May 19, 2021 Webinar
12:00pm – 1:00pm EDT
Register here.

Please join Mayer Brown partners, Christopher Houpt, Brian Massengill, and Anna Pinedo, for the third session in the Banking & Financial Services Litigation webinar series.

This panel will discuss special purpose acquisition companies (SPACs), including:

  • An overview of the SPAC market and the SPAC and de-SPAC transaction structure
  • The use of forecasts in connection with marketing the de-SPAC PIPE transaction
  • The availability of the PSLRA for public companies, like SPACs; comparison to IPOs; and recent SEC Staff statements
  • Cautionary language and diligence with respect to forecasts
  • Conflicts of interest in the context of SPAC transactions: SPAC board duties, diligence obligations, SEC Staff comments
  • Bringing claims for breach of fiduciary duty
  • Securities disclosure cases and proxy (14A) versus prospectus (S-4) standards
  • PIPE-related claims

Today, for the first time as Chair of the Securities and Exchange Commission, Gary Gensler appeared before Congress to provide testimony regarding the market disruptions and volatility witnessed in January 2021 relating to GameStop and other securities.  Chair Gensler identified seven factors contributing to market volatility:  gamification and user experience; payment for order flow; equity market structure issues; short selling; social media; clearance and settlement (or “market plumbing”) issues; and system-wide risks.  Chair Gensler noted that the SEC Staff expects to publish a staff report on these issues.  He also noted that he has asked the SEC Staff to prepare a request for public input on gamification related issues, including how current rules apply in light of the development of new technologies, and this will facilitate an evaluation of existing rules for possible amendment.  Chair Gensler posed a number of questions regarding payment for order flow:  “Do broker-dealers have inherent conflicts of interest?  If so, are customers getting best execution in the context of that conflict?  Are broker-dealers incentivized to encourage customers to trade more frequently than is in those customers’ best interest?  What are the policy implications with regard to the data aggregated by the purchasers of order flow?”

The Chair also commented on the Archegos Capital matter.  In that respect, he noted that Congress had given the SEC rulemaking authority to extend beneficial ownership reporting requirements to total return swaps and other security-based swaps.  Chair Gensler noted that he has asked the SEC Staff to consider recommendations as to whether to include total return swaps and other security-based swaps under new disclosure requirements, and if so how.

He also noted that Congress had directed the SEC under the Dodd-Frank Act to publish rules on monthly aggregate short sale disclosures.  In addition, the Dodd-Frank Act had provided authority to the SEC to increase transparency in the stock loan market.  The Chair has directed SEC Staff to prepare recommendations for the SEC’s consideration on these issues as well.

Chair Gensler commented on social media and the potential for bad actors to take advantage of social media platforms, as well as the use of sentiment analysis to manipulate the market.  He noted the need to understand these algorithms and trading strategies better.  He also addressed risks arising due to clearing, settlement, and the trading cycle.

See the full text of his remarks.

May 18, 2021 Webinar
1:00pm – 2:00pm EDT
Register here.

Given the increased interest in going public through a combination with a SPAC, many private companies may not have had an opportunity to complete a public company readiness assessment. Often, in light of the accelerated timelines associated with SPAC opportunities, public company preparations may not be top-of-mind for the working group at the company focused on the business combination. In fact, the public company readiness process may have to be compressed and often will be undertaken in parallel with negotiation of the initial business combination agreement, as well as the Securities and Exchange Commission’s review of the proxy or proxy/prospectus.

Join Daniel Klausner and Richard Sola of PwC and Mayer Brown partner, Anna Pinedo, to discuss the main elements of the public company preparedness process and how these might be coordinated or timed in conjunction with a de-SPAC process.

Our panelists will discuss:

  • The SPAC market
  • Recent SEC Staff Statements on SPACs
  • Timing and process for SPAC initial business combination
  • Timing and process for public company readiness assessment
  • Corporate governance best practices and other compliance considerations
  • Expectations regarding disclosure controls and internal control over financial reporting
  • Planning ahead for timely earnings reports and periodic filings

Prior to 2020, the last significant revisions to Regulation S-K were over 30 years ago.  As modernization of the human capital disclosure requirements have caught up with the times, companies are faced with setting reporting precedents.  See our previous post that provides an explanation of the Regulation S-K amendments.   

How did companies respond to the SEC’s new human capital disclosure requirement?  To answer this question, a new report published by Intelligize discusses the differences in hundreds of Forms 10-K filed by S&P 500 companies.  With no two filings alike, analysis shows that companies seemed to build on each other as time progressed; earlier filings were shorter, and less-inclusive in their disclosures, while later filings were longer and more descriptive.  The study sample in the report specifically focuses on Form 10-K filings made from November 2020 through March 2021. Varying in style and content, the filings examined were bucketed into three wide-ranging groups:

  1. General, largely unchanged from previous filings
  • Unstructured paragraphs
  • Less inclusive of past data (plus omissions)
  • More inclusive of aspirations going forward
  1. Middle-of-the-road
  • Less inclusive of past data (plus omissions)
  • More inclusive of disclosures on specific topics
  1. Most comprehensive (the smallest group of filings)
  • Thorough disclosures
  • More inclusive/detailed data, especially in the form of charts and tables

These categories are a result of the rule offering very little guidance on the specific information to be included by registrants.  The only direction provided tells registrants to incorporate “the number of persons employed by the registrant” and “any human capital measures of objectives that the registrant focuses on in managing business.” Across the board, filers included particular examples of “measures and objectives,” such as development, attraction, and retention of personnel. In addition, likely as a result of the COVID-19 pandemic, filings highlighted issues of turnover in their descriptions.

Out of 427 Form 10-K filings, 424 covered Diversity and Inclusion (D&I); in fact, more than half included D&I as its very own section. Oddly enough, however, only 16 filers disclosed a breakdown of personnel by race, gender, and other EEO-reporting characteristics.  This may be because some S&P 500 companies already report this information separately.

The majority, but surprisingly not all, incorporated company data on safety and health responsiveness of their employees, especially related to COVID-19, for instance. Benefits were another topic some touched on. The Intelligize report highlights that although compensation may have been mentioned, filers emphasized less-quantifiable aspects of payment programs, such as time off, enhanced workplace culture, and an increase in volunteer opportunities.

Although many found it puzzling that the SEC was not more explicit in its reporting expectations, a foundation has now been set for future filings to build on.

On April 29, 2021, Sen. John Kennedy (R) introduced the Sponsor Promote and Compensation (SPAC) Act (the “bill”), which would require the SEC to issue rules requiring enhanced disclosures for blank check companies, including SPACs, during the IPO and pre-merger stages.

Specifically, the SPAC Act calls for rules requiring the disclosure of:

  1. the amount of cash per share expected to be held by the blank check company immediately prior to the merger under various redemption scenarios;
  2. any side payments or agreements to pay sponsors, blank check company investors, or private investors in public equity for their participation in the merger, including any rights or warrants to be issued post-merger and the dilutive impact of those rights or warrants; and
  3. any fees or other payments to the sponsor, underwriter, and any other party, including the dilutive impact of any warrant that remains outstanding after blank check company investors redeem shares pre-merger.

Further, the bill would require the SEC’s rules provide for more explicit disclosure for the benefit of retail investors. The bill would compel the SEC to take action within 120 days of the bill’s passage.

The introduction of the SPAC Act follows an increased regulatory scrutiny surrounding the IPO alternatives, which has included the SEC’s Investor Alert cautioning investors against celebrity-sponsored SPACs, the SEC Staff’s statement on accounting and reporting considerations for warrants issued by SPACs, and additional SEC Staff statements concerning SPACs.

In 2020, the SEC issued new guidance on MD&A in light of COVID-19. The authors of this Securities & Commodities Regulation article discuss this guidance in detail, as well as recent amendments to Item 303 of Regulation S-K, and guidance on key performance indicators. They then turn to discussions of disclosure obligations relating to cybersecurity and the SEC’s focus on MD&A in comment letters.

Management’s discussion and analysis of financial condition and results of operations (MD&A) is a very important portion of a public company’s filings with the Securities and Exchange Commission, enabling investors to see the company through the eyes of management.  As such, companies should revisit their MD&A disclosure each time they prepare an SEC filing that requires it.  This is especially true at this time because of both the ongoing need to describe the various effects of the global outbreak of COVID-19, and recent rule changes and guidance impacting MD&A disclosure.

Read the full article.

May 12, 2021 Webinar
11:00am – 12:00pm EDT
Register here.

For US federal tax purposes, the main consideration for replacing an interbank offered rate (IBOR) with a fallback rate (or of adding a fallback mechanic to an existing instrument) is that this alteration could result in a deemed exchange of the instrument (with tax consequences for both the issuer of the instrument and the holder of the instrument).

Guidance for addressing the US federal tax consequences of an IBOR with a successor rate resides in three areas:

  • Older rules for addressing the US tax consequences for amendments to debt in general;
  • Treasury Regulations initially proposed in 2019; and
  • An IRS Revenue Procedure released in 2020.

Hosted by Intelligize, join Mayer Brown experts, Thomas Humphreys and Brennan Young, as they provide an overview of IBOR replacement under current federal tax guidance and a discussion of practical considerations in connection with various different types of instruments.

May 3, 2021 Webinar 
12:00pm – 1:00pm EDT
Register here.

Climate change and its associated effects, among other developments, have led to more responsible investments and ESG-driven business goals. However, parsing through ESG data leads to more questions regarding ESG’s impact on returns and shifts in risk-related and social norms. During this session, Frédéric Samama, Head of Responsible Investment at CPR AM, Amundi Group, will discuss responsible and impact investing, the effects of climate change on the market, and other topics, including:

  • Responsible investing;
  • ESG data and objectives;
  • ESG impacts on returns;
  • Evolving sources of capital for corporates; and
  • Impact and thematic investing.

Frédéric Samama is Head of Responsible Investment at CPR AM, Amundi Group. He is the founder of the SWF Research Initiative, co-editor of a book on long-term investing alongside Nobel Prize Laureate Joseph Stiglitz and Professor Patrick Bolton, and has published numerous papers on green finance. Four of Frédéric’s publications have been featured in the Financial Times’ “Green books sprout tall: 10 top ESG reads” list, published by Gillian Tett, which include:

  • Sustainable Investing: A Path To A New Horizon
  • Seeking Virtue in Finance: Contributing To Society In A Conflicted Industry
  • The Green Swan: Central Banking and Financial Stability In the Age Of Climate Change
  • Making Money Moral: How A New Wave of Visionaries Is Linking Purpose And Profit

Formerly, Frédéric oversaw Corporate Equity Derivatives within Crédit Agricole Corporate Investment Banking in New York and Paris. During his tenure, he developed and implemented the first international leveraged employee share purchase program, a system now widely used among French companies. He has advised the French government in different areas, including employee investing mechanisms, market regulation, and climate finance, and has a long track record of innovation at the crossroads of finance and government policy. In recent years, he has focused on climate change with a mix of financial innovation, research and policymaking recommendations, advising central banks, and sovereign wealth funds.

Lexis Practice Advisor

This practice note provides an overview of post-financial crisis market trends in the commercial paper market which went through significant restructuring and witnessed a reduction in the use of commercial paper to securitize assets. The note examines the market structure and evolution and legal and regulatory trends and discusses crisis programs established by the Federal Reserve in response to the onset of the COVID-19 pandemic.

Read the full practice note here.