United States: SEC Rulemaking Developments 2016

The U.S. Securities and Exchange Commission (SEC) had a busy rulemaking year in 2016. As part of its Disclosure Effectiveness Initiative launched at the end of 2013, the SEC continued to propose and adopt rules that are intended to improve and modernize the disclosure requirements for reporting companies. The SEC also continued to implement sections of the Jumpstart Our Business Startups Act (JOBS Act) and the Fixing America's Surface Transportation Act (FAST Act) to provide more flexibility in capital raising and reduce the regulatory burden on private companies.

Despite the SEC's intensive rulemaking in 2016, with Mary Jo White stepping down as SEC Chair in January 2017 and President Donald Trump's expressed commitment to scale back on financial regulations, 2017 may be the beginning of a new era from a U.S. securities law perspective. President Trump has already taken preliminary steps to reduce some of the regulatory burdens imposed on reporting companies in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), landmark legislation crafted by the Obama administration and passed by Congress in 2010 in response to the economic meltdown.On February 14, 2017, President Trump signed into law Congress's repeal of the extractive industry transparency rules adopted by the SEC in June 2016 that required oil and gas companies to disclose payments from the U.S. and foreign governments. President Trump also signed an executive order directing the Department of the Treasury to restructure major provisions of the Dodd-Frank Act. While some believe that U.S. securities laws are set for potentially significant changes in 2017, the impact of this executive order and other measures yet to be announced by the Trump administration on U.S. securities laws generally, and SEC rulemaking in particular, remains to be seen.

This update provides an overview of the following significant U.S. securities law and regulatory developments in 2016:

  1. Final SEC rules facilitating intrastate and regional securities offerings
  2. Final SEC rule amendments increasing the thresholds for Exchange Act registration, termination of registration and suspension of reporting
  3. Interim final SEC rule amending Form 10-K to allow a summary section
  4. Final Nasdaq rule requiring listed companies to disclose third-party payments to directors and director nominees
  5. Final New York Stock Exchange rule change requiring semi-annual financial reporting by foreign private issuers
  6. SEC staff guidance on the definition of "foreign private issuer"
  7. SEC staff guidance on non-GAAP financial measures
  8. Proposed SEC rules modernizing property disclosures for mining registrants
  9. Proposed SEC rules requiring the use of universal proxies
  10. Proposed SEC rules requiring hyperlinks to exhibits in filings

Although some of these rules are applicable only to U.S. issuers, we believe these developments should be of interest to market participants abroad, as well as Canadian issuers and their advisers.

1. Final SEC rules facilitating intrastate and regional securities offerings

In October 2016, the SEC modernized the exemptions for intrastate securities offerings to facilitate capital raising for smaller companies.

Read more about the final SEC rules facilitating intrastate and regional securities offerings.

2. Final SEC rule amendments increasing the thresholds for Exchange Act registration, termination of registration and suspension of reporting

In May 2016, the SEC adopted rule amendments pursuant to sections 12(g) and 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act) to implement higher thresholds for registration, termination of registration and suspension of reporting obligations under the Exchange Act. The rule amendments were adopted under the JOBS Actand the FAST Act to reduce the regulatory burden of private companies and provide more flexibility for their capital raising.

Read more about the final SEC rule amendments increasing the thresholds for Exchange Act registration, termination of registration and suspension of reporting.

3. Interim final SEC rule amending Form 10-K to allow a summary section

An interim final rule of the SEC, which became effective on June 9, 2016, amended Form 10-K to allow (but not require) issuers to provide a summary section in their annual reports so long as each item in the summary "is presented fairly and accurately" and includes a cross-reference by hyperlink to the more detailed material contained in the issuer's Form 10-K to which the item relates. Issuers that summarize information that is incorporated by reference into the Form 10-K from an exhibit that is filed with the form must include a hyperlink from the summary to the accompanying exhibit.

Read more about the interim final SEC rule amending Form 10-K to allow a summary section.

4. Final Nasdaq rule requiring listed companies to disclose third-party payments to directors and director nominees

In August 2016, the Nasdaq Stock Market LLC (Nasdaq) adopted a rule requiring listed companies to publicly disclose the material terms of all agreements and arrangements between a director or director nominee and any third party relating to compensation and other payments in connection with that person's candidacy or service as a director. The new rule is intended to enhance the transparency of the governance processes of listed companies by disclosing compensation arrangements that could raise conflicts of interest among directors. The new rule applies to all Nasdaq-listed companies, except that foreign private issuers may elect to follow their home country practices in lieu of the new rule, subject to the typical conditions in the Nasdaq rules that are applicable to foreign private issuers that elect to follow their home country practices.

Read more about the final Nasdaq rule requiring listed companies to disclose third-party payments to directors and other nominees

5. Final NYSE rule change requiring semi-annual financial reporting by foreign private issuers

In February 2016, the SEC approved a New York Stock Exchange amendment to its Listed Company Manual, requiring each listed foreign private issuer to, at a minimum, submit to the SEC a Form 6-K that includes (i) an interim balance sheet as of the end of its second fiscal quarter; and (ii) a semi-annual income statement that covers its first two fiscal quarters. This Form 6-K must be submitted no later than six months after the end of the company's second fiscal quarter and applies to any fiscal year commencing on or after July 1, 2015. The financial information included in the Form 6-K must be presented in English, but does not have to be reconciled to U.S. generally accepted accounting principles (GAAP).

Read more about the final New York Stock Exchange rule change requiring semi-annual financial reporting by foreign private issuers.

6. SEC staff guidance on the definition of "foreign private issuer"

In December 2016, the SEC staff updated its Compliance and Disclosure Interpretations to provide further guidance on the definition of "foreign private issuer" under Rule 405 under the Securities Act of 1933, as amended, and Rule 3b-4(c) under the Exchange Act.

Read more about the SEC staff guidance on the definition of "foreign private issuer."

7. SEC staff guidance on non-GAAP financial measures

In May 2016, the SEC staff updated its Compliance and Disclosure Interpretations to provide guidance on the use and presentation of non-GAAP financial measures, to address increasing concerns that these measures were being used improperly. This guidance is also relevant to Canadian public companies and other foreign private issuers that are SEC registrants, especially to those that prepare financial statements in accordance with GAAP in the United States.

Read more about SEC staff guidance on non-GAAP financial measures.

8. Proposed SEC rules modernizing property disclosures for mining registrants

In June 2016, as part of its Disclosure Effectiveness Initiative, the SEC announced proposed rules to modernize the disclosure requirements for mining properties by aligning them with current industry and global regulatory practices and standards in order to provide more meaningful information to investors.

Read more about the proposed SEC rules modernizing property disclosures for mining registrants.

9. Proposed SEC rules requiring the use of universal proxies

In October 2016, the SEC proposed new rules under the Exchange Act that would require parties soliciting proxies in contested director elections to use universal proxies listing all the nominee director candidates for whom proxies are being solicited. The purpose of the proposed rules is to have the proxy voting process better mirror the in-person voting process that takes place at shareholders' meetings so that shareholders voting by proxy may vote for any combination of the registrant and dissident nominees. The proposed rules apply only to registrants that are subject to the U.S. federal proxy rules and, therefore, will not affect foreign private issuers, including Canadian public companies with securities listed on a U.S. stock exchange.

Read more about the proposed SEC rules requiring the use of universal proxies.

10. Proposed SEC rules requiring hyperlinks to exhibits in filings

In August 2016, the SEC proposed rules and form amendments that would require each SEC registrant that is filing a registration statement or current report that is subject to the exhibit requirements under section 601 of Regulation S-K, or that is filing a Form F-10 or 20-F, to include a hyperlink to each exhibit that is listed in the exhibit index of the SEC filing. The proposed rules, which are part of the SEC's Disclosure Effectiveness Initiative, are primarily intended to allow users of EDGAR to access exhibits in an efficient manner via a hyperlink. As currently proposed, the rules would not require Canadian issuers that are SEC registrants to include hyperlinks to exhibits in multijurisdictional disclosure system forms filed with the SEC.

Read more about proposed SEC rules requiring hyperlinks to exhibits in filings.

Download the complete update.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.