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

The SEC has adopted interim final amendments to Form 10-K, Form 20-F, Form 40-F, and Form N-CSR to implement the disclosure and submission requirements of the Holding Foreign Companies Accountable Act, or the HFCA Act.  The HFCA Act became law on December 18, 2020. Among other things the HFCA Act requires the SEC to identify each “covered issuer” that has retained a registered public accounting firm to issue an audit report where that registered public accounting firm has a branch or office that:

  • Is located in a foreign jurisdiction; and
  • The PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction.

The SEC refers to registrants so identified as Commission-Identified Issuers.   Commission-Identified Issuers are required to submit documentation to the Commission that establishes that they are not owned or controlled by a governmental entity in that foreign jurisdiction. In addition, if the registrant is determined to be a Commission-Identified Issuer for three consecutive years, Section 2 of the HFCA Act directs the Commission to prohibit trading of the registrant’s securities. Section 3 of the HFCA Act provides that Commission-Identified Issuers that are foreign issuers, referred to as Commission-Identified Foreign Issuers, are subject to additional specified disclosure requirements, as discussed in more detail below.

Scope of Amendments

The scope of the interim final amendments is limited to:

  • the statutory mandate to issue rules that establish the manner and form in which a Commission-Identified Issuer must make the required submissions; and
  • the disclosure obligations set forth in Section 3 of the HFCA Act that have been added to the relevant Commission forms.

Role of the PCAOB

Under Section 104(i)(2) of the Sarbanes-Oxley Act, as added by the HFCA Act, the PCAOB is responsible for determining that it is unable to inspect or investigate completely a registered public accounting firm because of a position taken by an authority in a foreign jurisdiction. The SEC  understands that the PCAOB is considering its obligations under the HFCA Act, including the process for making these determinations. The SEC believes it is important that the PCAOB act quickly to identify the best manner in which to make these determinations. Any PCAOB rulemaking in response to the HFCA Act will be subject to Commission review and approval prior to taking effect. Once the PCAOB process has been established, the Commission will use the PCAOB’s determination about which firms it is unable to inspect or investigate completely, along with information in a registrant’s annual reports, to compile a list of registrants that are Commission-Identified Issuers.

Disclosure Requirements

Section 3 of the HFCA Act requires a Commission-Identified Foreign Issuer to provide certain additional disclosure in its annual report for the year that the Commission so identifies the issuer. The HFCA Act requires this disclosure in the issuer’s Form 10-K, Form 20-F, or a form that is the equivalent of, or substantially similar to, these forms. Specifically, a Commission-Identified Issuer is required to disclose:

  • That, during the period covered by the form, the registered public accounting firm has prepared an audit report for the issuer;
  • The percentage of the shares of the issuer owned by governmental entities in the foreign jurisdiction in which the issuer is incorporated or otherwise organized;
  • Whether governmental entities in the applicable foreign jurisdiction with respect to that registered public accounting firm have a controlling financial interest with respect to the issuer;
  • The name of each official of the Chinese Communist Party (“CCP”) who is a member of the board of directors of the issuer or the operating entity with respect to the issuer; and
  • Whether the articles of incorporation of the issuer (or equivalent organizing document) contains any charter of the CCP, including the text of any such charter.

While Section 3 of the HFCA Act does not mandate specific rule or form changes, the SEC believes that amending its forms to include the new disclosure requirements will help registrants comply with the HFCA Act. The Commission therefore amended Form 10-K, Form 20-F, Form 40-F, and Form N-CSR to reflect the disclosure requirements in Section 3 of the HFCA Act.

Submission Requirements

In addition to the Section 3 disclosure requirement, Section 2 of the HFCA Act amended Sarbanes-Oxley Act Section 104 to, in part, require any Commission-Identified Issuer to submit to the Commission documentation establishing that the issuer is not owned or controlled by a governmental entity in the foreign jurisdiction of the registered public accounting firm that the PCAOB is unable to inspect or investigate completely, and mandates that the Commission adopt rules establishing the manner and form in which such submissions will be made no later than 90 days after enactment. Because the submission requirement is triggered by the preparation of an audit report on a registrant’s financial statements, the Commission is amending Form 10-K, Form 20-F, Form 40-F, and Form N-CSR to implement this provision. In contrast to the disclosure requirement in Section 3 of the HFCA Act that applies only to Commission-Identified Foreign Issuers, the submission requirement in Section 2 of the HFCA Act applies to all Commission-Identified Issuers. The amendments require a registrant that is a Commission-Identified Issuer that is not owned or controlled by a governmental entity in the described foreign jurisdiction to electronically submit documentation to the Commission on a supplemental basis that establishes that the registrant is not so owned or controlled. Under the interim final amendments, such submissions will be made through the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system on or before the due date of the relevant annual report form.

While the interim final amendments prescribe the timing and means by which such submissions shall be made, neither they nor the HFCA Act specify the particular types of documentation that can or should be submitted for this purpose. Moreover, the SEC recognizes that available documentation could vary depending upon the organizational structure and other factors specific to the registrant. Thus, as an initial matter, registrants will have flexibility under the interim final amendments to determine how best to satisfy this requirement. At the same time, the SEC is requesting comment as to whether the Commission should require specific types of documentation or whether additional guidance would be necessary or useful to registrants as they seek to comply with the submission requirement.

In re Forum Mobile, Inc. considers petitioner Synergy Management Group LLC’s request for the appointment of its President to be custodian of Forum Mobile, Inc. under Section 226(a)(3) of the Delaware General Corporation Law, or DGCL. The respondent in the action technically is Forum, but according to the Court, Forum is a defunct entity whose only value lies in the fact that its shares continue to have a CUSIP number that allows them to trade over the counter.  Synergy seeks to revive Forum to use as a blank check company. Through a reverse merger with Forum, a new business could access the public markets.

The court notes that in addition to not complying with the federal securities laws, Forum has failed to comply with Delaware law. It does not maintain a registered agent within the State of Delaware, has not filed annual reports with the Delaware Secretary of State, and has not held an annual meeting of stockholders. The Delaware Secretary of State’s website lists Forum’s status as void for failing to pay its franchise taxes. Forum appears to have abandoned its business

Affidavits filed with the Court indicate Synergy has attempted to locate Forum’s officers and directors to demand that they cause Forum to comply with its legal obligations.  Synergy has received no response.

Despite Forum’s status as a defunct entity, the fact that its shares have a CUSIP number and trade over the counter gives the company value. Recognizing this fact, Synergy acquired 494,530 shares of its stock

Through the instant litigation in the Court of Chancery, Synergy seeks to have its president appointed as a custodian. The order appointing the custodian would provide the custodian the power to call a meeting of stockholders, and authorize the meeting to proceed under a special quorum requirement so that the stockholders who attend the meeting can elect a new board of directors. Synergy’s CEO then will revive Forum for use as a blank check entity. In particular the court indicated he intends to “identify private companies that may be interested in a reverse merger” with Forum.

Synergy’s petition is one of six virtually identical petitions that Synergy has filed. Synergy’s counsel also represents Universal Management Association, which has filed four virtually identical petitions seeking to have its president appointed as a custodian for other defunct Delaware corporations.

The Court noted Synergy’s petition implicates important questions of public policy, including the State of Delaware’s interest in preventing the use of Delaware entities to circumvent the federal securities laws.

The Court noted Synergy’s request is the latest instance of a recurring phenomenon. The Court of Chancery periodically confronts efforts by capital-markets entrepreneurs to revive otherwise defunct entities to use as blank check companies.

In reviewing precedents, the Court noted the odd fact that directors of company like Forum should have In the usual course of business filed a certificate of dissolution terminating its corporate existence and a deregistration statement terminating its status as a reporting company. Had the directors taken these responsible actions it would be impossible to revive a defunct entity as a blank check company.

The Court rejected Synergy’s arguments that the SEC does not prohibit reverse mergers as controlling precedent for this matter.

The Court noted Delaware authorities addressing efforts to revive defunct entities for use as blank check companies reflect a consistent Delaware public policy against allowing capital-markets entrepreneurs to deploy Delaware law to bypass the federal securities laws that govern stock offerings. That policy is based on the Court of Chancery’s understanding of the federal securities laws and the SEC’s priorities.

The Court stated it would be helpful to have input from the SEC and the benefit of adversarial briefing on the petition. That was particularly true because Synergy and another firm have filed a raft of these petitions. Having input from the SEC also would provide a direct answer to the question of whether Delaware’s concern about creating a state-law bypass around the federal securities laws governing stock offerings has become stale, as Synergy argues.

The Court further stated it would benefit from the appointment of an amicus curiae who can consult with the SEC regarding the petition. Informed by a consultation with the SEC, the amicus curiae will provide an independent view regarding whether the petition should be granted.

Accordingly, the Court appointed a Delaware attorney as amicus curiae.

The Securities and Exchange Commission announced settled charges against an Oklahoma-based gas exploration and production company, Gulfport Energy Corporation, and its former CEO, Michael G. Moore, for failing to properly disclose as compensation certain perks provided to Moore, as well as failing to disclose certain related person transactions.

SEC enforcement actions for failure to disclose perks always attract a lot of attention.  Almost never do these cases rest on fine lines of interpretation with people trying to do the right thing.  Most of the cases result from egregious actions and blatant disregard of the rules.  According to the SEC’s description, this appears to be one of those cases.  According to the SEC:

From the time he became CEO in 2014 until his resignation in October 2018 (the “Relevant Period”), Moore: (1) caused Gulfport to incur approximately $650,000 worth of charges by traveling on chartered aircraft for reasons that were not integrally and directly related to the performance of his CEO duties; and (2) used a Gulfport corporate credit card for personal expenses that he did not repay timely, which resulted in Gulfport extending Moore interest-free credit and carrying a related person account receivable. Additionally, during 2015, Gulfport paid Moore’s son’s company approximately $152,000 to provide landscaping services.

The SEC order finds that during the Relevant Period, Gulfport did not have any internal policies or procedures specifically governing the use of chartered aircraft. Gulfport’s Code of Business Conduct and Ethics, however, required that “[a]ll Company assets should be used for legitimate business purposes only.” Also, by 2016, Gulfport issued an Employee Handbook, approved and adopted by Moore, that provided that company resources should not be used for personal expenses.

From 2014 to 2018, Moore caused Gulfport to pay for his travel by chartered aircraft in some instances where his travel was not integrally and directly related to the performance of his duties as CEO, costing Gulfport approximately $650,000. For example, Moore used chartered aircraft for himself and his wife to attend two events sponsored by a Gulfport supplier: a wine tasting weekend in Napa, California and a poker tournament in Las Vegas, Nevada. Neither one of these events was integrally and directly related to Moore’s duties as Gulfport’s CEO.

As a result of the lack of policies and procedures discussed above, Gulfport did not review Moore’s chartered aircraft usage to determine if it involved perquisites or personal expenses. While Gulfport was aware of the chartered aircraft usage through its process of purchasing and tracking the charter services, no one at Gulfport reviewed the individual flights to determine the flight purpose.

Moore also did not provide information about his flights to Gulfport during the annual process to identify perquisites and other personal benefits that might require disclosure. Each year, in connection with the preparation of the proxy statement, Moore received a document titled “Questionnaire for Directors, Officers and Certain Other Persons” (the “D&O Questionnaire”). The D&O Questionnaire required that perquisites and personal benefits be disclosed, and contained detailed examples and explanations concerning benefits that may require disclosure, including “[p]ersonal use of Company provided aircraft.” Further, the D&O Questionnaire highlighted that “[i]f you have any doubts about whether to include an item of information, please resolve those doubts in favor of disclosure.”

In addition, Gulfport hired Moore’s son’s company to perform landscaping work for Gulfport in at least 2014, 2015, and 2016. From January 1, 2015, through December 1, 2015, Gulfport paid Moore’s son’s company approximately $152,000 for this work.

In December 2015, Moore directed his son’s company to repay Gulfport approximately $32,000, thereby bringing the amount paid to the landscaping company below $120,000, the threshold for related person transaction disclosure. Moore then personally paid his son’s company the additional $32,000 to make up for the shortfall created by the repayment.

Moore’s son’s company had in fact provided services and materials valued at approximately $152,000 in 2015. In Moore’s D&O Questionnaire for the year ending 2015, he failed to identify the payments to his son’s company, even though the information was required to be disclosed.

Gulfport and Moore did not admit or deny the SEC’s findings.

The Securities and Exchange Commission announced the creation of a Climate and ESG Task Force in the Division of Enforcement.

Consistent with increasing investor focus and reliance on climate and ESG-related disclosure and investment, the Climate and ESG Task Force will develop initiatives to proactively identify ESG-related misconduct.  The task force will also coordinate the effective use of Division resources, including through the use of sophisticated data analysis to mine and assess information across registrants, to identify potential violations.

The initial focus will be to identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules.  The task force will also analyze disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies.

In addition, the Climate and ESG Task Force will evaluate and pursue tips, referrals, and whistleblower complaints on ESG-related issues, and provide expertise and insight to teams working on ESG-related matters across the Division.

On March 5, 2021, the Securities and Exchange Commission charged AT&T, Inc. with repeatedly violating Regulation FD, and three of its Investor Relations executives with aiding and abetting AT&T’s violations, by selectively disclosing material nonpublic information to research analysts.

The enforcement action demonstrates how efforts to talk down analyst estimates can potentially violate Regulation FD.

According to the SEC’s complaint, in March and April of 2016, Defendant AT&T, aided and abetted by Defendants Womack, Evans, and Black, executives in its Investor Relations Department, repeatedly violated Regulation FD.  Regulation FD is a Commission rule that prohibits selective disclosures by issuers of material nonpublic information to securities analysts and others.  The core Regulation FD violation alleged by the SEC is that AT&T and other defendants disclosed AT&T’s projected and actual financial results during phone calls Womack, Evans, and Black held with equity stock analysts from approximately 20 Wall Street firms on a one-on-one basis.

According to the SEC, in early March 2016, AT&T and its executives, including Womack, Evans, and Black, learned that a steeper-than-expected decline in smartphone sales by AT&T would cause its revenue for the first quarter of 2016 (“1Q16”) to fall short of analysts’ estimates. In fact, AT&T’s “equipment upgrade rate” (i.e., the rate at which existing customers purchased new smartphones) would be a record low for the company, with the result that AT&T’s consolidated gross revenue was expected to fall more than $1 billion below the consensus estimate—that is, the average of the forecasts for all analysts covering AT&T.

Fearful of a revenue miss at the end of the quarter, AT&T’s Chief Financial Officer instructed AT&T’s IR Department to “work[] the analysts who still have equipment revenue too high.”

In turn, the Director of Investor Relations (“IR Director”) instructed Womack, Evans, and Black to speak to analysts privately on a one-by-one basis about their estimates in order to “walk the analysts down”—i.e., induce analysts to reduce their individual estimates. The goal, according to the SEC, was to induce enough analysts to lower their estimates so that the consensus revenue estimate would fall to the level that AT&T expected to report to the public—i.e., AT&T would not have a revenue miss, which would have been the company’s third consecutive quarterly miss.

Between March 9 and April 26, 2016, Womack, Evans, and Black called approximately 20 separate analyst firms and spoke to analysts in order to induce them to lower their revenue estimate and thereby reduce the consensus estimate to the level that AT&T expected to report. During these calls, Womack, Evans, and Black intentionally disclosed material nonpublic information regarding AT&T’s results to date. Depending on the firm and the date of the call, Womack, Evans, and Black disclosed AT&T’s projected or actual equipment upgrade rate, its projected or actual wireless equipment revenue amount (presented as a percentage decrease compared with the first quarter of 2015), or both.

On some of Black’s calls to analysts, he represented to the analysts that he was conveying publicly available consensus estimates, when in fact he was providing AT&T’s own internal projected or actual results. Black knew or recklessly disregarded that he was misrepresenting the information he was conveying to analysts because he tracked AT&T’s calculation of consensus estimates—none of which matched the information he provided on the calls with analysts.

The SEC alleges Womack, Evans, and Black knew or recklessly disregarded that the information that they provided to the analysts during these calls was both material and nonpublic. Among other things, they knew that they were prohibited from selectively disclosing AT&T’s internal revenue and related data to analysts, and they did so with the expectation that the analysts would act on the information to substantially reduce the estimates they published for investors. Their knowing or reckless conduct was also evidenced by, for example, Black’s efforts to disguise the internal information he was presenting as “consensus,” the fact that the analysts’ initial estimates deviated so far from AT&T’s projected and actual results that the group needed to call approximately 20 separate firms to bring the consensus down to where AT&T could meet it, and that they presented the equipment upgrade rate as a “record low” during some of these calls.

Finally, the SEC alleges the analyst firms that received these calls promptly adjusted their revenue estimates, resulting in a reduced consensus revenue forecast for 1Q16 that AT&T beat when it announced earnings on April 26, 2016, in a Form 8-K filed with the SEC.

No Court has found any of the defendants has violated the law, and the allegations in the SEC’s complaint are as of yet unproven.

In a public statement Acting SEC Chair Allison Herren Lee noted that she had directed the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings. Chair Lee noted the Commission in 2010 provided guidance to public companies regarding existing disclosure requirements as they apply to climate change matters. As part of its enhanced focus in this area, the staff will review the extent to which public companies address the topics identified in the 2010 guidance, assess compliance with disclosure obligations under the federal securities laws, engage with public companies on these issues, and absorb critical lessons on how the market is currently managing climate-related risks. The SEC staff will use insights from this work to begin updating the 2010 guidance to take into account developments in the last decade.

ISS has posted its usual suite of interpretive material for the upcoming proxy season.

The Compensation FAQs note exceptional circumstances of the COVID-19 pandemic and its impact on company operations will be considered in ISS’ qualitative evaluation. The FAQs then point you toward ISS’ previously released COVID-19 FAQs.

The Equity Compensation Plan FAQs note that passing scores of the Equity Plan Scorecard (EPSC) will increase for the S&P 500 model (from 55 points to 57 points) and the Russell 3000 model (from 53 points to 55 points). The threshold passing scores are unchanged for other models. There are no new factors or factor score adjustments.

In Pascal v. Czerwinski et al, the Delaware Court of Chancery considered whether disclosures in Columbia Financial’s 2019 proxy statement related to the adoption of an equity incentive plan, or EIP, were adequate.  The directors of the company granted awards to themselves as compensation for past efforts to take the company public.

The plaintiffs claimed the director defendants:

  • planned to use the EIP to retroactively reward themselves for taking the Company public (the “go-public conversion”),
  • had been planning to do so even before issuing the 2019 Proxy, which solicited the stockholders’ vote for the EIP, but
  • did not include any disclosure of that plan in the 2019 Proxy, as demonstrated by the fact that the 2019 Proxy’s language regarding the EIP framed the EIP as contemplating forward-looking compensation only.

The complaint alleged that one of the reasons for the EIP was the directors’ intent to award themselves equity under the plan to compensate past efforts to take the company public  However it was claimed the defendants failed to disclose in the 2019 Proxy that they intended the EIP to reward past efforts, as the alleged proxy disclosures only addressed the intent to incentivize future actions.

The defendants argued the 2019 Proxy did disclose both intentions: the proxy provided that the EIP was meant to “attract, retain and reward the best available persons for positions of substantial responsibility and to recognize significant contributions made by such individuals to the Company’s success.”

The Court found that the 2019 Proxy did not explicitly mention the possibility of retrospective payment for the go-public conversion.  However, the 2019 Proxy did set out that the company might issue awards in part for past accomplishments. And, given that “awards for past accomplishments” encompasses “retrospective payment for the conversion,” the Court did not find it reasonably conceivable that stockholders would have found the difference between the two to be material.

It’s a good reminder at this time of year to think carefully about disclosures when asking for approval of equity compensation plans.

It’s worth noting the Court indicated  the awards would be subject to entire fairness review and the Court did not decide any claims regarding breach of fiduciary duty.

The SEC adopted final rules that will require resource extraction issuers that are required to file reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 to disclose payments made to the U.S. federal government or foreign governments for the commercial development of oil, natural gas, or minerals.  The rules implement Section 13(q) of the Exchange Act, which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).

The SEC adopted rules to implement Section 13(q) in 2016, but the 2016 Rules were disapproved pursuant to the Congressional Review Act, or CRA, by a joint resolution of Congress.  Although the 2016 Rules were disapproved under the CRA, the statutory mandate in Section 13(q) of the Exchange Act has remained in effect.  As a result, the Commission was statutorily obligated to issue a new rule, however, pursuant to the CRA the Commission may not reissue the disapproved rule in “substantially the same form” or issue a new rule that is “substantially the same” as the disapproved rule.

The final rules will, among other things:

  • require public disclosure of company-specific, project-level payment information;
  • define the term “project” to require disclosure at the national and major subnational political jurisdiction, as opposed to the contract, level, recognizing that more granular contract-level disclosure could be used to satisfy the rule;
  • add two new conditional exemptions for situations in which a foreign law or a pre-existing contract prohibits the required disclosure;
  • add a conditional exemption for smaller reporting companies and emerging growth companies;
  • define “control” to exclude entities or operations in which an issuer has a proportionate interest;
  • limit the liability for the required disclosure by deeming the payment information to be furnished to, but not filed with, the Commission;
  • add relief for issuers that have recently completed their U.S. initial public offerings; and
  • extend the deadline for furnishing the payment disclosures.

The SEC also issued an order finding that certain resource extraction payment disclosure regimes by the European Union and certain countries are alternative reporting regimes that satisfy the transparency objectives of Section 13(q) under the Exchange Act for purposes of alternative reporting under Rule 13q-1(c) and paragraph (c) of Item 2.01 of Form SD.

Rule 13(q)(1) will become effective 60 days after publication in the Federal Register.  Following a two-year transition period, an issuer will be required annually to submit Form SD no later than 270 days following the end of its most recently completed fiscal year.  For example, if the rules were to become effective on March 1, 2021, the compliance date for an issuer with a December 31 fiscal year-end would be Monday, September 30, 2024 (i.e., 270 days after its fiscal year end of December 31, 2023).

The pending National Defense Authorization Act (NDAA) for Fiscal Year 2021 (H.R. 6395) will require many private companies to confidentially report the beneficial ownership of their common stock in many circumstances.  The beneficial ownership provisions are included in what is named the “Corporate Transparency Act.”

The Corporate Transparency Act excludes the following types of companies from reporting beneficial ownership:

  • an issuer:
    • of a class of securities registered under section 12 of the Securities Exchange Act of 1934; or
    • that is required to file supplementary and periodic information under section 15(d) of the Securities Exchange Act of 1934;
  • an entity:
    • established under the laws of the United States, an Indian Tribe, a State, or a political subdivision of a State, or under an interstate compact between 2 or more States; and
    • that exercises governmental authority on behalf of the United States or any such Indian Tribe, State, or political subdivision;
  • a bank, as defined in:
    • section 3 of the Federal Deposit Insurance Act;
    • section 2(a) of the Investment Company Act of 1940; or
    • section 202(a) of the Investment Advisers Act of 1940;
    • a Federal credit union or a State credit union (as those terms are defined in section 101 of the Federal Credit Union Act);
  • a bank holding company (as defined in section 2 of the Bank Holding Company Act of 1956) or a savings and loan holding company (as defined in section 10(a) of the Home Owners’ Loan Ac)t;
  • a broker or dealer (as those terms are defined in section 3 of the Securities Exchange Act of 1934) that is registered under section 15 of that Act;
  • an exchange or clearing agency (as those terms are defined in section 3 of the Securities Exchange Act of 1934) that is registered under section 6 or 17A of that Act;
  • certain other entities not described above that are registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934;
  • an entity that:
    • is an investment company (as defined in section 3 of the Investment Company Act of 1940) or an investment adviser (as defined in section 202 of the Investment Advisers Act of 1940); and
    • is registered with the Securities and Exchange Commission under the Investment Company Act or the Investment Advisers Act of 1940;
  • an investment adviser described in section 203(l) of the Investment Advisers Act of 1940 and that has filed Item 10, Schedule A, and Schedule B of Part 15 1A of Form ADV, or any successor, with the Securities and Exchange Commission;
  • an insurance company (as defined in section 2 of the Investment Company Act of 1940):
  • an entity that:
    • is an insurance producer that is authorized by a State and subject to supervision by the insurance commissioner or a similar official or agency of a State; and
    • has an operating presence at a physical office within the United States;
  • a registered entity (as defined in section 1a of the Commodity Exchange Act); or
  • an entity that is:
    • a futures commission merchant, introducing broker, swap dealer, major swap participant, commodity pool operator, or commodity trading advisor (as those terms are defined in section 1a of the Commodity Exchange Act); or
    • a retail foreign exchange dealer, as described in section 20 2(c)(2)(B) of that Act; and registered with the Commodity Futures Trading Commission under the Commodity Exchange Act;
  • a public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act of 2002;
  • a financial market utility designated by the Financial Stability Oversight Council under section 804 of the Payment, Clearing, and Settlement Supervision Act of 2010;
  • certain pooled investment vehicles advised by other exempt entities;
  • any:
    • organization that is described in section 501(c) of the Internal Revenue Code of 1986 (determined without regard to section 508(a) of such Code) and exempt from tax under section 501(a) of the Code, except that in the case of any such organization that loses an exemption from tax, such organization shall be considered to be continued to be exempt for the 180-day period beginning on the date of the loss of such tax-exempt status;
    • political organization (a defined in section 527(e)(1) of the Code) that is exempt from tax under section 527(a) of the Code;
    • trust described in paragraph (1) or (2) of section 4947(a) of the Code;
  • any corporation, limited liability company, or other similar entity that:
    • operates exclusively to provide financial assistance to, or hold governance rights over, any entity described in the foregoing bullet point;
    • is a United States person;
    • is beneficially owned or controlled exclusively by 1 or more United States persons that are United States citizens or lawfully admitted for permanent residence; and
    • derives at least a majority of its funding or revenue from 1 or more United States persons that are United States citizens or lawfully admitted for permanent residence;
  • any entity that:
    • employs more than 20 employees on a full-time basis in the United States;
    • filed in the previous year Federal income tax returns in the United States demonstrating more than $5,000,000 in gross receipts or sales in the aggregate, including the receipts or sales of:
      • other entities owned by the entity; and
      • other entities through which the entity operates; and
    • has an operating presence at a physical office within the United States;
  • any corporation, limited liability company, or other similar entity:
    • in existence for over 1 year;
    • that is not engaged in active business;
    • that is not owned, directly or indirectly, by a foreign person;
    • that has not, in the preceding 12-month period, experienced a change in ownership or sent or received funds in an amount greater than $1,000 (including all funds sent to or received from any source through a financial account or accounts in which the entity, or an affiliate of the entity, maintains an interest); and
    • that does not otherwise hold any kind or type of assets, including an ownership interest in any corporation, limited liability company, or other similar entity; and
  • any entity or class of entities that the Secretary of the Treasury, with the written concurrence of the Attorney General and the Secretary of Homeland Security, has, by regulation, determined should be exempt from the requirements of beneficial ownership reporting because requiring beneficial ownership information from the entity or class of entities:
    • would not serve the public interest; and
    • would not be highly useful in national security, intelligence, and law enforcement agency efforts to detect, prevent, or prosecute money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or other crimes.