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Tag Archives: SEC

Reminder: SEC exhibit hyperlink and format rules become effective Sept. 1, 2017

Effective for filings on and after Sept. 1, 2017, registrants will be required to include a hyperlink to each exhibit identified in the exhibit index of periodic reports, current reports and registration statements. For registration statements, the rule applies to the initial registration statement, and to each subsequent pre-effective amendment.

The SEC adopted the final rules on March 1, 2017. According to the SEC’s adopting release, the rules are intended to address the inefficient and time-consuming search required to locate exhibits that have been incorporated by reference into reports and registration statements.

These rules apply to the following types of filings:

  • Form 8-K
  • Form 10-Q
  • Form 10-K
  • Form 10
  • Form 10-D
  • Registration statements:
    • Forms S-1, S-3, S-4, S-8, S-11, F-1, F-3, F-4, SF-1, SF-3, SF-3, F-10 and 20-F

Learning from Yahoo!’s missteps: Meeting SEC disclosure obligations after a cyber-attack

In July 2016, Verizon announced it would buy Yahoo! for an unprecedented $4.83 billion. Several months later, Yahoo! disclosed two massive data breaches that affected 1.5 billion people, threatening to scuttle the agreement. Although Verizon recently finalized the acquisition, the hack forced Yahoo! to accept a $350 million reduction in purchase price.

Within the last few years, publically held companies—including Sony, Target, and most recently, Chipotle Mexican Grill—have been infiltrated by hackers bent on stealing trade secrets and personal information. The efficacy of cloud computing has spawned a digital arms race between companies who attempt to safeguard customer information and private and state actors, who wish to obtain it. Given that large-scale data breaches are becoming the norm, companies need to be aware of reporting and disclosure obligations they may face in the event of a breach. While most companies recognize their obligations under state data breach laws and HIPAA, few publically traded companies consider what, if anything, they should disclose to the U.S. Securities and Exchange Commission (SEC) in the event of a breach. In failing to do so, they risk SEC sanctions and potential liability from class action lawsuits, either of which could result in significant losses.…

Diverse companies receive SEC approval to raise funds with Regulation A+

The SEC has approved 12 Regulation A+ offerings (and about 40 initial Form 1-A filings have been made) since the new Regulation A+ rules became effective in June. The companies now raising money under Regulation A+ include a dental device manufacturer, technology companies, an automaker, a cannabis company and a bank. Regulation A+ allows private companies to raise up to $50 million by selling debt or equity to the public without having to meet all of the requirements of a traditional initial public offering.

Many of the companies using Regulation A+ are true startups, but some are existing businesses with customer revenue and operations. Dental device manufacturer Sun Dental Holdings is notable because it is using a registered broker-dealer placement agent to conduct its offering. Many of the approved offerings seek to publicly sell securities that likely will not result in loss of control for the current owners or require mandatory distributions or dividends, despite potentially raising millions.

Below is a summary of the SEC-approved Regulations A+ offerings. …

SEC Brings Civil Charges Against Cohen, Asks For Ban

Friday afternoon, the Securities and Exchange Commission (“SEC”) announced that it filed charges against Steven Cohen, manager of SAC Capital Advisors (“SAC Capital”), for failing to adequately supervise his employees and ignoring signs of suspicious trading activity. Cohen is alleged to have missed warning signs that “any reasonable hedge fund manager” should have seen, though the charges fall short of alleging Cohen was directly involved in insider trading. The SEC alleges SAC Capital realized $275 million in profits or avoided losses, and is asking for Cohen to be banned from overseeing investor funds.…

District Court Vacates Resource Extraction Issuer Payment Disclosure Rules; May Foreshadow Ruling on Conflict Minerals Challenge

On July 2, 2013, the United States District Court for the District of Columbia (the “Court”) vacated Securities and Exchange Commission (“SEC”) Rule 13q-1 (the “Rule”), which required certain companies to disclose payments made to foreign governments in connection with the commercial development of oil, natural gas or minerals. The Court found that (i) the SEC erroneously read the statutory language as requiring public disclosure of these payments; and (ii) that the SEC’s decision to deny any exemption to the disclosure requirements, specifically in the case of countries that prohibit disclosure of these payments, was arbitrary and capricious.…

Zillow, Inc. To Use Twitter For Earnings Call

The real estate website company Zillow, Inc. announced it would use Twitter and Facebook to field questions on its first quarter earnings call.  The company claims that it is the first to take questions in this manner, but will continue to take questions in the traditional way – from those dialed into the call. This announcement comes in the wake of the SEC relaxing the rules related to the use of social media to comply with Regulation FD. …

This Week in SEC Enforcement Activity

State of Illinois Charged With Misleading Muni Bond Investors

The SEC charged the state of Illinois with failing to inform municipal bond investors of potential issues with its pension funding plan. The state failed to disclose that its pension obligations were at risk of “structural underfunding” issues associated with the state’s statutory funding plan, and misrepresented the overall risk associated with the pension’s financial condition.  Illinois offered $2.2 billion in bonds during 2005 to 2009.…

SEC Enforcement Activity: March 4-8

Mark Cuban Insider Trading Case Set For Trial

Mark Cuban, the charismatic owner of the NBA’s Dallas Mavericks, lost his attempt to dismiss the SEC’s insider trading case against him, sending it to trial. The district court judge in Dallas said the ruling was “in some respects a close one.” Mr. Cuban is charged in connection with a 2004 sale of his stock in Mamma.com, allegedly after learning non-public information about an upcoming equity offering.  Read the original complaint here.…

SEC Publishes Handbook For Foreign Issuers: “Accessing U.S. Capital Markets”

This month the SEC released a handbook for foreign companies interested in registering and issuing securities on U.S. exchanges. The handbook, titled “Accessing the U.S. Capital Markets – A Brief Overview for Foreign Private Issuers,” explains the eligibility requirements for “foreign private issuer” status and the unique registration and reporting rules that apply to foreign companies.…

SEC Enforcement Activity: Feb. 11- 15

Second Circuit Hears Oral Argument on SEC-Citigroup Settlement

Last November, a federal judge in New York rejected a proposed settlement between the SEC and Citigroup in connection with charges of misleading investors at the beginning of the financial crisis. This week the Second Circuit Court of Appeals heard oral arguments in the case, which saw the SEC and Citigroup join forces against the District Court. Jim Hamilton has a good analysis of the proceedings here. …

SEC Enforcement Activity: Jan. 14-18

SEC Settles with Pond Securities In Market Manipulation Case

Four defendants – Andreas Badian, Jeffrey Graham, Pond Securities, and Ezra Birnbaum – agreed to settle charges of market manipulation, the SEC announced this week. In a complaint filed in April 2006, the SEC alleged that the defendants manipulated the stock of Sedona Corporation and violated record-keeping rules by falsely creating trade tickets. Without admitting or denying the allegations, the defendants agreed to disgorgement of profits and civil penalties of over $700,000. 

Read the SEC release here.…

SEC Enforcement Activity: Dec. 24-28

Following the short holiday week, below are notable developments in SEC enforcement activity for the week of Dec. 24-28. 

Insider Trading: One More Charged for IBM-SPSS Merger Scheme

The SEC has charged another broker for taking part in an insider trading scheme connected to IBM’s acquisition of SPSS. Trent Martin learned of the impending merger from an attorney friend working on the deal, who confided in Martin for “moral support, reassurance, and advice,” according to the SEC complaint. Martin allegedly purchased SPSS shares the first day he learned of the deal, then tipped his roommate, Thomas Conradt, who was charged earlier this month.  

Read the SEC complaint here.…

SEC Enforcement Activity Round-Up

Below are notable developments in SEC enforcement activity for the week of December 3-7, 2012.

Big Lots CEO Resigns Amidst SEC Inquiry

The CEO of Central Ohio-based Big Lots (NYSE: BIG) is under scrutiny by the SEC surrounding his sale of over $10 million in company stock prior to a negative quarterly earnings report. Big Lots stock fell 24 percent as a result of the April 2012 earnings report. Steven Fishman will retire as soon as a replacement is found, after serving as CEO since 2005.

Article here.

Chinese Affiliates of Big Four Accounting Firms Charged For Refusing To Produce Documents

The SEC announced charges this week against the Chinese affiliates of the Big Four accounting firms for refusing to produce audit records for Chinese companies under investigation for violations of accounting fraud. According to the SEC’s administrative order, the four firms (as well as BDO) have refused to cooperate with the SEC investigations for months. For the Shanghai office of Deloitte & Touche, these recent charges are similar to those brought by the SEC in May  and September.

See the order here.…

SEC Enforcement Activity Round-Up

Below are updates on notable SEC enforcement activity from the week of November 26-30, 2012:

“White-Out” Firm Found Guilty

Jeffrey Liskov and his firm, EagleEye Asset Management, LLC were found guilty of securities fraud by a jury in Boston. The Plymouth, MA firm was found guilty of misleading investors by misrepresenting the risks associated with investments in the foreign currency exchange (“forex”) market. 

The Commission alleged that Liskov and EagleEye persuaded “older” clients to shift investments from low-risk securities into high-risk forex positions based on misleading information. Despite racking up huge losses for the clients, Liskov earned over $300,000 in performance fees. Among the allegations were that Liskov used “white-out” to change names and dates on forms in order to, among other things, fraudulently transfer client assets into forex trading accounts. 

After four hours of deliberation, the jury found Liskov and EagleEye liable for violations of Section 10(b) of the Exchange Act, Rule 10b-5, and the Advisers Act. 

For more, read the SEC Release

Insider Trading: Oil Company CEO Charged

Former CEO of Denver-based oil company Delta Petroleum Corporation was charged with insider trading. In the run-up to California-based investment firm Tracinda taking a 35% stake in Delta, former CEO Roger Parker tipped a close friend, who in turn tipped friends and family, according to the SEC complaint. Delta’s stock rose 20% in value once the Tracinda investment was announced. The complaint also alleges Parker provided early insights into a positive earnings report. The SEC obtained emails and phone records in connection with the alleged tipping.…

SEC Chairman Schapiro To Retire In December; Commissioner Walter To Take Over

The SEC announced yesterday that on December 14 of this year Mary Schapiro will step down as Chairman. Chairman Schapiro took office in January 2009, making her term as chairman one of the longest in SEC history. She was appointed by President Obama in the midst of the financial crisis. Schapiro brought decades of experience to the position, being first appointed as a commissioner by President Reagan in 1988.

During her tenure the SEC brought a record number of enforcement actions, including an average of 50 Ponzi scheme actions per year. She oversaw SEC actions related to the financial crisis against many of the largest names in the banking and finance industry. Chairman Schapiro also oversaw the SEC’s rulemaking in compliance with the new Dodd-Frank Act.

Sitting commissioner Elisse B. Walter will take over as Chairman. Ms. Walter was appointed as a commissioner by President Bush in 2008, and previously served as a Vice President for both FINRA and NASD. Prior to that she worked as General Counsel to the Commodity Futures Trading Commission. Because she is a sitting commissioner, Ms. Walter does not need to be confirmed by the Senate and will take over immediately after Chairman Schapiro retires.

Read the SEC Press Release on Chairman Schapiro’s announced retirement here.  …