On November 9, 2016, the SEC’s Division of Corporation Finance  issued revised Question 240.11 and new Questions 240.15 and 240.16 of its Compliance and Disclosure Interpretations (the “C&DIs”), pertaining to Securities Act Rule 457(p) and Form S-8 registration statements.  Rule 457(p) allows an issuer to utilize previously-paid filing fees relating to unsold securities under an earlier registration statement to offset against the filing fees due for a subsequent registration statement filed within five years of the filing of the earlier registration statement. Within the context of shares of common stock being registered under Form S-8 that are issuable upon the exercise of outstanding options granted under an issuer’s equity compensation plan, the main takeaways of the C&DIs are as follows:

  • Rule 457(p) permits filing fees to be transferred only after the registered offering has been completed or terminated or the registration statement has been withdrawn.
  • An offering registered on Form S-8 is only completed or terminated when no additional securities will be issued pursuant to the plan covered by the Form S-8, including through the exercise of any outstanding awards.
  • An issuer that wishes to: (i) roll over, from one equity compensation plan to a new plan, (a) shares remaining under the earlier plan that are not subject to outstanding options and (b) shares subject to outstanding options under the earlier plan that would expire, be terminated or canceled under the new plan, and (ii) register shares newly authorized for issuance under the new plan, can register all these shares on a new Form S-8.  However, because the offering is not yet completed under the earlier plan, Rule 457(p) does not permit the issuer to claim the filing fees associated with the shares from the earlier plan as an offset against the filing fees due for the new Form S-8.  Alternatively, the issuer can file (without the need to pay new filing fees), a post-effective amendment to the earlier Form S-8 for the early plan, indicating that such Form S-8 will also cover the issuance of shares under the new plan once they are no longer issuable pursuant to the old plan and instead become authorized for issuance under the new plan, but a new and separate S-8 covering the new shares to be issued under the new plan must be filed.

A copy of the C&DIs is available at: https://media2.mofo.com/documents/161111-new-cdis-on-rule457p.pdf

On November 3, 2016, the Second Circuit upheld the district court’s ruling involving the Facebook IPO that underwriters of the IPO are not required to disgorge short-swing profits made with their sales and purchases of shares in connection with the offering. Section 16(b) of the Securities Exchange Act of 1934 provides for the recovery by the issuer, in an action brought by the issuer or by a security holder of the issuer, of profits gained by a statutory insider (an officer, director, or more than ten percent “beneficial owner”) from any purchase or sale, or any sale and purchase, of the equity securities of the issuer within a six month period. Section 16(b) is intended to prevent such insiders from profiting from “short-swing” variations in share price. Although the lead underwriters alone did not meet the ten percent threshold, “beneficial owner” under Section 13(d) of the Exchange Act can include a “group.” The appellant argued that the lead underwriters and certain pre-IPO shareholders together formed a “group” under Section 13(d) due to the lock-up agreements between them prohibiting the shareholders from selling their stock for a specified period of time except as permitted by the lead underwriters. The court solicited the opinion of the SEC, as amicus curiae, which stated that a typical IPO lock-up agreement between shareholders and underwriters, standing alone, is not sufficient to establish a “group” under Section 13(d). The court agreed, stating that standard IPO lock-up agreements do not form a “group” of shareholders with respect to application of “short-swing” profit rules. The Second Circuit’s holding provides protection for underwriters entering into standard form lock-up agreements, which are standard for typical IPOs.

The use of liability management transactions in the wake of the financial crisis, along with two important court cases (i.e., Marblegate and Caesars Entertainment Corp.), has brought a renewed focus on the obligations of trustees and the rights of bondholders under the Trust Indenture Act of 1939.

See our FAQs on the Trust Indenture Act of 1939 available at: https://media2.mofo.com/documents/faq-trust-indenture-act-1939.pdf.


New FINRA Rule 2241 covering equity research reports and analysts and new FINRA Rule 2242 covering debt research reports took effect less than a year ago in December 2015 and July 2016, respectively; and market practice with respect to compliance with the new research rules continues to evolve.

Our updated FAQs on the separation of research and investment banking are intended to help explain (1) the main requirements of new research rules, (2) how firms can comply with the new research rules and the related safe harbors, (3) recent FINRA guidance on the new research rules, and (4) related SEC rules and guidance and JOBS Act implications.

See our updated FAQs available at: https://media2.mofo.com/documents/frequently-asked-questions-about-separation-of-research-and-investment-banking.pdf.

Today the SEC announced the agenda and the panelists for its first ever fintech forum on November 14th.  As noted in the announcement, the session, which will begin at 9 a.m. ET, will be divided into four panels. Participants on the first panel will discuss the impact of recent innovation in investment advisory services. The second panel will discuss the impact of recent innovation on trading, settlements, and clearance activities. Participants on the third panel will discuss the impact of recent innovation in capital formation. The final panel will discuss investor protection in the fintech era.  The session is open to the public and also will be webcast.

Learn more here:   https://www.sec.gov/news/pressrelease/2016-234.html

On November 1, 2016, the SEC issued a no-action letter with respect to the required Rule 144 holding period after the exchange of partnership interests in an umbrella operating partnership (OP units) into shares of its parent corporation (Corporation shares) in an up-C structure (see our prior post and Practice Pointers on up-Cs).

Rule 144 lists the conditions under which restricted and control securities may qualify for public resale under a safe harbor exemption from registration. Among other requirements, Rule 144(b) states that an issuer may rely on the safe harbor if the holding period requirement set out in Rule 144(d)(1) has been satisfied. The holding period requirement may be between six months and one year depending on the issuer’s reporting requirements, and generally commences at the time a person acquires a security.

The SEC’s interpretative guidance clarifies that for purposes of Rule 144(d)(1), the holding period for Corporation shares issued in up-C transactions consistent with the below conditions commences upon the earlier acquisition of the OP units. The SEC noted the following conditions in reaching this conclusion: (i) the OP unit holders paid the full purchase price for the OP units at the time they were acquired from the umbrella operating partnership; (ii) the up-C governing documents contemplate and provide the terms for the exchange of OP units for Corporation shares such that the OP unit holder has the same economic risk as if it were a holder of the Corporation shares during the entire period it holds the OP units; and (iii) no additional consideration is paid by the OP unit holders for the Corporation shares. The no-action letter can be found here.

This no-action letter relief is consistent with the Staff’s relief relating to REITs. Given the popularity of the up-C structure, especially for private equity-backed IPOs, the relief will be quite useful and makes the up-C format more compelling.

Earlier today at an open meeting, the SEC adopted final rules regarding intrastate and regional offerings, which closely follow the SEC’s proposed rules issued on October 30, 2015.  The final rules amend Securities Act Rule 147 to facilitate offerings relying upon recently adopted intrastate crowdfunding exemptions under state securities laws.  Rule 147 provides a safe harbor for intrastate offerings exempt from registration pursuant to Securities Act Section 3(a)(11), which exempts any security offered and sold only to persons resident within a single state or territory by an issuer residing or incorporated in and doing business within such state or territory.  As amended, Rule 147 will continue to function as a safe harbor under Section 3(a)(11), though Section 3(a)(11) will still be available as a potential statutory exemption in and of itself.  The final rules also establish a new Securities Act exemption, designated Rule 147A, that further accommodates offers accessible to out-of-state residents and companies that are incorporated or organized out-of-state.  The final rules also amend Rule 504 of Regulation D to (1) increase the aggregate amount of securities that may be offering and sold in any twelve-month period from $1 million to $5 million and (2) disqualify certain bad actors from participating in Rule 504 offerings.  In addition, the final rules repeal Rule 505 of Regulation D, which had provided a safe harbor from registration for securities offered and sold in any twelve-month period from $1 million to $5 million.  The amendments to Rule 147 and Rule 504 are part of the SEC’s broader effort to assist smaller companies with capital formation consistent with other public policy goals, including investor protection.

For more information, read our client alert.

On Wednesday, October 26, 2016, beginning at 10:00 a.m., the Securities and Exchange Commission will hold an open meeting at which the Commission will consider the adoption of final rule amendments relating to Securities Act Rule 147 and Rule 505, which would facilitate intrastate and regional securities offerings.  The proposed amendments were well-received by market participants and generated only modest comments.  The open meeting notice also states that the Commission will consider whether to repeal Rule 505.  Rule 505 provides an exemption for sales of up to $5 million of securities in a 12-month period, without the use of general solicitation, to accredited investors and, subject to information requirements, to non-accredited investors.  Presumably, the amendments to Rule 504 would render Rule 505 superfluous.

Tuesday, October 25, 2016
11:00 a.m. – 12:30 p.m. EDT

The cross-border private placement market has continued to grow, providing non-US issuers with an opportunity to raise capital from US and European financial institutions. This market, which has seen incredibly robust activity this past year, has continued to attract issuers across a myriad of industries and from multiple worldwide jurisdictions. These issuers seek to, among other things, diversify their funding sources or supplement their bank lending, lengthen their existing debt profile, refinance acquisition debt or finance certain single-asset projects. In this webinar, speakers will discuss:

  • The global private placement market and recent trends;
  • Market participants;
  • Documentation requirements for traditional and structured transactions;
  • Financial covenants, “MFLs” and model form provisions;
  • New Issuers using the market (social housing trusts, universities, investment trusts, etc);
  • Marketing process with Agented and “direct” Private Placements; and
  • Ratings and the NAIC.


  • Scott Ashton
    Partner, Morrison & Foerster LLP
  • Brian Bates
    Partner, Morrison & Foerster LLP
  • Tarun Sakhrani
    Vice President, Barclays

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

Tuesday, November 1, 2016
10:30 a.m. – 1:30 p.m.

The Fairmont Royal York
100 Front Street West
Toronto, ON M5J 1E3

Please join us for one (or both) of our sessions.

During the first session, we will provide an overview of debt capital market trends in 2016 and what to expect in the months ahead. We will discuss some of the regulatory developments that are, and will continue to, impact issuances by financial institutions, including the Canadian banks. In particular, we will discuss the proposed US Federal Reserve long term debt, TLAC and clean holding company requirement, bank regulatory developments in Europe and the proposed bail-in and high loss absorbency requirement in Canada. We also will discuss recent NVCC issuances in the United States by Canadian banks.

During the second session, we will focus on regulatory developments affecting SEC and Canadian reporting issuers, including the increased focus on non-GAAP financial measures, the SEC’s disclosure effectiveness initiative, the mining disclosure update and modernization release, board diversity, and related matters.

Session 1: The Debt Capital Markets, Regulatory Developments, and Recent Issuances
10:30 a.m. – 12:30 p.m.

  • Overview of the debt capital markets;
  • Issuance levels and trends;
  • What to expect in the months ahead;
  • The US LTD, TLAC and clean holding company requirement and other regulatory developments;
  • Canadian regulatory developments;
  • NVCC issuances; and
  • Planning ahead to modify issuance programs for bail in regime.

Lunch: 12:30 p.m. – 1:00 p.m.

Session 2: Update on US and Canadian Corporate and Securities Law Developments
1:00 p.m. – 1:30 p.m.

  • The Use of Non-GAAP Measures;
  • The SEC’s Disclosure Effectiveness Initiative;
  • The SEC’s Mining Disclosure Update Release; and
  • Disclosures Relating to Board Diversity in the United States and Canada.


  • Bryan Farris
    Associate Director, UBS Securities LLC
  • Wendi Locke
    Partner, McCarthy Tétrault LLP
  • Anna Pinedo
    Partner, Morrison & Foerster LLP

To register for this program, or for more information, please click here.