Securities and Exchange Commission

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 March 12, 2020, the U.S. Securities and Exchange Commission (the “SEC”) adopted amendments to the definition of “accelerated filer” and “large accelerated filer” definitions in Exchange Act Rule 12b-2, which amendments will be effective 30 days after publication in the Federal Register and will apply to annual report filings due on or after such effective date.
Continue Reading SEC Amends Definitions of “Accelerated Filer” and “Large Accelerated Filer” and Provides Relief to Small Issuers from Auditor Attestation Requirements

The Securities and Exchange Commission (the “SEC”) recently proposed amendments to modernize and simplify specific financial disclosure requirements in Regulation S-K as part of the SEC’s Disclosure Effectiveness Initiative. The proposed amendments are designed to eliminate duplicative disclosures and modernize, in particular, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).
Continue Reading SEC Proposal to Modernize Financial Disclosure Requirements in Regulation S-K

The coronavirus (COVID-19) outbreak has impacted publicly traded companies that have to provide information to trading markets, shareholders and to the Securities and Exchange Commission (SEC) in a number of ways. The SEC has been particularly active in acknowledging the challenges that the outbreak poses to such companies and has provided conditional relief and has issued guidance as the outbreak has developed. The SEC Enforcement Division is also on high alert for COVID-19 scams.
Continue Reading Coronavirus and Considerations for Publicly Traded Companies

The Securities and Exchange Commission (“SEC”) announced on September 26, 2019 that it voted to adopt the application of “testing-the-waters” rules to all issuers who engage in raising capital in the public markets. This represents a significant expansion of that accommodation, as those rules were previously only available to certain issuers classified as emerging growth companies or “EGCs.” The new Rule 163B will become effective 60 days after publication in the Federal Register.
Continue Reading Gauging Interest: SEC Votes to Approve Proposal to Expand “Test-the-Waters” Rules

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 May 7, 2019, Representative James Himes (D-Conn) introduced the “Insider Trading Prohibition Act” (H.R. 2534). The proposed legislation would amend the Securities Exchange Act of 1934, 15 U.S.C § 78a et seq. (the “Act”) by inserting a new section that defines the elements of criminal insider trading.

The bill’s objective is to eliminate the ambiguity of the offence as it is conceived under current law. It would also significantly expand the potential scope of criminal liability for insider trading in several ways: first, by eliminating the existing “personal benefit” requirement; second, by expanding the scienter requirement from willful to reckless use of “wrongfully obtained” matpreliminarerial non-public information; and third, by expanding the definition of “wrongfully obtained” information to include stolen, hacked, and fraudulently obtained information.
Continue Reading New Bill Seeks to Bring Clarity to Insider Trading Law

A new bill, the Token Taxonomy Act was introduced to congress to amend the Securities Act of 1933 and the Securities Exchange Act of 1934 to exclude digital tokens from the definition of a security, to direct the Securities and Exchange Commission to enact certain regulatory changes regarding digital units secured through public key cryptography, to adjust taxation of virtual currencies held in individual retirement accounts, to create a tax exemption for exchanges of one virtual currency for another, to create a de minimis exemption from taxation for gains realized from the sale or exchange of virtual currency for other than cash, and for other purposes.
Continue Reading New Effort to Exempt Crypto Currency from Certain SEC, Tax and Other Regulatory Burdens

In Lorenzo v. Securities & Exchange Comm., No. 17-1077, 2019 WL 1369839 (U.S. Mar. 27, 2019), the Supreme Court of the United States (Breyer, J.) held that an individual who did not “make” a false or misleading statement within the meaning of Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135 (2011) (blog article here), but instead disseminated it to potential investors with intent to defraud, can be held to have employed a scheme to defraud and/or engaged in an act, practice or course of business to defraud in violation of subsections (a) and (c) of Securities and Exchange Commission (“SEC”) Rule 10b-5, 17 C.F.R. § 240.10b-5. This decision broadens the scope of primary liability under Rule 10b-5 beyond those who make false and misleading statements to include those who knowingly “disseminate” (i.e., communicate to potential investors) such false or misleading statements. Although this decision involved an SEC enforcement action, it is likely to be invoked by plaintiffs in private securities litigation to expand the scope of named defendants beyond the issuer and individuals directly responsible for making public statements on the issuer’s behalf.
Continue Reading United States Supreme Court Holds That Knowing Dissemination of False Statements Made by Others Can Constitute Primary “Scheme Liability” In Violation of Rule 10b-5(a) and (c)

As an expensive “slap on the wrist,” the Securities and Exchange Commission (“SEC” or the “Commission”) recently concluded that approximately $12.7 million worth of funds raised in a 2017 Initial Coin Offering (“ICO”) by Gladius Network LLC (“Gladius”) were part of an unregistered securities offering, and all proceeds must be returned to investors. However, the penalty to Gladius for their regulatory violations was zero.
Continue Reading With the SEC, Cooperation is Key