XBRL – Covered Forms
The last time I wrote about XBRL was related to the 2018 adoption of Inline XBRL which is now fully effective for all companies (see HERE). Although I gave an overview of Inline XBRL, that blog did not cover exactly what SEC forms need to be edgarized using XBRL. I’ll cover that now.
XBRL Requirements
XBRL requirements currently apply to operating companies that prepare their financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) or in accordance with International Financial Reporting Standards (“IFRS”). Operating companies (as opposed to a new initial public offering) are required to submit financial statements and any applicable financial statement schedules in XBRL with certain Exchange Act reports and Securities Act registration statements. The 2018 adoption of inline XBRL allowed companies to embed XBRL data directly into an HTML document, eliminating the need to tag a copy of the information in a separate XBRL exhibit. Inline XBRL is both human-readable and machine-readable
Termination Of Registration Under Section 12 Of The Exchange Act
A public company with a class of securities registered under Section 12 or which is subject to Section 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) must file Section 13 reports with the SEC (10-K, 10-Q and 8-K). A company registers securities under Section 12 by filing an Exchange Act registration statement such as on Form 10, Form 20-F or Form 8-A. A company becomes subject to Section 15(d) by filing a registration statement under the Securities Act of 1933, as amended (“Securities Act”) such as a Form S-1 or F-1. The Section 15(d) reporting requirements are scaled down from the full Exchange Act reporting requirements for a company with a class of securities registered under Section 12.
I have previously written about suspending the duty to file reports under Section 15(d) and the related question of determining voluntary reporting status (see HERE). This blog addresses the termination of registration under Section 12.
Terminating
Will the Disclosure Modernization and Simplification Act of 2014 Simplify Reporting Requirements for ECG’s and Smaller Reporting Companies?
ABA Journal’s 10th Annual Blawg 100
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In early December the House passed the Disclosure Modernization and Simplification Act of 2014, which will now go to the Senate for action—or inaction, as the case may be.
The bill joins a string of legislative and political pressure on the SEC to review and modernize Regulation S-K to eliminate burdensome, unnecessary disclosure with the dual purpose of reducing the costs to the disclosing issuer and ensure readable, material information for the investing public.
The Disclosure Modernization and Simplification Act of 2014, if passed, would require the SEC to adopt or amend rules to: (i) allow issuers to include a summary page to Form 10-K; and (ii) scale or eliminate duplicative, antiquated or unnecessary requirements in Regulation S-K. In addition, the SEC would be required to conduct yet another study on all Regulation S-K disclosure requirements to determine how best to amend and modernize the rules to reduce costs and burdens while
Public Company SEC Reporting Requirements
A public company with a class of securities registered under either Section 12 or which is subject to Section 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) must file reports with the SEC (“Reporting Requirements”). The underlying basis of the Reporting Requirements is to keep shareholders and the markets informed on a regular basis in a transparent manner. Reports filed with the SEC can be viewed by the public on the SEC EDGAR website. The required reports include an annual Form 10-K, quarterly Form 10Q’s and current periodic Form 8-K as well as proxy reports and certain shareholder and affiliate reporting requirements.
A company becomes subject to the Reporting Requirements by filing an
SEC Proposes Rules for Regulation A+
On December 18, 2013, the SEC published proposed rules to implement Title IV of the JOBS Act, commonly referred to as Regulation A+. The proposed rules both add the new Section 3(b)(2) (i.e., Regulation A+) provisions and modify the existing Regulation A. This blog is limited to a discussion of the new Regulation A+.
Background
Title IV of the JOBS Act technically amends Section 3(b) of the Securities Act, which up to now has been a general provision allowing the SEC to fashion exemptions from registration, up to a total offering amount of $5,000,000. Regulation A is and has historically been an exemption created under the powers afforded the SEC by Section 3(b).
Technically speaking, Regulation D, Rule 504 and 505 offerings and Regulation A offerings are promulgated under Section 3(b), and Rule 506 is promulgated under Section 4(a)(2). This is important because federal law does not pre-empt state law for Section 3(b) offerings, but it does so for Section
SEC Files Proceedings Against 19 S-1 Companies and Suspends Trading on 255 Shell Companies
A. S-1 Proceedings
On February 3, 2014, the SEC initiated administrative proceedings against 19 companies that had filed S-1 registration statements. The 19 registration statements were all filed with an approximate 2-month period around January 2013. Each of the companies claimed to be an exploration-stage entity in the mining business without known reserves, and each claimed they had not yet begun actual mining. The 19 entities used the same attorney, who is the subject of a separate SEC action filed in August 2013 alleging involvement in a pump-and-dump scheme. Each of the entities was incorporated at around the same time using the same registered agent service. The 19 S-1’s read substantially the same.
Importantly, each of the 19 S-1’s lists a separate officer, director and sole shareholder, and each claims that this person is the sole control person. The SEC complains that contrary to the representations in the S-1, a separate single individual is the actual control person behind each
DTC Has Published Proposed Rules Related To Chills and Locks
Background
On October 8, 2013, I published a blog and white paper providing background and information on the Depository Trust Company (“DTC”) eligibility, chills and locks and the DTC’s then plans to propose new rules to specify procedures available to Issuers when the DTC imposes or intends to impose chills or locks. On December 5, 2013, DTC filed these proposed rules with the SEC and on December 18, 2013, the proposed rules were published and public comment invited thereon (“Rule Release”). For background on DTC basics such as eligibility and the evolving procedures in dealing with chills and locks, please see my prior blog here .
The Depository Trust Company (“DTC”) is a central securities depository in the U.S. which was originally created as a central holding and clearing system to handle the flow of trading securities and the problems with moving physical certificates among trading parties. The DTC is regulated by the SEC, the Federal Reserve System and the
Direct Public Offering or Reverse Merger; Know Your Best Option for Going Public
Introduction
For at least the last twelve months, I have received calls daily from companies wanting to go public. This interest in going public transactions signifies a big change from the few years prior.
Beginning in 2009, the small-cap and reverse merger, initial public offering (IPO) and direct public offering (DPO) markets diminished greatly. I can identify at least seven main reasons for the downfall of the going public transactions. Briefly, those reasons are: (1) the general state of the economy, plainly stated, was not good; (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 clearing penny stock with broker dealers and FINRA’s enforcement of broker-dealer and clearing house due diligence requirements related to penny stocks; (5) DTC scrutiny and difficulty in obtaining clearance following
How to Complete an Unregistered Spin-Off
A spin-off is when a parent company distributes shares of a subsidiary to the parent company’s shareholders such that the subsidiary separates from the parent and is no longer a subsidiary. The distribution normally takes the form of a dividend by the parent corporation. In Staff Legal Bulletin No. 4, the Securities and Exchange Commission (SEC) explains how and under what circumstances a spin-off can be completed without the necessity of filing a registration statement.
In particular, the subsidiary shares (the shares distributed to the parent company shareholders) do not need to be registered if the following five conditions are met: (i) the parent shareholders do not provide consideration for the spun-off shares; (ii) the spin-off is pro-rata to the parent shareholders; (iii)
SEC has Modified Policies on Offerings by Shell Companies
Recently, albeit not officially, the Securities and Exchange Commission (“SEC”) has materially altered its position on offerings by shell companies that are not blank-check companies. In particular, over the past year, numerous shell companies that are not also blank-check companies have completed offerings using an S-1 registration statement and successfully obtained market maker support and a ticker symbol from FINRA and are trading. As recently as 18 months ago, this was not possible.
Rule 419 and Blank-Check Companies
The provisions of Rule 419 apply to every registration statement filed under the Securities Act of 1933, as amended, by a blank-check company. Rule 419 requires that the blank-check company filing such registration statement deposit the securities being offered and proceeds of the offering into
