On January 18, 2019, Congresswoman Maxine Waters and Congressman Patrick McHenry introduced legislation that would require the Securities and Exchange Commission (the “Commission”) to carry out a study of Rule 10b5-1 trading plans. Rule 10b5-1 trading plans are passive investment agreements that provide an affirmative defense for companies and insiders (directors, officers and affiliated shareholders) transacting in the relevant company’s securities from claims brought under the Exchange Act. Currently, any person or entity can establish a Rule 10b5‐1 trading plan to sell or buy a company’s securities at a time when the person or entity is not aware of any material non-public information relating to the company. The study would review whether Rule 10b5-1 should be amended to:

  • limit the ability to adopt a trading plan to a time when the company or insider is permitted to buy or sell securities during issuer-adopted trading windows;
  • limit the ability of companies and insiders to adopt multiple trading plans;
  • establish a mandatory delay between the adoption of a trading plan and the execution of the first trade made pursuant to such plan;
  • limit the frequency with which companies and insiders may modify or cancel trading plans;
  • require companies and insiders to file adopted trading plans with the Commission; and
  • require boards of companies to adopt policies covering trading plans and monitor trading plan transactions

The Commission would be required to issue a report within one year of the adopted legislation and revise Rule 10b5-1 based on the study’s results. A copy of the legislation can be found using the below link: https://financialservices.house.gov/uploadedfiles/waters_007_xml_hr_624.pdf.

 

On January 10, 2019, the staff of NYSE Regulation released its annual memorandum detailing important rules and policies applicable to listed companies. The memorandum provides helpful reminders for issuers (noting important rule differences for domestic and foreign private issuers) with securities listed on the NYSE and also highlights new compliance items. In particular, as previously announced, the memorandum notes that NYSE-listed companies are now required to provide notice to the NYSE at least ten minutes before making any public announcement with respect to a dividend or stock distribution, including when the notice is outside of NYSE trading hours. Additionally, NYSE-listed companies are now no longer required to provide physical copies of proxy materials to the NYSE if such proxy materials are publicly filed with the Securities and Exchange Commission (“SEC”) on EDGAR. The memorandum also provides important reminders specific to foreign private issuers, including with respect to semi-annual reporting. NYSE-listed foreign private issuers are required to submit a Form 6-K to the SEC containing semi-annual unaudited financial information no later than six months following the end of the company’s second fiscal quarter. The memorandum also includes the latest NYSE staff contact information for purposes of complying with notification requirements and contacting the NYSE in the event material news is released. A copy of the full memorandum can be obtained by clicking here.

On December 21, 2018, the Securities and Exchange Commission (the “SEC”) appointed Martha Legg Miller as the Advocate for Small Business Capital Formation. As the first individual appointed to the new role, Miller will assist small businesses in accessing and navigating capital markets and identify the challenges that they face in doing so. Additionally, Miller will suggest regulatory changes to better accommodate the interests of small businesses. The position was created along with the Office of the Advocate for Small Business Capital Formation under the SEC Small Business Advocate Act of 2016. The SEC created the new role and office to better represent the needs of small businesses in accessing capital, while continuing to ensure investor protection. The SEC press release covering the appointment can be found here.

Before the SEC shutdown, the Office of the Investor Advocate published the annual report on its activities during 2018. The report addresses non-GAAP financial measures and key performance indicators. The report notes that some investors find value in non-GAAP financial measures; however, others are troubled by inconsistent and changing disclosures and would like to see greater standardization that would permit comparisons to be more easily made. The report suggests continue attention be paid to the metrics used by public companies, and I how these are prepared and presented period to period. The report also addresses the Advocate’s focus during the year on problematic investment products, such as initial coin offerings, and increasing use of margin debt. The full report can be accessed here: https://www.sec.gov/advocate/reportspubs/annual-reports/sec-investor-advocate-report-on-activities-2018.pdf

 

The recently published MoneyTree Report provides an overview of venture capital investment trends. In 2018, VC-backed companies raised $99.5 billion, an increase in annual funding of 30%, despite a decline in the number of deals. In 2018, the number of early-stage deals declined, but the number of later-stage deals increased. There were 184 “mega-rounds” completed in 2018, or funding rounds of $100 million or more. Globally, there were 382 mega-rounds completed in 2018 although overall financing activity globally declined in 2018. There were 55 companies that attained unicorn status in 2018. At year-end 2018, there were 140 venture-backed unicorns. By sector, Internet companies led with 540 deals completed in the fourth quarter raising $9.1 billion. This was followed by 162 healthcare financings and $4.0 billion. Fintech-related funding increased 38% in 2018 over 2017.

Tuesday, February 26, 2019
Registration: 8:30a.m. – 9:00 a.m.
Program: 9:00a.m. – 10:00 a.m.

Location
Mayer Brown LLP
1221 Avenue of the Americas,
New York, NY 10020

Successful privately held companies considering their liquidity opportunities or eyeing an IPO often turn to late stage private placements. Late stage private placements with institutional investors, cross-over investors and strategic investors raise a number of considerations distinct from those arising in earlier stage and venture financing transactions. Privately held companies also have become more comfortable sponsoring liquidity programs for early investors, employees and consultants, as well as allowing these holders to sell to cross-over investors in late stage investment rounds.

During our session, we will discuss:

  • Timing and process for late stage private placements;
  • Terms of late stage private placements;
  • Principal concerns for cross-over funds;
  • Diligence, projections and information sharing;
  • IPO and acquisition ratchets;
  • Participation by strategic investors;
  • Issuers and third-party tender offerings; and
  • Private secondary market opportunities

For more information or to register, please click here.

In a recent cease and desist order accompanied by a $100,000 civil penalty, the US Securities and Exchange Commission (SEC) gave a strong reminder of the importance of providing equal or greater prominence to the most directly comparable financial measure calculated and presented in accordance with Generally Accepted Accounting Principles (GAAP) in disclosures containing non-GAAP financial measures, including earnings releases. This Legal Update discusses SEC rules and guidance applicable to this order.

To learn more, read our Legal Update.

In a recent cease and desist order accompanied by a $100,000 civil penalty, the US Securities and Exchange Commission (SEC) gave a strong reminder of the importance of providing equal or greater prominence to the most directly comparable financial measure calculated and presented in accordance with Generally Accepted Accounting Principles (GAAP) in disclosures containing non-GAAP financial measures, including earnings releases. This Legal Update discusses SEC rules and guidance applicable to this order.

To learn more, read our Legal Update.

In December 2018, Bill 3718 (the “Bill”) was introduced in the Senate and referred to Committee. The Bill, or the “Ban Conflicted Trading Act,” prohibits members of Congress and senior congressional staff from trading individual stocks and other investments while in office. Specifically, the Bill prohibits such covered persons from (1) purchasing or selling any security, commodity, future, or derivative and (2) entering into a transaction that creates a net short position in any security. Additionally, the Bill prohibits any covered person from serving as an officer or member of any board of any for-profit association, corporation, or other entity. Certain exceptions are set forth for investments that were held before taking office. Investments in diversified mutual funds or exchange-traded funds would still be allowed. On a case-by-case basis, the Select Committee on Ethics may authorize a covered person to place their securities holdings in a qualified blind trust approved by the Committee. Under the Bill, all members would have six months after enactment to divest their shares. New members would get six months from their entry into Congress to divest. Those who fail to comply with the Act would be subject to a civil penalty. Similar measures have been introduced in prior sessions of Congress; however, in light of recent enforcement activity, it’s fair to predict that this measure may be adopted. The Bill can be found in full here.

Thursday, February 7, 2019
1:00 p.m. – 2:00 p.m. ET

The U.S. capital markets remain an attractive source of capital for emerging companies in the life sciences sector. Over 21.7% of the 2017 IPOs were life sciences companies. Many of these IPOs were preceded by late stage (or mezzanine) private placements made principally to U.S. institutional investors.

In our session, partners Anna Pinedo and David Bakst will focus on:

  • Financing alternatives for pre-IPO companies;
  • The late-stage (or “cross-over”) private placement market;
  • Considering milestones when planning a financing strategy; and
  • Post-IPO alternatives, including registered direct offerings, PIPE transactions, at the market offerings, and related financing considerations

To register, please click here.