Lexis Practice Advisor

This practice note provides 10 practice points to consider in drafting and negotiating lock-up agreements. In connection with securities offerings, the underwriters or placement agents generally negotiate a lock-up agreement with the issuer, as well as with the issuer’s directors, officers, and, in the case of initial public offerings, control persons and other stockholders. The lock-up agreements provide the underwriters or placement agents with some assurance that new issuer securities will not be sold immediately following the proposed offering the sale of which might disrupt the trading market for the offered securities.

Read the full article here.

On September 16, 2020, the Securities and Exchange Commission adopted amendments to Exchange Act Rule 15c2-11.  This rule was last amended about thirty years ago.  Rule 15c2-11 prescribes requirements relating to the publication or submission of quotations by broker-dealers in a quotation medium other than a national securities exchange, so OTC markets.  Before a broker-dealer may initiate or resume quotations for a security in a quotation medium, the broker-dealer must review key, basic information about the issuer of the security.  The amendments are intended to modernize the requirements and promote additional transparency for investors so that there is current information about an issuer and security before a broker-dealer provides quotes.  The amendments will become effective 60 days following publication of the amendments in the Federal Register.  The Rule will have a general compliance date that is nine months after the effective date as well as a compliance date that is two years after the effective date regarding provisions to require an issuer’s financial information for the last two fiscal years to be current and publicly available.

The press release and fact sheet are available here.  The adopting release is available here.

Thursday, September 24, 2020
12:30pm to 2:40pm EDT
Register here.

Please join us via webcast for our two-part Mortgage REIT Regulatory and Market Developments Update.

Part I: Regulatory & Finance Update (12:30pm to 1:25pm)
During the first part of our webcast, we will discuss:

  • Status of QM Rule Making;
  • Forbearance;
  • Solutions For Financing Advancing Obligations;
  • Update on MSR Financing Structures;
  • Rise of fair lending as an urgent issue;
  • GSE capital rules and GSE reform;
  • Constitutionality of the FHFA; and
  • Political outlook for housing.

Part II: Market Developments (1:35pm to 2:40pm)
During the second part of our webcast, we will discuss:

  • Mortgage and mortgage REIT market update;
  • Financings and other strategic transactions undertaken in 2020 to date;
  • SEC disclosure considerations for mortgage REITs;
  • Transition away from LIBOR, FRNs, fixed-to-floating rate preferred stock, repo, and the ISDA protocol; and
  • Other market developments, including mergers into SPACs and the IPO market for mortgage companies.

On September 9, 2020, the U.S. Securities and Exchange Commission (SEC) staff amended CF Disclosure Guidance Topic No. 7, Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b-2 (Guidance Topic No. 7) to specify options available when a confidential treatment order is about to expire. Notably, the amendments permit companies to maintain confidential treatment in some cases by transitioning from reliance on Rules 406 or 24b-2 to the “streamlined” redaction rules of Regulation S-K Item 601(b)(10)(iv).

Background: Companies desiring to redact sensitive information from material contracts filed as exhibits under the Securities Act or the Exchange Act have two options:

(1) They may obtain a confidential treatment order (CTO) by making a confidential treatment request (CTR) under Rule 406 (for Securities Act filings) or Rule 24b-2 (for Exchange Act filings), which requires written application to the SEC. CTOs, if granted, expire at a certain time.

(2) They may file a redacted exhibit relying on the “streamlined” process under Regulation S-K Item 601(b)(10)(iv). Companies may redact immaterial, competitively harmful information without submitting in advance an explanation to the SEC staff or providing an unredacted copy. The staff may later review and challenge the redactions.

Typically, companies prefer the Item 601(b) process and use the CTR process only as a fallback if redactions are challenged or if the filing is not covered by Item 601(b) (such as Schedule 13D and Regulation M-A Item 1016 exhibits). However, prior to its adoption in March 2019, the Item 601(b) process was not an option.

The prior Guidance Topic No. 7 permitted a CTO to be extended by submitting a short-form application. Companies could not maintain confidential treatment by transitioning to reliance on Item 601(b).

Guidance Amendments: The amendments to Guidance Topic No. 7 expand the options companies have to extend confidential treatment when a CTO is about to expire:

  • If the CTO initially was issued more than 3 years ago, it may be extended by either:
  • Transitioning to Item 601(b) confidential treatment (and other parallel rules), which requires re-filing the exhibit in compliance with the Item 601(b)(10)(iv) requirements. The transition may occur any time after the 3-year period following the initial issuance of the CTO, even if the CTO has not yet expired. The staff will not recommend enforcement action if the company re-files the exhibit in its first Exchange Act report following the expiration of the CTO; or
  • Submitting a complete CTR application (the short-form application is not available).
  • If the CTO initially was issued less than 3 years ago, companies may extend by filing a short-form CTR application.
  • If the information in a material contract exhibit no longer needs protection after the expiration of the CTO, it must be re-filed in unredacted form.

Monday, September 21, 2020 and Tuesday, September 22, 2020
Register here.

The PLI Pocket MBA is for attorneys representing clients in the financial industry. This two-day program is designed to improve your understanding of business strategies, accounting fundamentals and vocabulary used by management, investors, auditors and bankers.

Partner Jen Carlson, co-chair of the event, will speak on the Investment Banking Basics: Fundamentals of Capital Structures panel. The panel will cover:

  • Common financing alternatives — debt, equity and hybrids
  • Sources of funding — public and private markets
  • Liquidity — raising and deploying capital
  • Finding the Optimal Capital Structure
  • Current marketplace developments

Thursday, October 8, 2020
1:00pm – 2:00pm EDT
Register here.

Any issuer eligible to register its securities on Form S-3 should consider setting up an ATM program in order to maximize its opportunity to raise just-in-time capital.  As a result of the economic downturn, volatility and uncertainty resulting from the pandemic, many issues have found that having an ATM program available provides funding diversification and may be used to raise substantial capital.  Significant selling stockholders may also benefit from the flexibility of the ATM structure in order to take advantage of market opportunities to sell their shares from time to time.  For many issuers, an ATM may be paired with a forward sale component to provide additional flexibility.  During this webinar, Zach Dombrowski (BMO Capital Markets) and Brian Hirshberg (Mayer Brown) will review the basics of ATMs, as well as some of the legal and regulatory considerations that arise for issuers and for ATM agents.  Topics will include:

  • Form S-3 eligibility for issuers;
  • SEC filing requirements;
  • Block sales from an ATM and considerations for issuers;
  • Reporting ATM sales;
  • ATMs with forwards;
  • Compliance considerations for ATM agents, including those arising under Reg M;
  • ATMs for BDCs, following the modernization of the offering rules for BDCs; and
  • ATM offerings for a selling stockholder.

Wednesday, September 23, 2020 and Thursday, September 24, 2020
Click here for more information.

The firm is proud to sponsor the SIFMA Compliance & Legal Virtual Forum, a two-day September event featuring industry leaders’ perspectives on the current regulatory and enforcement environments, lessons learned thus far, and much more.

Marlon Paz will speak on a live panel entitled “COVID-19: Lessons Learned for Compliance & Legal Professionals”, which will discuss: operational capacity; meeting regulatory obligations for oversight in this COVID-19 environment; anticipating unique risks in this new operating structure; supervisory and management challenges with remote staff and related information security challenges; and a discussion of today’s challenges of internal and external communications and recordkeeping; and considerations for Return-to-Work plans.

Mayer Brown is also pleased to provide an on-demand session for C&L participants on Broker-Dealer Issues & Considerations Relating to LIBOR Cessation, led by Marlon Paz.

The SIFMA C&L Virtual Forum brings together financial services industry leaders and regulators that will discuss a variety of compliance and legal topics, including current regulatory and enforcement environments, litigation, leveraging technology in the industry, diversity and inclusion, and more.

Monday, September 21, 2020
Register here.

This year’s virtual PLI program will cover accounting, disclosure and reporting relief related to COVID-19 for mid-sized and small reporting companies. Further discussions throughout the webinar include the standard-setting agenda of the FASB, updates on rulemaking, interpretive guidance, frequent comments, and enforcement actions emanating from the SEC.

Mayer Brown Counsel Laura Richman, will be speaking on the Tuning Up Your Management’s Discussion and Analysis panel, specifically discussing:

  • Disclosure of qualitative and quantitative impacts of COVID-19
  • SEC’s proposed changes to MD&A
  • SEC’s guidance on use of key performance indicators and metrics
  • Cybersecurity disclosures
  • Critical accounting estimates versus critical audit matters
  • Brexit
  • Changes to LIBOR
  • Common issues from the SEC in MD&A reviews

On September 11, 2020, the U.S. Securities and Exchange Commission (SEC) adopted, in substantially the form it had proposed, amendments to the requirements for statistical disclosures that bank and savings and loan registrants provide to investors.

The rules rescind Industry Guide 3, Statistical Disclosure by Bank Holding Companies (Guide 3); codify certain Guide 3 disclosures into a new Subpart 1400 of Regulation S-K, eliminate other Guide 3 disclosures that overlap with other SEC disclosure requirements, U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS); and add certain credit ratio disclosure requirements.

According to the SEC, the rules aim to streamline compliance efforts and decrease reporting burdens for registrants and to enhance comparability among issuers. The changes also form part of the SEC’s Division of Corporation Finance’s (CorpFin) disclosure effectiveness initiative.

Read our Legal Update