On September 26, 2019, the SEC announced that all issuers —including non-reporting issuers and investment companies (including registered investment companies and business development companies) will soon be able to “test-the-waters” in initial public offerings and other registered securities offerings. Under the newly adopted Rule 163B, any issuer will be able to engage in “test-the-waters” communications with qualified institutional buyers and institutional accredited investors.
Previously, under the Jumpstart Our Business Startups Act, only emerging growth companies were permitted to engage in “test-the-waters” communications. Rule 163B provides relief from the from restrictions imposed by Section 5 of the Securities Act on written and oral offers prior to, or after filing, a registration statement for issuers who do not qualify as emerging growth companies. This will give all issuers “flexibility in determining whether to proceed with a registered public offering while maintaining appropriate investor protections.”
Once in effect, communications made under Rule 163B will: (more…)
On April 2, 2019, the Division of Corporation Finance of the Securities and Exchange Commission issued a no-action letter to TurnKey Jet, Inc. in connection with a proposed sale of tokens in the United States. It was the first no-action letter relating to cryptocurrencies and was widely heralded as a watershed event (e.g., “SEC Issues First ‘No-Action’ Letter Clearing ICO to Sell Tokens in US”) (see here).
But what does the SEC’s no-action letter really mean? First, a no-action letter is the SEC’s staff response to a request that the SEC not take enforcement action against the requestor based on the specific facts and circumstances set forth in the request. In most cases, the staff will not permit parties other than the requester to rely on the no-action letter. As was the case here, the staff’s response often is based in part on the legal opinion rendered by the requester’s lawyer that the proposed conduct is not a violation of the federal securities laws. (more…)
On March 20, 2019, the SEC adopted amendments to modernize and simplify disclosure requirements for public companies. Specifically, the SEC adopted amendments to modernize its disclosure requirements for public filings in a way that the SEC believes will minimize the costs and burdens on public companies while continuing to provide all material information to investors.
Why It Matters
Investors will benefit from these new amendments as they eliminate out-of-date, repetitive and unnecessary disclosure, and should simplify the process by which they assess material information. The SEC hopes investors will benefit from its work to improve disclosure, as they focus on modernizing their disclosure system to meet the expectations of today’s investors while eliminating unnecessary costs and burdens. (more…)
Last week, the President said that in his discussions with the business community on ways to improve the business ecosystem, one particular idea was raised as a means to bolster business: move to a six-month financial reporting calendar from the current quarterly one.
Now, there is an argument to be made for such a move. One could say this would help deter “short-termism,” seeing as how companies would no longer need to focus on meeting analyst expectations on a quarterly basis at the expense of longer term thinking (not to mention this would save businesses time and money). In addition, some executives view quarterly reporting as one of the hindrances to going public and/or maintaining public company status and, as a result, have already been advocating for changes to be made to the current reporting schedule. (more…)
In late May, President Trump signed the Economic Growth, Regulatory Relief and Consumer Protection Act. Although the president and many Republican members of Congress had threatened to repeal and replace Dodd-Frank, the new law’s actual changes are relatively minor. The new law rolls back some of the post-financial crisis legislation enacted in 2010, particularly for smaller community banks and credit unions. But it largely leaves intact the core framework of Dodd-Frank.
Less publicized but worthy of attention is the new law’s Title V—Encouraging Capital Formation, which amends the Securities Act of 1933 and Investment Company Act of 1940 with regard to early stage companies. Like the amendment to Dodd-Frank, the new law’s amendments to the federal securities laws are modest. (more…)
Under the FAST Act mandate, the U.S. Securities and Exchange Commission (SEC) voted on October 11, 2017 to propose amendments to Regulation S-K and related rules and forms aimed at modernizing and simplifying the current disclosure requirements for investment companies, public companies, and investment advisers.
What are the Proposed Amendments?
If adopted, the amendments would:
Revise rules or forms to update, streamline or otherwise improve the Commission’s disclosure framework by eliminating the risk factor examples listed in the disclosure requirement and revising the description of property requirement to emphasize the materiality threshold;
Update rules to account for developments since their adoption or last amendment by eliminating certain requirements for undertakings in registration statements;
Simplify disclosure or the disclosure process, including proposed changes to exhibit filing requirements and the related process for confidential treatment requests and changes to Management’s Discussion and Analysis that would allow for flexibility in discussing historical periods; and
Incorporate technology to improve access to information by requiring data tagging for items on the cover page of certain filings and the use of hyperlinks for information that is incorporated by reference and available on EDGAR.
With increased attention to how securities laws may apply to digital token sales and the disruptive nature of increased cyber threats to the investor community, the Securities Exchange Commission (“SEC”) last week announced two new initiatives. The SEC’s press release, found here, outlined the creation of the Cyber Unit (“Unit”) and the Retail Strategy Task Force (“RSTF”).
According to the press release the Unit will focus the Enforcement Division’s substantial cyber-related expertise on targeting cyber-related misconduct, including: (more…)
In March 2017, the United States Securities and Exchange Commission (the SEC) adopted amended Rule 15c6-1(a) which shortens the standard trade settlement cycle for most broker-dealer securities transactions from three business days (known as T+3) to two business days, (known as T+2). On Tuesday, September 5, 2017, the amended rule went into effect.
What Does the Change Apply To?
The new T+2 settlement cycle applies to the same securities transactions currently covered under the T+3 cycle, which the SEC states includes “transactions for stocks, bonds, municipal securities, exchange-traded funds, certain mutual funds, and limited partnerships that trade on an exchange.”
However, the new cycle does not apply to certain categories of securities, such as securities exempt from registration with the SEC due to being backed by a government or governmental institution. (more…)
Are you concerned about whether Nasdaq’s change of control rule will limit the size of your public offering? According to the Nasdaq staff, you don’t need to worry about this, as long as you have a bona fide public offering.
Nasdaq Listing Rule 5635(b) provides that shareholder approval is required prior to the issuance of securities when the issuance or potential issuance will result in a change of control of the company. According to Nasdaq, a change of control would occur when, as a result of the issuance, an investor or a group would own, or have the right to acquire, 20% or more of the outstanding shares of common stock or voting power and such ownership or voting power would be the largest ownership position (the “Change of Control Rule”). See Nasdaq FAQ ID#195.
Nasdaq Listing Rule 5635(d) provides that shareholder approval is required for the issuance of common stock (or securities convertible into or exercisable for common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock (the “Private Placement Rule”). Under the Private Placement Rule, however, shareholder approval is not required for a “public offering.” (more…)
In a recent effort to foster increased public offering activity, the U.S. Securities and Exchange Commission (SEC) announced on June 29, 2017 that it will permit all companies to submit voluntary draft registration statements relating to initial public offerings (IPOs), certain follow-on offerings and national securities exchange listings for non-public review. This process will be available for nearly all offerings made in the first year after a company has entered the public reporting system. This benefit will take effect on July 10, 2017.