April 2022 marked the ten-year anniversary of the JOBS Act.  My former partner and friend, Dave Lynn, co-editor of TheCorporateCounsel.net and The Corporate Counsel, invited me to join him on his podcast, Deep Dive with Dave.  We discussed the anniversary, and genesis of the JOBS Act, as well as some of the changes to the exempt offering framework that came about as a result of the Act.  We also gave our views on what worked and what maybe didn’t work as well as we had hoped, and why a JOBS Act 4.0 might be in order.

Here’s a link to the podcast.

Structured certificates of deposit – they look and feel like structured notes, but there are important differences, and traps for the unwary. Are they securities, or not? How does a structured CD program differ from a medium-term note program? Read our new What’s the Deal? – Structured Certificates of Deposit guide to find the answers to these questions and for some helpful practice points.

May 18, 2022 Webinar
1pm – 2pm EDT
Register here. 

Join Mayer Brown partners Claire Ragen and Adam Kanter to hear diverse perspectives on the potential impact of the US Securities and Exchange Commission’s (SEC) recent proposed rules on private fund investors and sponsors. Topics will include potential considerations for investors and sponsors on due diligence, side letters, and fund structures. Panelists will lead a discussion with industry experts representing viewpoints of investors and sponsors.

Guest speakers representing the investor viewpoint include:

  • Christopher Hayes: Advisor, Alumni, Head of Government Relations, Celo Foundation and former Senior Policy Counsel, ILPA
  • Heather Harlan: Associate General Counsel, Northwestern University
  • Igor Rozenblit: Managing Partner, Iron Road Partners and former Co-Head of the SEC’s Private Funds Unit

Our speakers representing the sponsor viewpoint include:

  • Troy Paredes: Founder, Paredes Strategies LLC and former Commissioner of the SEC
  • George Chang: General Counsel and Chief Compliance Officer, The Voleon Group
  • Teale Long: Senior Vice President and Associate General Counsel, Neuberger Berman
  • Minh Ta: Vice President for Global Government Affairs, The Carlyle Group

On May 5, 2022, Congressman McHenry, the senior Republican on the House Financial Services Committee, and Congressman Huizenga, the senior Republican on the Investor Protection, Entrepreneurship, and Capital Markets Subcommittee sent a letter to Chairwoman Maxine Waters reiterating their demand for a hearing with the full US Securities and Exchange Commission (SEC). The House Financial Services Committee Republicans previously called on Chair Waters to schedule a hearing with the full SEC no later than April 2022 to discuss the SEC’s expansive rulemaking agenda and to hear the views of each Commissioner. In the letter, the Congressmen note that, “the SEC has taken several actions outside the scope of its authority and jurisdiction, and it has done so without giving stakeholders a fair chance to provide input. It is imperative that our full Committee convene to discuss the SEC’s unprecedented rulemaking agenda and hear the full range of views on the Commission.”

Read the full letter to Chair Waters here.

The US Securities and Exchange Commission (SEC) rulemaking process has received much attention under Chair Gensler’s leadership not only because of the volume and substance of proposed rules, but also because of the relatively short comment periods allotted for the public to respond pursuant to the Administrative Procedure Act process. As just one example of the reaction from market participants and others, see here an earlier Mayer Brown post summarizing a letter to the SEC from 25 trade associations seeking longer comment periods.

The SEC published a press release on May 9, 2022, announcing that it has extended the comment period for its proposed rule mandating climate-related disclosures by public companies. In addition, the SEC has reopened the comment periods for rule proposals related to private fund advisers and the inclusion of certain Treasury markets platforms within Regulation ATS.

Chair Gensler stated the following with respect to this action: “Today, the Commission acted to provide the public with additional time to comment on three proposed rulemakings that have drawn significant interest from a wide breadth of investors, issuers, market participants, and other stakeholders. The SEC benefits greatly from hearing from the public on proposed regulatory changes. Commenters with diverse views have noted that they would benefit from additional time to review these three proposals, and I’m pleased that the public will have additional time to provide thoughtful feedback.”

As a result of this action, the comment period for the proposed rules on climate-related disclosures will close on June 17, 2022 (not May 20, 2022, as originally anticipated). The comment periods for the rule proposals affecting private fund advisers and Regulation ATS will be reopened for 30 days following publication of the reopening release in the Federal Register.

The Staff of the US Securities and Exchange Commission’s Division of Corporation Finance released a sample comment letter that provides guidance regarding the types of disclosures that reporting companies should consider in connection with the direct or indirect that Russia’s invasion of Ukraine and the international response it may have on their businesses. Among other things, the letter identifies as possible areas of disclosure impacts suffered by companies on their business, operations, or prospects due to changes in their employee base, disruptions to their supply chain, changes in their business relationships, heightened cybersecurity risks or threats, increased volatility in the trading prices of commodities, etc.

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. 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, which might disrupt the trading market for the offered securities.

Read the complete article here.

Underscoring the U.S. Securities and Exchange Commission’s (SEC) attention to environmental, social, and governance (ESG) disclosures, the SEC has charged Vale S.A., a publicly traded Brazilian mining company, with making false and misleading claims about the safety of its dams prior to the January 2019 collapse of its Brumadinho dam. This Legal Update highlights allegations from the SEC’s complaint.

In various public statements of late, representatives of the Securities and Exchange Commission have noted concern regarding the growth of the private markets.  The statements have pointed to the fact that fundraising in the private markets has surpassed fundraising in the public markets.  For example, a recent speech cited statistics that private assets under management reached an all-time high of $9.8 trillion as of July 2021, an increase of ~33% from $7.4 trillion in 2020.  The number of U.S. public companies has declined.  According to statistics published by the SEC’s Office of the Advocate for Small Business Capital Formation, there were 7,414 U.S. public companies in 1997 and 4,071 public companies in 2021.  By contrast, the number of companies achieving unicorn status continues to grow—now reaching over 1,000 worldwide, and over 600 in the United States.  In aggregate, the 1,057 unicorns worldwide at year-end 2021, according to CB Insights, had a valuation of approximately $3,502 billion.

Over time, there has been greater legal certainty regarding the availability of exemptions from registration from the Securities Act registration requirements.  This can be traced back to the adoption of Regulation D, and more recently to the adoption of a number of new exempt offering alternatives resulting from the enactment of the JOBS Act.  The shortening of the Rule 144 holding period also has contributed to reducing the liquidity discount associated with private placements.  The 2020 amendments rationalizing the exempt offering alternatives and modernizing the securities integration framework also has provided much-needed clarity.  Recent statements from SEC representatives appear to suggest that exempt offerings came “without the transparency, accountability and investor protections afforded by the public markets.”  However, the JOBS Act required investor protections—such as investor verification in the case of Rule 506(c) offerings, Securities Act liability in the case of Regulation A and Regulation Crowdfunding transactions, and the use of a gatekeeper (either a funding portal or a broker-dealer) for crowdfunded offerings—and the SEC rules implementing the JOBS Act mandates also impose investor limits in the case of Regulation A and Regulation Crowdfunding transactions, in addition to requiring disclosure documents in the case of both Regulation A and Regulation Crowdfunding offerings.

Concerns also have been raised as to whether investors in the private markets lack the “standardized disclosure that all investors can rely on for decision-making, reporting frameworks that form the basis of corporate accountability.”  However, the basis of the statutory private placement exemption, the Section 4(a)(2) exemption, has always been that there is a category of investor that does not require the protections associated with the registration requirements.  The SEC has on its rulemaking agenda revisiting the Exchange Act Section 12(g) threshold.  The SEC also has introduced significant proposed amendments to various disclosure requirements that would be applicable to public companies, including disclosures related to cybersecurity and climate change.  Also, the SEC has proposed amendments that would affect an alternative approach to entering the public markets—that is a business combination with a special purpose acquisition company, or SPAC.  However, there is nothing on the SEC’s rulemaking agenda that would address the initial public offering process.  Interesting, given that direct listings and combinations with SPACs have come about, at least in part, as challenges to the traditional IPO.  And we’ve witnessed a number of other changes to the traditional IPO process in recent years that suggest areas in which the process may no longer address market needs as well as it once did.  To contemplate turning back the clock and re-regulating the private markets, without taking a step back and considering the IPO process and the regulation of public companies would be profoundly disruptive.

On May 6, 2022, the SEC’s Small Business Capital Formation Advisory Committee will host a live meeting to discuss two recent long-awaited and controversial SEC proposals:  the SEC’s proposed rules on Climate-Related Disclosures and its proposed rules on SPACs, Shell Companies, and Projections.

Mayer Brown partner Anna Pinedo will provide testimony relating to, and participate in discussion concerning, the SPAC proposal.

The meeting will be open to the public and webcast live on the SEC’s website, starting at 10:00am ET.  See the meeting agenda for additional details.