September 29, 2021 Webinar | 1:00pm – 2:00pm EDT
Hosted by Intelligize
Register here.

This webinar will focus on recent developments and trends with the SEC and FASB. Join Mayer Brown partners, Anna Pinedo and Brian Hirshberg, and Ernst & Young managing director, Polia Nair, where they will examine the following topics:

  • The SEC’s amendments to MD&A and financial disclosure requirements
  • Experience with early adoption of the amendments
  • Disclosure requirements related to liquidity and critical accounting estimates
  • Areas of frequent SEC Staff comment on MD&A
  • The SEC’s amendments to Form 10-K and disclosure practice
  • Key performance indicators (KPIs) and non-GAAP measures, SEC Staff comments, and enforcement actions
  • Subpart 1400 of Regulation S-K (the successor to Industry Guide 3)

 

Benefits & Compensation University: Hot Topics in Executive Compensation
October 31, 2021 Webinar | 12:00pm – 1:30pm EDT 
Register here. 

Please join us for Mayer Brown’s Benefits & Compensation University. During this webinar series, we are exploring ERISA, benefits and compensation issues in depth and hearing from leading Mayer Brown lawyers about the changing regulatory landscape, including trends in US Department of Labor audits and investigations. The Mayer Brown team will provide practical, business-focused guidance on dealing with these challenges.

This second session will cover such areas as:

  • Clawbacks and recoupment policies
  • Local and state laws impacting executive compensation
  • Impact of President Biden’s tax proposals on executive compensation
  • Executive compensation issues in SPACs

You are an issuer, investment adviser, or broker-dealer.  You want to communicate to the public about securities.  Should you (a) type a letter and drop it in the mailbox; (b) chisel out a prospectus on two stone tablets; or (c) use social media?

If you chose (c), please see our new edition of the Mayer Brown Social Media Guide.  We discuss in depth the latest guidance and regulations covering the use of social media, including using websites in capital raising transactions, “advertisements” under the Investment Advisers Act of 1940, the use of robo-advisers, and FINRA guidance on the use of social media by broker-dealers.

 

Alessandro Fenili and Carlo Raimondo, in their study and paper ESG and the Pricing of IPOs: Does Sustainability Matter, find a significant relationship between a discussion of ESG related issues and IPO pricing.  They performed textual analyses of 783 US IPOs completed during the period from 2012 through 2019 across various industries.  Given investor interest in sustainability and ESG in their investment decisions, the study focuses on the amount of information about sustainability disclosed by IPO issuers.  In order to assess IPO disclosures, the study considered a list of words that were associated with ESG topics.  Then, they performed textual and other analyses on the IPO prospectuses.  A large increase in the number of ESG “words” in the IPO prospectuses was found to lead to reduced information asymmetry (investors have better information on which to base their investment decision regarding the IPO issuer’s ESG focus) and to less IPO underpricing.  Over the years studied, the study observed an increase in the mean number of words included in IPO prospectuses and also in the mean number of ESG words included in IPO prospectuses.  So, IPO prospectuses are getting longer, and ESG related disclosures are getting more detailed.  Disclosing ESG information leads to better firm evaluation.

In addition, in order of magnitude for price revision, ESG, Environmental, Governance, and Social variables had respective decreases of .194, .183, .182, and .130 standard deviations. Thus, demonstrating that ESG as a whole has the highest economic effect on underpricing and price revision.  The authors checked their results through robustness checks; they controlled different variables and data items and overall the results did not significantly change. Ultimately, the paper offers evidence of a strong association between ESG disclosure during an IPO and less IPO underpricing and more accurate evaluation by investors of the IPO issuer’s valuation.  The paper is available here.

In various prepared remarks in recent weeks, Securities and Exchange Commission (SEC) Chair Gensler has commented on a number of potential proposals for additional disclosure requirements.

In remarks made to the European Parliament Committee on Economic and Monetary Affairs, Chair Gensler addressed a number of topics, including gamification and crypto assets.  Commenting on issuer disclosures, the Chair stated that “from time to time we freshen up our disclosure regimes to reflect investor demands.”  He noted that investors increasingly seek out information regarding the climate risks, workforces, and cybersecurity risks of the companies whose stock they own or might buy.  Chair Gensler explained that the SEC Staff was working on a proposal regarding climate risk disclosure requirements.  In its consideration of these disclosure requirements, the Chair asked the Staff to consider other existing frameworks and standards, including the Task Force on Climate-related Financial Disclosures (TCFD) framework.  Relatedly, he noted the use by funds in their branding of terms like “green,” “sustainable,” “low-carbon,” and so on, and pointed out that he had directed the Staff to review current practices and consider recommendations whether fund managers should disclose the criteria and underlying data they use to market themselves in this manner.  He also pointed out that he requested that the Staff develop disclosure requirement recommendations for the SEC’s consideration regarding human capital and board diversity.  All of these items were reflected in the SEC’s regulatory agenda.

Chair Gensler also identified a new initiative—he noted that he had asked the Staff to develop a proposal for the SEC’s consideration on cybersecurity risk governance, which could address cyber hygiene and incident reporting.

Addressing the recent meeting of the SEC’s Investor Advisory Committee last week, Chair Gensler expressed appreciation for the Committee’s recommendations for additional disclosures in connection with offerings by SPACs.  He pointed out how he thought that more could be done to strengthen disclosures regarding dilution and costs to investors in the context of SPAC transactions.  The Chair noted that rulemaking recommendations were being developed to enhance disclosures and economic analysis was being undertaken to understand how investors were being benefited or disadvantaged by SPAC related transactions.

If you walk like a bank and talk like a bank, are you really a “bank”?  What are Section 3(a)(2) bank note programs, and which issuers are eligible to use them? Why do national banks exempt from registration under the Securities Act still have to follow the OCC’s securities offering disclosure rules?  Find the answers in our new What’s the Deal? article on Section 3(a)(2) bank note programs, in the latest of our What’s the Deal? series.

Published by The Business Lawyer, the quarterly journal of the American Bar Association, the 2021 Annual Review of Federal Securities Regulation (the “Review”) was prepared by the Subcommittee on Annual Review of the Committee on Federal Regulation of Securities of the ABA Business Law Section.  The Review covers significant developments in federal securities law, regulation, accounting and caselaw during 2020.  The Review is written from the perspective of practitioners in the fields of corporate and securities law.  This results in an emphasis on significant developments under the federal securities laws relating to companies, shareholders, and their respective counsel.  Discussion is limited to developments that are of greatest interest to a wide range of practitioners and addresses only final rules.

See the complete Review.

 

In the latest installment of our What’s the Deal? series, we provide an overview of the Rule 144A resale exemption, and discuss traditional Rule 144A offerings, as well as Rule 144A basics.  Access our What’s the Deal? guide.

You may also be interested in comparing Rule 144A offerings to other offering formats—a number of useful charts are available in our Resources section.

 

On August 26, 2021, the US Securities and Exchange Commission (“SEC”) approved an amendment to Rule 314 of the NYSE Listed Company Manual in connection with the review and approval of related party transactions.  As we previously blogged, earlier this year the NYSE amended certain of its shareholder approval rules, including those relating to issuances of common stock to a listed company’s directors, officers, and substantial security holders (“Related Parties”).  As part of those amendments, Rule 314 required a company’s audit committee to conduct a reasonable prior review and oversight of all transactions involving Related Parties for potential conflicts of interest and prohibit any such transaction if it determined the transaction to be inconsistent with the interests of the company and its shareholders.  With respect to public disclosure, Item 404 of Regulation S-K and Item 7.B of Form 20-F set forth the SEC’s requirements for disclosures of transactions involving Related Parties of domestic issuers and foreign private issuers, respectively.  However, as adopted earlier this year, the NYSE’s amendments did not address the transaction value or the materiality threshold set forth in the SEC’s disclosure rules.  The newly approved NYSE rule now rectifies that inconsistency by further amending Rule 314 to provide that the audit committee’s review and approval requirement will be applicable only to transactions that are required to be disclosed after taking into account the transaction value and materiality thresholds set forth in Item 404 of Regulation S-K, or Item 7.B of Form 20-F, as applicable.

See the NYSE’s amendment here.

Over 60 law firms, including Mayer Brown, signed a joint statement responding to a recent action against a SPAC asserting that SPACs are investment companies under the Investment Company Act of 1940 because proceeds from their IPOs are invested in short-term US Treasury securities and qualifying money market funds.

The signing law firms view the assertion that SPACs are investment companies as without factual or legal basis and believe that a SPAC is not an investment company under the 1940 Act if it (i) follows its stated business plan of identifying and engaging in a business combination with one or more operating companies within a specified period of time and (ii) holds short-term US Treasury securities and qualifying money market funds in its trust account pending completion of its initial business combination.

Read the joint statement.