Related Party Transactions – Foreign Private Issuers
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
SEC Suspends New Share Repurchase Disclosure Rules
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
SEC Adopts Amendments To Management Discussion And Analysis
It has been a very busy year for SEC rule making, guidance, executive actions and all matters capital markets. Continuing its ongoing disclosure effectiveness initiative on November 19, 2020, the SEC adopted amendments to the disclosures in Item 303 of Regulation S-K – Management’s Discussion & Analysis of Financial Conditions and Operations (MD&A). The proposed rule had been released on January 30, 2020 (see HERE). Like all recent disclosure effectiveness rule amendments and proposals, the rule changes are meant to modernize and take a more principles-based approach to disclosure requirements. In addition, the rule changes are intended to reduce repetition and disclosure of information that is not material.
The new rules eliminate Item 301 – Selected Financial Data – and amend Items 302(a) – Supplementary Financial Information and Item 303 – MD&A. In particular, the final rules revise Item 302(a) to replace the current tabular disclosure with a principles-based approach and revise MD&A to: (i) to
Drill Down On NASDAQ Audit Committee Requirements
I’ve written several times about Nasdaq listing requirements including the general listing requirements (see HERE) and the significant listing standards changes enacted in August of this year (see HERE). This blog will drill down on audit committees which are part of the corporate governance requirements for listed companies. Nasdaq Rule 5605 delineates the requirements for a Board of Directors and committees. The Nasdaq rule complies with SEC Rule 10A-3 related to audit committees for companies listed on a national securities exchange.
SEC Rule 10A-3
SEC Rule 10A-3 requires that each national securities exchange have initial listing and ongoing qualification rules requiring each listed company to have an audit committee comprised of independent directors. Although the Nasdaq rules detail its independence requirements, the SEC rule requires that at a minimum an independent director cannot directly or indirectly accept any consulting, advisory or other compensation or be affiliated with the company or any of its subsidiaries. The prohibition against compensation