Tag: EDGAR

SEC Proposes New EDGAR Rules

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

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.

1. 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 Reopens The Comment Period On Proposed New Share Repurchase Disclosure Rules

On December 15, 2021, the SEC proposed 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 proposed amendments are intended to improve the quality, relevance, and timeliness of information related to issuer share repurchases.

The proposed new rules were part of a broader SEC initiative aimed at market manipulation and insider trading, including the recently adopted amendments related to Rule 10b5-1 Insider Trading Plans (see HERE).

On December 7, 2022, the SEC re-opened the comment period on the proposed new rules for an additional 30 days after publication in the federal register.  The reason for re-opening the comment period is that the Inflation Reduction Act of 2022 added a corporate non-deductible excise tax equal to one

Public Market Listing Standards

One of the bankers that I work with often once asked me if I had written a blog with a side-by-side comparison of listing on Nasdaq vs. the OTC Markets and I realized I had not, so it went on the list and with the implementation of the new 15c2-11 rules, now seems a very good time to tackle the project.  I’ve added NYSE American to the list as well.

Quantitative and Liquidity Listing Standards

Nasdaq Capital Markets

To list its securities on Nasdaq Capital Markets, 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.

A Review of FINRA’s Corporate Finance Rule

As the strongest U.S. IPO market in decades continues unabated, it seems a good time to talk about underwriter’s compensation.  FINRA Rule 5110 (Corporate Financing Rule – Underwriting Terms and Arrangements) governs the compensation that may be received by an underwriter in connection with a public offering.

Rule 5110 – The “Corporate Financing Rule”

Rule 5110 regulates underwriting compensation and prohibits unfair arrangements in connection with the public offerings of securities.  The Rule prohibits member firms from participating in a public offering of securities if the underwriting terms and conditions, including compensation, are unfair as defined by FINRA.  The Rule requires FINRA members to make filings with FINRA disclosing information about offerings they participate in, including the amount of all compensation to be received by the firm or its principals, and affiliations and relationships that could result in the existence of a conflict of interest.  As more fully described herein, underwriter’s compensation is subject to lock-up provisions.

Filing Requirements

SEC Fall 2020 Regulatory Agenda

The SEC’s latest version of its semiannual regulatory agenda and plans for rulemaking has been published in the federal register.  The Fall 2020 Agenda (“Agenda”) is current through October 2020.  The Unified Agenda of Regulatory and Deregulatory Actions contains the Regulatory Plans of 28 federal agencies and 68 federal agency regulatory agendas. The Agenda is published twice a year, and for several years I have blogged about each publication.

Like the prior Agendas, the Fall 2020 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 down to 32 items.  The Spring Agenda had 42 and the Fall 2019 had 47 on the list.

Items on the Agenda can move from one category to

SEC Proposed Rule Changes For Exempt Offerings – Part 4

On March 4, 2020, the SEC published proposed rule changes to harmonize, simplify and improve the exempt offering framework.  The SEC had originally issued a concept release and request for public comment on the subject in June 2019 (see HERE). The proposed rule changes indicate that the SEC has been listening to capital markets participants and is supporting increased access to private offerings for both businesses and a larger class of investors.  Together with the proposed amendments to the accredited investor definition (see HERE), the new rules could have as much of an impact on the capital markets as the JOBS Act has had since its enactment in 2012.

The 341-page rule release provides a comprehensive overhaul to the exempt offering and integration rules worthy of in-depth discussion.  I have been breaking the information down into a series of blogs, with this fourth blog focusing on amendments to Regulation A other than integration and offering communications which

Hester Peirce Proposal For Treatment Of Cryptocurrency

SEC Commissioner Hester M. Peirce, nicknamed “Crypto Mom,” has made a proposal for the temporary deregulation of digital assets to advance innovation and allow for unimpeded decentralization of blockchain networks.   Ms. Peirce made the proposal in a speech on February 6, 2020.

The world of digital assets and cryptocurrency literally became an overnight business sector for corporate and securities lawyers, shifting from the pure technology sector with the SEC’s announcement that a cryptocurrency is a security in its Section 21(a) Report on the DAO investigation. Since then, there has been a multitude of enforcement proceedings, repeated disseminations of new guidance and many speeches by some of the top brass at the SEC, each evolving the regulatory landscape.  Although I wasn’t focused on digital assets before that, upon reading the DAO report, I wasn’t surprised.  It seemed clear to me that the capital raising efforts through cryptocurrencies were investment contracts within the meaning of SEC v.

SEC Strategic Plan

On June 19, 2018, the SEC published a draft Strategic Plan and requested public comment on the Plan. The Strategic Plan would guide the SEC’s priorities through fiscal year 2022. The Plan reiterates the theme of serving the interests of Main Street investors, but also recognizes the changing technological world with a priority of becoming more innovative, responsive and resilient to market developments and trends. The Plan also broadly focuses on improving SEC staff’s performance using data and analytics.

The Strategic Plan begins with a broad overview about the SEC itself, a topic I go back to and reiterate on occasion, such as HERE. The SEC’s mission has remained unchanged over the years, including to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation. In addition, according to the Strategic Plan, the SEC:

• Engages and interacts with the investing public directly on a daily basis through a variety of channels, including investor roundtables and education

The SEC Has Issued New Guidance On Cybersecurity Disclosures

On February 20, 2018, the SEC issued new interpretative guidance on public company disclosures related to cybersecurity risks and incidents. In addition to addressing public company disclosures, the new guidance reminds companies of the importance of maintaining disclosure controls and procedures to address cyber-risks and incidents and reminds insiders that trading while having non-public information related to cyber-matters could violate federal insider-trading laws.

The prior SEC guidance on the topic was dated, having been issued on October 13, 2011. For a review of this prior guidance, see HERE. The new guidance is not dramatically different from the 2011 guidance.

Introduction

The topic of cybersecurity has been in the forefront in recent years, with the SEC issuing a series of statements and creating two new cyber-based enforcement initiatives targeting the protection of retail investors, including protection related to distributed ledger technology (DLT) and initial coin or cryptocurrency offerings (ICO’s). Moreover, the SEC has asked the House Committee on Financial