As we previously blogged, a Trump tweet called on the Securities and Exchange Commission to undertake a study regarding the costs and benefits of quarterly versus semi-annual filings.  Though no particular connection was drawn in the tweet between semi-annual periodic reports and a focus on long-term investment, the Commission responded with a statement from Chair Clayton titled, “Statement on Investing in America for the Long Term,” that refocuses the discussion and is reprinted below in its entirety:

“The President has highlighted a key consideration for American companies and, importantly, American investors and their families — encouraging long-term investment in our country. Many investors and market participants share this perspective on the importance of long-term investing. Recently, the SEC has implemented — and continues to consider — a variety of regulatory changes that encourage long-term capital formation while preserving and, in many instances, enhancing key investor protections. In addition, the SEC’s Division of Corporation Finance continues to study public company reporting requirements, including the frequency of reporting. As always, the SEC welcomes input from companies, investors, and other market participants as our staff considers these important matters.”

Today, the Securities and Exchange Commission adopted amendments to certain disclosure requirements that have become duplicative, overlapping, or outdated. In July 2016, the Commission proposed amendments for this purpose and also solicited comments on disclosure requirements that overlap with, but require information incremental to, U.S. GAAP. The Commission also was required pursuant to title LXXII, section 72002(2) of the Fixing America’s Surface Transportation (FAST) Act to undertake a review and make certain recommendations to addressed outdated disclosure requirements. In its adopting release, the Commission notes that it is adopting most of the proposed amendments substantially as proposed in 2016. The adopting release notes that in certain instances the Commission is making modifications to the 2016 proposed amendments, and in other cases, the Commission is not adopting the proposed amendments. In a few instances, the Commission is adopting additional changes to make technical corrections. The amendments will be effective 30 days from publication in the Federal Register. The full text of the adopting release is available here. The fact sheet is available here.

In a very early morning tweet, the President chose to comment on the requirement to file quarterly reports on Form 10-Q. (See the tweet here.)  We noted in a prior post that the House JOBS Act 3.0 bill already included a requirement that the Securities and Exchange Commission conduct a study regarding the costs and benefits associated with quarterly filing requirements, especially for emerging growth companies. Not clear whether a tweet asking the Commission to study this will change the dynamic.

The Securities and Exchange Commission recently published guidance providing some useful clarifications related to the Commission’s recent changes to the definition of “smaller reporting company” (see our prior posts, here and here).  In the guidance, the Commission confirms that foreign issuers can qualify as SRCs; however, investment companies (including BDCs), ABS issuers and majority-owned subsidiaries of non-SRC parent companies cannot. The new definition of SRC becomes effective on September 10, 2018.

Assessing SRC Status.  A company assesses whether it qualifies as an SRC annually as of the last business day of its second fiscal quarter.  If it qualifies as an SRC on that date, it may elect to use the SRC scaled disclosure accommodations in its subsequent filings, beginning with its second quarter Form 10-Q.  A company must reflect its SRC status in its Form 10-Q for the first fiscal quarter of the next year.  Reporting companies calculate their public float annually as of the last business day of their second fiscal quarter. A reporting company that does not qualify under the “public float” test would determine whether it qualifies as an SRC based on its annual revenues in its most recent fiscal year completed before the last business day of the second fiscal quarter.

Assessing SRC Status in connection with Initial Registration Statement.  A company filing its initial registration statement for shares of common equity will make its initial SRC determination in connection with the filing of its registration statement.  Public float is measured as of a date within 30 days of the date of the filing of the registration statement and is computed by multiplying the aggregate worldwide number of shares of voting and non-voting common equity held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of shares of voting and non-voting common equity included in the registration statement by the estimated public offering price of the shares.  In the case of a determination based on an initial Securities Act registration statement, a company that determined it was not an SRC has the option to re-determine its status under the “public float” test at the conclusion of the offering covered by the registration statement based on the actual offering price and number of shares sold.  A company filing its initial registration statement for common equity that does not qualify under the “public float” test would determine whether it qualifies as an SRC based on its annual revenues in its most recent audited financial statements available on the initial public float calculation date.

Changes in Float/Revenue and Qualification as an SRCThe Commission provides a chart showing how a company can transition and qualify as an SRC depending on changes in its float and/or revenues.

Transitioning to the Amended SRC Definition.  For purposes of the first determination of SRC status after September 10, 2018, a company will qualify as an SRC if it meets the initial qualification thresholds in the revised definition as of the date it is required to measure its public float and, if applicable, had annual revenues of less than $100 million in its most recently completed fiscal year, even if such company previously did not qualify as an SRC.  A company that completed its initial public offering since the end of its most recent second fiscal quarter may elect to determine whether it qualifies as an SRC based on its public float as of the date it estimated its public float prior to filing or as of the conclusion of the offering based on the actual offering price and number of shares sold.  A company newly qualifying as an SRC under the amended definition after September 10, 2018, regardless of whether it qualified under the previous definition, has the option to use the SRC scaled disclosure accommodations in its next periodic or current report due after September 10, 2018, or, for transactional filings without a due date, in filings or amended filings made on or after September 10, 2018.

See the full guidance, including the charts, here.

On July 24, 2018, the Securities and Exchange Commission (SEC) proposed amendments to the financial disclosure requirements in Rules 3-10 and 3-16 of Regulation S-X, in an effort to simplify and streamline disclosures by registrants in registered debt offerings with respect to guaranteed or collateralized debt securities. Rule 3-10 addresses the financial disclosure requirements for guarantors and issuers of guaranteed securities, while Rule 3-16 focuses on financial disclosure requirements for affiliates whose securities constitute a substantial portion of the collateral for securities offered. Both sets of disclosure requirements affect not only the issuer’s offering documents, but also its periodic filings. The SEC stated that the proposed amendments are “intended to provide investors with material information given the specific facts and circumstances, make the disclosures easier to understand, and reduce the costs and burdens to registrants.” The review of the requirements and proposed amendments to Rule 3-10 and 3-16 stem from the SEC’s Disclosure Effectiveness Initiative. The proposed rules follow the SEC’s 2015 request for comments on these requirements. This Legal Update summarizes the SEC’s proposed amendments.

Yesterday the Securities and Exchange Commission announced that it would convene a roundtable in order to gather information regarding whether the Commission’s rules on the proxy process should be refined. The announcement outlines a number of areas for possible consideration, including the proxy voting process, proxy voting and the low retail participation rate, the shareholder proposal process and shareholder engagement, the role of proxy advisory firms, the use of technology throughout the proxy process, and other related matters.  The announcement and the submission form for comments are available here.

On July 18, 2018, the Securities and Exchange Commission issued a concept release soliciting public comment on potential ways to modernize compensatory offerings and sales of securities, consistent with investor protection. Specifically, the concept release requests comment on aspects of Rule 701 under the Securities Act of 1933 and on Form S-8. This Legal Update highlights key questions raised by the concept release and practical considerations for public and private companies.

At last week’s open meeting, the Securities and Exchange Commission originally had been scheduled to consider a proposed amendment to Regulation S-X Rules 3-10 and 3-16, as we had previously blogged.  The agenda for the open meeting was amended shortly prior to the meeting to remove consideration of the Regulation S-X rule changes that originally had been considered in 2015.

Yesterday, the Commission voted to propose amendments.  The amendments would affect disclosures relating to guarantors and affiliates the securities of which are pledged as collateral.

The link to the press release is here.

The link to the proposed rules is here.

A client alert is available here.

At this morning’s open meeting, the Securities and Exchange Commission adopted an amendment to Rule 701.  The Commission was mandated to adopt an amendment to Rule 701 by the Economic Growth, Regulatory Relief and Consumer Protection Act, often referred to as the Crapo Act.  The amendment increases the threshold that triggers an issuer’s requirement to provide certain disclosures to investors from $5 million to $10 million.  In addition, the Commission approved the release of a concept release soliciting comments regarding  Rule 701 and Form S-8 requirements.  The release solicits responses on more than 50 questions.  The Commission did not consider or take action on the changes to certain financial statement related requirements, which originally had been on the agenda for the meeting.

Below we provide links to the Commission’s fact sheet, the amendment and the concept release.  A client alert will follow in short order.

Fact sheet

Rule 701 amendment

Concept release

The Securities and Exchange Commission will hold an open meeting on July 18th in order to consider the changes to Rule 701 required by the Crapo Act about which we previously blogged (see:, as well as to consider the release of a Concept Release relating to Rule 701 and Form S-8.  The Commission also will consider proposed amendments to Regulation S-X Rule 3-10 and Rule 3-16.  The Commission had issued a request for comment in 2015 on these regulations (see:  For the details on the open meeting, see: