Helping Clients Access the Capital Markets and Stay Apprised of Regulatory Developments

Public Company Option Grants in 2024‎

Public companies planning to grant stock options, SARs or similar option-like instruments to executive officers in 2024 should consider whether to avoid the windows in which a new disclosure requirement under SEC rules applies. See SEC Release 33-11138. Companies may already consider whether they have material non-public information at the time of equity grants and avoid making those grants until that information has been disclosed, but now there is a disclosure requirement during specified windows related to SEC periodic and current report filings.

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Public Companies Should Pay Attention to the Corporate Transparency Act‎

Public companies have an exemption from the filing requirements under the new Corporate ‎Transparency Act (CTA) reporting rules. The public company exemption applies to companies ‎that are required to file reports with the U.S. Securities and Exchange Commission (SEC). That ‎exemption, however, is not enough to insulate public companies from having to conduct a ‎compliance review and install new internal controls to comply with the new rules of the ‎Financial Crimes Enforcement Network (FinCEN) that became effective January 1, 2024 ‎‎(FinCEN Rules).‎

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Exchanges Extend Clawback Policy Deadline to December 1

Last week, each of the major stock exchanges filed proposed changes to their listing rules governing the adoption of “clawback” policies that will require listed companies to recover erroneously awarded compensation paid to executive officers in the event of a financial statement restatement. The SEC approved these rule changes (including those of the NYSE, Nasdaq and NYSE American) on an accelerated basis on Friday, June 9, 2023. The effect of these changes is to make the effective date of the rules October 2, 2023, giving listed companies until 60 days later, or December 1, 2023, to adopt compliant policies.

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M&A Broker Exemption Update‎

We are updating our March 6, 2023 QuickStudy that discussed the new statutory exemption ‎under section 15(b)(13) of the Securities Exchange Act of 1934 from broker registration that ‎allows unregistered M&A advisers to provide M&A advice and services in certain smaller ‎transactions. As anticipated in our QuickStudy, on March 29, the SEC announced that it ‎revoked the 2014 no-action letter that allowed similar activities by unregistered M&A advisers ‎without the limitations under the statutory exemption.‎

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SEC Adopts Revised Stock Buyback Disclosure Requirements

On May 3, 2023, the SEC adopted‎ final rules relating to corporate stock buybacks. The new rules have some significant differences from ‎those the SEC proposed in December 2021. While the new rules do require significantly greater ‎detail about daily stock repurchases in Inline XBRL format, they will only require filing of that ‎information quarterly, in a new exhibit to the company’s Form 10-K and Form 10-Q filings.‎

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Updating Clawback Policies

The public comment period for the new NYSE and Nasdaq listing standards requiring public ‎companies to have expanded clawback policies ended on April 3, 2023. The new standards will ‎require listed companies to have clawback policies that provide for the recovery of excess ‎incentive-based compensation of current and former executive officers upon the restatement of ‎the company’s financial statements for any reason (currently recovery of compensation is only ‎required from the CEO and CFO when there is company misconduct). ‎

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Further Update on Validating Defective Corporate Actions

Following our February 24 post, we learned that representatives of accounting firms sought advice from the SEC on whether they can rely solely on Section 205 Orders to confirm valid issuance of outstanding shares as to which there is uncertainty. We understand that they were informed by the SEC Chief Accountant that a Section 205 Order would not be sufficient and that they should request an opinion of counsel as to the shares being valid as of the time of their issuance.

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Update on Validating Defective Corporate Action

On February 14, we reported that a number of Delaware corporations, mostly those resulting from deSPAC transactions, have petitioned the Court of Chancery to validate their increases in authorized shares and other corporate actions due to their failure to seek, and in many cases to obtain, the class vote that the Court of Chancery held in Garfield v. Boxed, Inc.[1] was required by DGCL section 242(b)(2).

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