Disclosure Requirements

The Securities and Exchange Commission adopted final rules requiring public companies (other than foreign private issuers and certain fund issuers) to disclose in proxy statements their policies regarding hedging transactions in the company’s securities by directors and employees.  The Commission was required by Section 955 of the Dodd-Frank Act to adopt such rules.

The Commission’s fact sheet notes that new Item 407(i) of Regulation S-K will require a company to describe any practices or policies it has adopted regarding the ability of its employees (including officers) or directors to purchase securities or other financial instruments, or otherwise engage in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of equity securities granted as compensation, or held directly or indirectly by the employee or director.

The final rule text has not been released yet.

The Securities and Exchange Commission announced that it will hold an open meeting on December 19, 2018.  Among other things, the Commission will consider a rule requiring disclosure of hedging arrangements entered into by a reporting company’s directors and employees as required by Dodd-Frank Act Section 955, as well as whether to issue a comment request regarding the content of quarterly reports and earnings releases issued by reporting companies.  The latter has been the subject of significant media coverage since a Presidential tweet suggested that quarterly reporting contributes to short-termism (see our previous blog post).  The proposed package of legislation known as JOBS Act 3.0 contains a bill that would require that a study be conducted by the Commission regarding the requirement for quarterly reporting by smaller reporting companies.  See the meeting notice here: https://www.sec.gov/news/openmeetings/2018/agenda121918.htm.

 

Tuesday, December 11, 2018
1:30 p.m. – 2:30 p.m. EST

During this webinar, Partner Anna T. Pinedo will provide an overview of the market trends that shaped the year, including an overview of the IPO market and notable trends, follow-on offerings, and other market developments.  In addition, she will discuss a number of the principal areas of focus for the SEC during 2018 that affect issuers, including the following:

  • Disclosure updates and simplification, the final rules and what’s to come;
  • Changes impacting executive compensation, including the Rule 701 amendment, the Concept Release on Rule 701 and Form S-8, and the focus on perk disclosures;
  • Cybersecurity guidance and disclosure and enforcement trends;
  • The amendments to the smaller reporting company definition;
  • Adoption of new accounting standards (revenue recognition and lease accounting); and
  • What to expect in 2019.

LexisNexis will provide CLE credit. For more information, or to register for this session, please visit the event website.

 

The Commission announced an open meeting for October 31st in order to consider amendments related to the property disclosure requirements for mining registrants.  The proposed amendments were released in 2016. The amendments as proposed would rescind Industry Guide 7 and include the mining property disclosure requirements in Regulation S-K and align the disclosure requirements with industry and global regulatory standards.  See the meeting notice here.

In a recent speech, Commissioner Kara Stein addressed a number of disclosure related concerns, including cyber disclosures and ESG disclosures.  Just as many of us had been reading about a decline in the number of SEC Staff comments regarding the use of non-GAAP measures in SEC filings, Commissioner Stein’s remarks seemed to focus renewed attention on this issue.  Commissioner Stein cited studies that show that approximately 97% of S&P 500 companies cite at least one non-GAAP metric in their reports.  In addition to echoing prior Staff concerns regarding the possibility that the use of non-GAAP measures may be misleading or may “disguise financial performance,” Commissioner Stein raised a new issue—the lack of uniform standards for non-GAAP measures.  Hopefully, such concerns can be allayed with more detailed disclosures, rather than prescriptive standards regarding frequently used non-GAAP measures.  Commissioner Stein also focused on “key performance indicators” (KPIs).  While remarks from Commission Staff representatives in recent months have indicated that attention is being paid during disclosure reviews on the use of “tailored” performance measures reported by registrants, Commissioner Steins’ comments appear to reflect some intensified focus.  Commissioner Stein noted that more and more companies are provided tailored measures of financial performance, which may include same store sales, sales per square foot, customer churn rates, sales conversion rates, customer retention, etc.  Stein also noted that non-GAAP measures and KPIs appear to be used in the private markets, with forward-looking adjustments, such as cost savings.  While noting that many of these measures may be used by the key decision makers within companies to track the companies’ performance and, therefore, may provide useful insights for investors, the lack of transparency regarding the calculation of many such measures, the lack of comparability as to such measures, and the possible selective use of such measures may raise investor protection concerns.  See the full text of the Commissioner’s remarks here.

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

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

View our legal update, 2019 Proxy and Annual Reporting Season: Let the Preparations Begin.

For more information, or to register for this complimentary session, please visit the event 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.

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.

Wednesday, October 17, 2018
1:00 p.m. – 2:00 p.m. EDT

During this session, Partners Michael L. Hermsen and Anna T. Pinedo will review the accommodations available to foreign private issuers, or non-U.S. domiciled companies, that choose to access the U.S. capital markets. We will discuss assessing a company’s status as a foreign private issuer, the initial registration and ongoing disclosure requirements for foreign private issuers, liability considerations, and related topics. The speakers also will address recent developments significant to foreign private issuers, including:

  • Staff guidance regarding the foreign private issuer definition;
  • Areas of focus for SEC comments in anticipation of upcoming 20-Fs and 40-Fs, including cyber security matters;
  • Disclosure simplification;
  • Exhibits, HTML and XBRL for foreign private issuers and IFRS filers; and
  • Areas of likely SEC focus in the coming months.

Wolters Kluwer will provide CLE credit. For more information, or to register for this session, please visit the event website.

In a recent speech, SEC Commissioner Kara Stein commented on the importance of cybersecurity.  The Commissioner noted that encouraging adoption of written policies and procedures, voluntary frameworks and non-binding guidance was not sufficient.  She noted that boards of directors have a fiduciary duty to shareholders to monitor and oversee risk, including cybersecurity oversight.  She seems to suggest that just as Commission rules require disclosure regarding financial experts, it would be reasonable for there to be some disclosure as to whether boards have an independent director with expert knowledge of technology and cybersecurity.  Otherwise, boards should retain experts to provide advice.  The Commissioner suggests independent directors meet with the company’s chief information security officer at least twice a year in executive session.  She notes that boards should assess company disclosures regarding cyber risks.  Finally, she suggests that the board ought to consider how well prepared the company is to respond to a breach, the resiliency of its infrastructure, and the procedures that will be implemented to recover and resume operations.