January 24, 2014

Corp Fin Issues Rule 506 Transitional Guidance

Yesterday, Corp Fin issued two new CDIs related to Rule 506 offerings commenced prior to September 23, 2013, the effective date of the new Rule 506(c) exemption. This blog by Blank Rome’s Melissa Murawsky summarizes them…

By the way, the Federal Register finally published the SEC’s Reg A+ proposing release yesterday…

Big Four Auditors Lose Initial Work Papers Decision In Chinese Affiliates Case

Two days ago, an administrative law judge issued this 112-page initial decision, sanctioning the Chinese affiliates of the Big Four auditors for willfully refusing to produce their work papers to the SEC related to China-based companies. For this violation of Section 106 of Sarbanes-Oxley, the sanctions included censure and a six-month total practice ban. If you read the initial decision, you will see that the ALJ was quite harsh in its commentary of the Big 4 affiliates (eg. “Such behavior does not demonstrate good faith, indeed, quite the opposite – it demonstrates gall.”).

The Chinese affiliates announced that they plan to appeal the decision to the SEC – which will conduct a de novo review – and then federal court if they lose again. The sanctions could have the effect of keeping any Chinese company from the US markets. The ALJ’s sanctions are not effective pending determination of the anticipated appeal. The timing of all this is explained in this Skadden memo

Here’s an interesting Economist article that challenges current thinking about accountants, including a chart about the likelihood of auditors being replaced by computers!

Nasdaq Gets Regulatory Approval for “Nasdaq Private Market”

Here’s news from this blog by MoFo’s Nilene Evans:

In March 2013, Nasdaq and SharesPost announced Nasdaq Private Market (NPM), a joint venture intended to create a preeminent marketplace for private growth companies. The road to full regulatory approval has been long but in January 2014, FINRA approved the registration as a broker-dealer of NPM Securities, LLC, a Nasdaq OMX Group brokerage unit, a necessary first step to the launch of NPM itself.

In its broker-dealer FINRA profile, NPM Securities said that it is in “the process of registering with the SEC as an alternative trading system assisting in the matching of buyers and sellers in primary and secondary offerings of the securities of privately held companies.” The profile also revealed that NPM is owned 75% by Nasdaq OMX and the balance by SharesPost.

– Broc Romanek