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Public Company Reporting (Series: Securities Law Made Simple (Not Really)

Once public, a company is subject to a continuously evolving landscape of disclosure and reporting requirements. Recent disclosure developments have addressed everything from executive compensation to cybersecurity. In addition, the prevalence of social media has made it such that a company must now consider not only the nuances of what to disclose but also how to deliver that disclosure. Is your company tweeting its earnings reports; are you using your corporate Facebook page to make Regulation FD disclosures?

In this webinar our expert panel provides you with a high-level overview of key public company reporting and disclosure requirements, including the latest developments brought about by the Dodd-Frank Act, JOBS Act, FAST Act and, most recently, the SEC’s Disclosure Effectiveness Initiative, as well as provide you with tangible examples and practical advice on how to comply with the ever-changing means of delivering that disclosure.

To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/public-company-reporting-2020/

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Public Company Reporting (Series: Securities Law Made Simple (Not Really)

  1. 1. 1
  2. 2. 2 Practical and entertaining education for attorneys, accountants, business owners and executives, and investors.
  3. 3. 3 Thank You To Our Sponsor
  4. 4. Disclaimer The material in this webinar is for informational purposes only. It should not be considered legal, financial or other professional advice. You should consult with an attorney or other appropriate professional to determine what may be best for your individual needs. While Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate, Financial Poise™ makes no guaranty in this regard. 5
  5. 5. Meet the Faculty MODERATOR: Vanessa Schoenthaler - Sugar Felsenthal Grais & Helsinger LLP PANELISTS: Alissa Parisi - K & L Gates LLP Julia Vax - Arnold & Porter Kaye Scholer LLP Craig Mordock - Titan Health & Security Technologies, Inc. 6
  6. 6. About This Webinar Public Company Reporting Once public, a company is subject to a continuously evolving landscape of disclosure and reporting requirements. Recent disclosure developments have addressed everything from executive compensation to cybersecurity. In addition, the prevalence of social media has made it such that a company must now consider not only the nuances of what to disclose but also how to deliver that disclosure. Is your company tweeting its earnings reports; are you using your corporate Facebook page to make Regulation FD disclosures? In this webinar our expert panel provides you with a high-level overview of key public company reporting and disclosure requirements, including the latest developments brought about by the Dodd-Frank Act, JOBS Act, FAST Act and, most recently, the SEC’s Disclosure Effectiveness Initiative, as well as provide you with tangible examples and practical advice on how to comply with the ever-changing means of delivering that disclosure. 7
  7. 7. About This Series Securities Law Made Simple (Not Really) The federal securities laws, made up of a interwoven collection of Congressional statutes, rules and regulations promulgated by the Securities and Exchange Commission and federal judicial precedent, play a ubiquitous role throughout a company’s life-cycle, relevant from the first issuance of founder shares at organization, to the use of equity compensation to reward and incentivize directors, employees and consultants, to offerings of equity and debt in corporate finance transactions, to initial, secondary and alternative public offerings, in mergers and acquisitions, strategic transactions and beyond. This webinar series of leading securities law experts discusses both the fundamentals of the federal securities laws and the latest developments in this ever-evolving area of law. Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and executives without much background in these areas, yet is of primary value to attorneys, accountants, and other seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that participants will enhance their knowledge of this area whether they attend one, some, or all episodes. 8
  8. 8. Episodes in this Series #1: Securities Law: An Overview Premiere date: 5/14/20 #2: Private Offering Exemptions and Private Placements Premiere date: 6/4/20 #3: Public Company Reporting Premiere date: 7/16/20 9
  9. 9. Episode #3 Public Company Reporting 10
  10. 10. How Does an Issuer Become a Reporting Company? • An issuer becomes subject to reporting obligations under Section 13(a) or Section 15(d) the Securities Exchange Act of 1934 by having a class of securities registered under Section 12 or being subject to Section 15(d). • This creates three general categories of reporting companies: 11
  11. 11. How Does an Issuer Become a Reporting Company? • Securities Exchange Listing - Companies with securities listed on a national securities exchange, such as the NYSE or NASDAQ (Section 12(b)).  Company must register that class of securities under the Exchange Act by filing application with exchange and a registration statement with SEC under Section 12(b).  Applies to debt and equity registrations. 12
  12. 12. How Does an Issuer Become a Reporting Company? • Size Thresholds - Companies that satisfy certain size thresholds (Section 12(g))  Total assets exceeding $10 million and: o For issuers that are not banks or bank holding companies, there are 2,000 or more record holders of that class of equity securities or 500 persons who are not accredited investors; or o For banks and bank holding companies, there are 2,000 or more record holders of that class of equity securities.  Applies to equity securities only.  Such company must file a registration statement under Section 12(g) of the Exchange Act within 120 days after the last day of its first fiscal year in which it exceeds the above thresholds. 13
  13. 13. How Does an Issuer Become a Reporting Company? • Effective ’33 Act Registration Statement - Companies that have an effective ’33 Act registration statement for debt or equity securities, even if securities are not listed on an exchange (Section 15(d)):  Section 15(d) companies are subject to current and periodic reporting only (Forms 8-K, 10-Q and 10-K).  Do not have to comply with other Exchange Act obligations (proxy and tender offer rules, Section 16 reporting and short-swing profit restrictions and Schedule 13 beneficial ownership reporting). 14
  14. 14. How Did the JOBS Act and the FAST Act Change the Threshold and On-Ramp for Becoming a Reporting Company? • Final Rules adopted May 3, 2016 - implementing JOBS Act and FAST Act changes. • “Backdoor” public company thresholds before the JOBS Act:  $10 Million in assets and 500 shareholders of record. 15
  15. 15. How Did the JOBS Act and the FAST Act Change the Threshold and On-Ramp for Becoming a Reporting Company? • “Backdoor” public company thresholds after the JOBS Act:  $10 Million in assets and 2,000 shareholders of record, including 500 “unaccredited” investors and excluding holders of compensatory equity awards, with de-registration threshold remaining at 300 holders; or  For banks and bank holding companies, $10 Million in assets and 2,000 equityholders of record, with de-registration threshold at 1,200 holders. • FAST Act changed thresholds for savings and loan holding companies to match the above. 16
  16. 16. How Did the JOBS Act and the FAST Act Change the Threshold and On-Ramp for Becoming a Reporting Company? • Other main benefits created by the JOBS Act for IPO on-ramp:  New “Emerging Growth Company” – EGC – category;  Confidential initial registration statement filing;  Two, rather than three, years of audited financials;  Scaled executive compensation disclosures;  Opportunity for “testing the waters” before or after filing; and  Other benefits, opt-outs and alternative treatments. 17
  17. 17. How Has the Definition of Smaller Reporting Company Changed? • Large accelerated filers:  Public float of $700 million or more • Accelerated filers:  Public float of $75 million or more but less than $700 million 18
  18. 18. How Has the Definition of Smaller Reporting Company Changed? • Smaller reporting companies: 19
  19. 19. What are the Consequences of Becoming a Reporting Company? • Public disclosure duties - periodic reports (10-K, 10-Q, 8-K). • Annual meeting process - proxy rules, stockholder proposals. • Insider trading regulation - Rule 10b-5, Section 16 reports and short-swing trading. • Investor communications - earnings releases, Regulation FD. • SRO regulation - NYSE & Nasdaq listing standards. • Williams Act - Schedule 13D/G, tender offer regulation. • Other substantive regulations – Sarbanes-Oxley, Dodd Frank, FCPA. 20
  20. 20. What are Some of the Required Reports? • Form 10-K - Annual Report; • Form 10-Q - Quarterly Report; • Form 8-K - Current Report; • Schedules 14A and 14C - Proxy and Information Statements; • Schedule 14-F - Information Statement for Change in Majority of Directors; • Schedules 13D and 13G - 5% Beneficial Ownership; • Forms 3, 4 and 5 - Section 16 Insider Reporting; and • Schedule TO - Tender Offer Statements. 21
  21. 21. SEC Amendments and Proposed Ideas to Modernize Disclosure 22 Rule Summary Description of Amended Rules Regulation S-K, Item 303 and Form 20-F Issuers will generally be able to exclude discussion of the earliest of three years in MD&A if they have already included the discussion in a prior filing. Regulation S-K, Items 601(b)(10) and 601(b)(2) and investment company registration forms Issuers will be able to omit confidential information in material contracts and certain other exhibits without submitting a confidential treatment request to the SEC, so long as the information is (i) not material and (ii) would likely cause competitive harm to the issuer if publicly disclosed. Regulation S-K, Item 601(b)(10) Only newly reporting issuers will be required to file material contracts that were entered within two years of the applicable registration statement or report.
  22. 22. SEC Amendments and Proposed Ideas to Modernize Disclosure 23 Rule Summary Description of Amended Rules Regulation S-K, Item 601(a)(5) and investment company forms Issuers will not be required to file attachments to their material agreements if such attachments do not contain material information or were not otherwise disclosed. Regulation S-K, Item 102 Issuers will need to provide disclosure about a physical property only to the extent that it is material to the issuer. Forms 8-K, 10-Q, 10-K, 20-F and 40-F Issuers will be required to disclose on the form cover page the national exchange or principal U.S. market for their securities, the trading symbol, and title of each class of securities.
  23. 23. SEC Amendments and Proposed Ideas to Modernize Disclosure 24 Rule Summary Description of Amended Rules Securities Act Rule 411(b)(4); Exchange Act Rules 12b-23(a)(3), and 12b-32; Investment Company Act Rule 0-4; and Regulation S-T Rules 102 and 105 Issuers will no longer be required to file as an exhibit any document or part thereof that is incorporated by reference in a filing, but instead will be required to provide hyperlinks to documents incorporated by reference. Forms 10-K, 10-Q, 8-K, 20-F and 40-F. Issuers will be required to tag all cover page data in Inline XBRL. Regulation S-T Rules 102 105, 201, 202 and 311; Form N-CSR; and investment company registration forms Investment companies will be required to file reports on Form N-CSR and registration statements and amendments thereto in HTML format and provide hyperlinks to exhibits and other information incorporated by reference.
  24. 24. What Kind of Executive Compensation Disclosure is Required and in Which Reports? • Part III of Form 10-K and Proxy Statement incorporation timing • Who is covered: mainly, Named Executive Officers – based on total compensation (Summary Compensation Table) • What is covered: salary, bonuses, certain benefits and perquisites, equity awards value and change of control or termination benefits - “all compensation must be disclosed” • What does it look like: CD&I, tables, narrative descriptions • JOBS Act impact – scaled disclosure for EGCs, smaller reporting companies 25
  25. 25. What is a Corporate Report and When are they Filed? • General  Report intended to supplement recurring filing requirements when material events occur that should be brought to prompt attention of investing public. • Timing  Company generally must file Form 8-K within four business days after occurrence of reportable event.  Form 8-K filed in accordance with SEC’s fair disclosure rules (Regulation FD) must be filed in time frame specified under those rules.  Company may voluntarily file Form 8-K upon occurrence of any event deemed of importance to shareholders (no deadline).  Don’t file late! Cannot use Registration Statement on Form S-3. 26
  26. 26. What is a Corporate Report and When are they Filed? • Mandatory reportable items include:  Entry into/amendment/termination of material definitive agreement not made in ordinary course of business;  Bankruptcy events;  Mine safety events;  Results of operations and financial conditions;  Creation of, or acceleration or increase in, material, direct financial obligation or obligation under off-balance sheet arrangement;  Costs associated with exit plan activities;  Material impairments to assets;  Acquisition or disposal of assets not in ordinary course of business; 27
  27. 27. What is a Corporate Report and When are they Filed? • Mandatory reportable items include:  Change in control;  Receipt of notice of delisting or failure to satisfy continued listing rule or standard or transfer of listing from a exchange or inter-dealer quotation system;  Non-reliance on financial statements or related audit report;  Changes in certifying accountant;  Unregistered sales of equity securities aggregating at least 1% of the outstanding class;  Material modifications to the rights of security holders;  Departure of directors or principal officers;  Election of directors other than by shareholder vote; 28
  28. 28. What is a Corporate Report and When are they Filed? • Mandatory reportable items include:  Appointment of principal officers;  Certain amendments to charter or bylaws and changes in fiscal year;  Temporary suspensions of trading under employee benefit plans;  Amendment or waiver of Code of Ethics;  Change in shell company status;  Certain shareholder director matters for companies with proxy access procedures;  Shareholder voting results;  Certain disclosures related to asset-backed securities; and  Disclosures to satisfy Regulation FD. 29
  29. 29. What Does the SEC’s Process for Reviewing and Commenting on Disclosure Entail? • Regular review by SEC – some level of review every 3 years (SOX mandate). • SEC discretionary review triggers – new registrants, outliers, largest companies. • Full review vs. limited scope review. • Public availability of SEC comments and issuer responses. • Areas of focus – MD&A, exec comp, segment reporting, goodwill, risk factors. 30
  30. 30. What Does the SEC’s Process for Reviewing and Commenting on Disclosure Entail? • Best practices:  Coordination of players (management, board, auditors, counsel);  Careful analysis of comments and tailored response;  Escalation process – use wisely and appropriately;  Confidential treatment – Rule 83; and  Choose your battles wisely. 31
  31. 31. What are Some Topics that Should be on Your Radar? • Board diversity initiatives (California’s S.B. 826). • Pay ratio disclosure. • Possible amendments to Rule 10b5-1 (Promoting Transparent Standards for Corporate Insiders Act) 32
  32. 32. About the Faculty 33
  33. 33. Vanessa Schoenthaler - vschoenthaler@sfgh.com Vanessa Schoenthaler is a partner in the New York office of Sugar Felsenthal Grais & Helsinger. She focuses her practice on corporate and securities matters with an emphasis on private and public securities transactions, compliance and disclosure obligations and corporate governance matters. Her clients rely on her deep experience navigating the complexities of both the public and private securities regulatory environment. Vanessa's corporate finance experience ranges from advising investors and development stage companies in early round financings to representing issuers and intermediaries in registered and exempt offerings of equity and debt securities. She has worked with foreign and domestic issuers on matters such as periodic and ongoing disclosure obligations, corporate governance practices, exchange listing standards, joint ventures, equity compensation arrangements, ESOP transactions and mergers, acquisitions and dispositions. Vanessa counsels foreign and domestic sponsors, private funds and investment managers with regard to formation and operation, investment adviser registration, and periodic and ongoing disclosure obligations. She also guides her clients in structuring investments, compliance with regulatory requirements (including under Section 13, Section 16 and Rule 144) and addressing insider trading issues. . 34 About The Faculty
  34. 34. Alissa Parisi - alissa.parisi@klgates.com Alissa Parisi is a partner in K&L Gates’s Corporate/M&A practice group and resides in the Washington, DC office. Ms. Parisi advises clients on a full range of corporate, securities, governance and compliance matters. Ms. Parisi has significant experience in advising boards and executive management on complex business and operational matters, including in the areas of risk assessment, implementation of governance initiatives and alignment of corporate strategy to achieve corporate goals. She also acts as corporate counsel for companies, advising on a host of general corporate matters, including fiduciary duties, management transitions, relationships with shareholders and effective approaches to the changing regulatory environment. Ms. Parisi advises companies on compliance matters relating to the SEC, NYSE, Nasdaq, state regulators and other authorities. Her compliance experience includes preparing of SEC reports, advising with respect to the timing and substance of disclosure of material events and counseling with respect to shareholder meetings. Ms. Parisi also represents publicly and privately held entities in merger and acquisition transactions. She has broad experience in representing clients in the structure, negotiation, diligence and documentation of transactions ranging from several million dollars to several billion dollars. Ms. Parisi serves as co-chair of the Women in the Profession Committee and the Associate Development Committee. 35 About The Faculty
  35. 35. About The Faculty Julia Vax - julia.vax@arnoldporter.com Julia Vax focuses her practice on corporate and securities laws in representing emerging growth and public companies, primarily in the life sciences and technology sectors, from formation and early-stage capital raising to publicly traded entities. Ms. Vax has advised clients in the biopharmaceutical, genomics, medical device, diagnostics, Internet and digital media, software, IP telephony, telecommunications and financial services sectors in all aspects of their corporate development and in connection with a broad range of financing and strategic transactions. Ms. Vax has extensive experience in IPOs, Rule 144A transactions, shelf registrations, private placements, including PIPE transactions and venture capital financings, as well as in executive compensation, corporate governance and SEC reporting and compliance for public companies. She has been involved in numerous public and private financing transactions representing companies, investors, underwriters and placement agents. Ms. Vax is a faculty member at the Center for International Legal Studies and has taught US corporate securities laws at the University of Tartu, Estonia, School of Law, as a Visiting Professor in the Fall 2017. 36
  36. 36. About The Faculty Craig Mordock - cmordock@titanhst.com Craig is General Counsel of Titan Health & Security Technologies, Inc., a California-based tech company providing a emergency alert, telemedicine and mass notifications system for businesses, governments and other large institutions. He has practiced for over 25 years as a corporate/securities lawyer focusing on private and public securities offerings, corporate governance, and mergers and acquisitions. His corporate finance experience ranges from representing venture capitalists, institutional investors, and start-up companies in early- stage financings to representing issuers and investment banks in public offerings of equity and debt securities. He advises purchasers and sellers of companies in a variety of industries, including software, communications, semiconductors, life sciences, renewable energy, consumer products, and financial services. Craig has extensive experience representing public companies in connection with disclosure and compliance matters under the Securities Act of 1933 and the Securities Exchange Act of 1934 and provides general corporate and business counseling to several privately held companies. He regularly counsels boards of directors and board committees in connection with their duties under state and federal law as well as their compliance with the rules of self-regulatory organizations such as the New York Stock Exchange and NASDAQ. Craig has been a speaker at numerous conferences on securities and corporate governance matters and has published articles on various topics in these areas. 37
  37. 37. Questions or Comments? If you have any questions about this webinar that you did not get to ask during the live premiere, or if you are watching this webinar On Demand, please do not hesitate to email us at info@financialpoise.com with any questions or comments you may have. Please include the name of the webinar in your email and we will do our best to provide a timely response. IMPORTANT NOTE: The material in this presentation is for general educational purposes only. It has been prepared primarily for attorneys and accountants for use in the pursuit of their continuing legal education and continuing professional education. 38
  38. 38. About Financial Poise 39 Financial Poise™ has one mission: to provide reliable plain English business, financial, and legal education to individual investors, entrepreneurs, business owners and executives. Visit us at www.financialpoise.com Our free weekly newsletter, Financial Poise Weekly, updates you on new articles published on our website and Upcoming Webinars you may be interested in. To join our email list, please visit: https://www.financialpoise.com/subscribe/

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