Yesterday, the SEC’s spring regulatory flexibility agenda was published (see: Agency Rule List – Spring 2022). The agenda is very ambitious and includes a wide range of items. Based on the agenda, which is indicative as to timing, proposed rules relating to human capital are slated for October 2022, while proposed rules relating to board diversity are expected in early spring 2023. Climate change final rules are targeted for late this year, which may not be realistic given the volume and tone of comments on the proposed rules. Also targeted for late fall for final rulemaking are rules on share repurchase modernization and pay-for-performance and claw backs. Cybersecurity risk governance, Rule 10b5-1 and insider trading, and the 13D/G beneficial ownership modernization final rules are all noted as having an April 2023 target date. The release of the agenda drew comment from Commissioner Peirce who observed that the agenda “sets forth flawed goals and a flawed method for achieving them.” Read Commissioner’s Peirce’s remarks here.

On June 9, 2022, the staff (“Staff”) of the US Securities and Exchange Commission (“SEC”) added Question 101.01 to its Compliance and Disclosure Interpretations (“C&DI”), addressing forward contracts on restricted securities. The new CD&I clarifies that forward contracts on restricted securities would not be considered “intended to be physically settled” under certain circumstances as discussed below.

Typically, forward contracts benefit from an exclusion from the definition of “swap” and “security-based swap;” this is because the definitions of “swap” and “security-based swap” exclude “any sale of a nonfinancial commodity or security for deferred shipment or delivery, so long as the transaction is intended to be physically settled.” Forward contracts are typically “intended to be physically settled.”  To the extent forward contracts are excluded from the definition of “swap” and “security-based swap,” they are not subject to Title VII under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”).

CD&I Question 101.01 clarifies that while a determination of whether an instrument is a “swap” or a “security-based swap” is based on facts and circumstances, the SEC Staff would not consider a forward contract as “intended to be physically settled” if, at the time the parties enter into the contract, the underlying securities (i) cannot be legally transferred, or (ii) are subject to contractual restrictions on transfer. In order for the contract to be considered “intended to be physically settled,” the following conditions must both be met: (i) the offer and sale of the underlying securities must be registered in compliance with Section 5 of the Securities Act or otherwise exempt from registration; and (ii) any contractual restrictions on the transfer of the underlying securities must be satisfied or otherwise waived.

This means that employees and stockholders of private companies that are subject to employment or charter restrictions on transfers may be prevented from using forward contracts to obtain liquidity in the absence of the company’s express cooperation. Although some private companies sponsor liquidity programs for employees and stockholders, typically, these are sponsored through organized platforms and are structured as outright sales.   

If the contractual restrictions are not waived, the forward contract would not be considered “intended to be physically settled” and would be subject to regulation under Section 5 of the Securities Act of 1933 (the “Securities Act”), which was amended by the Dodd-Frank Act to make it unlawful for any person to offer to sell, offer to buy, or purchase or sell a security-based swap to any person or entity that is not an eligible contract participant (“ECP”) without first registering with the SEC. As a result, these transactions would no longer be practically viable.

The US Securities and Exchange Commission (“SEC”) has come under increased scrutiny following its widely anticipated proposed rules that would require extensive reporting by public companies of climate change-related disclosures and related attestations.

On April 25, 2022, a group of professors of law and finance submitted a comment letter raising questions concerning the proposed rules. The letter calls into question whether the Commission, as a financial regulator, has the authority to collect information on a company’s contribution to climate change. In addition, the letter argues that the proposed rules respond to interest groups that are not among the SEC’s statutory constituencies.

On June 17, 2022, with now 22 signatories, the group of academics filed another letter urging the Commission to withdraw its proposal. The June 17th comment letter requests that the Commission withdraw the proposed rules, as they are neither appropriate for either investor protection nor the public interest.

On March 30, 2022, the US Securities and Exchange Commission (“Commission”) proposed new rules and amendments to existing rules and forms (the “Proposed Rules,” see summary) addressing the treatment of initial public offerings (“IPOs”) by special purpose acquisition companies (“SPACs”) and subsequent business combination transactions (“De-SPAC Transactions”) between SPACs and operating companies (“Targets”). The Proposed Rules were published in the Federal Register on May 13, 2022 and the comment period has now closed.

The Securities Industry and Financial Markets Association, through its comment letter filed with the Commission, expressed support for increased disclosure related to SPAC IPOs and De-SPAC Transactions, but raised significant concerns about the newly proposed Rule 140a, which relates to gatekeepers in De-SPAC Transactions.

The Federal Regulation of Securities Committee (“Committee”) of the American Bar Association’s Business Law Section, through its comment letter filed with the Commission, addressed, among other things, the need to preserve the availability of distinct capital-raising alternatives for issuers and investors, while striking the right balance between investor protection and capital formation. In 71 pages of analysis and comment, the Committee’s letter raises concerns regarding a number of aspects of the Proposed Rules, such as the fairness determination of the De-SPAC Transaction in the Proposed Rules, making the Target a co-registrant to a merger registration statement in connection with a De-SPAC Transaction as to which there is no basis, the overly broad and unsupported interpretation regarding the entities that may be considered to be statutory underwriters under the proposed Rule 140a, the amendments that would remove the current safe harbor under the Private Securities Litigation Reform Act of 1995 for De-SPAC Transactions, and the proposed Investment Company Act safe harbor.

In this practice note, we discuss market trends in capital markets and securities-related considerations during the COVID-19 pandemic. It describes how the US Securities and Exchange Commission (“SEC”) addressed the effects of the pandemic through exemptive orders and guidance and discusses key disclosure matters, including risk factors, management’s discussion and analysis of financial position and results of operations, and financial statement issues that companies have had to address during this time.

Read the full article here.

Well, What’s the Deal?

We updated our popular series and published a new compendium. It includes brief discussions in plain English on popular financing methodologies, securities law issues, and practice pointers. With over 170 pages of content, the compendium is available online now to print. See also the tab on the left.

Request your paperback print copy here or e-mail your Mayer Brown contact directly.

On June 8, 2022, the US Securities and Exchange Commission (“SEC”) issued a release (“New Reopening Release“), reopening the comment period on the clawback listing standard rules that it proposed in 2015 (“2015 Proposal“). At the same time, the SEC made available a memorandum prepared by the staff of the SEC’s Division of Economic and Risk Analysis (“Staff Memorandum“) that discusses the increase in voluntary adoption of compensation recovery policies by issuers and provides estimates of the number of additional restatements that would trigger a compensation recovery analysis if the rules were extended to include all required restatements made to correct an error in previously issued financial statements, including “little r” restatements. The Staff Memorandum also addresses some potential costs and benefits of the proposed rules. The SEC reopened the comment period to allow interested persons to consider and comment on the analyses and data set forth in the Staff Memorandum.

The New Reopening Release represents the second time in less than a year that the SEC reopened the comment period on the 2015 Proposal. In October 2021, the SEC reopened the comment period on the 2015 Proposal (“Original Reopening Release”), which closed on November 22, 2021. 

The 2015 Proposal requested comments on more than 100 specific questions. The Original Reopening Release raised additional requests for comment in 10 multifacted areas. While the New Reopening Release is designed to allow comment on the Staff Memorandum, interested parties may also submit comments on any aspect of the 2015 Proposal, including on the additional requests for comments raised in the Original Reopening Release.

The new comment period closes 30 days after publication of the New Reopening Release in the Federal Register.


The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) added Section 10D to the Securities Exchange Act of 1934, requiring the SEC to direct national securities exchanges and associations to establish listing standards that prohibit the listing of any security of a company that does not adopt and implement a written policy requiring the recovery, or “clawback,” of certain incentive-based executive compensation payments. For additional information on the SEC’s 2015 Proposal, see our Legal Update, “US SEC Proposes Compensation Clawback Listing Standards Requirement,” dated July 16, 2015. For additional information on the SEC’s 2015 Proposal, see our Legal Update, “SEC Reopens Comment Period for Clawback Listing Standards,” dated October 18, 2021.

Practical Considerations

The New Reopening Release provides interested parties with another chance to provide input on, and perhaps influence, the SEC’s clawback listing standard rules before they are finalized. The Staff Memorandum provides data and analyses that the SEC will likely rely on as it develops its final clawback listing standard. Specifically, the Staff Memorandum is expected to inform the economic analysis that would serve as the justification for any final rule. Having this opportunity to review, consider and respond to this presentation at this time can be very helpful to interested parties that may be impacted by the clawback listing standard rules.  

Because the new comment period will close 30 days after publication in the Federal Register, interested persons should start reviewing the Staff Memorandum and thinking about possible comments right way.

Previously-submitted comments do not have to be re-submitted.

Because many investors and proxy advisory firms view clawback policies as an important corporate governance practice, many listed companies have already adopted corporate clawback policies and others may adopt them before the listing standards envisioned by Dodd-Frank are effective. However, since this is an evolving regulatory area, listed companies need to monitor all clawback developments closely to determine whether amendments to their policies become necessary or advisable as this rulemaking proceeds.

June 16, 2022 Webinar
1:00pm – 2:00pm EDT
Register here.

Late stage private placements with institutional investors, crossover investors, corporate venture capital (CVC) funds, and strategic investors raise a number of considerations distinct from those arising in earlier stage and venture financing transactions. Privately held companies have been more comfortable sponsoring liquidity programs for early investors, employees, and consultants, and have allowed these holders to sell to crossover investors in late stage investment rounds.

Join Mayer Brown partners, Anna Pinedo and Brian Hirshberg, as well as Moelis & Company’s Co-Head of Capital Markets and Head of Private Capital Markets, Angus Whelchel, and Nasdaq Private Markets’ Managing Director, Kevin Gsell as they discuss:

  • Market developments affecting the private markets and late stage private placements;
  • Current market trends affecting late stage private placements;
  • Unicorn investors and the emergence of new market actors;
  • CVC market participation;
  • Principal concerns for crossover funds participating in these rounds;
  • Legal considerations;
  • Issuer and third-party tender offers; and
  • Structuring private placements with existing security holders.

On June 3, 2022, the US Securities and Exchange Commission (SEC) updated electronic filing requirements, making it mandatory to submit certain documents to the SEC electronically via EDGAR.  Among other documents, this new requirement will apply to Form 144 and to “glossy” annual reports to security holders.  The amendments will also require the use of Inline XBRL for the financial statements and accompanying notes to the financial statements required by Form 11-K. The amendments will be effective 30 days after publication in the Federal Register, although the SEC provided for later compliance dates to facilitate transition.

Form 144. Rule 144 is an SEC safe harbor from the registration requirements of the Securities Act of 1933 for resales.  If a person satisfies Rule 144’s specific criteria for not being deemed engaged in a distribution, that person will not be treated as an underwriter and therefore will be eligible to rely on the Section 4(a)(1) exemption from registration. Form 144 is a notice of a sale of securities pursuant to this safe harbor.

Currently Form 144 may either be mailed to the SEC or submitted electronically via EDGAR. The amendments require that Form 144 be submitted electronically where the issuer of the securities is subject to the reporting requirements under Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act).

In conjunction with this rule change, the SEC plans to provide an online fillable Form 144 to enable the convenient input of information without additional software and to support the electronic assembly of such information and transmission to EDGAR.

The compliance date for mandatory EDGAR filing of Form 144 will be six months after the date on which the amendments are published in the Federal Register.

Glossy Annual Reports. Many companies use a “glossy” annual report  as part of their proxy materials, for example, wrapping additional pages around the Form 10-K that typically contain photographs, graphics, and reader-friendly descriptions of their business and its achievements.  The amendments require these glossy annual reports to be submitted to the SEC in accordance with the EDGAR Filer Manual. This is in addition to the EDGAR filing of the annual report on Form 10-K itself.

Prior to the amendments, Rule 14a-3(c) required that seven copies of the  glossy annual report be mailed to the SEC. In 2016 the staff of the SEC’s Division of Corporation Finance issued guidance indicating that it would not object if a company posted an electronic version of its glossy annual report to its corporate web site by the requisite dates, in lieu of mailing paper copies to the SEC or submitting the report via EDGAR, as long as the glossy annual report remained accessible for at least one year after posting. The  amendments supersede this 2016 staff guidance, which is being withdrawn upon the compliance date for the amendment.

Similarly,  the amendments require foreign private issuers that furnish their “glossy” annual reports to the SEC in response to the requirements of Form 6-K to do so via EDGAR.

The compliance date for mandatory electronic filing of glossy annual reports is six months after the effective date of the amendments.  Therefore this requirement will be in effect for the 2023 proxy season.  Public companies should add this requirement, and related coordination with their service providers, to their proxy season calendars.

Inline XBRL for Form 11-K. Form 11-K is the form used for annual reports of employee stock purchase, savings and similar plans that are filed with the SEC pursuant to Section 15(d) of the Exchange Act.  Currently, these reports are not subject to the SEC’s structured data reporting requirements.  The amendments require that the financial information required by Form 11-K, including narrative disclosures such as the notes to the financial statement, be tagged using Inline XBRL, which is both machine readable and human-readable. This new requirement applies whether the financial information is prepared in accordance with Regulation S-X or the financial reporting requirements of ERISA.

The compliance date for Inline XBRL for Form 11-K is three years after the effective date of the amendments.

The adopting release is available here.

The SEC’s fact sheet is available here.

As the US capital markets are among the most liquid in the world, many foreign companies opt to go public in the United States. However, becoming a public company in the United States can be expensive and time-consuming. Registering as a foreign private issuer (“FPI”) allows foreign companies to access the US capital markets while benefitting from certain disclosure, reporting and corporate governance accommodations. In this What’s the Deal guide, we provide an overview of the laws, rules, regulations and exemptions that govern FPIs.