KMK Law Corporate & Securities Blog

On April 30, 2019, the U.S. Department of Justice (“DOJ”) released new guidance detailing its evaluation of the adequacy and effectiveness of a company’s compliance program (the “Guidance”). The Guidance spells out how prosecutors examine compliance programs when deciding whether to monitor, fine or file criminal charges against a company, and we believe the 18-page document is the most comprehensive and detailed corporate compliance document that informs all businesses, whether or not party to a DOJ enforcement action. The Guidance includes a step-by-step ...

On April 3, 2019, the SEC announced the framework it would use to determine whether a digital asset would be considered an “investment contract” in light of the Supreme Court’s ruling in SEC v. W.J. Howey Co. and subsequent case law. Howey found that an “investment contract” exists where there is an investment of money in a common enterprise with a reasonable expectation that profits will be derived from others’ efforts.  In applying the framework to digital assets, the SEC focuses on three main prongs. First, in determining whether there is a reliance on the efforts of ...

On June 19, 2019, the SEC issued a concept release seeking comment on possible ways to simplify, harmonize, and improve the exempt offering framework to promote capital formation. The release requests comment on whether there should be any changes to improve Regulation D, Regulation A, the intrastate offering exemptions and Regulation Crowdfunding.

On May 9, 2019, the SEC voted to propose amendments to the definitions of accelerated filer and larger accelerated filer. The cost-reducing effects of the proposed amendments are discussed below. 

The amendments would exclude from the accelerated and large accelerated filer definitions certain issuers who are eligible to be smaller reporting companies and had no revenues or annual revenues of less than $100 million in the most recent fiscal year for which audited financial statements are available.  Additionally, for accelerated and large accelerated filers becoming ...

On May 3, 2019 the SEC proposed amendments to Regulation S-X to simplify financial disclosure requirements for public companies relating to acquisitions and dispositions of businesses.  Among other changes, the amendments would modify the significance tests applicable to acquisitions as set forth in Rule 3-05 of Regulation S-X, which sets forth the number of years of financial statements of the acquired business that must be filed with the SEC. Specifically, the proposal would amend (i) the investment test to require a comparison of a company’s investment in an acquired ...

On April 2, 2019, the SEC adopted new rules allowing for the filing of redacted material contracts without the need to apply for confidential treatment.  The rules, included in Item 601(b) of Regulation S-K, provide that information contained in material contracts may be redacted, provided the redacted information (i) is not material and (ii) would be competitively harmful if publicly disclosed.  In order to properly redact such information, companies must comply with specific requirements, including marking the exhibit index of the filing to indicate that portions of a contract ...

The Securities and Exchange Commission voted on March 20, 2019 to adopt amendments to certain disclosure requirements for public companies. These amendments are intended to modernize and simplify disclosure requirements and make it easier for investors to access and analyze material information. Other expected benefits are lower costs and burdens on companies, improved readability and navigability of disclosure documents and reduced repetition of immaterial information.

Some of the disclosure simplifications include the following:

With 2018 behind us, it is time to look ahead to the 2019 reporting season. This advisory highlights some of the changes, new rules, and “best practices” from 2018 that SEC reporting companies will need to address in 2019.

On September 29, 2018, the Securities and Exchange Commission (the “SEC”) announced that CEO and Chairman of Tesla, Elon Musk, had agreed to settle securities fraud charges brought by the SEC and that Tesla had agreed to settle SEC charges that it failed to have required disclosure controls and procedures covering Mr. Musk’s tweets.

On August 17, 2018, the Securities and Exchange Commission (“SEC”) finalized a series of amendments to its rules and forms with the aim of reducing redundant and outdated disclosure requirements for public companies. Although many of the modifications simply “clean up” references and cross-references that have become outdated due to changes in accounting terminology or other revisions to the SEC’s forms and rules, several of the amendments do serve to remove certain disclosure requirements previously required by the SEC. The summary below outlines those modifications that may be of significance to public companies.