The Securities and Exchange Commission recently announced another meeting of its Investor Advisory Committee.  The virtual public meeting will be open to the public and webcast on May 21, 2020 starting at 10:00 am Eastern Time.  The Committee’s agenda includes a panel discussion regarding index funds, and a panel discussion regarding credit rating agencies.

The agenda also includes a discussion of three recommendations to the SEC, including a recommendation relating to sustainability disclosure, a recommendation relating to disclosure effectiveness (see the text of the recommendation), and a recommendation regarding accounting and financial reporting disclosure (see the text of the recommendation here).  The press release is available here.  The agenda and schedule are available here.

PLI Webinar
May 20, 2020
3:00pm – 4:00pm EDT
Register here for the free webinar.

The Securities and Exchange Commission approved a rule filing from Nasdaq granting temporary relief from the shareholder approval requirements in respect of certain transactions. Nasdaq has adopted Listing Rule 5336T, which provides for limited relief from Nasdaq Listing Rule 5635(d) (Transactions Other Than Public Offerings) and under certain limited circumstances a limited attendant exception to Listing Rule 5635(c) (Equity Compensation). During this webcast, the speakers will address:

  • The basic requirements of Rule 5635, which applies to certain transactions other than public offerings that involve an issuance of common stock or securities convertible into, or exercisable for, common stock in excess of 20% of pre-transaction total shares outstanding on a discounted basis;
  • The financial viability exception to the shareholder vote rule;
  •  New temporary Listing Rule 5636T and the conditions for reliance on the rule;
  • The safe harbor provisions;
  •  Nasdaq Listing Qualifications Dept. review of transactions not meeting the safe harbor;
  • Listing Rule 5636T(c), which provides certain flexibility for affiliate participation in a financing;
  • Notification requirements; and
  • Aggregation of certain offerings for purposes of shareholder approval rules.

The Practicing Law Institute has made this webcast free of charge as part of its COVID-19 coverage. The discount will be reflected at checkout. To register, visit the PLI event page.

 

Mayer Brown Webinar
3:00 pm – 3:30 pm ET
Register here

On April 30, the Federal Reserve Board announced it is expanding the scope and eligibility for the Main Street Lending Program in order to further help credit flow to small and medium-sized businesses that were in sound financial condition before the COVID-19 pandemic.

Please join Mayer Brown partners Fred Fisher, Jeff Taft, and Adam Wolk and associate Logan Payne as they discuss these new changes, which include:

  • A new third loan option for “priority loans,” with increased risk sharing by lenders;
  • An expansion of the pool of businesses eligible to borrow and lenders eligible to lend (though in both cases, with important exclusions);
  • Leverage measures being based on “adjusted EBITDA”; and
  • And a step back from SOFR to LIBOR.

 

The Staff of the Securities and Exchange Commission’s Division of Corporation Finance provided additional guidance regarding some of the COVID-19 related relief in the form of several questions and answers, repeated below for convenience (see the SEC’s website as well):

COVID-19 Order Questions

  1. Question: What disclosure is required under the COVID-19 Order (Release No. 34-88465 (March 25, 2020) (“COVID-19 Order”))?

Answer: To take advantage of an extended filing deadline under the COVID-19 Order, a registrant must make certain prescribed disclosures in the Form 8-K (or Form 6-K, if applicable) and in the report, schedule or form that is filed on a delayed basis.

In the Form 8-K (or Form 6-K), the registrant must disclose (1) that it is relying on the COVID-19 Order; (2) a brief description of the reasons why the registrant could not file the subject report, schedule or form on a timely basis; (3) the estimated date by which the report, schedule or form is expected to be filed; and (4) a company-specific risk factor or factors explaining the impact, if material, of COVID-19 on the registrant’s business. If the reason the subject report cannot be filed timely relates to the inability of any person, other than the registrant, to furnish any required opinion, report or certification, the registrant must also attach, as an exhibit to the Form 8-K or Form 6-K, a statement signed by such person stating the specific reasons why such person is unable to furnish the required opinion, report or certification on or before the original due date of such report.

In the report, schedule or form filed on a delayed basis pursuant to the COVID-19 Order, the registrant or other filing person must disclose that it is relying on the COVID-19 Order and state the reasons why it could not file such report, schedule or form on a timely basis.

All of these disclosures are necessary to appropriately rely on the COVID-19 Order. [May 4, 2020]

Form S-3 Questions

  1. Question: May a registrant continue to conduct takedowns using an already-effective registration statement while relying on the COVID-19 Order for a periodic report, including a Form 10-K?

Answer: Yes, if the registrant determines that the prospectus used complies with Section 10(a) of the Securities Act of 1933. Registrants that fully comply with the conditions of the COVID-19 Order may delay the filing of periodic reports required under the Exchange Act; however, the COVID-19 Order does not delay or exempt compliance with requirements for Securities Act registration statements. Section 10(a)(3) requires that when a prospectus is used more than nine months after the effective date of the registration statement, the information contained therein shall be as of a date not more than sixteen months prior to such use, so far as such information is known to the user of such prospectus or can be furnished by such user without unreasonable effort or expense. In addition, shelf offerings pursuant to Rule 415 require an undertaking to reflect in the prospectus any facts or events arising after the effective date of the registration statement which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Although Section 10(a)(3) may permit registrants relying on the COVID-19 Order to conduct a takedown using a prospectus that contains information older than sixteen months in the event that updated information cannot be furnished without unreasonable effort or expense, registrants and their legal advisers will need to determine when it is appropriate to update the prospectus. Registrants are responsible for the accuracy and completeness of their disclosure. [May 4, 2020]

  1. Question: With respect to an effective Form S-3, when must a registrant reassess its eligibility to remain on the form if it has relied on the COVID-19 Order to delay filing a Form 10-K that will serve as a Section 10(a)(3) update?

Answer: Under Securities Act Rule 401(b), if an amendment to a registration statement and prospectus is filed for the purpose of meeting the requirements of Section 10(a)(3) of the Act, the form and contents of such an amendment must conform to the applicable rules and forms as in effect on the filing date of such amendment. A registrant is therefore required to reassess its Form S-3 eligibility when it files the Form 10-K that serves as a Section 10(a)(3) update. When a registrant properly relies on the COVID-19 Order, the due date for filing the Form 10-K is extended and the registrant must reassess its eligibility when it files the Form 10-K. At the time of filing the Form 10-K, the registrant must meet all of the requirements of Form S-3, including that the registrant has filed all the material required to be filed pursuant to Section 13, 14 or 15(d) for a period of at least twelve calendar months immediately preceding the Section 10(a)(3) update, to remain on Form S-3. The Form 10-K will be considered timely if all the conditions of the COVID-19 Order are met with respect to the filing. Refer to the Commission’s Press Release, available at: https://www.sec.gov/news/press-release/2020-73. [May 4, 2020]

  1. Question: Is a registrant relying on the COVID-19 Order to delay a required filing eligible to file a new Form S-3 registration statement between the original due date of a filing and the extended due date, and will the staff accelerate the effectiveness of registration statements that do not contain all required information?

Answer: Between the original due date of a required filing and the due date as extended by the COVID-19 Order, a registrant may file a new Form S-3 registration statement even if the registrant has not filed the required periodic report prior to the filing of the registration statement. The staff will consider the registrant to be current and timely in its Exchange Act reporting if the Form 8-K disclosing reliance on the COVID-19 Order is properly furnished. The registrant will no longer be considered current and timely, and will lose eligibility to file new registration statements on Form S-3, if it fails to file the required report by the due date as extended by the COVID-19 Order. Registrants with compelling and well-documented facts may contact the staff to discuss their specific capital raising needs. However, registrants relying on the COVID-19 Order should note that the staff will be unlikely to accelerate the effective date of a Form S-3 until such time as any information required to be included in the Form S-3 is filed. [May 4, 2020]

On May 4, 2020, the Securities and Exchange Commission approved a rule filing from Nasdaq granting temporary relief from the shareholder approval requirements in respect of certain transactions.  Nasdaq has adopted Listing Rule 5336T, which provides for limited relief from Nasdaq Listing Rule 5635(d) (“transactions other than public offerings”) and under certain limited circumstances a limited attendant exception to Listing Rule 5635(c) (“equity compensation”).

Continue reading our Legal Update.

Recent events have negatively impacted fintech funding.  CB Insights recently published data comparing fintech financing activity in the first quarter 2020 compared to the same quarter in prior years.  While, for example, in each of the prior three years there were between 200 and 300 deals completed each month in the first quarter, in the first quarter 2020, monthly deal volumes declined to under 200 each month.  The decline in deal activity has affected volumes in Asia, Europe and North America.  The data shows that through the end of March 2020, both dollars raised and number of financings for fintech companies are down month-over-month, quarter-over-quarter, and year-over-year.  Based on the current pace of funding activity, funding for fintech companies in the first quarter 2020 will settle at approximately $6 billion, which is comparable to the lows recorded in 2017.

The article, part of the Thomson Reuters Practical Law Global Guides to Debt Capital Markets Law and Equity Capital Markets Law, examines the various exemptions available for the resale of restricted and control securities under the US Securities Act of 1933 (as amended), the conditions applicable to the use of these exemptions and other relevant related topics.

Access the article to learn more.

The Securities and Exchange Commission announced that the Small Business Capital Formation Advisory Committee will meet on May 8, 2020, by video, which will be webcast live.  The Committee will discuss the SEC’s capital formation proposal, which aims to simplify and harmonize the exempt offering framework.  In addition, the Committee will continue its discussion regarding the impact of COVID-19 on small businesses.

The SEC’s Office of the Advocate for Small Business Capital Formation, which supports the Committee, is convening virtual coffee breaks to engage with the public on how COVID-19 is impacting raising capital.

See the announcement here.

This Lexis Practice Advisor First Analysis article discusses the amendments adopted by the U.S. Securities and Exchange Commission to the accelerated filer and large accelerated filer definitions in Rule 12b-2 under the Securities Exchange Act of 1934 (17 CFR 240.12b-2). The final amendments are intended to reduce the number of issuers that qualify as accelerated filers and reduce compliance costs for smaller reporting companies while maintaining investor protections.  Access the article to learn more.

The Securities and Exchange Commission’s Investor Advisory Committee will hold a public meeting on May 4, 2020, which will be available to the public by webcast.  The Committee will discuss public company disclosure considerations in a COVID-19 pandemic context, and public company shareholder engagement/virtual shareholder meetings in a COVID-19 pandemic context.  See the announcement and agenda on the SEC’s webpage.