強制仲裁条項は、もはやSECにとって問題ではなくなった
2025年9月17日、SEC（米国証券取引委員会）は従来の立場を転換し、企業の定款やその他の会社関係書類に強制仲裁条項が含まれていても、それ自体が登録届出書を有効と宣言するかどうかのSECの判断に影響を及ぼすものではないとする方針声明を発表した。
背景
SEC企業財務部（CorpFin）は、1933年証券法（「証券法」）および1934年証券取引法（「証券取引法」）に基づく提出書類を審査し、コメントを行っています。CorpFinによる審査の目的は、S-K規制およびS-X規制を含む連邦証券法に基づく開示要件、ならびに一般的な不正防止規定への準拠を確保することです。これらの要件はいずれも、誤解を招くことなく必要な開示を行うために重要な情報の開示を求めています。必要な開示の基準は、一般的に情報の重要性です。TSC Industries, Inc.対Northway, Inc.事件において、米国最高裁判所は、重要性を、合理的な投資家が入手可能な情報全体の中で、その総合的な情報構成を大幅に変更したと見なす可能性が相当に高い情報であると定義しました。
SECおよびCorpFinはいずれも、特定の取引の是非や、当該取引または企業が特定の投資家や市場全体にとって適切かどうかについて評価・判断を行うものではありません。審査の目的は、証券法に基づく開示要件への準拠を確保することにあります。その観点から、CorpFinは、特定の条項のメリットまたはデメリットに関して、より詳細なリスク要因の開示や明確な説明を求めることはありますが、開示の範囲を超えて、それらの是非自体を評価またはコメントする権限は有していません。ただし、SECは、特定の公的政策上の懸念に基づき、登録届出書を有効と宣言することを拒否する権限を有しています。
連邦証券法に基づく投資家の請求について仲裁を義務付ける強制仲裁条項を、定款や細則などのコーポレート・ガバナンス文書に盛り込むことについては、長年にわたり議論の的となってきました。強制仲裁条項は、株主に対し、裁判所で高額な証券集団訴訟を提起するのではなく、個別の証券請求について仲裁による解決を求めることができる点で、企業にとって有利な手段とされています。
これまでSECは、強制仲裁条項について、公的政策上の懸念を理由に問題視していることを示してきましたが、その際に用いてきた数少ない手段の一つが、登録届出書の効力発生の迅速化（アクセラレーション）を拒否することでした。SECは、公的政策上の懸念のみを理由として、登録届出書を有効と宣言するか否かについて無制限の裁量権を有しているわけではなく、連邦証券法に基づき権限を有する事項に限って判断することが求められています。SECが登録届出書を有効と宣言しない場合、企業は、20日間の経過後に登録届出書が自動的に有効となることを定める証券法第8条(a)に依拠せざるを得ません。本ブログの末尾に、証券法第8条(a)の概要を改めて整理した説明を掲載しています。
2025年9月17日、SECは公的政策に関する声明を発表し、発行体と投資家間の強制仲裁条項の存在は、証券法に基づく登録届出書の効力発生の迅速化（アクセラレーション）の判断に影響を与えないことを示しました。この方針変更は、連邦証券法が仲裁合意の執行を優先する連邦仲裁法（FAA）の方針に優先するものではないとする最近の最高裁判決や、連邦証券法が株主にクラスアクションでの請求権を保証するものではないとする判例を踏まえた結果です。
強制仲裁条項
前述のとおり、企業は、一般的な訴訟コストの削減やクラスアクション訴訟の回避手段として、投資家の請求に対する強制仲裁条項を好んで導入しています。連邦仲裁法（FAA）自体も、こうした契約条項について「有効で取り消し不能、かつ強制可能である」と明記しており、その効力を裏付けています。FAAの下では、仲裁条項は有効かつ強制可能な書面契約に含まれている必要がありますが、定款や細則は、企業とその役員、取締役、株主との間の有効かつ強制可能な契約として確立されていることが確立的な法理とされています。
こうした仲裁条項が普及するにつれて、多くの州が、定款や細則などの企業構成文書に強制仲裁条項を含めることを禁じる法律を制定し、多くの訴訟が発生しました。多くの場合、FAAが勝利し、裁判所は「強制仲裁合意の強制力を名前で直接的に、あるいは『仲裁の基本的属性に干渉する』などのより微妙な方法で制限する州法」は、FAAによって優先される可能性があると判断しました。
その後、SECは、連邦証券法がFAAに優先するかどうかを検討します。SECは以前、次の理由から、証券法がFAAに優先すると主張できると考えていました。(i) 発行体と投資家間の強制仲裁条項は、司法手続きの利用を妨げることにより、連邦証券法の権利放棄禁止規定に違反する可能性があること、(ii) そのような条項は、裁判所でのクラスアクション訴訟を妨げることにより、投資家が連邦証券法に基づく権利を保護するための個人訴訟を提起する能力を不当に制限する可能性があること、です。
しかし、最高裁判例を含む長年の判例を踏まえ、SECは現在、連邦証券法はFAAを優先するものではないと結論付けています。特に、権利放棄禁止規定やその他の連邦証券法の規定の文言のいずれにも、FAAが連邦証券法の請求には適用されないと明確に議会が意図したと解釈できる記述はありません。さらに、強制仲裁条項が一部の人々の連邦証券法に基づく私的請求の経済的動機を損なう可能性があるという理由だけで、FAAを上書きすることはできません。
判例などの分析に基づき、SECは、発行体と投資家間の強制仲裁条項の存在が、登録届出書の効力発生の迅速化の判断に影響しないと結論付けています。
SECは公的政策に関する声明の中で、「FAAが特定の発行体・投資家間の強制仲裁条項に適用されるかどうかは、委員会に施行権限が付与されていない連邦法と、当該条項を規律する州法その他の法域の独自の法律との交差点に関わる法的問題である」と指摘しています。つまり、仲裁条項の強制力の有無は、SECの権限の及ぶ範囲を超える事項であるということです。
第8条(a)の復習
証券法第8条(a)は、登録届出書およびその修正届出書の効力発生について規定しています。特に、この規定では、登録届出書は提出から20日後、またはSECが指定するそれ以前の日に自動的に効力を発生することとされています。第8条(b)は、登録届出書が「表面上、重大な点において不完全または不正確である」場合に、SECが第8条(a)に基づく効力発生を阻止する停止命令を発する権限を与えています。
実際には、企業は規則473(a)に基づき、登録届出書に「遅延修正」と呼ばれる文言を追加することで、第8条(a)の効力を回避しています。遅延修正の典型的な文言は、以下のようになります。
本予備目論見書に記載された情報は完全なものではなく、変更される可能性があります。当社は、証券取引委員会（SEC）に提出された登録届出書が効力を発生するまで、これらの証券を販売できません。本予備目論見書は、これらの証券を販売するための勧誘ではなく、また、当該販売が認められていない州やその他の法域においてこれらの証券を購入するための勧誘でもありません。
…そしてこの条項を盛り込むことで、第8条(a)の効力発生を回避することができます。その後、企業はSECとコメント・審査・修正のプロセスを経て、最終的にSECからコメントが解消されたことを通知されます。その後、企業はRule 461に基づき、登録届出書の効力発生の迅速化（アクセラレーション）をSECに申請する書簡を提出します。技術的には、この申請により、企業は「遅延修正」文言を削除し第8条(a)文言を追加した最終修正届出書を提出して20日間待つことなく、登録届出書の効力発生を加速させることが可能となります。
実務上、第8条(a)が使用されない理由は二つあります。第一に、企業およびその弁護士、監査人、引受人は、SECの審査を受けないことによる訴訟リスクがあまりにも大きいと考えていることです。もし登録届出書の開示内容に後に不備があると判明した場合、SECによる審査が通常行われていないことが、原告側弁護士の主張を補強する材料となります。
第二の理由は、20日後に効力を発生するS-1届出書には、価格情報を含め完全な内容が求められることです。従来のIPOやフォローオン・オファリングでは、企業は最終修正届出書に価格情報を記載するのは、効力発生日まで待ちます。これにより、企業は販売時点の市場状況を判断して最適な価格を設定することが可能となります。これは特に、引受人がIPOで企業の登録株式全てを買い取り、直ちに顧客やシンジケート・ブローカーに再販売する確定引受方式の取引において重要です。また、企業は効力発生前の通常10〜15日間に行われるロードショー中に得られるフィードバックをもとに、価格決定に反映させることもできます。
しかし、SECが登録届出書を有効と宣言しない場合、あるいは最近見られるように政府閉鎖などで宣言ができない場合には、リスクとリターンのバランスが変化し、第8条(a)が現実的な選択肢となります。
著者
ローラ・アンソニー弁護士
設立パートナー
アンソニー、リンダー＆カコマノリス
企業法務および証券法務事務所
証券弁護士ローラ・アンソニー氏とその経験豊富な法律チームは、中小規模の非公開企業、上場企業、そして上場予定の非公開企業に対して継続的な企業顧問サービスを提供しています。ナスダック、NYSEアメリカン、または店頭市場（例えばOTCQBやOTCQX）で上場を目指す企業も対象です。20年以上にわたり、Anthony, Linder & Cacomanolis, PLLC（ALC）は、迅速でパーソナライズされた最先端の法的サービスをクライアントに提供してきました。当事務所の評判と人脈は、投資銀行、証券会社、機関投資家、その他の戦略的提携先への紹介など、クライアントにとって非常に貴重なリソースとなっています。当事務所の専門分野には、1933年証券法の募集・販売および登録要件の遵守（レギュレーションDおよびレギュレーションSに基づく私募取引、PIPE取引、証券トークン・オファリング、イニシャル・コイン・オファリングを含む）が含まれますが、これに限定されません。規制A/A+オファリング、S-1、S-3、S-8フォームの登録申請、S-4フォームによる合併登録、1934年証券取引法の遵守（フォーム10による登録、フォーム10-Q、10-K、8-Kおよび14C情報・14A委任状報告書）、あらゆる形態の株式公開取引、合併・買収（リバースマージャーおよびフォワードマージャーを含む）、ナスダックやNYSEアメリカンを含む証券取引所のコーポレートガバナンス要件への申請および遵守、一般企業取引、一般契約および事業取引が含まれます。アンソニー氏と当事務所は、合併・買収取引において、買収対象企業と買収企業の双方を代理し、合併契約、株式交換契約、株式購入契約、資産購入契約、組織再編契約などの取引文書を作成します。ALC法務チームは、公開企業が連邦および州の証券法やSROs要件に準拠することを支援しており、15c2-11申請、社名変更、リバース・フォワードスプリット、本拠地変更などにも対応しています。アンソニー氏はまた、中堅・中小企業向けの業界ニュースのトップ情報源であるSecuritiesLawBlog.comの著者であり、企業財務に特化したポッドキャスト『LawCast.com: Corporate Finance in Focus』のプロデューサー兼ホストでもあります。当事務所は、ニューヨーク、ロサンゼルス、マイアミ、ボカラトン、ウェストパームビーチ、アトランタ、フェニックス、スコッツデール、シャーロット、シンシナティ、クリーブランド、ワシントンD.C.、デンバー、タンパ、デトロイト、ダラスなど、多くの主要都市でクライアントを代理しています。
アンソニー氏は、Crowdfunding Professional Association（CfPA）、パームビーチ郡弁護士会、フロリダ州弁護士会、アメリカ弁護士会（ABA）および連邦証券規制やプライベート・エクイティ・ベンチャーキャピタルに関するABA委員会など、さまざまな専門団体のメンバーです。パームビーチ郡およびマーティン郡のアメリカ赤十字社、スーザン・コーメン財団、オポチュニティ社（Opportunity, Inc.）、ニュー・ホープ・チャリティーズ、フォー・アーツ協会（Society of the Four Arts）、ノートン美術館、パームビーチ郡動物園協会、クラヴィス・パフォーミング・アーツ・センターなど、複数の地域社会慈善団体を支援しています。
アンソニー氏はフロリダ州立大学ロースクールを優秀な成績で卒業しており、1993年から弁護士として活動しています。
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Background
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New Subpart 1600 of Regulation S-K
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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
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
SEC Issues Guidance On New Pay Versus Performance Disclosure Rules
On February 10, 2023, the SEC published 15 new Compliance and Disclosure Interpretations (C&DI) related to the pay versus performance (“Pay vs. Performance”) disclosure rules which were, in turn, adopted in August, 2022 (see HERE) after seven years in the process.
The rules require companies to provide a table disclosing 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 will be 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 will be required to describe the relationships between the executive compensation actually paid and each of the performance measures, as well as the relationship between the company’s TSR and the
Financial Reporting Manual Updated
On January 30, 2023, the SEC’s Division of Corporation Finance updated its Financial Reporting Manual (“Manual”). The latest update is dated as of December 31, 2022. Although we attorneys like to leave the accounting to the accountants, the Financial Reporting Manual is a go to resource for all practitioners and is generally one of the many resources always open on my desktop.
As the preamble to the Manual states, it was originally created as internal guidance to the SEC staff. In 2008, in an effort to increase transparency of informal staff interpretations, the SEC posted a version of the Manual to its website. The SEC continues with its usual disclaimers that the manual is not formal guidance and that they can change their interpretations or views at any time, etc. Regardless, we all use it as a resource and in my years of experience, have never had the SEC take a counter-position to the Manual’s guidance unless there has been
Proposed Rules On Cybersecurity Disclosure
Earlier this year, the SEC published proposed rules on cybersecurity risk management, strategy, governance and incident disclosure by public companies. Although the comment period has passed, a final rule has not yet been issued. As of now, cybersecurity disclosures are encompassed within the general anti-fraud provisions including the requirement to disclose “such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading” as well SEC guidance last updated in 2018 (see HERE).
The proposed amendments would require, among other things, current reporting about material cybersecurity incidents and updates about previously reported cybersecurity incidents. The proposal also would require periodic reporting about a company’s policies and procedures to identify and manage cybersecurity risks; the company’s board of directors’ oversight of cybersecurity risk; and management’s role and expertise in assessing and managing cybersecurity risk and implementing cybersecurity policies and procedures. The proposal would further
SEC Proposed Mandatory Climate Disclosure Rules – Part 8
On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about greenhouse gas emissions (GHG), climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.
The proposed rules are enormous in scope, complexity, and ramifications with a polarizing comment response largely along party lines. The comment period ended June 17, 2022, after a relatively short, but necessary extension by the SEC. Despite the controversy, there is no doubt that the rules, even if somewhat modified, will be passed and public companies need to start preparing now. The recently published Reg Flex Agenda indicates we should see final rules in October 2022. The rules will require compliance with extraordinarily granular
SEC Proposed Mandatory Climate Disclosure Rules – Part 7
On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about greenhouse gas emissions (GHG), climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.
The proposed rules are enormous in scope, complexity, and ramifications with a polarizing comment response largely along party lines. The comment period ended June 17, 2022, after a relatively short, but necessary extension by the SEC. Despite the controversy, there is no doubt that the rules, even if somewhat modified, will be passed and public companies need to start preparing now. The recently published Reg Flex Agenda indicates we should see final rules in October 2022. The rules will require compliance with extraordinarily
SEC Proposed Mandatory Climate Disclosure Rules – Part 6
On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about greenhouse gas emissions (GHG), climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.
The proposed rules are heady and complex (490-page rules release) presenting an enormous scope, complexity and ramifications. As such, like the SPAC rules, I am breaking down the proposal in detail in a series of blogs.
In the first blog in this series, I provided some background and an introduction to the rules (see HERE). The second provided a high-level summary of the proposed rules including the phase in compliance schedule (see HERE). The third blog in the series discussed the
SEC Proposed Mandatory Climate Disclosure Rules – Part 5
On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about greenhouse gas emissions (GHG), climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements. As a natural result of the new disclosure requirements, management of companies will be required to implement disclosure controls and procedures, including methodologies for identifying and assessing risks, and attest to their effectiveness.
The proposed rules, which are heady and complex, initially only allotted for a 39-day comment period. Considering the size (490-page rules release), scope, complexity and ramifications, the marketplace pushed back on such a short window. On May 9, 2022, the SEC extended the comment period through June 17, 2022, and all
SEC Proposed Mandatory Climate Disclosure Rules – Part 4
On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about greenhouse gas emissions (GHG), climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.
The proposed rules, which are heady and complex, initially only allotted for a 39-day comment period. Considering the size (490-page rules release), scope, complexity and ramifications, the marketplace pushed back on such a short window. On May 9, 2022, the SEC extended the comment period through June 17, 2022, and all aspects of the industry are weighing in. Other than the small but powerful group of environmental activists and institutional investors that influenced the proposed rule, the vast majority of the commenters believe the
SEC Proposed Mandatory Climate Disclosure Rules – Part 3
On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.
The proposed rules would include a phase-in period for all registrants, with the compliance date dependent on the registrant’s filer status, and an additional phase-in period for Scope 3 greenhouse gas emissions disclosure.
The proposed rules, which are heady and complex, initially only allotted for a 39-day comment period. Considering the size (490-page rules release), scope, complexity and ramifications, the marketplace pushed back on such a short window. On May 9, 2022, the SEC extended the comment period through June 17, 2022, and all aspects of the industry are
SEC Proposed Mandatory Climate Disclosure Rules – Part 2
On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.
The proposed rules would include a phase-in period for all registrants, with the compliance date dependent on the registrant’s filer status, and an additional phase-in period for Scope 3 emissions disclosure.
The proposed rules, which are heady and complex, initially only allotted for a 39-day comment period. Considering the size (490-page rules release), scope, complexity and ramifications, the marketplace pushed back on such a short window. On May 9, 2022, the SEC extended the comment period through June 17, 2022.
In last week’s blog, I provided some background and
SEC Proposed Mandatory Climate Disclosure Rules – Part 1
On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.
The proposed rule changes would require a company to disclose information about (i) the company’s governance of climate-related risks and relevant risk management processes; (ii) how any climate-related risks identified by the company have had or are likely to have a material impact on its business and consolidated financial statements, including over the short, medium, or long term; (iii) how any identified climate-related risks have affected or are likely to affect the company’s strategy, business model, and outlook; and (iv) the impact of climate-related events (severe weather events
Updated Guidance On Confidential Treatment In SEC filings
In March 2019, the SEC adopted amendments to Regulation S-K as required by the Fixing America’s Surface Transportation Act (“FAST Act”) (see HERE). Among other changes, the amendments allow companies to redact confidential information from most exhibits without filing a confidential treatment request (“CTR”), including omitting schedules and exhibits to exhibits. Likewise, the amendments allow a company to redact information that is both (i) not material, and (ii) competitively harmful if disclosed without the need for a confidential treatment request. The enacted amendment only applies to material agreement exhibits under Item 601(b)(10) and not to other categories of exhibits, which would rarely contain competitively harmful information.
After the rule change, the SEC streamlined its procedures for granting CTR’s and for applying for extended confidential treatment on previously granted orders. The amendments to the CTR process became effective April 2, 2019. See HERE for a summary of confidential treatment requests. In December 2019, the SEC issued new guidance on confidential
SEC Issues Transitional FAQ On Regulation S-K Amendments
The recent amendments to Items 101, 103 and 105 of Regulation S-K (see HERE) went into effect on November 9, 2020, raising many questions as to the transition to the new requirements. In response to what I am sure were many inquiries to the Division of Corporation Finance, the SEC has issued three transitional FAQs.
The amendments made changes to Item 101 – description of business, Item 103 – legal proceedings, and Item 105 – Risk Factors of Regulation S-K.
FAQ – Form S-3 Prospectus Supplement
The first question relates to the impact on Form S-3 and in particular the current use of prospectus supplements for an S-3 that went into effect prior to November 9, 2020. In general, a Form S-3 is used as a shelf registration statement and a company files a prospectus supplement each time it takes shares down off that shelf (see HERE).
The prospectus supplement must meet the requirements of Securities Act Rule
SEC Adopts Amendments To Business Descriptions, Risk Factors And Legal Proceedings
Just eight months following the rule proposal (see HERE), on August 26, 2020, the SEC adopted final amendments to Item 101 – description of business, Item 103 – legal proceedings, and Item 105 – Risk Factors of Regulation S-K. The amendments make a more principles-based approach to business descriptions and risk factors, recognizing the significant changes in business models since the rule was adopted 30 years ago. The amendments to disclosures related to legal proceedings continue the current prescriptive approach. In addition, the rule changes are intended to improve the readability of disclosure documents, as well as discourage repetition and disclosure of information that is not material.
The Item 101 and Item 103 amendments only apply to domestic companies and foreign private issuer that elect to file using domestic company forms. The forms generally used by foreign private issuers (F-1, F-3, 20-F, etc.) do not have references to Items 101 and 103 of Regulation S-K but rather refer
New CDI On Mining Company Disclosures
In the 4th quarter of 2018, the SEC finalized amendments to the disclosure requirements for mining companies under the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”). See HERE. In addition to providing better information to investors about a company’s mining properties, the amendments were intended to more closely align the SEC rules with industry and global regulatory practices and standards as set out in by the Committee for Reserves International Reporting Standards (CRIRSCO). The amendments rescinded Industry Guide 7 and consolidated the disclosure requirements for registrants with material mining operations in a new subpart of Regulation S-K.
The final amendments require companies with mining operations to disclose information concerning their mineral resources and mineral reserves. Disclosures on mineral resource estimates were previously only allowed in limited circumstances. The rule amendments provided for a two-year transition period with compliance beginning in the first fiscal year on or after January 1, 2021.
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
Updated Disclosures for Mining Companies
In the 4th quarter of 2018, the SEC finalized amendments to the disclosure requirements for mining companies under the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”). The proposed rule amendments were originally published in June 2016. In addition to providing better information to investors about a company’s mining properties, the amendments are intended to more closely align the SEC rules with current industry and global regulatory practices and standards as set out in by the Committee for Reserves International Reporting Standards (CRIRSCO). In addition, the amendments rescind Industry Guide 7 and consolidate the disclosure requirements for registrants with material mining operations in a new subpart of Regulation S-K.
The final amendments require companies with mining operations to disclose information concerning their mineral resources and mineral reserves. Disclosures on mineral resource estimates were previously only allowed in limited circumstances. The rule amendments provide for a two-year transition period with compliance beginning in
Financial Statement Disclosure Relief Under Rule 3-13
Rule 3-13 of Regulation S-X allows a company to request relief from the SEC from the financial statement disclosure requirements if they believe that the financial information is burdensome and would result in disclosure of information that goes beyond what is material to investors. Consistent with the ongoing message of open communication and cooperation, the current SEC regime has been actively encouraging companies to avail themselves of this relief and has updated the CorpFin Financial Reporting Manual to include contact information for staff members that can assist.
As part of its ongoing disclosure effectiveness initiative, the SEC is also considering amendments to the financial statement disclosure process and the publication of further staff guidance. In addition to advancing disclosure changes, allowing for relief from financial statement requirements could help encourage smaller companies to access public markets, an ongoing goal of the SEC and other financial regulators. For a review of the October 2017 Treasury Department report to President Trump, including
SEC Amends Definition of “A Smaller Reporting Company”
On June 28, 2018, the SEC adopted the much-anticipated amendments to the definition of a “smaller reporting company” as contained in Securities Act Rule 405, Exchange Act Rule 12b-2 and Item 10(f) of Regulation S-K. The amendments come almost two years to the day since the initial publication of proposed rule changes (see HERE).
Among other benefits, it is hoped that the change will help encourage smaller companies to access US public markets. The amendment expands the number of companies that qualify as a smaller reporting company (SRC) and thus qualify for the scaled disclosure requirements in Regulation S-K and Regulation S-X. The SEC estimates that an additional 966 companies will be eligible for SRC status in the first year under the new definition.
As proposed, and as recommended by various market participants, the new definition of a SRC will now include companies with less than a $250 million public float as compared to the $75 million
ABA Comment Letter On Disclosures Under Regulation S-K
In December 2017, the American Bar Association (“ABA”) submitted its fourth comment letter to the SEC related to the financial and business disclosure requirements in Regulation S-K. Like the SEC’s ongoing Disclosure Effectiveness Initiative, the ABA has a Disclosure Effectiveness Working Group as part of its Federal Regulation of Securities Committee (of which I am a member) and its Law and Accounting Committee.
The ABA comment letter begins with a general discussion of the materiality concept, which is the underlying basis of disclosure, and then provides input on various specific areas of disclosure under Regulation S-K. The ABA comment letter specifically responded to the SEC concept release and request for public comment on sweeping changes to certain business and financial disclosure requirements issued on April 15, 2016. See my two-part blog on the S-K Concept Release HERE and HERE.
I’ve been writing about Regulation S-K and the SEC Disclosure Initiative since at least early 2015. Although consistently a
The SEC’s 2018 Flex Regulatory Agenda
In December 2017, the SEC posted its latest version of its semiannual regulatory agenda and plans for rulemaking with the U.S. Office of Information and Regulatory Affairs. Prior to issuing the agenda, SEC Chair Jay Clayton had promised that the SEC’s regulatory agenda’s would be “more realistic” and he seems to have been true to his word.
The agenda is separated into two categories: (i) Existing Proposed and Final Rule Stages; and (ii) Long-term Actions. The Existing Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The semiannual list published in July 2017 only contained 33 legislative action items to be completed in a 12-month time frame, and the newest list is down to 26 items, whereas the prior fall 2016 list had 62 items.
The Unified Agenda of Regulatory and Deregulatory Actions
The Office of Information and Regulatory Affairs, which is an executive office of the
SEC Issues Final Rules Requiring Links To Exhibits
On March 1, 2017, the SEC passed a final rule requiring companies to include hyperlinks to exhibits in filings made with the SEC. The amendments require any company filing registration statements or reports with the SEC to include a hyperlink to all exhibits listed on the exhibit list. In addition, because ASCII cannot support hyperlinks, the amendment also requires that all exhibits be filed in HTML format. The rule change was made to make it easier for investors and other market participants to find and access exhibits listed in current reports, but that were originally provided in previous filings.
The SEC first proposed the rule change on August 31, 2016, as discussed in my blog HERE. The new rule continues the SEC’s Division of Corporation Finance’s ongoing Disclosure Effectiveness Initiative. I anticipate that this initiative will not only continue but gain traction in the coming years under the new administration as, hopefully, more duplicative, antiquated and immaterial requirements come
Yahoo Hacking Scandal And Obligations Related To Cybersecurity
On September 26, 2016, Senator Mark R. Warner (D-VA), a member of the Senate Intelligence and Banking Committees and cofounder of the bipartisan Senate Cybersecurity Caucus, wrote a letter to the SEC requesting that they investigate whether Yahoo, Inc., fulfilled its disclosure obligations under the federal securities laws related to a security breach that affected more than 500 million accounts. Senator Warner also requested that the SEC re-examine its guidance and requirements related to the disclosure of cybersecurity matters in general.
The letter was precipitated by a September 22, 2016, 8-K and press release issued by Yahoo disclosing the theft of certain user account information that occurred in late 2014. The press release referred to a “recent investigation” confirming the theft of user account information associated with at least 500 million accounts that was stolen in late 2014. Just 13 days prior to the 8-K and press release, on September 9, 2016, Yahoo filed a preliminary 14A filing with
SEC Issues Proposed Amendments To Item 601 Of Regulation S-K Related To Exhibits
On August 31, 2016, the SEC issued proposed amendments to Item 601 of Regulation S-K to require hyperlinks to exhibits in filings made with the SEC. The proposed amendments would require any company filing registration statements or reports with the SEC to include a hyperlink to all exhibits listed on the exhibit list. In addition, because ASCII cannot support hyperlinks, the proposed amendment would also require that all exhibits be filed in HTML format.
This newest proposed rule change to Regulation S-K is part of the SEC Division of Corporation Finance’s Disclosure Effectiveness Initiative. At the end of this blog, I include an up-to-date summary of the proposals and request for comment related to the ongoing Disclosure Effectiveness Initiative.
Background
On April 15, 2016, the SEC issued a 341-page concept release and request for public comment on sweeping changes to certain business and financial disclosure requirements in Regulation S-K (“S-K Concept Release”). The S-K Concept Release contained a discussion and
SEC Requests Comment On Changes To Subpart 400 To Regulation S-K
On August 25, 2016, the SEC requested public comment on possible changes to the disclosure requirements in Subpart 400 of Regulation S-K. Subpart 400 encompasses disclosures related to management, certain security holders and corporate governance. The request for comment is part of the ongoing SEC Division of Corporation Finance’s Disclosure Effectiveness Initiative and as required by Section 72003 of the FAST Act.
Background
The topic of disclosure requirements under Regulations S-K and S-X as pertains to financial statements and disclosures made in reports and registration statements filed under the Exchange Act of 1934 (“Exchange Act”) and Securities Act of 1933 (“Securities Act”) has come to the forefront over the past couple of years. The purpose of the Disclosure Effectiveness Initiative is to assess whether the business and financial disclosure requirements continue to provide the information investors need to make informed investment and voting decisions.
Regulation S-K, as amended over the years, was adopted as part of a uniform disclosure initiative
SEC Issues Proposed Regulation S-K And S-X Amendments
On July 13, 2016, the SEC issued a 318-page proposed rule change on Regulation S-K and Regulation S-X to amend disclosures that are redundant, duplicative, overlapping, outdated or superseded (S-K and S-X Amendments). The proposed rule changes follow the 341-page concept release and request for public comment on sweeping changes to certain business and financial disclosure requirements issued on April 15, 2016. See my two-part blog on the S-K Concept Release HERE and HERE.
The proposed S-K and S-X Amendments are intended to facilitate the disclosure of information to investors while simplifying compliance efforts by companies. The proposed S-K and S-X Amendments come as a result of the Division of Corporation Finance’s Disclosure Effectiveness Initiative and as required by Section 72002 of the FAST Act. Prior to the issuance of these S-K and S-X Amendments, on June 27, 2016, as part of the same initiative, the SEC issued proposed amendments to the definition of “Small Reporting Company” (see
SEC Proposes Amendments To Definition Of “Small Reporting Company”
On June 27, 2016, the SEC published proposed amendments to the definition of “smaller reporting company” as contained in Securities Act Rule 405, Exchange Act Rule 12b-2 and Item 10(f) of Regulation S-K. The amendments would expand the number of companies that qualify as a smaller reporting company and thus qualify for the scaled disclosure requirements in Regulation S-K and Regulation S-X. The rule change follows the SEC concept release and request for public comment on sweeping changes to the business and financial disclosure requirements in Regulation S-K. Throughout the SEC Concept Release, it referenced the scaled and different disclosure requirements for the different categories of company and affirmed that it was evaluating and considering changes to the eligibility criteria for each.
If the rule change is passed, the number of companies qualifying as a smaller reporting company will increase from 32% to 42% of all reporting companies.
The proposed rule change follows the SEC Advisory Committee on
SEC Issues Concept Release On Regulation S-K; Part 2
On April 15, 2016, the SEC issued a 341-page concept release and request for public comment on sweeping changes to certain business and financial disclosure requirements in Regulation S-K (“S-K Concept Release”). This blog is the second part discussing that concept release. In Part I, which can be read HERE, I discussed the background and general concepts for which the SEC provides discussion and seeks comment. In this Part II, I will discuss the rules and recommendations made by the SEC and, in particular, those related to the 100, 200, 300, 500 and 700 series of Regulation S-K.
Background
The fundamental tenet of the federal securities laws is defined by one word: disclosure. In fact, the SEC neither reviews nor opines on the merits of any company or transaction, but only upon the appropriate disclosure, including risks, made by that company. However, excessive rote immaterial disclosure can dilute the material important information regarding that particular company and have the
SEC Issues Concept Release On Regulation S-K; Part 1
On April 15, 2016, the SEC issued a 341-page concept release and request for public comment on sweeping changes to certain business and financial disclosure requirements in Regulation S-K (“S-K Concept Release”). This blog is the first part in a series discussing that concept release. The S-K Concept Release is part of the SEC Disclosure Effectiveness Initiative mandated by the JOBS Act.
The fundamental tenet of the federal securities laws is defined by one word: disclosure. In fact, the SEC neither reviews nor opines on the merits of any company or transaction, but only upon the appropriate disclosure, including risks, made by that company.
This is the first blog in a two-part series on the S-K Concept Release. In this Part I, I will discuss the background and general concepts for which the SEC provides discussion and seeks comment. In Part II of the series I will discuss the rules and recommendations made by the SEC and, in particular, those
Responding To SEC Comments
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 to enhance such disclosures as to each particular issuer. CorpFin will also be cognizant of the anti-fraud provisions of the federal securities laws and may refer a matter to the Division of Enforcement where material concerns arise over the adequacy and accuracy of reported information or other securities law violations, including violations of the Section 5 registration requirements. CorpFin has an Office of Enforcement Liason in that regard.
CorpFin’s review and responsibilities can be described with one word: disclosure!
CorpFin selectively reviews filings, although generally all first-time filings, such as an S-1 for an initial public offering or Form 10 registration under
SEC Gives Insight On 2016 Initiatives
SEC Chair Mary Jo White gave a speech at the annual mid-February SEC Speaks program and, as usual, gave some insight into the SEC’s focus in the coming year. This blog summarized Chair White’s speech and provides further insight and information on the topics she addresses.
Consistent with her prior messages, Chair White focuses on enforcement, stating that the SEC “needs to go beyond disclosure” in carrying out its mission. That mission, as articulated by Chair White, is the protection of investors, maintaining fair, orderly and efficient markets, and facilitating capital formation. In 2015 the SEC brought a record number of enforcement proceedings and secured an all-time high for penalty and disgorgement orders. The primary areas of focus included cybersecurity, market structure requirements, dark pools, microcap fraud, financial reporting failures, insider trading, disclosure deficiencies in municipal offerings and protection of retail investors and retiree savings. In 2016 the SEC intends to focus enforcement on financial reporting, market structure, and the
SEC’s Financial Disclosure Requirements For Sub-Entities Of Registered Companies
As required by the JOBS Act, in 2013 the SEC launched its Disclosure Effectiveness Initiative and has been examining disclosure requirements under Regulation S-K and Regulation S-X and methods to improve such requirements. In September 2015, the SEC issued a request for comment related to the Regulation S-X financial disclosure obligations for certain entities other than the reporting entity. In particular, the SEC is seeking comments on the current financial disclosure requirements for acquired businesses, subsidiaries not consolidated, 50% or less owned entities, issuers of guaranteed securities, and affiliates whose securities collateralize the reporting company’s securities.
It is important to note that the SEC release relates to general financial statement and reporting requirements, and not the modified reporting requirements for smaller reporting companies or emerging growth companies. In particular, Article 8 of Regulation S-X applies to smaller reporting companies and Article 3 to those that do not qualify for the reduced Article 8 requirements. The SEC discussion and request for
SEC Small Business Advisory Committee Public Company Disclosure Recommendations
On September 23, 2015, the SEC Advisory Committee on Small and Emerging Companies (the “Advisory Committee”) met and finalized its recommendation to the SEC regarding changes to the disclosure requirements for smaller publicly traded companies.
By way of reminder, the 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.”
The topic of disclosure requirements for smaller public companies under the Securities Exchange Act of 1934 (“Exchange Act”) has come to the forefront over the past year. In early December the House passed the Disclosure Modernization and
ABA Federal Regulation Of Securities Committee Makes Recommendations On Regulation S-K
On March 6, 2015, the Federal Regulation of Securities Committee (“Committee”) of the American Bar Association (“ABA”) submitted its second comment letter to the SEC making recommendations for changes to Regulation S-K. The Committee’s recommendations are aimed at improving the quality of business and financial information that must be disclosed in periodic reports and registration statements in accordance with Regulation S-K. I note that I am a member of the Committee, but not a member of the sub-committee that drafted the comment letter, nor did I have any input in regard to the comment letter.
The recommendations fall into four major categories: materiality; duplication; consolidation of existing interpretive and other guidance from the SEC; and obsolescence. The recommendations in the letter are based on themes articulated by the Division of Corporation Finance in a 2013 report to Congress mandated by the JOBS Act and subsequent speeches by the Division’s Director, Keith F. Higgins.
Materiality
The Committee’s letter recommends that
Proposed Amendments To Disclosure Of Hedging Policies For Officers, Directors And Employees
On February 9, 2015, the SEC issued proposed rules that would increase corporate disclosure of company hedging policies for directors and employees in annual meeting proxy statements. The new rules are part of the ongoing rule-making requirements mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). In particular, the new rule would implement Section 14(j) of the Securities Exchange Act of 1934 (“Exchange Act”), which requires annual meeting proxy or consent solicitation statements to disclose whether employees or members of the board are permitted to purchase financial instruments, such as options, swaps, collars and the like, to hedge price decreases in the company securities.
The proposed rules regulate disclosure of company policy as opposed to directing the substance of that policy or the underlying hedging activities. In fact, the rule specifically does not require a company to prohibit a hedging transaction or otherwise adopt specific policies. The rule would require disclosure about whether directors, officers and
First Issuer Completes NASAA Coordinated Review For Regulation A Offering
ABA Journal’s 10th Annual Blawg 100
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The first issuer has completed the NASAA coordinated review process to qualify to sell securities in multiple states under Regulation A. As the first and only issuer to complete this process, the issuer (Groundfloor Finance, Inc.) took the time to write a comment letter to the SEC with respect to its Regulation A+ rulemaking and in particular to discuss its experience with the NASAA coordinated review process. The issuer’s comment letter was followed by a letter to SEC Chair Mary Jo White from the House Financial Services Committee requesting that the SEC study the NASAA Coordinated Review Program.
The Coordinated Review Process
The NASAA coordinated review process is well put together and seems to have a focus on both investor protection and supportive assistance for the issuer. An issuer elects to complete the coordinated review process by completing a Form CR-3b and submitting the application together with a copy of the completed Form
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
Risk Factor Disclosures For Reporting Public Companies
ABA Journal’s 10th Annual Blawg 100
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A risk factor disclosure involves a discussion of circumstances, trends, or issues that may affect a company’s business, prospects, operating results, or financial condition. Risk factors must be disclosed in registration statements under the Securities Act and registration statements and reports under the Exchange Act. In addition, risk factors must be included in private offering documents where the exemption relied upon requires the delivery of a disclosure document, and is highly recommended even when such disclosure is not statutorily required.
The Importance of Risk Factors
Risk factors are one of the most often commented on sections of a registration statement. The careful crafting of pertinent risk factors can provide leeway for more robust discussion on business plans and future operations, and can satisfy a wide arrange of SEC concerns regarding existing financial and non-financial matters (such as potential default provisions in debt, dilution matters, inadvertent rule violations, etc.).
Although smaller reporting companies are
Public Company and Affiliate Stock Buyback Rules; Rule 10b-18
ABA Journal’s 10th Annual Blawg 100
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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 Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”). Exchange Act Rule 10b-18 provides issuers 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 Exchange Act when issuers bid for or repurchase their common stock in the open market in accordance with the Rule’s manner, timing, price and volume conditions. Each of the four main conditions of Rule 10b-18 must be satisfied on each day that a repurchase is made.
Sections 9 and 10 of the Exchange Act are the general anti-fraud and anti-manipulation provisions under the Act. Section 9(a)(2) of the Exchange Act makes it unlawful for any person to, directly or indirectly, create
The DPO Process Including Form S-1 Registration Statement Requirements
One of the methods of going public is directly through a public offering. In today’s financial environment, many Issuers are choosing to self-underwrite their public offerings, commonly referred to as a Direct Public Offering (DPO). Management of companies considering a going public transaction have a desire to understand the required disclosures and content of a registration statement. This blog provides that information.
Pursuant to Section 5 of the Securities Act of 1933, as amended (“Securities Act”), it is unlawful to “offer” or “sell” securities without a valid effective registration statement unless an exemption is available. Companies desiring to offer and sell securities to the public with the intention of creating a public market or going public must file with the SEC and provide prospective investors with a registration statement containing all material information concerning the company and the securities offered. Currently all domestic Issuers must use either form S-1 or S-3. Form S-3 is limited to larger filers with
Mergers and Acquisitions; Merger Documents Outlined
An Outline Of the Transaction
The Confidentiality Agreement
Generally the first step in an M&A deal is executing a confidentiality agreement and letter of intent. These documents can be combined or separate. If the parties are exchanging information prior to reaching the letter of intent stage of a potential transaction, a confidentiality agreement should be executed first.
In addition to requiring that both parties keep information confidential, a confidentiality agreement sets forth important parameters on the use of information. For instance, a reporting entity may have disclosure obligations in association with the initial negotiations for a transaction, which would need to be exempted from the confidentiality provisions. Moreover, a confidentiality agreement may contain other provisions unrelated to confidentiality such as a prohibition against
SEC Guidance On Social Media And Websites For Company Announcements And Communications- Part I
On April 2, 2013, the Securities Exchange Commission (“SEC”) issued a report confirming that companies can use social media, such as Facebook and Twitter, to make company announcements in compliance with Regulation Fair Disclosure (Regulation FD) as long as investors are alerted as to which social media outlet is being used by the company. The report was issued following an investigation into a Facebook posting made by Reed Hastings, CEO of Netflix. In the report the SEC stated that previously published guidance on the use of Company websites was applicable to the use of social media. Accordingly, a review of the SEC guidance on the use of company websites is in order.
Background
Regulation FD requires that companies take steps to ensure that material information is disclosed to the general public in a fair and fully accessible manner such that the public as a whole has simultaneous access to the information. Regulation FD is designed to ensure that
Necessity of Background Searches on Officers and Directors as Part of Due Diligence Prior to a Reverse Merger or IPO
If you are a private company looking to go public on the OTCBB, securities attorney Laura Anthony provides expert legal advice and ongoing corporate counsel. Ms. Anthony counsels private and small public companies nationwide regarding reverse mergers, corporate transactions and all aspects of securities law.
Many private companies go public either through a reverse merger with a public shell or initial public offering (IPO) process. A reverse merger allows a private company to go public by purchasing a controlling percentage of shares of a public shell company and merging the private company into the shell. An initial public offering is where the private company files a registration statement with the Securities and Exchange Commission and once the registration statement is effective proceeds to sell stock either directly (a DPO) or more commonly through an underwriter.
It is very important that management of public shells and underwriters conduct a background check on the private company’s officers and directors prior to embarking
