The Securities and Exchange Commission’s Division of Economic and Risk Analysis (DERA) has regularly updated its studies regarding the market for unregistered securities offerings.  The most recent study provides data through the end of 2017.  Over $3.0 trillion was raised in unregistered securities transactions in 2017.  By contrast, registered offerings accounted for approximately $1.5 trillion.  Approximately $1.8 trillion was raised in Regulation D offerings, which surpasses the amount of capital raised in public offerings.  Of this amount, most was raised in Rule 506(b) offerings and pooled investment vehicles.  Some “repeat” issuers have switched to Rule 506(c).  Approximately 65% of the Regulation D offerings (by number) involve equity offerings.  The data presented in the study is based on information contained in Form D filings and, as a result, may understate the actual level of activity.

On September 25, 2018, the Securities and Exchange Commission’s (“SEC”) Division of Trading and Markets released Compliance and Disclosure Interpretations (“C&DIs”) to frequently-asked questions regarding Regulation Crowdfunding. Specifically, the SEC provided C&DIs related to the Rule 300 series of Regulation Crowdfunding which applies to requirements for intermediaries, including broker-dealers and funding portals. Additionally, the SEC Staff provided C&DIs related to the Rule 400 series of Regulation Crowdfunding, which contains rules specifically applicable to funding portals.

These address, among other things, the financial interests of an intermediary in the issuer, due diligence requirements for intermediaries, requirements for the delivery of educational materials by intermediaries, intermediary requirements with respect to transactions, changes and cancellation of an offering, and intermediary payments to third parties for directing investors to their platform. The SEC Staff notes that an intermediary is permitted to have a financial interest in the issuer.

Additionally, the C&DIs provide instructions on how to register as a funding portal and notes amendments to Form Funding Portal must be made within 30 days after information previously submitted becomes inaccurate. Moreover, interpretation was given regarding the Rule 402 conditional safe harbor for funding portals and recordkeeping requirements for funding portals.

The C&DIs can be found in full on the SEC’s website.

Thursday, October 25, 2018
12:00 p.m. – 1:00 p.m. Eastern

It’s time to get ready for the 2019 proxy and annual reporting season. Please join Mayer Brown Partners Jennifer J. Carlson, Robert F. Gray, Jr., Michael L. Hermsen, Anna T. Pinedo and Counsel Laura D. Richman for a complimentary webinar to discuss issues impacting the upcoming proxy season. Topics will include:

  • Pay ratio disclosure
  • Say-on-pay and other compensation disclosure matters
  • Shareholder proposals
  • Institutional shareholder initiatives
  • Proxy advisory reform initiatives
  • Trends in proxy disclosure
  • Virtual meetings
  • SEC’s cybersecurity guidance
  • Annual report risk factors
  • Disclosure update and simplification amendments
  • Director and officer questionnaires

CLE credit is pending. For more information, or to register, please visit the event website.

A recent paper titled, “Why do firms go public through debt issuance instead of equity?” reviews the characteristics of companies that choose to access the public market through debt issuance.  There were approximately 600 initial debt offerings from 1987 to 2016.  Public debt issuers tend to be larger companies with higher ratios of operating cash flows to capital expenditure and are often sponsor-backed.  There is no industry concentration.  A small percentage (16%) subsequently issue equity through an IPO.  When companies with public debt eventually do go public, they face lower underpricing than companies in the same industry that undertake traditional equity IPOs.

Since January 2018, the present U.S. administration has imposed a series of tariff policies (U.S. Tariff Policies) that potentially have a wide range of consequences. In this Lexis Practice Advisor® Practice Note, partner Anna Pinedo and associates Martin Estrada and Gonzalo Go discuss disclosure trends related to U.S. Tariff Policies.

October 23–26, 2018

Fort Mason Center for Arts & Culture
2 Marina Blvd.
San Francisco, CA 94123

SOCAP is the world’s leading conference activating the capital markets to drive positive social and environmental impact – convening the marketplace at the intersection of money and meaning. The conference brings together impact investors, social entrepreneurs, philanthropists, business leaders and other innovators from across the world in a unique cross-sector approach to catalyze collaboration for change.

Partner Anna T. Pinedo will speak on the “Linking Philanthropic Funding to Impact Performance: A Case Study” panel on Day Three of the conference. This session will include a discussion with the inventors and participants of the first ever Impact Security deal. The Impact Security represents a powerful new way to fund impact using a standardized financial product that explicitly links capital with impact. NPX developed the financial product to benefit all three participants – nonprofits, donors and investors. The first deal, benefiting the nonprofit The Last Mile, launched in May 2018 and included 27 top philanthropists and foundations.

For additional information, please visit the event website.

The Securities and Exchange Commission recently released its Strategic Plan for fiscal years 2018 to 2022.  The plan identifies three goals.  The first goal is to focus on the long-term interests of Main Street investors.  In order to accomplish this objective, the SEC intends to: enhance its outreach and educational efforts; pursue enforcement initiatives related to retail investor misconduct, including microcap fraud; modernize disclosure requirements and the EDGAR system; and promote investment options for retail investors by expanding the number of companies that are SEC-registered and exchange-listed. The second goal relates to enhancing data security.  To further this goal, the SEC will focus on ensuring that market participants are engaged in managing cybersecurity risks.  The third goal is to invest in the SEC’s analytical capabilities and human capital development.  The SEC intends to continue to expand the use of risk and data analytics in detecting improper behavior and bringing enforcement proceedings.

On October 1, 2018, a public petition was filed with the US Securities and Exchange Commission for a rulemaking on environmental, social and governance (ESG) disclosure. The Petition was authored by two law professors and signed by investors and associated organizations representing more than $5 trillion in assets under management.

This Legal Update outlines what the petition’s authors are requesting—and why.

In recent comments, Commissioner Peirce shared her views on the role of the Securities and Exchange Commission in expressing a view regarding mandatory arbitration provisions. Commissioner Peirce noted that, in her opinion, the SEC does not have grounds to object to mandatory arbitration provisions. She noted that the Federal Arbitration Act “directs federal agencies to respect private contracts that favor arbitration.” To the extent that a corporate charter or bylaws are viewed as private contracts, the Federal Arbitration Act would seem to limit the authority of the SEC to prohibit a mandatory arbitration provision that is otherwise permissible under applicable state law. The Commissioner noted that it has been reported in the past that the Staff of the SEC has not allowed domestic registrants with mandatory arbitration provisions in their charters to have declared effective their IPO registration statements. She notes that if the Staff were to recommend that the SEC prohibit another company from registering an offering because of a mandatory arbitration provision in the future, the Commissioner would want to understand the basis for such view. Despite various statements from Chair Clayton to the effect that the SEC is not actively considering its position on mandatory arbitration, Commissioner Peirce’s comments seem to suggest that mandatory arbitration provisions remain a topic of discussion.

An at-the-market (ATM) offering is an offering of an issuer’s securities into the existing trading market for such securities at publicly available bid prices. An issuer’s internal legal team and outside counsel play critical roles in properly documenting an ATM offering. In this Lexis Top 10 Practice Tips: At-The-Market Offerings, we provide 10 practice tips that can help attorneys effectively and efficiently assist with an ATM offering.