Category Archives: SEC Regulations

The 5 Stages of M&A: overview chart is now downloadable

Having just five stages is a bit oversimplified, however working with young, inexperienced organizations – many Emerging Growth Companies –  we’ve found that having a 30,000 foot view of a deal has proved useful. Certainly, the law firms have the street-level “to-do” list however this guides their corporate working group to think in deadlined-structured buckets.

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The five stages:

  1. Foundation
  2. Preparation
  3. Examination
  4. Negotiation
  5. Completion

As you read on the one-page guide, CLICK HERE, both sides of the M&A transaction have tasks at each stage.

Our role within the five stages is two-fold: 1.) the set-up and management of the secure virtual data room (watch video demo) and 2.) with the material disclosure required to the SEC and/or across the news media and to shareholders.

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Dodd-Frank pay ratio disclosure requirement adopted: It’s time to practice “CEOR”

Investor Relations (IR) officers may have a new job description: Chief Executive Officer Relations (CEOR). You may have to begin planning to simultaneously communicate the company’s AND the CEO’s financial brand.

In a 3-2 vote, the Securities and Exchange Commission, yesterday, adopted a final rule that requires public companies to disclose the ratio of their CEO’s compensation against the median compensation of its employees.

Beginning with their first fiscal year on or after January 1, 2017, this new element within Dodd-Frank’s say-on-pay mandate, may force IROs to “justify” their CEO value to The Street, employees and even consumers. Coincidently, new research from Harvard Business School shows that customers favor retailers that reign in their CEOs’ salaries. Their research documented that an issuer with an unbalanced CEO-to-employee Yin & Yang must offer a considerable 50% discount to be par with a company that keeps a low ratio.

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Time will tell what Wall Street thinks… certainly, activist investors and CSR-minded institutional investors will use the ratio data when it benefits them most. IR and corpcomm’s workload will undoubtingly increase to counterbalance the predicted hype from media and markets’ pundits “naming and shaming” well paid CEOs and the companies that employ them.

Issuers do have some flexibility in calculating their pay ratio:

  • Companies will have to include part-time and non-U.S. employees in CEO pay ratio calculation
  • Pay ratio will allow issuers to exclude 5% of non-U.S. employees or those in nations with restrictive data privacy laws
  • The median employee determination calculation is required only once every three years
  • The determination date can be within the last three months of a company’s fiscal year

The ratio disclosure would apply to all companies required to provide executive compensation disclosure under Item 402(c)(2)(x) of Regulation S-K.  Smaller reporting companies, foreign private issuers, MJDS filers, emerging growth companies, and registered investment companies would not be subject to the requirement.

For details on Form S-K filings, our free guidebooks are recommended. REQUEST A SET HERE.

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SEC Reg A+ gives Twitter and StockTwits a “Like”

The enhancements to Reg A+ (read more here) not only increases the capital raise allotment ten-fold, but the Securities and Exchange Commission’s Compliance and Disclosure Interpretation published that an emerging growth company post a social media message about its offering to “test the waters” towards potential investors.

THUMBSEC

Their points are below. Note, when the SEC says “…technological limitations on the number of characters or amount of text…” they mean Twitter and StockTwits type platforms.

  • The electronic communication is distributed through a platform that has technological limitations on the number of characters or amount of text that may be included in the communication;
  • Including the required statements in their entirety, together with the other information, would cause the communication to exceed the limit on the number of characters or amount of text; and
  • The communication contains an active hyperlink to the required statements that otherwise satisfy Rule 255 and, where possible, prominently conveys, through introductory language or otherwise, that important or required information is provided through the hyperlink.

These conditions are consistent with the SEC’s view on social media, when it gave the use of posts on Facebook and Twitter to communicate corporate announcements such as earnings a thumbs up. Of course, this all birthed from the 2012 Jumpstart Our Business Startups Act, which deregulated fundraising rules for emerging growth companies.

5 questions and 37 answers about SEC Reg A+

Each day, our Reg A+ team (READ HERE) is fielding more questions from clients, eager to learn about the impact the new Regulation A+ can have on their potential capital raise. Here is a quick to-date Q&A compilation. Spoiler: there is a lot of industry jargon below.

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Why a new Regulation A (+)?

  • Mandated by JOBS Act. Old Reg A was rarely used. Exemption only allowed $5 million capital raise. Reg D exemption much more widely used.
  • Blue sky (state) review was required
  • Updated Reg A (Reg A+) allows for capital raise up to $50 million, and Tier
  • Two raises not subject to Blue sky review
  • Reg A+ securities are not restricted (advantage over Reg D)
  • Potential liquidity advantage: exit strategy for VC

Who can use Reg A+?

  • Must be U.S. or Canadian company
  • Must NOT be already subject to Exchange Act reporting
  • Canadian companies can be listed in Canada
  • REITs allowed; BDCs NOT allowed (yet)
  • 40 Act companies, shell companies NOT allowed
  • Securities offered must be equity, debt, or convertible to equity
  • ABS NOT allowed

What are the requirements? 

Tier 1 (up to $20 million)

  • File an Offering Circular on Form 1-A. Some exhibits required
  • File an Exit Report on Form 1-Z
  • Tier 1 still subject to Blue Sky review
  • Intended for smaller, regional offerings
  • Not expected to be a large portion of the filings
  • NO XBRL

Tier 2 (up to $50 million) 

  • File an Offering Circular on Form 1-A. Some exhibits required
  • Prelim/Final Offering Circulars under Form Type 253(G1-4) [similar to 424 filing on Registered side]
  • Ongoing periodic reporting (current, semiannual, annual)
  • Audited Financials
  • May see voluntary Quarterly Financial filings to allow 144A sales
  • Exit report required on 1-Z
  • Transfer Agent services likely necessary
  • Monitor number of shareholders
  • Limited exemption from Exchange Act filing, but even if over limit, 2 year transition to Exchange Act reporting
  • NO XBRL

Are Confidential Draft filings allowed?

  • Similar to Emerging Growth Companies, who can file DRS
  • Reg A+ confidential filings file under DOS
  • DOS filings (and amendments) must be made public at time of 1-A filing— eliminates need to refile confidential filings as exhibits; starts 21-day clock towards qualification
  • There is no “Effectiveness” since there is no “Registration”; instead there is “Qualification”

Is Reg A+ a stepping stone to a exchange listing?

  • OTC changing its rules to allow Tier 2 Reg A+ disclosure to fully meet OTC disclosure requirements for the OTCQB Venture.
  • Partially meets OTCQX requirements (must also make quarterly financial reports, timely disclosure of material news events and have PCAOB audit standards)
  • Canadian companies must be listed on a qualified foreign exchange (e.g.TSXV)
  • Form 8-A eligible (no need for longer Form 10)

Expert Team Guides Clients Through Very First SEC Regulation A+ Filings

Vintage Capital Markets division well prepared to take growth stage companies through new regulatory process

NEW YORK, JUNE 29, 2015 / PR Newswire / — Vintage, the capital markets, corporate services and institutional & fund services division of PR Newswire, today announced that the company has successfully filed two of the first five draft EDGAR filings for clients under the Securities and Exchange Commission’s (SEC) new Regulation A+ ruling.

The new rule, which went in effect on June 19, 2015, revives the promise of The JOBS Act’s 2012 Regulation A by increasing the offering cap and streamlining the involvement of state securities regulators. Under “Reg A+” companies can now raise up to $50 million per year from investors, either individual or institutional.

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There are two tiers to the new SEC regulation: 

  • Tier 1 for offerings of securities of up to $20 million in a 12-month period, with not more than $6 million in offers by selling security-holders that are affiliates of the issuer;
  • Tier 2 for offerings of securities of up to $50 million in a 12-month period, with not more than $15 million in offers by selling security-holders that are affiliates of the issuer.

“The Tier 2 Regulation A+ offering can be considered a ‘mini-IPO’ because it allows emerging growth companies to raise capital with less costly financial and time-consuming requirements than a traditional S-1 registration commonly filed for an IPO,” said Gordon Ruckdeschel, Vice President of Operations at Vintage.

“This will be a less burdensome workflow for small and micro-cap companies to go public. However, like any IPO, it needs legal and regulatory expertise. Although it is a streamlined process compared to a traditional S-1 registration, the SEC published 453 pages of Regulation A+ rules… so it is ‘at par’ with the seriousness of an S-1 registration,” Ruckdeschel stated. Regulation A+ is still the sale of securities in your company and as such, we trained and created an internal team to work the intricacies of these unique filings.”

The table below compares a company offering under new Regulation A+ with a company registration on Form S-1.

Description Form Type for
Reg A+ Offering
Form Type for “Traditional”
Registration
Non-public Draft Offering/Registration Statement DOS DRS
Amendment to Draft Offering/Registration Statement DOS/A DRS/A
Correspondence for Draft offering/Registration Statement DOSLTR DRSLTR
Public Offering/Registration Statement 1-A S-1
Pre-effective amendment to Public Offering/Registration Statement 1-A/A S-1/A
Post-effective amendment 1-A POS POS AM
Offering/Registration Withdrawal 1-A-W RW
Offering/Registration Withdrawal – amendment 1-A-W/A [not applicable]
Preliminary or Final Offering Statement/Prospectus 253G1, 253G2, 253G3, 253G4 424B1, 424B2, 424B3, 424B4, 424B5, 424B7, 424B8
Current report 1-U 8-K
Current report amendment 1-U/A 8-K/A
Quarterly report (for registered companies) / Semiannual (for Reg A+ companies) 1-SA 10-Q
Quarterly report (for registered companies) / Semiannual (for Reg A+ companies) amendment 1-SA/A 10-Q/A
Annual report 1-K 10-K
Annual report amendment 1-K/A 10-K/A
Exit Report (for Reg A+) / Deregistration (for registered companies) 1-Z 15-12B/15-12G/15-15D
Exit Report (for Reg A+) / Deregistration (for registered companies) – amendment 1-Z/A 15-12B/A/15-12G/A/15-15D/A
Withdrawal of Exit Report (for Reg A+ only) 1-Z-W [not applicable]
Withdrawal of Exit Report (for Reg A+ only) – amendment 1-Z-W/A [not applicable]

Note that this chart is a very simplified example as Reg A+ can be complex. For example, REITs and Canadian companies may offer securities under the new Reg A+ as well.

To help smaller companies understand the regulation, the SEC offers  “Amendments to Regulation A: a Small Entity Compliance Guide:” https://www.sec.gov/info/smallbus/secg/regulation-a-amendments-secg.shtml

To keep up-to-date on Vintage’s continued growth, please follow Vintage in LinkedIn: https://www.linkedin.com/company/vintage-filings-llc

Please visit Vintage today for more information: www.thevintagegroup.com

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About Vintage

Vintage, a PR Newswire division, is a top-three provider of full-service regulatory compliance and shareholder communications services, delivered across our three practice areas: Capital Markets, Corporate Services and Institutional & Fund Services.

Founded in 2002 and acquired by PR Newswire in 2007, Vintage has evolved to become the industry’s intelligent value choice. We deliver a flexible balance of people, facilities and technology to ensure that regulatory compliance and shareholder communications processes are efficient, transparent and painless. Services include IPO registrations, transactions, virtual data rooms, EDGAR & XBRL filing, typesetting, financial printing and investor relations websites. www.thevintagegroup.com 

About PR Newswire

PR Newswire (www.prnewswire.com) is the premier global provider of multimedia platforms that enable marketers, corporate communicators, sustainability officers, public affairs and investor relations officers to leverage content to engage with all their key audiences. Having pioneered the commercial news distribution industry 60 years ago, PR Newswire today provides end-to-end solutions to produce, optimize and target content — from rich media to online video to multimedia — and then distribute content and measure results across traditional, digital, mobile and social channels. Combining the world’s largest multi-channel, multi-cultural content distribution and optimization network with comprehensive workflow tools and platforms, PR Newswire enables the world’s enterprises to engage opportunity everywhere it exists. PR Newswire serves tens of thousands of clients from offices in the Americas, Europe, Middle East, Africa and the Asia-Pacific region, and is a UBM plc company. www.prnewswire.com

Media Contact:

Bradley H. Smith
Director of Marketing, IR and Compliance Services
PR Newswire & Vintage
+1 201.942.7157

“What triggers an 8-K?” is a common question we hear at the NIRI conference

Preparing for the 2015 NIRI Conference (booth 605, BTW) is more than just packing up our box of “HEART IR” buttons (and the subsequent prizes).

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It also mean prepping our booth team on the common questions we are routinely asked that fall out of the traditional shareholder communications bucket and more into SEC compliance. The (intelligent) value of having Vintage as a fully integrated toolset within PR Newswire is the true depth of EDGAR and XBRL expertise. It’s why we’re the #1 integrated Newswire/SEC filing agent.

When to send an 8-K is always heavily discussed. An 8-K is your first line of RegFD defense should a non-public material disclosure happen.

8-K trigger events include (besides a mistake material whoops):

  • Entering into amending or terminating a material contract
  • Material acquisitions or dispositions
  • The disclosure of quarterly or annual financial results
  • Material financing arrangements
  • The acceleration of material financing obligations
  • Material exit or disposal activities (bankruptcy or receivership)
  • Delisting or noncompliance with a listing rule
  • Unregistered sales of the company’s equity securities
  • A change in accountants
  • A change in auditors
  • A change in compensation of certain officers
  • A determination that the company’s previously issued financial statements should no longer be relied upon (restatement)
  • Changes in the board of directors
  • The appointment, retirement, resignation or termination of certain executive officers, or the entry into or amendment of a material compensatory arrangement with such officers
  • Charter and bylaw amendments
  • Amendments to or waivers of the company’s code of ethics
  • Voting results of shareholders’ meetings
  • Material debt incurred
  • Changes in control of the company

With some exceptions, reports on Form 8-K are generally required to be filed with or furnished to the SEC within four business days after the occurrence of the event to be disclosed.

Regulation FD defines the outer boundary for “prompt disclosure” to mean as soon as reasonably practical, but within 24 hours or by the start of the next day’s trading on the NYSE, regardless of where or whether the company’s stock is traded.

Look for us at the 2015 NIRI Annual Conference, June 14-17, Chicago. 

Quick help on how the new SEC Reg A+ compares with “traditional” registrations

The new SEC regulations for Reg A, now commonly referred to as Reg A+, take effect on June 19, 2015. As a starting guide, below is a comparison table that will be helpful in deciphering all the new EDGAR form types which are related to Regulation A+.

Briefly, Reg A+ is a regulation that exempts companies offering securities from registering under the Securities Act and becoming subject to Exchange Act reporting – similar to Form D.

In the past, Reg A was only available for selling up to $5 million of securities per 12-month period. Additionally, the securities offered were still subject to review and qualification by the states’ Blue Sky laws. There were other restrictions as well, which over the years made using Form D a much more popular option than Regulation A. Also, Ye Olde Regulation A documents were only filed in paper, which is why many companies avoided it.

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Reg A has now evolved into Reg A+… allowing for offerings up to $50 million per 12-month period. The new Reg A+ has two tiers with different advantages/disadvantages.

  • Tier 1 allows up to $20 million in securities per 12 months. Tier 1 is still subject to Blue Sky laws, but does not have ongoing reporting requirements nor does it require audited financial statements.
  • Tier 2 allows for up to $50 million in securities per 12-month period. This tier is exempt from state review/qualification but does require ongoing periodic reporting and audited financial statements.

The table below compares a company offering under new Regulation A+ with a company registration on Form S-1. This is simplified… as Reg A+ can be complex ie: REITs and Canadian companies may offer securities under the new Reg A+ as well.

Description Form Type for
Reg A+ Offering
Form Type for “Traditional”
Registration
Non-public Draft Offering/Registration Statement DOS DRS
Amendment to Draft Offering/Registration Statement DOS/A DRS/A
Correspondence for Draft offering/Registration Statement DOSLTR DRSLTR
Public Offering/Registration Statement 1-A S-1
Pre-effective amendment to Public Offering/Registration Statement 1-A/A S-1/A
Post-effective amendment 1-A POS POS AM
Offering/Registration Withdrawal 1-A-W RW
Offering/Registration Withdrawal – amendment 1-A-W/A [not applicable]
Preliminary or Final Offering Statement/Prospectus 253G1, 253G2, 253G3, 253G4 424B1, 424B2, 424B3, 424B4, 424B5, 424B7, 424B8
Current report 1-U 8-K
Current report amendment 1-U/A 8-K/A
Quarterly report (for registered companies) / Semiannual (for Reg A+ companies) 1-SA 10-Q
Quarterly report (for registered companies) / Semiannual (for Reg A+ companies) amendment 1-SA/A 10-Q/A
Annual report 1-K 10-K
Annual report amendment 1-K/A 10-K/A
Exit Report (for Reg A+) / Deregistration (for registered companies) 1-Z 15-12B/15-12G/15-15D
Exit Report (for Reg A+) / Deregistration (for registered companies) – amendment 1-Z/A 15-12B/A/15-12G/A/15-15D/A
Withdrawal of Exit Report (for Reg A+ only) 1-Z-W [not applicable]
Withdrawal of Exit Report (for Reg A+ only) – amendment 1-Z-W/A [not applicable]

Reach out to your uber-friendly Vintage Account Manager for more help.