August 23, 2013

Stop Order! SEC Stops a 1933 Act Registration Statement Prior to Effectiveness

An SEC stop order under 1933 Act Section 8(d) is a rare bird for 1933 Act geeks such as myself. Every law firm associate working on public offerings knows the seemingly pointless exercise of confirming that there are no stop orders on a registration statement being used for an offering, and it seems so pointless because so few stop orders are ever issued. Yesterday, the SEC issued a stop order (pre-effectively) with respect to a registration statement of a company called Counseling International, Inc., based alleged misstatements and omissions regarding the former CEO of the company. This stop order is notable in that it stopped the registration statement prior to it becoming effective, whereas in some cases (as demonstrated in this list of recent stop orders compiled by the SEC) a stop order is sought to suspend the effectiveness of an already effective registration statement. The Counseling International stop order also includes as a remedy that, for a period of five years, the Respondent will not engage in or participate in any unregistered offering of securities conducted in reliance on Rule 506 of Regulation D, including by occupying any position with, ownership of, or relationship to the issuer specified in the recently adopted bad actor disqualification rules.

You might ask yourself, why didn’t the company just withdraw the registration statement rather than face the stop order remedy? The Commission has discretion in determining whether it would grant or deny a request to withdraw a registration statement, so once an investigation is underway it can become very difficult for an issuer with a registration statement pending to avoid the stop order proceeding.

Pay Ratio Rule: Details Emerge

A story in yesterday’s Wall Street Journal revealed more details about the upcoming SEC rulemaking to adopt the CEO pay ratio rule mandated by the Dodd-Frank Act. As Broc noted a few weeks back, the pay ratio rule is expected to be considered by the Commission in the very near future – as early as September. The WSJ article indicates that the rules requirements will be less onerous than what is contemplated by Dodd-Frank, allowing issuers to take the statistical sampling approach to determining median employee pay that some pre-rulemaking commenters had thoughtfully suggested. This is good news in terms of mitigating the potential cost and burden of compliance with the requirement, particularly for companies with large, multinational workforces.

Hear more about the pay ratio rule at our upcoming conferences, in DC and via webcast on September 23 and 24. Check out the agendas and register now!

Just Mailed: The Latest Issue of The Corporate Counsel

We just wrapped up the latest issue of The Corporate Counsel, filled with insight and analysis on the latest developments. This issue addresses:

– The Brave New World – “Private” Offerings Using General Solicitation
– The Compensation Committee–New Exchange Listing Requirements Effective July 1, 2013
– The Staff’s New Rule 144 Pledging CDI–A Follow-Up on Recourse
– Confirmation that Rule 144 One-Year Current Public Information Requirement for Gifts of Control Stock Runs from Donor’s Acquisition
– Alternatives To Registration Chart By Stanley Keller, Jean Harris and Richard Leisner
– D.C. District Court Vacates Resource Extraction Issuer Disclosure Rules
– D.C. Court Weighs in on “Executive Officer” Definition

Get your copy today and take advantage of our “Rest of ’13” No-Risk Trial to The Corporate Counsel

– Dave Lynn