August 4, 2021 Webinar 
1:00pm EDT – 2:00pm EDT
Register here.

Practices for public companies relating to earnings calls, earnings guidance and investor updates vary. Especially in uncertain and volatile markets, preparing for these important communications requires careful consideration of a number of factors, including the recent statements and guidance from the Securities and Exchange Commission and SEC Staff.

During this session hosted by Intelligize, Mayer Brown partner, David Freed, and counsel, Laura Richman, will address:

  • Materiality and when an issuer has a duty to disclose;
  • Trend information and earnings guidance;
  • Non-GAAP financial measures and KPIs;
  • Forward-looking statements and cautionary statements;
  • SEC guidance related to COVID-19; and
  • Financings after earnings announcements and before quarterly reports are filed.

In Regulatory Notice 21-26 (July 15, 2021), FINRA amended the filing requirements of Rules 5122 and 5123 to require members to file with FINRA any “retail communications,” as defined in FINRA Rule 2210, that promote or recommend private placement offerings. FINRA Rule 5122 covers private placements of securities issued by a FINRA member, while Rule 5123 covers other private placements. Both rules have filing requirements, as well as exemptions from those filing requirements for offerings to institutional accounts (as defined in FINRA Rule 4512(c)), qualified purchasers (as defined in the Investment Company Act of 1940), and qualified institutional buyers (as defined in Rule 144A under the Securities Act of 1933), among others.

The filing requirements of Rules 5122 and 5123 currently require the filing of any “private placement memorandum, term sheet, or other offering document” provided to any prospective investor, for Rule 5122, or used in connection with the sale, for Rule 5123. The amendments to these rules, which will come into effect on October 1, 2021, add to each rule’s filing requirement, “any retail communication (as defined under Rule 2210) that promotes or recommends the [member private offering] [private placement] ….” A “retail communication” means “any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period.”

According to FINRA, most members currently file these retail communications, although not required by the current versions of Rule 5122 or 5123. Examples provided by FINRA of retail communications that will now fall within the filing requirements include web pages, slide presentations, fact sheets, sales brochures, executive summaries, and investor packets.

On July 13, 2021, the US Securities and Exchange Commission (“SEC”) announced charges against a special purpose acquisition company (“SPAC”), the proposed merger target company in the space transportation industry, each company’s CEO, and the SPAC’s sponsor. The charges were announced in connection with misleading statements made by the SPAC and target company to its investors.

This Legal Update discusses the SEC’s issuance of an Order Instituting Cease-And-Desist Proceedings against the related parties and the Order’s broader implications.

On June 11, 2021, the US Securities and Exchange Commission (SEC) announced that it would focus on cybersecurity disclosures made by public companies as part of its regulatory agenda. Given the SEC’s continued interest in cybersecurity issues, high-profile ransomware attacks and executive orders issued by President Biden, it is no surprise that the SEC is focused on taking an increasingly active role in a whole-of-government response to cybersecurity threats. Although it will be some time before a final rule on cybersecurity risk disclosures is issued, a proposal from the SEC is expected in October 2021. In the meantime, public companies should begin preparing for what is likely to be a new SEC rule mandating cybersecurity disclosures.

This Legal Update provides background on the new SEC chairman and the SEC rulemaking process, the SEC’s prior guidance on cybersecurity disclosures and steps that public companies can begin taking now to prepare for enhanced SEC oversight of cybersecurity disclosures.

At a recent conference, Securities and Exchange Commission Chair Gary Gensler gave wide-ranging remarks addressing market structure issues, LIBOR and other rates, and the Commission’s regulatory agenda.

Addressing regulatory initiatives relating to public company disclosures, Chair Gensler noted he has asked the Staff to put together recommendations on mandatory company disclosures on climate risk and human capital.  He also noted that investors would like disclosures that are consistent and that allow them to make comparisons among companies.  The Chair noted he has asked for specific recommendations relating to governance, strategy, and risk management related to climate risk, as well as a range of specific metrics, such as greenhouse gas emissions, to determine those which are most relevant to investors.  The Chair pointed to the over 400 comment letters the Commission has received regarding climate change disclosure.  He noted that he has asked the Staff, as well, to consider how funds that purport to focus on ESG are carrying out their investment objectives.  On human capital disclosures, the Chair recognized that the Staff is considering a number of possible metrics including workforce turnover, skills and development training, compensation, benefits, and workforce demographics including diversity, and health and safety.

Chair Gensler also discussed the Commission’s plans for modernizing the rules related to ownership reporting.  He noted that the rules relating to reporting beneficial ownership have not been updated since the late 1960s and connected this to the Archegos collapse, which may be tenuous.  In any event, he indicated that revisions to the Section 13 and Section 16 ownership reporting rules are contemplated, as well as updates to reporting of derivatives positions and greater transparency relating to short selling activity.

See the text of his complete remarks here.

Directors’ and officers’ (D&O) insurance policies are traditionally structured as “ABC” policies, comprised of Side A, B, and C coverage that together provide protection for the issuer and for directors and officers.  For SPACs, ABC polices differ from those of a traditional operating company with a balance sheet, and, as a result, some SPACs elect to purchase only Side A coverage.  Yelena Dunaevsky and Dan Berry of Woodruff Sawyer address D&O insurance policies for SPACs, the nuances and differences for SPACs, pricing and other considerations in this Woodruff Sawyer’s “Meet the Experts” series.

During the National Investor Relations Institute’s (NIRI) 2021 Virtual Conference, SEC Commissioner Elad Roisman spoke about the hot topic of ESG-related disclosure requirements.

The Commissioner noted that public companies are overwhelmed with the amount and the specificity of ESG data investors ask them to provide.  Commissioner Roisman appreciated the call for standardized disclosures related to environmental, social, and governance matters.  Yet, he seemed skeptical of how the SEC would approach construction of a set of ESG disclosure requirements.  Doing this would “displace a good amount of private sector engagement.”  Commissioner Roisman acknowledged SEC rule-writing is slow, and observed that there should be confidence in the process of crafting new disclosure requirements so that the requirements have long-lasting applicability, as reexamination does not happen often.

Additionally, while crafting ESG disclosure requirements, the Commissioner believes, although challenging, the SEC’s focus should be on “what information is material to an investment decision.”  Commissioner Roisman noted that the SEC Staff consists mainly of experts in financial markets, further stating, “We do not have, for example, climate scientists… It is fair to question how our staff is equipped to determine which climate or environmental information…is material to an investment decision.”

In his concluding observations, the Commissioner raised concerns also about standard-setting:  who would the SEC choose as the example to rely on and explain how its choice serves its intentions in establishing new ESG disclosure requirements? Although posing these questions and concerns, Commissioner Roisman said his mind is not ultimately made up on these issues and he is receptive to learning more.

Read the Commissioner’s full remarks here.

On June 21, 2021, US financial regulators met with US President Joe Biden to discuss the US economy and update him on their efforts to address climate-related risks.  According to the White House readout of the meeting, the regulators said “they were making steady progress” on implementing President Biden’s executive order on climate-related risk. The briefing follows last week’s passage of HR 1187, the Corporate Governance Improvement and Investor Protection Act, by the US House of Representatives by a vote of 215 to 214. HR 1187 would mandate that the SEC create an ESG disclosure regime for public companies and provides numerous statutory requirements for those disclosures, including climate-related disclosures. Although the bill is unlikely to become law due to expected opposition in the US Senate, which requires a 60-vote supermajority to pass legislation, the passage of the HR 1187 by the House – combined with President Biden’s focus on climate-related risks in his meeting with financial regulators –  should bolster and influence the US Securities and Exchange Commission’s (SEC) ongoing development of new ESG disclosure requirements for US public companies under its existing statutory authorities. With regulators telling President Biden that they are “making steady progress,” new disclosure requirements for US public companies appear to be just around the corner.

Read the full Legal Update.

Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System, No. 20-222

On June 21, 2021, the Supreme Court held that in a securities-fraud class action, the district court should consider whether the alleged misrepresentation is generic in determining whether the misrepresentation affected the price of the security at issue. The Court also held that the defendant bears the burden to prove the lack of price impact by a preponderance of the evidence.  Continue reading.

We are pleased to announce our latest resource, Writing on the Wall, offering explanations and definitions for over 800 securities, capital markets, derivatives, structured finance and financial services terms and phrases.

Access the glossary at, or wherever you see our icon, and suggest new terms to be added.