A big topic for discussion this week has been whether companies will elect to proceed with IPOs while the SEC Staff is furloughed during the government shutdown, following the updated Rule 430A guidance that Meredith discussed last Friday. While the SEC guidance is potentially helpful to companies considering IPOs in the near term, it is also important to consider the approach that the stock exchanges will take with respect to listing companies that may have not completed (or even started) the Corp Fin review process.
In updated FAQs posted by Nasdaq when the current government shutdown began, the exchange provided the following relevant guidance:
Q: Would Nasdaq list a company that had cleared all SEC comments before the shutdown?
Nasdaq generally would list a company that satisfies the listing requirements if the company cleared all SEC comments before the shutdown, regardless of whether the registration statement was already effective before the shutdown or becomes effective during the shutdown pursuant to the provisions of section 8(a) of the 1933 Act.
Q: Would Nasdaq list a company with outstanding SEC comments?
In limited situations, where the company has substantially completed the comment process before the shutdown and acquiesces to any outstanding SEC comments in a manner that clearly addresses the SEC comment, Nasdaq would consider listing the company upon its registration statement becoming effective. In making a determination, among other factors, Nasdaq will consider the nature and materiality of the outstanding comments, the history of the company and any prior review of its filings by the SEC, and whether the company’s counsel and auditor are willing to represent that they believe all disclosure and accounting comments, respectively, have been fully addressed. In addition, Nasdaq would consider any supplemental disclosure related to the shutdown, such as additional risk factors. Any company that believes it is in this situation and considering whether to proceed should contact Nasdaq’s Listing Qualifications Staff at + 1 301 978 8008 or DL -lnitialListingTeam@nasdag.com.
Q: Would Nasdaq list a company that had not yet received SEC comments or that first filed a registration statement during the shutdown?
Notwithstanding the ability for a registration statement to become effective during the shutdown, the U.S. capital markets depend upon the accuracy and completeness of registration statements and SEC review has been a longstanding part of this process. At this time, Nasdaq would not generally list a company in connection with an IPO unless the company has substantially completed the comment process with the SEC on its 1933 Act registration statement prior to the shutdown. However, Nasdaq recognizes the uncertain duration of the shutdown and its effects on companies. We are open to discussions with the government and legal, audit and banking advisors on controls, standards and processes that could adequately protect investors while allowing capital raising activity to continue. Nasdaq may revisit its position in light of any such discussions.
Q: Can a company currently trading in the over-the-counter market list on Nasdaq during the shutdown?
A company currently trading in the over-the-counter market that satisfies Nasdaq’s listing requirements can file a 1934 Act registration statement to list on Nasdaq, and Nasdaq will certify that registration statement. However, if a company trading on the over-the-counter market must file a 1933 Act registration statement to raise capital to satisfy Nasdaq’s listing requirements, Nasdaq will treat it similarly to the way we treat an IPO (as discussed above) – we will not approve the application unless the company has received and addressed all SEC comments on that registration statement.
As a self-avowed Swiftie, you can imagine how excited I was when Taylor Swift’s new album The Life of a Showgirl happened to drop on my birthday a couple weeks ago. I did receive my very own special edition vinyl that day, but I never actually got a chance to sit down and listen to the album because October is a very busy travel month for me! I have been on the road this week for the Society for Corporate Governance Western Regional Conference, and of course next week I will be arriving in Las Vegas to be a part of the 2025 Proxy Disclosure Conference and the 22nd Annual Executive Compensation Conference. Like Taylor, I will be drawing on my inner Showboy for inspiration as I “perform” with our great ensemble of speakers and our action-packed (and always entertaining) agenda.
To be a part of our October Conferences (either in-person or online), you can register online or reach out to our team by emailing info@ccrcorp.com or calling 1.800.737.1271. I look forward to seeing you there!
It is not every day that the SEC approves a Form 1, which is the form used to apply to the SEC to operate as a national securities exchange. Just before the government shutdown, TXSE Group Inc. announced that the SEC approved the Texas Stock Exchange’s Form 1 registration to operate as a national securities exchange. The announcement notes:
TXSE is the first fully integrated national securities exchange to receive SEC approval in decades. TXSE has already completed its proprietary order matching engine and exchange platform, incorporating the latest hardware and software to deliver low-latency performance, flexibility, and scalability in an evolving trading and regulatory environment.
Importantly, TXSE will provide comprehensive listing solutions for corporate issuers and ETP sponsors that are aligned with their priorities and fully transparent. TXSE worked closely with the SEC staff throughout the approval and public comment process.
“Today’s approval marks a pivotal moment in our effort to build a world-class exchange rooted in alignment, transparency, and partnership with issuers and investors,” said James H Lee, founder and CEO of TXSE and its parent company, TXSE Group Inc. “Real competition for corporate listings in the United States has finally arrived.”
TXSE will launch trading as well as ETP and corporate listings in 2026. Over the long run, TXSE’s mission is to reverse the decades-long decline in the number of U.S. public companies by reducing the burden of going and staying public while maintaining some of the highest quantitative standards in the industry.
TXSE has already led the push for key legislative and legal reforms to strengthen Texas’ pro-business environment and establish the state as the premier jurisdiction for corporate headquarters, listings, and exchange operators. TXSE will continue working alongside Texas leadership to advocate on behalf of issuers and investors to reform policy at the state, federal, and regulatory levels.
Texas Governor Greg Abbott offered his congratulations to the TXSE on the SEC’s approval, stating:
“Texas is swiftly becoming America’s financial hub,” said Governor Abbott. “I congratulate the Texas Stock Exchange for the launch of Texas’ own trading platform that will spur economic development and expand the financial might of our great state around the world. Working together, we will make Texas stronger and more prosperous than ever before.”
The TXSE has developed a proprietary order-matching engine and exchange platform that employs hardware and software to deliver low-latency performance designed to meet industry standards. This infrastructure is designed to operate within today’s complex trading landscape and stringent regulatory environment. The platform supports listing solutions for both corporate issuers and ETP sponsors, and seeks to address evolving market demands for transparency, efficiency, and reliability.
The SEC acknowledged in its approval that many attributes of the TXSE’s listing rules, including listing standards and governance guidelines, are substantially similar to the pre-existing national security exchange frameworks. According to the SEC, the TXSE’s corporate governance standards are “designed to promote independent and objective review and oversight of the accounting and auditing practices of listed issuers and to enhance audit committee independence, authority, and responsibility.”
It will be interesting to observe the launch of a startup national securities exchange – we do not get an opportunity to see that happen too often!
On October 7, S&P Global announced the launch of the new S&P Digital Markets 50 Index. The index is designed to track a wide range of companies and digital assets connected to the crypto ecosystem, combining cryptocurrencies and publicly traded crypto-linked equities into one index. S&P Global notes that Dinari, a leading provider of tokenized U.S. public securities, collaborated on the index design and will create a token tracking the benchmark.
The new index will track 35 companies that are involved in digital asset operations, infrastructure providers, financial services, blockchain applications and supporting technologies, as well as 15 cryptocurrencies. The announcement notes:
“By making the S&P Digital Markets 50 investible via dShares, we are not just tokenizing an index, we are demonstrating how blockchain infrastructure can modernize trusted benchmarks,” said Anna Wroblewska, Chief Business Officer at Dinari. “For the first time, investors can access both U.S. equities and digital assets in a single, transparent product. This launch shows how onchain technology can expand the reach of established financial standards, making them more efficient, accessible, and globally relevant.”
This new index will join the other digital asset benchmarks offered by S&P Global, the S&P Cryptocurrency Indices and S&P Digital Market Indices.
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 you 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.
