Public companies will soon be required to include an active hyperlink to each exhibit to all registration statements filed under the Securities Act of 1933, as amended, and all periodic and current reports filed under the Securities Exchange Act of 1934, as amended, filed on or after September 1, 2017.

Under Regulation S-K Item 601, public companies are required to file their material agreements, certificates of incorporation, bylaws and other specified documents as exhibits to their SEC filings. Exhibits that are identified in the exhibit index to the filing may be attached to the filing or, in the case of previously-filed exhibits, may be incorporated by reference from the previous filing to the extent permitted by the SEC’s rules and forms. Currently, an investor seeking access to an exhibit that is incorporated by reference into a filing must first determine where the exhibit is located by reviewing the exhibit index and then search for and locate the filing which contains the exhibit, which can be time-consuming and cumbersome. The exhibit hyperlink rule, therefore, is intended to facilitate easier access to these exhibits for investors and other users of the information.

Key points to note about the exhibit hyperlink rule:

  • An active hyperlink will be required for each exhibit identified in the exhibit index of the filing, including exhibits that are incorporated by reference from a prior filing and exhibits that are attached to the new filing. The hyperlink rule, however, does not require the hyperlinking of any XBRL exhibits or exhibits filed with Form ABS-EE. The SEC also decided not to require companies to refile electronically any exhibits previously filed only in paper.
  • The requirement to include exhibit hyperlinks applies to Securities Act registration statements, including all pre-effective amendments; Exchange Act periodic and current reports; registration statements on Form F-10 and annual reports on Form 20-F; and does not apply to other forms under the multi-jurisdictional disclosure system used by certain Canadian issuers or to Form 6-K.
  • The exhibit hyperlink rule is effective for filings submitted on or after September 1, 2017. Smaller reporting companies or non-accelerated filers that submit filings in ASCII format will be required to file their registration statements and periodic reports that are subject to exhibit filing requirements in HTML format and to comply with the exhibit hyperlink rule for filings submitted on or after September 1, 2018. The hyperlink rule does not apply to exhibits filed in paper pursuant to a temporary or continuing hardship exemption under Rules 201 or 202 of Regulation S-T or pursuant to Rule 311 of Regulation S-T.
  • If a filing contains an inaccurate exhibit hyperlink, the inaccurate hyperlink alone would not render the filing materially deficient nor affect the company’s eligibility to use Form S-3. However, the company must correct a nonfunctioning or inaccurate hyperlink, in the case of a registration statement that is not yet effective, by filing a pre-effective amendment to the registration statement or, in the case of a registration statement that is effective or an Exchange Act report, by correcting the hyperlink in the next Exchange Act periodic report that requires or includes an exhibit pursuant to Item 601 of Regulation S-K (or, in the case of a foreign private issuer, pursuant to Form 20-F or Form F-10).

By Sarita Malakar and Megan Gates

The Securities and Exchange Commission recently issued proposed amendments to increase the financial thresholds in the definition of a “smaller reporting company” that, if adopted, will increase the number of issuers that qualify as smaller reporting companies and thereby would benefit from the scaled disclosure requirements. The proposed amendments are intended to promote capital formation and reduce compliance costs for smaller issuers, while maintaining investor protections.

This advisory summarizes the proposed amendments issued by the SEC.

Read the full advisory >>

Every year at around this time, the Mintz Levin securities lawyers are busy collaborating with our December fiscal year-end clients to prepare for the annual year-end reporting season, involving a flurry of 10-Ks, proxy statements, governance review and upkeep, and related matters. Pam Greene and I have worked together for several years now (more than we would care to admit!) on what we fondly refer to as the “year-end kickoff memo,” which you can find here. Each year, we focus on a combination of new developments, reminders of things to keep in mind, and anticipated “hot topics” from the perspective of regulators, shareholders and companies themselves. We are pleased this year to have some terrific contributions to the memo from our partner Bret Leone-Quick, who focuses on securities litigation and related governance issues. We welcome your questions on the memo and look forward to working with all of you on this important annual process.

Our Venture Capital & Emerging Companies practice group analyzed the SEC’s recently released equity crowdfunding rules (referred to by the SEC as “Regulation Crowdfunding”) in a concise and easy-to-digest article authored by Sam Effron and Kristin Gerber.

The article does a great job of highlighting some of the regulation’s shortcomings, such as the limits it places on amounts that can be raised (at both the company and investor level); the requirement that companies complete and file a new Form C; and certain ongoing reporting obligations for companies.  In all, the added costs, burdens, and risks associated with complying with this regulation means that in most cases there are better alternatives (such as raises under Rule 506) for start-up companies looking to access the capital markets.

As originally reported on our Privacy & Security Matters blog, Mintz Levin will sponsor a webinar on September 30 at 1:00 p.m. (ET) to address regulatory compliance and risk management aspects of cyber attacks and data breaches at financial institutions and their service providers.

This topic is especially timely in light of the OCIE’s 2015 Cybersecurity Examination Initiative, announced just this week.  For more details about the key aspects of the OCIE initiative and our upcoming webinar, please check out this excellent post on the Privacy & Security Matters blog.  To register for the webinar, click here.

Pursuant to Section 1502 of the Dodd-Frank Act, which added new Section 13(p)(1) to the Securities Exchange Act of 1934, as amended, the SEC promulgated Rule 13p-1 (the “Conflict Minerals Rule”), which required that issuers that manufacture (or contract to manufacture) products in which conflict minerals are “necessary to the functionality or production of the product” are required to disclose whether or not their products contain tin, gold, tantalum, or tungsten mined from the Democratic Republic of Congo (the “DRC”) and nine of its neighboring countries.  This provision was included in the Dodd-Frank Act at the request of legislators who believed that the process of mining for and producing these particular minerals in certain countries is contributing to a grave, ongoing humanitarian crisis in that region of Africa. Continue Reading DC Circuit Court Reaffirms Earlier Decision Partially Invalidating Conflict Minerals Rule on First Amendment Grounds

Following up on their discussion last week about the SEC’s CitizenVC no action letter, our colleagues Dan DeWolf and Sam Effron have written another alert about the SEC’s recently issued compliance and disclosure interpretations relating to private placements under Regulation D.  For example, they discuss the treatment of securities offerings to an angel investing club and to large groups at venture fairs and demo days; what constitutes a pre-existing relationship; and what makes a relationship “substantive” so that contact with an investor is not considered a “general solicitation” under the SEC’s rules.  You can read more here.

Last week the SEC issued a no action letter that provides guidance and clarity as to how an issuer of securities can conduct a private placement in a password protected web page under Rule 506(b), without it being deemed a “general solicitation” and thereby being subject to the additional requirements imposed by the new Rule 506(c).  In the alert linked here, our colleagues Dan DeWolf and Sam Effron, who prepared the request to the SEC on behalf of CitizenVC, discuss the challenges faced by issuers seeking to offer securities through a private placement online and what issuers can do to take an offering outside of being considered a “general solicitation.”  This is cutting-edge information that can help issuers raise capital online without having to proceed under the more onerous requirements of Rule 506(c).

Our colleague Doug Hauer has launched a new Mintz blog about the federal EB-5 Immigrant Investor Program, EB-5 Financing Matters.  Check it out for a comprehensive review of pending legislation to extend and reform the EB-5 Program.  You will also find two posts discussing recent SEC actions involving the EB-5 Program: (1) a federal suit alleging that the defendants made fraudulent statements in soliciting EB-5 investors for an unprofitable oil company; and (2) an SEC enforcement action against two brokers that solicited investment for EB-5 projects in the United States without registering as securities brokers with the SEC.

The EB-5 Program, administered by the U.S. Citizenship and Immigration Services, offers foreign investors an opportunity to become permanent residents in the United States by making capital investments that create jobs in the U.S.  In the coming weeks we will be working with Doug and other colleagues on a series of posts analyzing the interplay between the EB-5 Program and the securities laws.

If you are a year-end company, today is the end of your second fiscal quarter, which means that it’s just about time to calculate your public float to see if your reporting status has changed. Here are a few things to remember.

Calculating Your Public Float

Your public float is the aggregate number of your company’s outstanding shares available for trading by public investors, multiplied by the current sale price of the shares. It does not include:

  •  Shares held by executive officers, directors and other stockholders who are deemed affiliates of the company (including all restricted stock and performance shares issued under equity compensation plans)
  • Treasury Shares
  • Derivative Securities (e.g., options, warrants and restricted stock units)

Public Float = sale price of common stock on the applicable date (e.g., last business day of the issuer’s second fiscal quarter (June 30th)) X the number of aggregate worldwide outstanding shares held by non-affiliates of the issuer on that date.

Continue Reading Happy Public Float Day!