Tag: SEC Division of Corporation Finance
New guidance from Corp Fin related to adoption of new accounting standards
Corp Fin recently revised some of the guidance in its Financial Reporting Manual related to adoption of new accounting standards. One revision relates to the adoption of a new accounting standard in the context of a significant acquisition, and the second relates to transition period accommodations for EGCs. This new guidance could take on particular significance in the context of the new revenue recognition standard.
Highlights of the 2017 PLI Securities Regulation Institute
Summarized below are some of the highlights of the 2017 PLI Securities Regulation Institute panel discussions with the SEC staff (Michele Anderson, Wesley Bricker, Karen Garnett, William Hinman, Mark Kronforst, Shelley Parratt, Ted Yu), as well as a number of former staffers and other commentators. Topics included the Congressional and SEC agendas, fresh insights into the shareholder proposal guidance, as well as expectations regarding cybersecurity, conflict minerals, pay ratio disclosure, waivers and many other topics.
Corp Fin posts new CDI regarding safeguards for electronic delivery of information under Rule 701
Yesterday, Corp Fin posted a new CDI 271.25 regarding permissible safeguards for protection of Rule 701(e) disclosures that are furnished electronically. You may recall that Rule 701—which provides an exemption from registration under the Securities Act for offers and sales to employees, directors and consultants under compensatory benefit plans and contracts—requires companies to deliver to the employee/investor a copy of the applicable benefit plan or contract, and, if the company sells, in any consecutive 12-month period, securities with a value in excess of $5 million, the company must deliver, a reasonable period of time before the date of sale, specified other information, including financial statements and information about the risks associated with the investment, much of which is likely to contain confidential or sensitive material.
Corp Fin posts two new CDIs regarding non-GAAP financial measures in connection with M&A transactions
The SEC has posted two new CDIs regarding the use of non-GAAP financial measures in connection with business combinations, summarized below.
Corp Fin issues interpretive guidance on the calculation of pay-ratio disclosure
Yesterday, Corp Fin issued new Guidance on Calculation of Pay Ratio Disclosure regarding the use of statistical sampling in connection with the pay-ratio disclosure requirement, which mandates public company disclosure of specified pay-ratio information, beginning with the upcoming 2018 proxy season. The new guidance provides a fairly expansive reading of the use of reasonable estimates, statistical sampling and other reasonable methods. But prepare yourself, it also uses terms such as “multimodal,” “gamma distribution” and, my favorite, “lognormal,” surely all firsts for this PubCo blog. (Wikipedia defines a “lognormal”distribution as “a continuous probability distribution of a random variable whose logarithm is normally distributed.” Does that help?) Whether or not you are mystified by some of the terminology (as am I), it is clear that the leitmotif (take that, statisticians) of the new guidance is that you can use or combine any number of different methodologies and estimates so long as they are all reasonable and appropriate under your particular facts and circumstances.
SEC hack provides occasion for Chair Clayton to revitalize 2011 Corp Fin disclosure guidance on cybersecurity risks and incidents
As you probably read in the papers (see, e.g., this article from the WSJ), SEC Chair Jay Clayton announced yesterday that, in 2016, the SEC’s EDGAR system was hacked and, in August 2017, the staff determined that the hack may have led to insider trading. The hackers took advantage of “a software vulnerability in the test filing component of our EDGAR system, which was patched promptly after discovery….” The SEC believes “the intrusion did not result in unauthorized access to personally identifiable information, jeopardize the operations of the Commission, or result in systemic risk. Our investigation of this matter is ongoing, however, and we are coordinating with appropriate authorities.” As part of his lengthy statement, Clayton addressed the cybersecurity considerations that the staff applies in the context of its review of public company disclosures.
A few new CDIs on Rules 147, 503 and 504, as well as Reg A
Today, Corp Fin posted a number of new CDIs that reflect updates for the amendments to Rule 147 (intrastate offers and sales) and Reg D Rules 503 and 504, and withdrew some CDIs in light of the repeal of Rule 505. There are also a number of changes throughout the CDIs interpreting Rule 147 and Reg D that Corp Fin describes as non-substantive based on current rules, such as changes to correct outdated references. The CDIs with these non-substantive changes are identified in the CDIs only by an asterisk and have not been updated to reflect a September 2017 date. Corp Fin has also removed the Reg D CDIs “that do not directly relate to the Commission’s current rules.” The CDIs identified as having substantive changes are summarized below, along with three new CDIs related to Reg A that were posted last week.
Update on pay-ratio rule
Rumor has it that, at the recent ABA Business Law Section Annual Meeting in Chicago, Corp Fin Director Bill Hinman confirmed—in case there was any doubt—that the pay-ratio rule would be in place for reporting in 2018.
GAO report on gold supply chain reveals little progress in responsible sourcing
The GAO has issued a new report on conflict minerals focused in this instance on the supply chain for artisanal and small-scale mined (ASM) gold in the DRC region. The report also addressed efforts to encourage responsible sourcing of ASM gold and sexual violence in the region since the GAO’s last report in August 2016.
Corp Fin posts new and updated CDIs related to omission of financial information in registration statements
The Corp Fin staff has posted new and updated CDIs related to omission of financial information from registration statements by emerging growth companies and, under the recently expanded guidance that allows non-EGCs to file registration statements confidentially (see this PubCo post), by non-EGCs. The updated CDI under the FAST Act and the identical new CDI under the Securities Act appear to refine an earlier position taken by the staff.
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