RMSC: Corporate Finance

The final session of the morning covered developing issues in Corporate Finance.  The panel included Shelly Parratt, Deputy Director, Division of Corporate Finance, Securities & Exchange Commission; Jason Day, Partner, Perkins Coie; and Jeffrey Sherman, Special Counsel, Faegre Baker Daniels.   The panel discussed the continued areas of focus for the SEC’s Corporate Finance Division, staff observations and guidelines for certain disclosure requirements, and the new initiatives for capital formation included in the JOBS Act. 

The panel provided an overview of the areas of focus in the SEC’s Corporate Finance Division.  The focus areas include ensuring large financial institutions are as transparent as possible with their disclosure, disclosures by community banks, ensuring non-GAAP financial metrics comply with the SEC Rules, reverse merger disclosures, and shareholder rights disclosures.  

Staff observations and guidelines for disclosure included ensuring Form 8-K filings regarding major acquisitions and reverse mergers have all the required disclosures, including financial statements.  Another focus was on cyber security disclosures, including any significant risk factors assessed therewith and disclosure of any material incidents or breaches.  The panel suggested that disclosure may be required under Management’s Discussion & Analysis (“MD&A”) section, legal proceedings section, or, if necessary, under a loss contingency disclosure.  

Finally, the JOBS Act created new initiatives for capital formation.  The panel highlighted the confidential review provisions allowing a company to keep filings private up until 21 days prior to the beginning of a road show.  Next, the panel discussed the changes regarding the threshold number of shareholders before private companies are forced to go public.  Previously, the number of shareholders that triggered public filings was 500, but is now 2,000.  The JOBS Act exempts shares issued through equity compensation plans and any shares issued under the crowdfunding provisions.  

 Another new development is the elimination of the general solicitation provisions under Rule 506; however, this provision will not be effective until the SEC adopts the Rules implementing this provision.  The SEC is seeking pre-rulemaking public comments regarding its directives under the JOBS Act.

Our previous discussion of the JOBS Act can be found here, here, and here

Todd Penner