We are pleased to release MaloneBailey's February 2022 issue of The Crunch, our newsletter highlighting recent accounting, regulatory and tax updates. Please note that the updates provided in this newsletter are not a comprehensive list.
We encourage you to visit the SEC, FASB and IRS websites for more information as well as a complete list of updated rules, regulations and proposals. We invite you to contact us should you have any questions about the information provided in this issue. Please visit our website to review archived versions of this newsletter containing past accounting, regulatory and tax updates.
The MaloneBailey Team
|
|
What's the Crunch?
Featured Podcast
-
Harris Bricken Global Law and Business Podcast: A Discussion on International Tax & Audit Featuring Nicole Zhao
Recent Accounting & Regulatory Updates
Recent FASB & AICPA Updates
- FASB Accounting Standards Updates - Accounting Standards Update No. 2021-09 —Leases (Topic 842) —Discount Rate for Lessees That Are Not Public Business Entities
- FASB Accounting Standards Updates - Accounting Standards Update No. 2021-10 —Government Assistance (Topic 832) —Disclosures by Business Entities about Government Assistance
- Exposure Draft - Proposed Accounting Standards Update 2021-007 —Liabilities —Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations
- Exposure Draft - Proposed Accounting Standards Update 2021-006 —Financial Instruments —Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures
- Segment Reporting –FASB Discusses Segment Reporting
- FASB Agenda –FASB Discusses its Agenda
- Intangible Assets –FASB Discusses Identifiable Intangible Assets and Subsequent Accounting for Goodwill
- Supplier Finance Agreements –IASB Proposes Enhanced Disclosure Requirements for Supplier Finance Arrangements
- Presentation and Disclosure –AICPA Publishes 2021 Edition of Best Practices in Presentation and Disclosure Publication
- Non-Current Liabilities –IASB Proposes Guidance on Non-Current Liabilities with Covenants
- Leases –FASB Decides Against Further Delay of Effective Date of Leases Standard for NFPs and Private Companies
Recent SEC & PCAOB Updates
- Release No. 34-93784: Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions
- Release No. IC-34441: Money Market Fund Reforms Modernization Release No. 34-93783: Share Repurchase Disclosure Modernization
- Release No. 33-11013: Rule 10b5-1 and Insider Trading Release No. 34-93614: Electronic Recordkeeping Requirements for Broker-Dealers, Security-Based Swap Dealers, and Major Security-Based Swap Participants
- Release No. 34-93613: Reporting of Securities Loans Release No. 34-93595: Proxy Voting Advice
- Release No. 33-11005: Updating EDGAR Filing Requirements Release No. 33-11016: Adoption of Updated EDGAR Filer Manual
- Release No. 34-93701: Holding Foreign Companies Accountable Act Disclosure Release No. 34-93596: Universal Proxy
- Release No. IA-5904: Performance-Based Investment Advisory Fees
- SEC Staff Views: December 21, 2021: Sample Letter to China-Based Companies SEC Staff Views: Staff Statement Regarding Form CRS Disclosures
- SEC Staff Speeches: Statement of Commissioner Elad L. Roisman, Elad L. Roisman, Commissioner - December, 2021
- SEC Staff Views: Announcement Regarding Personally Identifiable and Other Sensitive Information in Rule 14a-8 Submissions and Related Materials
- SEC Staff Speech, Falling Further Back - Statement on Chair Gensler’s Regulatory Agenda, Hester M. Peirce and Elad L. Roisman, Commissioner - December, 2021
- SEC Staff Speech, Virtual Remarks at the Center for American Progress and Sierra Club: Down the Rabbit Hole of Climate Pledges, Caroline Crenshaw, Commissioner - December, 2021
- SEC Staff Views: Announcement Regarding Staff Responses to Rule 14a-8 No-Action Requests SEC Staff Views: Remarks Before the Healthy Markets Association Conference, Gary Gensler, Chairman - December, 2021
- SEC Staff Views: Staff Accounting Bulletin No. 120 SEC Staff Views: SEC Staff Statement on LIBOR Transition - Key Considerations for Market Participants
- SEC Staff Views: AICPA & CIMA Conference on Current SEC and PCAOB Developments - 2021
- SEC Staff Views: The Lessons of Structured Data, Caroline Crenshaw, Commissioner - November, 2021
- SEC Staff Views: Remarks at the PepsiCo-PwC CPE Conference: Controlling Internal Controls, Caroline Crenshaw, Commissioner - November, 2021
- SEC Staff Views: President’s Working Group Report on Stablecoins, Gary Gensler, Chairman - November, 2021
- SEC Staff Views: Prepared Remarks Before the SIFMA Annual Meeting, Gary Gensler, Chairman - November, 2021
- SEC Staff Views: Statement regarding Shareholder Proposals: Staff Legal Bulletin No. 14L, Gary Gensler, Chairman - November, 2021
- SEC Staff Views: Statement on PCAOB Rule 6100 to Fulfill Obligations under the HFCAA, Gary Gensler, Chairman - November, 2021
- HFCAA –PCAOB Makes HFCAA Determinations Regarding Mainland China and Hong Kong
Extra Crunch
- OTC Markets - Thought Leadership
About MaloneBailey, LLP
|
|
Harris Bricken Global Law and Business Podcast: A Discussion on International Tax & Audit Featuring Nicole Zhao
Summary - Harris Bricken is an international law firm with locations in Los Angeles, Portland, San Francisco, Seattle, Barcelona and Beijing. The firm's podcast, Global Law and Business, is hosted by international attorneys Fred Rocafort and Jonathan Bench.
Nicole Zhao, Senior Tax Manager at MaloneBailey, is featured in Episode 49. In this episode, Nicole discusses international tax and audit, tax issues for foreign companies looking to establish a presence in U.S., advice for businesses that struggled in 2021, expected tax code changes under the Biden Administration, why estate planning in 2021 was important for high net worth people and much more. Episode 49 and all others are available on the Harris Bricken website. Please click here.
For more information about Harris Bricken, please click here.
|
|
Recent FASB & AICPA Updates
|
|
FASB Accounting Standards Updates - Accounting Standards Update No. 2021-09 —Leases (Topic 842) —Discount Rate for Lessees That Are Not Public Business Entities
Summary - The FASB issued ASU No. 2021-09, Leases (Topic 842): Discount Rate for Lessees That Are Not Public Business Entities. This ASU improves discount rate guidance for lessees that are not public business entities, including private companies, not-for-profit organizations, and employee benefit plans. The amendments should reduce the cost of implementing the lease standard (Topic 842) for those entities while retaining the expected benefits for users of financial statements.
Topic 842 currently provides lessees that are not public business entities with a practical expedient that allows them to make an accounting policy election to use a risk-free rate as the discount rate for all leases. The FASB originally provided this practical expedient to relieve those lessees from the cost and complexity of having to calculate an incremental borrowing rate.
Some private company stakeholders expressed reluctance to use the risk-free rate election for all leases. Those stakeholders noted that a risk-free rate (e.g., a U.S. Treasury rate) is low compared with their expected average incremental borrowing rates, and that using the risk-free rate election could increase an entity’s lease liabilities and right-of-use assets.
To address these concerns, the amendments in the ASU allow lessees that are not public business entities to make the risk-free rate election by class of underlying asset, rather than at the entity-wide level. It also requires that, when the rate implicit in the lease is readily determinable for any individual lease, a lessee use that rate (rather than a risk-free rate or an incremental borrowing rate), regardless of whether it has made the risk-free rate election.
An entity that has not yet adopted Topic 842 as of November 11, 2021, should apply ASU No. 2021-09 to all new and existing leases when the entity first applies Topic 842. An entity that has adopted Topic 842 as of November 11, 2021, should apply ASU No. 2021-09 for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Earlier application is permitted as of the beginning of the fiscal year of adoption.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
FASB Accounting Standards Updates - Accounting Standards Update No. 2021-10 —Government Assistance (Topic 832) —Disclosures by Business Entities about Government Assistance
Summary - The FASB issued Accounting Standards Update (ASU) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which is expected to increase transparency in financial reporting by requiring business entities to disclose, in notes to their financial statements, information about certain types of government assistance they receive. Examples of such government assistance include cash grants and grants of other assets.
The amendments in the ASU require the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy to other accounting guidance such as a grant model within FASB Accounting Standards Codification® Topic 958, Not-for-Profit Entities, or International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance:
- Information about the nature of the transactions and the related accounting policy used to account for the transactions;
- The line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item; and
- Significant terms and conditions of the transactions, including commitments and contingencies.
The amendments are effective for all entities within their scope, which excludes not-for-profit entities and employee benefit plans, for financial statements issued for annual periods beginning after December 15, 2021. Early application is permitted.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Exposure Draft - Proposed Accounting Standards Update 2021-007 —Liabilities —Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations
Summary - The FASB issued a proposed Accounting Standards Update (ASU) intended to help investors and other allocators of capital better consider the effect of supplier finance programs on a buyer’s working capital, liquidity, and cash flows. Stakeholders are encouraged to review and provide comment on the proposed ASU by March 21, 2022.
The proposed ASU would affect buyers that use supplier finance programs in connection with the purchase of goods and services. Supplier finance programs allow a buyer to offer its suppliers the option to be paid by a third party in advance of an invoice due date, based on invoices that the buyer has confirmed as valid. These transactions are also commonly known as reverse factoring, payables finance, or structured payables arrangements.
Stakeholders have observed that there is a lack of transparency about supplier finance programs because (1) there are no explicit disclosure requirements in Generally Accepted Accounting Principles (GAAP) for those programs; and (2) a buyer may present obligations covered by those programs in the same balance sheet line item as accounts payable or in another balance sheet line item depending on the facts and circumstances of the arrangement.
The proposal would address these issues by requiring the buyer in a supplier finance program to disclose sufficient information about the program to allow an investor to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. These disclosures would include the key terms of the program, as well as the obligation amount that the buyer has confirmed as valid to the third party that is outstanding at the end of the reporting period, a rollforward of that amount, and a description of where that amount is presented in the balance sheet.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Exposure Draft - Proposed Accounting Standards Update 2021-006 —Financial Instruments —Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures
Summary - The FASB has issued the proposed Accounting Standards Update (ASU), Financial Instruments—Credit Losses (Topic 326)—Troubled Debt Restructurings and Vintage Disclosures. The FASB intends the revisions, if adopted as proposed, to improve the decision usefulness of information provided to investors about certain loan refinancings, restructurings, and write-offs. The comment deadline for the proposed ASU is December 23, 2021.
The proposed ASU addresses areas identified by the FASB as part of its Post-Implementation Review (PIR) process, which evaluates whether a standard is achieving its objective by providing investors with relevant information. Since issuing its credit losses standard, which introduced the current expected credit losses (CECL) model in 2016, the FASB has provided resources to monitor and assist stakeholders with its implementation. These activities include forming a Credit Losses Transition Resource Group (TRG), conducting outreach with stakeholders of all types, developing educational materials and staff question-and-answer guidance, conducting educational workshops, and performing archival review of financial reports.
Troubled Debt Restructurings by Creditors That Have Adopted CECL
During the PIR of the credit losses standard, including a May 2021 roundtable, investors and other stakeholders questioned the relevance of the troubled debt restructuring (TDR) designation and the decision usefulness of disclosures about those modifications. Some noted that measurement of expected losses under the CECL model already incorporates the forward-looking aspects of the TDR model and that relevant information for investors would be better conveyed through enhanced disclosures about certain modifications.
The proposed amendments would eliminate the accounting guidance for TDRs by creditors while enhancing disclosure requirements for loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty.
Vintage Disclosures—Gross Write-offs
The FASB also received feedback that an illustrative example, which shows how a public business entity might meet the disclosure requirement to present financing receivable information by year of origination (commonly referred to as the “vintage disclosures”), includes a line item for gross write-offs and gross recoveries for each origination year. Some stakeholders indicated that it was unclear whether gross write-offs and recoveries are required to be presented in the vintage disclosures because that information is not listed as a specific disclosure requirement. Also, the disclosure of gross write-offs was cited by numerous investors as an essential input to their analysis.
To address this feedback, these proposed amendments would require that a public business entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
FASB Agenda – FASB Discusses its Agenda
Summary - As reported in its “Summary of Board Decisions” publication, the FASB me on December 15, 2021, and discussed stakeholder feedback received on its June 2021 Invitation to Comment, Agenda Consultation. In response to feedback received, FASB Chair Rich Jones announced comprehensive changes to the FASB research agenda. The FASB’s research agenda will be comprised of the following projects (in no particular order):
-
Accounting for Exchange-Traded Digital Assets and Commodities: This research project will explore accounting for and disclosure of a subset of exchange-traded digital assets and exchange-traded commodities.
-
· Accounting for and Disclosure of Intangibles: This research project will consider potential ways to improve the accounting for and disclosure of intangibles, including software costs, internally developed intangibles, and research and development.
-
Hedge Accounting Phase 2: This research project will seek stakeholder feedback that could bring further alignment of hedge accounting with risk management activities beyond the targeted improvements made to the hedge accounting model in Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, and consider changes to the definition of a derivative.
-
Accounting for Financial Instruments with Environmental, Social, and Governance (ESG)-Linked Features and Regulatory Credits: This research project will explore accounting for and disclosure of financial instruments with ESG-linked features and regulatory credits.
-
Accounting for Government Grants, Invitation to Comment: This research project will solicit feedback on whether the requirements in IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, should be incorporated into GAAP.
-
Agenda Consultation: This research project will solicit feedback about the financial reporting issues that the Board should consider adding to its agenda and the priority of those issues.
The FASB staff also updated the board on its progress on the reference rate reform—fair value hedging project. The FASB directed the staff to perform additional outreach and research. The Board made no decisions.
Regarding reference rate reform—deferral of the sunset date of Topic 848, the FASB decided to add a project to the technical agenda to defer the sunset date of Topic 848, Reference Rate Reform. The FASB also decided to defer the sunset date of the guidance in Topic 848 to December 31, 2024.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Segment Reporting –FASB Discusses Segment Reporting
Summary - As reported in its “Summary of Board Decisions” publication, the FASB me on December 8, 2021, and continued its deliberations of a principle-based disclosure requirement to report the significant segment expense categories and amounts that are both: (1) regularly provided to the chief operating decision maker (CODM); and (2) included in the reported measure of segment profit or loss. The FASB made the following decisions.
Multiple Segment Profit or Loss Measures
The FASB discussed whether to clarify which of a segment’s profit or loss measures the principle applies to when multiple measures are reported. The FASB decided that the principle should apply to all reported measures of a segment’s profit or loss.
Transition
The FASB discussed transition and decided that:
- The proposed amendments should be applied retrospectively for each comparative period that an income statement is presented.
- When applying the amendments retrospectively, a public entity should first apply the principle to identify the significant segment expense categories and amounts for the current period presented (that is, the period of adoption). The entity should then disclose the comparative period amounts for those same categories.
The FASB also decided that a public entity should provide a qualitative transition disclosure about certain changes to the segment expenses included in the management reports that are regularly provided to the CODM.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Intangible Assets – FASB Discusses Identifiable Intangible Assets and Subsequent Accounting for Goodwill
Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on November 17, 2021, and discussed identifiable intangible assets and subsequent accounting for goodwill. Specifically, the FASB discussed staff research and analysis on the elements of an estimated goodwill amortization model. This discussion involved an overall amortization period estimation principle, a possible list of factors, providing a cap and floor on the amortization period, and the reassessment of an estimated goodwill amortization period. The FASB made no decisions at this meeting.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Supplier Finance Agreements –IASB Proposes Enhanced Disclosure Requirements for Supplier Finance Arrangements
Summary - The IASB has published the Exposure Draft, Supplier Finance Arrangements - Proposed Amendments to IAS 7 and IFRS 7. The comment deadline is March 28, 2022.
The IASB intends these revisions to the supplier finance disclosure requirements, if adopted as proposed, to enhance the transparency of supplier finance arrangements and their effects on a company’s liabilities and cash flows.
Supplier finance arrangements are often referred to as supply chain finance, payables finance, or reverse factoring arrangements. The IASB believes these proposals would meet investors’ demands for more detailed information to help them analyze and understand the effects of such arrangements.
Under the proposals, a company would be required to disclose information that enables investors to assess the effects of the company’s supplier finance arrangements on its liabilities and cash flows. These proposals would amend IAS 7, Statement of Cash Flows, and IFRS 7, Financial Instruments: Disclosures. The proposals complement an agenda decision published by the IFRS Interpretations Committee in 2020.
The proposed amendments would affect a company that, as a buyer, enters into one or more supplier finance arrangements, under which the company, or its suppliers, can access financing for amounts the company owes its suppliers.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Presentation and Disclosure –AICPA Publishes 2021 Edition of Best Practices in Presentation and Disclosure Publication
Summary - The AICPA has published the 2021 edition of U.S. GAAP Financial Statements — Best Practices in Presentation and Disclosure. This publication provides reporting and disclosure examples from real world financial statements, providing accounting professionals with an invaluable resource for incorporating new and existing accounting and reporting guidance into financial statements using presentation techniques adopted by companies across numerous industries, all of which are headquartered in the United States.
This new edition surveyed annual reports of 350 entities of various sizes representing over 100 industries with fiscal periods ending between January and December 2020.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Non-Current Liabilities –IASB Proposes Guidance on Non-Current Liabilities with Covenants
Summary - The IASB has published the Exposure Draft, Non-current Liabilities with Covenants. The comment deadline is March 21, 2022. The Exposure Draft includes proposed amendments to International Accounting Standard (IAS) 1, Presentation of Financial Statements. The IASB believes these proposals, if adopted as amendments, will improve the information companies provide about long-term debt with covenants. IAS 1 requires a company to classify a liability as non-current only if the company has a right to defer settlement of the liability for at least 12 months after the reporting date. However, such a right is often subject to the company complying with covenants after the reporting date. For example, a company might have long-term debt that could become repayable within 12 months if the company fails to comply with covenants after the reporting date.
The proposed amendments announced today would specify that, in such a situation, covenants would not affect the classification of a liability as current or non-current at the reporting date. Instead, a company would:
- Present non-current liabilities that are subject to covenants on the statement of financial position separately from other non-current liabilities; and
- Disclose information about the covenants in the notes to its financial statements, including their nature and whether the company would have complied with them based on its circumstances at the reporting date.
The IASB expects that these proposals will improve the information a company provides about non-current liabilities with covenants by enabling investors to assess whether such liabilities could become repayable within 12 months. The proposals also address feedback from stakeholders about the classification of debt as current or non-current when applying requirements introduced in 2020 that are not yet in effect. Consequently, the IASB is also proposing to defer the effective date of those requirements to align with the proposed amendment. In addition to the Exposure Draft, the IASB has also released a Snapshot document that provides an overview of the proposal.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Leases – FASB Decides Against Further Delay of Effective Date of Leases Standard for NFPs and Private Companies
Summary - The FASB met on Wednesday, November 10, 2021, and among other topics, considered the issue of further postponement of the effective date for implementation of Accounting Standards Update No. 2016-02, Leases (Topic 842), as amended, and the requirements of Topic 842, Leases.
Given the complexity of the new standard and later, due to implementation issues caused by the pandemic, in November 2019 and June 2020, respectively, the FASB deferred the effective dates of Topic 842 for certain not-for-profit organizations and private companies.
At its November 2021 meeting, the FASB decided against providing a further delay of Topic 842 for private companies and certain not-for-profits, entities within the scope of ASC paragraph 842-10-65-1(b).
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Recent SEC & Regulatory Updates
|
|
Release No. 34-93784: Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions
Summary - The SEC has issued for public comment a proposed rule, Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions. The proposed rule is aimed at preventing fraud, manipulation and deception in connection with security-based swaps, to prevent undue influence over the chief compliance officer (CCO) of security-based swap dealers and major security-based swap participants (SBS Entities), and to require any person with a large security-based swap position to publicly report certain information related to the position. The proposal includes the following new rules:
-
Rule 9j-1, which would prohibit fraudulent, deceptive, or manipulative conduct in connection with all transactions in security-based swaps, including misconduct in connection with the exercise of any right or performance of any obligation under a security-based swap.
-
Rule 15Fh-4(c), which would prohibit personnel of an SBS Entity from taking any action to coerce, mislead or otherwise interfere with the SBS Entity’s CCO.
-
Rule 10B-1, which would require any person, or group of persons, who owns a security-based swap position that exceeds the threshold amount set by the rule to promptly file with the SEC a statement containing the information required by Schedule 10B on the SEC’s EDGAR filing system. The filings will be publicly available.
The comment period will remain open for 45 days after publication in the Federal Register.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Release No. IC-34441: Money Market Fund Reforms Modernization
Summary - The SEC has issued for public comment a proposed rule, Money Market Fund Reforms. This proposal includes amendments to certain rules that govern money market funds under the Investment Company Act of 1940. The SEC indicates that in March 2020, growing economic concerns about the impact of the COVID-19 pandemic led investors to reallocate their assets into cash and short-term government securities. Prime and tax-exempt money market funds, particularly institutional funds, experienced large outflows, which contributed to stress on short-term funding markets. The SEC’s proposed amendments are designed, in part, to address concerns about prime and tax-exempt money market funds highlighted by these events.
The proposed amendments would “increase liquidity requirements for money market funds to provide a more substantial liquidity buffer in the event of rapid redemptions. The proposed amendments also would remove provisions in the current rule permitting or requiring a money market fund to impose liquidity fees or to suspend redemptions through a gate when a fund’s liquidity drops below an identified threshold. These provisions appeared to contribute to investors’ incentives to redeem in March 2020 as some funds’ reported liquidity levels declined.”
To address concerns about redemption costs and liquidity, the proposal would require institutional prime and institutional tax-exempt money market funds to implement swing pricing policies and procedures that would require redeeming investors, under certain circumstances, to bear the liquidity costs of their redemptions.
Further, the proposal would amend certain reporting requirements to improve the availability of information about money market funds and enhance the SEC’s monitoring and analysis of these funds.
The comment period will remain open for 60 days after publication in the Federal Register.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Release No. 34-93783: Share Repurchase Disclosure Modernization
Summary - The SEC proposed amendments to its rules regarding disclosure about an issuer’s repurchases of its equity securities, often referred to as share buybacks. The SEC indicates that the proposed rules would require an issuer to provide a new Form SR before the end of the first business day following the day the issuer executes a share repurchase.
Form SR would require disclosure identifying the:
- Class of securities purchased;
- Total amount purchased; and
- Average price paid.
Issuers would also have to disclose on Form SR the aggregate total amount purchased on the open market in reliance on the safe harbor in Exchange Act Rule 10b-18 or pursuant to a plan that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c).
The proposed amendments also would “enhance existing periodic disclosure requirements regarding repurchases of an issuer’s equity securities. Specifically, the proposed amendments would require an issuer to disclose: the objective or rationale for the share repurchases and the process or criteria used to determine the repurchase amounts; any policies and procedures relating to purchases and sales of the issuer’s securities by its officers and directors during a repurchase program, including any restriction on such transactions; and whether the issuer is making its repurchases pursuant to a plan that it intends to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) and/or the conditions of the Exchange Act Rule 10b-18 non-exclusive safe harbor.”
The proposed rules apply to issuers that repurchase securities registered under Section 12 of the Securities Exchange Act of 1934, including foreign private issuers and certain registered closed-end funds.
The comment period will remain open for 45 days after publication in the Federal Register.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Release No. 33-11013: Rule 10b5-1 and Insider Trading
Summary - The SEC has issued for public comment a proposal, Rule 10b5-1 and Insider Trading. This proposal includes amendments to Rule 10b5-1 under the Securities Exchange Act of 1934 to enhance disclosure requirements and investor protections against insider trading. The proposal includes updates to Rule 10b5-1(c), which provides an affirmative defense to insider trading for parties that frequently have access to material nonpublic information, including corporate officers, directors and issuers.
The proposed amendments to Rule 10b5-1 would update the requirements for the affirmative defense, including:
- Imposing a cooling off period before trading could commence under a plan;
- Prohibiting overlapping trading plans; and
- Limiting single-trade plans to one trading plan per twelve month period.
In addition, the proposal would require directors and officers to furnish written certifications that they are not aware of any material nonpublic information when they enter into the plans and expand the existing good faith requirement for trading under Rule 10b5-1 plans. This proposal aims to address critical gaps in the SEC’s insider trading regime and to help shareholders understand when and how insiders are trading in securities for which they may at times have material nonpublic information.
According to the SEC, the amendments would also elicit “more comprehensive disclosure about issuers’ policies and procedures related to insider trading and their practices around the timing of options grants and the release of material nonpublic information. A new table would report any options granted within 14 days of the release of material nonpublic information and the market price of the underlying securities the trading day before and the trading day after the disclosure of the material non-public information. Insiders that report on Forms 4 or 5 would have to indicate via a new checkbox whether the reported transactions were made pursuant to a Rule 10b5-1(c) or other trading plan. Finally, gifts of securities that were previously permitted to be reported on Form 5 would be required to be reported on Form 4.”
The comment period will remain open for 45 days after publication in the Federal Register.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Release No. 34-93614: Electronic Recordkeeping Requirements for Broker-Dealers, Security-Based Swap Dealers, and Major Security-Based Swap Participants
Summary - The SEC has issued for public comment a proposed rule, Electronic Recordkeeping Requirements for Broker-Dealers, Security-Based Swap Dealers, and Major Security-Based Swap Participants. This proposal includes amendments to the electronic recordkeeping and prompt production of records requirements applicable to broker-dealers, security-based swap dealers (SBSDs), and major security-based swap participants (MSBSPs).
The SEC’s broker-dealer electronic recordkeeping rule requires firms to preserve electronic records exclusively in a non-rewriteable, non-erasable format (otherwise known as write once, read many). The SEC indicates that the proposed amendments “would add an audit-trail alternative. Under this alternative, electronic records could be preserved in a manner that permits the recreation of an original record if it is altered, over-written, or erased. The audit-trail alternative is designed to provide broker-dealers with greater flexibility in configuring their electronic recordkeeping systems so they more closely align with current technologies and practices while also protecting the authenticity and reliability of original records.”
The proposed amendments would require nonbank SBSDs and MSBSPs to preserve electronic records using either of the above alternatives that would be available to broker-dealers. The amendments also would require broker-dealers and all types of SBSDs and MSBSPs to produce electronic records to securities regulators in a reasonably usable electronic format. This proposal is designed to facilitate examinations and make them more efficient.
Comments should be received on or before January 3, 2022.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Release No. 34-93613: Reporting of Securities Loans
Summary - The SEC has issued for public comment a proposed rule, Reporting of Securities Loans. This proposal is intended to increase the transparency and efficiency of the securities lending market by requiring any person that loans a security on behalf of itself or another person to report the material terms of those securities lending transactions and related information regarding the securities the person has on loan and available to loan to a registered national securities association (RNSA).
The proposed rule would also require that the RNSA make available to the public certain information concerning each transaction and aggregate information on securities on loan and available to loan.
Comments on the proposal are due 30 days from publication in the Federal Register.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Release No. 34-93595: Proxy Voting Advice
Summary - The SEC published for public comment proposed amendments to its rules governing proxy voting advice. The proposed amendments “aim to address concerns expressed by investors and others that the current rules may impede and impair the timeliness and independence of proxy voting advice and subject proxy voting advice businesses to undue litigation risks and compliance costs.”
The proposed amendments would rescind two rules applicable to proxy voting advice businesses that the Commission adopted in 2020. Specifically, the SEC is proposing to rescind conditions to the availability of two exemptions from the proxy rules’ informational and filing requirements on which proxy voting advice businesses often rely. Those conditions require that:
- Registrants that are the subject of proxy voting advice have such advice made available to them in a timely manner; and
- Clients of proxy voting advice businesses are provided with a means of becoming aware of any written responses by registrants to proxy voting advice.
The SEC indicates that investors and others have expressed concerns that these conditions will impose increased compliance costs on proxy voting advice businesses and impair the independence and timeliness of their proxy voting advice.
The proposed amendments would also rescind the 2020 changes made to the proxy rules’ liability provision. Although the changes were intended to make clear that proxy voting advice is subject to liability under the proxy rules, investors and others have expressed concerns that the 2020 changes have created confusion, increased proxy voting advice businesses’ litigation risks, and potentially impair the independence and quality of the proxy voting advice.
The proposal will have a 30-day public comment period following its publication in the Federal Register.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Release No. 33-11005: Updating EDGAR Filing Requirements
Summary - The SEC published proposed amendments to update electronic filing requirements. According to the SEC, the agency currently permits and sometimes requires certain forms to be filed or submitted in paper format. The proposed rule and form amendments would require certain forms to be filed or submitted electronically. The proposed amendments also would make technical amendments to certain forms to require structured data reporting and remove outdated references. The amendments are intended to promote efficiency, transparency, and operational resiliency by modernizing the manner in which information is submitted to the SEC and disclosed.
Furthermore, publicly filed electronic submissions would be more readily accessible to the public and would be available on our website in easily searchable formats, which benefits both investors and the broader public. The SEC indicates, that the “electronic filing capabilities have been an effective measure in addressing logistical and operational issues raised by the spread of coronavirus disease (COVID-19). Electronic submissions would allow the Commission, and those filing submissions, to effectively navigate any future disruptive events that make the paper submission process unnecessarily burdensome, impractical, or unavailable.”
The public comment period will remain open until December 22, 2021.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Release No. 33-11016: Adoption of Updated EDGAR Filer Manual
Summary - The SEC has updated Volume II of the EDGAR Filer Manual. This volume has been updated to reflect new EDGAR filing requirements, including those relating to Rule 15Fk-1(c) under the Securities Exchange Act of 1934, which requires security-based swap dealers and security-based swap participants (“SBS Entities”) to submit an annual report to the SEC.
The EDGAR system was updated for these changes December 20, 2021.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Release No. 34-93701: Holding Foreign Companies Accountable Act Disclosure
Summary - The SEC has adopted amendments to finalize rules implementing the submission and disclosure requirements in the Holding Foreign Companies Accountable Act (HFCAA). The Final Rule, Release No. 34-93701, Holding Foreign Companies Accountable Act Disclosure, applies to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the Public Company Accounting Oversight Board (PCAOB) is unable to inspect or investigate (Commission-Identified Issuers).
"We have a basic bargain in our securities regime, which came out of Congress on a bipartisan basis under the Sarbanes-Oxley Act of 2002. If you want to issue public securities in the U.S., the firms that audit your books have to be subject to inspection by the PCAOB," said SEC Chair Gary Gensler. "This final rule furthers the mandate that Congress laid out and gets to the heart of the SEC's mission to protect investors. The Commission and the PCAOB will continue to work together to ensure that the auditors of foreign companies accessing U.S. capital markets play by our rules. We hope foreign governments will, working with the PCAOB, take action to make that possible."
The final amendments require Commission-Identified Issuers to submit documentation to the SEC establishing that, if true, it is not owned or controlled by a governmental entity in the public accounting firm’s foreign jurisdiction. The amendments also require that a Commission-Identified Issuer that is a "foreign issuer," as defined in Exchange Act Rule 3b-4, provide certain additional disclosures in its annual report for itself and any of its consolidated foreign operating entities. Further, the release provides notice regarding the procedures the SEC has established to identify issuers and to impose trading prohibitions on the securities of certain Commission-Identified Issuers, as required by the HFCAA.
The SEC will identify Commission-Identified Issuers for fiscal years beginning after December 18, 2020. A Commission-Identified Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December 31, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal year ended December 31, 2022.
The amendments are effective 30 days after publication in the Federal Register. The new addition to §232.405, Interactive Data File submissions, is effective from 30 days after publication in the Federal Register through July 1, 2023.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Release No. 34-93596: Universal Proxy
Summary - The SEC adopted final rules requiring parties in a contested election to use universal proxy cards that include all director nominees presented for election at a shareholder meeting. The SEC indicates that the rule changes will give shareholders the ability to vote by proxy for their preferred combination of board candidates, similar to voting in person.
The final rules will require dissident shareholders and registrants to provide shareholders with a proxy card that includes the names of all registrant and dissident nominees. The rules will apply to all non-exempt solicitations for contested elections other than those involving registered investment companies and business development companies. The rules will require registrants and dissidents to provide each other with notice of the names of their nominees, establish a filing deadline and a minimum solicitation requirement for dissidents, and prescribe presentation and formatting requirements for universal proxy cards.
To further facilitate shareholder voting in director elections, the SEC also adopted amendments to the proxy rules to ensure that proxy cards clearly specify the applicable shareholder voting options in all director elections and to require proxy statements to disclose the effect of a shareholder’s election to withhold its vote.
To facilitate transition to the new rules, compliance with the rules related to universal proxy cards will be required for any shareholder meeting involving contested director election held after August 31, 2022.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
Release No. IA-5904: Performance-Based Investment Advisory Fees
Summary - The SEC has adopted amendments to the rule under the Investment Advisers Act of 1940 (“Advisers Act”) that permits investment advisers to charge performance-based compensation to “qualified clients.” The rule defines “qualified client” with reference to specific dollar amount thresholds, which are required to be adjusted every five years to account for the effects of inflation. These amendments replace specific dollar amount thresholds in the rule’s “qualified client” definition with references to the SEC’s “most recent order,” as defined by the amended rule, containing the specific dollar amount thresholds adjusted for inflation.
The amendments are effective upon publication in the Federal Register.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: December 21, 2021: Sample Letter to China-Based Companies
Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has published a Sample Letter to China-Based Companies. This letter provides views of the Corp Fin staff, indicating that the recent events “have highlighted the risks associated with investing in companies that are based in or that have the majority of their operations in the People’s Republic of China (China-based companies). The Division of Corporation Finance believes that more prominent, specific, and tailored disclosure about these risks, and companies’ use of the variable interest entity (VIE) structure specifically, is warranted to provide investors with the information they need to make informed investment decisions and for companies to comply with their disclosure obligations under the federal securities laws.” Although not considered an exhaustive list, the letter contains sample comments that Corp Fin may issue China-based companies.
In light of these concerns, Corp Fin indicates that it is issuing comments to China-based companies seeking more specific and prominent disclosure about the legal and operational risks associated with China-based companies. Corp Fin’s comments focus on the need for clear and prominent disclosure regarding the structure of the company, including:
- The relationship between the entity conducting the offering and the entities conducting the operating activities;
- Risks associated with a company’s use of the VIE structure; and
- The potential impact on the company’s operations and investors’ interests if such structure were disallowed or the contracts were determined to be unenforceable.
Corp Fin’s comments also focus on additional legal, regulatory, and enforcement risks that may apply to investments in China-based companies, such as the potential impact of the Holding Foreign Companies Accountable Act and related rules and any necessary PRC permissions a China-based company may need to operate its business or offer securities to foreign investors.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: Staff Statement Regarding Form CRS Disclosures
Summary - The SEC’s Standards of Conduct Implementation Committee (Committee) has issued Staff Statement Regarding Form CRS Disclosures. This document provides guidance on disclosures within Form CRS. Form CRS is a brief relationship summary designed to help retail investors make informed choices regarding what type of relationship (brokerage, investment advisory, or a combination of both) best suits a retail investor’s particular circumstances and investment objectives. The statement reviews observations from the Committee on disclosures within Form CRS on relationship summaries.
The Committee is comprised of staff from the Division of Trading and Markets, the Division of Investment Management, the Division of Examinations, and the Office of Investor Education and Advocacy.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Speeches: Statement of Commissioner Elad L. Roisman, Elad L. Roisman, Commissioner - December, 2021
Summary - SEC Commissioner Elad L. Roisman has informed President Joe Biden that he is resigning his position at the end of January 2022. In his statement, Roisman indicates that serving “the American people as a Commissioner and an Acting Chairman of this agency has been the greatest privilege of my professional life. It has been the utmost honor to work alongside my extraordinary SEC colleagues, who care deeply about investors and our markets. Over the next several weeks, I remain committed to working with my fellow Commissioners and the SEC’s incredible staff to further our mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.”
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: Announcement Regarding Personally Identifiable and Other Sensitive Information in Rule 14a-8 Submissions and Related Materials
Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has issued Announcement Regarding Personally Identifiable and Other Sensitive Information in Rule 14a-8 Submissions and Related Materials. The announcement indicates that Rule 14a-8 submissions and related materials frequently include personally identifiable and other sensitive information about shareholder proponents, companies and other parties that is not relevant to Corp Fin’s consideration of a no-action request. While the Corp Fin seeks to redact, to the extent practicable, this information before making the materials publicly available, this process can result in delays in the public dissemination of these materials.
Corp Fin announces that beginning immediately, companies and shareholder proponents should redact all personally identifiable and other sensitive information from Rule 14a-8 submissions and related materials prior to submitting them to the division. For example, companies should redact personally identifiable information from an individual shareholder’s cover letter accompanying the proposal. Shareholder proponents should also limit the personally identifiable and sensitive information in the materials they provide to companies by including only the information that is necessary to establish their eligibility to submit the proposal and for the company to communicate with them. Corp Fin may require parties to resubmit any materials it receives that contain personally identifiable or sensitive information, in which case Corp Fin will not consider the substance of those materials until they are resubmitted.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Speech, Falling Further Back - Statement on Chair Gensler’s Regulatory Agenda, Hester M. Peirce and Elad L. Roisman, Commissioner - December, 2021
Summary - SEC Commissioners Hester M. Peirce and Elad L. Roisman expressed their disappointment in SEC Chair Gary Gensler’s regulatory agenda. Peirce and Roisman indicated that the regulatory agenda “fails to include any items intended to facilitate capital formation and misses opportunities to foster fair, orderly, and efficient markets and further investor protection. Instead the agenda is brimming with plans to redo recently completed rules, add new regulatory obligations, and constrain investor choice.”
The SEC’s regulatory agenda lists short- and long-term regulatory actions that the agency plans to take.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Speech, Virtual Remarks at the Center for American Progress and Sierra Club: Down the Rabbit Hole of Climate Pledges, Caroline Crenshaw, Commissioner - December, 2021
Summary - SEC Commissioner Caroline A. Crenshaw recently discussed her views on climate-change corporate disclosures. Crenshaw indicated that accurate “and reliable climate metrics are not only important for investors’ evaluation of sustainability efforts or how companies are spending shareholder money on politics, it is also critical for assessing fundamental and traditional corporate governance matters, like executive compensation. Recent surveys indicate that more executive compensation is being linked to “sustainability performance.” Linking executive pay to achieving ESG or sustainability-related goals can be a positive alignment of incentives. However, without reliable and consistent disclosures about those ESG targets, I wonder whether investors and Boards have the tools to accurately assess if such targets have been met and if that alignment between executive pay and ESG targets has been achieved.”
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: Announcement Regarding Staff Responses to Rule 14a-8 No-Action Requests
Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has issued Announcement Regarding Staff Responses to Rule 14a-8 No-Action Requests. The announcement indicates that in 2019, Corp Fin discontinued the longstanding practice of responding to each shareholder proposal “no-action request” with a written letter. During the last two proxy seasons, Corp Fin instead responded with a written letter only in limited instances and communicated the vast majority of responses via notations to a chart maintained on the division’s website.
Corp Fin indicates that it has “reconsidered this approach, and after review of the practice we believe that written responses will provide greater transparency and certainty to shareholder proponents and companies alike. Beginning with the publication of this announcement, we will return to our prior practice and the staff will once again respond to each shareholder proposal no-action request with a written letter, similar to those issued in prior years. Our response letters will be posted publicly on the Division’s website in a timely manner. We will no longer communicate our responses via a chart, but we expect to publish a chart upon completion of the proxy season.”
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: Remarks Before the Healthy Markets Association Conference, Gary Gensler, Chairman - December, 2021
Summary - SEC Chair Gary Gensler recently shared his thoughts on the use of special purpose acquisition companies (SPACs) to go public. Gensler indicates that due to “the various moving parts and SPACs’ two-step structure, I believe these vehicles may have additional conflicts inherent to their structure. There are conflicts between the investors who vote then cash out, and those who stay through the deal — what might be called “redeemers” and “remainers.” Thus, to reduce the potential for such information asymmetries, conflicts, and fraud, I’ve asked staff for proposals for the Commission’s consideration around how to better align the legal treatment of SPACs and their participants with the investor protections provided in other IPOs, with respect to disclosure, marketing practices, and gatekeeper obligations.”
Regarding disclosures and transparency, Gensler indicates that he has asked the SEC to provide recommendations about how investors might be better informed about the fees, projections, dilution, and conflicts that may exist during all stages of SPACs, and how investors can receive those disclosures at the time they’re deciding whether to invest. The SEC staff is also considering clarifying disclosure obligations under existing rules.
Gensler raised concerns of who, in the SPAC transaction process, is performing the role of “gatekeepers,” which may include directors, officers, SPAC sponsors, financial advisors, and accountants. Gensler indicates that there may be “some who attempt to use SPACs as a way to arbitrage liability regimes. Many gatekeepers carry out functionally the same role as they would in a traditional IPO but may not be performing the due diligence that we’ve come to expect. Make no mistake: When it comes to liability, SPACs do not provide a “free pass” for gatekeepers.” The SEC staff is expected to provide recommendations about how the SEC can better align incentives between gatekeepers and investors, and how the SEC can address the status of gatekeepers’ liability obligations. Gensler cautioned that as the SEC and its staff evaluates these policy areas, the SEC’s Division of Enforcement continues to be the “cop on the beat” to ensure that investors are being protected in the SPAC space.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: AICPA & CIMA Conference on Current SEC and PCAOB Developments - 2021
Summary - As discussed above, on December 6-8, 2021, representatives of the SEC, FASB, PCAOB, IASB, and AICPA spoke at the 2021 AICPA & CIMA Conference on Current SEC and PCAOB Developments. Topics discussed during the 2021 conference covered a number of important financial reporting and auditing issues. Principal themes of the conference included:
- The importance of transparency and integrity on financial reporting, including the role of the auditor in providing assurance and trust in the financial reports of entities;
- Disclosure and assurance of economic, social, or governance (ESG) matters (integrated or sustainability reporting);
- Disclosures and reporting special-purpose acquisition company (SPAC) transactions;
- The importance of internal control over financial reporting (ICFR), including the designing and implementation of controls, and the important role of auditors have in testing the effectiveness of ICFR; and
- PCAOB standard-setting, inspection, and enforcement.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: Staff Accounting Bulletin No. 120
Summary - The SEC staff has issued guidance for companies about how to properly recognize and disclose compensation cost for "spring-loaded awards" made to executives.
“Spring-loaded” awards are share-based compensation arrangements where a company grants stock options or other awards shortly before it announces market-moving information such as an earnings release with better-than-expected results or the disclosure of a significant transaction.
According to Staff Accounting Bulletin (SAB) No. 120 prepared by the SEC's Office of the Chief Accountant and the Division of Corporation Finance, non-routine spring-loaded grants merit particular scrutiny by those responsible for compensation and financial reporting governance at public companies.
The SEC staff believes that as companies measure compensation actually paid to executives, they must consider the impact that the material nonpublic information will have upon release. In other words, companies should not grant spring-loaded awards under any mistaken belief that they do not have to reflect any of the additional value conveyed to the recipients from the anticipated announcement of material information when recognizing compensation cost for the awards.
"It is important that companies' accounting and disclosures reflect the economics and terms of these compensation arrangements," SEC Chair Gary Gensler said. "This gets to the SEC's remit to protect investors."
The statements in SABs are not rules or interpretations of the Commission nor are they published bearing the Commission's official approval. They represent interpretations and practices followed by the Division of Corporation Finance and the Office of the Chief Accountant in administering the disclosure requirements of the federal securities laws.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: SEC Staff Statement on LIBOR Transition - Key Considerations for Market Participants
Summary - The SEC has published SEC Staff Statement on LIBOR Transition—Key Considerations for Market Participants. The SEC staff indicates that this statement is being issued to remind investment professionals of their obligations when recommending LIBOR-linked securities and to remind companies and issuers of asset-backed securities of their disclosure obligations related to the LIBOR transition. This statement follows previous staff statements addressing various aspects of the forthcoming LIBOR transition. Topics discussed in this statement include:
- Background and general considerations for market participants;
- Broker-dealer registrants: recommendations to retail customers;
- Broker-dealer registrants: municipal securities underwriting and sales to customers;
- Registered investment advisers and funds; and
- Disclosure considerations for public companies and asset-backed securities issuers.
Regarding disclosure considerations, the SEC staff encourages companies to provide qualitative disclosures and, when material, quantitative disclosures, such as the notional value of contracts referencing LIBOR and extending past December 31, 2021 or June 30, 2023, as applicable, to provide context for the status of the company’s transition efforts and the related risks.
In general, companies generally include disclosures about the LIBOR transition as part of risk factors, recent developments, MD&A and/or quantitative and qualitative disclosures about market risk. To the extent a company provides this disclosure in response to more than one disclosure requirement within a filing, consider providing a cross-reference or otherwise summarizing or tying the information together so an investor has a complete and clear view of the company’s plan for the discontinuation of LIBOR, the status of the company’s efforts, and the related risks and impacts.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: The Lessons of Structured Data, Caroline Crenshaw, Commissioner - November, 2021
Summary - SEC Commissioner Caroline A. Crenshaw recently discussed structured data (XBRL) and the need to provide better data going forward. Crenshaw indicated that she believes XBRL data is delivering a myriad benefits, “there is room for improvement in terms of the quality and accuracy of the data. Some users have found material error rates in data tagged in our filings, including errors in tags that are likely to be crucially important to investors like Revenues, Net Income, and Assets, and scaling errors that can be impactful.”
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: Remarks at the PepsiCo-PwC CPE Conference: Controlling Internal Controls, Caroline Crenshaw, Commissioner - November, 2021
Summary - SEC Commissioner Caroline A. Crenshaw recently discussed internal accounting and controls and ESG risks facing companies today. Crenshaw indicated that “internal accounting controls must be dynamic enough to consider and respond to changes in the markets, such as those posed by ESG issues. Companies have to evolve over time because the market place is constantly changing in response to new developments and challenges. These changes can be prompted by new technology, developments in the global economy, or even by our planet. Change drives innovation for not just corporate America, but investors, consumers and citizens. Change can be a good thing. But as markets change, so do the risks that can impact a company’s financial statements. Corporate internal accounting controls must evolve as well. Although these are relatively technical matters often thought of as within the remit of accounting and legal professionals of a specific company, I am regularly reminded that, in the aggregate, these details matter to all Americans.”
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: President’s Working Group Report on Stablecoins, Gary Gensler, Chairman - November, 2021
Summary - SEC Chair Gary Gensler issued a statement in response to the President’s Working Group Report on Stablecoins. This week, the President’s Working Group on Financial Markets (PWG), along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, published a report on stable value coins, or so-called stablecoins. Stablecoins are crypto tokens pegged or linked to the value of fiat currencies. Gensler noted that based on the report’s findings, “the use of stablecoins presents a number of public policy challenges with respect to protecting investors.”
Gensler indicates that the PWG report “highlights a number of recommendations to address these public-policy challenges. While Congress and the public evaluate this report, we at the SEC and our sibling agency, the Commodity Futures Trading Commission, will deploy the full protections of the federal securities laws and the Commodity Exchange Act to these products and arrangements, where applicable.”
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: Prepared Remarks Before the SIFMA Annual Meeting, Gary Gensler, Chairman - November, 2021
Summary - SEC Chair Gary Gensler recently discussed capital market structure. Gensler indicates that given the “rapidly changing technology and business models, I think we at the SEC need to look for opportunities to freshen up our rules to continue to maintain markets that are the envy in the world.” Gensler went on to say that ultimately, “promoting fair, orderly, and efficient markets can help reduce the cost of capital for issuers and increase the rate of returns for investors across each of these markets. This helps contribute to economic growth and is a competitive advantage for our nation.”
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: Statement regarding Shareholder Proposals: Staff Legal Bulletin No. 14L, Gary Gensler, Chairman - November, 2021
Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has issued Staff Legal Bulletin No. 14L, Shareholder Proposals. This guidance provides information for companies and shareholders regarding Rule 14a-8 under the Securities Exchange Act of 1934. Specifically, this bulletin rescinds Staff Legal Bulletin Nos. 14I, 14J and 14K (the “rescinded SLBs”) after a review of Corp Fin staff experience applying the guidance in them. In addition, to the extent the views expressed in any other prior Corp Fin staff legal bulletin could be viewed as contrary to those expressed herein, this staff legal bulletin controls.
This bulletin outlines Corp Fin’s views on Rule 14a-8(i)(7), the ordinary business exception, and Rule 14a-8(i)(5), the economic relevance exception. We are also republishing, with primarily technical, conforming changes, the guidance contained in SLB Nos. 14I and 14K relating to the use of graphics and images, and proof of ownership letters. In addition, we are providing new guidance on the use of e-mail for submission of proposals, delivery of notice of defects, and responses to those notices.
In Rule 14a-8, the SEC has provided a means by which shareholders can present proposals for the shareholders’ consideration in the company’s proxy statement. This process has become a cornerstone of shareholder engagement on important matters. Rule 14a-8 sets forth several bases for exclusion of such proposals. Companies often request assurance that the staff will not recommend enforcement action if they omit a proposal based on one of these exclusions (“no-action relief”). Corp Fin is issuing this bulletin to streamline and simplify our process for reviewing no-action requests, and to clarify the standards the staff will apply when evaluating these requests.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
SEC Staff Views: Statement on PCAOB Rule 6100 to Fulfill Obligations under the HFCAA, Gary Gensler, Chairman - November, 2021
Summary - The SEC has approved the PCAOB’s Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act. Rule 6100 will establish a framework for the PCAOB’s determinations under the Holding Foreign Companies Accountable Act (HFCAA) that the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by an authority in that jurisdiction.
The SEC indicates that the Sarbanes-Oxley Act of 2002, as amended, mandates that the PCAOB inspect registered public accounting firms in both the United States and in foreign jurisdictions and investigate potential statutory, rule, and professional standards violations committed by registered public accounting firms and their associated persons. The HFCAA requires that the PCAOB determine whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by an authority in that jurisdiction. PCAOB Rule 6100 establishes the:
- Process for the PCAOB’s determinations under the HFCAA;
- Factors the PCAOB will evaluate and the documents and information the PCAOB will consider when assessing whether a determination is warranted;
- Form, public availability, effective date, and duration of such determinations; and
- Process by which the PCAOB will reaffirm, modify, or vacate any such determinations.
SEC Chair Gary Gensler issued a statement in connection with the passage of this rule.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
HFCAA –PCAOB Makes HFCAA Determinations Regarding Mainland China and Hong Kong
Summary - The PCAOB issued a report on its determinations that the board is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region of the People’s Republic of China (PRC), because of positions taken by PRC authorities in those jurisdictions. The Board made these determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfills its responsibilities under the Holding Foreign Companies Accountable Act (HFCAA).
Rule 6100 sets forth three factors that together reflect the access the PCAOB needs to completely execute its statutory mandate with respect to its inspections and investigations. The PCAOB’s determination report provides the PCAOB’s assessment of these factors based on positions taken by PRC authorities. As discussed in the report, PRC authorities assert that access by the Board to audit work papers and related information can be provided only under a cooperative agreement, but they persistently have taken positions that prevent the finalization of, or their full performance under, such agreements.
For more information, click here.
© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
|
|
OTC Markets - Thought Leadership
OTC Markets provides various resources on its website that contain a plethora of thought leadership pieces and blog posts from members of the OTC Markets team as well guest contributors who are experts on capital markets topics.
Topics range from "Accessing U.S. Capital Markets Without SEC Registration" to "Three Ways for Small Cap Companies to Better Tell Their IR Brand Story." For a complete listing of resources, please click here.
|
|
|
|
|
|
|