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Updated Summary of Director Education Opportunities Available

Gibson Dunn's summary of director education opportunities has been updated as of January 2023. A copy is available at this link. Boards of Directors of public companies find this a useful resource as they look for high quality education opportunities.

This update includes a number of new opportunities as well as updates to the programs offered by organizations that have been included in our prior summaries.

 

Thank you to associate To Nhu Huynh from our Houston office for her assistance with this quarter's update.

 


SEC Updates Non-GAAP C&DIs

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On December 13, 2022, the staff of the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission announced an update to its Compliance and Disclosure Interpretations (“C&DIs") on Non-GAAP Financial Measures under Questions 100.01, 100.04 – 100.06, and 102.10(a)(b)(c).  Many of the changes memorialize positions the Staff has taken in comment letters or provide additional detail about those positions.

Significant changes are discussed below, and Appendix A (attached as a pdf) is a marked version of the impacted C&DIs showing all of the revisions and additions.

Question 100.01 – Misleading Adjustments

Question 100.01 was revised to emphasize that a company's individual facts and circumstances affect whether an adjustment makes a non-GAAP measure misleading. Using the pre-update example (i.e., a non-GAAP performance measure that excludes normal, recurring, cash operating expenses may be misleading), the updated C&DI illustrates this by noting that:

  • When evaluating what is a “normal, operating expense," the Staff considers the nature and effect of the non-GAAP adjustment and how it relates to the company's operations, revenue generating activities, business strategy, industry and regulatory environment.
  • The Staff would view an operating expense that occurs repeatedly or occasionally, including at irregular intervals, as “recurring."

Question 100.04 – Individually Tailored Accounting Principles

Question 100.04, which was completely re-written, continues to include a prohibition on individually tailored accounting principles, but has now been supplemented with the following additional examples of adjustments that would run afoul of this prohibition:

  • adjusting performance measures to accelerate revenue that GAAP requires to be recognized ratably over time as though revenue was earned when customers were billed;
  • presenting revenue on a net basis when GAAP requires it to be presented on a gross basis (and vice versa); and
  • changing the basis of accounting for revenue or expenses in a non-GAAP performance measure from an accrual basis in accordance with GAAP to a cash basis.

100.05 – Improper Labels and Descriptions

New Question 100.05 memorializes the Staff's position, often made clear through comment letters, that a non-GAAP measure can be misleading if it (or any adjustment ma...

Updated Summary of Select Director Education Opportunities Available

Gibson Dunn's summary of director education opportunities has been updated as of October 2022 and is available at this link. Boards of Directors of public companies find this a useful resource as they look for high quality education opportunities.

This update includes a number of additional opportunities as well as updates to the programs offered by organizations that have been included in our prior summaries.

Thank you to associate To Nhu Huynh from our Houston office for her assistance with this quarter's update.

EDGAR Ready to Accept Online Form 144 Filings Ahead of Deadline for Electronic Filing Requirement

Since September 23, 2022, the Securities and Exchange Commission (the “SEC") Electronic Data Gathering, Analysis, and Retrieval (“EDGAR") system has been ready to accept electronic Form 144 filings, pursuant to the SEC's recent amendments requiring certain Forms 144 to be filed electronically. Filers have approximately six months from September 2022 to transition to electronic filing of Forms 144. The SEC's compliance date is April 13, 2023. 

Which Forms 144 Are Affected by the Amendments?

On June 2, 2022, the SEC adopted amendments that require certain Forms 144 to be filed electronically on the EDGAR system. The amendments seek to update and simplify Form 144, a notice form that must be filed with the SEC by an affiliate of an issuer who intends to resell restricted or control securities of such issuer in reliance upon Rule 144 (Our post from January 5, 2021 discussed the proposed amendments in more details).

The amendments will affect Forms 144 related to the sale of securities of an issuer subject to the reporting requirements under Section 13 or 15(d) of the Securities and Exchange Act of 1934. In contrast, Forms 144 related to the sale of the securities of non-reporting companies should continue to be reported exclusively in paper.

Online Fillable Form 144 or Filer-Constructed XML Submission, and Bulk Filing

Filers may comply with the electronic filing requirement by completing an online fillable Form 144 on EDGAR. The form is similar to other EDGAR online fillable forms, such as Forms D, 3, 4, and 5. Alternatively, filers may submit a filer-constructed XML Form 144 on EDGAR.

Multiple Forms 144 for different filers may be submitted on EDGAR through a bulk filing function. For example, a broker-dealer could bulk file Forms 144 simultaneously on EDGAR for multiple clients.

Links to detailed instructions on electronic filings of Form 144 are provided below:

SEC Raises Annual Gross Revenue Amount in the Definition of Emerging Growth Company

On September 9, 2022, the Securities and Exchange Commission (the “SEC”) amended its rules to implement inflation-adjusted amendments to Rule 405 of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 12b-2 of the Securities Exchange Act of 1932, as amended (the “Exchange Act”), and raised the annual gross revenue amount in the definition of “emerging growth company” (“EGC”) from $1,070,000,000 to $1,235,000,000. The final rule (available here) is effective as of September 20, 2022.

Title I of the Jumpstart Our Business Startups (“JOBS”) Act added Securities Act Section 2(a)(19) and Exchange Act Section 3(a)(80) to define the term “emerging growth company.” A qualified EGC may take advantage of certain exemptions from various compliance and reporting requirements that apply to other public companies that are not EGCs. Previously, an EGC was defined as an issuer with total annual gross revenues of less than $1,070,000,000 during its most recently completed fiscal year. Effective as of September 20, 2022, this amount is raised to $1,235,000,000.

Under the JOBS Act, the SEC is required, every five years, to index to inflation the annual gross revenue amount used to determine EGC status to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics (as set forth in more detail in the final rule). The Commission last adopted inflation adjustments in 2017, previously raising the threshold amount from 1,000,000,000 to $1,070,000,000 (previous changes to the EGC definition were discussed here and here).

Additionally, the SEC’s inflation adjustments also affect certain crowdfunding transactions under Section 4(a)(6) and Section 4A of the Securities Act.​ ​

We would like to thank Rodrigo Surcan in our New York office and To Nhu Huynh in our Houston office for their work on this post.

Division of Corporation Finance Issues Interpretive Guidance on the SEC’s Universal Proxy Rules

On August 31, 2022, the universal proxy rules adopted late last year by the Securities and Exchange Commission (the “SEC") will become effective.  As discussed in our previous client alert, the rules require proxy cards distributed by both public companies and nominating shareholders in contested director elections to include both sides' director nominees, such that shareholders casting their vote can “mix-and-match" nominees from each of the company's and the dissident's slate of director nominees.  

In connection with the upcoming effectiveness of the rules, on August 25, 2022, the staff of the Division of Corporation Finance of the SEC (the “Staff") issued three new Compliance and Disclosure Interpretations (“C&DIs") focused on the mechanics associated with implementing these rules in practice.

The new C&DIs address the following issues related to the universal proxy rules:

1.       When a dissident shareholder provides the company with notice of the names of its director nominees (as required by Rule 14a-19(b)), the notice can only include the names of nominees the dissident actually intends to nominate (see C&DI Proxy Rules and Schedules 14A/14C, Question 139.01);​

2.       In a contested director election where there is more than one dissident slate, the company is obligated to inform each of the dissident shareholders the names of both its own and the other dissident shareholder's director nominees (see C&DI Proxy Rules and Schedules 14A/14C, Question 139.02); and


3.       If a company's advance notice bylaw provision imposes an earlier deadline than the 60-day deadline in Rule 14a-19(b)(1) and requires all of the information required under Rule 14a-19, the company's proxy statement only needs to disclose such earlier deadline; however, if Rule 14a-19(b) requires information that is not required by the advance notice bylaw, then the company's proxy statement must clearly inform potential dissidents that they must also comply with the additional requirements of Rule 14a-19(b) (see C&DI Proxy Rules and Schedules 14A/14C, Question 139.03).

1. Dissident can only include Names of Director Nominees for whom it Intends to Solicit Proxies.

Under Question 139.01, the Staff confirms that a dis...

Update on Changes in SEC Commissioners

On July 18, 2022, the Securities and Exchange Commission (“SEC”) announced that Jaime Lizárraga was sworn in as the SEC’s newest Commissioner following the departure of Allison Herren Lee on July 15. The current SEC Commissioners are as follows, in order of reverse seniority:

Jaime Lizárraga

Commissioner

Commissioner Jaime Lizárraga is returning to the SEC after a lengthy career in public service, serving in roles as Senior Professional Staff Member/Director of Legislative Affairs for the Democratic staff of the House Financial Services Committee, Deputy to the Assistant Secretary of Legislative Affairs at the U.S. Department of the Treasury, and Deputy Director of the SEC’s Office of Legislative and Intergovernmental Affairs. More recently, he served as Senior Advisor to Speaker of the House Nancy Pelosi.

Commissioner Lizárraga’s term expires on June 5, 2027.

Mark Uyeda

Commissioner

Commissioner Mark Uyeda was sworn in as a Commissioner in June 2022 continuing his long career at the SEC. He has served on the staff of the SEC since 2006, including as Senior Advisor to Chairman Jay Clayton, Senior Advisor to Acting Chairman Michael S. Piwowar, Counsel to Commissioner Paul S. Atkins, and various staff positions in the Division of Investment Management. At the time of his appointment, he was serving as securities counsel to the Senate Banking Committee’s minority staff. Prior to joining the SEC, he served as Chief Advisor to the California Corporations Commissioner and was an attorney at K&L Gates and O’Melveny & Myers LLP.

Commissioner Uyeda’s term expires on June 5, 2023.

Gary Gensler

Chair

(twitter: link)

Chair Gary Gensler was sworn in as Chair of the SEC in April 2021. Before joining the SEC, Chair Gensler was most recently Professor of the Practice of Global Economics and Management at the MIT Sloan School of Management, Co-Director of MIT’s Fintech@CSAIL, and Senior Advisor to the MIT Media Lab Digital Currency Initiative. From 2017-2019, he served as chair of the Maryland Financial Consumer Protection Commission. Chair Gensler also served as chair of the U.S. Commodity Futures Trading Commission, leading the Obama Administration’s reform of the $400 trillion swaps market, Senior Advisor to U.S. Senator Paul Sarbanes in writing the Sarbanes-Oxley Act (2002), and was Under Secretary of the Treasury for Domestic Finance and Assistant Secretary of the Treasury from 1997-2001. Prior to his public service, Gensl...

Now Available: SEC Desktop Calendar for 2023

​To continue assisting US companies with planning for SEC reporting and capital markets transactions into 2023, we offer our annual SEC Desktop Calendar. This calendar provides both the filing deadlines for key SEC reports and the dates on which financial statements in prospectuses and proxy statements must be updated before use (a/k/a financial staleness deadlines).

Please note the SEC has proposed new rules on share repurchases and beneficial ownership reporting deadlines that have yet to be finalized. The final rules, if adopted, may affect certain future filing deadlines, and we will provide an updated calendar accordingly.

You can download a PDF of Gibson Dunn's SEC Desktop Calendar for 2023 at the link below.

https://www.gibsondunn.com/wp-content/uploads/2023/07/SEC-Filing-Deadline-Calendar-2023.pdf.

Gibson Dunn has a preeminent capital markets practice.  Our capital markets group is consistently ranked among the top firms for ​complexity and value of the capital markets matters in which we are involved, both domestically and internationally. Through our regular participation in a variety of IPOs and other offerings, Gibson Dunn has access to a wealth of transaction data, market intelligence and practical, actionable experience. We offer clear advice on risks and opportunities. For access to resources, publications and replays of webcasts, please visit Gibson Dunn's Capital Markets Practice Center.

Gibson Dunn is consistently recognized as having one of the leading Securities Regulation and Corporate Governance practices in the United States.  We regularly represent public and private companies of all sizes on a variety of disclosure, accounting and securities regulation issues, as well as on shareholder activism.  We also advise senior management, boards of directors and their audit, compensation, governance and special committees on a wide range of issues relating to board and committee operation, fiduciary duties, conflicts of interest and relationships with shareholders. This group includes a deep bench of lawyers who are dedicated to specific areas of securities regulation, governance and disclosure practices. Our SRCG-dedicated lawyers work seamlessly with our Capital Markets lawyers to deliver the highest quality service and forward-thinking advice on the latest developments. For more information and resources about current developments in securities regulation, corporate governance and executive compensation, please visit Gibson Dunn's

Updated Summary of Select Director Education Opportunities Available

Gibson Dunn's summary of director education opportunities has been updated as of July 2022 and is available at the link below. Boards of Directors of public companies find this a useful resource as they look for high quality education opportunities.

This update includes a number of additional opportunities as well as updates to the programs offered by organizations that have been included in our prior summaries.

https://www.gibsondunn.com/wp-content/uploads/2017/03/Board-Education-Opportunities-July-2022.pdf

Thank you to summer associate Ruoqi Wei for her assistance with this quarter's update.​

SEC Division of Corporation Finance Issues Interpretations Addressed to SPACs’ Business Combinations

​On March 22, 2022, the staff of the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (the “Commission") issued new Compliance and Disclosure Interpretations (“C&DIs") that primarily focus on filing and disclosure issues that arise in the context of merger transactions by special purpose acquisition companies (“SPACs"). The Staff has previously addressed concerns with respect to SPACs, as discussed in our previous article, including statements addressing certain accounting, financial reporting and governance issues related to SPACs and the post-business combination public company.

The new C&DIs address the following issues related to the business combination process:

  • public communication by private target company constitutes a “solicitation" of the acquirer's shareholders subject to the proxy rules
    (see C&DI Proxy Rules and Schedules 14A/14C, Question 101.02); and
  • public communications by a private target that is not filing a proxy solicitation in connection with a proposed business combination are allowed prior to the proxy solicitation by the acquiror, under certain circumstances
    (see C&DI Proxy Rules and Schedules 14A/14C, Question 132.01);
  • public communications by an acquirer that is not filing a proxy solicitation in connection with a proposed business combination are allowed prior to the proxy solicitation by the target company, under certain circumstances
    (see C&DI Proxy Rules and Schedules 14A/14C, Send Comment to EditorSend comment to Editor
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Current thoughts on development and trends in securities regulation, corporate governance and executive compensation published by Gibson Dunn.

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