In this newsletter, we provide a snapshot of the principal US, European and selected international governance and securities law developments of interest to corporates and financial institutions.

US DEVELOPMENTS

SEC Developments

Revised Statement on WKSI Ineligible Issuer Waivers

On 12 March 2014, the Division of Corporation Finance of the Securities and Exchange Commission ("SEC") published a revised statement on waivers of ineligible issuer status under the rules for qualifying as a "well known seasoned issuer" ("WKSI"). WKSI status provides large issuers that regularly access the US capital markets with certain flexibilities in the communications and registration process, including automatic effectiveness of registration statements, which are not subject to SEC review.

To qualify as a WKSI, an issuer may not be an "ineligible issuer". Rule 405 of the Securities Act of 1933 defines an "ineligible issuer" to be, among other things, an issuer that has (or whose subsidiary has) been convicted of a felony or misdemeanor specified in four enumerated provisions under Section 15 of the Securities Exchange Act of 1934 or violated the antifraud provisions of the federal securities laws. The revised statement updates the SEC statement issued in 2011, which provided guidance on what constitutes "a showing of good cause" for purposes of an ineligible issuer waiver request.

The revised statement provides a more detailed framework of what factors the SEC will take into consideration when granting waivers of ineligible issuer status.

The revised statement is available at: http://www.sec.gov/divisions/corpfin/guidance/wksi-waivers-interp-031214.htm

SEC Updates its Conflict Minerals Guidance

On 7 April 2014, the SEC updated its conflict minerals guidance by issuing new compliance and disclosure interpretations. The new compliance and disclosure interpretations address a number of frequently asked questions primarily related to the requirement for issuers to obtain an independent private sector audit of their conflict minerals report filed on Form SD. The independent private sector audit requirement applies to issuers that manufacture products containing tantalum, tin, tungsten or gold sourced from the Democratic Republic of the Congo or adjoining countries, subject to a temporary two-year exemption for products which an issuer is unable to determine are DRC conflict free.

The updated guidance is available at: http://www.sec.gov/divisions/corpfin/guidance/conflictminerals-faq.htm

SEC Guidance on Cyber Security

On 26 March 2014, the SEC held a round table discussion on cyber security-related issues, including a panel session on disclosure. The conference discussion about disclosure did not add much to a disclosure guidance from 2011 on this topic. Instead, most of the discussion revolved around what could change. Relevant points and suggestions included:

  • companies would benefit from having a board member knowledgeable in cyber security issues;
  • some panellists (not SEC members) suggested having a requirement to have a cyber-security committee or have the audit committee monitor cyber security issues;
  • some panellists complained that companies have not been disclosing company or industry specific risks and have been using too much boiler plate;
  • some panellists encouraged the SEC to provide more guidance. Others pushed back and said there is already enough guidance and companies are better positioned to determine the necessary disclosure; and
  • disclosure often does not have an impact on share price but can lead to significant litigation costs as a result of frivolous law suits.

The presentation is available at: http://www.sec.gov/news/otherwebcasts/2014/cybersecurity-roundtable-032614.shtml

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.