Tag: SEC Division of Corporation Finance
Coates named Acting Director of Corp Fin
On Monday, the SEC announced that John Coates has been appointed Acting Director of Corp Fin. He has been the John F. Cogan Professor of Law and Economics at Harvard University, where he also served as Vice Dean for Finance and Strategic Initiatives. If that name sounds familiar—even if you haven’t been one of his students—it may be because he sometimes pops up in Matt Levine’s column in Bloomberg as the author of “The Problem of Twelve,” which he describes as the “likelihood that in the near future roughly twelve individuals will have practical power over the majority of U.S. public companies.” Beyond that, he has been a very active member of the SEC’s Investor Advisory Committee, and Committee recommendations he has authored may give us some insight on his perspective on issues.
Corp Fin issues disclosure guidance on SPACs
Happy new year! To complete the year- and term-end surge, just before Christmas, the Corp Fin staff issued CF Disclosure Guidance: Topic No. 11 regarding disclosure considerations for special purpose acquisition companies in connection with their IPOs and subsequent business combinations, often referred to as de-SPAC transactions. As usual, the staff provides some great questions to consider when crafting disclosure.
Corp Fin provides new disclosure guidance for China-based issuers
Yesterday, Corp Fin posted CF Disclosure Guidance: Topic No. 10, Disclosure Considerations for China-Based Issuers, which provides guidance regarding disclosure considerations for companies based in or with the majority of their operations in the People’s Republic of China (China-based Issuers). You might recall that, in August, the President’s Working Group on Financial Markets, which includes Treasury Secretary Steven T. Mnuchin, Fed Chair Jerome H. Powell, SEC Chair Jay Clayton and CFTC Chair Heath P. Tarbert, issued a Report on Protecting United States Investors from Significant Risks from Chinese Companies, which made a number of recommendations, among them that regulators should require enhanced and prominent issuer disclosures of the risks of investing in China-based Issuers and should issue interpretive guidance to clarify these disclosure requirements and increase awareness of the risks of investing in these companies. (See this PubCo post.) This guidance appears designed to implement that recommendation. The clear implication of the guidance is that China-based Issuers need to consider beefing up their risk factor and related disclosures; in outlining risks and posing questions to consider, the guidance provides a great starting point.
Happy Thanksgiving!
Staff allows early use of electronic signatures
Today, the SEC staff issued a revised Statement regarding the extension, for an indeterminate period, of temporary relief related to authentication document retention requirements under Rule 302(b) of Reg S-T in light of light of public health and safety concerns regarding COVID-19. This staff Statement is temporary and remains in effect until the staff provides public notice that it no longer will be in effect; that notice will be published at least two weeks before the announced termination date. Nothing new there. But what is new is that the Statement indicates that the staff will not recommend enforcement action if filers take advantage of the new electronic signature rules even before the effective date of those rules.
Corp Fin issues new CDI on equity line financings
On Friday, Corp Fin updated CDI 139.13 under Securities Act Section 5 and withdrew CDIs 139.15 through 139.20. The updated CDI relates to equity line financings.
Corp Fin posts FAQs related to transition to new Reg S-K modernization rules
Today, Corp Fin posted a few new FAQs regarding the transition to the new amendments to Reg S-K Items 101, 103 and 105, which are designed to modernize the disclosure requirements related to the descriptions of business, legal proceedings and risk factors (see this PubCo post). Those new rule amendments will become effective November 9.
Corp Fin amends guidance on extensions of confidential treatment orders
Corp Fin has amended Disclosure Guidance Topic No. 7, Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b-2, to modify the alternatives available for companies with confidential treatment orders that are about to expire. The guidance—which, as always, is just that and not intended to be binding—addresses procedures for CTRs that were submitted, not under the new streamlined approach adopted last year (see this PubCo post), but rather under the old traditional approach that still lives but is now rarely used. Under the prior guidance, when a CT order obtained under the traditional process was about to expire, companies could use a short-form application for extensions, but they were not permitted to transition to the streamlined new process by simply filing the redacted exhibit on EDGAR following the streamlined procedures. However, under the new amended guidance, transition to the new streamlined approach is now one of the permitted alternatives.
Study looks at COVID-19 disclosure
It’s well known that COVID-19 provided an unanticipated shock to the economy as a consequence of what economist Paul Krugman termed the “economic equivalent of a medically induced coma.” As a result, many companies were compelled to disclose historic performance that was, to put it mildly, at odds with their expectations of a few months prior, with little insight about the shape of future performance. In this paper, The Spread of COVID-19 Disclosure, from the Corporate Governance Research Initiative at the Stanford Graduate School of Business and the Rock Center for Corporate Governance at Stanford University, the authors looked at how companies responded to this situation, examining the levels of transparency that companies provided in the “widely uncertain” setting of COVID-19.
SEC update of status of temporary relief related to COVID-19
For those interested in a summary and update of the SEC’s and its staff’s targeted relief to address COVID-19, you may want to look at this updated statement issued today by SEC Chair Jay Clayton and the Directors of Corp Fin, Investment Management and Trading and Markets. The statement summarizes the current temporary relief and indicates the staff’s views on whether the relief should be extended or otherwise adjusted: “It is clear that the need for certain relief remains, such as relief to ensure continued remote operations and to provide flexibility in light of continued market volatility. Other forms of current relief, however, are unlikely to be extended.”
Corp Fin posts sample comment letter for offerings in context of extreme volatility
Yesterday, Corp Fin posted a sample comment letter containing the types of comments that Corp Fin staff might, depending on the particular facts and circumstances, issue to companies seeking to raise capital in securities offerings amid the current market and price volatility. In that context, Corp Fin believes that “specific, tailored disclosure about market events and conditions, the company’s situation and the potential impact on investors is warranted to provide investors with the information they need to make informed investment decisions and comply with the company’s disclosure obligations under the federal securities laws.” Corp Fin suggests that companies preparing offering disclosure documents take these sample comments into account, particularly if the disclosure documents would not typically be subject to staff review, such as automatically effective registration statements and prospectus supplements for takedowns from existing shelf registration statements. While most of the sample comments are not altogether surprising, Corp Fin does have some notable suggested additions to the prospectus cover page.