Jason Brenkert

On August 26, 2020, the Securities and Exchange Commission (the “Commission”) adopted amendments to update the definition of “accredited investor” in the Commission’s rules governing certain kinds of private securities offerings, including securities offerings to natural persons and entities conducted pursuant to Rules 506(b) and 506(c) of Regulation D under the United States Securities Act of 1933, as amended (the “Securities Act”), and the definition of “qualified institutional buyer” in Rule 144A under the Securities Act. The amendments to the accredited investor definition (i) add new categories of qualifying natural persons, including a category based on professional knowledge, experience or certifications and a category for knowledgable employees of private funds; (ii) add new categories of entities, including “family offices with at least $5 million in assets under management and a “catch-all” category for any entity which owns investments in excess of $5 million; and (ii) make certain other modifications to the existing definition.  The amendments to the qualified institutional buyer definition similarly expand the list of eligible entities under that definition. The current defintion of “accredited investor” had not been significantly updated for over three decades.  The adopted amendments are meant to expand the number of persons eligible to participate in private offerings based on knowledge and sophistication versus the prior rules focus on income and net worth. Notably, the adopted amendments did not raise the standards for individual income ($200,000 for an individual, $300,000 for a married couple) or net worth ($1,000,000), which were established in 1982 and which many have argued should be updated for inflation. The amendments will become effective 60 days following formal publication in the Federal Register, which means the rules will start to apply to new offerings in early November.  You can read the full text of the Final Rule here. Accredited Investor Definition The amendments to the accredited investor definition in Rule 501(a) include: Natural Person Categories Adding a new category to the definition that permits natural persons to qualify as accredited investors based on certain professional certifications, designations or credentials or other credentials issued by an accredited educational institution, which the Commission may designate from time to time by order. In conjunction with the adoption of the amendments, the Commission designated by order holders in good standing of the Series 7, Series 65, and Series 82 licenses as qualifying natural persons. The Commission may designate other certifications, designations, or credentials by the Commission order, providing the Commission with flexibility to reevaluate or add certifications, designations, or credentials in the future. Including as accredited investors, with respect to investments in a private fund, natural persons who are “knowledgeable employees” of the fund. Adding the term “spousal equivalent” to the accredited investor definition. The amendments allow unmarried couples to pool their assets for purposes of income and net worth tests, so long as the individuals are “spousal equivalents,” defined to mean a cohabitant occupying a relationship generally equivalent to that of a spouse. Expanded Entity Categories Adding a new “catch-all” catergory for any entity, including Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries, that own “investments,” as defined in Rule 2a51-1(b) under the Investment Company Act, in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered, Clarifying that limited liability companies with $5 million in assets may be accredited investors. Adding Commission- and state-registered investment advisers, exempt reporting advisers, and rural business investment companies (RBICs) to the list of entities that may qualify. Adding “family offices” with at least $5 million in assets under management and their “family clients,” as each term is defined under the Investment Advisers Act. The amendments apply only to a family office that was not formed for the specific purposes of acquiring the securities offered and whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that the family office is capable of evaluating the merits and risks of the prospective investment. The amendment to Rule 215, which is applicable to securities offerings made under Section 4(a)(5) of the Securities Act, replaces the existing definition with a cross reference to the definition in Rule 501(a). The Commission also adopted conforming amendments to Rule 163B under the Securities Act and to Rule 15g-1 under the Exchange Act. Qualified Institutional Buyers The amendments expand the definition of “qualified institutional buyer” in Rule 144A to include limited liability companies and RBICs if they meet the $100 million in securities owned and invested threshold in the definition.  The amendments also add to the list any institutional investors included in the accredited investor definition that are not otherwise enumerated in the definition of “qualified institutional buyer,” provided they satisfy the $100 million threshold.

On May 4, 2020, the SEC announced final rules that provide temporary, conditional relief from certain requirements of Regulation Crowdfunding, relating to the timing of the offering and the availability of financial statements in issuers’ offering materials.   This relief was effective immediately and is available to certain issuers that meet the eligibility criteria described below. The SEC adopted the temporary rules in response to feedback received by the Small Business Capital Formation Advisory Committee. The rules are intended to expedite the offering process for smaller companies directly or indirectly affected by COVID-19 that are seeking to use Regulation Crowdfunding to meet their funding needs. The amendments apply to securities offerings initiated under Regulation Crowdfunding between May 4, 2020, and August 31, 2020. The amendments provide flexibility for smaller issuers that meet the following eligibility criteria (in addition to current eligibility criteria to use Regulation Crowdfunding): the issuer cannot have been organized and cannot have been operating less than six months prior to the commencement of the offering; and any issuer that has sold securities in a Regulation Crowdfunding offering in the past must have complied with the requirements in section 4A(b) of the Securities Act of 1933, as amended, and the related rules. Such issuers may assess interest in an offering prior to preparation of full offering materials. If such issuers launch an offering, they may close and have access to funds sooner than under existing rules. Subject to certain qualifications detailed in the table below, under the temporary relief, such issuers may close as soon as binding commitments are received for the target amount of the offering.  Under existing rules, issuers could not close for at least 21 days following the target amount being reached. The temporary rules also provide an exemption from certain financial statement review requirements for issuers offering more than $107,000 but not more than $250,000 in securities in reliance on Regulation Crowdfunding within a 12-month period. The following table from the SEC’s release summarizes the existing rules and the temporary amendments: Click here to view the table

On April 2, 2020, SEC Chairman John Clayton, issued a public statement amid the ongoing COVID-19 pandemic. In the statement, Chairman Clayton stated that the Commission and its staff remain focused on protecting the interests of Main Street investors who are “the lens through which” the Commission evaluates if it is effectively advancing its mission and noting that the Commission “continue[s] to allocate [its] resources in the best interests of investors and… capital markets, with investor protection and market integrity front of mind.” As part of the statement, Chairman Clayton emphasized that the Commission is “keenly focused on ensuring that issuers and other registrants continue to provide material information to investors, including information related to the current and expected effects of COVID-19, as promptly as practicable.” Chairman Clayton also referenced the recent Commission notification that while the comment period on a variety of proposed actions had closed in March 2020, the Commission would not take final action on those items in the coming weeks to allow potential commenters more time to submit comments for consideration if needed. He noted that the Commission does not expect to move forward on any of these proposed actions before May 1, 2020. These actions include: Amendments to Rule 2-01, Qualifications of Accountants; Amending the “Accredited Investor” Definition; Disclosure of Payments by Resource Extraction Issuers; Use of Derivatives by Registered Investment Companies and Business Development Companies; Required Due Diligence by Broker-Dealers and Registered Investment Advisers Regarding Retail Customers’ Transactions in Certain Leveraged/Inverse Investment Vehicles; Notice of Proposed Order Directing the Exchanges and the Financial Industry Regulatory Authority to Submit a New National Market System Plan Regarding Consolidated Equity Market Data; and Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds. Issuers and other interested parties that desire to submit comments on these proposed actions are encouraged to do so on the most reasonable possible timeframe prior to May 1, 2020.

On March 4, 2020, the Securities and Exchange Commission (the “Commission”) proposed amendments to the private offering exemptive framework under the Securities Act of 1933, as amended (the “Securities Act”) to “simplify, harmonize, and improve certain aspects of the framework” with the goal of promoting capital formation while maintaining investor protections. The current private offering framework is a set of exemptions and safe harbors which permit issuers to raise capital through various, differing rules which don’t require the filing of a registration statement with the Commission under the Securities Act. These rules are meant to provide issuers with a less expensive and more efficient alternative to a registered public offering in exchange for certain limitations and requirements being placed on the offering, typically regarding the number and type of investors, the type and context of solicitations, the size of the offering and individual investments and certain limited information requirements. The conflicting requirements of the current, differing rules and the potential integration (determination of whether multiple transactions are part of the same offering) of offerings conducted under this “patchwork system” has resulted in a complex and sometimes confusing regulatory framework where the interaction of offerings conducted under the various exemptions and safe harbors is often uncertain, leading to potential violations of the Securities Act. As Chairman Clayton stated in relation to the proposed amendments, “[t]he complexity of the current framework is confusing for many involved in the process, particularly for those smaller companies whose limited resources spent on navigating our overly complex rules are diverted from direct investments in the companies’ growth.” As noted in the Commission’s press release, “[t]he Commission’s proposed amendments are intended to reduce potential friction points to make the capital raising process more effective and efficient to meet evolving market needs.” The proposed amendments would: address, in one broadly applicable rule, the ability of issuers to move from one exemption to another, and ultimately to a registered offering; increase the offering limits for Regulation A, Regulation Crowdfunding, and Rule 504 offerings, and revise certain individual investment limits; provide greater certainty to issuers and protection to investors by setting clear and consistent rules governing offering communications between investors and issuers, including permitting certain “demo day” activity without running afoul of the prohibition on general solicitation; and harmonize certain disclosure and eligibility requirements and bad actor disqualification provisions to reduce differences between exemptions. For more information on the proposed rules, see our recent eUpdate here.

On March 12, 2020, the Securities and Exchange Commission (the “Commission”) adopted amendments to the “accelerated filer” and “large accelerated filer” definitions in the Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The amendments would exclude from the definition of “accelerated filer” and “large accelerated filer” issuers that are eligible to be smaller reporting companies and that have less than $100 million in revenues in their most recent fiscal year for which audited financial statements are available.  This exclusion permits these issuers to forego an auditor attestation report on the issuers’ internal control over financial reporting (“ICFR”) in their annual reports on Form 10-K.  The following table from the adopting release sets forth the relationship between smaller reporting companies, non-accelerated filers, accelerated filers and large accelerated filers following the new amendments. Relationships between SRCs and Non-Accelerated, Accelerated, and Large Accelerated Filers under the Final Amendments Status Public Float Annual Revenues SRC and Non-Accelerated Filer Less than $75 million $75 million to less than $700 million N/A Less than $100 million SRC and Accelerated Filer $75 million to less than $250 million $100 million or more Accelerated Filer (not SRC) $250 million to less than $700 million $100 million or more Large Accelerated Filer (not SRC) $700 million or more N/A Note: This table addresses initial determinations of filer status and does not consider requirements for transitions between filer status. Transition thresholds have also been amended, as discussed below. More specifically, the amendments: Exclude from the “accelerated filer” and “large accelerated filer” definitions an issuer that is eligible to be a smaller reporting company and had annual revenues of less than $100 million in the most recent fiscal year for which audited financial statements are available. The amendments also allow business development companies to qualify for this exclusion if they meet the requirements of the smaller reporting company revenue tests using their annual investment income as the measure of annual revenue, although business development companies would continue to be ineligible to be smaller reporting companies; Increase the public float transition thresholds for an accelerated and a large accelerated filer becoming a non-accelerated filer from $50 million to $60 million and for exiting large accelerated filer status from $500 million to $560 million; Provide that an issuer may exit reporting as an accelerated filer or large accelerated filer by either falling below the adjusted public float thresholds or by falling below the smaller reporting company revenue test thresholds, as applicable; and Add a check box to the cover pages of annual reports on Forms 10-K, 20-F, and 40-F to indicate whether an ICFR auditor attestation is included in the filing. The amendments do not impact the most significant exemption from the ICFR auditor attestation requirement, which is the exemption provided to an emerging growth company (“EGC”) pursuant to Title I of the JOBS Act. Generally, an EGC is company that has total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year end and that has not sold common equity securities under a registration statement. The JOBS Act provides EGCs with a five-year exemption from the ICFR auditor attestation requirement. The following are two examples of the implementation of the new definitions and transition thresholds taken from the adopting release: An issuer with a December 31 fiscal year end that did not exceed the public float threshold for a smaller reporting company in the prior year and that has a public float, as of June 30, 2020, of $230 million and annual revenues for the fiscal year ended December 31, 2019 of $101 million will be eligible to be a smaller reporting company under the public float test; however, because the issuer would not be eligible to be a smaller reporting company under the smaller reporting company revenue test, it will be an accelerated filer (assuming the other conditions for accelerated filer are also met). At the next determination date (June 30, 2021), if its public float, as of June 30, 2020, remains at $230 million and its annual revenues for the fiscal year ended December 31, 2019 are less than $100 million, the issuer will be eligible to be a smaller reporting company under the smaller reporting company revenue test (in addition to the public float test) and thus it will become a non-accelerated filer. On the other hand, an issuer with a December 31 fiscal year end that has a public float, as of June 30, 2020, of $400 million and annual revenues for the fiscal year ended December 31, 2019 of $101 million will not be eligible to be a smaller reporting company under either the public float test or the smaller reporting company revenue test and will be an accelerated filer (assuming the other conditions for accelerated filer also are met). At the next determination date (June 30, 2021), if its public float, as of June 30, 2021, remains at $400 million, that issuer will not be eligible to be a smaller reporting company under the smaller reporting company revenue test unless its annual revenues for the fiscal year ended December 31, 2020 are less than $80 million, at which point it will be eligible to be a smaller reporting company under the smaller reporting company revenue test and to become a non-accelerated filer. The amendments will become effective 30 days after publication in the Federal Register. The final amendments will apply to annual report filings due on or after the effective date.

On March 2, the Securities and Exchange Commission adopted amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees. The final amendments amend Rule 3-10 of Regulation S-X and partially relocate its provisions to new Rule 13-01 and completely relocate Rule 3-16 into new Rule 13-02 (Rule 3-16 will continue to exist during the transition period). The Commission stated that the amendments are intended to: Improve existing Rules 3-10 and 3-16 by requiring disclosures that focus investors on the information that is material given the specific facts and circumstances and by making the disclosures easier to understand; Reduce the cost of compliance for registrants and encourage potential issuers to offer guaranteed or collateralized securities on a registered basis, thereby affording investors protections they may not be provided in offerings conducted on an unregistered basis; and Facilitate, through lower costs and burdens of compliance, issuers' flexibility to include guarantees or pledges of affiliate securities as collateral when they structure debt offerings, which may increase the number of registered offerings that include these credit enhancements and could result in a lower cost of capital and an increased level of investor protection. The amendments as adopted are substantially similar to the amendments proposed by the Commission on July 24, 2018. The amendments will be effective on January 4, 2021, but voluntary compliance will be permitted in advance of the effective date. Amendments to Rule 3-10 and New Rule 13-01 Prior to the amendments, Rule 3-10 required financial statements to be filed for all issuers and guarantors of securities that are registered or being registered, subject to several exceptions. Under the amendments, Rule 3-10 will continue to permit the omission of separate financial statements of subsidiary issuers and guarantors when certain conditions are met and the parent company provides supplemental financial and non-financial disclosure about the subsidiary issuers and/or guarantors and the guarantees. Similar to the existing rule, the amended rule will provide the conditions that must be met in order to omit separate subsidiary issuer or guarantor financial statements. New Rule 13-01 sets forth the accompanying amended disclosure requirements, as follows: The condition that a subsidiary issuer or guarantor be 100%-owned by the parent company is replaced with a condition that it be consolidated in the parent company's consolidated financial statements; The condensed consolidating financial information, as specified in existing Rule 3-10, is replaced with certain new financial and non-financial disclosures. The amended financial disclosures will consist of summarized financial information of the issuers and guarantors, which may be presented on a combined basis, and reduce the number of periods presented. The amended non-financial disclosures, among other matters, will expand the qualitative disclosures about the guarantees and the issuers and guarantors. Consistent with the existing rule, disclosure of additional information about each guarantor will be required if it would be material for investors to evaluate the sufficiency of the guarantee; The amended disclosures may be provided outside the footnotes to the parent company’s audited annual and unaudited interim consolidated financial statements in all filings; and The amended financial and non-financial disclosures are required for as long as an issuer or guarantor has an Exchange Act reporting obligation with respect to the guaranteed securities rather than for as long as the guaranteed securities are outstanding. Amendments to Rule 3-16 and New Rule 13-02 Rule 3-16 requires a registrant to provide separate financial statements for each affiliate whose securities constitute a substantial portion of the collateral, based on a numerical threshold, for any class of registered securities as if the affiliate were a separate registrant. Under the amendments, the requirements in Rule 3-16 will be replaced with the disclosure requirements in new Rule 13-02 (although existing Rule 3-16 will remain in place for transitional purposes). Among other things, the amendments will: Replace the existing requirement to provide separate financial statements for each affiliate whose securities are pledged as collateral with amended financial and non-financial disclosures about the affiliate(s) and the collateral arrangement as a supplement to the consolidated financial statements of the registrant that issues the collateralized security. The registrant will be permitted to provide the amended financial and non-financial disclosures outside the footnotes to its audited annual and unaudited interim consolidated financial statements in all filings; and Replace the requirement to provide disclosure only when the pledged securities meet or exceed a numerical threshold relative to the registered securities with a requirement to provide the proposed financial and non-financial disclosures in all cases, unless they are immaterial.

At the Securities and Exchange Commission’s (the “Commission”) open meeting on December 18, 2019, the Commissioners proposed rules to require resource extraction issuers to file an annual Form SD that includes information about payments related to the commercial development of oil, natural gas, or minerals that are made to a foreign government or to the U.S. federal government. The proposed rules implement Section 13(q) of the United States Exchange Act of 1934, as amended, and they are mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). It has been a difficult road for the Commission to implement these rules. The Commission first adopted rules on resource extraction payments disclosure in 2012, but those rules were vacated by the U.S. District Court for the District of Columbia. The Commission then adopted new rules in 2016, which were disapproved by a joint resolution of Congress pursuant to the Congressional Review Act. The new proposed rules are a substantial easing of the requirements in the prior rules. For more information on the proposed rules, see our recent eUpdate here.

At the Securities and Exchange Commission’s (the “Commission”) open meeting on December 18, 2019, the Commissioners approved proposed amendments to the definition of “accredited investor” under Regulation D under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) and the definition of a “qualified institutional buyer” in Rule 144A under the U.S. Securities Act. Commissioners Robert Jackson and Allison Lee both dissented on the proposal. The statements of the commissioners on the proposed rules showcased significant disagreement between them on the role of the Commission and the fundamental purposes of the federal securities laws. Commissioner Jackson’s public statement was titled Statement on Reducing Investor Protections around Private Markets and highlighted his belief that the new release does not take the Commission’s role in protecting investors seriously. Commissioner Lee also noted her concern regarding the one-sided nature of the proposed rules which seek to expand the pool of available investors without adequately considering an adjustment in the income and wealth thresholds. The amendments to the definition of “accredited investor” are meant to provide more opportunity for main street investors to participate in private capital markets by including a greater number of institutional and individual investors that have the knowledge and expertise to participate in private capital markets. The proposed amendments add new categories of natural persons and entities that qualify as accredited investors. Specifically, the proposed amendments would: add new categories of natural persons that may qualify as accredited investors based on certain professional certifications or designations or other credentials or their status as a private fund’s “knowledgeable employee;” expand the list of entities that may qualify as accredited investors and allow entities meeting an investments test to qualify; add family offices with at least $5 million in assets under management and their family clients; and add the term “spousal equivalent” to the definition. Changes are also proposed to the “qualified institutional buyer” definition to include limited liability companies, RBICs, and any institutional accredited investor not already listed in Rule 144A when they meet the existing threshold of $100 million in securities owned and invested. For more information on the proposed amendments, see our recent eUpdate here.

At the SEC's open meeting yesterday (November 5, 2019), the Commissioners approved two new proposed rules in their ongoing efforts to modernize proxy solicitation and shareholder proxy access, as follows: (1) amendments to certain procedural requirements, including ownership requirements, documentation requirements, meetings to discuss proposals and limitations on the number of proposals submitted, and resubmission thresholds for shareholder proposals, and (2) amendments to proxy rules conditioning the availability of certain existing exemptions from the information and filing requirements of the proxy rules for proxy voting advice businesses upon compliance with additional disclosure and procedural requirements. Comments on the proposals are due on or before 60 days after publication in the Federal Register. For more information on the proposed rules, see our recent eUpdate available here: dorsey.com/newsresources/publications/client-alerts/2019/11/sec-adopts-proposed-rules-requirements.

Yesterday the SEC announced the agenda for its upcoming open meeting to be held on Tuesday, November 5 at 10:00 a.m. EST. All SEC open meetings are webcast and a hyperlink to the webcast will be posted to www.sec.gov shortly before the start of a meeting. The SEC has indicated that the agenda, in part, will focus on “continued efforts to facilitate constructive shareholder engagement and enhance transparency, improve disclosures, and increase confidence in the proxy process.” We expect to provide further analysis following the open meeting and on any proposals once they are published. More information about the specific agenda items for the open meeting can be found in our eUpdate here:  dorsey.com/newsresources/publications/client-alerts/2019/10/sec-to-discuss-proxy-adviser-regulation.

On December 22, 2017, the Securities and Exchange Commission announced publication of staff guidance for issuers, auditors, and others to ensure timely public disclosures of the accounting impacts of the Tax Cuts and Jobs Act (the “TCJA”), which was enacted on December 22, 2017. Specifically, the staff of the Office of the Chief Accountant and the Division of Corporation Finance issued the following interpretations: Staff Accounting Bulletin (SAB) No. 118 expresses views of the staff regarding application of U.S. GAAP when preparing an initial accounting of the income tax effects of the TCJA. Compliance and Disclosure Interpretation 110.02 expresses views of the staff regarding the applicability of Item 2.06 of Form 8-K with respect to reporting the impact of a change in tax rate or tax laws pursuant to the TCJA. SAB 118 The staff issued SAB 118 to address certain fact patterns where the accounting for changes in tax laws or tax rates under ASC Topic 740 is incomplete upon issuance of an issuer’s financial statements for the reporting period in which the TCJA is enacted. As detailed in SAB 118, in the financial reporting period during which the TCJA is enacted, companies must first reflect the income tax effects of the TCJA in which the accounting under ASC Topic 740 is complete. These completed amounts would not be provisional amounts. The income tax effects of the TCJA for which the accounting under ASC Topic 740 is incomplete, but for which a reasonable estimate is determinable, would be reported as provisional amounts, which would be subject to adjustment during a "measurement period" until the accounting under ASC 740 is complete. For any specific income tax effects of the Act for which a reasonable estimate cannot be determined, provisional amounts would not be reported, and companies would continue to apply ASC Topic 740 based on the provisions of the tax laws that were in effect immediately prior to the TCJA being enacted. For those income tax effects for which companies were not able to determine a reasonable estimate (such that no related provisional amount was reported for the reporting period in which the Act was enacted), companies would report provisional amounts in the first reporting period in which a reasonable estimate can be determined. The measurement period begins in the reporting period that includes the TCJA’s enactment date and ends when an issuer has obtained, prepared, and analyzed the information that was needed in order to complete the accounting requirements under ASC 740. During the measurement period, the staff expects that issuers will be acting in good faith to complete the accounting under ASC 740. The staff notes that in no circumstances should the measurement period extend beyond one year from the enactment date. During the measurement period, an issuer may need to reflect adjustments to its provisional amounts or report additional tax effects upon obtaining, preparing, or analyzing additional information about facts and circumstances that existed as of the enactment date. Any income tax effects of events unrelated to the TCJA should not be reported as measurement period adjustments. SAB 118 also describes supplemental disclosures that should accompany the provisional amounts, including the reasons for the incomplete accounting, the additional information or analysis that is needed, and other information relevant to why the issuer was not able to complete the accounting required under ASC 740 in a timely manner. C&DI 110.02 In C&DI 110.02 the staff clarifies that the re-measurement of a deferred tax asset (“DTA”) to incorporate the effects of newly enacted tax rates or other provisions of the TCJA does not trigger an obligation to file under Item 2.06 of Form 8-K. The re-measurement of a DTA to reflect the impact of a change in tax rate or tax laws is not an impairment under ASC 740. Issuers employing the “measurement period” approach as contemplated by SAB 118 that conclude that an impairment has occurred due to changes resulting from the enactment of the TCJA may rely on the Instruction to Item 2.06 of Form 8-K and disclose the impairment, or a provisional amount with respect to that possible impairment, in its next periodic report.

On August 14, 2017, the SEC approved an NYSE rule change that requires listed companies to give notice to the NYSE at least 10 minutes before any public announcement of dividends or stock distributions, even if such announcements occur outside the hours of the Exchange’s current immediate release policy. The rule change was effective immediately. The Exchange’s immediate release policy (Sections 202.05 and 202.06 of the NYSE Listed Company Manual (the “Manual”)) already requires listed companies to provide notification to the Exchange at least 10 minutes prior to the public release of a dividend or stock distribution announcement during the hours between 7:00 a.m. Eastern Time and market close (usually 4:00 p.m. Eastern Time). During those hours, listed companies are required to call the Exchange’s Market Watch department at least 10 minutes before any material news announcement, including stock distributions and dividends. Additionally, Section 204.12 of the Manual already requires listed companies to give notice to the NYSE of any action related to dividends or stock distributions in relation to a listed stock. Such notice must be at least 10 days in advance of the record date for such events. Section 204.21 also requires 10 days advance notice of the fixing of a date for the taking of a record of shareholders for any purpose. The effect of the rule change is to amend Sections 204.12 and 204.21 of the Manual to specify that listed companies are to provide 10 minutes advance notice to the Exchange about any dividend or stock distribution announcement made at any time, not just those announcements made in the hours during which the Exchange’s immediate release policy is in effect.

Beginning April 2017, companies with 250 or more employees in England, Wales and Scotland on April 5th should be aware of a requirement to begin publishing annually on their own website and on a government website the following four figures: Gender pay gap (mean and median averages) Gender bonus gap (mean and median averages) Proportion of men and women receiving bonuses Proportion of men and women in each quartile of the organization’s pay structure Please note that the term “employee” is very broadly defined for this reporting purpose.  For guidance on managing the calculation and reporting requirements, the Government Equalities Office and Acas prepared guidance available here: http://www.acas.org.uk/index.aspx?articleid=5768

On March 31, 2017, the Securities and Exchange Commission (SEC) issued final rules regarding inflation adjustments and other technical amendments under Title I and III of the Jumpstart Our Business Startups (JOBS) Act. Under the inflation adjustments, the SEC adjusted the gross revenue threshold for an issuer to lose its status as an Emerging Growth Company (EGC) from $1.0 billion to $1.07 billion, a $70 million dollar increase. Further, the SEC adjusted the Regulation Crowdfunding thresholds, increasing among other thresholds the maximum amount an issuer can raise under Regulation Crowdfunding from $1 million to $1.07 million. In relation to the various exemptions and scaled disclosure permitted to EGCs under the JOBS Act, the SEC also adopted technical amendments to certain rules and to certain forms, adding check boxes to the cover pages for companies to indicate if they are an EGC and whether they have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the Exchange Act). Forms and rules amended include Forms C, S-1, S-3, S-4, S-8, S-11, F-1, F-3 and F-4 under the Securities Act of 1933; Rule 12b-2, Rule 14a-21 and Forms 10, 8-K, 10-Q, 10-K, 20-F and 40-F under the Exchange Act; Rule 2-02 and Rule 3-02 of Regulation S-X; Rule 100 and Rule 201 of Regulation Crowdfunding; and Items 301, 303, 308, 402 and 1101 of Regulation S-K to reflect these reporting accommodations. The new rules and changes in the forms will take effect upon publication in the Federal Register, which is currently scheduled to take place on April 12, 2017. Issuers should take note of these changes in the form cover pages in preparing their next periodic reports to the SEC.

On March 22, 2017, the Securities and Exchange Commission adopted an amendment to Rule 15c6-1(a) to shorten by one business day the standard settlement cycle for most broker-dealer securities transactions.  Currently, the standard settlement cycle for these transactions is three business days, known as T+3.  The amended rule shortens the settlement cycle to two business days, T+2. The amended rule will take effect on September 5, 2017. The SEC stated that the amended rule is “designed to enhance efficiency, reduce risk, and ensure a coordinated and expeditious transition by market participants to a shortened standard settlement cycle.” To assist in the preparation for the implementation of the new, shortened settlement cycle, the SEC has established an e-mail address – T2settlement@sec.gov – for the submission of inquiries to SEC staff.  Issuers will want to consider and be prepared for the impact of the shortened settlement cycle in relation to closing and settlement of public securities offerings.

On March 9, 2017, the Senate Banking Committee passed a series of four bills focused on deregulation, including one that would make it easier for privately held companies to issue stock awards through equity compensation plans. Each of the bills was a bipartisan effort. One bill eases certain restrictions on reporting on exchange traded funds (ETFs). The bill would address securities laws and regulations that discourage broker-dealers from publishing research on ETFs by directing the Securities and Exchange Commission (SEC) to provide a safe harbor for research reports that cover ETFs. The second bill proposes to ease reporting thresholds for privately held corporations when issuing stock awards. Currently, under Item 701 under the Securities Act of 1933, as amended, if the sales price or amount of securities sold in any 12-month period under a private company’s equity compensation plans exceeds $5 million, then the company must provide certain information to the holders of the equity compensation securities, which many companies consider onerous and inappropriate for a privately held corporation. The bill would increase that threshold to $10 million and have it adjusted for inflation. A third bill would raise to 250 from 100 the number of investors venture capital funds can acquire before triggering SEC registration requirements under the Investment Company Act of 1940, as amended. The final bill would credit stock exchanges for any fees they have overpaid the SEC. The bills have been reported to the Senate, placed on the Senate legislative calendar and are awaiting further action by the Senate. Companion bills in the House are moving through the House Finance Committee.

On November 10, 2016, GAMCO Asset Management filed a Schedule 13D/A and 14N announcing that it had used the proxy access bylaw at National Fuel Gas to nominate a director candidate for election to NFG’s board at the upcoming 2017 annual meeting of shareholders.  This nomination appears to be the first use of proxy access bylaws by a shareholder to nominate a director in the United States.  NFG adopted its proxy access bylaw in March of 2016.  Given the recent trend of companies adopting bylaws to grant proxy access to shareholders (approximately 40% of S&P 500 companies) and recent decisions by the Staff of the SEC Division of Corporate Finance to allow "fix-it" shareholder proposals to modify secondary features of proxy access bylaws (see, for example, H&R Block’s Rule 14a-8 No-Action Letter), we expect that more companies will be granting proxy access to shareholder nominees in the coming years. Companies should review their director nomination process and shareholder access bylaws as part of their preparations for annual report and proxy season to be prepared to adequately address potential shareholder nominations.