On March 25, the SEC adopted final rules updating and expanding Regulation A, which provides an exemption from registration for smaller issuers of securities, to implement Title IV of the Jumpstart Our Business Startups (JOBS) Act. The updated exemption (referred to as Regulation A+) will enable smaller companies to offer and sell up to $50 million of securities in a 12-month period, subject to eligibility, disclosure and reporting requirements. Release. Final Rule.
SEC
SEC Issues Guidance Regarding Standards Applicable to Waivers of Disqualification under Regulation A and Rules 505 and 506 of Regulation D
The disqualification provisions of Rules 262 and 505 under the Securities Act make the exemptions from registration under Regulation A and Rule 505 of Regulation D unavailable for an offering if, among other things, an issuer, any of its predecessors, or any affiliated issuer is subject to certain administrative orders, industry bars, an injunction involving certain securities law violations or specified criminal convictions. Disqualification also occurs if any of the issuer’s directors, officers, general partners, 10 percent beneficial owners of any class of the issuer’s equity securities, or promoters, underwriters, persons compensated for soliciting purchasers, or any of the underwriters’ or paid solicitors’ partners, directors, or officers, is subject to administrative orders, injunctions, associational bars or specified convictions.
On March 13, the SEC clarified that it may waive Regulation A or Regulation D disqualifications upon a showing of good cause that it is not necessary under the circumstances that the exemptions be denied. A waiver could include conditions or limitations. The SEC has delegated authority to grant these waivers to the Director of its Division of Corporation Finance.
SEC Fee Rate Advisory #4
On February 27, the SEC announced that the Section 31 fee rate for fiscal year 2015 will remain at the current rate of $18.40 per million. Release.
SEC Proposes New Rules for Security-Based Swap Information Reporting
On February 11, the SEC issued proposed new rules and rule amendments to Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information. New rules would require platforms to report to a registered security-based swap data repository (“registered SDR”) a security-based swap executed on such platform, would require a registered clearing agency to report to a registered SDR any security-based swap to which it is a counterparty, and certain other changes. Comments must be received within 45 days after the proposal is published in the Federal Register. Proposed Rule.
SEC Proposes Rules for Disclosure of Hedging Policies
On February 9, the SEC issued proposed rules that are intended to enhance disclosure of company hedging policies for directors and employees, as mandated by Dodd-Frank. The proposal would require disclosure about whether directors, officers and other employees are permitted to hedge or offset any decrease in the market value of equity securities held, directly or indirectly, by employees or directors. The proposed rules would require disclosure in proxy and information statements for the election of directors and apply to companies subject to the federal proxy rules, including smaller reporting companies, emerging growth companies, business development companies, and registered closed-end investment companies with shares listed and registered on a national securities exchange. Release. Proposed Rule.
The SEC’s Office of Compliance Inspections and Examinations (OCIE) Publishes Risk Alert On Addressing Cybersecurity Issues for Broker-Dealers and Investment Advisers
On February 3, the SEC’s Office of Compliance Inspections and Examinations (OCIE) published a Risk Alert that contains observations based on examinations of more than 100 broker-dealers and investment advisers. The examinations focused on how these firms:
- Identify cybersecurity risks
- Establish cybersecurity policies, procedures, and oversight processes
- Protect their networks and information
- Identify and address risks associated with remote access to client information, funds transfer requests, and third-party vendors
- Detect unauthorized activity
A second publication, an Investor Bulletin issued by the SEC’s Office of Investor Education and Advocacy (OIEA), provides core tips to help investors safeguard their online investment accounts, including:
- Pick a “strong” password
- Use two-step verification
- Exercise caution when using public networks and wireless connections
SEC Publishes Technical Corrections to Regulation AB II
On February 4, the SEC released certain technical corrections to rules that were published in the Federal Register on September 24, 2014. The changes effect Regulation AB and other rules governing the offering process, disclosure, and reporting for asset-backed securities. The corrections are effective February 6, 2015. Release.
SEC Extends Expiration Dates to Interim Final Rules Providing Exemptions for Certain Security-Based Swaps
On February 5, the SEC adopted amendments to the expiration dates in its interim final rules that provide exemptions under the securities laws for certain security-based swaps. Under the amendments, the expiration dates in the interim final rules will be extended to February 11, 2017. Release.
SEC Suspends S&P From Rating Certain CMBS As Part Of $77 Million Settlement
On January 21, 2015, the SEC suspended Standard & Poor’s Rating Services (S&P) from rating conduit/fusion CMBS for one year as part of a settlement between McGraw-Hill Financial Inc., S&P’s parent company, and the SEC. The settlement stems from S&P’s disclosures in 2011 that it would utilize a certain methodology to rate six CMBS transactions and provide a preliminary rating for two others, when it actually used a different methodology, forcing S&P to pull a rating on a $1.5 billion bond that same year. In addition, S&P agreed to retract an allegedly untrue and misleading article that it published in 2012 and settled another claim that it failed to maintain and enforce internal controls regarding changes to its monitoring standards for certain RMBS. S&P further agreed to parallel settlements with New York Attorney General Eric Schneiderman and Massachusetts Attorney General Maura Healey. The rating agency has also agreed to pay more than $77 million to settle these claims with the federal and state regulators ($58 million to the SEC and another $19 million to New York and Massachusetts). SEC Settlement Order 1. SEC Settlement Order 2. SEC Settlement Order 3.
Fee Rate Advisory #3 for Fiscal Year 2015
On January 15, the SEC announced that starting on Feb. 14, 2015, the fee rates applicable to most securities transactions will be set at $18.40 per million dollars. Each SRO will continue to pay the Commission a rate of $22.10 per million for transactions occurring on charge dates through Feb. 13, 2015, and a rate of $18.40 per million for transactions occurring on charge dates on or after Feb. 14, 2015. Release. Order.