Annual Review of Federal Securities Regulation
Summer 2017 I The Business Lawyer, Vol. 72, No. 3 I Talley K. Wood et al.
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Introduction
This Annual Review (“Review”) was prepared by the Subcommittee on Annual Review of the Committee on Federal Regulation of Securities of the ABA Business Law Section. The Review covers significant developments in federal securities law and regulation during 2016. The Review is divided into three sections: regulatory actions, accounting statements, and caselaw developments. The Review is written from the perspective of practitioners in the fields of corporate and securities law. This results in an emphasis on significant developments under the federal securities laws relating to companies, shareholders, and their respective counsel. Our discussion is limited to those developments that are of greatest interest to a wide range of practitioners and addresses only final rules.
During 2016, the U.S. Securities and Exchange Commission (the “Commission” or “SEC”) continued its efforts on rulemaking required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Jumpstart Our Business Startups Act (the “JOBS Act”), and the Fixing America’s Surface Transportation Act (the “FAST Act”). For example, in May 2016, as required by the JOBS Act and the FAST Act, the Commission adopted final rules to reflect the higher “held of record” thresholds for registration and reporting obligations. As a result of these amendments, banks, bank holding companies, and savings and loan holding companies with fewer than 1,200 holders are able to terminate registration and immediately suspend their duty to report upon filing a Form 15. In addition, the Commission adopted new rules to implement the statutory exclusion for securities held by persons who received them pursuant to an employee compensation plan. Specifically, Rule 12g5-1(a)(8)(i)(A) provides that, for purposes of determining whether an issuer is required to register a class of securities pursuant to section 12(g)(1), the issuer may exclude securities “held by persons who received the securities pursuant to an employee compensation plan in transactions exempt from, or not subject to, the registration requirements” of the Securities Act of 1933 (the “Securities Act”).
In June 2016, the SEC continued its Dodd-Frank Act rulemaking by adopting a new Rule 13q-1 under the Exchange Act and an amendment to Form SD. The Commission adopted a prior version of Rule 13q-1 in 2012, but the U.S. District Court for the District of Columbia vacated the rule in 2013. Revised Rule 13q-1 required certain “resource extraction issuers” in the oil, natural gas, or mining business to annually disclose payments made to either the federal or foreign governments that are equal to or in excess of $100,0009 and made for the purpose of furthering the commercial development of oil, natural gas, or minerals. Rule 13q-1 was adopted to increase the transparency of such payments made by oil, natural gas, or mining companies.
On February 14, 2017, the President signed a joint resolution of Congress that effectively nullified Rule 13q-1. The resolution stated that the SEC rule on Disclosure of Payments by Resource Extraction Issuers “shall have no force or effect.” While Rule 13q-1 is not effective, analyzing the mechanics of the final rule adopted by the SEC affords readers a historical perspective as to the disclosure requirements and serves an important purpose by providing readers context in the event a new version of Rule 13q-1 is adopted by the SEC in the future.
In November 2016, the Commission adopted intrastate and regional offerings rules meant to complement recent efforts by Congress, state legislatures, and state securities regulators to modernize existing federal and state securities laws and regulations to assist smaller companies with capital formation.
Generally, the Review does not discuss rules or cases that are narrowly focused. For example, the Review does not address hedge fund and other private-fund related rulemaking, nor rulemaking related to registered investment companies, registered investment advisers, or municipal advisors. Cases are chosen for both their legal concepts as well as factual background. While the Subcommittee tries to avoid making editorial comments regarding regulations, rules, or cases, we have attempted to provide a practical analysis of the impact of the developments in the law and regulations on the day-to-day practice of securities lawyers.
