Securities and Exchange Commission

On November 19, 2020, Peter Driscoll, director of the Office of Compliance Inspection and Examination (“OCIE”) of the Securities and Exchange Commission (“SEC”), gave a speech urging advisory firms to empower their Chief Compliance Officers (“CCOs”).  The speech, made at the SEC’s annual compliance outreach conference, accompanied OCIE’s Risk Alert, issued the same day, identifying notable deficiencies and weaknesses regarding Registered Investment Advisors (“RIAs”) CCOs and compliance departments.  Driscoll’s speech complemented the Risk Alert by outlining the fundamental requirements for CCOs:  “empowered, senior and with authority.”
Continue Reading OCIE Director Instructs Advisers to Empower Chief Compliance Officers

A Securities and Exchange Commission (“SEC”) plan to create a registration exemption for certain finders has generated a mixed response.  The nearly 90 comments received by the SEC by the November 12, 2020 close of the comment period reflect a clear divide along predictable lines.  Broker-dealers, issuers, and some practitioners lauded the proposal for bringing regulatory clarity to what has long been a cloudy issue while regulatory groups and investor advocates criticized the plan for allowing unregistered finders to conduct brokerage activities without sufficient investor protection mechanisms.
Continue Reading SEC Proposal to Exempt Finders from Registration Generates Split Reaction

On November 2, 2020, the Securities and Exchange Commission adopted amendments intended to ease the rules for certain exempt offerings. These changes include increasing the annual cap on equity crowdfunding from $1.07 million to $5 million, raising the annual cap on Reg A+ offerings from $50% million to $75 million, raising the maximum offering amount for Rule 504 of Regulation D from $5 million to $10 million, and expanding the “test-the-waters” accommodation to Regulation Crowdfunding issuers.
Continue Reading SEC Adopts Rule Amendments Aimed at Expanding Access to Capital

On September 17, 2020, Stephanie Avakian, Director of the SEC’s Division of Enforcement, spoke at the Institute for Law and Economics, University of Pennsylvania Carey Law School Virtual Program.  Ms. Avakian used her time to highlight the Division’s enforcement priorities, operations, and challenges in the years since Jay Clayton became the director of the SEC in May 2017.
Continue Reading Despite Challenges, It’s Full Steam Ahead For SEC’s Enforcement Division

For the first time outside of the originating case itself, a federal appeals court was called upon to apply the principles governing disgorgement in SEC enforcement actions established by the United States Supreme Court’s high-profile decision in Liu v. Securities & Exchange Comm’n, No. 18-1501, 2020 WL 3405845 (U.S. June 22, 2020) (blog article here).  In Securities & Exchange Comm’n v. Yang, No. 19-55289, 2020 WL 4530630 (9th Cir. Aug. 6, 2020), the United States Court of Appeals for the Ninth Circuit reviewed a district court order, issued some eighteen months before the Supreme Court spoke in Liu, awarding the SEC disgorgement.  In an unpublished memorandum decision, the Court of Appeals reversed the disgorgement awards and remanded the case to the district court to explicitly determine whether the awards comported with the requirements for such relief under Liu.  The Yang decision drew attention because it served as an example of how the high court’s decision is impacting appellate review of disgorgement awards.  If Yang is any indication, courts of appeal will be remanding cases to district courts with instruction to reach specific findings regarding compliance with Liu’s disgorgement requirements.
Continue Reading Ninth Circuit Reverses SEC Disgorgement Award and Remands in First Decision Post-Liu

Public companies with a December 31 fiscal year end are now in the process of preparing their Form 10-Q reports for the quarter ended June 30, 2020.

When preparing the MD&A section of the Form 10-Q, management should be mindful of the recently released SEC Division of Corporation Finance guidance, “Coronavirus (COVID-10 – Disclosure Considerations Regarding Operations, Liquidity, and Capital Resources”.
Continue Reading SEC Issues New MD&A Guidance Regarding COVID-19

In Liu v. Securities & Exchange Comm’n, No. 18-1501, 2020 WL 3405845 (U.S. June 22, 2020), the United States Supreme Court upheld the authority of the Securities and Exchange Commission (“SEC”) to seek disgorgement as an equitable remedy under 15 U.S.C. § 78u(d)(5), so long as it “does not exceed a wrongdoer’s net profits and is awarded for victims.”  Although Liu preserved the SEC’s disgorgement powers as a general matter, it narrowed the criteria for appropriate equitable relief, effectively curtailing the SEC’s ability to pursue unduly broad disgorgement remedies.
Continue Reading Supreme Court Preserves But Limits SEC Disgorgement Power

In New York Stock Exchange LLC v. Securities & Exch. Comm., 2020 WL 3248902 (D.C. Cir. June 16, 2020), the United States Court of Appeals for the District of Columbia Circuit invalidated the Securities and Exchange Commission’s (“SEC”) experimental transaction fee pilot program to study the market effects of broker-dealer incentive programs used by domestic stock exchanges.  The Court of Appeals held that the SEC lacked the authority under the Securities Exchange Act of 1934 (“Exchange Act”) to compel the exchanges to conduct what amounted to a “costly experiment” to see how the fees these exchanges charge and the incentives they offer “might” affect the trading habits of market participants.  The ruling demonstrates a judicial willingness to curb the SEC’s rulemaking authority under the Exchange Act for merely experimental policies.
Continue Reading DC Circuit Repudiates SEC Program for Testing Exchange Fee Structures

*This post has been updated as of August 4, 2020.

On May 20, 2020, the Securities and Exchange Commission formally adopted amendments to financial disclosure regulations regarding the acquisition and disposition of certain businesses. The final rules – which are intended to update disclosure requirements for the benefit of registrants and investors – represent the most comprehensive revision to the SEC’s regulations in this area in more than 30 years. The new rules can be found here.
Continue Reading SEC Adopts Comprehensive Changes to “Significance” Tests and Financial Disclosure Requirements of Acquired and Disposed Businesses

With annual reports on Form 10-K publicly filed and first quarter earnings releases getting underway, proxy season – the annual practice of filing and distributing proxy statements, reserving meeting venues and courting shareholders – is now in full effect.
Continue Reading Virtual and Hybrid Shareholder Meetings in the Era of COVID-19: What Public Companies Need to Know

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