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

NASDAQ’s New 20% Rule for Private Offerings

On September 26, 2018, the Securities and Exchange Commission approved amendments (the “Amendments”) to NASDAQ Rule 5635(d) (commonly referred to as the “20% Rule”).  The purpose of the 20% Rule is to protect an issuer’s existing public shareholders against a significantly dilutive private offering by giving the shareholders an opportunity to vote on the offering and/or sell their stock prior to its consummation.

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Cyber Threats and Internal Accounting Controls

On October 16, 2018, the Securities and Exchange Commission (“SEC”) issued an investigative report (see here) pursuant to Section 21(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) warning public companies that become victims of cyber-related frauds that they may violate the federal securities laws if they fail to have a sufficient system of internal accounting controls.

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Which Way Does the MAC Knife Cut

The Delaware courts have long prided themselves on the contractarian character of their approach to interpreting and enforcing agreements.  In the M&A context, this has meant holding parties to the transaction they agreed to do, as reflected in IBP, Inc. v. Tyson Foods, Inc., 789 A.2d 14 (Del. Ch. 2001), and Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008).

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Tweeting Misleading Information is Not an Acceptable Response to Short Sellers

We recently wrote about short sellers being the scourge of public companies and the availability of a response from the SEC (here).  The SEC has now made clear in an enforcement action against Elon Musk, the CEO of Tesla Inc., a favorite of short sellers, that a response that is not acceptable is releasing false and misleading information, even by tweet, to pump up the stock price (here).

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CorpFin Provides Relief on Effectiveness of “Disclosure Simplification” Rules

As discussed in more detail in our QuickStudy (available here), on August 17, 2018 the Securities and Exchange Commission (the “SEC”) adopted numerous amendments to its disclosure requirements that were intended to simplify compliance for issuers by eliminating certain redundant, overlapping, outdated or superseded disclosure requirements (the “Disclosure Simplification Rules”).

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The Meaning of the SEC Chairman’s Statement Regarding Staff Views

On September 13, 2018, following the lead of other federal agencies, SEC Chairman Jay Clayton issued a reminder that SEC staff positions are nonbinding and create no enforceable legal rights or obligations of the Commission or others, and thus is to be distinguished from actions by the Commission (

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A Lesson From SeaWorld

From time to time there is an SEC enforcement action that has a broader lesson for public companies.  The recent settled enforcement action against SeaWorld Entertainment, Inc. ( is one of those.  In SeaWorld the SEC charged the company, its CEO and its vice president of communication with misleading investors when they failed to accurately disclose the impact of the Blackfish documentary, which criticized SeaWorld’s treatment of orcas, on the company’s reputation and business.

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