Tag: SEC Division of Corporation Finance
Corp Fin announcement regarding acceleration requests—TODAY
Corp Fin has announced that, presumably in light of the imminent government shutdown, if you want Corp Fin to “consider a request for acceleration of the effective date of a pending registration statement or qualification of a pending offering statement to today, December 20, 2024,” you should “contact a staff member identified in the letter you received. Alternatively, you may contact the Disclosure Review Program’s main number at (202) 551-2076.” After 5:30 p.m. today, the Corp Fin “will not be in a position to act upon any such requests until the SEC receives appropriations to fund its operations.”
What I want for Christmas is…another Government shutdown? Not!
But apparently there’s one looming—serious enough to cause Corp Fin to issue its now-standard shutdown announcement. The shutdown deadline is Friday night, and apparently there’s currently an impasse over farm aid. Corp Fin’s announcement indicates that, in the event of a shutdown, its activities would be “extremely limited.” According to the announcement, although EDGAR will continue to operate and accept filings, Corp Fin “will not be able to accelerate the effectiveness of registration statements.” (Fortunately, there are typically fewer offerings over the holidays.) In light of the uncertainty related to acceleration, Corp Fin suggests that “registrants with pending registration or offering statements that are substantially complete, and that have met all statutory requirements to request acceleration of the effective date (including the dissemination of any draft registration statement for the required periods under Securities Act Section 6(e) or the related Division accommodations) or qualification, may want to consider requesting effectiveness or qualification while the Division continues its normal operations.”
Departure of Corp Fin Director
The SEC has just announced the departure of Corp Fin Director Erik Gerding at the end of this year. On his departure, Cicely LaMothe, the current Corp Fin Deputy Director, Disclosure Operations, will serve as Acting Director. Gerding has served as Corp Fin Director since February 2023, and recommended rules and amendments on climate disclosure, cybersecurity, SPACs, beneficial ownership reporting, universal proxy, clawbacks, sales under 10b5-1 plans and “pay versus performance.”
Update to FAQs regarding de-SPACs and submission of draft registration statements
The 2012 JOBS Act permitted Emerging Growth Companies to initiate the IPO process by submitting their IPO registration statements confidentially to the SEC for nonpublic review by the SEC staff. The confidential process was intended to allow an EGC to defer the public disclosure of sensitive or competitive information until it was almost ready to market the offering—and potentially to avoid the public disclosure altogether if it ultimately decided not to proceed with the offering. In 2017, Corp Fin extended that benefit to companies that were not EGCs, allowing them, for the first time, to submit confidential draft registration statements for IPOs, as well as for most offerings made in the first year after going public. (See this PubCo post, this PubCo post and this PubCo post) This week, Corp Fin posted newly updated FAQs regarding voluntary submissions of DRS for nonpublic review under the expanded procedures. Unfortunately, unlike its practice with CDIs, Corp Fin does not identify which FAQs have been changed—hint, hint—but it appears that the one notable change was to the last FAQ regarding de-SPACs in light of new EDGAR release 24.3.
Corp Fin updates FAQs regarding draft registration statements
The 2012 JOBS Act permitted Emerging Growth Companies to initiate the IPO process by submitting their IPO registration statements confidentially to the SEC for nonpublic review by the SEC staff. The confidential process was intended to allow an EGC to defer the public disclosure of sensitive or competitive information until it was almost ready to market the offering—and potentially to avoid the public disclosure altogether if it ultimately decided not to proceed with the offering. In 2017, Corp Fin extended that benefit to companies that were not EGCs, allowing them, for the first time, to submit confidential draft registration statements for IPOs, as well as for most offerings made in the first year after going public. (See this PubCo post and this PubCo post.) Yesterday, Corp Fin posted newly updated FAQs regarding voluntary submissions of DRS for nonpublic review under the expanded procedures. The FAQs are summarized below. One notable addition is an FAQ regarding de-SPACs.
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.
What happened with no-action requests this proxy season?
According to “SEC No Action Statistics to May 1, 2024” from the Shareholder Rights Group, this proxy season, the SEC staff “has nearly doubled the number of exclusions” of shareholder proposals compared with 2023; that is, relative to the prior year, the staff has issued almost twice the number of letters indicating that it would not recommend enforcement action if the company excluded the proposal from its proxy statement. While that surge reflects primarily a “sharp increase” in the number of requests for no-action filed by companies, importantly, the article indicates that it also reflects an increase in the relative proportion of no-action requests granted. From November 1, 2023 to May 1, 2024, the article reports, the SEC has granted company requests for no-action regarding shareholder proposals about 68% of the time (excluding requests withdrawn), compared with 56% at the same point last year. Notably, the article reports, that percentage (68%) is fairly comparable to the average exclusion rate (69%) during the prior administration (2017 to 2020). Since the issuance of SLB 14L in 2021, the staff has come in for criticism for applying a revised approach to evaluating no-action requests that some market participants considered perhaps a bit too generous to proponents of proposals, leading to an excess of overly prescriptive proposals presented at shareholder meetings. As the article suggests, has this criticism led to a moderation of that approach?
What happened at the Corp Fin Workshop of PLI’s SEC Speaks 2024?
At the Corp Fin Workshop last week, a segment of PLI’s SEC Speaks 2024, the panel focused on disclosure review, a task that occupies 70% of Corp Fin attorneys and accountants. The panel discussed several key topics, looking back to 2023 and forward to 2024. Some of the presentations are discussed below.
Corp Fin staff advice on “eligible sell-to-cover” transactions under Rule 10b5-1
Many thanks to thecorporatecounsel.net blog for posting this memorandum to the ABA’s Joint Committee on Employee Benefits from three members of that committee regarding their informal discussions with SEC staff about a couple of questions that have arisen about the scope of the exception for “sell-to-cover” transactions under Rule 10b5-1.
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