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.”
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 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.
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?
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.
As seems to be common practice these days, the SEC cancelled its open meeting scheduled for this morning and instead went ahead and posted its proposal to amend the rules to harmonize and simplify the framework for private securities offering exemptions. Here is the 341-page proposing release and the related press release. The proposal draws on input received in response to the SEC’s concept release issued in June of last year (see this PubCo post), which sought public comment on ways to promote capital formation, to harmonize and streamline the patchwork universe of private placement exemptions and “to expand investment opportunities while maintaining appropriate investor protections.” Currently, the framework has 10 different exemptions or safe harbors, with different sets of requirements. As SEC Chair Jay Clayton said in a 2018 speech, the current framework would not likely exist as it is if the SEC were starting with blank slate. The comment period will be open for 60 days.
Last week, SEC officials suggested that the SEC might provide relief to address the impact of the coronavirus (see this PubCo post), and today, the SEC came through, issuing an order providing “conditional regulatory relief for certain publicly traded company filing obligations.” As SEC Chair Jay Clayton observed, the “health and safety of all participants in our markets is of paramount importance. While timely public filing of Exchange Act reports is a cornerstone of well-functioning markets, we recognize that this situation may prevent certain issuers from compiling these reports within required timeframes.” According to the order, a number of companies have advised the staff that the coronavirus “may present challenges in timely meeting certain of their obligations under the federal securities laws. These entities may include U.S. companies with significant operations in the affected areas, as well as companies located in those regions.” The SEC encourages companies to contact SEC staff with questions or matters of particular concern, such as administrative issues related to inability to obtain a required signature due to a quarantine or other issues that may need to be addressed on a case-by-case basis.