December 20, 2018

SEC Adopts Reg A for All ’34 Act Companies

Yesterday, the SEC adopted the rules allowing ’34 Act reporting companies to rely on the Reg A exemption from registration for their securities offerings. This rulemaking was required by the “Economic Growth, Regulatory Relief and Consumer Protection Act” enacted earlier this year. Here’s the SEC’s press release – and here’s the 34-page adopting release.

Meanwhile, the SEC approved the PCAOB’s budget for next year…

The SEC Closed on Xmas Eve

As noted in this executive order, all federal agencies are closed on Monday for Christmas Eve…

By the way, if the government had partially closed due to a lack of approved funding by Congress and/or the President, the SEC would have been one of those agencies that could have been impacted (but SEC Chair Clayton said a few days ago that the agency has funds available to continue to operate for a little while – like the SEC has done in recent years when the government closed). Last night, the Senate passed a short-term spending bill to avert a shutdown and hopefully the House will pass it today & the President signs it – but when this short-term funding runs out on February 8th, this threat will re-emerge.

E&S Disclosures: SEC Chair Clayton Speaks

In this blog, Cooley’s Cydney Posner summarizes commentary recently provided by SEC Chair Jay Clayton about E&S disclosures. Here’s an excerpt:

Clayton contended that the current materiality disclosure framework (“materiality, comparability, flexibility, efficiency and responsibility (i.e., liability) are the lynchpins”) is the right one, but that what goes into it needs to reassessed. That is, we need to recognize when things have changed, and, Clayton maintained, what is important now is forward-looking information. For example, Clayton observed that, because the market reflects anticipated future performance, stocks tend to move at the time of the earnings release and analyst call—when guidance tends to be issued—not at the time of filing of the 10-Q. (Is that a harbinger of his view on the need for quarterly filings, now that it’s back on the agenda? See this PubCo post.)

Although KPIs are valued because they can presage future performance, they’re not part of the regulatory framework because there is little comparability across companies or industries. As a result, adding KPIs and NGFMs to GAAP is really difficult. What Clayton would like to see with regard to KPIs and NGFMs is a clear tie-back to GAAP and period-to-period consistency for each company. In addition, he indicated, these types of measures should track how management looks at its business, not just how management wants to present its business.

Broc Romanek