SEC Rule 701 exempts non-reporting companies from registering securities offered or sold to employees, officers, directors, partners, trustees, consultants, and advisors under compensatory benefit plans or other compensation agreements. As discussed in an earlier post, under the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) passed by Congress in 2018, the threshold for the aggregate sales price of securities sold during any consecutive 12-month period that triggers additional disclosure requirements under Rule 701…

On February 19, 2019, the Securities and Exchange Commission voted to propose a new rule that would expand the availability of the “testing-the-waters” provisions that enable eligible companies to engage in certain communications to gauge institutional investor interest in a proposed IPO. Currently, only companies that qualify as “emerging growth companies” or “EGCs” are eligible to test the water. The new rule and related amendments would expand the availability of the provisions to all types…

As securities lawyers know, disclosure is generally regarded as the best disinfectant.  However, in a recent enforcement action, the SEC determined that disclosure is not always enough.  Specifically, when it comes to internal controls over financial reporting, or ICFR, companies need to actually fix the problems they disclose. In the action, the SEC cited four companies for failing to maintain ICFR for periods ranging from seven to 10 consecutive annual reporting periods.  While each…

In case you think that corporate minutes and other corporate formalities are for sissies, think again.  And read the opinion in the case of KT4 Partners vs. Palantir, decided by the Delaware Supreme Court in January 2019. KT4 had submitted a demand under Section 220 of the Delaware General Corporation Law, seeking to inspect Palantir’s books and records.  Because such an inspection must be for a “proper purpose,” KT4 noted that, among other things,…

On December 19, 2018, the SEC adopted final rules allowing reporting companies to rely on the Regulation A exemption. How did we get here? The SEC adopted a new – and greatly improved – Regulation A, known as Reg A+, in 2015.  As noted in previous posts (see here and here) Reg A, provides an exemption from registration under the Securities Act for smaller public offerings, but for many years was seldom used…

Each January, I depart from my admittedly nerdy focus on SEC and governance matters to communicate with you on one of my other admittedly nerdy pursuits – reading – by providing a list of my 10 favorite books of the prior year, five works of fiction and five of non-fiction.  As always, the list is comprised of books I read during the year gone by, rather than books published during the year. By way of…

Lest you think that the SEC’s focus on the use of non-GAAP financial metrics is so, well, 2018, think again.  On December 26, the SEC issued a cease-and-desist order against a company based entirely on the company’s use of non-GAAP metrics without giving “equal or greater prominence [to] the most directly comparable financial measure or measures calculated and presented in accordance with GAAP…”, as required by Item 10(e)(1)(i)(A) of Regulation S-K. According to the SEC…