Category: Securities

Employment / Securities

Companies Subject to U.S. Jurisdiction Should not Restrict Personnel from Being SEC Whistleblowers, or Receiving SEC Whistleblower Awards

SEC rules prohibit taking “any action” to impede an individual from communicating directly with the SEC about a possible securities law violation, including by enforcing, or threatening to enforce, a confidentiality agreement. Previously, the SEC has brought enforcement actions against, and secured large monetary settlements from, companies whose internal agreements and policies included broad confidentiality provisions that would restrict an employee from voluntarily being a whistleblower to the SEC. This month, the SEC announced a new round of settlements with seven different U.S. listed companies, who agreed to pay the SEC penalties totaling $3 million for violating these rules. What is notable about this new round of enforcement is that in each case,...

Capital Markets / Securities

The Perils of Finder’s Fees (Revisited)

Way back in 2017, one of our earliest posts discussed the legal and financial risks to both the issuer and the finder if an issuer pays a finder’s fee in connection with a sale of securities in the United States, and the person receiving the fee is not a U.S. registered broker-dealer. In many cases, this type of fee violates U.S. securities laws. However, this continues to occur from time to time, especially in deals where U.S. counsel is not consulted prior to the closing. For a brief summary of the risks of paying this type of finder’s fee, and an example of one issuer that declared bankruptcy as a result, read on....

Capital Markets / SEC Rulemaking / Securities

The SEC Amends Policy on Economic Projections, and Issues Final Rules and Additional Guidance for SPACs and Shell Companies

As discussed in our eUpdate published today, the SEC on January 24, 2024 adopted final rules amending the disclosure and registration requirements applicable to special purpose acquisition companies (SPACs) and shell companies that register or file reports with the SEC. These amendments impose significant new requirements on SPAC IPOs, as well as de-SPAC and similar transactions for SEC reporting shell companies. The new SEC rules do not apply to Canadian capital pool companies, SPACs, or shell companies unless they register or file reports with the SEC. As part of the final rule package, the SEC also amended its guidance for all SEC reporting companies on how to make economic projections in SEC filings,...

SEC Rulemaking / Securities

SEC Amends Schedule 13D/G Requirements

On October 10, 2023, the Securities and Exchange Commission approved amendments to the Regulation 13D-G reporting regime for persons who beneficially own more than 5% of a class of securities (“5% Owners”) that is registered under Section 12 of the Securities and Exchange Act of 1934, as amended.  The amendments accelerate the deadlines by which 5% Owners must file initial reports and amendments on Schedule 13D or 13G, mandate the use of machine-readable language in those reports, and provide for additional amendments and guidance.  The amendments apply to 5% Owners of all Section 12 registered securities, including 5% Owners of Canadian foreign private issuers and MJDS filers listed on Nasdaq, the New York...

Capital Markets / Securities

The SEC’s Form F-7 Can Be Used to Conduct a U.S. Public Offering of Securities, with No Review, No Ongoing SEC Reporting, and No Market Capitalization Requirement

Did you know that the Canada-U.S. multijurisdictional disclosure system (MJDS) includes an SEC form that does not include any minimum market capitalization requirement, and can be used to complete a public offering of securities in the United States without triggering any ongoing SEC reporting requirements?  It’s true. Form F-7 allows certain TSX and TSXV-listed Canadian companies to extend a rights offering to its United States shareholders on a public offering basis, provided they satisfy certain form eligibility requirements.  U.S. information legends are included in the Canadian offering documents, which are filed with the SEC under cover of Form F-7, together with certain consents.  A Form F-7 is not normally reviewed by the SEC. ...

Capital Markets / Securities

Raising U.S. Funds Under Canada’s New “Listed Issuer Financing Exemption”

As many of our readers will have heard, the Canadian Securities Administrators (“CSA”) has announced the adoption of a new prospectus exemption for certain reporting issuers listed on a Canadian stock exchange (the “Listed Issuer Financing Exemption”), effective November 21, 2022.  To date, little attention has been given to the potential effect of the Listed Issuer Financing Exemption on the practices of Canadian listed companies raising funds from U.S. investors.  In this post, we discuss those implications and suggest methods for relying on the Listed Issuer Financing Exemption while still preserving the ability to raise funds from U.S. investors. Overview of the Listed Issuer Financing Exemption The Listed Issuer Financing Exemption will allow...

Natural Resources / Securities

Mining Companies Subject To The SEC’S Subpart 1300 Of Regulation S-K Should Prepare Now For Next Year’s Annual Report

In 2022, many SEC reporting companies with mineral resource assets completed their inaugural SEC annual report on Form 10-K or 20-F subject to the SEC’s mining disclosure rules in subpart 1300 of Regulation S-K (“subpart 1300”), and filed their inaugural subpart 1300 technical report summaries, if applicable. As 2023’s annual reporting season approaches, we outline for our readers some important factors to consider in preparing for Year 2 of subpart 1300 compliance.  Depending on the situation, an issuer may need to begin its preparations well in advance of its fiscal year end (“FYE”), or risk being in default of its reporting requirements. Overview Subpart 1300 requires an issuer with material mining assets that...

M&A / Securities

Continuing a Company from One Country to Another Country Without U.S. Registration or Exemption Triggers Shareholder Rescission Rights

In Canada it’s considered no big deal to ask shareholders to approve a continuance or redomicile of a company from one province to another, or between Canadian provincial and federal jurisdictions. That’s also largely true from a U.S. securities perspective, but only because the continuance is being made within the same country. If a continuance or redomicile is made from one country to a different country, it’s a completely different story. Canadian counsel and their clients are sometimes surprised to hear that if a company continues from Canada to another country, or if a company continues into Canada, the failure to comply with U.S. securities laws may subject the company to rescission rights...

Capital Markets / SEC Rulemaking / Securities

New NASDAQ Board Diversity Disclosure Rules

As discussed in more detail here, on August 6, 2021, the United States Securities and Exchange Commission (the “SEC”) approved NASDAQ Rules 5605(f) and 5606, which require each NASDAQ listed company (subject to certain narrow exceptions) to (i) publicly disclose, to the extent permitted by applicable law, information on the voluntary self disclosed gender, racial characteristics and LGBTQ+ status of the issuer’s board members, and (ii) have at least two “diverse” board members or explain why it does not have two diverse members meeting the applicable requirements. Issuers with five or fewer board members are required only to have one “diverse” board member. Canadian issuers that are NASDAQ listed are subject to the...

Capital Markets / Securities

The Lights Could Go Out on Over-the-Counter Companies on September 28, 2021

On September 28, 2021, companies trading in the United States over-the-counter securities markets (“OTC Markets”) that do not comply with amended Rule 15c-211 will no longer be eligible for quotation on the OTC Markets, effectively eliminating their public quotation in the United States. Amended Rule 15c-211 requires that broker-dealers obtain and review basic information about an issuer and its security before initiating or resuming quotation of a security in the OTC Markets. The amendments should have no effect on companies that are traded on a national securities exchange (i.e., NASDAQ, New York Stock Exchange, NYSE American, etc.), the OTCQX or OTCQB. Companies trading on the OTC Pink or OTC Grey Market will need...