Tag: Compliance and Disclosure Interpretations
Securities Act and FPI Exchange Act forms CDIs update
Corp Fin continues its project of updating CDIs. This new tranche relates to effectiveness of Form S-3 relative to timing of filing of Forms 10-K and proxy statements, allowing non-automatically effective Forms S-3 to be declared effective during the period between the filing of the Form 10-K and the definitive proxy statement. The CDIs also relate to foreign private issuer filings and withdraw a few CDIs to reflect the vacatur by a Federal court of the repurchase modernization rules. The new, revised and withdrawn CDIs are summarized below.
Corp Fin issues new and revised Securities Act CDIs—primarily Reg A and Reg D
Corp Fin has just issued a slew of new and revised CDIs regarding the Securities Act and related rule and forms—primarily Reg A and Reg D. Some are updates that relate back to the 2020 amendments designed to harmonize and simplify the patchwork universe of private offering exemptions. (See this PubCo post.) There are also a few CDIs related to Reg Crowdfunding. And, in a burst of housekeeping, Corp Fin has also withdrawn a number of mostly ancient CDIs. The highlights here are two new CDIs under Rule 502: New Question 256.35 and New Question 256.36. CDI 256.35 outlines factors that should be used—and how they should be used—in applying a reasonableness standard to assess accredited investor status. CDI 256.36 reflects a new no-action letter describing how, in a high minimum investment offering, an issuer could reasonably conclude that reasonable steps have been taken to verify accredited investor status—new guidance that is expected to simplify the private offering process. The CDIs are summarized below and, for revised CDIs, a ink to the prior version is included.
New CDIs related to M&A
Corp Fin has just posted some new CDIs related to M&A transactions, more specifically, a revised CDI related to Form S-4 and lock-up agreements and a new group of CDIs related primarily to material changes in tender offers. The CDIs are summarized below.
Corp fin posts two new CDIs on Schedules 13D and 13G
Corp Fin has posted two new CDIs regarding filing of Schedules 13D and 13G under Exchange Act Sections 13(d) and 13(g) and related Rule 13d-1. The new CDIs address issues related to determining, for purposes of eligibility to file a Schedule 13G, whether the shareholder acquired the securities with the purpose or effect of changing or influencing control of the issuer. One of the CDIs suggests that, in the context of Schedule 13G eligibility, the process of shareholder engagement with management might be trickier to navigate than perhaps originally contemplated.
Corp Fin issues new CDIs on cybersecurity incident disclosure
Corp Fin has just issued a new set of CDIs under Form 8-K, Item 1.05, Material Cybersecurity Incidents. The SEC adopted final rules regarding cybersecurity disclosure in 2023, requiring companies “to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance.” Under the final rules, if a public company experiences a cybersecurity incident that the company determines to be material, the company is required to file a Form 8-K under new Item 1.05, describing the “material aspects of the nature, scope, and timing of the incident, and the material impact or reasonably likely material impact on the registrant, including its financial condition and results of operations.” The materiality determination regarding a cybersecurity incident must be made “without unreasonable delay” after discovery of the incident. To the extent that the required information has not been determined or is unavailable at the time of the required filing, the company is required to include a statement to that effect in the filing and then file an amendment to its Form 8-K containing that information within four business days after the company, without unreasonable delay, determines the information or the information becomes available. (See this PubCo post.) Generally, the new CDIs address Form 8-K Item 1.05 filings in the context of cybersecurity incidents that involve ransomware attacks that result in a disruption in operations or the exfiltration of data. Summaries are below, but each CDI number below is linked to the CDI on the SEC website, so you can easily read the version in full.
Corp Fin adds one more new CDI on Form 8-Ks for material cybersecurity incidents
A few days ago, Corp Fin issued three new CDIs relating to delays in reporting material cybersecurity incidents on Form 8-K. Those CDIs, together with the Department of Justice Material Cybersecurity Incident Delay Determinations, addressed questions related to the Attorney General’s determination—or not—that disclosure of the incident on Form 8-K would pose a substantial risk to national security or public safety. (See this PubCo post.) Yesterday afternoon, Corp Fin added a new CDI on a closely related topic—the impact of a DOJ consultation on a determination, for reporting purposes, about the materiality of the incident itself. As Corp Fin Director Erik Gerding observed in a speech yesterday on cybersecurity disclosure, the CDI was intended to ensure that companies are not deterred from consulting with the DOJ or other national security agencies. The new CDI can be found under the caption Exchange Act Forms, in Section 104B, Item 1.05 Material Cybersecurity Incidents. A summary is below, but the CDI number is linked to the CDI on the SEC website, so you can easily read the version in full.
Corp Fin issues new CDIs on delaying Form 8-Ks for material cybersecurity incidents
Corp Fin has just released some new CDIs, summarized below, relating to material cybersecurity incidents. As you know, in July, the SEC voted, three to two, to adopt final rules on cybersecurity disclosure, which includes a requirement for material incident reporting on Forms 8-K and 6-K. Compliance with the 8-K and 6-K incident disclosure requirements will be required for all companies other than smaller reporting companies beginning on December 18, 2023. SRCs will have an additional 180 days deferral. (See this PubCo post.) The new CDIs can all be found under the caption Exchange Act Forms, in a new Section 104B, Item 1.05 Material Cybersecurity Incidents. Summaries are below, but each CDI number is linked to the CDI on the SEC website, so you can easily read the version in full.
Corp Fin releases more new CDIs on pay versus performance
Yesterday, Corp Fin released yet another group of new and revised CDIs, these relating to pay-versus-performance disclosure. (See this PubCo post.) Several of the new CDIs address issues regarding peer groups and some provide advice about handling transitions in company status. A couple of the CDIs revise responses that Corp Fin provided in the February and October PVP CDIs. Summaries are below, but each CDI number is linked to the CDI on the SEC website, so you can easily read the version in full.
Happy Thanksgiving!
Corp Fin posts new CDIs regarding pay versus performance
Corp Fin has posted some new CDIs on pay versus performance. In August last year, the SEC finally adopted a new rule requiring disclosure of information reflecting the relationship between executive compensation actually paid by a company and the company’s financial performance—a new rule that had been 12 years in the making, mandated in 2010 by Dodd-Frank. (See this PubCo post.) The final amendments added new Item 402(v) of Reg S-K, which requires companies to describe the relationship between executive compensation actually paid and the financial performance of the company for the five most recently completed fiscal years (three for smaller reporting companies) in proxy or information statements in which executive compensation disclosure is required. Generally, for most companies, the new disclosures were first required for the 2023 proxy season. Apparently some issues cropped up, reflected in these new CDIs.
New CDIs on stock buybacks and foreign private issuers
In May, the SEC adopted a proposal intended to modernize and improve disclosure regarding company stock repurchases. One fortunate aspect of the final rules—for domestic companies, that is—was that the new rule did away with the proposed new Form SR for reporting of daily repurchase data by domestic companies and, instead, moved to quarterly reporting of detailed quantitative information on daily repurchase activity, to be filed as exhibits to companies’ periodic reports. But that was not the case for foreign private issuers. The final rules require FPIs that report on FPI forms to disclose daily quantitative repurchase data at the end of every quarter on new Form F-SR, due 45 days after the end of the FPI’s fiscal quarter. Some commenters on the proposal had suggested exempting FPIs that already make repurchase disclosure under home-country rules, but the SEC elected not to do so in light of its view that the detailed disclosure would be beneficial for all investors in companies that conduct repurchases. The SEC noted, however, that, if an FPI’s home country disclosures furnished on Form 6-K satisfy the Form F-SR requirements, it can incorporate those disclosures by reference into its Form F-SR. (See this PubCo post.)
Now, Corp Fin has issued three new CDIs, summarized below, related to new Form F-SR addressing reporting in the absence of repurchases and reporting for the final fiscal quarter.
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