Rule 144 – see HERE ; in the second, I discussed definitions including the impactful “affiliate” definition – see HERE; in the third I reviewed the current public information requirements – see HERE; and in the fourth I covered holding periods – see HERE.

Conditions for Use of Rule 144

General

Rule 144 provides certain conditions that must be met by selling affiliates and selling non-affiliates which conditions vary depending on whether the Issuer of the securities is a reporting or non-reporting company and whether the Issuer is or ever has been a shell company. The high-level Rule 144 requirements for non-affiliates include: (i) holding period; (ii) availability of current public information; and

Rule 144 – A Deep Dive – Part 4 – Holding Period

September 2, 2025

In this fourth installment of my series on Rule 144, I will continue discussing the various conditions for the use of the Rule, including the meaty holding period requirements. In the first installment, I provided a high-level review of Rule 144 – see HERE; in the second, I discussed definitions including the impactful “affiliate” definition – see HERE; and in the third I reviewed the current public information requirements – see HERE.

Conditions for Use of Rule 144

General

Rule 144 – A Deep Dive – Part 3 – Current Public Information

August 26, 2025

In this third installment of my series on Rule 144, I will begin discussing the various conditions for the use of the Rule, including the current public information requirement. In the first installment, I provided a high-level review of Rule 144 – see HERE and in the second, discussed definitions including the impactful “affiliate” definition – see HERE.

Conditions for Use of Rule 144

General

As set out in the first blog in this series, Rule 144 provides certain conditions that must be met by selling affiliates and selling non-affiliates which conditions vary depending on whether the Issuer of the securities is a reporting or non-reporting company and whether the Issuer or ever has been a shell company. The high-level Rule 144 requirements for non-affiliates include: (i) holding period; (ii) availability of current public information; and (iii) no shell status ineligibility. The high-level Rule 144 requirements for affiliates (i.e. holders of control securities) include: (i) holding

Rule 144 – A Deep Dive – Part 2 – Definitions

August 19, 2025

Last week I published a high-level review of Rule 144 – see HERE. This week, I will begin the deep dive discussion of the numerous intricacies of this very important rule, starting with definitions.

Rule 144 Definitions

Rule 144 only has four definitions, but there is a lot to discuss on each of these definitions.

Affiliate

Rule 144 sets forth different conditions for sellers that are “affiliates” or a person that has been an affiliate in the past 90 days then for those that are non-affiliates. Sales by affiliates always require that a company have current public information, are subject to volume limitations (the drip rules), are subject to manner of sale requirements (sales must be made through a broker-dealer) and require the filing of a Form 144. Sales by non-affiliates only require current public information when effectuated after six months but prior to a one year holding period and are never subject to the volume limitations,

Rule 144 – A Deep Dive – Part 1

August 12, 2025

It has been ten years since I summarized Rule 144 (see HERE), and at that time it was a very high level overview, not a deep dive into the numerous intricacies of the rules application. Rule 144 is likely the most oft used rule by founders, private investors, early investors, affiliates and insiders, and merger/reverse merger participants, and as such deserves some focus.

I will start this blog series with a high-level overview of Rule 144 and then unpack the numerous individual requirements in the following editions.

Rule 144 – Basic Overview

As I repeat again and again, every offer or sale of securities must either be registered or have an available exemption from registration. Rule 144 promulgated under the Securities Act of 1933 (“Securities Act”) sets forth certain requirements for the use of Section 4(a)(1) for the sale of restricted or control securities by an existing shareholder. Control securities are those securities held by an affiliate of

SEC Publishes CD&I On Legal Proceeding Disclosures

August 5, 2025

On June 20, 2025, the SEC revised two, and withdrew one, CD&I related to disclosures on legal proceedings.

Revised CD&I 105.01 states:

Question: Are costs anticipated to be incurred under the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601) (otherwise known as the “Superfund” law), pursuant to a remedial agreement entered into in the normal course of negotiation with the EPA, generally considered “sanctions” within Item 103(c)(3)(iii)?

Answer: No. Footnote 30 of Release No. 33-6835 (May 18, 1989) and the letter to Thomas A. Cole (Jan. 17, 1989) clarify that, while there are many ways a Superfund “potential monetary sanction” may be triggered, including the stipulated penalty clause in a remedial agreement, the costs anticipated to be incurred under Superfund, pursuant to a remedial agreement entered into in the normal course of negotiation with the EPA, generally are not “sanctions” within Item 103(c)(3)(iii).

Revised CD&I 105.03 states:

Question: Should a proceeding against an

SEC Publishes New CD&I On Schedule 13D-G

July 29, 2025

In October 2023, the SEC adopted final amendments to Sections 13(d) and 13(g) of the Exchange Act. To review the final amendments see HERE and HERE. In March 2025, the SEC published a few CD&I’s related to the new amendments (see HERE).

The amendments updated Sections 13(d), 13(g) and Regulation 13D-G to accelerate filing deadlines for both initial and amended reports; expand the timeframe within a business day in which filings may be timely made; clarify the Schedule 13D disclosure requirements with respect to derivative securities; and require that Schedule 13D and 13G filings be filed using XBRL.

On July 11, 2025, the SEC published 18 revised CD&Is on the filing of Schedules 13D and 13G. Many of the changes are clean-up, clarification and updates to align the guidance with the October 2023 amendments.

Section 13(d)

Two of the revised CD&I address Section 13(d) of the Exchange Act.

Revised CD&Is 101.01 and 103.01 confirm that when a company

SEC Publishes New CD&I On Compensation Clawbacks And De-SPAC C-Registrants

July 22, 2025

On April 11, 2025, the SEC published several updates to its compliance and disclosure interpretations (“CD&I”) related to compensation clawbacks and co-registrants in de-SPAC transactions.

De-SPAC Transactions

Under the new SPAC rules, a target company, or companies, are included as co-registrants on the S-4 (or other Securities Act registration statement) in association with the de-SPAC. Under Exchange Act rules, upon effectiveness of the S-4, each of the target co-registrants become separately subject to the Exchange Act reporting requirements. New C&DI 253.03 confirms that the SEC will not object if each target co-registrant files a Form 15, as long as they are wholly owned by the combined company and the combined company remains current in its Exchange Act reporting requirements.

For a review of the new de-SPAC rules see here – Part 1 – HERE; Part 2 – HERE; Part 3 – HERE; Part 4 – HERE; Part 5 – HERE;

Market Wrap-Up Q2 2025

July 15, 2025

This edition of my market recap covers the second quarter of 2025. For a review of November and December 2024 see HERE; for October 2024 see HERE; and for Q1 2025 see HERE.

Thirty-three small cap ($30,000,000 and under) IPOs priced in the second quarter of 2025 (20 in April, 5 in May and 8 in June) – a downtrend from Q1 2025. Below is a chart of relevant deal information for the second quarter IPOs.

Exchange	Offer Amount	Domestic/Foreign Issuer	Banker(s)

Nasdaq Global	$30,000,000	Foreign	Goldman Sachs (Asia) LLC, Citigroup, US Tiger Securities, CICC, Kingswood
Nasdaq Capital	$6,400,000	Foreign	D. Boral Capital
Nasdaq Capital	$5,000,000	Foreign	R.F. Lafferty & Co., Inc.
Nasdaq Capital	$7,200,000	Foreign	Craft Capital Management
NYSE MKT	$10,075,000	Foreign	Maxim Group, LLC
Nasdaq Capital	$6,000,000	Foreign	Dominari Securities, LLC; Revere Securities LLC
Nasdaq Capital	$7,000,000	Foreign	Craft Capital Management, LLC; Westpark Capital
Nasdaq Capital	$7,740,000	Domestic	The Benchmark Company; Axiom Capital Management,

SEC Officials Talk Tokenization

July 8, 2025

On May 12, 2025, SEC Chair Paul S. Atkins and Commissioner Mark T. Uyeda gave speeches at the crypto task force roundtable on tokenization.

Chair Atkins Speech

Techology is advancing such that securities are increasingly being moved from traditional databases (ledgers with the transfer agent, etc..) to blockchain based ledger systems. Atkins likens this change to the historical music industry which morphed from analog vinyl records to cassettes to digital software. The change in the music industry allowed streaming and an entirely new system of developing and listening to music.

Atkins notes that just as digitization revolutionized the music industry, the digitization (i.e. tokenization) of securities has the potential to “remodel aspects of the securities market by enabling entirely new methods of issuing, trading, owning, and using securities.” For example, the new technology will make the issuance of dividends (especially recurring dividends) automatic, allow for the trading of previously illiquid assets, and allow for the creation of new

NYSE Amends Listing Standards For Foreign Private Issuers And Listing Fees For All Issuers

July 1, 2025

In April the NYSE amended its listing fees for all issuers and in May 2025, amended the standards for foreign private issuers to meet the exchange’s minimum stockholder distribution requirements. The new rules were enacted a few weeks before the SEC published a concept release and request for comment related to foreign private issuers in general (which will be the subject of an upcoming blog).

NYSE Listed Company Rule 902.03 – Fees for Listed Equity Securities

Effective April 1, 2025, the NYSE amended Listed Company Rule 902.03 to reduce the listed company fees for the first five years following an initial listing. The amended rule provides that a company that lists on the exchange will only be charged the initial listing fee plus an annual fee calculated on an adjusted basis for any subsequent issuance or other corporate action (“Limited Fee Exemption Period”).

During the Limited Fee Exemption Period, an eligible company will not be charged any other listing fees

SEC Withdraws 14 Rule Proposals

June 24, 2025

On June 12, 2025, the SEC withdrew fourteen (14) rule proposals, backtracking many Biden-era regulations including several in the environmental, social and governance (ESG) arena. This move clears the slate for what should be a very different spring regulatory agenda, expected to be published in early July. Each of these rules were discussed to some extent in my last Regulatory Agenda update – which can be reviewed here – HERE.

Withdrawn Rule Proposals

Shareholder Proposals – Rule 14a-8

The SEC has withdrawn certain proposed amendments Exchange Act Rule 14a-8. The withdrawn rule proposal was first published in July 2022. Rule 14a-8 allows a qualifying shareholder to submit proposals that, subject to substantive and procedural requirements, must be included in the company’s proxy materials for annual and special meetings, and provides a method for companies to either accept or attempt to exclude such proposals. The rule has been subject to many changes, including via updated Staff Legal Bulletins, over the

Disclosures On Offerings And Registrations Of Securities In The Crypto Asset Markets

June 17, 2025

On April 10, 2025, the SEC Division of Corporation Finance (“CorpFin”) issued a statement on disclosurs in offerings and registrations of securities in the crypto asset markets. This is the third statement issued by CorpFin on various topics dealing with cryptocurrencies and digital assets in a matter of weeks. For a review of CorpFin’s statement on certain proof of work mining activities see HERE and on stablecoins, see HERE.

The statement is meant to give guidance related to specific disclosure topics when either registering crypto assets or when filing a registration statement for an issuer in the crypto asset business. The guidance cuts across all Regulation S-K disclosures whether in a Securities Act form (S-1; F-1; etc..) or an Exchange Act form (10-K; 20-F etc..).

Description of Business – Item 101 of Regulation S-K

Item 101 of Regulation S-K – Description of Business – requires an issuer to provide detailed background information material to understanding the general development

SEC Statement On Stablecoins

June 10, 2025

On April 4, 2025, the SEC’s Division of Corporation Finance (“CorpFin”) issued a statement on stablecoins. In Particular, the statement addresses stablecoins that are designed to maintain a stable value relative to the United States Dollar (“USD,”) on a one-for-one basis, can be redeemed for USD on a one-for-one basis (i.e., one stablecoin to one USD), and are backed by assets held in a reserve that are considered low-risk and readily liquid with a USD-value that meets or exceeds the redemption value of the stablecoins in circulation (“Covered Stablecoins”).

Stablecoins Generally

A stablecoin is a type of crypto asset designed to maintain a stable value relative to a reference asset, such as USD, another fiat currency, a commodity like gold, or a pool or basket of assets. Stablecoins usually track with the underlying asset on a one-to-one basis (for example, one stablecoin for $1 USD). Stablecoins can maintain their value in different ways, including through a set reserve

SEC Statement On Proof-Of-Work Mining Activities

June 3, 2025

On March 20, 2025, the SEC’s Division of Corporation Finance (“CorpFin”) issued a statement on certain proof-of-work mining activities. Illustrating CorpFin’s evolving understanding of the digital world, the statement drills down to a very specific aspect of the crypto mining industry.

The CorpFin statement “addresses the mining of crypto assets that are intrinsically linked to the programmatic functioning of a public, permissionless network, and are used to participate in and/or earned for participating in such network’s consensus mechanism or otherwise used to maintain and/or earned for maintaining the technological operation and security of such network.” In the statement, CorpFin refers to these mined crypto assets as “Covered Crypto Assets” and the mining as “Protocol Mining.”

Protocol Mining

Networks utilizing Protocol Mining are governed by computer code eliminating the need for designated trusted intermediaries. The programmed software enforces certain network rules, technical requirements, and rewards distributions. Public, permissionless networks allow anyone to participate in the network’s operation, including the validation

SEC Withdraws Statement On Broker Dealer Custody Of Digital Asset Securities

May 27, 2025

On May 15, 2025, the SEC Division of Trading and Markets and Office and FINRA’s Office of General Counsel withdrew their joint statement on broker dealer custody of digital asset securities. The original joint statement had been issued on July 8, 2019 (see HERE). This original statement has oft been thought of as the reason that broker dealers have not (could not) adopt any broad ranging policies or procedures related to digital assets.

The withdrawal of the joint statement, together with the slew of other recent activity from the SEC related to digital assets, (see HERE for example) is an important step towards more widespread adoption of digital asset trading, allowing retail investors to aggregate their investments with their trusted broker dealer advisors.

Refresher On Original Joint Statement/Concerns

Broker-dealers that hold funds and securities must comply with Exchange Act Rule 15c3-3 (the “Customer Protection Rule”), which generally requires the broker to maintain physical possession or control over

New Guidance On Rule 14a-8 Shareholder Proposals And No Action Letter Process

May 20, 2025

On February 12, 2025, shortly after the inauguration, the SEC Division of Corporation Finance (“Corp Fin”) issued Staff Legal Bulletin 14M (“SLB 14M”) rescinding SLB 14L which had in turn rescinded prior SLBs 14I, 14J and 14K. As an aside, SLB 14L was issued under then new Chair Gary Gensler in 2021 following Biden’s election, and the prior three SLB’s had been issued under then Chair Jay Clayton, following President Trump’s first election. For more on SLB 14L see HERE.

New SLB 14M provides more of a middle ground to the prior 14L which had been designed to make it easier for environmental, social and governance (ESG) advocates to include their various proposals in company proxy materials.

Background – Rule 14a-8

The regulation of corporate law rests primarily within the power and authority of the states. However, for public companies, the federal government imposes various corporate law mandates including those related to matters of corporate governance. While state law

Delaware Reworks General Corporation Law

May 13, 2025

On March 25, 2025, Delaware enacted sweeping changes to the Delaware General Corporation Law (“DGCL”) to provide certainty to key areas of Delaware corporate law. The changes are expected to reduce the tide of redomestications to other states and reduce litigation risks for corporations and their boards of directors. The key changes include new safe harbor protections for one or more directors, officers, or controlling shareholders/groups, from liability where they may not be independent in a transaction and changes to stockholders’ rights to inspect books and records.

Related Party Liability Protections

Section 144 of the DGCL relates to interested directors, officers and controlling stockholder transactions. In essence, Section 144 provides a safe harbor against liability claims for transactions between a corporation and its officers, directors, or controlling stockholders where conflicts, such as a financial interest, exist. Section 144 prevents a transaction from being declared void or voidable solely due to the conflict of interest, as long as certain conditions

SEC Publishes CD&I On Mergers And Acquisitions, Form S-4 And Tender Offers

May 6, 2025

On March 6, 2025, the SEC published several updates to its compliance and disclosure interpretations (“CD&I”) related to mergers and acquisitions, Form S-4 and tender offers.

Rule 145(a)/Form S-4

Revised CD&Is 239.13 and 225.10 address the circumstances upon which seeking commitments for favorable votes, in advance of a merger/acquisition transaction, would be deemed an “offer or sale” of securities under Section 5, requiring either registration or an exemption from registration by the soliciting party.

Acquiring companies often seek management and principal shareholder commitments to vote in favor of a transaction as part of the negotiations associated with a merger/acquisition prior to soliciting such favorable votes from the shareholders at large such as by filing a Form S-4. The SEC recognizes that by executing these agreements, those management and shareholders have made investment decisions, prior to the transaction being presented to non-affiliate shareholders, in violation of Rule 145(a). However, the SEC also recognizes the legitimate reasons an acquiring company

SEC Publishes CD&I On Form S-3, Regulation S-K, Form 20-F, And Section 13

April 29, 2025

On March 20, 2025, the SEC published several updates to its compliance and disclosure interpretations (“CD&I”) related to Forms S-3 and 20-F, and Regulation S-K. The new CD&I importantly allow all issuers, not just well-known seasoned issuers (“WKSIs”) to go effective on Form S-3 registration statements between the filing of a Form 10-K and the filing of the proxy statement containing Form 10-K Part III disclosures.

Earlier, on February 11, 2025, the SEC published one revised and one new CD&I related to Section 13 filings on Schedules 13D and 13G.

Form S-3/Securities Act Rules

Revised CD&Is 114.05 and 198.05 confirm that a Form S-3 ASR and a non-automatically effective Form S-3 may be filed and declared effective after a company files its Form 10-K but prior to filing its Part III information in either a proxy statement or amended Form 10-K. However, the SEC notes that companies are responsible for ensuring that any prospectus used in connection with

Market Wrap-Up – First Quarter 2025

April 22, 2025

This edition of my market recap covers the first quarter of 2025. For a review of November and December 2024 see HERE and for October 2024 see HERE.

Forty-two small cap ($30,000,000 and under) IPOs priced in the first quarter of 2025 (13 in January, 15 in February and 14 in March) – a large uptick from 2024. Below is a chart of relevant deal information for the first quarter IPOs.

Exchange	Offer Amount	Domestic/Foreign Issuer	Banker(s)

Nasdaq Capital	$8,000,000	Foreign	AC Sunshine Securities, LLC
Nasdaq Capital	$6,000,000	Foreign	Kingswood Capital Partners, LLC
Nasdaq Capital	$5,000,000	Foreign	Craft Capital Management, LLC and Boustead Securities, LLC
Nasdaq Capital	$7,000,000	Foreign	Benjamin Securities, Inc. and Prime Number Capital, LLC
Nasdaq Capital	$8,400,000	Foreign	R.F. Lafferty & Co., Inc.
Nasdaq Capital	$5,614,740	Foreign	Bancroft Capital, LLC and Eddid Securities USA
Nasdaq Capital	$7,000,000	Foreign	Benjamin Securities, Inc. and Prime Number Capital, LLC
NYSE MKT	$10,000,000	Domestic	Alliance Global Partners
Nasdaq Capital

SEC Publishes CD&I On Exempt Offerings; Accredited Investor Guidance – Part 2

April 15, 2025

On March 12, 2025, the SEC published several updates to its compliance and disclosure interpretations (“CD&I”) related to exempt offerings. Two of the new C&DI clarify acceptable processes for verifying accredited investor status in a Rule 506(c) offering. On the same day the SEC issued no-action relief providing further detail on affirming accredited investor status. Part 1 of this blog series discussed the two rule 506(c) C&DI and no action letter – see HERE. This Part 2 will continue a review of the remaining substantive CD&I.

Confidential Filing of Form 1-A

Modified CD&I question 182.01 confirms that when a confidentially filed Form 1-A is made public by choosing “Disseminate Draft Offering Statement” in the EDGAR database, it will have satisfied the requirements to make prior confidential information public. The prior CD&I on this topic required an issuer to file, as an exhibit to its public Form 1-A, any related non-public correspondence. The SEC will now undertake to make

SEC Publishes CD&I On Exempt Offerings; Accredited Investor Guidance – Part 1

April 8, 2025

On March 12, 2025, the SEC published twenty-four new or revised compliance and disclosure interpretations (“CD&I”) related to exempt offerings. Two of the new C&DI clarify acceptable processes for verifying accredited investor status in a Rule 506(c) offering. On the same day the SEC issued no-action relief providing further detail on affirming accredited investor status. The new guidance should make the use of Rule 506(c) offerings much easier and more palatable. This blog will address the C&DI directed to Rule 506(c) and the no-action letter, and Part 2 will unpack the rest. I’ve included a refresher on Rule 506(c) at the end of this blog.

New C&DI

Question 256.35 asks “[I]f an issuer does not satisfy any of the verification safe harbors in Rule 506(c)(2)(ii), are there other methods an issuer can use that will satisfy the requirement to take reasonable steps to verify accredited investor status?”

Answering in the affirmative, the SEC confirms that the verification methods listed in

Crypto Industry Gets A Second Chance

April 1, 2025

The last time I substantively wrote about cryptocurrencies and the crypto industry was in April 2023, when the SEC was firmly hostile against the industry and a slew of negative events (FTX collapse, etc..) pretty well eliminated crypto as an active element in the capital markets (see HERE). That has changed!

Here is a recap of the newly regenerated crypto capital markets initiatives:

Digital Asset Executive Order

On January 23, 2025, President Trump signed an executive order entitled “Strengthening American Leadership in Digital Financial Technology” supporting the growth of the digital asset industry in the U.S. The order specifically:

Protects and promotes the ability of individual citizens and private-sector entities to access and use open blockchain including the ability to develop and deploy software to participate in mining and validating crypto assets;
Allow individual citizens and private-sector entities to self-custody digital assets;
Promotes and protects the U.S. dollar through the development and growth of dollar backed stablecoins;

SEC Further Expands Ability To File Confidential Registration Statements

March 25, 2025

The SEC’s Division of Corporation Finance has expanded the ability to file non-public confidential registration statements to include all registration statements.

In 2012, the JOBS Act created a path for emerging growth companies to file draft registration statements (DRS) on a confidential basis when completing an initial public offering. In 2017 the Division of Corporation Finance expanded the DRS filing option to include all Section 12(b) Exchange Act registration statements (but not 12(g) registrations), all registration statements for initial public offerings, and follow on offerings completed within 12 months of an initial public offering, for all class of issuers. See – HERE.

On March 3, 2025, the Division of Corporation Finance announced that it has further expanded the ability to utilize a DRS filing to include:

Initial registrations under the Exchange Act, including both Sections 12(b) and 12(g) including Forms 8-A, 10, 20-F and 40-F;
All Securities Act of 1933 (Securities Act) registration statements regardless of the amount of

Widespread “Dealer” Litigation Is Almost Over!

March 18, 2025

In August 2024, then SEC Commissioner Mark T. Uyeda made a public statement against the rampant enforcement proceedings against small cap investors claiming violations of the dealer registration requirements (see HERE). Fast forward to today, now Chair of the SEC, Mr. Uyeda, is sticking by his contentions and finally, after eight long years of numerous enforcement proceedings, is directing the SEC to roll back its position.

What Happened

This week, the SEC enforcement division entered into two joint motions halting ongoing litigation claiming violations of the dealer registration rules. The U.S. District Court for the District of Massachusetts entered an order in the case involving Auctus Fund Management staying the case while the parties wrap up an agreement to end the litigation. Under the agreement Auctus will not seek attorney fees from the government or pursue a review of the enforcement action.

In the filing, Auctus said “[T]he parties have reached an agreement in principle to dismiss this

SEC Chair Uyeda Talks SEC Priorities

March 11, 2025

Just a few weeks after SEC Commissioner Hester Peirce gave some insight into the SEC’s priorities (see HERE), acting SEC Chair Mark Uyeda got more granular on what we can expect under his regime. Commissioner Uyeda drilled down on particular SEC goals while giving a speech at the Florida Bar’s Annual Federal Securities Institute and M&A Conference.

The overarching goal of the SEC over the next few years will be to foster innovation, job creation and economic growth by maintaining cost effective regulations throughout a business’s life cycle. To accomplish these goals, the SEC intends to “return normalcy” to the SEC by being cognizant of its legal authority, policy priorities and enforcement initiatives, all of which have gone awry over the last few years.

Commissioner Uyeda highlights some of the actions already taken to facilitate these goals, including rescinding Staff Legal Bulletin 14 related to shareholder proposals and proxy statements (for more on Staff Legal Bulletin 14 see

Commissioner Peirce Gives A Sneak Peak At SEC Priorities

March 4, 2025

At the end of January 2025, SEC Commissioner Hester Peirce, who finally is not on an island alone within the SEC top brass, gave a speech at the Northwestern Securities Law Institute giving some insight into what we can expect from the SEC under the new administration.

Commissioner Peirce has been vocal over the years about her disdain for bringing political and social issues into SEC reporting and compliance management for public companies, however now, working with like-minded executives, she has solid ideas for a path forward. First and foremost, a public company should have the goal of maximizing value for its shareholders as a group. Unfortunately, in today’s world, public companies are often forced to answer to activists, non-shareholder “stakeholders” and the like, forcing executives to utilize company resources to further these groups (or individual’s) favorite cause. Commissioner Peirce notes that “[D]irectors and executive officers serve shareholders and society best by keeping the companies they guide focused on

SEC’s Fall 2024 Flex Regulatory Agenda

February 25, 2025

The SEC has published its semi-annual Fall 2024 regulatory agenda (“Agenda”) and plans for rulemaking. The Agenda is published twice a year, and for several years I have blogged about each publication. Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.

The Agenda is broken down by (i) Proposed Rule Stage; (ii) Final Rule Stage; and (iii) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to be completed in a 12-month time frame is 30, down from 34 on the Spring 2024 Agenda and 43 on the Fall 2023 Agenda. Many in the industry believe the

Climate Disclosure Rules On The Way Out

February 18, 2025

On February 11, 2025 SEC Chairman Mark T. Uyeda issued a statement on the Enhancement and Standardization of Climate-Related Disclosure for Investors rule (“Climate Disclosure Rule”) adopted by the SEC on March 6, 2024 and later stayed as a result of ongoing litigation.

Commissioner Uyeda reiterated both he and Commissioner Peirce’s consistent view that the current disclosure rules are sufficient to cover any material climate related disclosures. Furthermore, the Climate Disclosure Rule lacks statutory authority, SEC expertise and goes beyond the SEC’s arena of capital market regulation.

Commissioner Uyeda points out (and I whole-heartedly agree) that the Climate Disclosure Rule would require a large volume of financially immaterial information overstepping the SEC’s authority.

The Rule is currently preparing for oral argument in front of the Eighth Circuit based on briefs submitted by the prior administration. Commissioner Uyeda has instructed the SEC litigation team to inform the Court that the SEC’s previously submitted briefs do not reflect the SEC’s

NASDAQ Finalizes Amendments To Accelerate Delisting Process

February 11, 2025

On January 17, 2025 the SEC approved Nasdaq’s rule change to accelerate the delisting process for companies that fail to regain compliance with the minimum bid price requirements following a second compliance period and for securities that have had a reverse stock split over the prior one-year period. The final rule was passed as last submitted by Nasdaq, though in between the SEC required substantial additional analysis delaying the process on 3 occassions.

These rule changes follow other recent rule changes meant to reduce the number of ultra micro-cap companies trading on the national exchange and tighten up compliance for those that do meet the standards. In October 2024, Nasdaq amended Rule 5810(c)(3)(A) to allow for an accelerated delisting process where a listed company uses a reverse split to regain compliance with the bid price requirement for continued listing, but that as a result of the reverse split, the company falls below other listing standards, such as the minimum

NYSE Amends Listing Standards Related To Reverse Splits To Meet Minimum Price

February 4, 2025

On January 15, 2025, the SEC approved amendments to NYSE Listed Company Manual Rule 802.01C to allow for an accelerated delisting process where a listed company uses a reverse split to regain compliance with the bid price requirement for continued listing, but that as a result of the reverse split, the company falls below other listing standards, such as the minimum number of round lot holders, or minimum number of shares in the publicly held float. In October 2024, the SEC approved a similar rule change for Nasdaq – see HERE.

The SEC also approved amendments to Rule 802.01C such that: (i) if a listed company has effected a reverse stock split over the prior one-year period; or (ii) has effected one or more reverse stock splits over the prior two year period with a cumulative ratio of 200:1 or more, the company shall not be eligible for any compliance period and will face immediate suspension and delisting.

Background

Market Wrap Up – November and December 2024

January 28, 2025

As promised, I am going to provide regular market wrap-ups for the IPO market as we move forward with the next administration and chapter for our U.S. capital markets. This edition covers November and December 2024. For a review of the Market Wrap-Up for October 2024 see HERE.

Nine small cap ($30,000,000 and under) IPOs priced in November 2024 and 12 in December 2024 (compared to 19 in October; 12 in September; 8 in August; 8 in July; 3 in June; 5 in May; 12 in April; 6 in March; 6 in February; and 8 in January). Below is a chart of relevant deal information for the November and December IPOs. In October I only included deals up to $25,000,000 but raised the cap to $30,000,000. Normally, I would include all deals under $50,000,000 in this category, but the deal sizes remain very low. As deal sizes return to pre 2022 normal levels, I will continue to

SEC Enforcement Actions For Late Form D Filings

January 21, 2025

In a first, the SEC settled three enforcement actions on December 20, 2024, for failing to timely file a Form D in connection with private offerings. The three companies included one private fund and two private operating businesses.

The SEC enforcement actions were solely related to a violation of Rule 503 (as described below) and did not include any charges of fraud or other nefarious activity. As a result of the settlements each of these companies are prohibited from relying on Regulation D in the future, unless specifically granted a waiver by the SEC.

In its release, the SEC stated that the SEC relies on Form D filings to assess the scope of the Regulation D market and whether the market is balancing the need for investor protection and the furtherance of capital formation, especially for smaller businesses. The SEC also relies on Form D to monitor compliance with the requirements of Regulation D. Likewise, state regulators rely on

NASDAQ Proposes Amendment To Liquidity Listing Standard

January 14, 2025

On December 12, 2024, Nasdaq proposed an amendment to its liquidity listing standards for the Nasdaq Capital Market and Nasdaq Global Market such that the market value of unrestricted publicly held shares requirement could only be satisfied from the proceeds of the initial public offering. That is, Nasdaq would no longer count shares registered for re-sale by existing shareholders towards satisfying this listing standard. Nasdaq is also proposing to make similar changes affecting companies the uplist onto the Nasdaq from OTC Markets.

To list its securities on Nasdaq Capital Market or Nasdaq Global Market, a company is required to meet: (a) certain initial quantitative and qualitative requirements and (b) certain continuing quantitative and qualitative requirements. The quantitative listing thresholds for initial listing are generally higher than for continued listing, thus helping to ensure that companies have reached a sufficient level of maturity prior to listing. NASDAQ also requires listed companies to meet stringent corporate governance standards.

Listing

Court Issues Nationwide Injunction on Corporate Transparency Act

January 7, 2025

On December 3, 2024, in what was not at all surprising, a Texas court issued a preliminary injunction blocking enforcement and staying the compliance date of the Corporate Transparency Act (CTA). The Court found that the CTA is unconstitutional as outside of Congress’s power.

A full discussion of the CTA is included below. The Texas court found that the CTA represents a federal attempt to monitor companies created under state law and eliminates the corporate anonymity feature designed by states charged with regulating corporate formation – both in violation of the U.S. Constitution and its explicit separation of powers.

The court’s opinion is strongly written, determining that the government could not justify the constitutionality of the law, regardless of every attempt. In particular, the Plaintiff’s contend that CTA violates: (i) the Ninth and Tenth Amendments by intruding on State’s rights; (ii) the First Amendment by compelling speech and burdening individuals’ rights of association; and (iii) the Fourth Amendment by

Registration Statement Undertakings

December 31, 2024

Every four years we go through a regulatory dead zone as the SEC prepares for a change in administration with new priorities, new interpretations, and a whole new rulemaking agenda, including the potential unwinding of the prior administration’s rules. While waiting for the significant changes to come, I’ll continue to dive into the endless detailed topics of disclosure and other requirements of the federal securities laws. This week I’ll cover the ongoing requirements associated with an effective registration statement – known as “Undertakings.”

Every registration statement filed pursuant to the Securities Act of 1933 (“Securities Act”), whether by a domestic company or foreign private issuer (“FPI”) requires the registrant to include a statement as to certain affirmative undertakings by such company. Item 512 of Regulation S-K sets forth the undertakings, and registration statements on Forms S-1, S-3, F-1 and F-3 must include all items set forth in Item 512. Registration Statements on Form S-8 need only include the undertakings in

Internet Availability of Proxy Materials

December 24, 2024

A few weeks ago, I wrote about shareholder meeting timelines, which included a brief discussion as to how a company can increase, or decrease, a meeting timeline by delivering proxy materials by making them available on the internet – see HERE. This week I am going to drill down on Rule 14a-16 including disclosure obligation and technical requirements for utilizing “Internet Availability of Proxy Materials.”

Rule 14a-16 – Internet Availability of Proxy Materials

Rule 14a-16 governs a company’s ability to make proxy materials available over the internet, as opposed to printing and mailing, which can be expensive and time consuming. Rule 14a-16 provides that when a company is making proxy materials available over the internet, it must mail a notice to all security holders a minimum of 40 calendar days before the meeting, or if there is no meeting, before the consents or authorizations may be used to affect the consented upon corporate action.

Companies may not

Court Overrules Nasdaq Board Diversity Rule

December 17, 2024

The court has come to the rescue once again! On December 11, 2024, the 5^th Circuit held that the SEC exceeded its authority in approving Nasdaq’s board diversity rule finding the rule was far removed from the purposes of the Securities Exchange Act’s regulatory regime. Rumor has it that the Nasdaq does not intend to appeal, meaning the board diversity rule may be DOA.

Background

On August 6, 2021, the SEC approved Nasdaq’s board diversity listing standards proposal adding new listing Rule 5606(a) (see HERE).

Court Strikes Down Recent Changes To Definition Of A Dealer

December 10, 2024

In a big win for hedge funds and the crypto industry, on November 21, 2024, a Texas federal judge overturned the recent SEC rule that expanded the definition of “dealer” under the Exchange Act. For a review of the final rule see HERE.

The amendments were intended to require certain proprietary or principal traders and liquidity providers to register as either a dealer or government securities dealer as applicable. The rules amended Exchange Act Rules 5a5-4 and 3a44-2 to enhance the definition of “as part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Exchange Act.

In a legal challenge, the Crypto Freedom Alliance of Texas and Blockchain Association sued the SEC claiming that the rule amendments radically expanded the definition of a “dealer” in a way that could encompass digital asset industry participants (and hedge funds) that do not engage in any conduct resembling “dealing” as that term has ever been

Understanding the Shareholder Meeting Timeline

December 3, 2024

Proxy season is fast approaching. Whether it is for an annual meeting or special shareholder meeting, clients are always asking how quickly they can schedule a shareholder meeting, or where action is taken by consent, how quickly the company can effectuate such consented upon action. The answer depends on several factors, including whether the meeting is a special or annual meeting, if annual, whether there are any “non-routine” items on the agenda, and whether the company intends to mail out all proxy materials or just a notice of internet availability of such materials. Although I have written about the proxy rules many times, this is the first blog where I drill down and focus on the timeline.

Introducing The OTCID

November 26, 2024

OTC Markets has announced the launch of a new market tier. Effective July 2025, Pink Current will become the OTCID, a basic reporting market requiring companies to meet minimal current information disclosures and provide management certifications. OTC Markets will still maintain the Pink Limited and Expert Market tiers for companies that do not qualify for the OTCID. OTC Markets has not yet published all of the requirements for the OTCID, but I suspect they will be similar to the existing Pink Current, with the addition of the management certifications.

I support the change and new branding opportunity. OTC Markets have struggled in recent years, primarily as a result of an inability for OTC Markets traded companies to obtain institutional financing or underwriter/placement agent banker support. Forever the optimist, the change could be just what is needed to revitalize the OTC Markets as a venture market place for U.S. micro-cap companies.

OTCID

Currently, the OTC Markets divides issuers into

Nasdaq Amends Bid Price Compliance Rules to Accelerate Delisting Process

November 19, 2024

On October 7, 2024 the SEC approved amendments to Nasdaq Rule 5810(c)(3)(A) to allow for an accelerated delisting process where a listed company uses a reverse split to regain compliance with the bid price requirement for continued listing, but that as a result of the reverse split, the company falls below other listing standards, such as the minimum number of round lot holders, or minimum number of shares in the publicly held float. This new rule is separate from another pending rule change that would accelerate the delisting process for companies that fail to regain compliance with the minimum bid price requirements following a second compliance period and for securities that have had a reverse stock split over the prior one-year period.

Market Wrap-Up

November 12, 2024

For the first time since December 2022, the markets are seeing an uptick in completed small cap initial public offerings (IPOs). My clients are always asking me about the deals that are getting done, which prompted this blog, the first in what will be regular periodic market roundups.

Nineteen small cap (under $25,000,000) IPOs priced in October compared to 12 in September; 8 in August; 8 in July; 3 in June; 5 in May; 12 in April; 6 in March; 6 in February; and 8 in January. Below is a chart of relevant deal information for the 19 October IPOs. Normally, I would include all deals under $50,000,000 in this category, but the deal sizes remain very low. As deal sizes return to pre 2022 normal levels, I will adjust by market recaps upward accordingly.

Exchange	Offer Amount	Domestic/Foreign Issuer	Banker(s)

Nasdaq Capital	$4,199,995	Foreign	Aegis Capital Corp.
Nasdaq Capital	$5,200,000	Foreign	The Benchmark Company
Nasdaq Capital	$7,000,000

Nasdaq and NYSE Clawback Rules

November 5, 2024

On October 26, 2022, the SEC adopted final rules on listing standards for the recovery of erroneously awarded incentive-based executive compensation (“Clawback Rules”) (see HERE). The Clawback Rules implement Section 954 of the Dodd-Frank Act and require that national securities exchanges require disclosure of policies regarding and mandating the clawback of compensation under certain circumstances as a listing qualification.

I’ve written about the Clawback Rules a few times, including SEC guidance (see HERE) but have not detailed the final Nasdaq and NYSE rules, until now.

Nasdaq Clawback Rules

Nasdaq listing Rule 5608 sets forth the listing requirements related to the recovery of erroneously awarded compensation. The language conforms closely to Rule 10D-1 and the SEC release, including explanations on materiality and “litter” restatements that are material based on facts and circumstances and existing judicial and administrative interpretations.

As allowed by Rule 10D-1, the Nasdaq rule provides that a company would not be required to pursue

SEC Adopts New EDGAR Rules

October 29, 2024

A year after publishing proposed rules, on September 27, 2024, the SEC adopted rule and form amendments to the EDGAR system dubbing the updates as EDGAR Next (for a review of the proposed rules see HERE). The rule changes are meant to enhance security and improve access to the EDGAR system. My view is that will accomplish the former and not the latter. The changes require EDGAR filers to authorize identified individuals who are responsible for managing the filers’ EDGAR accounts. Individuals acting on behalf of filers on EDGAR will need individual account credentials to access those EDGAR accounts and make filings.

The new rules amend Rules 10 and 11 of Regulation S-T and amend Form ID. Only the identified authorized individuals will be able to access a filer’s EDGAR account. The authorized individual(s) need not be an employee of the filer, but the filer needs to provide a notarized power of attorney to appoint someone.

Through the

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 3

October 22, 2024

Although many years ago I wrote a high-level review of foreign private issuer (FPI) registration and ongoing disclosure obligations, I have not drilled down on the subject until now. While I’m at it, in the multi part blog series, I will cover the Nasdaq corporate governance requirements for listed FPIs.

In Part 1 in this series, I covered the definition of a foreign private issuer (FPI), registration and ongoing reporting requirements – see HERE. In Part 2 I covered Rules 801 and 802 of the Securities Act, which give FPI’s registration exemptions for rights offerings and exchange offers, respectively – see HERE. In this Part 3, I discuss the Nasdaq corporate governance requirements for FPIs.

Nasdaq Corporate Governance

In addition to its quantitative listing standards, Nasdaq imposes certain corporate governance and board composition requirements as part of its listing standards. FPIs, however, are exempt from numerous of these standards and may instead opt to comply with home

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 2

October 15, 2024

In Part 1 in this series, I covered the definition of a foreign private issuer (FPI), registration and ongoing reporting requirements – see HERE. In this Part 2 I will cover Rules 801 and 802 of the Securities Act, which give FPI’s registration exemptions for rights offerings and exchange offers, respectively.

Rule 801 – Exemption in Connection with Rights Offerings

Rule 801 provides an exemption from registration for certain rights offerings by FPIs. A “rights offering” is defined for these purposes as the sale for cash of equity securities in which existing securities holders of a particular class (including holders of ADRs) are

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 1

October 8, 2024

Definition of a Foreign Private Issuer

Both the Securities Act of 1933, as amended (“Securities Act”) and the Securities Exchange Act of 1934, as amended (“Exchange Act”) contain definitions of a “foreign private issuer” (“FPI). Generally, if a company does not meet the definition of an FPI, it is subject to the same registration and reporting requirements as any U.S. company.

The determination of FPI status is not just dependent on the country of domicile, though a U.S. company can never qualify regardless of the location of its operations, assets, management and subsidiaries. There are generally two tests of qualification as a foreign private issuer, as follows:

Related Party Transactions – Foreign Private Issuers

October 1, 2024

About a year ago, the SEC brought several enforcement proceedings targeting shortcomings in related party transactions disclosures, including by Lyft. The action provides a reminder that Item 404(a) is broadly construed and reminded me that related party transactions are a topic worthy of blogging about. Last week I published a blog on related party transaction disclosures for domestic companies (see HERE) and this week covers foreign private issuers (FPIs).

Item 404 of Regulation S-K sets forth the related party disclosure obligations for domestic companies that must be included in various periodic reports and registration statements under the Securities Exchange Act of 1934 (“Exchange Act”) and in registration statements under the Securities Act of 1933 (“Securities Act”). Foreign private issuers can comply with Item 404 by providing the information required by Item 7.B of Form 20-F plus any additional information required by its home.

Item 7.B of Form 20-F

General Disclosure

Item 7.B of Form 20-F requires certain disclosure

Related Party Transactions – Domestic Companies

September 24, 2024

About a year ago, the SEC brought several enforcement proceedings targeting shortcomings in related party transactions disclosures, including by Lyft. The action provides a reminder that Item 404(a) is broadly construed to require a description of transactions since the beginning of the registrant’s last fiscal year in excess of $120,000 in which it was or is to be a participant, and in which a related person had or will have a direct or indirect material interest. When the cases came out, I added related party transactions to my (very long) list of topics worthy of a blog and now is the time.

Terminating Reporting Obligations In An Abandoned IPO

September 17, 2024

It has been a tough few years for small cap (and all) initial public offerings (IPOs). Although I have been seeing a small up-tick in priced deals recently, we are not yet near the highs of 2020 – 2022. Among the various challenges facing IPO issuers, lengthy Nasdaq/NYSE review periods and trouble building out sufficient allocations have been especially difficult resulting in a lengthier IPO process than expected.
An increased IPO timeline adds significant expense to the process. A registration statement cannot go effective with stale financial statement. Financial statements for domestic issuers go stale every 135 days requiring either a new quarterly review or annual audit and an amended registration statement. Likewise, financial statements for foreign private issuers (FPIs) go stale every nine months. When an issuer is nearing the end date for financial statements, and it appears that a closing of an IPO may be imminent, they sometimes choose to go effective and rely on Rule 430A.

NYSE Approves Change To Delist Companies That Change Primary Business

September 10, 2024

On July 24, 2024, the SEC approved an NYSE rule change to allow for the delisting of companies that change their primary business.

NYSE Continued Listing Standards

As I wrote about in October 2023, the NYSE continued listing requirements as set forth in the Listed Company Manual section 802.01 include (pre-rule change) (see HERE):

Distribution of Capital Stock: (i) total stockholders of 400; or (ii) total stockholders of 1,200 and an average monthly trading volume of less than 100,000 shares; or (iii) total non-affiliated publicly held shares of 600,000.
Market Value: (i) average global market capitalization of less than $50 mil and stockholders equity is less than $50 mil for 30 consecutive trading days.
Disposal of Assets – Reduction of Operations: The NYSE will consider a suspension or delisting if: (i) the company has sold or otherwise disposed of its principal operating assets or has ceased to be an operating company or has discontinued a substantial portion of its

Supreme Court Strikes Down Chevron Deference

September 3, 2024

In June 2024, the U.S. Supreme Court struck down a decades old judicial precedent that provided guidance as to when judges could defer to a federal agencies’ interpretation of a law. The original precedent derived from the 1984 case Chevron v. Natural Resources Defense Council, which gave deference to federal agencies’ interpretations of a law over the judicial system. Although Chevron applied to all federal agencies, in light of a slew of recent litigation by and against the SEC related to rule making and interpretations (for example related to who is a “dealer” – see HERE) I decided to cover it in a blog.

Chevron v. Natural Resources Defense Council

Chevron v. Natural Resources Defense Council (“Chevron”) held that a government agency must conform to any clear legislative statements when interpreting and applying a law, but courts will give the agency deference in ambiguous situations if its interpretation is reasonable. In other words, if

Commissioner Uyeda’s Statement On Dealer Litigation

August 27, 2024

On August 19, 2024, SEC Commissioner Mark T. Uyeda published a statement regarding one of the numerous defendants in SEC initiated enforcement proceedings claiming unlicensed dealer activity. The statement resonates with the sentiments of most of my colleagues, peers and clients.

Background

In November 2017 the SEC shocked the industry when it filed an action against Microcap Equity Group, LLC and its principal alleging that its investing activity required licensing as a dealer under Section 15(a) of the Exchange Act. Since that time, the SEC has filed numerous additional cases with the sole allegation being that the investor acted as an unregistered dealer. In each case, the investor entity purchased convertible promissory notes from micro-cap OTC Markets issuers (or other existing note holders), which, after the applicable Rule 144 holding period, were converted into shares of common stock and sold on the open market. As the securities were generally low priced, the conversions resulted in large quantities of additional

NASDAQ Amends Rule 5210 – Listing Prerequisites

August 20, 2024

In March 2024, the Nasdaq Stock Market quietly amended Rule 5210 requiring that all lead underwriters on an IPO must be Nasdaq members or limited underwriting members as a prerequisite to applying for a listing. The new rules also created the “limited underwriting member” class and accompanying rules applicable to the group and its associates including eligibility, application process and ongoing requirements. Although the amendment garnered little attention at the time, now that it has become effective, it is loudly impacting the small cap IPO market.

Rule 5210 – Background

Nasdaq Rule 5210 sets forth the prerequisites for a company to apply for a Nasdaq listing. Until October 2023, the Rule had 12 subparts with new Rule 5210(l) being added in October 2023 and new Rule 5210(m) being added in March 2024. Rule 5210(l) requires that any company listing on Nasdaq comply with the recovery of erroneously awarded compensation (Clawback) rules. For more on the Clawback rules see HERE.

The SEC’S Spring 2024 Flex Regulatory Agenda

August 13, 2024

On July 9, 2024, the SEC published its semi-annual Spring 2024 regulatory agenda (“Agenda”) and plans for rulemaking. The Agenda is published twice a year, and for several years I have blogged about each publication. Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.

The Agenda is broken down by (i) Proposed Rule Stage; (ii) Final Rule Stage; and (iii) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to be completed in a 12-month time frame is 34, down from 43 on the Fall 2023 Agenda and a whopping 55 on the Spring 2023 Agenda. Many

SEC Division Of Corporation Finance Statement On Disclosure Review

August 6, 2024

On June 24, 2024, Erik Gerding the Director of the SEC’s Division of Corporation Finance made a statement regarding the SEC’s state of disclosure review. In fiscal year 2023 and continuing into 2024, the top areas of review and comment by the SEC were China-related matters, artificial intelligence, non-GAAP disclosures, management’s discussion and analysis, revenue recognition and financial statement presentation. In addition, disruptions in the banking industry, cybersecurity risks, the impact of inflation and disclosure related to or as a result of newly adopted rules (such as pay versus performance) are gaining attention by SEC review teams.

The director’s statement gives some insight into the SEC’s focus and serves as a reminder to our clients and us practitioners alike to be sure we are staying abreast of the ever-changing capital markets environment.

China Related Disclosures

A few years ago, the SEC enacted the Holding Foreign Companies Accountable Act and approved rules implementing same (see HERE). The SEC continues to

SEC Publishes More New C&DI On Cybersecurity Rules

July 30, 2024

On June 24, 2024 the SEC published five (5) new compliance and disclosure interpretations (C&DI) on cybersecurity incident disclosures supplementing the C&DI published in December 2023 (see HERE).

Cybersecurity

The cybersecurity rules add new Item 1.05 to Form 8-K requiring disclosure of a material cybersecurity incident including the incident’s nature, scope, timing, and material impact or reasonably likely impact on the company. An Item 1.05 Form 8-K is due within four business days following determination that a cybersecurity incident is material. Given the sensitive nature of cybersecurity crimes, the SEC has added a provision allowing an 8-K to be delayed if it is informed by the United States Attorney General, in writing, that immediate disclosure would pose a substantial risk to national security or

Free Writing Prospectus

July 23, 2024

I’m finding a lot of good segues recently – flowing from my discussion on the definition and implications of shell company status in a reverse merger (see HERE) is the topic of a free writing prospectus (“FWP”). In particular, what is a free writing prospectus, when and how is it used, and what companies are eligible for its use.

Communications during a registered offering are strictly regulated, including communications before the filing of a registration statement, after filing and before effectiveness, and after effectiveness – for more on communications during the offering process see HERE. An FWP is a written communication other than the prospectus filed with the SEC, used to make offers, or to market an offering.

An FWP is one of the few writings, beyond the prospectus itself, that may be used to market an offering. However, its use is limited to eligible companies, or in securities law parlance – those that are not ineligible. Accordingly,

F-3 Eligibility

July 16, 2024

The ability to utilize a shelf registration statement on Form F-3 or S-3 offers significant advantages to publicly traded companies. A Form F-3/S-3 allows for variably priced offerings – that is offerings made either at-the-market or at other than fixed prices. Only companies that are eligible for F-3/S-3 can complete primary (or indirect primary) offerings at prices other than a fixed price (for more on primary offerings see HERE).

I have previously written a detailed blog related to S-3 eligibility (see HERE) and although the requirements for an F-3 are substantially similar, there are some key differences due to the different regulatory framework applicable to foreign private issuers (“FPIs”) – i.e. “F Filers.” Like an S-3, F-3 eligibility is comprised of both registrant or company requirements and transaction requirements.

Moreover, like Form S-3, a Form F-3 specifies generally that the Form may not be used for an offering of asset-backed securities.

Registrant Requirements

Companies that meet the

NASDAQ Issues New FAQ On MarketWatch News Submittals

July 9, 2024

In November 2023, Nasdaq added a new FAQ providing guidance on completing the electronic disclosure form to provide the required advance notice to Nasdaq’s MarketWatch Department when material non-public information is being announced, including news releases. I realized that while I have blogged about the Nasdaq notification requirements in general (see HERE), the recent changes to the Nasdaq reverse split rules, including MarketWatch notification (see HERE) and Nasdaq continued listing requirements (see HERE), I have not yet drilled down on the Nasdaq Rule 5250(b)(1) MarketWatch disclosure requirements, until now.

As an aside, Nasdaq Rule 5250 is a lengthy rule covering multiple facets of listed company obligations (including the reverse split and notification requirements and several of the corporate governance requirements in the blogs linked to above). This blog focuses on Rule 5250(b)(1) and its related IM discussions related to the disclosure of material non-public information.

Nasdaq Rule 5250(b)(1)

Nasdaq Rule 5250(b)(1) sets forth a listed company’s obligation

Supreme Court Decides MD&A Case

July 2, 2024

It is not often that the U.S. Supreme Court weighs in on the specific disclosure requirements under the federal securities laws, but in the case of Macquarie Infrastructure Corp. v. Moab Partners, L.P., they had occasion to do so in the context of a Rule 10b-5 fraud claim.

Macquarie owned a subsidiary that operates terminals to store bulk liquid commodities including No. 6 fuel oil. In 2016 the United Nations’ International Maritime Organization formally adopted IMO 2020, a regulation capping the sulfur content of fuel oil used in shipping. In the ensuing years, Macquarie did not discuss IMO 2020 in its public offering documents or SEC periodic reports. In February 2018, however, Macquarie announced a drop in the amount of storage contracted for use by its subsidiary due in part to the decline in the No. 6 fuel oil market. Macquarie’s stock price fell 41%.

Plaintiff Moab Partners sued Macquarie and various officers alleging, among other things, that

SEC Updates Guidance On Confidential Treatment Requests

June 25, 2024

For the first time since December 2019, the SEC has updated its guidance on the process associated with submitting a confidential treatment request (“CTR”). The March 2019 guidance update was triggered by the passing of the Fixing America’s Surface Transportation Act (“FAST Act”) which allows companies to redact confidential information from most material agreement exhibits without filing a CTR, including omitting schedules and exhibits to exhibits. The FAST Act also allows a company to redact information in material agreements that is both (i) not material, and (ii) competitively harmful if disclosed without the need for a CTR. For a discussion on the December 2019 guidance see HERE. At the end of this blog, I include a refresher on the streamlined, self-executing rules for omitting confidential information from material contract exhibits to SEC filings.

The latest updated guidance flows through the process in general, so the below discussion includes all such updates.

Confidential Treatment Requests Under Rules 406

SEC Provides Guidance On Sell To Cover Exception In Rule 10b5-1

June 18, 2024

On December 14, 2022, the SEC adopted amendments to Rule 10b5-1 under the Securities Exchange Act of 1934 (“Exchange Act”) 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. For a review of the Rules see HERE and HERE.

Updated Rule 10b5-1 adds conditions to the affirmative defense to insider trading. The Rule now has cooling-off periods before trading can commence under a Rule 10b5-1 plan and adds a condition that all persons entering into a Rule 10b5-1 plan must act in good faith with respect to the plan. The Rule also requires 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 or its securities; and

Delaware Court Of Chancery – M&A Transactions

June 11, 2024

The Delaware Chancery Court’s recent decisions in Crispo v. Musk, West Palm Beach Firefighters v. Moelis & Company, Chordia v. Lee, and Sjunde AP-fonden v. Activision Blizzard, Inc. have caused some angst for merger and acquisition (M&A) practitioners. This blog will summarize those opinions and the statutory changes proposed by the Delaware Bar in response.

Crispo v. Musk

In Crispo v. Musk, the court decided on the ambiguous issue of when a target may assert a claim for premium damages in the event of a default by a buyer in an acquisition agreement. In essence, when a public company is the target in an acquisition, the board of directors act as agents for the shareholders, who will ultimately receive the merger consideration. Moreover, that merger consideration is almost always at a premium to pre-merger market price. Unfortunately, this creates a contractual legal issue, whereby if the buyer breaches the agreement, the only damage claim by the target

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

June 4, 2024

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 Proxy Rules

May 28, 2024

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. As my blog topic list tends to be very long, I am finally getting to this and will cover the various new C&DI topics over the next few weeks.

Proxy Rules

The federal proxy rules can be found in Section 14 of the Securities Exchange Act of 1934 (“Exchange Act”) and the rules promulgated thereunder. The rules apply to any company which has securities registered under Section 12 of the Act. Section 14 of the Exchange Act and its rules govern the timing and content of information provided to shareholders in connection with annual and special meetings with a goal of providing shareholders meaningful information to make informed decisions, and a valuable method to allow them to participate in the shareholder voting

SEC Publishes New C&DI On Cybersecurity Rules

May 21, 2024

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. As my blog topic list tends to be very long, I am finally getting to this and will cover the various new C&DI topics over the next few weeks.

Cybersecurity

In July, 2023 the SEC adopted final new rules requiring disclosures for both domestic and foreign companies related to cybersecurity incidents, risk management, strategy and governance (see HERE for a review of the new rules). The SEC has published three new C&DI directly related to the Form 8-K reporting requirements and ability to delay reports based on national security concerns.

SEC Adopts Changes To The Definition Of A “Dealer”

May 14, 2024

Two years after proposing rule changes (see HERE) the SEC has adopted final new rules amending the definition of a “dealer” under the Exchange Act. Although the rule change comes after years of a continuous stream of litigation against small-cap and penny stock convertible debt lenders, the new rules specifically fail to provide regulatory clarity to this sector of the marketplace.

The amendments are intended to require certain proprietary or principal traders and liquidity providers to register as either a dealer or government securities dealer as applicable. The rules amend Exchange Act Rules 5a5-4 and 3a44-2 to enhance the definition of “as part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Exchange Act. The enhancement, however, is as to large proprietary traders and government securities dealers, leaving small cap traders to continue with rule making through judicial precedence.

Background

Although the amended rules are not limited to participants in the U.S. Treasury markets,

Definition Of A Shell Company In A Reverse Merger

May 7, 2024

Ten weeks of blogs on the new SPAC and shell company rules provides the perfect segue to discuss exactly what is a “shell company” in the context of a reverse merger and its implications – including one heartburn inducing unintended consequence. As I have been discussing over the past weeks, the new rules specifically apply to any reverse merger with a shell company, not just a SPAC shell company.

New Rule 145a deems any business combination of a reporting shell company involving another entity that is not a shell company to entail a sale of securities to the reporting shell company’s shareholders. Nothing in Rule 145a would prevent or prohibit the use of a valid exemption, if available, for the deemed sale of securities; however, I know of no such available exemption and the SEC rule release not only does not suggest one but specifically clarifies that Section 3(a)(9) would not be available.

As a result, the SEC release suggests

SEC Adopts Final Rules On SPACs, Shell Companies And The Use Of Projections – Part 10

April 30, 2024

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions. The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs. The new rules spread beyond SPACs to shell companies and blank check companies in general. The compliance date for the new rules is July 1, 2025.

In the first blog in this series, I provided background on and a summary of the new rules – see HERE. The second blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE. The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE. Part 4 continued a

SEC Adopts Final Rules On SPACs, Shell Companies And The Use Of Projections – Part 9

April 23, 2024

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 8

April 16, 2024

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 7

April 9, 2024

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 6

April 2, 2024

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 5

March 26, 2024

In the first blog in this series, I provided background on and a summary of the new rules – see HERE. Last week’s blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE. The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE. Part 4 continued a

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 4

March 19, 2024

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 3

March 12, 2024

In the first blog in this series, I provided background on and a summary of the new rules – see HERE. Last week’s blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE. This week’s blog will continue a review of new Subpart 1600 to Regulation S-K.

New Subpart 1600 of Regulation S-K

The SEC has adopted new Subpart 1600 to

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 2

March 5, 2024

In last week’s blog, I provided background on and a summary of the new rules – see HERE. This week’s blog begins a granular discussion of the 581-page rule release and its vast implications to not only the SPAC market, but shell company reverse mergers in general. This week in particular, I will begin coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions.

New Subpart 1600 of Regulation S-K

The SEC has adopted new Subpart 1600 to Regulation S-K to: (i) set forth disclosure obligations for

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 1

February 27, 2024

The SEC is specifically requiring enhanced disclosures with respect to compensation paid to sponsors, conflicts of interest, dilution, and the determination, if any, of the board of directors (or similar governing body) of a SPAC regarding whether a de-SPAC transaction is advisable and in the best interests of the SPAC and its shareholders. The SEC has also adopted rules that deem any business combination transaction involving a reporting shell company, including a SPAC, to involve a sale of securities to the reporting shell company’s shareholders, and has amended several financial statement requirements applicable to transactions involving

Section 13 – Beneficial Shareholder Reporting Requirements – Part II

February 20, 2024

As discussed last week, the SEC has adopted final amendments to Sections 13(d) and 13(g) of the Securities Exchange Act of 1934 (“Exchange Act”). The amendments were first proposed in February, 2022 – see HERE.

The final rules do not adopt proposed changes to determine beneficial ownership where a person holds cash settled derivative securities but rather refer to guidance on the subject. Likewise, the final rules do not adopt many changes that had been proposed to clarify the circumstances under which two or more persons have formed a “group” that would be subject to beneficial ownership reporting obligations; or to provide new exemptions to permit certain persons to communicate and consult with one

Section 13 – Beneficial Shareholder Reporting Requirements – Part 1

February 13, 2024

Barely two weeks after the SEC charged six officers, directors and five percent (5%) or greater shareholders with failing to timely file reports, the SEC adopted final amendments to Sections 13(d) and 13(g) of the Securities Exchange Act of 1934 (“Exchange Act”). The amendments were first proposed in February, 2022 – see HERE.

The amendments update Sections 13(d), 13(g) and Regulation 13D-G to accelerate filing deadlines for both initial and amended reports; expand the timeframe within a business day in which filings may be timely made; clarify the Schedule 13D disclosure requirements with respect to derivative securities; and require that Schedule 13D and 13G filings be filed using XBRL. I’ve included a chart of the amendments to Schedules 13D and 13G at the end of this blog.

The final rules do not adopt changes that had been proposed to clarify the circumstances under which two or more persons have formed a “group” that would be subject to beneficial ownership reporting

NYSE Amends Shareholder Approval Requirements In Private Securities Transactions Involving Substantial Shareholders

February 6, 2024

On December 26, 2023, the SEC approved an NYSE rule change to make it easier for listed companies to raise money from existing substantial shareholders. In particular, the NYSE has amended Section 312.03(b) and 312.04 of the NYSE Listed Company Manual to modify the circumstances under which a listed company must obtain shareholder approval prior to the sale of securities below the Minimum Price to a substantial security holder.

Background

Section 312.03 of the NYSE Listed Company Manual lists the circumstances upon which shareholder approval must be obtained prior to the issuance of securities. Pre-amendment Section 312.03(b)(i) requires shareholder approval prior to the issuance of common stock, or of securities convertible into or exercisable for common stock, in any transaction or series of related transactions, to a director, officer or substantial security holder of the company (each a “Related Party”) if the number of shares of common stock to be issued, or if the number of shares of common stock

The Corporate Transparency Act – What You Need To Know

January 30, 2024

Since the January 1, 2024 compliance effective date for the Corporate Transparency Act, I have been inundated with compliance inquiries. Here is what you need to know.

Background

On January 1, 2021, Congress passed the Corporate Transparency Act (“CTA”). The CTA requires all business entities, subject to certain exceptions, to disclose information about the entity and the individual(s) who own such entity and/or have substantial control. The CTA was created to help the United States government combat money laundering, tax fraud and illegal foreign ownership of U.S. businesses. On September 30, 2022, the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a Final Rule on the CTA, explaining what information needs to be disclosed in the form of a Beneficial Ownership Information Report (referred to as a “BOI Report”). For a review of the rule release, see HERE. The BOI Report will become part of a national database on corporate ownership.

The CTA specifically requires entities to file

SEC Issues Staff Report On Accredited Investor Definition

January 23, 2024

On December 15, 2023, the SEC issued a staff report on the accredited investor definition. The report comes three years after the most recent amendments to the accredited investor definition (see HERE).

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) requires the SEC to review the accredited investor definition, as relates to natural persons, at least once every four years to determine whether the definition should be modified or adjusted. The last two reports can be read HERE and HERE.

The current report focuses on the composition of the accredited investor demographic, including since the last definition amendments; the extent to which accredited investors have the financial sophistication, ability to sustain the risk of loss of investment, and access to information that have traditionally been associated with an ability to fend for themselves; and accredited investor participation in exempt offerings.

I’ve included the complete current accredited investor definition at the end of this blog.

Background

All

SEC Fall 2023 Regulatory Agenda

January 16, 2024

On December 6, 2023, the SEC published its semi-annual Fall 2023 regulatory agenda (“Agenda”) and plans for rulemaking. The Agenda is published twice a year, and for several years I have blogged about each publication. Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.

Fourteen items are included in the proposed rule stage, down

What Is Regulation M?

January 9, 2024

Regulation M, which was adopted in 1996, is designed to prevent market manipulation by participants in a securities offering by regulating certain activities. In general, Regulation M restricts distribution participants (underwriters, placement agents and their affiliates), issuers, selling security holders and their affiliates, from bidding for, purchasing, or attempting to induce other to bid for or purchase, certain securities during an applicable restricted period. Regulation M also prohibits any person that has sold short a security that is the subject of a registered offering from purchasing securities in the offering from an underwriter, or broker or dealer participating in the offering if the short sale took place during a specified period prior to the pricing of the registered offering.

Although a large part of Regulation M relates to underwriter and broker dealer conduct and due diligence obligations, it is helpful for issuers and selling security holders to understand the rules as pertains to them. Regulation M consists of six

The New 10-K Requirements For Annual Report Season

January 2, 2024

As 2023 has come to a close it is time to prepare for the upcoming annual report season and this year there are multiple new requirements to be cognizant of. With annual reports being followed by proxies and first quarter 10-Q’s in rapid succession, it is important to get ahead of all the new disclosures. This blog will summarize each of the new disclosures and include some practice tips.

First, though is what is suddenly not a new requirement and in particular the share repurchase disclosures. Adopted on May 3, 2023 (see HERE) the new disclosure requirements would have taken effect for inclusion in the upcoming 10-K season. Following a successful court challenge, on November 22, 2023, the SEC issued an order postponing the effective date of the new rules pending further SEC action (see HERE). However, the SEC may not get the opportunity to resurrect the rules. The U.S. Chamber of Commerce is doubling down and

NASDAQ Amends Rules For Waivers To Code Of Conduct

December 26, 2023

On September 5, 2023, Nasdaq adopted amendments to Listing Rule 5610 and IM-5610 requiring listed companies to maintain a code of conduct and to disclose certain waivers. This is also a good time to discuss the code of conduct/code of ethics requirements applicable to all companies subject to the Securities Exchange Act of 1934 (“Exchange Act”) reporting requirements.

Code of Conduct/Code of Ethics

Section 406(c) of the Sarbanes-Oxley Act of 2002 (“SOX”) requires all companies that are subject to the Exchange Act reporting requirements to disclose whether they have adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. If the company has not adopted such a code, it must explain why it has not done so.

SOX defines a code of ethics as written standards reasonably designed to deter wrongdoing and to promote: (i) honest and ethical conduct including related to conflicts of

SEC Suspends New Share Repurchase Disclosure Rules

December 19, 2023

In a win for conservatives, the recent amendments to the share repurchase rules are officially on hold. Adopted on May 3, 2023 (see HERE) the new disclosure requirements would have taken effect for inclusion in the upcoming 10-K season. Following a successful court challenge, on November 22, 2023, the SEC issued an order postponing the effective date of the new rules pending further SEC action.

Background

On May 3, 2023, the SEC adopted amendments to Securities Exchange Act Rule 10b-18, which provides issuers and affiliates with a non-exclusive safe harbor from liability for market manipulation under Sections 9(a)(2) and 10(b) and Rule 10b-5 under the Securities Exchange Act of 1934, as amended (“Exchange Act”) when issuers bid for or repurchase their common stock.

The SEC allows for limited methods that an issuer can utilize to show confidence in its own stock and assist in maintaining or increasing its stock price. One of those methods is Exchange Act Rule

Nasdaq Adopts New Reverse Split Rule Change

December 12, 2023

On November 1, 2023, the SEC approved Nasdaq’s rule changes to the notification and disclosure requirements for reverse splits. The new rules went effective immediately upon approval. For the proposed rule changes see HERE.

Background

After the market highs of the second half of 2020 and all of 2021, we have all witnessed the general decline, including noticeably depressed valuations and market price, especially in the small cap space. In 2022, Nasdaq processed 196 reverse stock splits, compared to 31 in 2021 and 94 in 2020. As of June 23, 2023, Nasdaq has processed 164 reverse stock splits, and projects significantly more throughout 2023. The majority of reverse splits are completed by companies that trade on the Nasdaq Capital Market tier of the exchange and are completing the split to maintain the minimum $1.00 bid price to avoid delisting.

In response to concerns by Nasdaq that market participants do not have enough visibility on these companies or their

SEC Adopts Revisions To The Privacy Act

December 5, 2023

On September 20, 2023, the SEC approved final revisions to the Privacy Act, governing the handling of personal information in the federal government (See HERE for a review of the proposed rules). The revisions codify current practices for processing requests for information made by the public under the Privacy Act and result in an entire re-write of the current rules. The SEC last updated the Privacy Act in 2011.

Background

The Privacy Act is the principal law governing the handling of personal information in the federal government, regulating the collection, maintenance, use, and dissemination of information about individuals that is maintained in systems of records by federal agencies. The Privacy Act also allows individuals to access information about them and provides a method to correct inaccurate records.

Final New Rules

The amended rules result in a complete rewrite of the Privacy Act to: (i) add a provision setting forth the process by which individuals may be provided with

SEC Proposes New EDGAR Rules

November 28, 2023

On September 13, 2023, the SEC proposed rule and form amendments to the EDGAR system dubbing the updates as EDGAR Next. The rule changes are meant to enhance security and improve access to the EDGAR system. My view is that will accomplish the former and not the latter. The changes would require EDGAR filers to authorize identified individuals who would be responsible for managing the filers’ EDGAR accounts. Individuals acting on behalf of filers on EDGAR would need individual account credentials to access those EDGAR accounts and make filings. As part of the proposed rule changes, the SEC is making a beta software public for testing and feedback which software would eventually be used by filers if the proposed new rules are implemented.

The proposed rules would amend Rules 10 and 11 of Regulation S-T and amend Form ID. Only the identified authorized individuals would be able to access a filer’s EDGAR account. The authorized individual(s) need not be

SEC Publishes Sample Comment Letter Regarding XBRL Disclosure

November 21, 2023

Back in June, 2018, the SEC adopted the Inline XBRL requirements (see HERE) and since that time almost all new disclosure rules require either XBRL tagging or Inline XBRL. In December 2022 a new law was passed requiring the SEC to “establish a program to improve the quality of the corporate financial data filed or furnished by issuers under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”),” causing the SEC to focus even more on XBRL use. As a result, in September 2023, the SEC published a sample letter to companies regarding their XBRL disclosures.

The sample letter consists of six comments, which I have included in full below followed by a short commentary on the point.

Your filing does not include the required Inline XBRL presentation in accordance with Item 405 of Regulation S-T. Please file an amendment to the filing to include the required Inline XBRL presentation.

SEC Publishes New C&DI On Pay Versus Performance Rules

November 14, 2023

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

Nasdaq Listing Deficiencies And Delisting – Part 3

November 7, 2023

As 2022 and 2023 have continued to be extremely tough years for the capital markets many small cap companies find themselves failing to maintain the minimum continued listing requirements. I’ve recently written about those continued listing requirements, see HERE, and Nasdaq’s proposed rule changes for reverse split notifications as companies struggle to maintain the $1.00 minimum bid price requirement, see HERE.

These blogs provide a perfect segue for a deep dive into the Nasdaq deficiency notice and delisting process. In this first blog in the series, I provided an overview of deficiencies, deficiency notices, cure periods and compliance plans – see HERE. In Part 2, I reviewed the hearing panel process – see HERE. In this Part 3, I will review the appeals to the Nasdaq Listing and Hearing Review Council and delisting. I note that the Nasdaq rules also contain administrative rules regarding the conduct of adjudicators and advisors and the adjudication process, which

Nasdaq Listing Deficiencies And Delisting– Part 2

October 31, 2023

Review of Deficiency Determinations by Hearing Panel

As noted in Part 1 of this series, Nasdaq deficiency notifications are one of four types:

Staff delisting determinations, which are notifications of deficiencies that, unless appealed, subject the Company to

Nasdaq Listing Deficiencies And Delisting – Part 1

October 24, 2023

As 2022 and 2023 have continued to be extremely tough years for the capital markets, many small-cap companies find themselves failing to maintain the minimum continued listing requirements. I’ve recently written about those continued listing requirements – see HERE – and Nasdaq’s proposed rule changes for reverse split notifications as companies struggle to maintain the $1.00 minimum bid price requirement – see HERE.

These blogs provide a perfect segue for a deep dive into the Nasdaq deficiency notice and delisting process. In this first blog in the series, I provide an overview of deficiencies, deficiency notices, cure periods and compliance plans. In the Part 2, I will review the hearing panel process followed by appeals and ultimately delisting.

Overview – Deficiency Notices

When the Nasdaq Listing Qualifications Department determines that a company does not meet a listing standard, it will immediately notify the company of the deficiency. The notification will come in letter format, literally within a day

SEC Chair Gary Gensler’s Annual Congressional Testimony

October 17, 2023

On September 12, 2023, Gary Gensler gave his annual testimony to the United States Senate Committee on Banking, Housing and Urban Affairs and then on September 27^th to the United States House of Representatives Committee on Financial Services (for a review of last year’s testimony see HERE). Both appearances included the same prepared remarks followed by robust Q&A from the lawmakers.

This year Chair Gensler’s prepared remarks focused on: (i) rule amendments and updates; (ii) improving efficiency in equity markets; (iii) disclosure matters and related enforcement including related to cryptocurrency; and (iv) general updates on the SEC and capital markets.

Prepared Remarks

We shouldn’t expect the busy SEC rule making agenda to slow down any time soon. Chair Gensler prioritizes updating rules for technology, business and market changes. Although Gensler’s speech focuses on rule changes to make the markets more efficient and resilient and lower costs, the reality is that not all rule changes will accomplish

NYSE/NYSE American Continued Listing Requirements

October 10, 2023

Although I often write about initial listing standards, I realized that I have not yet blogged about the reduced ongoing listing standards for national exchanges. Last week I wrote about the Nasdaq continued listing requirements (see HERE) and this week I will cover the NYSE and NYSE American. For a review of the initial listing requirements for the NYSE American see HERE.

NYSE American

The NYSE American prefaces it continued listing qualitative minimum standards with it high level discretionary authority. The basis for continued listing is summed up in Section 1001 of the NYSE Company Guide as follows:

In considering whether a security warrants continued trading and/or listing on the Exchange, many factors are taken into account, such as the degree of investor interest in the company, its prospects for growth, the reputation of its management, the degree of commercial acceptance of its products, and whether its securities have suitable characteristics for auction market trading. Thus, any developments

NASDAQ Continued Listing Requirements

October 3, 2023

Although I often write about initial listing standards, I realized that I have not yet blogged about the reduced ongoing listing standards for national exchanges. In this blog, I will cover the continued listing requirements for Nasdaq listed companies and in next week’s blog I will cover the NYSE/NYSE MKT. For a review of initial listing requirements for the Nasdaq Capital Markets and NYSE MKT see HERE.

Nasdaq Capital Markets

To continue listing on Nasdaq Capital Markets, a company is required to meet certain ongoing quantitative and qualitative requirements. NASDAQ also requires listed companies to meet stringent corporate governance standards.

In order to continue listing on Nasdaq Capital Markets a company must meet all of the following requirements: (i) at least 2 market makers; (ii) a $1 minimum bid price; (iii) at least 300 unrestricted round lot public shareholders; (iv) at least 500,000 publicly held shares; and (v) a market value of publicly held shares of at least $1

SEC Publishes New Sample Comment Letter To China Based Companies

September 26, 2023

Continuing its concerns over the quality of disclosures from companies based in or with a majority of their operations in the People’s Republic of China, in July 2023, the SEC’s Division of Corporation Finance published yet another sample comment letter to China-based companies.

Back in April 2020, former SEC Chairman Jay Clayton and a group of senior SEC and PCAOB officials issued a joint statement warning about the risks of investing in emerging markets, especially China, including companies from those markets that are accessing the U.S. capital markets (see HERE). Before that, in December 2018, Chair Clayton, SEC Chief Accountant Wes Bricker and PCAOB Chairman William D. Duhnke III issued a similar cautionary statement, also focusing on China (see HERE).

The Holding Foreign Companies Accountable Act (“HFCA”) was adopted on December 18, 2020, requiring both the SEC and the PCAOB to adopt rules and procedures implementing its provisions. The HFCA requires foreign-owned issuers to certify that the PCAOB

NASDAQ Proposes Reverse Split Rule Changes

September 19, 2023

In July Nasdaq filed a proposed rule change with the SEC to establish listing standards related to notification and disclosure requirements of reverse splits. As of the writing of this blog, the proposed rule change has received only a single comment, which supported the change.

Background

After the market highs of the second half of 2020 and all of 2021, we have all witnessed the general decline, including noticeably depressed valuations and market price, especially in the small cap space. In 2022, Nasdaq processed 196 reverse stock splits, compared to 31 in 2021 and 94 in 2020. As of June 23, 2023, Nasdaq has processed 164 reverse stock splits, and projects significantly more throughout 2023. In its rule proposal, Nasdaq notes that the majority of reverse splits are effectuated by smaller companies that do not have broad media or research coverage. These companies generally trade on the Nasdaq Capital Market tier of the exchange and are completing reverse splits

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

September 12, 2023

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

2023 Changes To Delaware Corporate Law

September 5, 2023

Each year the Delaware legislature passes several amendments to the Delaware General Corporation Law (DGCL) which impact not only public and private companies incorporated in Delaware, but elsewhere, as many states follow the DGCL. This year the most significant changes relate to reduced stockholder approval provisions. Effective August 1, 2023, the DGCL has been amended to: (i) eliminating the need for stockholder approval for forward stock splits in certain cases; (ii) reducing the voting threshold for certain reverse stock splits or changes to authorized shares; (iii) allowing for the disposition of treasury stock for less than par value; (iv) simplifying the process for ratifying defective corporate actions; (v) simplify notices to stockholders following action taken by consent; (vi) expanding certain appraisal rights; and (vii) establishing “safe harbor” provisions from the stockholder approval requirement for certain dispositions of pledged assets.

Shareholder Voting Requirements for Certain Amendments to the Certificate of Incorporation – DGCL Section 242

One of the reasons Delaware

SEC Adopts Final New Rules On Cybersecurity Disclosures

August 29, 2023

On July 26, 2023, the SEC adopted final new rules requiring disclosures for both domestic and foreign companies related to cybersecurity incidents, risk management, strategy and governance. The proposed rules were published in March 2022 (see HERE). In response to numerous comments, the final rules made several changes to the proposal, including narrowing the disclosures in both the Form 8-K/6-K and annual reports on Form 10-K and 20-F.

The final rules add new Item 1.05 to Form 8-K requiring disclosure of a material cybersecurity incident including the incident’s nature, scope, timing, and material impact or reasonably likely impact on the company. An Item 1.05 Form 8-K will be due within four business days following determination that a cybersecurity incident is material. Given the sensitive nature of cybersecurity crimes, the SEC has added a provision allowing an 8-K to be delayed if it is informed by the United States Attorney General, in writing, that immediate disclosure would pose a substantial

Who Is An “Affiliate” And Why Does It Matter – Exchange Act; Determining Filer Status

August 22, 2023

The concept of affiliation resonates throughout the federal securities laws, including pertaining to both the Securities Act and Exchange Act rules, regulations and forms and Nasdaq and NYSE compliance. In this multi-part series of blogs, I am unpacking what the term “affiliate” means and its implications. The first blog in the series began with an analysis of the Securities Act definition of “affiliate” and the implications under Rule 144, Section 4(a)(7) and Form S-3 eligibility (see HERE). The second delved into the topic of a primary vs. secondary offering, which itself hinges on whether the offeror is an affiliate (see HERE). In this third part of the series, I will discuss the meaning and implications of an “affiliate” under the Exchange Act.

Exchange Act Definition of Affiliate

Exchange Act Rule 12b-2 defines an affiliate the same as the Securities Act, to wit: ‘An affiliate’ of, or a person “affiliated” with, a specified person, is a person that

Who Is An Affiliate And Why Does It Matter – Primary VS Secondary Offering

August 15, 2023

The concept of affiliation resonates throughout the federal securities laws, including pertaining to both the Securities Act and Exchange Act rules, regulations and forms and Nasdaq and NYSE compliance. In this multipart series of blogs, I will unpack what the term “affiliate” means and its implications. This first blog in the series began with an analysis of the Securities Act definition of “affiliate” and the implications under Rule 144, Section 4(a)(7) and Form S-3 eligibility (see HERE). In this Part 2 of the series, I am delving into the meaty topic of a primary vs. secondary offering, which itself hinges on whether the offeror is an affiliate.

Secondary/Resale Offerings vs. Primary Offerings

A secondary offering is an offering made by or on behalf of bona fide selling shareholders and not by or on behalf of the registrant company. A secondary offering can only occur after a company is public. That is, even if a company goes public

Who Is An Affiliate And Why Does It Matter – Part 1

August 8, 2023

WHO IS AN “AFFILIATE” AND WHY DOES IT MATTER? PART 1

The concept of affiliation resonates throughout the federal securities laws, including pertaining to both the Securities Act and Exchange Act rules, regulations and forms and Nasdaq and NYSE compliance. In this multipart series of blogs, I will unpack what the term “affiliate” means and its implications. This first blog in the series begins with the Securities Act definition of an “affiliate” and the implications under Rule 144, Section 4(a)(7) and Form S-3 eligibility. In Part 2 of the series, I will delve into the meaty topic of a primary vs. secondary offering, which itself hinges on whether the offeror is an affiliate.

Securities Act Definition of Affiliate

The Securities Act provides a statutory definition of an “affiliate” to begin what is a facts and circumstances analysis (as is common in the federal securities laws). Rule 405 of the Securities Act defines an “affiliate” as “[A]n affiliate of, or

Nasdaq Board Diversity Matrix In Practice

August 1, 2023

Although the compliance deadline for the requirement to add diverse directors was extended, the board diversity matrix disclosure form (“Board Diversity Matrix”) requirement is now in its second year.

Nasdaq Rule 5606(a) requires Nasdaq listed companies to publicly disclose, in an aggregated form, to the extent permitted by law (for example, some foreign countries may prohibit such disclosure), information on the voluntary self-identified gender and racial characteristics and LGBTQ+ status of the company’s board of directors as part of the ongoing corporate governance listing requirements. Each company must provide an annual Board Diversity Matrix disclosure, including: (i) the total number of directors; (ii) the number of directors based on gender identity (female, male or non-binary); (iii) the number of directors that did not disclose gender; (iv) the number of directors based on race and ethnicity; (v) the number of directors who self-identify as LGBTQ+; and (vi) the number of directors who did not disclose a demographic background.

Regulation FD

July 25, 2023

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

Furnish VS. Filed

July 18, 2023

Over the years I’ve noted that information required pursuant to various disclosure obligations, or new or amended rules, may be “furnished” versus “filed” with the SEC, but I realize in a “let’s get back to basics” moment, I have not yet (until now) provided a detailed explanation of what that means. In summary, information that is “filed” with the SEC carries Section 18 liability, only “filed” information can be incorporated by reference into other filings, such as an S-3 registration statement, and only “filed” SEC reports affect S-3 eligibility.

Section 18

Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”) imposes liability on any person that makes or causes to be made any statement in any application, report or document “filed” pursuant to the Exchange Act or any rule thereunder which statement was at the time and in the light of the circumstances under which it was made false or misleading with

SEC Spring 2023 Regulatory Agenda

July 11, 2023

On June 13, 2023, the SEC published its semiannual Spring 2023 regulatory agenda (“Agenda”) and plans for rulemaking. The Agenda is published twice a year, and for several years I have blogged about each publication. Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.

The Agenda is broken down by (i) “Pre-rule Stage”; (ii) Proposed Rule Stage; (iii) Final Rule Stage; and (iv) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to be completed in a 12-month time frame is 55, which is in-line with the average items under Gary Gensler’s regime (and much higher than

SEC Publishes Guidance On Rule 10b5-1 Amendments

July 5, 2023

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

FINRA Approves OTC Markets To Trade Digital Securities

June 27, 2023

As the SEC continues its onslaught against the crypto industry, including the filing of high-profile actions against Binance, which operates the largest crypto asset trading platform in the world, and Coinbase, a multi-billion-dollar crypto trading platform, FINRA has quietly approved OTC Markets to provide trading services for digital asset securities.

OTC Markets announced the approval in early May but don’t expect any activity in the near future. Concurrent with announcing the approval, OTC Markets CEO, R. Cromwell Coulson, stated:

“We also recently received FINRA approval to permit digital asset securities to be traded by broker-dealers on OTC Link ATS. This approval furthers our mission of operating regulated markets for broker-dealers and issuers of securities. While it will be some time until the regulatory framework and infrastructure develop, we believe our markets are well-positioned to be part of new trading, data, and disclosure solutions for these securities.”

OTC Markets is clearly putting itself in a position to

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