Earlier this month, the SEC’s Division of Corporation Finance announced it had expanded its policies to better accommodate public issuers seeking to raise capital and go-to-market faster.
Corporate partner Kenneth Silverman and litigation partner Kerrin Klein published an article in the Securities Regulation Law Journal, Winter 2024 ed. entitled “Quarterly Survey of SEC Rulemaking and Major Court Decisions.” The article reviews the SEC’s rulemaking activities and other decisions relating to federal securities laws from July 1, 2024 through September 30, 2024. "This quarter," the authors write, "the SEC proposed one new rule and approved seven final rules. The final and proposed rules released this quarter continue the SEC’s trend of increasing the scope and transparency of information available to investors."
Olshan corporate partners Kenneth Silverman and Honghui Yu authored an article in Bloomberg Law entitled “GameStop’s $3.5 Billion Windfall Shows Power of SEC Rule Mastery.” Their article highlights how public companies, with the right securities law strategies in place, can raise money quickly on the heels of viral news, with the rise in both retail investors and “influencer” investors. GameStop is a notable example of a public company that was able to raise billions of dollars through at-the-market offerings following a surge in the company’s stock price driven by viral social media posts. In total, GameStop has raised about $3.5 billion in gross proceeds. Ken and Honghui represented GameStop in its at-the-market offerings.
Corporate partner Kenneth Silverman and litigation partner Kerrin Klein published an article in the Securities Regulation Law Journal, Fall 2024 ed. entitled “Quarterly Survey of SEC Rulemaking and Major Court Decisions.” The article reviews the SEC’s rulemaking activities and other decisions relating to federal securities laws from April 1, 2024 through June 30, 2024. “This quarter,” the authors write, “the SEC proposed one new rule and approved two final rules. In relevant part, this quarter the SEC has largely focused on addressing the increased security threats and potential of criminal activity faced by the nation’s financial systems and its customers.”
Olshan litigation partner John Moon and corporate partner Kenneth Silverman authored an article in Bloomberg Law entitled “SEC Enforcement Sweep Shows It Takes Reporting Failures Seriously.” In the article, John and Ken discuss the Securities and Exchange Commission’s (SEC) recent settlement with 11 institutional investment managers, highlighting a potential shift toward stricter enforcement of Form 13F violations. They explain the implications of these settlements for foreign and domestic investment managers, shedding light on the importance of compliance with U.S. reporting requirements, and emphasize the SEC's renewed focus on Forms 13F and 13H reporting obligations, which demand increased attention from large institutional investors operating in U.S. capital markets. They also highlight the SEC’s lenience towards those delinquent filers that self-reported their violations and cooperated with the SEC’s investigation. "Regardless where an investor and their broker-dealer are physically located, the SEC maintains jurisdiction if they invest in US capital markets," John and Ken note. They explain that the SEC’s cross-border enforcement sends a strong message to the international investment community to remain diligent about regulatory filings.
Olshan litigation partner John Moon and corporate partner Kenneth Silverman authored an article in New York Law Journal entitled “SEC Enforcements Highlight Risk of Noncompliance—Gone Are 'You Pay Your Money and Takes Your Chance' Days in the U.S.” In the article, John and Ken discuss the significant amount of foreign investment in the United States, representing 20 percent of all U.S. securities and approximately 17 percent of all equity securities traded on U.S. stock markets. Because of such large figures, they advise that, while investment by foreign money managers in U.S. markets can indeed show high returns, investors must diligently navigate the nation’s complex regulatory requirements. “Recently, SEC concerns over the influence of large investors on the securities markets have manifested a robust sweep of enforcement actions,” John and Ken write. “The extra-territorial nature of the SEC’s jurisdiction over foreign money managers runs counter to our conceptions of jurisdiction that are generally based on the use of domestic wires or the mails, or where the defendant corporation is headquartered or registered.” They advise that foreign compliance teams and U.S. securities counsels must stay abreast of all laws—and any new reporting requirements the SEC may implement. “The costs of failing to do so can be extensive,” they explain. “If an investor is faced with delinquent filings, proactive self-reporting and cooperation with the SEC are critical tools for remediation.”
Corporate partner Kenneth Silverman and litigation partner Kerrin Klein published an article in the Securities Regulation Law Journal, Summer 2024 ed. entitled “Quarterly Survey of SEC Rulemaking and Major Court Decisions.” The article reviews the SEC’s rulemaking activities and other decisions relating to federal securities laws from January 1, 2024 through March 31, 2024. “This quarter,” the authors write, “the SEC proposed one new rule and approved nine final rules. In relevant part, the final and proposed rules continue the SEC’s trend of increasing the scope of information available to investors. The highlights of this latest round of rulemaking are the changes to SPAC regulations and the hotly contested climate-risk disclosures.”
Corporate partner Kenneth Silverman and litigation partner Kerrin Klein published an article in the Securities Regulation Law Journal, Spring 2024 ed. entitled “Quarterly Survey of SEC Rulemaking and Major Court Decisions.” The article reviews the SEC’s rulemaking activities and other decisions relating to federal securities laws from October 1, 2023 through December 31, 2023. “This quarter,” the authors write, “the SEC proposed one new rule and approved eight final rules. In relevant part, the SEC’s latest round of rulemaking largely targets reforms to the 1934 Act to increase regulatory oversight and promote market fairness for all participants. The most significant rule affects investors’ beneficial ownership reporting obligations.”
Corporate partner Kenneth Silverman and litigation partner and co-chair Brian Katz published an article in the Securities Regulation Law Journal, Winter 2023 ed. entitled “Quarterly Survey of SEC Rulemaking and Major Court Decisions.” The article reviews the SEC’s rulemaking activities and other decisions relating to federal securities laws from July 1, 2023 through September 30, 2023. “This quarter,” the authors write, “the SEC proposed six new rules and approved seven final rules. In pertinent part, the final and proposed rules continue the ongoing trend in recent years to modernize current regulatory frameworks in a manner that facilitates increased market resiliency and investor protection.” The highlight of SEC’s rulemaking this quarter was the adoption of new cybersecurity disclosure requirements for issuers.
Corporate partner Kenneth Silverman and litigation partner and co-chair Brian Katz published an article in the Securities Regulation Law Journal, Fall 2023 ed. entitled “Quarterly Survey of SEC Rulemaking and Major Court Decisions.” The article reviews the SEC’s rulemaking activities and other decisions relating to federal securities laws from April 1, 2023 through June 30, 2023. “This quarter,” the authors write, “the SEC proposed four new rules and approved seven final rules. In pertinent part, the final and proposed rules continue the ongoing trend in recent years to modernize current regulatory frameworks in a manner that facilitates increased transparency and investor protection.”
Corporate partner Kenneth Silverman and litigation partner and co-chair Brian Katz published an article in the Securities Regulation Law Journal, Summer 2023 ed. entitled “Quarterly Survey of SEC Rulemaking and Major Court Decisions.” The article reviews the SEC’s rulemaking activities and other decisions relating to federal securities laws from January 1, 2023 through March 31, 2023. “This quarter,” the authors write, ”the SEC proposed nine new rules and approved three final rules. The SEC's latest rule changes and proposals are largely geared towards modernizing the mechanisms of capital markets infrastructure and bolstering protections to individuals and entities from cybersecurity and privacy risks.”
Corporate partner Kenneth Silverman and litigation partner and co-chair Brian Katz published an article in the Securities Regulation Law Journal, Spring 2023 ed. entitled “Quarterly Survey of SEC Rulemaking and Major Appellate Decisions.” The article reviews the SEC’s rulemaking activities and other decisions relating to federal securities laws from October 1, 2022 through December 31, 2022. “The SEC’s latest rule changes and proposals are largely geared toward streamlining disclosure processes,” the authors write. “Given the recent collapse of cryptocurrency exchange FTX and related actions that came to light during this quarter, we expect the SEC will begin to develop and propose new rules to regulate and provide further oversight over cryptocurrency markets.”
Another indication that regulators are on high alert for further fallout in the wake of the collapse of major crypto firms.
Review of the Division of Corporation Finance’s Sample Comment Letters Can Help Guide Issuers in Preparing Their SEC Filings
Spencer Feldman's article first appeared in Law360 (April 9, 2021, subscription required)
Issuers Need to be Prepared to Provide More Accurate and Consistent Disclosures of the Material Risks Associated with Climate Change
President Biden to Nominate Former CFTC Chair Gary Gensler to Lead the SEC
On December 1, 2020, Nasdaq filed Proposed Rule 5605(f) with the U.S. Securities and Exchange Commission (“SEC”) to adopt new listing rules related to board diversity. If approved by the SEC, Proposed Rule 5605(f) would require all companies listed on Nasdaq’s U.S. exchange to publicly disclose their diversity statistics regarding their board of directors. Proposed Rule 5605(f) would also require all Nasdaq-listed companies to include a minimum number of individuals on their board of directors who self-identify in one or more of the following “Diverse” categories: female, underrepresented minority or LGBTQ+.
Authored by Kenneth M. Silverman; Zachary E. Freedman, Law Clerk
Recognizing the longstanding need for a new approach to the regulation of finders who help smaller businesses raise early stage capital, the SEC has published a notice of a proposed exemptive order and request for comment to formalize the regulatory status of unregistered finders. The proposed finders exemption from broker-dealer registration would facilitate a role for unregistered finders in the capital-raising process and clarify the circumstances under which issuers can legally compensate finders who comply with specified conditions. The author’s thoughts on the proposed finders exemption follow a summary of the rule proposal.
The New Rules are Designed to Add Clarity, Efficiency and Transparency to the SEC’s Already Successful Whistleblower Award Program
Public companies and first-time issuers will pay about 16% less to register their securities with the SEC starting next month.
On August 26, 2020, the SEC adopted amendments to its business, legal proceedings and risk factors disclosure rules. All public companies, particularly smaller ones, can benefit from the SEC’s continuing commitment to a principles-based and company-specific approach to disclosure in registration statements, periodic reports and certain proxy statements filed with the SEC.
Highest court affirms the right of the SEC to recover fraudulently obtained profits
The U.S. Securities and Exchange Commission (the “SEC”) filed enforcement actions on May 14, 2020, against two unrelated companies, Turbo Global Partners, Inc. (“Turbo”) and Applied BioSciences Corp. (“APPB”). The SEC charged both companies with securities fraud based on alleged materially misleading statements that the companies were offering and shipping products to combat the coronavirus (COVID-19). These actions taken by the SEC are consistent with approaches taken by other regulators, including the Federal Trade Commission and Food and Drug Administration (the “FDA”), with regard to misleading statements made in connection with coronavirus-related products. On the whole, regulators appear to be particularly cognizant of businesses and individuals seeking to take improper advantage of the circumstances created by the global pandemic, and as such are taking action against such companies and individuals.
On March 25, 2020, the SEC issued an updated executive order granting extended filing relief and disclosure guidance as publicly traded companies address the COVID‑19 pandemic and its effect on operations and financial condition. The SEC Staff also recently issued a statement regarding the manual signature requirement for electronic filings with the SEC. This post summarizes the significant aspects of the SEC’s recent pronouncements.
Despite the continuing coronavirus global pandemic, business marches on, including compliance with applicable regulatory requirements. Regulatory bodies recognize that the reduced staffing, “social distancing” and other factors could hamper efforts to comply with various regulations. The U.S. Securities and Exchange Commission (“SEC”) has acted to ameliorate certain of the burdens publicly traded companies are currently facing. In addition, companies need to take into account the effects of COVID-19 on their businesses and regulatory disclosures, and we have highlighted certain significant considerations in this client alert.
On January 30, 2020, the Securities and Exchange Commission (“SEC”) proposed a series of new amendments to the Regulation S-K requirements. The proposed amendments seek to modernize, simplify, and enhance certain financial disclosure requirements primarily by reducing duplicative disclosure and focusing issuers’ efforts on material information. The proposal would eliminate Items 301 and 302, which deal with selected financial data and supplementary financial data, respectively. The SEC’s primary focus is on Item 303. This item addresses disclosure requirements in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) section of issuers’ periodic reports (i.e., Forms 10-K and 10-Q) and registration statements.
On February 3, 2020, Olshan’s Shareholder Activism Group issued a letter of comment to the Securities and Exchange Commission in response to its proposed amendments to the federal proxy rules released on November 5, 2019 that would condition the availability of certain existing exemptions from the information and filing requirements of the proxy rules for proxy voting advice businesses upon compliance with additional disclosure and procedural requirements. The scope of our comments is limited to the severe shortcomings of the proposed rules in terms of their practical application in the “real world” of a proxy contest. We have drawn upon our vast experience in advising on hundreds of contested solicitations to highlight the flaws inherent to the proposed rules.
The SEC proposes rules to add a new category for individuals to qualify as accredited investors based on professional certifications and designations or credentials that show “financial sophistication.” The SEC requests public input on exactly which industry exams, academic degrees and levels of job experience should be considered.
This article was originally published by Bloomberg Law, October 2019.
On August 21, 2019, the Securities and Exchange Commission (the “SEC”) (i) approved new guidance (the “Guidance”) regarding the proxy voting responsibilities of investment advisers under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and (ii) issued an interpretation and related guidance (the “Interpretation”) regarding the applicability of the federal proxy rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to proxy voting advice provided by proxy advisory firms. The Guidance discusses, among other things, the ability of investment advisers to establish a variety of different voting arrangements with their clients and matters they should consider when they utilize the services of a proxy advisory firm. Specifically, the Guidance clarifies how an investment adviser’s fiduciary duties to its clients and Rule 206(4)-6 of the Advisers Act relate to an investment adviser’s voting authority on behalf of clients, particularly where the investment adviser retains a proxy advisory firm. The Interpretation confirms the SEC’s historical position that proxy voting advice generally constitutes a “solicitation” under Rule 14a-1(l) of the Exchange Act and, as such, falls under the purview of the antifraud provisions of Rule 14a-9 of the Exchange Act. The Guidance and Interpretation will become effective upon publication in the Federal Register. The Guidance and Interpretation were issued after years of advocacy by members of Congress, corporations and others claiming that proxy advisory firms such as Institutional Shareholder Services and Glass Lewis & Co. wield too much power and a regulatory framework should be put in place to address issues related to the services provided by these firms such as conflicts of interest, accuracy of reports, transparency and oversight.
While the SEC favors a more flexible principles-based approach to disclosure of business descriptions and risk factors as determined by a company’s management, a lack of bright-line, quantitative rules to specify when disclosure is required may lead to second guessing by regulators, among others.
The SEC staff will be actively monitoring the extent to which public companies and other market participants are identifying and addressing risks associated with the expected discontinuation of LIBOR, a common system of interest rates for financial transactions, past 2021.
The SEC’s Office of Investor Education and Advocacy warns investors to be skeptical of endorsements from famous influencers marketing new investment opportunities.
The proposal would allow companies to more effectively consult with potential institutional investors to better identify acceptable offering terms in advance of a public offering, as compared to the current practice of repeated registration statement amendments to calibrate the public markets.
In order to avoid undue delay caused by the current partial government shutdown, issuers may wish to remove the “delaying amendment” on the face of their registration statements to become effective automatically after a 20-day statutory period following the filing. The SEC’s operations plan for the shutdown also includes this suggestion. Lack of the SEC’s normal review and clearance of registration statements raises policy questions.
Regulation A would be a logical choice for smaller, non-exchange traded public companies, particularly for broadly disseminated public offerings of their shares to “uplist” to Nasdaq and for subscription rights offerings to their shareholders.
Smaller publicly-traded companies that do not meet the public float requirements for Form S-4 incorporation by reference face an expensive and time-consuming public M&A process; the SEC’s focus on capital formation by smaller public companies should not overshadow efforts to aid in their future growth through acquisitions.
Acknowledging that there are substantial, but non-traditional relationships between workers and their 21st century companies, Airbnb makes its case to broaden the exemption from registration that allows private companies to issue compensatory equity to employees to also extend to contractors such as hosts on its network.
Rep. Jeb Hensarling’s op-ed in The Wall Street Journal highlights five key capital formation bills that are now being considered to build a steady stream of small businesses for strong long-term economic growth and to restore U.S. competitiveness.
To promote capital formation by reducing compliance costs for smaller public companies, the SEC expands the pool of registrants that can take advantage of the scaled disclosure accommodations under SEC regulations.
On February 21, 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents. Below is a summary outlining this new disclosure category which impacts all public companies, regardless of their size, and applies to all prospectuses and periodic reports filed with the SEC.
Rule 10b5-1 plans do not preclude questions about insider trading if entered into or amended improperly.
On November 30, 2017, the SEC announced that it awarded more than $16 million to a pair of whistleblowers reporting securities law violations by a public company, ranking it among the ten largest awards since the inception of the whistleblower program. With this case, SEC enforcement actions triggered by whistleblowers have now resulted in more than $1 billion in financial remedies ordered against wrongdoers.
First open meeting under Chair Clayton includes unanimous approval of proposed revisions to SEC disclosure rules and forms
In an exceptionally thoughtful column using the recent Social Capital Hedosophia SPAC IPO as his test case, author James Mackintosh suggests it's time to fix IPOs with smarter lock-ups, an auction process variant for price setting and more say by issuers over who gets stock.
Public companies and first-time issuers will pay 7.4% more to register their securities with the SEC starting next month.
The SEC staff frequently comments during its review process about the lack of an established corporate governance structure, such as board member independence and board committee composition, by OTC quoted issuers, even if not required by SEC and national securities exchange rules.
Former SEC Chairman Harvey L. Pitt takes a guess that one day we may see five to six pages-long summary disclosure documents with hyperlinks to the detailed information of issuers in previously filed periodic reports.
In compliance with Section 17(b) of the Securities Act of 1933, any and all compensation received from a specific company must be publicly stated in all research reports and other correspondence, with the amount and paying party disclosed.
The SEC’s final rules effectuate inflation adjustments required under the JOBS Act and make other helpful technical rule and form amendments.
Proposed Amendment Shortens Settlement from Three to Two Business Days
The public meeting will be live streamed on the SEC website and agenda includes the current hot topic of unequal voting rights of shares.
Domino’s “Piece of the Pie Rewards” program is turning customers into shareholders.
Important considerations for the upcoming proxy season.
Opens door for Conservative Shift and Deregulation of Wall Street.
SEC Updates Intrastate Crowdfunding Rules 147 & 504 and Repeals Rule 505.
On October 26, 2016, the Commissioners of the Securities and Exchange Commission voted 2-1 to propose to require universal proxy ballots in contested elections. Proponents of universal proxies believe that the current federal proxy regime makes it too difficult for shareholders to mix and match their votes among all candidates, thereby disenfranchising shareholders and undermining corporate governance in the United States. Universal proxies would include all management and dissident nominees on one proxy card from which shareholders would vote. Under the current rules and proxy voting mechanics, a shareholder who desires to split votes generally must attend the shareholders meeting and vote by ballot.
The SEC’s whistleblower program surpasses $100 million in awards.
Public companies and first-time issuers will pay 15% more to register their securities with the SEC starting next month.
Chair White discusses SEC efforts to provide more transparency on environmental, social and governance matters in public company periodic reports.
SEC Chair White reports that SEC is preparing a proposal to require more meaningful diversity disclosure.
As recommended by the SEC’s Advisory Committee on Small and Emerging Companies and the Forum on Small Business Capital Formation, the SEC has proposed expanding the pool of registrants that can take advantage of the scaled disclosure accommodations under SEC regulations.
Pilot program plan for wider stock trading increments aimed at improving the trading of small-company stocks.
The SEC’s whistleblower program provides substantial bounties for reporting alleged corporate fraud and stock manipulation.
SEC rules and regulations require certain disclosures in connection with the use of “non-GAAP” financial measures in public communications and filings with the SEC; the use of such measures may draw SEC scrutiny
Chair Mary Jo White addressed the 45th annual “SEC Speaks” program to highlight what the SEC accomplished in 2015 and what the SEC is already advancing in 2016
SEC assessing adequacy of current disclosure rules.