The SEC expanded the registration exemption for intrastate offerings, and proposed amendments to proxy requirements that would require the use of universal proxy cards.

The SEC voted to adopt changes concerning exemptions to facilitate intrastate and regional securities offerings (new Securities Act Rule 147A, Securities Act Rule 147, Securities Act Rule 504, repeal of  Securities Act Rule 505). These changes include (among others):  

  • a requirement that the issuer must have its "principal place of business" in-state and satisfy at least one "doing business" requirement;
  • a new "reasonable-belief" standard for issuers to use when determining the residence of the purchaser at the time of the sale of securities;
  • a requirement that issuers obtain a written representation from each purchaser concerning residency;
  • for persons who reside within the state or territory of the offering, a limit on resales for a period of six months from the date of the sale by the issuer to the purchaser;
  • "an integration safe harbor that would include any prior offers or sales of securities by the issuer made under another provision, as well as certain subsequent offers or sales of securities by the issuer occurring after the completion of the offering";
  • legend requirements for offerees and purchasers concerning the limits on resales; and
  • amendments to Securities Act Rule 504 of Regulation D to (i) increase the aggregate amount of securities that may be offered and sold in any twelve-month period from $1 million to $5 million and disqualify certain bad actors from participating in Rule 504 offerings, and (ii) repeal Securities Act Rule 505, which permits offerings of up to $5 million annually that must be sold solely to accredited investors or to no more than 35 non-accredited investors.

The SEC also proposed amendments to certain proxy requirements. (See Delta Strategy Group's summary of the open meeting where the amendments were proposed.) The proposed amendments to proxy requirements would:

  • require proxy contestants to provide shareholders with a universal proxy card that included the names of both management and dissident nominees, which would be required in all nonexempt solicitations in contested elections;
  • revise the definition of a "bona fide nominee" in Securities Exchange Act Rule 14a-4(d) to include a person who agreed to be named in any proxy statement relating to a company's next meeting of shareholders at which directors were to be elected;
  • eliminate the "short slate rule" (i.e., Securities Exchange Act Rule 14a-4(d)(4));
  • require proxy directors to notify each other of their respective director candidates;
  • require dissidents to solicit shareholders who represented at least a majority of the voting power of shares entitled to vote on the election of directors;
  • require proxy contestants to refer shareholders to the other party's proxy statement for information about that party's nominees and explain that shareholders could access the other party's proxy statement for free on the SEC website;
  • require a proxy card to be used to include an "against" option for the election of directors; and
  • eliminate the current ability to provide a "withhold" voting option when an "against" vote has a legal effect on the election of directors.

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