All posts by Cydney Posner

Senators urge SEC to institute moratorium on non-COVID-19-related rulemaking

The SEC has announced that, in light of the challenges associated with COVID-19 and particularly the difficulty associated with submission of comment letters, it will not take formal action before April 24 on a number of different proposed rulemakings with comment periods otherwise set to expire in March. Of course, the SEC has historically been open to consider comments submitted after the deadline but before adoption. The purpose of this extension was to expressly allow commenters additional time to comment if needed.  Apparently, however, the SEC’s action was not enough for two Senators on the Senate Banking Committee, ranking member Sherrod Brown and Chris Van Hollen. 

SEC adopts carve-out from the auditor attestation requirement of SOX 404(b) for low-revenue companies

On March 12, the SEC voted (by a vote of three to one, with Commissioner Allison Lee dissenting) to approve amendments to the accelerated filer and large accelerated filer definitions to provide a narrow carve-out for companies that qualify as smaller reporting companies (SRCs) and reported less than $100 million in annual revenues in the most recent fiscal year for which audited financial statements were available. Most significantly, under the final amendments, companies qualifying for the carve-out will no longer be subject to the SOX 404(b) requirement to have an auditor attestation report on internal control over financial reporting (ICFR), a requirement that applies to accelerated and large accelerated filers. In adopting these amendments, the SEC said that the amendments will “more appropriately tailor the types of issuers that are included in the definitions, thereby reducing unnecessary burdens and compliance costs for certain smaller issuers while maintaining investor protections. The amendments are consistent with the Commission’s and Congress’s historical practice of providing scaled disclosure and other accommodations to reduce unnecessary burdens for new and smaller issuers.” The new rules will become effective 30 days after publication in the Federal Register.

Guidance provides regulatory flexibility regarding annual meetings

Today, in light of the spread of COVID-19, the SEC announced new Corp Fin staff guidance regarding annual meetings.  Because of limitations on the ability to hold in-person annual meetings as a result of health and travel concerns, the staff guidance “provides regulatory flexibility to companies seeking to change the date and location of the meetings and use new technologies, such as ‘virtual’ shareholder meetings that avoid the need for in-person shareholder attendance, while at the same time ensuring that shareholders and other market participants are informed of any changes.” 

SEC adopts changes to accelerated filer definition

Yesterday, the SEC cancelled an open meeting that had been scheduled to consider the proposal to create an exemption from the SOX 404(b) auditor attestation requirement for low-revenue smaller reporting companies. (See this PubCo post.)  True to form, the SEC nonetheless went ahead and adopted the rule amendments largely as proposed, with Commissioner Allison Lee dissenting.  (BTW, all so predictable, I wrote that sentence two days ago.)  The final rules were adopted today, and the rules and related press release have now been posted. The amendments revise the accelerated filer and large accelerated filer definitions by providing a narrow carve-out for companies that qualify as smaller reporting companies (SRCs) and reported less than $100 million in annual revenues in the most recent fiscal year for which audited financial statements were available. The final rule will become effective 30 days after publication in the Federal Register.  Watch this space for an updated post with more details of the final rules and Commissioner statements.

Corp Fin operating status

Corp Fin has issued an announcement regarding Corp Fin’s operating status, in light of the impact of the coronavirus. Not to worry—Corp Fin is still open and operating, but many Corp Fin staff members are “teleworking.” (Apparently, according to the WSJ,  an employee at the SEC was “referred for novel coronavirus testing.”) Nonetheless, Corp Fin continues “to conduct normal business functions,” including reviewing filings and accelerating registration statements under normal time frames—at least that’s the plan.

From “Who’s Who to who’s he”—should a former CEO stay on the board?

Should a CEO that retires or otherwise steps down from his or her position remain on the board as Chair or, as seems to be a recent trend, even as Executive Chair?  That’s the question discussed in this article from Fortune. Probably, we can all think of examples of former CEOs who, for one reason or another, don’t entirely cut their ties, and instead become board members or executive chairs. Sometimes it’s strictly to assist in the transition on a short-term basis; sometimes it’s because stepping away created a “psychological crisis” for the former top dog: “They’re leaving behind power, fame, income, even their identity—as one ex-CEO put it, ‘You’re going from Who’s Who to who’s he?’” In any event, suggested the author, it’s typically a call for the board to make, taking into account this question: will the appointment be for the benefit of the shareholders or the former CEO?

New report on California board gender diversity mandate

As required by SB 826, California’s board gender diversity law, the California Secretary of State has posted its March 2020 report on the status of compliance with the new law. The report combines information gathered in the July 2019 report (see this PubCo post) with data for the additional six-month period of July 1, 2019 through December 31, 2019. The report counts 625 publicly held corporations that identified principal executive offices in California in their 2019 10-Ks, but indicates that only 330 of these “impacted corporations” had filed a 2019 California Publicly Traded Corporate Disclosure Statement, which would reflect their compliance with the board gender diversity requirement. Of the 330 companies that had filed, 282 reported that they were in compliance with the board gender diversity mandate.