The SEC today adopted amendments to the disclosure requirements relating to repurchases of an issuer’s equity securities, including:

• requiring issuers to provide daily repurchase activity on a quarterly or semi-annual basis, depending on the type of issuer (note the proposed rules would have required next day disclosure so the final rules provide significantly more time for reporting the data). The required disclosures include, for each day on which a repurchase was conducted, the number of shares repurchased that day (including whether they were intended to qualify for the safe harbor in Rule 10b-18) and the average price paid, among other things. The information will be filed, as the case may be (1) as an exhibit to Forms 10-Q and 10-K for domestic issuers, (2) in annual and semi-annual reports on Form N-CSR for listed closed-end funds and (3) quarterly on a new Form F-SR for foreign private issuers due within 45 days after each quarter end. The new disclosures will replace existing requirements regarding monthly repurchase data in Regulation S-K, Form 20-F and Form N-CSR.
• issuers will be required to include a checkbox indicating whether certain officers and directors traded in the relevant securities in the four business days before or after the announcement of the repurchase plan or program.
• the amendments will revise and expand narrative repurchase disclosure requirements to require that an issuer disclose: (1) the objectives or rationales for its share repurchases and the process or criteria used to determine the amount of repurchases; and (2) any policies and procedures relating to purchases and sales of the issuer’s securities during a repurchase program by its officers and directors, including any restriction on such transactions.
• the amendments will add a new item 408(d) to Regulation S-K to require quarterly disclosure in periodic reports on Forms 10-Q and 10-K about an issuer’s adoption and termination of Rule 10b5-1 trading arrangements.

Foreign private issuers will disclose the quantitative data in new Form F-SR beginning with the Form F-SR that covers the first full fiscal quarter that begins on or after April 1, 2024, and provide the narrative disclosure starting in the first Form 20-F filed after their first Form F-SR has been filed. Registered closed-end management investment companies that are exchange traded will disclose the quantitative data and provide the narrative disclosure on Form N-CSR beginning with the Form N-CSR that covers the first six-month period that begins on or after January 1, 2024. All other issuers will be required to include the quantitative data as an exhibit to their Forms 10-Q and 10-K  and provide the narrative disclosure in their Forms 10-Q and 10-K beginning with the first filing that covers the first full fiscal quarter that begins on or after October 1, 2023.

On June 3, the SEC adopted rules and form amendments to mandate the electronic filing or submission of certain documents that currently are permitted to be filed or submitted in paper, most notably "glossy" annual reports and Form 144s; and mandate the use of Inline eXtensible Business Reporting Language ("Inline XBRL") for the filing of the financial statements and accompanying schedules to the financial statements required by Form 11-K. The new rules for annual reports and most of the other filings impacted will go into effect in approximately 6 months, while the new rules for Form 144 will go into effect 6 months after an updated EDGAR filer manual is published (expected in September; so presumably the new Form 144 rules will go into effect sometime around March 2023). In addition, once in effect, the current SEC guidance allowing website posting of annual reports in lieu of filing with the SEC will be withdrawn (though of course companies can continue to post them on their websites in addition to the EDGAR filings).

For additional information, as well as other filings impacted please see the full rule release here: https://www.sec.gov/rules/final/2022/33-11070.pdf

As part of the SEC Division of Corporation Finance’s focus on climate-related disclosure in public company filings, and as a follow up to guidance on this topic issued in 2010, the Division posted an illustrative letter containing sample comments that the Division may issue to companies regarding their climate-related disclosure or the absence of such disclosure. These sample comments impact several sections of company filings, including most significantly management’s discussion and analysis of financial condition and results of operations (MD&A):

General

1. We note that you provided more expansive disclosure in your corporate social responsibility report (CSR report) than you provided in your SEC filings.  Please advise us what consideration you gave to providing the same type of climate-related disclosure in your SEC filings as you provided in your CSR report.

Risk Factors

2. Disclose the material effects of transition risks related to climate change that may affect your business, financial condition, and results of operations, such as policy and regulatory changes that could impose operational and compliance burdens, market trends that may alter business opportunities, credit risks, or technological changes.
3. Disclose any material litigation risks related to climate change and explain the potential impact to the company.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

4. There have been significant developments in federal and state legislation and regulation and international accords regarding climate change that you have not discussed in your filing. Please revise your disclosure to identify material pending or existing climate change-related legislation, regulations, and international accords and describe any material effect on your business, financial condition, and results of operations.
5. Revise your disclosure to identify any material past and/or future capital expenditures for climate-related projects. If material, please quantify these expenditures.
6. To the extent material, discuss the indirect consequences of climate-related regulation or business trends, such as the following:
   • decreased demand for goods or services that produce significant greenhouse gas emissions or are related to carbon-based energy sources;
   • increased demand for goods that result in lower emissions than competing products;
   • increased competition to develop innovative new products that result in lower emissions;
   • increased demand for generation and transmission of energy from alternative energy sources; and
   • any anticipated reputational risks resulting from operations or products that produce material greenhouse gas emissions.
7. If material, discuss the physical effects of climate change on your operations and results. This disclosure may include the following:
   • severity of weather, such as floods, hurricanes, sea levels, arability of farmland, extreme fires, and water availability and quality;
   • quantification of material weather-related damages to your property or operations;
   • potential for indirect weather-related impacts that have affected or may affect your major customers or suppliers;
   • decreased agricultural production capacity in areas affected by drought or other weather-related changes; and
   • any weather-related impacts on the cost or availability of insurance.
8. Quantify any material increased compliance costs related to climate change.
9. If material, provide disclosure about your purchase or sale of carbon credits or offsets and any material effects on your business, financial condition, and results of operations.

The full letter may be found here.

Yesterday, the SEC announced that, effective October 1, 2021, the fees that public companies and other issuers pay to register their securities with the Commission will be set at $92.70 per million dollars. This is a decrease from the current rate of $109.10/million.

It looks like we can expect more SEC comments on climate change disclosures and likely new guidance or new rules in the not too distant future: https://www.sec.gov/news/public-statement/lee-statement-review-climate-related-disclosure.

The SEC’s Division of Corporation Finance published an "illustrative letter" with sample comments that it may issue to companies seeking to raise capital in securities offerings amid market and price volatility. These will most often apply to companies with (1) recent stock run-ups or recent divergences in valuation ratios relative to those seen during traditional markets, (2) high short interest or reported short squeezes, and (3) reports of strong and atypical retail investor interest (whether on social media or otherwise). However, all companies should review this new guidance as part of their preparations for any upcoming capital raising.

https://www.sec.gov/corpfin/sample-letter-securities-offerings-during-extreme-price-volatility

The sample comments generally call for increased disclosures about:

• recent price volatility and any known risks of investing in the stock under these circumstances.
• the market price of the stock prior to the recent price volatility.
• any recent change in financial condition or results of operations, such as in earnings, revenues or other measure of company value that is consistent with the recent change in stock price. 
• risk factors addressing the recent extreme volatility in stock price, the effects of a potential "short squeeze" due to a sudden increase in demand for the stock, the impact that the offering could have on the stock price and on investors where there is a significant number of shares being offered relative to the number currently outstanding and, to the extent the company expects to conduct additional offerings in the future to fund its operations or provide liquidity, the dilutive impact of those offerings on investors that purchase shares in the offering at a significantly higher price.
• various impacts of the sales price on the use of proceeds.

The SEC has adopted amendments to Regulation S-K to revise the rules for MD&A and eliminate the requirement for selected financial data in SEC filings. According to the SEC, "The amendments are intended to enhance the focus of financial disclosures on material information for the benefit of investors, while simplifying compliance efforts for registrants."

The amendments will become effective 30 days after they are published in the Federal Register. However, companies are not required to comply with the amended rules until the first fiscal year ending on or after the date that is 210 days after publication in the Federal Register, which means for calendar year fiscal year end companies, these rules will not be mandatory for their 2020 annual reports on 10-K or 20-F. Companies will be required to apply the amended rules in a registration statement and prospectus that on its initial filing date is required to contain financial statements for a period on or after that initial compliance date. Although companies will not be required to apply the amended rules until their mandatory compliance date, they may comply with the final amendments any time after the effective date, so long as they provide disclosure responsive to an amended item in its entirety.

The changes to Items 301, 302, and 303 of Regulation S-K:

• Eliminate Item 301 (Selected Financial Data); and
• Modernizing, simplifying and streamlining Item 302(a) (Supplementary Financial Information) and Item 303 (MD&A) to:
  • Revise Item 302(a) to replace the current requirement for quarterly tabular disclosure with a principles-based requirement for material retrospective changes;
  • Add a new Item 303(a), Objective, to state the principal objectives of MD&A;
  • Amend current Item 303(a)(1) and (2) (amended Item 303(b)(1)) to modernize, enhance and clarify disclosure requirements for liquidity and capital resources;
  • Amend current Item 303(a)(3) (amended Item 303(b)(2)) to clarify, modernize and streamline disclosure requirements for results of operations;
  • Add a new Item 303(b)(3), Critical accounting estimates, to clarify and codify Commission guidance on critical accounting estimates;
  • Replace current Item 303(a)(4), Off-balance sheet arrangements, with an instruction to discuss such obligations in the broader context of MD&A;
  • Eliminate current Item 303(a)(5), Tabular disclosure of contractual obligations, in light of the amended disclosure requirements for liquidity and capital resources and certain overlap with information required in the financial statements; and
  • Amend current Item 303(b), Interim periods (amended Item 303(c)) to modernize, clarify and streamline the item and allow for flexibility in the comparison of interim periods to help registrants provide a more tailored and meaningful analysis relevant to their business cycles.

In addition, the SEC adopted certain parallel amendments to the financial disclosure requirements applicable to foreign private issuers, including to Forms 20-F and 40-F, as well as other conforming amendments to the Commission's rules and forms, as appropriate.

To the extent you are working on executive compensation disclosure in a proxy statement or registration statement, the SEC just released this interpretation related to benefits provided to executives during the pandemic:

219.05 In reporting compensation for periods affected by COVID-19, questions may arise whether benefits provided to executive officers because of the COVID-19 pandemic constitute perquisites or personal benefits for purposes of the disclosure required by Item 402(c)(2)(ix)(A) and determining which executive officers are “named executive officers” under Item 402(a)(3)(iii) and (iv). The two-step analysis articulated by the Commission in Release 33-8732A continues to apply when determining whether an item provided because of the COVID-19 pandemic constitutes a perquisite or personal benefit:

• An item is not a perquisite or personal benefit if it is integrally and directly related to the performance of the executive’s duties.
• Otherwise, an item that confers a direct or indirect benefit and that has a personal aspect, without regard to whether it may be provided for some business reason or for the convenience of the company, is a perquisite or personal benefit unless it is generally available on a non-discriminatory basis to all employees.

Whether an item is "integrally and directly related to the performance of the executive’s duties" depends on the particular facts. In some cases, an item considered a perquisite or personal benefit when provided in the past may not be considered as such when provided as a result of COVID-19. For example, enhanced technology needed to make the NEO’s home his or her primary workplace upon imposition of local stay-at-home orders would generally not be a perquisite or personal benefit because of the integral and direct relationship to the performance of the executive’s duties. On the other hand, items such as new health-related or personal transportation benefits provided to address new risks arising because of COVID-19, if they are not integrally and directly related to the performance of the executive’s duties, may be perquisites or personal benefits even if the company would not have provided the benefit but for the COVID-19 pandemic, unless they are generally available to all employees.

The SEC adopted amendments to modernize its shareholder proposal rule, which governs the process for a shareholder to have its proposal included in a company’s proxy statement for consideration by all of the company’s shareholders. The main changes were:

• amend Rule 14a-8(b) by:
  • replacing the current ownership threshold, which requires holding at least $2,000 or 1% of a company’s securities for at least one year, with three alternative thresholds that will require a shareholder to demonstrate continuous ownership of at least:
    • $2,000 of the company’s securities for at least three years;
    • $15,000 of the company’s securities for at least two years; or
    • $25,000 of the company’s securities for at least one year.
  • prohibiting the aggregation of holdings for purposes of satisfying the amended ownership thresholds;
  • requiring that a shareholder who elects to use a representative for the purpose of submitting a shareholder proposal provide documentation to make clear that the representative is authorized to act on the shareholder’s behalf and to provide a meaningful degree of assurance as to the shareholder’s identity, role and interest in a proposal that is submitted for inclusion in a company’s proxy statement; and
  • requiring that each shareholder state that he or she is able to meet with the company, either in person or via teleconference, no less than 10 calendar days, nor more than 30 calendar days, after submission of the shareholder proposal, and provide contact information as well as specific business days and times that the shareholder is available to discuss the proposal with the company.
    
• amend Rule 14a-8(c) by:
  • applying the one-proposal rule to "each person" rather than "each shareholder" who submits a proposal, such that a shareholder-proponent will not be permitted to submit one proposal in his or her own name and simultaneously serve as a representative to submit a different proposal on another shareholder’s behalf for consideration at the same meeting. Likewise, a representative will not be permitted to submit more than one proposal to be considered at the same meeting, even if the representative were to submit each proposal on behalf of different shareholders.
    
• amend Rule 14a-8(i)(12) by:
  • revising the levels of shareholder support a proposal must receive to be eligible for resubmission at the same company’s future shareholder meetings from 3%, 6% and 10% for matters previously voted on once, twice or three or more times in the last five years, respectively, with thresholds of 5%, 15% and 25%, respectively. For example, a proposal would need to achieve support by at least 5% of the voting shareholders in its first submission in order to be eligible for resubmission in the following three years. Proposals submitted two and three times in the prior five years would need to achieve 15% and 25% support, respectively, in order to be eligible for resubmission in the following three years.

The amendments will be effective 60 days after publication in the Federal Register, and the final amendments will apply to any proposal submitted for an annual or special meeting to be held on or after January 1, 2022. The final rules also provide for a transition period with respect to the ownership thresholds that will allow shareholders meeting specified conditions to rely on the $2,000/one-year ownership threshold for proposals submitted for an annual or special meeting to be held prior to January 1, 2023.

In his remarks, the SEC Chair noted that he believes that additional changes to the proxy process still need attention such as the rules around counting of votes and so-called proxy plumbing – stay tuned!

Effective October 1^st, the SEC registration fee will decrease to $109.10 per million dollars registered from the current rate of $129.80 per million dollars.