On February 28, 2017, the SEC’s Division of Economic and Risk Analysis (DERA) and New York University’s Salomon Center for the Study of Financial Institutions will host a dialogue on Securities Crowdfunding in the U.S.  The event, held at the SEC’s headquarters, will include a discussion on the economic rationale and legal framework for securities crowdfunding; a discussion on investor protection and capital formation in securities crowdfunding; and a presentation on the empirical evidence and data on securities crowdfunding.

Welcome remarks will start at 9:15 am.  The event is open to the public and will also be webcast on the SEC’s website.

Thursday, March 9, 2017
12:30 p.m. – 2:00 p.m. EST

As the Trump Administration takes charge in 2017, the only thing that seems inevitable is that the regulatory and enforcement outlook will change. Initial indications point to a desire to relax or repeal certain regulations that may be regarded as burdensome to public companies. Also, proposed legislation would relax certain corporate governance and compensation-related measures that formed part of the Dodd-Frank Act. Proposed legislation also would address the types of cost-benefit analysis that would be required to support proposed regulation.

Don’t miss this chance to learn SEC regulations’ status and how they will likely change from experts who have been directly involved in rule-making and implementation of U.S. securities laws.

Topics to be discussed include:

  • Rules that were proposed but not adopted by the SEC as part of the Dodd-Frank Act rule-making mandate;
  • What to expect as far as corporate governance and executive compensation requirements;
  • Final rules adopted pursuant to the Dodd-Frank Act mandate relating to extractive minerals and specialized disclosures;
  • Future of the Disclosure Effectiveness initiative;
  • Likely status of the rules proposed by the SEC and not yet adopted;
  • Proposed changes affecting investment companies and their likely status; and
  • Anticipated enforcement areas of focus.

Speakers:

  • Andrew J. “Buddy” Donohue
    Former Chief of Staff, Director of Enforcement, and Director of Investment Management, SEC
  • Roberta Karmel
    Centennial Professor of Law, Brooklyn Law School,
    former SEC Commissioner
  • Troy Paredes
    Paredes Strategies LLC, former SEC Commissioner
  • Anna Pinedo
    Partner, Morrison & Foerster LLP

For more information, or to register, please click here.

Please contact cmg-events@mofo.com for a promotional code for discounted $99 tuition.

The SEC’s Advisory Committee on Small and Emerging Companies announced its agenda for its upcoming February 15 meeting.  The committee will discuss:

  • Secondary market liquidity for Regulation A Tier 2 and non-exchange listed companies;
  • Broker-Dealer status of “finders”;
  • Why more companies are staying private; and
  • Finalizing board diversity recommendation.

The meeting is open to the public and will start at 9:30 a.m.  The meeting will be webcast on the SEC’s website.

At the 35th Annual Federal Securities Institute, a representative of the Securities and Exchange Commission shared some market data.

From its effective date in June 2015 through December 2016, there were 171 Regulation A offerings filed. Of these, 76 were Tier 1 offerings and 95 were Tier 2 offerings. The aggregate proceeds sought to be raised in the filed deals was approximately $3 billion. There were 97 offerings qualified. Thus far, $238 million has been reported sold, though more complete data will be available when issuers file their reports in a few months.

From its May 2016 effective date, 163 companies have filed to undertake crowdfunded offerings. The average minimum raise sought is $100,000 and the average maximum raise is $647,000. The average time period has been between four and six months. 28 deals have been completed raising approximately $8.1 milllion. 24 issuers failed to meet the minimum amount sought and withdrew their offerings.

On February 1, 2017, the NYSE issued separate Listed Company Compliance Guidance memoranda for both U.S. companies (“Domestic Companies”) and foreign private issuers (“FPIs”) listed on the NYSE. Below is a brief overview of several of the developments and ongoing policies covered in the memoranda:

  • Proposed Rule Changes Related to Shortened Settlement Cycle. Consistent with the 2016 proposal by the SEC to amend Exchange Act Rule 15c6-1(a) to shorten the standard settlement cycle from T+3 to T+2, the NYSE announced that it has proposed to adopt new NYSE rules to reflect “regular way” settlement as occurring on T+2.
  • NYSE MKT Timely Alert/Material News Policy. The NYSE reminded listed companies that Part 4 of the NYSE’s Company Guide requires listed companies to release promptly news or information which might be reasonably expected to materially affect the market for the company’s securities.
  • Changes to the Date of a Listed Company’s Earnings Release. Given that a change in the earnings announcement date can sometimes affect the trading price of a company’s securities, the NYSE stated that it is important for listed companies to promptly and broadly disseminate to the market: (i) news of the scheduling of earnings announcements and (ii) changes in that schedule.
  • Record Dates. The NYSE explained that listed companies are required to notify the NYSE at least 10 calendar days in advance of all record dates set for any purpose.
  • Meeting Dates. The NYSE recommended that shareholders receive notice of the listed company’s required annual shareholders’ meeting, along with proxy materials, at least 20 days before the meeting date.
  • Shareholder Meetings and Proxy Materials. The NYSE reminded listed companies that they must solicit proxies for any annual or special meetings of shareholders, and must file three definitive copies of all proxy materials with the NYSE no later than the mailing date of the materials.
  • Redemption and Conversion of Listed Securities. The NYSE noted that listed companies should promptly contact their Corporate Actions analyst prior to issuing an announcement about the redemption or conversion of a listed security.

Copies of the memoranda are available at:

https://www.nyse.com/publicdocs/nyse/regulation/nyse-mkt/2017_NYSE_MKT_Listed_Company_Compliance_Guidance_Memo_for_Domestic_Companies.pdf

https://www.nyse.com/publicdocs/nyse/regulation/nyse-mkt/2017_NYSE_MKT_Listed_Company_Compliance_Guidance_Memo_for_Foreign_Private_Issuers.pdf

On February 3, 2017, President Donald Trump signed an executive order to roll back certain parts of the Dodd-Frank Act.  We will continue to monitor news relating to the executive order and report developments on this blog.

UPDATE:  The White House released the official text of the Presidential Executive Order on Core Principles for Regulating the United States Financial System later in the afternoon on February 3.  See the executive order here: https://www.whitehouse.gov/the-press-office/2017/02/03/presidential-executive-order-core-principles-regulating-united-states.

In a recent journal article, titled “Legal Institutions and IPO Puzzles,” authors Ruoying Chen and Saul Levmore, address IPO underpricing. In some jurisdictions, including in the United States, there have been some IPOs structured as auctions. Presumably, an auction methodology would address the underpricing experienced in IPOs that rely on book building and would have gained in popularity. However, the authors observe that, but for some limited cases, auctions did not reduce IPO underpricing. Auctions require bidders to acquire more information than they otherwise would be required to obtain in a traditional IPO. This information may be difficult or expensive to acquire. As a result, an auction would not address lack of transparency or access to information. Although an auction might eliminate agency costs associated with IPO underwriters, an auction would impose comparable cost on buyers who, as a result, decline to participate or require an even lower initial offering price. The article can be accessed here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2886536

Likely, this is only the beginning. Senator Inhofe and Representative Huizenga filed Congressional Review Act Resolution relating to the Securities and Exchange Commission’s final rule regarding the disclosure of certain payments made by resource extraction issuers. The rule was required by Section 1504 of the Dodd-Frank Act. In the statement regarding the CRA, Senator Inhofe claimed that the rule “would put [U.S.] companies at a disadvantage by forcing them to disclose confidential business information to their private and international competitors.”

On January 10, 2017, the House of Representatives passed H.R. 79, the “Helping Angels Lead Our Startups Act” (the “HALOS Act”). The HALOS Act was originally passed by the House of Representatives as H.R. 4498 on April 27, 2016, but the Senate did not act on the bill in the 114th Congress. The HALOS Act directs the SEC to amend Regulation D under the Securities Act to make the prohibition against general solicitation or general advertising inapplicable to events with specified sponsors (including nonprofit organizations, colleges or universities, venture forums, and angel investor groups that are composed of accredited investors) where:

  • presentations or communications are made by or on behalf of an issuer;
  • the advertising does not refer to any specific offering of securities by the issuer;
  • the sponsor does not engage in certain activities (such as offering investment recommendations or advice to attendees) or charge attendees any fees other than administrative fees; and
  • no specific information regarding a securities offering is communicated (other than that the issuer is in the process of offering or planning to offer securities, including the type and amount of securities being offered).

However, the HALOS Act merely incorporates into formal regulation guidance that the SEC Staff has previously provided in the form of a no-action letter (Michigan Growth Capital Symposium, SEC No-Action Letter (May 4, 1995)) and a Compliance and Disclosure Interpretation (“C&DI”) (SEC Division of Corporation Finance Compliance and Disclosure Interpretations, Securities Act Rules, Question 256.26 (Aug. 6, 2015)). No-action letters and C&DIs are treated by companies and their counsel as having the same practical effect as formal SEC rules or regulations.

H.R. 79 is available at: https://www.govtrack.us/congress/bills/115/hr79/text.