On March 31, 2020 CorpFin issued two Compliance and Disclosure Interpretations to answer questions arising from its Order providing reporting relief for companies.  The C&DI’s deal with the interaction of Form 12b-25 and the provisions in the Order.

Question 135.12

Question: A registrant expects that due to COVID-19 it will be unable to file a report of the type covered by Rule 12b-25 on a timely basis without incurring an unreasonable effort or expense. It is uncertain as to its ability to file the required report within the applicable Rule 12b-25(b)(2)(ii) period. Should the registrant instead furnish a report on Form 8-K or 6-K, as applicable, relying on the COVID-19 Order (Release No. 34-88465 (March 25, 2020))?

Answer: Yes. As a condition to its use, the COVID-19 Order requires, among other things, that the registrant furnish certain specified statements by the later of March 16, 2020 or the original due date of the required report. If the registrant only files a Form 12b-25 by the original due date of the required report, it will have not met the condition of the COVID-19 Order to provide the statements called for by the original filing deadline on a furnished Form 8-K or Form 6-K. Unless this condition is met, the 45 day relief period provided in COVID-19 Order will not be available. Registrants unable to rely on the COVID-19 Order are encouraged to contact the staff to discuss collateral consequences of late filings. [March 31, 2020]

Question 135.13

Question: Can a registrant that filed a Form 12b-25 subsequently rely on the COVID-19 Order (Release No. 34-88465 (March 25, 2020)), to extend the filing deadline for the subject report?

Answer: The COVID-19 Order is conditioned on a registrant having furnished a Form 8-K or Form 6-K by the later of March 16, 2020 or the original due date of the report. A Form 12b-25 filing does not extend the original due date of a report. Therefore, unless a registrant that filed a Form 12b-25 also furnished a Form 8-K or Form 6-K by March 16, 2020 or the original due date of the report, it would not be able to rely on the COVID-19 Order.

On the other hand, a registrant that relies on the COVID Order for a report will be considered to have a due date 45 days after the original filing deadline for the report. As such, the registrant would be permitted to subsequently rely on Rule 12b-25 if it is unable to file the report on or before the extended due date. Registrants unable to rely on the COVID-19 Order are encouraged to contact the staff to discuss collateral consequences of late filings. [March 31, 2020]

As always, your thoughts and comments are welcome!

Coming to grips with how the uncertainty and disruption created by COVID-19 affects impairment testing will be a crucial part of this quarter-end.  To help SEC reporting professionals through this process, the SEC Institute Division of PLI will present a complimentary One-Hour Briefing – Impairment Testing Considerations for Quarter One in the 2020 Coronavirus Environment, on April 3, 2020 at 3 PM EDT.

Leading the discussion will be SEC Institute workshop leaders Bob Laux and George Wilson.  In this briefing you will:

• Recall and review the steps in the impairment testing processes for:
  • Plant assets
  • Intangible assets
  • Goodwill
• Understand the order in which to perform impairment tests
• List impairment testing considerations in the current environment for each category of the impairment test

The program will include several examples of common challenges and problems in performing impairment tests as well as a number of example SEC comments.  You can register for the program here.

You can find all of PLI’s COVID-19 related programs here.  New programs are added on a regular basis and are archived so that you can view them later at your convenience.  All programs are provided without charge.

As always, your thoughts and comments are welcome.

An enjoyable and positive way to spend time during this period of disruption and uncertainty is listening to new podcasts.  Several weeks ago PLI launched the inSecurities Podcast, an in-depth podcast examining changes to securities rules, regulations, and cases from a practitioner’s perspective in both law and accounting.  The podcast is hosted by Chris Ekimoff, a forensic accountant, and Kurt Wolfe, a securities regulatory attorney.  They provide a wonderfully balanced and entertaining perspective on securities issues ranging from insider trading to whistleblowing.  You can find the podcast here and also at such podcast providers as Apple and Spotify.

If you’d like a good starting point, Episode 4 is a deep dive into insider trading, Episode 5 features a market structure discussion with former SEC Commissioner Robert Jackson and George Mason University Law Professor J.W. Verret, and Episode 6 delves into whistleblower issues, all fascinating discussions.

Beyond great information and interesting content, be sure to listen to their acronym bingo episode which is hopefully coming soon!

We hope this helps you use your time in a valuable way during this period, and as always, your thoughts and comments are welcome!

We always emphasize at our Workshops that all SEC filings require manual signatures.  Regulation S-T, the electronic filing rules, contains this provision:

• 232.302   Signatures.

……….

(b) Each signatory to an electronic filing (including, without limitation, each signatory to the certifications required by §§240.13a-14, 240.15d-14 and 270.30a-2 of this chapter) shall manually sign a signature page or other document authenticating, acknowledging or otherwise adopting his or her signature that appears in typed form within the electronic filing. Such document shall be executed before or at the time the electronic filing is made and shall be retained by the filer for a period of five years. Upon request, an electronic filer shall furnish to the Commission or its staff a copy of any or all documents retained pursuant to this section.

If you would like to see a case where a company got in trouble for not obtaining manual signatures, amongst other issues, check out this enforcement case.

In the current COVID-19 chaos the SEC does not want to expose people to more risk because of this requirement.  On March 25, 2020, CorpFin, along with the Divisions of Investment Management and Trading and Markets, issued a Statement to provide relief.  The statement provides:

“In light of these difficulties, the staff will not recommend the Commission take enforcement action with respect to the requirements of Rule 302(b) if:

• a signatory retains a manually signed signature page or other document authenticating, acknowledging, or otherwise adopting his or her signature that appears in typed form within the electronic filing and provides such document, as promptly as reasonably practicable, to the filer for retention in the ordinary course pursuant to Rule 302(b);

• such document indicates the date and time when the signature was executed; and

• the filer establishes and maintains policies and procedures governing this process.

The signatory may also provide to the filer an electronic record (such as a photograph or pdf) of such document when it is signed.”

As always, your thoughts and comments are welcome!

On March 25, 2020 the SEC extended its March 4 Order granting deadline and annual meeting relief.  The relief period now includes reports due on or before July 1, 2020.

In addition CorpFin also issued Disclosure Guidance Topic No. 9 –  Coronavirus (COVID-19).

Both will be discussed in depth along with related disclosure and communication considerations in our complimentary One Hour Briefing on March 26, 2019 – COVID-19 Challenges for First Quarter 2020 Form 10-Q and Annual Meetings.

As always, your thoughts and comments are welcome.

Coming to grips with SEC reporting and other legal implications of COVID-19 is crucial in this period of uncertainty and disruption.  PLI, together with our volunteer faculty, has developed a number of programs to help in dealing with these implications, with more programs being added regularly. Also, all of these programs are being provided without charge.

This Thursday, March 26, 2020, we are presenting a complimentary One-Hour Briefing at 3:00 PM EDT titled “COVID-19 Challenges for First Quarter 2020 Form 10-Q and Annual Meetings”.  Leading the discussion will be SEC Institute workshop leader Gary Brown and his colleague from Nelson Mullins, Charles Vaughn, along with George Wilson from SEC Institute.  This briefing will:

• Review the SEC’s guidance for COVID-19 disclosure considerations
• Discuss the details of the SEC’s deadline and reporting accommodations relating to COVID-19
• Outline risk factor disclosure requirements as applied to COVID-19
• Identify the need for known trend disclosures in MD&A about COVID-19’s possible impact
• List where COVID-19 may create disclosure issues in other items in Form 10-Q
• Analyze the impact of COVID-19 on the annual meeting process
• Review the SEC’s guidance for virtual annual meetings

On the next day, March 27, 2020, we are presenting another One-Hour Briefing “Coronavirus Considerations: SEC Disclosure, Labor & Employment, Insurance, Litigation, Breach of Contract and Force Majeure Issues”.

You can find all of PLI’s COVID-19 related programs here.  New programs are being added on a regular basis so you might want to bookmark this webpage.

As always, your thoughts and comments are welcome.

On March 26, 2020 SEC Institute will present a complimentary One-Hour Briefing titled “COVID-19 Challenges for First Quarter 2020 Form 10-Q and Annual Meetings”.

In this briefing participants will:

• Review the SEC’s guidance for COVID-19 disclosure considerations
• Discuss the details of the SEC’s deadline and reporting accommodations relating to COVID-19
• Outline risk factor disclosure requirements as applied to COVID-19
• Identify the need for known trend disclosures in MD&A about COVID-19’s possible impact
• List where COVID-19 may create disclosure issues in other items in Form 10-Q
• Analyze the impact of COVID-19 on the annual meeting process
• Review the SEC’s guidance for virtual annual meetings

Each participant will be able to ask questions of the presenters.  You can register for this complimentary program here.

As always, your thoughts and comments are welcome.

On March 13, 2020 the SEC issued guidance to “assist public companies, investment companies, shareholders, and other market participants affected by COVID-19 with their upcoming annual shareholder meetings”.  The staff guidance addresses changing meeting dates and locations as well as the use of technology for “virtual” meetings.  The guidance provides processes to make changes without the expense of an additional paper mailing to shareholders.

You can find a comprehensive review of the SEC’s guidance and related state law considerations in this Nelson Mullins Securities Alert.

As always, your thoughts and comments are welcome!

Even with the disruption of the coronavirus the SEC is moving forward with its regulatory agenda.  On March 12, 2020 the SEC finalized a significant part of this agenda by changing the definition of Accelerated Filer.  The rule finalized a proposal made on May 9, 2019.

The Final Rule will be effective 30 days after publication in the Federal Register and applies to all filings due on or after the effective date.

The major change in the Final Rule is that companies with public float of over $75 million but less than $700 million AND less than $100 million in revenues will now be Non-Accelerated Filers.  These companies, which had been Accelerated Filers, will be able to use the longer 90 day and 45 day deadlines for Forms 10-K and 10-Q, respectively, and will not be required to obtain an auditors attestation report on their ICFR.  (As in the existing rules public float will be measured on the last business day of the company’s second fiscal quarter.)

This table from page 53 of the Final Rule summarizes how the definitions of  Non-Accelerated Filer, Accelerated Filer, Large Accelerated Filer and Smaller Reporting Company will fit together:

The Final Rule will also add a check box to the cover page of Form 10-K to indicate if the report includes an auditors attestation report on ICFR.

In the press release accompanying the Final Rule the SEC makes a very important point about ICFR for the population of Non-Accelerated Filers:

 Following the adoption of the amendments, smaller reporting companies with less than $100 million in revenues will continue to be required to establish and maintain effective internal control over financial reporting (ICFR). Their principal executive and financial officers must continue to certify that, among other things, they are responsible for establishing and maintaining ICFR and have evaluated and reported on the effectiveness of the company’s disclosure controls and procedures. In addition, these smaller companies will continue to be subject to a financial statement audit by an independent auditor, who is required to consider ICFR in the performance of that audit. As a result of these amendments, and unlike larger issuers, these smaller companies will no longer be required to obtain a separate attestation of their ICFR from an outside auditor. These smaller issuers will be able to redirect the associated cost savings into growing their businesses. Business development companies will receive analogous treatment as a result of the amendments.

 The Final Rule, on page 81, also provides these estimates of the number of companies expected to be affected:

We estimate that the amendments will result in 527 additional issuers being classified as non-accelerated filers, and therefore no longer subject to the filing deadlines and ICFR auditor attestation requirement applicable to accelerated filers.  Of these, an estimated 154 issuers are EGCs and are thereby already exempt from the ICFR auditor attestation requirement.

Among the total 527 affected issuers, an estimated 492 issuers are accelerated filers (or large accelerated filers that have public float of less than $560 million) that will be newly classified as non-accelerated filers because they have annual revenues of less than $100 million and are eligible to be SRCs.

The Final Rule also changes the public float thresholds to change from Accelerated Filer to Non-Accelerated Filer to $60 million and the threshold to change from Large Accelerated Filer to Accelerated Filer to $560 million.  The Final Rule also adds that a company can exit Accelerated or Large Accelerated Filer status if it meets the definition of a smaller reporting company based on the revenue test in that definition.

As always, your thoughts and comments are welcome!

As you can read in this Announcement it is business as usual for CorpFin, as many staff members are teleworking.  The staff anticipates being able to meet normal time frames for filing reviews and inquires.

As always, your thoughts and comments are welcome!