July 21, 2010

Dodd-Frank: Clarifying the “Accredited Investor” Definition

Even before Dodd-Frank is signed into law, a number of issues have arisen about how to interpret the statute. One area where members have sent in a variety of questions is Section 413 and the new definition of “accredited investor.” Alan Parness of Cadwalader reports on the first Staff oral guidance regarding this new test:

For those of you who may still be puzzled by the change to the net worth standard for accredited investors effected by Section 413 of the Dodd-Frank Act, Gerry Laporte, Chief of the Office of Small Business Policy of the SEC’s Division of Corporation Finance, has confirmed that it is the Staff’s view that the exclusion of a primary residence from an investor’s net worth for purposes of the accredited investor test in Rule 501(a)(5) of SEC Reg. D (as well as for purposes of the identical test in Rule 215(e) under the 1933 Act) will be effective upon enactment of the law.

There is no transition period, nor is grandfathering permitted by Section 413, and, accordingly, issuers relying on the definition of “accredited investor” in Regulation D or in Rule 215 in order to effect sales to accredited investors after enactment, should revise their disclosure and subscription documents in anticipation that the Act will be signed into law within the next several days.

FASB Releases Proposal on Disclosure of Certain Loss Contingencies

Yesterday, the FASB released an Exposure Draft regarding its proposal related to disclosure of loss contingencies (ie. former FAS 5; now known as “ASC Topic 450”). As noted in this blog, this project has been on a fast-track – but the Exposure Draft is out a few months later than expected. There is a 30-day comment period – pretty short for such a controversial topic, but the FASB already has heard a lot of commentary about this hot potato.

For public companies, the standards would be effective for fiscal years ending after December 15, 2010 and interim and annual periods for subsequent fiscal years. Also, nonpublic companies would not be required to provide tabular reconciliations of accrued loss contingencies. Note that nonpublic companies are covered by the proposed loss contingencies standards, but the standards would not be effective for them until the first annual period beginning after December 15, 2010 and interim periods of fiscal years after the first annual period (would not be required to provide tabular reconciliations of accrued loss contingencies).

Overcoming the Challenges: Integration Issues & Merger of Equal Issues

Tune in tomorrow for the webcast – “Overcoming the Challenges: Integration Issues & Merger of Equal Issues” – to hear Wally Bardenwerper of Towers Watson, Chris Cain of Foley & Lardner, Stephen Glover of Gibson Dunn and Jessica Kosmowski of Deloitte Consulting discuss how to overcome the challenges of deal integration as well as factors you should consider when negotiating a merger of equals to ease the transition afterwards. Please print off these course materials in advance.

Cool Old-Timey Video: Having grown up in Chicago, I dig this video from 1948 showing the city at its best…

– Broc Romanek