It’s official: companies conducting Rule 506 offerings in New York need to file a completed Form D through the NASAA Electronic Filing Depository in order to notify the state. That’s according to guidance issued earlier this month by the New York Attorney General – which brings NY in line with other states with respect to these notice filings and also says that no Form 99’s or Form 99 renewals will be accepted after February 1st. Also see this Mintz memo and these revised regulations for broker-dealers.
This is big news for anyone doing private placements in New York. For years, practitioners have relied on the New York State Bar Association’s interpretive opinion that said the provisions of the Martin Act requiring a Form 99 filing were preempted by NSMIA, and that no New York filing was required. The biggest practical takeaway from this new guidance is that if you’ve been doing that, you need to stop. The guidance also specifies that the Form D must be complete – including by listing all related persons and all persons receiving or expected to receive sales compensation.
House Passes “Holding Foreign Companies Accountable Act”
Members of Congress have found something to agree on: regulating China-based companies. The House has passed the “Holding Foreign Companies Accountable Act” – which would amend the Sarbanes-Oxley Act to prohibit listing on US exchanges of foreign companies for which the PCAOB has been unable to inspect audit work papers. The Senate previously approved this legislation – and the President is expected to sign the bill into law. This is separate from the SEC proposal on the same topic that is expected before year-end.
Under the bill, the SEC would be required to identify companies that have registered public accounting firms that are located in foreign jurisdictions and for which the PCAOB is unable to inspect work papers. If the Commission determines that a company has 3 consecutive non-inspection years, it must prohibit the securities from being traded on a national securities exchange or over-the-counter. Companies must also submit documentation to show they aren’t owned or controlled by a governmental entity and disclose information about relationships to the Chinese Communist Party.
This CNBC article notes that Americans might miss out on some pretty significant investment opportunities if this law comes to fruition – and that foreign countries like China might welcome the chance to build up their own exchanges. One of the bill’s Senate sponsors even notes in this press release that 224 U.S.-listed companies are located in countries where there are obstacles to PCAOB inspections, and these companies have a combined market capitalization of more than $1.8 trillion. Maybe that’s why the bill gives a three-year lead-time for compliance and opportunities for correction and relisting. In addition, the co-audit solution that is expected to be included in the SEC’s proposal might help the Commission find a way to balance investor protection with investment opportunities.
Bob Stebbins to Depart From SEC’s “OGC”
Last week, the SEC announced that Bob Stebbins will depart from the SEC in early January – after serving over three and a half years as the Commission’s General Counsel. The SEC’s Office of the General Counsel has a wide range of responsibilities – so Bob played a role in all of the rulemaking, enforcement and other activities that we cover in this blog. The press release says he advised on more than 85 rules, hundreds of interpretive releases and 2750 enforcement actions! He also advised on CARES Act implementation for the Treasury Department. SEC Chair Jay Clayton issued this statement to commend Bob on his service.
– Liz Dunshee