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

Nasdaq Adopts New Reverse Split Rule Change

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

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

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.
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SEC Publishes New C&DI On Pay Versus Performance Rules

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

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 1

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

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 27th 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

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