This week's corporate law news roundup includes discussions of the Second Circuit's decision declining to adopt the "extreme departure" standard for materiality of omissions in public filings, the SEC's expanding private review of draft registration statements to all companies under the JOBS Act, and the Fourth Circuit's ruling that the Environmental Protection Agency has no specific duty to report the regulatory impact on coal sector employment.

SECOND CIRCUIT DECLINES TO ADOPT "EXTREME DEPARTURE" STANDARD FOR MATERIALITY OF OMISSIONS IN PUBLIC FILINGS

On June 21, 2017, the U.S. Court of Appeals for the Second Circuit declined to follow the First Circuit's materiality standard for requiring the disclosure of interim financial documents in an SEC registration statement.  The First Circuit had used a standard referred to as the "extreme departure" test, pursuant to which the omission would need to represent an extreme departure from the company's previous performance to warrant the need for interim financial statements.  The Second Circuit chose to use a standard under which the disclosure analysis hinges on whether a reasonable investor would consider the omitted information as having significantly altered the total mix of information available. For more information on the Stadnick v. Vivint Solar, Inc. case, see http://reaction.withersworldwide.com/rs/emsdocuments/stadnick-vivint_solar.pdf

SEC NOW ALLOWS ALL COMPANIES' DRAFT REGISTRATION STATEMENTS TO BE FILED CONFIDENTIALLY

Beginning July 10, 2017 the SEC will expand to all companies the popular JOBS Act benefit of allowing companies to privately submit their registration statements to the SEC for nonpublic review. The SEC will review a draft initial Securities Act registration statement and related revisions on a nonpublic basis so long as the issuer confirms in a cover letter to the nonpublic draft submission that it will publicly file its registration statement and nonpublic draft submissions at least 15 days prior to among other things, any road show or, in the absence thereof, the requested effective date of the registration.  The SEC will also do so with respect to draft registration statements submitted prior to the end of the 12th month after the effective date of the issuer's initial Securities Act registration statement or Exchange Act Section 12(b) registration; an issuer submitting a draft registration statement in these circumstances should confirm in its cover letter that it will publicly file its registration statement and nonpublic draft submissions at least 48 hours prior to any requested effective time and date. The SEC will limit its nonpublic review in these cases to the initial submission. For more information, see https://www.sec.gov/corpfin/announcement/draft-registration-statement-processing-procedures-expanded.

COURT HOLDS THAT EPA MAY NOT BE REQUIRED TO REPORT REGULATORY IMPACT ON COAL SECTOR EMPLOYMENT

In late June 2017, in a defeat for the coal mining industry, the U. S. Court of Appeals for the Fourth Circuit overturned a ruling that required the Environmental Protection Agency to report how Clean Air Act regulations affect employment in the coal industry.  A lower court judge in West Virginia had ruled that the Clean Air Act imposed a specific duty on the EPA to conduct continuing evaluations of potential loss or shifts of employment.  The Fourth Circuit reversed the lower court, finding that the EPA has a broad and open-ended statutory mandate, giving discretion to the EPA in terms of reporting data. For more information on the Murray Energy Corp. et al. v. Administrator, U.S. Environmental Protection Agency case, see http://www.ca4.uscourts.gov/Opinions/Published/162432.P.pdf.

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