A pre-funded warrant allows its holder to purchase the issuer’s securities at a nominal exercise price (typically, $0.01 per share).  Instead of waiting to receive proceeds following a warrant’s exercise, the issuer receives substantially all of the warrant’s proceeds upfront (without any conditions) as part of the warrant’s purchase price.  In our recently published On point. we provide a comprehensive overview of pre-funded warrants, including certain advantages for issuers and holders, as well as structuring and other legal considerations.

On November 30, 2018, the Securities and Exchange Commission (the “Commission”) adopted a new rule establishing a non-exclusive research report safe harbor (“Rule 139b”) for unaffiliated brokers or dealers that publish or distribute research reports regarding qualifying investment funds.  The Commission took this action in furtherance of the mandate of the Fair Access to Investment Research Act of 2017 (the “FAIR Act”).  The FAIR Act required that the Commission expand the Rule 139 safe harbor for research reports in order to cover research reports on investment funds.

Continue reading our Legal Update.

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.

In September, California mandated women directors on corporate boards.  In a new paper titled “Mandating Women on Boards: Evidence from the United States,” authors Sunwoo Hwang, Anil Shivdasani, and Elena Simintzi review the effects of mandating the inclusion of women on boards.

The California law requires that public companies headquartered in the state of California have at least one female director by end of 2019.  By year-end 2021, companies with six or more directors must have three female directors, boards with five members must have two female directors, and boards with four or fewer directors, must have at least one female director.  Noncompliance would result in potential fines. There are approximately 450 public companies in the Russell 3000 index headquartered in California with a market cap of nearly $5 trillion.

The authors present evidence that mandating gender diversity through legislation is expensive for shareholders.  This results from heightened costs for female directors, because there is a small supply and public companies will be pressed to comply at the same time resulting in competition.  In addition, the authors find costs will increase as a result of the possibility that companies will expand their boards in part to comply with the requirements.   Although the paper concludes that there is a lack of a consensus on the impact of regulations mandating gender diversity, it raises concerns.

Separate from the paper, commentators have raised concerns regarding the constitutionality of the California law.

Shortly following the SEC’s proxy roundtable, Senators Reed, Perdue, Heitkamp, Gillis, Jones and Kennedy introduced a new bill, S. 3614, which would amend the Investment Advisers Act in order to require proxy advisory firms to register as advisers.  The bill is referred to as the Corporate Governance Fairness Act.  In addition to requiring registration under the Advisers Act, the bill would require periodic inspections by the Commission of the activities of proxy advisory firms to examine compliance with policies and procedures designed to address conflicts of interest as well as other matters such as knowingly making false statements or omitting to state a material fact that would be necessary not to render a proxy advisory firm’s statements not misleading.  Finally, the bill would require the Commission to deliver a report to Congress every five years assessing the effectiveness of the regulation of proxy advisory firms.

Thursday, December 6, 2018
1:00 p.m. – 2:00 p.m. EST

Any issuer eligible to register its securities on Form S-3 should consider setting up an ATM program in order to maximize its opportunity to raise just-in-time capital. Significant selling stockholders may also benefit from the flexibility of the ATM structure in order to take advantage of market opportunities to sell shares quickly. During this webinar, Counsel Brian D. Hirshberg and Raymond James’ Jeff Fordham will review the basics of ATMs, as well as some of the legal and regulatory considerations.

Topics will include:

  • Form S-3 eligibility for issuers;
  • SEC filing requirements; and
  • ATM offerings for a selling stockholder.

PLI will provide CLE credit. For more information, or to register, please visit the event website.

In this Lexis Practice Advisor® Practice Note, we provide answers to questions frequently asked by securities lawyers and their clients regarding the federal securities laws applicable to communications and publicity matters involving companies conducting initial public offerings (IPOs) and other securities offerings under the Securities Act of 1933, as amended (Securities Act).

Specifically, this practice note includes questions relating to:

  • Publicity guidelines during IPOs;
  • Publicity guidelines for follow-on offerings;
  • Roadshows and non-deal road shows; and
  • Earnings guidance issued close to a registered offering.

The SEC’s Investor Advisory Committee will hold its next public meeting on December 13, 2018 at 9:00 am.  The Committee’s agenda includes a discussion regarding disclosures on sustainability and environmental, social and governance topics, and a discussion regarding unpaid arbitration awards.  Earlier this fall, the SEC received a petition for rulemaking on ESG disclosure, which was signed by institutional investors that included CalPERs, New York State Comptroller Thomas DiNapoli, Illinois State Treasurer Michael Frerichs, Connecticut State Treasurer Denise Nappier and others representing over $5 trillion in managed assets.  The rulemaking petition called for the SEC to propose for comment a comprehensive framework that would require issuers to address certain ESG matters.  The petition is available here.


In November 2018, SIFMA published another primer in its recently introduced series on capital formation–this one titled “An exploration of the IPO process and listings exchanges”. The primer provides interesting statistics on IPO trends.

The primer notes the decline in the number of US listed companies.  The number of listed companies peaked in 1996 at 8,090, but is down to 4,336 at the end of 2017, or a 46 percent decline during this period.  The number of IPOs in 1996 was 860 and that was down to 173 in 2017. Deal value is also down from 1996 to 2017.  US IPOs represented only 10 percent of total global IPOs in 2017 but averaged 51 percent in the 1990s.  The decline in small cap IPOs (deal value less than $2 billion) also is well documented.  Small cap IPOs peaked in 2000 at 382, and reached a trough in 2008 with 37.  The average was 153 from 2000 to 2017, with a three-year average of 124.

The primer explores a number of theories underlying the decline in IPOs.  Among these, the primer cites the decline in equity research coverage.  Interestingly the number of research analysts has declined 10 percent from 2012 to 2016.  Budgets have declined 51 percent from 2008 to 2016 at the largest investment banks.  Whereas the average company with a market cap of $500 million or less used to have three to four analysts, now the number of analysts is down to one or two. While the last version of JOBS Act 3.0 would have required a study on research for EGCs, little attention has otherwise been directed to address the role of research coverage in the decline of smaller IPOs