On September 27, 2023, the Securities and Exchange Commission (the “SEC”) announced charges against six officers, directors, and major shareholders of public companies (“insiders”) for failing to timely report and file disclosures related to (i) their holdings in public company stock and (ii) transactions they undertook involving public company stock. Five public companies were also charged in connection with timely reporting failures by their insiders. Without admitting or denying the charges, the six insiders and five public companies agreed to cease and desist from violating the charged provisions and agreed to pay civil penalties ranging from $66,000 to $200,000.Continue Reading SEC Announces Charges Against Insiders for Reporting Failures and Adopts Amendments to Schedule 13D and 13G Report Filing Timelines
The Corporate Transparency Act (“CTA”) was enacted as part of the National Defense Authorization Act for Fiscal Year 2021. The CTA aims to enhance transparency of beneficial ownership information for certain types of business entities in an effort to combat money laundering, terrorist financing, and other illicit activities. The CTA becomes effective on January 1, 2024 (“Effective Date”), but reporting companies will have either 30 days or one year to comply, depending on whether they were formed before or after the Effective Date.Continue Reading Corporate Transparency Act: Reporting Requirements; Preparing Your Company and Other Related Considerations
On August 25, 2022, the Securities and Exchange Commission adopted a pay versus performance rule in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule requires a registrant to disclose, in a proxy statement or an information statement in which executive compensation disclosure is required to be included, how executive compensation actually paid by the registrant to its named executive officers is related to the financial performance of the registrant. The new rule is intended to “provide investors with important and decision-useful information for comparison purposes in one place when they evaluate a registrant’s executive compensation practices and policies, including for purposes of the shareholder advisory vote on executive compensation, votes on other compensation matters, director elections, or when making investment decisions.”Continue Reading SEC Releases Pay Versus Performance Disclosure Requirements For Public Companies
On December 27, 2021, the California Court of Appeal issued two decisions addressing whether claims arising from statements made in filings with the Securities and Exchange Commission (“SEC”) fall within California’s statute designed to deter “strategic lawsuits against public participation,” or “SLAPPs,” arising from protected speech. In Sugarman v. Benett, No. B307753, 2021 WL 6111725 (Cal. App. Dec. 27, 2021) (“Benett”), and Sugarman v. Brown, No. B308318, 2021 WL 6111718 (Cal. App. Dec. 27, 2021) (“Brown”), the Court held that state law claims arising out of disclosures in federal SEC filings may be subject to California’s anti-SLAPP statute, giving defendants a powerful tool to dispose meritless claims early in the process.
Continue Reading California Court of Appeal Holds that SEC Filings May Be Protected Activities Under Anti-SLAPP Statute
FinCEN has issued a notice of proposed rulemaking (NPRM) regarding how the agency is planning to implement the Corporate Transparency Act (CTA). The NPRM came out on December 8, 2021, accompanied by an explanatory factsheet. Congress passed the CTA on January 1, 2021 in order to require U.S. companies to disclose beneficial ownership information.
Continue Reading FinCEN Issues Notice of Proposed Rulemaking for Corporate Transparency Act
On June 16, 2021, the U.S. House of Representatives voted (215-214) to pass the ESG [Environmental, Social and Governance] Disclosure Simplification Act of 2021 (H. R. 1187) (the “Bill”).…
Continue Reading House Passes Bill Requiring SEC to Define Mandatory ESG Metrics
The coronavirus (COVID-19) outbreak has impacted publicly traded companies that provide information to trading markets, shareholders and to the Securities and Exchange Commission (SEC). Companies need to be mindful with respect to disclosures in annual and quarterly reports, earnings releases, current reports, and public and private securities offering documents.
Continue Reading Coronavirus and Guidance on SEC Disclosures
On August 8, 2019, the Securities and Exchange Commission (the “SEC”) announced that it voted to propose rule amendments to modernize the description of business, legal proceedings, and risk factor disclosures that public companies are required to make pursuant to Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934.
Continue Reading SEC Looks to Modernize Disclosure Approach
On February 6, 2019, the Securities and Exchange Commission released two Compliance and Disclosure Interpretations (CDIs) discussing disclosure requirements in instances where a director or board nominee self-identifies specific diversity characteristics, such as race, gender, ethnicity, religion, nationality, disability, sexual orientation and cultural background.
Continue Reading SEC Issues New Guidance on Diversity Disclosure Requirements
In the aftermath of Equifax’s data breach, a federal court recently found that allegations of poor cybersecurity coupled with misleading statements supported a proper cause of action. In its decision, the U.S. District Court for the Northern District of Georgia allowed a securities fraud class action case to continue against Equifax. The lawsuit claims the company issued false or misleading statements regarding the strength and quality of its cybersecurity measures. In their amended complaint, the plaintiffs cite Equifax’s claims of “strong data security and confidentiality standards” and “a highly sophisticated data information network that includes advanced security, protections and redundancies,” when, according to the plaintiffs’ allegations, Equifax’s cybersecurity practices “were grossly deficient and outdated” and “failed to implement even the most basic security measures.” The court found that data security is a core aspect of Equifax’s business and that investors are likely to review representations on data security when making their investment decisions.
Continue Reading Court Finds Cybersecurity-Related Claims Sufficient in Securities Class Action
Public reporting companies that have material weaknesses in their internal control over financial reporting (“ICFR”) are required under Rule 308 of the Securities Exchange Act of 1934, as amended, to report such material weaknesses in their quarterly and annual reports along with proposed remedial measures. A material weakness is defined as a deficiency, or a combination of deficiencies, such that there is a reasonable possibility that a material misstatement of an issuer’s financial statements will not be prevented or detected on a timely basis.
Continue Reading SEC Administrative Proceedings Against Public Companies for Failure to Remediate Material Weaknesses in Internal Control Over Financial Reporting