On April 25, 2025, the SEC updated its Compliance and Disclosure Interpretations (C&DIs) addressing “Manipulative and Deceptive Devices and Contrivances: Rule 10b5-1.” The changes include two new C&DIs, updates to twenty C&DIs, and withdrawal of three C&DIs. Issues addressed include interactions with Rule 144, transactions in trusts, transactions with stock that was collateral for loans, and several other detailed areas.
As always, your thoughts and comments are welcome.
On April 12, 2025, Davita, Inc. reported a cybersecurity attack on Form 8-K. Interestingly, and appropriately, the company did not report the event on Item 1.05. The instructions for Item 1.05 begin with:
Item 1.05 Material Cybersecurity Incidents.
(a) If the registrant experiences a cybersecurity incident that is determined by the registrant to be material, describe the material aspects of the nature, scope, and timing of the incident, and the material impact or reasonably likely material impact on the registrant, including its financial condition and results of operations.
As this instruction clearly states, this Form 8-K Item is for material cybersecurity incidents. That said, many times a company will want to alert investors and others when a cybersecurity incident has occurred, but the company is still in the process of assessing the materiality of the event. On May 21, 2024, CorpFin issued this Statement addressing how to report a cybersecurity event before a materiality assessment is complete. In the Statement, CorpFin “encourages” companies to use a different Form 8-K Item, perhaps Item 8.01 or 7.01.
Davita’s Form 8-K was filed under Item 8.01 and includes this language:
Item 8.01. Other Events.
On April 12, 2025, DaVita Inc. (the “Company” or “we”) became aware of a ransomware incident that has encrypted certain elements of our network. Upon discovery, we activated our response protocols and implemented containment measures, including proactively isolating impacted systems. We are actively working to assess and remediate the incident with the assistance of third-party cybersecurity professionals and have notified law enforcement of the matter.
We have implemented our contingency plans, and we continue to provide patient care. However, the incident is impacting some of our operations, and while we have implemented interim measures to allow for the restoration of certain functions, we cannot estimate the duration or extent of the disruption at this time.
Given the recency of the incident, our investigation and response are ongoing, and the full scope, nature, and potential ultimate impact on the Company are not yet known.
As a final note, remember that Form 8-K Item 8.01 is filed information and Item 7.01 is only furnished. Careful consideration should be given as to whether a company wants this information to be furnished or filed.
As always, your thoughts and comments are welcome!
On April 21, 2025, the SEC’s Office of the Whistleblower announced a joint award of approximately $6 million. You can read more in this Press Release. You can find background about the whistleblower process along with the program’s 2024 annual report to Congress here.
As always, your thoughts and comments are welcome!
On April 21, 2025, Paul S. Atkins was sworn in as the next Chairman of the SEC. You can read his remarks and about his background in this Press Release.
You can also read Acting Chair Mark T. Uyeda’s thanks to the staff and welcome to the new Chairman in this Statement.
As always, your thoughts and comments are welcome!
Since the two clawback related check boxes were added to the Form 10-K cover page, there has been a fair amount of confusion concerning when companies should check the boxes. The wording for the check boxes involves interpreting phrases such as “the correction of an error” and a “required recovery analysis”:
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
While the staff made some comments about the check boxes in public forums, including PLI’s The SEC Speaks conference, there was no formal instruction about how to complete these two check boxes. On April 11, 2025, the staff addressed this situation with new Compliance and Disclosure Interpretations to provide clarity about when and how to use the check boxes.
Question 104.20 addresses the first check box concerning the correction of an error:
Question 104.20
Question: When a listed issuer reports a change to its previously issued financial statements in an annual report, how should the issuer determine whether “the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements” for purposes of determining whether the check box indicating such correction of an error should be marked on the cover of its annual report?
Answer: The listed issuer should look to the guidance under the generally accepted accounting principles applicable to its financial statements in determining whether the change represents the correction of an error. When the financial statements of the registrant included in the filing have been revised to reflect the correction of an error to previously issued financial statements, regardless of whether those restatements are required or not, the listed issuer must mark the check box.
A required restatement includes (1) an accounting restatement to correct an error in previously issued financial statements that is material to those financial statements (commonly referred to as a “Big R” restatement) and (2) an accounting restatement to correct an error that is immaterial to those financial statements but would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (commonly referred to as a “little r” restatement).
The correction of an immaterial prior period error that is recorded in the current year (commonly referred to as an “out-of-period adjustment”) does not require the listed issuer to mark the check box because the previously issued financial statements are not revised. [April 11, 2025]
Question 104.21 addresses the second check box concerning a required recovery analysis:
Question 104.21
Question: In 20X4, a listed issuer reports a “Big R” restatement to the 20X3 financial statements in an amendment to its 20X3 annual report and marks the check box on the cover to indicate that the financial statements reflect the correction of an error to previously issued financial statements. After applying its recovery policy pursuant to Exchange Act Rule 10D-1(b), the listed issuer determines that no recovery of erroneously awarded compensation is required.
Is the listed issuer also required to mark the check box on the cover of the amended 20X3 annual report to indicate that the restatement “required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period” pursuant to Exchange Act Rule 10D-1(b) and explain in that amended report why application of the recovery policy resulted in no recovery?
Answer: Yes, the listed issuer must mark the check box indicating that the restatement required the recovery analysis. This would include circumstances when:
Further, the listed issuer should briefly explain why application of its recovery policy resulted in no recovery. [April 11, 2025]
The remaining C&DIs address issues including whether the boxes should be checked in years after the restatement and the restatement of interim periods. One other C&DI addresses a SPAC issue related to co-registrant reporting.
As always, your thoughts and comments are welcome!
Following a February 11, 2025, Statement announcing that Acting Chairman Uyeda had directed the SEC staff to request that the Eighth Circuit not schedule arguments for the consolidated litigation challenging the SEC’s climate-related disclosure rules, on March 27, 2025, the Commission formally voted to end its defense of the rules.
In the Press Release announcing the Commission action, Acting Chairman Uyeda said, “The goal of today’s Commission action and notification to the court is to cease the Commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules.”
Commissioner Crenshaw issued a Statement disagreeing with the Commission’s action.
As always, your thoughts and comments are welcome!
On March 20, 2025, CorpFin announced a number of C&DI updates. Several of the updates address registration issues, including the timing of filing a registration statement after a year end has passed but the related Form 10-K or Form 10-K Part III information has not been filed. All the C&DIs related to the now vacated daily share repurchase Form F-SR were withdrawn.
For foreign private issuers, new C&DI 110.10 states that an auditor change that has been reported on Form 6-K does not need to be reported in a subsequent Form 20-F so long as the Form 6-K includes all disclosures required by Form 20-F Item 16F(a).
As always, your thoughts and comments are welcome.
On February 21, 2025, Acting Chair Mark T. Uyeda delivered the R. Franklin Balotti Keynote Address at the Florida Bar’s 41st Annual Federal Securities Institute and M&A Conference. In his address Acting Chair Uyeda focused on “the Commission’s role in fostering innovation, job creation, and economic growth, by maintaining cost-effective regulations for every stage of a company’s lifecycle.”
The major sections of his address were:
His remarks address a number of areas, including crowdfunding regulations, tailoring the Commission’s regulations for newly public companies and whether the Commissions scaled disclosure requirements, including the definitions of large accelerated and accelerated filer and smaller reporting company, should be updated. He also raised the question of whether all smaller reporting companies should be exempt from the SOX 404 ICFR auditor attestation requirements.
As always, your thoughts and comments are welcome!
On March 6, 2025, CorpFin updated two C&DIs addressing lock-up agreements in Rule 145(a) transactions (i.e., business combinations) and provided five new C&DIs related to tender offers. You can find a list of the new and updated C&DIs here.
As always, your thoughts and comments are welcome!
As a step to facilitate capital formation, on March 3, 2025, the SEC announced that the Division of Corporation Finance will expand its confidential review process for draft registration statements. The confidential review process was established as part of the 2012 JOBS Act. CorpFin expanded the process to all issuers in 2017. According to the Announcement, this next group of changes includes:
In the Press Release announcing these changes Cicely LaMothe, Acting Director of CorpFin said:
“Over the years, staff have observed companies seeking to raise capital are taking advantage of the nonpublic review process when available. Expanding these popular accommodations will provide new and existing companies greater flexibility to explore and plan public offerings.”
As always, your thoughts and comments are welcome!