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SEC Adopts Amendments to Reduce Unnecessary Burdens on Smaller Issuers by More Appropriately Tailoring the Accelerated and Large Accelerated Filer Definitions NEW!

Topic No. 8: Intellectual Property and Technology Risks Associated with International Business Operations NEW!

CF Disclosure Guidance Topic: Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b 2 NEW!

Entrepreneurship – SEC Advocate for Small Business Capital Formation Discusses Entrepreneurship 

Dual-Class Shares – SEC Investor Advocate Discusses Concerns of Dual-Class Shares 

Shareholder Proposals – SEC Staff Provides Guidance on Rule 14a-8 on Shareholder Proposals 

Regulation S-K – SEC Staff Updates Regulation S-K Interpretation 

Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 Regarding Certain Cyber-Related Frauds Perpetrated Against Public Companies and Related Internal Accounting Controls Requirements – Release No. 34-84429 

U. S. Securities and Exchange Commission Strategic Plan 

SEC Staff Guidance on Non-GAAP Measures Updated

Adjustments to Civil Monetary Penalty Amounts

Staff Accounting Bulletin No. 118

Financial Reporting Manual -- SEC Staff Financial Reporting Manual Updated

Articles

SEC Adopts Amendments to Reduce Unnecessary Burdens on Smaller Issuers by More Appropriately Tailoring the Accelerated and Large Accelerated Filer Definitions

Summary - In March 2020, the Securities and Exchange Commission (SEC) adopted amendments to the definition of accelerated filers and large accelerated filers. As a result, more companies can qualify as a smaller reporting company (SRC), which reduces burdens and compliance costs. For more information about the advantages of SRC status, please visit SEC.gov. Among the changes are a revenue test for exiting from both accelerated and large accelerated filer status and the possible elimination of including an internal control over financial reporting (ICFR) auditor attestation in the filing of Forms 10-K, 20-F and 40-F. Another change is lengthening the due dates for annual and quarterly reports to 90 calendar days and 45 calendar days, respectively.

Important points to know about the amendments:

  • If an issuer has less than $100 million in revenue and qualifies for SRC status, an ICFR audit is not needed, regardless of market cap.
  • If an issuer was not previously eligible for SRC status but has less than $80 million in revenue, an ICFR audit may not be needed, regardless of market cap.

For more information about these amendments, please click here.

Topic No. 8: Intellectual Property and Technology Risks Associated with International Business Operations

Summary - Corp Fin has issued CF Disclosure Guidance: Topic No. 8, Intellectual Property and Technology Risks Associated with International Business Operations. This guidance provides Corp Fin’s views regarding disclosure obligations that companies should consider with respect to intellectual property and technology risks that may occur when they engage in international operations.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

CF Disclosure Guidance Topic: Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b 2

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has issued CF Disclosure Guidance: Topic No. 7, Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b-2. This guidance addresses how and what to submit when filing an application objecting to public release of information otherwise required to be filed under the Securities Act and the Securities Exchange Act. This guidance replaces and supersedes the guidance provided in Staff Legal Bulletins 1 and 1A.

For more information, click here.

© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Entrepreneurship – SEC Advocate for Small Business Capital Formation Discusses Entrepreneurship


Summary - SEC Advocate for Small Business Capital Formation Martha Miller recently discussed entrepreneurship at a conference for military veteran business owners. Miller indicated that “small businesses and their investors are looking for the most efficient way to raise the capital they need. We also understand one size does not fit all.”

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Dual-Class Shares – SEC Investor Advocate Discusses Concerns of Dual-Class Shares

Summary - SEC Investor Advocate Rick Fleming recently expressed his concerns with the increased use of dual-class shares by companies that seek to go public. Fleming cautioned that “companies with dual-class structures tend to underperform companies with dispersed voting power.” 
For more information, click here.
© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Shareholder Proposals – SEC Staff Provides Guidance on Rule 14a-8 on Shareholder Proposals

Summary - The SEC staff has published Staff Legal Bulletin No. 14K. This bulletin provides information for companies and shareholders regarding Rule 14a-8 under the Securities Exchange Act of 1934 (Exchange Act). This bulletin is part of a continuing effort by the SEC staff to provide guidance on important issues arising under Exchange Act Rule 14a-8. Specifically, this bulletin contains information regarding:

The analytical framework of Rule 14a-8(i)(7);

  • Board analyses provided in no-action requests to demonstrate that the policy issue raised by the proposal is not significant to the company;
  • The scope and application of micromanagement as a basis to exclude a proposal under Rule 14a-8(i)(7); and
  • Proof of ownership letters.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Regulation S-K – SEC Staff Updates Regulation S-K Interpretation

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has updated its Compliance and Disclosure Interpretation (C&DI), Regulation S-K. This C&DI provides Corp Fin’s interpretations of various sections of Regulation S-K. Corp Fin has added new Questions 116.11 and 133.13. These questions include guidance on preparing Item 401 disclosure relating to director qualifications.

For more information, click here.

© 2019 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 Regarding Certain Cyber-Related Frauds Perpetrated Against Public Companies and Related Internal Accounting Controls Requirements – Release No. 34-84429

Summary - The SEC issued an investigative report cautioning that public companies should consider cyber threats when implementing internal accounting controls. The report is based on the SEC Enforcement Division's investigations of nine public companies that fell victim to cyber fraud, losing millions of dollars in the process.

According to the SEC, the investigations focused on "business email compromises" (BECs) in which perpetrators posed as company executives or vendors and used emails to dupe company personnel into sending large sums to bank accounts controlled by the perpetrators. The frauds in some instances lasted months and often were detected only after intervention by law enforcement or other third parties. Each of the companies lost at least $1 million, two lost more than $30 million, and one lost more than $45 million. In total, the nine companies wired nearly $100 million as a result of the frauds, most of which was unrecoverable. No charges were brought against the companies or their personnel.

The companies, which each had securities listed on a national stock exchange, covered a range of sectors including technology, machinery, real estate, energy, financial, and consumer goods. Public issuers subject to the internal accounting controls requirements of Section 13(b)(2)(B) of the Securities Exchange Act of 1934 must calibrate their internal accounting controls to the current risk environment and assess and adjust policies and procedures accordingly. The SEC indicates that the “FBI estimates fraud involving BECs has cost companies more than $5 billion since 2013.”

For more information, click here.

© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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U. S. Securities and Exchange Commission Strategic Plan

Summary - The SEC announced a new strategic plan to guide the agency’s work over the next four years with a primary focus on investors, innovation, and performance. The plan’s goals reflect the agency’s commitment to its longstanding mission while leveraging the opportunities and addressing the challenges that come from fast-evolving markets, products and services. The strategic plan includes the following goals:

  • Focus on the long-term interests of our Main Street investors.
  • Recognize significant developments and trends in our evolving capital markets and adjust our efforts to ensure we are effectively allocating our resources.
  • Elevate the SEC’s performance by enhancing our analytical capabilities and human capital development.

The SEC’s new strategic plan was published in accordance with the Government Performance and Results Modernization Act of 2010, which requires federal agencies to outline their missions, planned initiatives, and strategic goals for a four-year period.

For more information, click here.

© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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SEC Staff Guidance on Non-GAAP Measures Updated

Summary - The staff in the SEC's Division of Corporation Finance has updated its Compliance and Disclosure Interpretation (C&DI), Non-GAAP Financial Measures. This C&DI provides staff interpretations of the rules and regulations on the use of non-GAAP financial measures.
 
The staff has added Questions 101.02 and 101.03 to provide guidance on business combination transactions, including information on providing non-GAAP financial measures in certain forecasts.
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Adjustments to Civil Monetary Penalty Amounts

Summary - The SEC has issued a notice, Adjustments to Civil Monetary Penalty Amounts. The SEC is publishing this notice pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the Act). This Act requires all agencies to annually adjust for inflation the civil monetary penalties that can be imposed under the statutes administered by the agency and publish the adjusted amounts in the Federal Register. This notice sets forth the annual inflation adjustment of the maximum amount of civil monetary penalties administered by the SEC under the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, the Investment Advisers Act of 1940, and certain penalties under the Sarbanes-Oxley Act of 2002. These amounts are effective beginning on January 15, 2018, and will apply to all penalties imposed after that date for violations of the aforementioned statutes that occurred after November 2, 2015
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Staff Accounting Bulletin No. 118

Summary - The SEC staff published guidance for publicly traded companies, auditors, and others to help ensure timely public disclosures of the accounting impacts of the Tax Cuts and Jobs Act (the Act or the TCJA). Specifically, the SEC staff issued Staff Accounting Bulletin (SAB) No. 118. SAB 118 expresses views of the staff regarding application of U.S. GAAP when preparing an initial accounting of the income tax effects of the Act.
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Financial Reporting Manual -- SEC Staff Financial Reporting Manual Updated

Summary - The staff in the SEC's Division of Corporation Finance (Corp Fin) has updated certain guidance in its Financial Reporting Manual (Manual). Corp Fin has updated the FRM to:
  • Include revised guidance related to the pro forma impact of adopting new accounting standards;
  • Address adoption of new accounting standards after Emerging Growth Company status is lost; and
  • Clarify the effective dates for certain public business entities for FASB Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, and ASU No. 2016-02, Leases.
The Manual was originally prepared by the Corp Fin staff to serve as internal guidance but later made public in an effort to increase transparency of informal staff interpretations. Because of its informal nature, the Manual does not necessarily contain a discussion of all material considerations necessary to reach an accounting or disclosure conclusion. Such conclusions about a particular transaction are very fact dependent and require careful analysis of the transaction and of the relevant authoritative accounting literature and SEC requirements. The information in the Manual is non-authoritative. 
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.