Yesterday, the Staff issued four FAQs addressing issues arising under the SEC’s exemptive order extending filing deadlines for companies impacted by the Covid-19 crisis. The FAQs offer guidance on the disclosures required by companies seeking to avail themselves of the relief provided by the order, as well as the implications of reliance on the order for S-3 issuers. Here’s one that deals with a company’s eligibility to file a new Form S-3 during the extension period:
3. Question: Is a registrant relying on the COVID-19 Order to delay a required filing eligible to file a new Form S-3 registration statement between the original due date of a filing and the extended due date, and will the staff accelerate the effectiveness of registration statements that do not contain all required information?
Answer: Between the original due date of a required filing and the due date as extended by the COVID-19 Order, a registrant may file a new Form S-3 registration statement even if the registrant has not filed the required periodic report prior to the filing of the registration statement. The staff will consider the registrant to be current and timely in its Exchange Act reporting if the Form 8-K disclosing reliance on the COVID-19 Order is properly furnished. The registrant will no longer be considered current and timely, and will lose eligibility to file new registration statements on Form S-3, if it fails to file the required report by the due date as extended by the COVID-19 Order. Registrants with compelling and well-documented facts may contact the staff to discuss their specific capital raising needs. However, registrants relying on the COVID-19 Order should note that the staff will be unlikely to accelerate the effective date of a Form S-3 until such time as any information required to be included in the Form S-3 is filed. [May 4, 2020]
If you’re wondering why the Staff issued this guidance in the form of “FAQs” instead of the more customary CDIs, the FAQs say that it has to do with the “unique circumstances” of the Covid-19 crisis that prompted the issuance of the exemptive order in the first place.
Covid-19 Litigation: It’s Not What You’ve Said, It’s What You’re Going to Say
Over on the D&O Discourse blog, Doug Greene shares some thoughts about whether we’ll see a wave of Covid-19 crisis-based disclosure litigation. He thinks that what you said before the economy hit the wall probably won’t get you into trouble, but what you say going forward just might. This excerpt explains his reasoning:
Why don’t I think there will be a wave based on the economic downturn over the past two months? Everyone is in the same boat, so it’s difficult for plaintiffs to identify and prove that any particular company’s disclosures or governance problems caused economic harm. And plaintiffs need to choose extra-wisely, because many judges would be offended by accusations of fraud and poor oversight over problems caused by a pandemic – it would feel opportunistic.
But going forward, disclosure and governance will be judged far differently – almost in the polar-opposite way. Moving forward, judges will have no patience for companies whose disclosures are not careful or boards whose oversight fails to meet the moment. The legal standards governing disclosure and governance litigation are judged from inferences drawn in context by judges who are themselves living the context. They will be critical of disclosures that feel exaggerated and governance that feels lax. Company-specific stock drops and governance failures will be easy for the plaintiffs’ bar to spot in the coming months and years.
The blog goes on to provide some insights about how companies can best position themselves to defend both securities class action lawsuits & shareholder derivative actions based on disclosures and alleged governance lapses associated with the Covid-19 crisis.
Conflict Minerals: Form SD Due June 1 – No Covid-19 Relief
This Skadden memo provides a reminder that the SEC’s exemptive order providing extended filing deadlines relief doesn’t apply to your Form SD filing:
As a reminder, conflict minerals disclosures on Forms SD are required to be filed with the Securities and Exchange Commission (SEC) no later than June 1, 2020. This remains true despite the impact of COVID-19, given that Forms SD are not covered by the SEC’s order allowing public companies to delay certain reports in light of the pandemic.
– John Jenkins