Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155), which is primarily aimed at easing regulations on community banks, also contains provisions designed to facilitate capital formation. President Trump signed the bill into law on May 24, 2018.

Section 508 of the bill directs the SEC to revise Regulation A+ to permit public companies to use Regulation A+ to offer securities. Regulation A+ offers a streamlined procedure to offer securities as compared to the more burdensome use of SEC Form S-1. The bill also directs the SEC to revise its rules so that a currently public company can satisfy the Regulation A+’s ongoing reporting requirements for Tier 2 offerings by filing of reports such as 10-Ks and 10-Qs required under Section 13 of the Exchange Act.

Rule 701 provides an exemption for non-public companies to grant equity awards to employees. Section 507 of the bill directs the SEC to increase Rule 701’s threshold for providing additional disclosures to employees from aggregate sales of $5,000,000 during any 12-month period to $10,000,000. In addition, the threshold is to be inflation adjusted every five years.

Section 501 of the bill provides for additional preemption of state blue sky securities laws. Securities will now be considered “covered securities” under Section 18(b)(1) of the Securities Act, and thus not subject to blue sky regulation, if the security is listed on a national securities exchange that is a member of the National Market System.  The test for having substantially similar listing standards to NYSE or Nasdaq is removed.