Liz and I recently interviewed Angela Liu of Dechert and Jessica Lewis of WilmerHale for the latest episode of “Mentorship Matters with Dave & Liz.” Check out this 25-minute podcast to hear:
1. Why lawyers should think of mentorship relationships as both enjoyable and necessary strategic business development tools, rather than a “luxury.”
2. The value of casting a broad net for mentors, including with paralegals and other business professionals.
3. How to integrate mentorship into daily routines.
4. Ways mentees can actively contribute to their mentors’ success.
5. The types of questions mentees can ask to demonstrate genuine curiosity and interest in helping.
6. How relationships within your organization can help you build external networks.
Thank you to everyone who has been listening to the podcast! If you have a topic that your think we should cover or guest who you think would be great for the podcast, feel free to contact Liz or me by LinkedIn or email.
As the federal government shutdown drags on into its third week – and with the new flexibility afforded by the SEC Staff’s revised interpretation of Rule 430A as covered by Meredith on Friday – issuers and their advisors are carefully considering whether to remove the delaying amendment from their registration statements and go effective without any Staff interaction. During the 2018-2019 government shutdown, we noted that numerous companies had removed their delaying amendments, however many added the delaying amendment back on the registration statement when the SEC reopened.
When weighing the pros and cons of removing a delaying amendment, it is important to determine when the registration will become effective for the purposes of, e.g., launching an IPO. Securities Act Section 8(a) merely states “[e]xcept as hereinafter provided, the effective date of a registration statement shall be the twentieth day after the filing thereof,” but as we all know, counting days as a securities lawyer always involves some complication. That is why it is good to know that SEC Rule 459 exists, which explains how the 20 days in Section 8(a) is to be counted:
Saturdays, Sundays and holidays shall be counted in computing the effective date of registration statements under section 8(a) of the act. In the case of statements which become effective on the twentieth day after filing, the twentieth day shall be deemed to begin at the expiration of nineteen periods of 24 hours each from 5:30 p.m. eastern standard time or eastern daylight-saving time, whichever is in effect at the principal office of the Commission on the date of filing.
3. When does my registration statement go effective under Section 8(a)?
At exactly 5:30 p.m. on the 20th day (i.e., 19 days after filing), with each new day starting at 5:30 p.m. See Rule 459. To take an example, if you were to file before 5:30 pm on October 10, your registration statement would be effective at 5:30 pm on October 29.
Rule 459 is definitely one of those SEC rules that goes unnoticed for long periods of time until it becomes very important to one’s practice once the unthinkable actually happens – in this case, the Staff in the Division of Corporation Finance is not around to declare IPO and other registration statements effective on a timely basis.
Last week, Chairman Paul Atkins delivered the keynote address at the 25th Annual A.A. Sommer, Jr. Lecture on Corporate, Securities, and Financial Law at Fordham Law School, a lecture that he had previously delivered in 2007 when he was an SEC Commissioner. In last week’s speech, Chairman Atkins focused on the importance of the Wells process in the SEC’s Enforcement program. Chairman Atkins noted:
In my 35 years in and around the SEC, I can definitively say that Wells submissions can and do change the trajectory of enforcement actions—not in every case, of course, but in enough cases to matter. The SEC staff do not always get things right the first time, and the Wells process is a valuable procedural device that helps to guard against plain mistakes, extreme legal theories, misinformation, biases, and conflicts of interest. Tonight, I should like to return to this theme and extend it in consideration of how we can improve on and refine our enforcement processes while preserving their original purpose.
In his speech, Chairman Atkins specifies several expectations for the Staff of the Division of Enforcement in the Wells process, noting: “Ours should not be a ‘gotcha’ game.
The latest issue of The Corporate Counsel newsletter has been sent to the printer. It is also available now online to members of TheCorporateCounsel.net who subscribe to the electronic format. The issue includes the following articles:
– Radical Transparency for Insider Trading Policies: What Have We Learned?
– Capital Markets Alternatives: Overnight Deals
Please email info@ccrcorp.com to or call 1.800.737.1271 to subscribe to this essential resource.
Yesterday, Corp Fin updated its government shutdown guidance, as evidenced in this redline* (thanks, Corp Fin!), with a welcome change that addresses one of the major difficulties associated with relying on Section 8(a) so your registration statement can go effective in times like these when the SEC isn’t able to review registration statements or declare them effective. If this isn’t your first rodeo, you probably remember/know that a registration statement can go effective by operation of law 20 calendar days after filing under Section 8(a) of the Securities Act. Under normal circumstances, an issuer includes “delaying amendment” language from Rule 473 on the cover page of its registration statement to postpone effectiveness until the SEC has reviewed the filing and “accelerated” its effectiveness.
The prior version of the Staff’s shutdown guidance indicated that you couldn’t rely on Rule 430A to omit your offering price when filing a registration statement that would become effective after 20 days pursuant to Section 8(a) due to language in 430A that refers to a registration statement that is declared effective. (This would mean that the price is fixed for those 20 calendar days — yikes!) The new guidance now says:
Because the staff is not available to review or accelerate the effectiveness of registration statements during the shutdown, we will not recommend enforcement action to the Commission if a company omits the information specified in Rule 430A from the form of prospectus filed as part of a registration statement during the shutdown and such registration statement goes effective, either during or after the shutdown, by operation of law pursuant to Section 8(a) of the Securities Act.
You can launch your IPO with a price range. The updated guidance says a company can rely on Rule 430A during the shutdown, which means a company can launch its IPO with a price range on the cover and include the offering price in the final prospectus after the registration statement becomes effective (as it normally would in an IPO where the SEC declares the registration statement effective).
The Davis Polk alert also goes one step further to say:
You can price outside the range as in a regular IPO.In addition, the availability of Rule 430A means companies have the ability to price above or below the range and benefit from the 20% safe harbor under the rule, just like they would in a regular way IPO that is declared effective by the SEC.
The staff’s existing guidance for IPOs is that a “price range in excess of $2, for offerings up to $10 per share, or in excess of 20% of the high end of the range, for offerings over $10 per share, will not be considered bona fide.” (C&DI 134.04)
We believe that given the price range will be included in the publicly filed registration statement 20 days before effectiveness, it would not be unreasonable for a company to include a price range in excess of the limits included in existing staff guidance, so long as the range is reasonable.
This is clearly a great change for companies looking to move forward with offerings right now because it makes using Section 8(a) a much more workable option. Cool beans! Although there are still a number of complicating factors that need to be considered — including where you stand with Staff comments. Take a look at these 10 Latham FAQs with more information on removing the delaying amendment. Even if you’re not removing the delaying amendment, as this Freshfields blog notes, you may want to flip public during the shutdown to start the 15-day clock so you could quickly move to effectiveness once the SEC is open for business.
* Note that there were a few now moot FAQs that were deleted, but not shown in the redline, since they were relevant before a shutdown, but not during.
In the keynote address yesterday at the John L. Weinberg Center for Corporate Governance’s 25th Anniversary Gala, SEC Chairman Paul Atkins asked a provocative question: “Are precatory proposals a ‘proper subject’ for action by shareholders under Delaware law?” Chairman Atkins cited Kyle Pinder of Morris Nichols and his upcoming paper — and also former Vice Chancellor Leo Strine — for the proposition that there’s no firm basis under Delaware law for a shareholder right to submit non-binding proposals.
After a brief discussion of the history of the SEC’s position on precatory proposals, he dropped this:
Pulling all of this together, if there is no fundamental right under Delaware law for a company’s shareholders to vote on precatory proposals—and the company has not created that right through its governing documents—then one could make an argument that a precatory shareholder proposal submitted to a Delaware company is excludable under paragraph (i)(1) of Rule 14a-8.
If a company makes this argument and seeks the SEC staff’s views, and the company obtains an opinion of counsel that the proposal is not a “proper subject” for shareholder action under Delaware law, this argument should prevail, at least for that company. I have high confidence that the SEC staff will honor this position.
He also seemed to suggest that the SEC may seek to certify this question to the Delaware Supreme Court for declaratory judgment — highlighting that the Commission has once used this option when Corp Fin was confronted with two conflicting legal opinions on Delaware law:
In 2007, Delaware amended its constitution to give the SEC the ability to certify questions to its highest court for declaratory judgements. So far, the Commission has taken advantage of this tremendous opportunity only once—in June of 2008, shortly before I left the SEC as a Commissioner in my prior tour of duty. Interestingly, that certification also involved whether a shareholder proposal was a “proper subject” for shareholder action.
The court issued its decision just 20 days after the Commission’s certification. As I stated at the time, I salute the court for its speed in deciding the issue. If the need for the Commission to certify a question to the court arises in the future, I hope that both the agency and the court will continue to benefit from this unique partnership to expeditiously resolve matters of Delaware law that arise in the context of the federal securities laws.
There’s a lot to unpack here — on this topic and others. This Gibson Dunn blog has more.
You landed that job you wanted at that unicorn, it went public, the stock traded up and now the options you once worried might end up worthless are worth more than all your other assets combined. You’re living the dream! Right?!? Whether that scenario is your dream or not, I’m guessing it’s not that surprising to learn that all employees — including management — just don’t like working at a company as much after it goes public.
Employees become significantly less satisfied with their employers after an initial public offering (IPO).
Using 3.7 million employee reviews from Glassdoor between 2008 and 2022, we document that employee satisfaction drops measurably after companies go public. While employees at private firms typically rate their companies favorably, the ratings decline after an IPO and remain lower for years . . .
The drop occurs specifically after companies file their S-1 registration statements and enter the public markets, suggesting that the IPO process itself, rather than underlying company characteristics, drives the change.
Multiple aspects of the workplace experience are impacted, including, sadly, perceptions of senior management and (surprisingly?) work-life balance. But not all employees experience satisfaction declines equally. The research shows three trends:
First, the effect is concentrated among employees who were with the company before it went public.
Second, employees in management and compliance roles experience particularly large [roughly 2.5 times larger] drops in satisfaction.
Third, smaller companies and those audited by Big Four accounting firms see larger satisfaction declines. Smaller firms face proportionally higher regulatory costs relative to their resources, while Big Four auditors typically impose more rigorous compliance standards, amplifying the burden on employees.
And then there are these company-specific factors:
We find that [Emerging Growth Companies] experience only about half the satisfaction decline of traditional IPO firms, with the difference concentrated precisely in areas where regulatory burden was reduced. This evidence strongly supports regulatory costs as a driver of post-IPO satisfaction declines.
[N]ot all companies suffer equally from the IPO transition. Firms in industries with strong Environmental, Social, and Governance (ESG) reputations, particularly those with robust social practices, experience significantly smaller satisfaction declines. Companies in industries with low social reputation risk see drops only about half as large as the typical effect.
I know money can’t buy happiness, but I did actually do a text search in the paper for “options” and “equity” to see if it addressed whether the satisfaction trends are impacted by whether and how much the stock traded up. It doesn’t.
But it does at one point note the opposite — that is, “increases in employee satisfaction predict improvements in future operational performance and future stock returns.” So, in all seriousness, this impact on satisfaction sure seems like something companies should be considering and trying to manage. I’m not sure adding to that already 20+ page IPO checklist is the solution to the IPO-too-much-compliance-work-death-of-fun effect, but, IDK, maybe that intimidating checklist should also include human capital management and corporate culture.
Just in time for third-quarter 10-Qs, KPMG recently released the results of its analysis of disclosures about tariffs and trade policy in Form 10-Q filings from April through August 2025. “Out of approximately 880 Form 10-Q reports from Fortune 500 SEC registrants analyzed, nearly 90% mentioned tariff- and trade-related concerns” — not surprisingly, this was nearly double the number from the same period in 2024. The analysis also showed that disclosures are now more “detailed, quantified, and operationally focused.” Almost all related disclosures were in the financial statements, MD&A, risk factors, and disclosures about market risk.
– Financial Statements: Most disclosures were outside the financial statements, but in Q2, more companies began discussing the impact of tariff uncertainty and its impact on estimates — for example, whether tariff uncertainty has triggered a goodwill impairment, estimation uncertainty in allowance for loan losses for banks or incorporating tariff estimates into baseline economic forecasting.
– MD&A: 75% of 10-Qs reviewed addressed tariffs in MD&A. In Q1, disclosures were largely qualitative and addressed management’s strategies to address uncertainty. In Q2, disclosures became more specific and detailed, with many registrants reporting “actual, material effects—often quantified” and specific mitigation strategies.
– Quantitative and Qualitative Disclosures About Market Risk: Few tariff-related disclosures are included here currently, but KPMG expects this to change “to include anticipated macroeconomic effects and management strategies to mitigate risk exposures.”
– Risk Factors: Disclosures focus on uncertainty, regulatory compliance, supply chain risks and adaptation strategies, with risk factors in Q1 mostly anticipating effects and Q2 disclosures shifting away from hypothetical to start to address effects that are already occurring.
KPMG also addresses major themes in the disclosures. For example:
– Uncertainty: Companies acknowledge that the impact of tariff policies on the economy and their operations specifically is uncertain, discuss current and potential risk mitigation strategies and are beginning to quantify, model and embed tariff and trade policy risk into their financial processes — including economic forecasting and asset impairment testing — and providing detail about the actual and potential impact on financial results.
– Increased Costs: Disclosures about increased raw material costs and impact on margins have become more explicit in Q2 with many companies providing “specific dollar amounts or quantified margin effects.”
– Supply Chain Disruptions: Similarly, Q2 disclosures addressed actual supply chain disruptions and specific strategies used to address them.
– Adaptation: Disclosures discuss ways companies are adapting their business strategies to address tariff risks and also getting more specific. These adaptations include supply chain reconfigurations and supplier diversification efforts, the use of new technologies, price increases and changes to sourcing and business models to reduce exposure.
– Regulations: Disclosures highlight increasing compliance costs and regulatory challenges.
Also, take a look at this Deloitte article that addresses accounting implications of tariffs — for example, asset impairments, revenue recognition and income tax implications — that you should consider when preparing your third quarter 10-Q.
At the end of last month, the Commission announced that it issued a concept release soliciting input on the disclosure requirements for offerings of residential mortgage-backed securities (RMBS) and certain rules related to asset-backed securities (ABS) more generally. If this sounds familiar, as this Mayer Brown alert highlights, the SEC solicited feedback on issues impacting registered RMBS in October 2019, but that effort stalled.
Apparently, there have been no public RMBS offerings since 2013. Notably, this is just before the SEC’s adoption of Reg. AB II in 2014. So the SEC is considering how existing rules have contributed to the absence of these offerings — on the basis that these public offerings are an “important part of a healthy mortgage market.” The release requests input on:
– How to revise Reg. AB requirements for asset-level disclosures about the underlying residential mortgages to enable public offerings of RMBS
– Potential approaches to address privacy concerns stemming from public disclosure of information about mortgage obligors, including credit scores and income
– Whether the definition of “asset-backed security” in Reg. AB should be harmonized with the definition in Section 3(a)(79) of the Exchange Act
The Mayer Brown alert describes this definitional discrepancy further:
The SEC’s adoption of Regulation AB in 2004 included a definition of “asset-backed security” that was intended to capture the securities and offerings to which the registration, disclosure and reporting requirements under the Securities Act of 1933 and the Exchange Act would apply . . . As part of the litany of laws, rules, and regulations adopted as a result of the global financial crisis of 2008, the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Exchange Act to include a separate, broader definition of “asset-backed security” . . .
The SEC recognizes that securitization transactions have become more diverse and complex, both structurally and in the types of assets that are securitized. As a result, transactions and structures that do not meet the requirements of an “asset-backed security” under Regulation AB are not able to take advantage of the SEC’s disclosure regime or utilize Form SF-1 (absent staff no-action letters or guidance permitting exceptions) or Form SF-3 to issue publicly registered securities.
The SEC also believes the competing definitions in Regulation AB and Exchange Act has caused market confusion with respect to the differences, overlap, and purpose of each definition. As a result, the SEC is seeking comment about whether it should amend the definition in Regulation AB to better align with the Exchange Act definition, and broaden the types of assets and transaction structures that can facilitate publicly registered transactions and use the SEC’s disclosure and reporting regime.
We’ve recently posted another episode of our “Understanding Activism with John & J.T.” podcast. This time, J.T. Ho and John were joined by LDG Advisory’s Lauren Gojkovich. They discussed a range of topics relating to value investors’ approach to activism. Topics covered during this 30-minute podcast include:
– Key motivators for value investors.
– The most and least productive ways to engage with value investors.
– The best way to engage with a value investor who is on the board.
– Factors driving the recent trend toward quicker settlements with activists.
– Increasing quality of value investor candidates for board positions.
– Key takeaways for companies from recent value investor activism successes.
– Thoughts on how value investing may evolve over the next few years.
This podcast series is intended to share perspectives on key issues and developments in shareholder activism from representatives of both public companies and activists. John and J.T. continue to record new podcasts, and they’re full of practical and engaging insights from true experts – so stay tuned!
