Category: Capital Markets

Capital Markets / Corporate / Securities

SEC Proposes to Greatly Expand Exemption from SOX 404 Auditor Attestation Requirement

The SEC has proposed revisions to the definition of an “accelerated filer” that would exempt most companies that have both a public float of common equity of less than $700 million and annual revenues of less than $100 million from the requirements of Section 404 of the Sarbanes-Oxley Act (SOX 404). If adopted, these revisions would exempt many Canadian cross-reporting companies from the SOX 404 auditor attestation requirement, thereby reducing the cost of cross-border reporting. The proposal is subject to a 60-day public comment period. Additional information is available in the SEC’s press release regarding the proposed new amendments here: sec.gov/news/press-release/2019-68.

Capital Markets / M&A / Securities

What Cross-listed Canadian Companies Need to Know About the Impact of the U.S. Government Shutdown on SEC Operations

As a result of the partial U.S. government shutdown that began on December 22, 2018, the U.S. Securities and Exchange Commission (SEC), one of nine federal agencies affected, recently published its Operations Plan Under a Lapse in Appropriations and Government Shutdown (sec.gov/files/sec-plan-of-operations-during-lapse-in-appropriations-2018.pdf), which went into effect on December 27, 2018. The Operations Plan offers important guidance regarding the significant impacts of the shutdown on the agency’s activities. Additional guidance is also available from the SEC’s Divisions of Corporation Finance (here: sec.gov/page/corpfin-section-landing) and Investment Management (here: sec.gov/investment-management). Issuers and practitioners should make contingency plans to address the effects upon ongoing or planned securities offerings, filings, and requests for interpretive guidance, among other things. A few important highlights:...

Capital Markets / Corporate / Litigation / Securities

The SEC’s Recent Settlement with Tesla and Elon Musk Teaches Us a Valuable Corporate Governance Lesson

The SEC’s settlement with Tesla and Elon Musk teaches us some important corporate governance lessons on monitoring and vetting executive use of social media. As background, on August 7, 2018, the markets were surprised by a series of tweets initiated by Elon Musk, the CEO of Tesla, Inc., in which Musk mused about taking Tesla private at $420 per share (a significant premium to the then-market price), with funding secured. The stock price jumped, trading in Tesla stock was halted, and Tesla rushed to catch up with official announcements. The deal didn’t happen, and it was questioned whether Musk was really serious, and whether funding was really “secured.” The SEC commenced an investigation....

Capital Markets / Securities

What if You Miss the Deadline to File a Form D?

As a continuation of our August 9 post regarding the deadline for Canadian companies to file a Form D for a private placement in the United States, we now address the questions, “What if our company missed the deadline to file a Form D with the SEC?” And, more importantly, “Have we lost our ability to rely upon the exemption?” The good news is that the exemption provided by Regulation D is not dependent upon the filing of the Form D. So, an issuer that fails to file the Form, or files it late, need not be concerned about the liability associated with a non-exempt offering. However, the failure to file exposes the issuer...

Capital Markets / Securities

Could Your Form D Already be Late by the Date of Closing?

Canadian companies that sell securities to U.S. investors under Regulation D must file a Form D with the SEC within 15 days after “the date of first sale.” Most people would assume that the closing of the offering is the date of sale. However, in the instructions to Form D, the SEC explains that the date of first sale is “the date on which the first investor is irrevocably contractually committed to invest, which, depending on the terms and conditions of the contract, could be the date on which the issuer receives the investor’s subscription agreement or check.” Therefore, the deadline for the Form D will depend on the wording of the agreement...

Capital Markets / Natural Resources / Securities

Analysis of the 60 Most Recent SEC Comment Letters Issued to Canadian Form 40-F Filers

Since January 1, 2016, the SEC has publicly released its correspondence relating to 60 comment letters sent to Canadian issuers with respect to annual reports filed on Form 40-F pursuant to the Canada-U.S. Multi-Jurisdictional Disclosure System (MJDS). We have analyzed the content and key takeaways from these letters, including: The SEC’s most common areas of focus; Recent trends; and Common errors to be avoided. Background The MJDS system allows Canadian issuers that satisfy certain market capitalization and other requirements to file an annual report with the SEC on Form 40-F. Except for a few items, a Form 40-F does not impose U.S. disclosure requirements upon a Canadian issuer and, instead, includes and relies...

Cannabis / Capital Markets / Securities

Canadian Cannabis Companies Begin to Trade on National Stock Exchanges in the United States

With the listing on May 24th of Canopy Growth Corporation (Canopy) on the New York Stock Exchange (NYSE), both NASDAQ and the NYSE have permitted Canadian cannabis companies to trade on their respective exchanges. Canopy, the first Canadian cannabis company to list on the NYSE, follows Cronos Group Inc. (Cronos), which was the first Canadian cannabis company to list on a national stock exchange in the United States when it listed on NASDAQ in February. While neither exchange has formally adopted a policy on the listing of cannabis companies, informally they are willing, on a case-by-case basis, to accept a company with cannabis operations, so long as the company complies with all relevant...

Capital Markets / Securities

SEC Issues New Cybersecurity Guidance

On February 26, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents. The SEC’s new guidance reinforces and expands on its October 2011 guidance, emphasizing the importance of adopting sound cybersecurity policies and procedures and safeguards against insider trading in the event of a potentially material cybersecurity breach. Read more about the new guidance in our recent eUpdate: www.dorsey.com/newsresources/publications/client-alerts/2018/03/sec-issues-new-cybersecurity-guidance.

Capital Markets / Natural Resources / Securities

Status Check on the SEC’s Proposed Overhaul of the Mining Disclosure Regime (Part 2)

The SEC is aiming to finalize its new mining disclosure rules within the next year, according to statements made last week by William Hinman, Director of the SEC’s Division of Corporation Finance, at the Securities Regulation Institute. For more details regarding the SEC’s original 2016 proposal to revamp the rules, and reactions by industry, see our summary of the initial proposal (here: www.dorsey.com/newsresources/publications/client-alerts/2016/07/new-mining-disclosure-rules) and our last blog post (here: crossbordercounselor.com/status-check-on-the-secs-proposed-overhaul-of-the-mining-disclosure-regime/).  

Capital Markets / Natural Resources / Securities

Status Check on the SEC’s Proposed Overhaul of the Mining Disclosure Regime

About 18 months have passed since the U.S. Securities and Exchange Commission (SEC) published its bold attempt to modernize the disclosure requirements for mining companies that are listed on U.S. stock exchanges or otherwise report to the SEC. With final rules not yet adopted, the fight for a streamlined reporting regime continues. The SEC’s proposed overhaul was spawned by industry request – specifically, a request by the Society for Mining, Metallurgy & Exploration (SME), the leading professional society of mining professionals in the United States, that the SEC bring its disclosure requirements into the modern age and adopt a new disclosure regime based on the Committee for Mineral Reserves International Reporting Standards (CRIRSCO)...