Tag: Compliance and Disclosure Interpretations
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.
Corp Fin issues some new CDIs on Rule 10b5-1 plans
On Friday afternoon, Corp Fin issued several new CDIs regarding Rule 10b5-1 plans. As you may recall, in December last year, the SEC adopted new amendments to the rules regarding Rule 10b5-1 plans. These amendments added new conditions to the affirmative defense of Rule 10b5-1(c) designed to address concerns about abuse of the rule by opportunistic trading on the basis of material non-public information. Among other changes, Rule 10b5-1(c)(1) was amended to apply a cooling-off period to persons other than the issuer, impose a good-faith certification requirement on directors and officers, limit the ability of persons other than the issuer to use multiple overlapping Rule 10b5-1 plans, limit the use of single-trade plans by persons other than the issuer to one single-trade plan in any 12-month period, and add a condition that all persons entering into Rule 10b5-1 plans must act in good faith with respect to those plans. In addition, the amendments included requirements for new disclosures regarding (1) companies’ insider trading policies and procedures; (2) director and officer equity compensation awards made close in time to company to disclosure of MNPI; (3) adoption or termination by officers of directors of any 10b5-1 plan or “non-Rule 10b5-1 trading arrangement”; and (4) bona fide gifts of securities on Forms 4 by Section 16 filers and transactions under 10b5-1 plans on Forms 4 and 5. ) (See this PubCo post.)
The new CDIs, summarized below, address calculation of the cooling-off period, overlapping plans involving 401(k) plans, the new Form 4 checkbox and disclosures about adoption and termination of trading arrangements.
Corp Fin posts three new CDIs on Rule 10b5-1
Last week, Corp Fin posted (and then deleted and reposted—but that’s another story) three new CDIs regarding the affirmative defense under Rule 10b5-1. As you may recall, in December last year, the SEC adopted new amendments to the rules regarding Rule 10b5-1 plans. These amendments added new conditions to the affirmative defense of Rule 10b5-1(c) designed to address concerns about abuse of the rule by opportunistic trading on the basis of material non-public information. Among other changes, Rule 10b5-1(c)(1) was amended to apply a cooling-off period to persons other than the issuer, impose a good-faith certification requirement on directors and officers, limit the ability of persons other than the issuer to use multiple overlapping Rule 10b5-1 plans, limit the use of single-trade plans by persons other than the issuer to one single-trade plan in any 12-month period, and add a condition that all persons entering into Rule 10b5-1 plans must act in good faith with respect to those plans. In addition, the amendments included requirements for new disclosures regarding (1) companies’ insider trading policies and procedures, and the use of 10b5-1 plans and certain other similar trading arrangements by directors and officers; (2) director and officer equity compensation awards made close in time to company to disclosure of MNPI; and (3) bona fide gifts of securities on Forms 4 by Section 16 filers and transactions under 10b5-1 plans on Forms 4 and 5. (See this PubCo post.) The new CDIs relate to the timing of compliance and the use and termination of multiple plans.
Corp Fin posts update to tender offer CDIs
Corp Fin has posted an update to the CDIs related to the tender offer rules and schedules. Below are brief summaries.
Corp Fin posts a slew of new CDIs on pay versus performance
On Friday afternoon, Corp Fin posted a slew of new CDIs—15 in total—regarding the new pay-versus-performance rule. You may recall that, in August last year, the SEC finally adopted a new rule that will require disclosure of information reflecting the relationship between executive compensation actually paid by a company and the company’s financial performance—a new rule that was originally mandated by Dodd-Frank in 2010. Lots of questions have arisen about implementation of the rule, and SEC representatives let it be known that CDIs on the topic would be forthcoming. (See this post from thecorporatecounsel.net blog.) Not surprisingly, most of the CDIs are about the complicated Pay Versus Performance table and are just as thorny as the rule, so get your Advil ready.
Corp Fin posts revised and new non-GAAP CDIs
The Corp Fin staff has issued a group of revised and new compliance & disclosure interpretations on the use of non-GAAP financial measures. The CDIs are more detailed and expansive in describing disclosure that the staff considers to be misleading as well as presentations that the staff believes reflect excessive non-GAAP prominence over the comparable GAAP number under Reg S-K Item 10(e). Summaries are below.
Happy Holidays!
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