The SEC recently voted to approve proposed amendments to Rule 701 and Form S-8 governing the offer or sale of securities to employees through compensation programs. The proposed amendments provide for a temporary, five-year expansion of Rule 701 and Form S-8 to permit public and private companies to issue securities as compensation to certain “platform,” or “gig” workers, subject to various conditions.
Rule 701 provides an exemption from registration under the Securities Act of 1933, as amended, for the sale of securities by privately held companies to compensate employees, consultants, advisors and certain others under written compensatory benefit plans or written agreements. Form S-8 is used by SEC reporting companies to register the sale of public company securities to employees, consultants and advisors. Neither Rule 701 nor Form S-8 currently covers issuances to platform workers.
The proposed amendments to Rule 701 would allow a non-reporting company to offer and sell securities to “platform workers,” who are defined in the amended rules as workers who, pursuant to a written contract or agreement, provide services to an issuer or a third party through the issuer’s “internet-based marketplace platform or through another widespread, technology-based marketplace platform or system.” The proposed amendments to Form S-8 would permit a reporting issuer to include that same category of workers in compensatory offerings registered on Form S-8. The proposed amendments also include conditions that are designed to limit the possibility that the amended rules could result in offers and sales of securities for capital-raising, rather than
Nasdaq yesterday announced a proposed new listing rule that would require all Nasdaq-listed companies to publicly disclose consistent, transparent board diversity statistics in a specified form of matrix. In addition, the proposed rule would require Nasdaq-listed companies to have, or explain why they do not have, at least two diverse directors: one woman and one person who self-identifies as either an underrepresented minority or LGBTQ.
Nasdaq believes its proposal would benefit investors and the public interest, citing in its SEC filing numerous empirical studies as support for its finding that diverse boards “are positively associated with improved corporate governance and financial performance.” It also noted calls for diversity from institutional investors, corporate stakeholders and legislators.
If the rule is approved by the SEC, companies would be required to disclose board-level diversity statistics within one year of the SEC’s approval of the listing rule. In addition:
The SEC recently approved proposed amendments to rules governing the offer or sale of securities to employees through compensation programs. The proposed changes to Rule 701 — which exempts sales of securities by privately held companies made to compensate employees, consultants and advisors — and Form S-8 – which is the form used to register the sale of public company securities to employees and others — are designed to modernize the framework for compensatory securities offerings in light of the significant evolution in such offerings and the composition of today’s workforce.
We have prepared a client alert describing the amendments that can be found here.
The SEC recently approved amendments to Rule 302(b) of Regulation S-T, which governs the signing of “authentication documents” relating to typewritten signatures included in documents that are filed with the SEC electronically via EDGAR. Current Rule 302(b) requires that, prior to or at the time of such a filing, each signatory manually sign a signature page (or other document) “authenticating, acknowledging or otherwise adopting his or her signature that appears in typed form within the electronic filing.” Rule 302(b), as amended, will for the first time allow a signatory to use an electronic signature (as an alternative to a manual signature) on any such authentication document, provided certain requirements are met, as described below.
Effective Date. The amendments will become effective upon publication in the Federal Register. Following approval of the amendments, however, the SEC staff issued a statement indicating that, in light of COVID-19 concerns, early reliance on and compliance with amended Rule 302(b) is permitted.
Attestation Document (New). Before using an electronic signature in an authentication document for the first time, a signatory will be required to manually sign a document attesting that he or she agrees that the use of an electronic signature in any authentication document will be the legal equivalent of such individual’s manual signature.
Electronic Signature Procedures. In connection with the amendments, the SEC updated the EDGAR Filer Manual to set out the procedures that are required to be followed before an electronic signature may be used in an authentication document. The electronic signing
In yet another 3-2 vote, on November 19, 2020, the SEC adopted significant amendments to MD&A and related financial disclosures in order to streamline disclosures and move to a more “principles-based approach.” Among other things, the amendments:
We have prepared a client alert describing the amendments that can be found here.
As covered in our blog post dated August 26, 2020, the SEC recently adopted amendments to Regulation S-K Items 101 (business description), 103 (legal proceedings), and 105 (risk factors) aimed at modernizing disclosure requirements. The amended rules became effective on November 9, 2020.
The SEC Staff (the “Staff”) recently published three transitional FAQs addressing questions that have arisen regarding the amendments:
FAQ (1) – Applicability of Amended Items 101, 103 and 105 to Form S-3 Prospectus Supplements Filed on or after November 9, 2020.
Glass Lewis (“GL”) recently issued its 2020 Proxy Season Review (U.S.) (the “Report”) covering the U.S. 2020 Proxy Season (i.e., January 1, 2020 through June 30, 2020). GL reported on certain 2020 shareholder voting trends and results, as well as certain of GL’s voting recommendations. The statistics and information included below (1) cover only a portion of the Report and (2) refer to the U.S. 2020 Proxy Season and to the U.S. companies covered by GL, unless otherwise indicated.
Governance and Disclosure
The Securities and Exchange Commission (the “SEC”) recently adopted final amendments to the auditor independence requirements set forth in Rule 2-01 of Regulation S-X. The SEC stated that the final amendments were based on recurring fact patterns that the SEC staff has observed over the years in which certain relationships and services triggered technical independence rule violations without necessarily impairing an auditor’s objectivity and impartiality. These relationships either triggered non-substantive rule breaches or required potentially time-consuming audit committee review of non-substantive matters, thereby diverting time, attention, and other resources of audit clients, auditors, and audit committees from other investor protection efforts.
In the adopting release, the SEC stated that the amendments “…maintain the bedrock principle that auditors must be independent in fact and in appearance while…more effectively focusing the independence analysis on those relationships or services that are more likely to threaten an auditor’s objectivity and impartiality.” The SEC anticipates that Rule 2-01, as amended, will make the auditor independence rules easier to apply and appropriately limit the situations in which auditors are not deemed to be independent.
The amendments include, among others:
As COVID-19 rages on, companies are again flocking to virtual annual meetings for the 2021 proxy season, but with one important difference: the luxury of time. Many companies are already exploring retention of virtual annual meeting providers and alternatives for video and real-time Q&A, as well as drafting fulsome disclosure about meeting logistics in their proxy materials to address concerns raised by investors, the SEC and others with respect to some pitfalls during the 2020 proxy season.
Service Providers and Technology. For 2021, an issuer will have additional time to select an appropriate provider of a virtual meeting platform. The most widely used vendor for hosting virtual meetings is Broadridge Financial Solutions, Inc., which reported that it hosted 1,494 virtual shareholder meetings during the first six months of 2020. Other service providers, such as stock transfer agents, also provide such services. A few companies have even arranged to facilitate the virtual component of an annual meeting via Zoom.
In 2020, some companies were caught off-guard by technology glitches. For 2021, issuers should be in a position to anticipate technology issues and to put contingency plans in place to address them. Issuers can follow best practices for virtual meetings by, for example, putting in place technical support lines for the duration of their meetings.
Format and Rules of Conduct (including Q&A). Companies need to decide whether a meeting will be virtual-only, physical-only or a hybrid. For any virtual component, they need to decide whether the access will be audio-only or