KMK Law Corporate & Securities Blog

As we explained in our September 2019 Snapshot, on August 21, 2019, the SEC issued new guidance regarding the role of proxy advisors in the proxy voting process. We expect this guidance to play an important role in the upcoming 2020 proxy season, as the SEC further defines the voting obligations of registered investment advisors and seeks to promote greater accountability on the part of the proxy advisory firms. Read more here.

On September 26, 2019, the SEC adopted final rules permitting all companies to gauge market interest in registered offerings (including possible initial public offerings) through “testing the waters” by reaching out to certain institutional investors before filing a registration statement. Prior to these rules, only emerging growth companies had been able to engage in this activity under provisions of the JOBS Act. New Securities Act Rule 163B will allow any issuer to engage in oral or written communications with potential investors who are (or are reasonably believed to ...

On August 21, 2019, the SEC issued an interpretation and related guidance regarding the applicability of certain rules to proxy advisory firms.  The SEC interpretation imposes new regulatory oversight on proxy advisory firms that clarifies that proxy advisers are subject to Rule 14a-9 and the anti-fraud rules concerning materially false or misleading statements.

We expect proxy advisory firms will provide additional disclosures in in their reports in response to the guidance, such as:

• Explanations of the methodology used to formulate voting advice;
• Disclosures of peer group ...

On August 8, 2019, the SEC proposed rule amendments to modernize the business, legal proceedings and risk factors disclosures that public companies are required to make pursuant to Regulation S-K. 

The proposed amendments to Items 101(a), 101(c) and 105 would focus on a principles-based approach to allow companies to address the particular aspects of these disclosures that are material to each company.  Under amended Item 101(a), companies would be required to disclose information only to the extent it is material to an understanding of the development of the company’s business.  ...

On July 31, 2019, the SEC and North American Securities Administrators Association published a staff statement on “opportunity zones” and related compliance implications under federal and state securities laws considerations.

In general, the statement indicated that interests in a “qualified opportunity zone” (QOF), which is an investment vehicle organized as a corporation or partnership to invest in qualified opportunity zone property, will be considered securities within the purview of federal and state securities laws, except under limited circumstances.

As ...

On July 12, 2019, the SEC staff published a statement seeking to encourage public companies to actively prepare for the transition away from LIBOR. Among other considerations, the SEC statement provides that such preparation should include determining current contractual exposure to LIBOR and evaluating possible alternatives to LIBOR in future contracts.  The Division of Corporation Finance also provided specific advice to public companies that they should consider disclosures relevant to investors pertaining to LIBOR’s expected discontinuation.

For more information ...

On July 1, 2019, SEC rules regarding the disclosure of hedging policies or practices became effective.  New Item 407(i) of Regulation S-K requires public companies to provide, among other items:

• A summary of the company’s hedging policies or the full text of such policies;
• The categories of hedging transactions that are either specifically allowed or disallowed;
• The effect of hedging policies on all employees and directors; and
• If no hedging policy is in effect, a statement that no such policy is in effect.

The new rule applies to proxy statements for fiscal years beginning on or ...

On April 30, 2019, the U.S. Department of Justice (“DOJ”) released new guidance detailing its evaluation of the adequacy and effectiveness of a company’s compliance program (the “Guidance”). The Guidance spells out how prosecutors examine compliance programs when deciding whether to monitor, fine or file criminal charges against a company, and we believe the 18-page document is the most comprehensive and detailed corporate compliance document that informs all businesses, whether or not party to a DOJ enforcement action. The Guidance includes a step-by-step ...

On April 3, 2019, the SEC announced the framework it would use to determine whether a digital asset would be considered an “investment contract” in light of the Supreme Court’s ruling in SEC v. W.J. Howey Co. and subsequent case law. Howey found that an “investment contract” exists where there is an investment of money in a common enterprise with a reasonable expectation that profits will be derived from others’ efforts.  In applying the framework to digital assets, the SEC focuses on three main prongs. First, in determining whether there is a reliance on the efforts of ...

On June 19, 2019, the SEC issued a concept release seeking comment on possible ways to simplify, harmonize, and improve the exempt offering framework to promote capital formation. The release requests comment on whether there should be any changes to improve Regulation D, Regulation A, the intrastate offering exemptions and Regulation Crowdfunding.