September 17, 2007

The State of the SEC’s Commissioners

On Friday, the Washington Post ran this article about SEC Commissioner Campos’ departure and the Commission in general. Here is an excerpt from the article:

“To give both sides their say, Cox voted this summer to support each of the competing plans. The SEC is tentatively scheduled to revisit the subject at a public meeting in November. Cox’s position as the man in the middle will only intensify after Campos’s departure.

Meanwhile, Nazareth, the other Democrat on the panel, has removed her name from consideration for reappointment and told friends she would like to leave the SEC by the end of the year, adding another layer of uncertainty. Her term expired in June, but she is able to remain in her post for up to 18 months.”

Three Rule Changes for Nasdaq Companies

Over the last several weeks, the SEC has issued three releases approving amendments to the rules of the Nasdaq Stock Market:

1. Web Site Posting of Annual Report – Amended rules to permit companies to distribute annual reports by posting them on corporate web sites, which would require that they issue a press release providing information on the report’s availability – and clarified that the annual report requirement can be satisfied by providing the company’s annual filing with the SEC.

2. Quarterly Change in Number of Outstanding Shares – Amended rules to require that US companies that file with the SEC late must notify Nasdaq of quarterly changes in the number of shares outstanding so that Nasdaq may assess its fees for the listing of additional shares.

3. Discretionary Authority – Modified its discretionary authority provision – which is IM-4300 – to expand and clarify certain of the factors used in its exercise of discretionary authority where an individual employed by a company has a history of regulatory misconduct.

A Relatively Rare Form S-8 Case

A few weeks ago, the Ninth Circuit dealt – in SEC v. Phan – with how Form S-8 can (and cannot) be used. In this Section 5 case, the defendants (a CEO and his company) had used the automatically effective Form S-8 to raise capital for the cash-strapped company. Initially, the defendants registered on Form S-8 to compensate a consultant – but then they changed how they used the shares.

The Judge found that the Form S-8 could not be used by the issuer to register the resale of shares. However, the court also found that the fact that the ultimate transaction differed from the one registered on the Form S-8 didn’t establish – as a matter of law – that the defendants made a material misstatement. We have posted a copy of the opinion in our “Form S-8″ Practice Area.

– Broc Romanek