Category Archives: SEC Regulations

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.

SEC_a+-five

___________________________________________________

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.

VINTAGE_REGA_2

 

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

### 

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).

BLOG_button--2015

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.

Aplus-sec

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.

Doing our share to prevent faux SEC filings

Working the forensics of last Thursday’s fraudulent SEC regarding an offer to purchase Avon Products is none of our business here at Vintage. We’ll leave that to the SEC. This NYT article has a good review of the news.

faux

Our responsibility is to prevent faux filings BEFORE any bits of bytes reach EDGAR. Here is a simple summary of how we on-board new clients:

For every new client that comes to Vintage we require a New Member Application completed prior to any work being done. This ensures that the responsible party is agreeing to our terms of service, and that we have the correct company and billing contacts on file. When the New Member Application is filled out it comes into Vintage Client Services and we vet the company.

Some major points of that vetting process are…

  • We verbally confirm every application with the applicant.
  • We confirm that the person who filled out the application is associated directly with the organization which is signing up and will be receiving the bills (aka: responsible for payment of invoices generated on that account). If not we obtain permission from the billing entity to process work received from the agency sending in the work.
  • We ask if the Organization has a valid website with contact information matching what is provided on the application and is their email a domain email address.
  • We also crosscheck all information with our Salesforce.com database.
  • If validation cannot be made on information submitted in application our last step is asking for a bill (electric or telephone) that connects the person with the Organization’s address and telephone number (aka: some form of proof).
  • We also ask if they will be working with a law firm or third party and note this on our checklist.

Additionally there is strict policy we have surrounding releasing of any filing entities EDGAR codes. Whenever an entities’ codes are requested that request is forwarded to Vintage Client Services. If it is a telephone call request, we ask they follow up with the request via email for our records. Vintage Client Services will then require that authorization is given to us from an Officer of that company. We ask the same for Individuals, that authorization is received from the individual.

There are many reason companies should use a filing agent. There are even more reasons a company should us Vintage. (Yes, that was a shameless sales plug)

A quick review on shareholder proposals for proxy materials

This year, proxy access has become “the next big thing” within IR and governance discussions. It seems activism, traditionally targeted to mega-caps, has trickled down to all market capitalizations. As we learned last week, even M&A is on the activists’ radar (watch video here),

PROXYACCESSWe’ve worked with many clients on their proxy materials this year – and although Vintage tends to be on the tactical spectrum of the process, strategic and procedural discussion always arise. We try to have the answers – or at least know where to find them.

In summary, in order to have a shareholder proposal included on a company’s proxy card, and included along with any supporting statement in its proxy statement, a shareholder must be eligible and follow certain procedures. Under a few specific circumstances, the company is permitted to exclude a shareholder proposal, but only after submitting its reasons to the Commission.

What is a shareholder proposal?

A shareholder proposal is a shareholder recommendation or requirement that the company and/or its board of directors take action, which that shareholder intends to present at a meeting of the company’s shareholders. A shareholder proposal should state as clearly as possible the course of action that they believe the company should follow.

If a shareholder proposal is placed on the company’s proxy card, the company must also provide in the form of proxy means for all shareholders to specify by boxes a choice between approval or disapproval, or abstention. Unless otherwise indicated, the word “proposal” as used in this section refers both to a shareholder proposal, and to that shareholder’s corresponding statement in support of their proposal.

Who is eligible to submit a proposal, and how does a shareholder demonstrate to the company that they are eligible?

In order to be eligible to submit a proposal, a shareholder must have continuously held at least $2,000 in market value, or 1%, of the company’s securities entitled to be voted on the proposal at the meeting for at least one year by the date a shareholder submits the proposal. A shareholder must continue to hold those securities through the date of the meeting.

If a shareholder is the registered holder, which means that their name appears in the company’s records as a shareholder, the company can verify the shareholder’s eligibility on its own, although the shareholder will still have to provide the company with a written statement that they intend to continue to hold the securities through the date of the meeting of shareholders.

However, if like many shareholders, the shareholder is not a registered holder, the company likely does not know that they are a shareholder, or how many shares that shareholder owns. In this case, at the time a shareholder submit a proposal, they must prove eligibility to the company via a written statement from the “record” holder of the shareholder’s securities or via a filed a Schedule 13D, Schedule 13G, Form 3, Form 4 and/or Form 5 document. 

How many proposals may a shareholder submit? 

Each shareholder may submit no more than one proposal to a company for a particular shareholders’ meeting.

Order or 2015 SEC Reporting Rules here.

Order your free hardcopy 2015 SEC Reporting
Rules Guidebooks here.

How long can a shareholder proposal be? 

The proposal, including any accompanying supporting statement, may not exceed 500 words. 

What is the deadline for submitting a proposal?

If a shareholderis submitting their proposal for the company’s annual meeting, a shareholder can, in most cases, find the deadline in last year’s proxy statement. However, if the company did not hold an annual meeting last year, or has changed the date of its meeting for this year more than 30 days from last year’s meeting, a shareholder can usually find the deadline in one of the company’s quarterly reports on Form 10–Q, or in shareholder reports of investment companies under Rule 30d–1 of the Investment Company Act of 1940. In order to avoid controversy, shareholders should submit their proposals by means, including electronic means that permit them to prove the date of delivery.

Generally, a shareholder proposal must be received at the company’s principal executive offices not less than 120 calendar days before the date of the company’s proxy statement released to shareholders in connection with the previous year’s annual meeting. However, if the company did not hold an annual meeting the previous year, or if the date of this year’s annual meeting has been changed by more than 30 days from the date of the previous year’s meeting, then the deadline is a reasonable time before the company begins to print and send its proxy materials.

 What if a shareholder fails to follow one of the eligibility or procedural requirements?  

The company may exclude a shareholder proposal, but only after it has notified that shareholder of the problem, and that shareholder has failed adequately to correct it. Within 14 calendar days of receiving a shareholder proposal, the company must notify that shareholder – in writing –  of any procedural or eligibility deficiencies, as well as of the time frame for a response. The response must be postmarked, or transmitted electronically, no later than 14 days from the date a shareholder received the company’s notification. A company need not provide a shareholder such notice of a deficiency if the deficiency cannot be remedied, such as if failure to submit a proposal by the company’s properly determined deadline.

Who has the burden of persuading the Commission or its staff that a shareholder proposal can be excluded? 

Except as otherwise noted, the burden is on the company to demonstrate that it is entitled to exclude a proposal.

Must a shareholder appear personally at the shareholders’ meeting to present the proposal?

The shareholder, or their representative who is qualified under state law to present the proposal on the shareholder’s behalf, must attend the meeting to present the proposal. If the company holds its shareholder meeting in whole or in part via electronic media, and the company permits the shareholder or their representative to present the proposal via such media, then that shareholder may appear through electronic media rather than traveling to the meeting to appear in person.

If a shareholder or their qualified representative fail to appear and present the proposal, without good cause, the company will be permitted to exclude all of that shareholder’s proposals from its proxy materials for any meetings held in the following two calendar years.