SEC Issues Guidance on the Use of Company Web Sites
The SEC has issued interpretive guidance on the use of company web sites under the Exchange Act and the antifraud provisions of the federal securities law.
You can find the guidance here.
SEC Simplifies Form D and Requires Electronic Filing
| February 21, 2008 |
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By Stuart C. Campbell and Michele L. Buck-Romero
On Feb. 6, 2008, the Securities and Exchange Commission (SEC) issued a final rule adopting revisions to Form D effective Sept. 15, 2008, and requiring electronic filing of Form D as of March 16, 2009. Any company issuing securities pursuant to an exemption from registration under Regulation D should be aware of this new rule. The rule amendments are intended to ease the burdens of complying with Form D, facilitate electronic filing, improve and update Form D information requirements, and increase the public’s access to Form D information.
Under the Securities Act of 1933, an offer to sell securities must either be registered with the SEC or fall within an exemption from the registration requirements, such as the offering exemptions under Rules 504, 505 and 506 of Regulation D. A company relying upon a Regulation D exemption currently must file a Form D with the SEC in paper format no later than 15 days after the first sale of securities in the offering. Form D serves as the official notice of an exempt offering under Regulation D and includes basic information about the issuer and the offering. Continue reading...
2008 Compensation Disclosure & Analysis: Adherence to New Guidance Critical
| January 16, 2008 |
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SEC staff stresses better analysis and use of “plain English”
By Ryan York and Matt Larson
On Oct. 9, 2007, Securities and Exchange Commission (SEC) staff released additional guidance on Compensation Disclosure & Analysis (CD&A) disclosures that will affect many public companies as they prepare 2008 annual reports and proxy statements. We want to remind those affected by the guidance that the SEC expects registrants to incorporate it in 2008.
All companies that have a class of securities registered under Securities Exchange Act Section 12, or that are required to file reports under Exchange Act Section 15(d), are affected. We remind you to be certain that CD&A disclosures in your annual report and proxy include better analysis, are written in “plain English” and meet the SEC staff's disclosure standards for performance targets, benchmarks and change-in-control agreements.
We recommend that you review the SEC's Oct. 9, 2007 guidance (available at http://www.sec.gov/divisions/corpfin/guidance/execcompdisclosure.htm) as well as Item 402(b) of Regulation S-K well in advance of this year's deadlines for filing your annual report and distributing your proxy statement. Continue reading...
Regulatory Relief for Private Company Stock Option Plans
| January 15, 2008 |
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SEC simplifies reporting requirements for certain plans
Effective Dec. 7, 2007 the U.S. Securities & Exchange Commission (SEC) adopted a rule making it easier for larger private companies to use certain types of compensatory stock option plans. The rule exempts such plans of qualifying non-reporting companies from Exchange Act registration.
The exemption under the SEC’s new Rule 12h-1(f) affects private companies with more than $10 million in assets that have a class of equity securities, with stock options treated as a separate class, held by more than 500 persons. The rule also will impact certain subsidiaries of public companies.
Qualifying companies with stock option plans may reduce their compliance burden by ensuring their plans are properly structured. Qualifying companies that would like to establish stock option plans now have a clear path to doing so with greatly reduced regulatory obligations. Continue reading...
SEC to Provide Better Monitoring of Insider Trading in 2008
The U.S. Securities and Exchange Commission (SEC) has made a new years resolution: clamp down on Insider Trading in 2008. This, in response to a critical report of the SEC conducted by the Government Accountability Office which acts as the investigative arm of Congress. Essentially, the SEC will provide closer scrutinize to lower-level regulators that police brokerages and stock exchanges like the New York Stock Exchange and Nasdaq. These regulators known as self-regulatory organizations (SRO's) typically conduct internal audits themselves to curb insider trading, but now the SEC will make better use of their audits by improving their computer systems so as to make more use of referrals and advisories that it gets from SRO's on possible insider trading problems and other potential misconduct.
There was an upsurge in Insider Trading cases in 2007 which caused one senior SEC official to state, "insider trading appeared to be "rampant" among Wall Street professionals". The New York Times also noted that much of the rise in Insider Trading involved "pillow-talk" cases...insider-trading between husbands and wives.
SEC expands eligibility for use of Form S-3 and Form F-3
Smaller reporting companies should have an easier time complying with reporting requirements from the Securities and Exchange Commission (the "SEC") in 2008. Prior to the new year, the SEC revised the rules governing eligibility to register offerings under the Securities Act using a short-form registration statement on Form S-3 or Form F-3. The result is certain domestic and foreign private issuers will be able to conduct primary securities offerings on these forms without regard to the size of their market capitalization. Essentially, the amendments should allow more companies to benefit from the greater flexibility in accessing the public securities market afforded by Form S-3 and Form F-3. The full text of the SEC’s adopting Release (Release No: 33-8878) concerning the amendments is available on the SEC website, www.sec.gov.
SEC Issues Staff Observations in the Review of Executive Compensation Disclosure
The SEC issued its "Staff Observations in the Review of Executive Compensation Disclosure" today. This guidance grows out of the SEC's review of the executive compensation disclosures of 350 public companies, and gives a summary of the types of comments the SEC gave on various companies' compensation disclosures, and why it gave those comments. John W. White, the Director of the SEC's Division of Corporation Finance, also gave a speech today in which he discussed CD&A disclosures. You can view a text of the speech here.
Highlights of the staff observations on CD&A include, among other things:
- Focus on the how and why of decisions that were made;
- Emphasize material items, and de-emphasize immaterial items;
- Spend less time explaining mechanical procedures and lengthy statements on philosophy and more on how key decisions were made; flip the order--explain how the analysis resulted in the decisions made;
- Presentation matters--consider the order in which items are presented and how they are presented; and
- Consider adding tables that aren't required if they elucidate material issues.
The SEC guidance is helpful and worth reading.
Continue Reading...SEC Issues Proposed Rules on Exemption of Employee Options under Section 12(g)
The SEC has issued proposed rules regarding the exemption of compensatory employee stock options from registration under Section 12(g) of the Securities Exchange Act of 1934.
Under Exchange Act Section 12(g), an issuer with more than 500 holders of record of a class of securities and assets in excess of $10 million at the end of its most recent fiscal year must register that class of equity security (see SEC Release No. 34-37157 (May 1, 1996)), unless an exemption is available. Stock options issued to employees are considered a separate class of security for this purpose. There is currently no exemption available for employee stock options, and issuers with more than 500 optionees that meet the assets test instead have been relying on the SEC no-action action letter process.
The SEC has proposed an exemption from Exchange Act Section 12(g) registration for: (i) private, non-reporting issuers for compensatory employee stock option options issued under employee stock option plans, and (ii) compensatory employee stock options of issuers that have registered under Exchange Act Section 12 the class of equity security underlying those options.
Continue Reading...SEC Issues Compliance and Disclosure Interpretations
The SEC has issued compliance and disclosure interpretations, updated as of August 8, under Items 402 (Executive Compensation) and 404 (Transactions with Related Persons). You can view the 402 guidance here. You can view the 404 guidance here.
SEC Proposed Rule: Revisions of Limited Offering Exemptions in Regulation D
The SEC has proposed and is seeking public comment on substantial revisions to Regulation D. The purpose of the revisions is to provide additional flexibility for issuers and to clarify and improve the application of the rules. The rules would, among other things:
- Create a new exemption from registration under the Securities Act of 1933 for sales to “large accredited investors” (the definition of “large accredited investors” is based on the definition of “accredited investor”, but with higher and somewhat different dollar-amount thresholds ; limited advertising would be permitted but each purchaser would have to meet the definition of large accredited investor);
- Revise the term accredited investor to clarify it and reflect developments since its adoption (including set it to adjust for inflation);
- Shorten the integration safe harbor to 90 days; and
- Apply uniform disqualification (bad actor) provisions to all offerings under Regulation D (as opposed to just Rule 505 currently).
View the proposed rule.
Continue Reading...
