New SEC Regulatory Initiatives to Reduce Disclosure Obligations and Promote Capital Formation

Description

Recent actions by the SEC and Congress indicate a concerted effort to ease the disclosure obligations of public companies and encourage capital formation by smaller and emerging growth companies. Securities counsel must prepare to advise issuers of all types and sizes on taking advantage of these significant amendments to the regulations.

On Aug. 17, 2018, the SEC adopted amendments to simplify and update the disclosure requirements outlined in Regulation S-K, Regulation S-X, and other rules and forms. Although the amendments apply primarily to public reporting companies, certain provisions also impact other entities regulated by the SEC, including Regulation A issuers, investment advisers, investment companies, and broker-dealers.

On June 28, 2018, the SEC adopted amendments that raise the thresholds in the smaller reporting company (SRC) definition, thereby expanding the number of smaller companies eligible for the scaled disclosure requirements under Regulation S-K and Regulation S-X. While in concept the change is simple, compliance requires an understanding of rules regarding when and how the SRC determination is made, and what to do when companies fall in and out of SRC designation.

Rule 701 allows non-reporting companies to issue and sell securities for compensatory purposes without the requirement to register the offer and sale of the shares with the SEC. Under congressional mandate, the SEC recently amended Rule 701(e) to increase the trigger for certain disclosures from $5 to $10 million in aggregate sales of securities sold during a 12-month period. The SEC also issued a concept release soliciting public comment on ways in which the SEC might modernize its rules governing compensatory securities offerings.

Listen as our authoritative panel discusses the ramifications and complexities of each of these regulatory amendments for public and non-reporting companies. The panel will also discuss the JOBS and Investor Confidence Act of 2018, recently passed in the House by a vote of 406 to 4, and how it might effect IPOs and disclosure obligations going forward.