On December 2, 2020, the U.S. House of Representatives (“House”) passed the Holding Foreign Companies Accountable Act, Senate Bill No. 945 (the “bill”). A copy of the bill may be viewed here.

The bill seeks to amend Section 104 of the Sarbanes-Oxley Act of 2002 to require certain issuers to disclose to the Securities and Exchange Commission information regarding foreign jurisdictions that prevent the Public Company Accounting Oversight Board (“PCAOB”) from performing inspections, and for other purposes. The bill would require certain Chinese companies that have a class of securities listed or quoted on stock exchanges in the United States be delisted by such exchanges for, among other things, a failure to comply with the PCAOB audit requirements for three consecutive years.

In prior posts, we have blogged when the bill was unanimously approved by the U.S. Senate and about a bipartisan legislation that was introduced with substantially the same intent.

The House will send the bill to the White House and President Trump is expected to sign it into law.

On December 1, 2020, the Nasdaq Stock Market LLC filed with the US Securities and Exchange Commission (SEC) a proposal for new listing rules related to board diversity and disclosure, which are intended to advance board diversity and enhance the transparency and comparability of diversity statistics. The new rules would require Nasdaq-listed companies:

  • to have, or to explain why they do not have, at least two diverse directors, including (1) at least one director who self-identifies as female (regardless of assignment at birth) and (2) at least one director who self-identifies as either an underrepresented minority or as LGBTQ+, and
  • to provide a standardized board diversity matrix to disclose directors’ self-identified gender, race and ethnicity, and LGBTQ+ status.

Foreign issuers (including foreign private issuers) and smaller reporting companies would be able to satisfy the board-composition requirement by having two directors who self-identify as female.

Disclosure of diversity statistics would be required within one year of SEC approval of the proposed rule.  Companies would be required to have, or to explain why they do not have, (1) one diverse director within two years of SEC approval and (2) two diverse directors within four years of SEC approval (or five years, for Nasdaq Capital Market tier companies).

See the full text of the Nasdaq proposal here.

December 14, 2020 Webinar
2:00 p.m. – 3:00 p.m. EST
Register here.

In recent months, there have been a number of mortgage originators and servicers that have joined the ranks of SEC reporting companies. Some have gone public relying on a traditional IPO. While others have taken a different, and increasingly popular, alternative path to public company status: merging with a special purpose acquisition company, or SPAC. The momentum created by these transactions and market conditions in the mortgage sector may pave the way for additional IPOs or SPAC mergers.

There are also a number of entities considering new REIT financings in the institutional private placement market and the public market. Regardless of whether one is considering such a transaction in the near term, the valuations and investor reactions may also provide valuable information for companies that choose to remain private or consider M&A exits.

During this webcast, panelists from Mayer Brown and Mortgage Bankers Association will discuss:

  • The US IPO market in 2020 and what to expect in the coming months;
  • US IPO dynamics, aftermarket performance, and IPO trends;
  • Assessing IPO readiness and IPO considerations;
  • Disclosure, governance and related matters;
  • SPAC IPOs and what’s driving the trend;
  • Merging with a SPAC to become a public company; and
  • Mortgage market developments and learnings from recent deals.

Our latest On point. focuses on real estate investment trusts (“REITs”).  Established in 1960, REITs were designed to democratize real estate investing by providing retail investors with the opportunity to obtain passive gains from large-scale, income-producing real estate and mortgage portfolios.  REITs typically receive preferential tax treatment in the form of no entity-level tax and are required to distribute at least 90% of their taxable income as dividends each year.  We provide an overview of the tax, securities, Investment Company Act, and other considerations applicable in connection with REITS.

Continue reading here.

The US Securities and Exchange Commission (SEC) Division of Corporation Finance published CF Disclosure Topic No. 10 (the disclosure topic) on November 23, 2020.  The disclosure topic provides guidance to China-based Issuers: companies based in or with the majority of their operations in the People’s Republic of China (China).  The guidance is the latest step by US regulators to strengthen investor protection with respect to China-based Issuers, particularly with regards to the unique legal and regulatory risks such companies present.  The guidance follows the recommendations of the President’s Working Group on Financial Markets, and shows that US regulators remain focused on China-based Issuers that do not comply with US investor protection laws.

Continue reading the full Legal Update here.

December 9, 2020
Intelligize Webinar
1:00 p.m. EST – 2:00 p.m. EST
Register here.

Preparation is key to a successful proxy and annual report season, and late fall is not too early to begin. As companies evaluate the ramifications of COVID-19 that need to be discussed in various contexts in annual filings with the US Securities and Exchange Commission, advance planning will ensure a smoother process.

Join our panelists, Candace Jackson, Christine McDevitt, Anna Pinedo, and Christina Thomas to discuss the following topics:

  • SEC COVID-19 guidance and disclosures
  • Changes affecting this year’s 10-K, including MD&A and other Regulation S-K changes
  • Virtual meetings
  • Pay ratio and say-on-pay
  • Human capital and ESG disclosures
  • Shareholder proposals
  • Proxy voting advice amendments

On November 19, 2020, the US Securities and Exchange Commission continued its recent efforts to modernize and simplify certain financial disclosure requirements in Regulation S-K by amending Item 303 of Regulation S-K (Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)) and revising or eliminating several other requirements of Regulation S-K. This Legal Update provides further detail on the changes and notes practical considerations for public companies.

The Securities and Exchange Commission released for comment proposed rules that would apply on a temporary basis to allow for broader reliance on Rule 701 and Form S-8 for stock-based compensation related awards to gig or platform workers.  These workers may not be employees or consultants eligible to receive stock-based awards under current Rule 701.  The proposed rules would amend Rule 701 by adding a temporary rule provision that, for five years, would enable issuers to use Rule 701 to compensate certain platform workers, subject to specified conditions. An issuer would be able to use the exemption to issue its securities on a compensatory basis to platform workers who, pursuant to a written contract or agreement, provide bona fide services by means of an internet-based platform or other widespread, technology-based marketplace platform or system provided by the issuer.  Under the proposed amendments, these offerings would be able to be registered using Form S-8.  The amendments would be available on a temporary basis in order to allow the SEC to assess whether there are any unintended consequences.  The proposal will be subject to a 60-day public comment period.

See the SEC press release and fact sheet here, as well as the proposing release here.

Some time ago, in 2018, the Securities and Exchange Commission had issued a concept release requesting public comment on possible amendments to Rule 701 and Form S-8.  The concept release followed after the SEC Staff had issued a number of Compliance and Disclosure Interpretations on Rule 701, and after federal legislation had modified the dollar threshold triggering a requirement on issuers to furnish additional disclosures to stock-based compensation awardees.  The concept release had noted that in recent years, as more companies remained private longer, their approach to stock-based compensation and their reliance on Rule 701 had changed.  The concept release also had commented on new business models (referring to the “gig economy”), which were not contemplated by Rule 701.

Now, the SEC is proposing for public comment amendments to Rule 701.  Among other things, the proposed amendments would:

  • Revise the Rule 801 disclosure requirements for transactions in excess of the $10 million threshold;
  • Raise two of the three alternative ceilings that cap the overall amount of securities that a non-reporting issuer may issue in reliance on the exemption during any consecutive 12-month period; and
  • Make the exemption available for offers and sales of securities under a written compensatory benefit plan established by the issuer’s subsidiaries, whether or not majority-owned.

The proposed amendments would also modernize Form S-8 to facilitate the addition of multiple plans on a single registration statement, clarify the ability to allocate securities among multiple plans, and add securities or new classes of securities by post-effective amendment.

The comment period for the proposal will remain open for 60 days following publication in the Federal Register.  See the SEC press release and fact sheet here, and the proposing release here. A client alert will follow.