The SEC Pulse

Jeffrey Morlend

Jeffrey B. Morlend is a partner in the Corporate Department of Sullivan & Worcester's Boston office. Mr. Morlend works with both public and private clients in a range of corporate matters, including commercial transactions, mergers and acquisitions, private equity and venture capital transactions, securities law compliance, public and private offerings, financing transactions and general corporate matters. During law school, Mr. Morlend was the business editor of the Syracuse Law Review, a member of the Justinian Honor Society and served as judicial intern for the Honorable Frank M. Ciuffani, J.S.C., Superior Court of New Jersey.
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Recent Posts

Simplification of Regulation S-K - Proposed Rules

Posted by Jeffrey Morlend on October 12, 2017 at 3:59 PM

The SEC has proposed a series of amendments to modernize and simplify disclosure requirements for public companies, investment advisers and investment companies, particularly those disclosure requirements under Regulation S-K. Such amendments include proposed changes to, among others, Item 102 (Description of Property), Item 303 (Management’s Discussion and Analysis), Item 401 (Directors, Executive Officers, Promoters, and Control Persons), Item 405 (Compliance with Section 16(a) of the Exchange Act), Item 501(b) (Outside Front Cover Page of the Prospectus), Item 503(c) (Risk Factors), Item 508 (Plan of Distribution), Item 601(b)(10) (Material Contracts) and various rules related to incorporation by reference. 

Among the most impactful proposed changes are:

  1. Limiting the period-to-period comparison required by Item 303 (Management’s Discussion and Analysis) to only the two most recent fiscal years rather than the currently required three most recent fiscal years. The comparison to the third fiscal year would still be required if material to the understanding of the company’s financial statements and if not included in the company’s Form 10-K for the previous year.
  1. Limiting the disclosure required by Item 102 (Description of Property) to only those properties that are material.
  1. With respect to exhibits to SEC filings (Item 601):

 - Allowing companies to omit schedules that don't contain material information from all 
   exhibits, rather than only from acquisition agreements.

- Eliminating the requirement (other than for newly reporting companies) under Item
  601(b)(10) to file as exhibits material contracts that were entered into less than two
  years before that filing but that have been fully performed at the time of the filing.

- Permitting companies to omit or redact from material agreements filed as exhibits to
  SEC filings confidential information that is not material and would cause competitive
  harm if made public, without requiring companies to first file a confidential treatment
  request. Companies would be required to mark their filings to indicate omitted items.

  1. Permitting companies to omit disclosure about Section 16 reports if all reports have been timely filed (and eliminating the box on the cover of Form 10-Ks regarding Section 16 disclosure).

In contrast, the proposals would add a few requirements regarding descriptions of securities and XBRL tagging of cover pages, among others.

In addition, the proposals would eliminate certain other outdated disclosure requirements and make various conforming updates to forms and rules with outdated references.

The proposals, which can be found here, are subject to a public comment period, following which time, the SEC will further consider whether or not to approve them as final rules.

Small Entity Compliance Guide for Issuers

Posted by Jeffrey Morlend on May 31, 2016 at 1:48 PM

Earlier this month, the SEC released a small entity compliance guide for issuers regarding its recently passed crowdfunding regulation to help provide issuers with some additional clarity.  The guide presents a general description of the regulation and provides a step by step listing of the requirements issuers must meet in order to rely on the crowdfunding exemption.  In addition, the guide discusses disclosure requirements of issuers and other limits, restrictions and disqualifications under the regulation.

Find out more about crowdfunding:

Topics: crowdfunding

Crowdfunding – What You Need To Know

Posted by Jeffrey Morlend on November 12, 2015 at 12:02 PM

New Developments in Crowdfunding from the SEC

The SEC recently issued under the JOBS Act the long-awaited crowdfunding rules, whereby small businesses may raise capital from a large number of investors, each of whom contributes a small amount of money, without going through the trouble of filing a registration statement with the SEC.  However, it is important to understand the limits and filing requirements imposed by the SEC before moving forward with a crowdfunding transaction.  

  1. Limits.  As much as we’d each like to go collect $5 from every person we’ve ever met, the SEC has imposed several limits on crowdfunding in order to protect investors.  To qualify for the registration exemption, the aggregate amount of securities sold by a company to all investors in a crowdfunding transaction during a 12-month period cannot exceed $1 million.  In addition, the aggregate amount of securities sold by a company to any one investor in a crowdfunding transaction cannot exceed certain limits – if the investor’s annual income or net worth is less than $100,000, the limit is the greater of $2,000 or 5% of the lesser of the investor’s annual income or net worth, and if both the investor’s annual income and net worth are equal to or more than $100,000, the limit is 10% of the lesser of the investor’s annual income or net worth.  Still with me?  The SEC has also limited the aggregate amount of securities sold to one investor through all crowdfunding transactions to a maximum of $100,000.   In addition to these limits, a crowdfunding transaction must be done using one – and only one – intermediary (i.e., broker or funding portal).  So if you were thinking about crowdfunding through your website or by using multiple funding portals, sorry to be the bearer of bad news. 
  1. Issuer Requirements.  As mentioned above, the crowdfunding rules exempt a company from filing a registration statement with the SEC, but create a different obligation to file a new “Form C” with the SEC.  The Form C, despite not being as full-blown as a registration statement, still requires detailed disclosures.  As of the date of this post, the Form C was not available on the SEC’s website, but the crowdfunding rules tell us that it will require disclosures such as descriptions of the company, financial condition, intended use of proceeds, targeted amount of money to be raised and price per share.  Notably, a company will need to provide a complete set of financial statements that are, depending on the amount of securities offered and sold in a crowdfunding transaction during a 12-month period, accompanied by information from the company’s tax returns, reviewed by an independent public accountant or audited by an independent auditor.  A company that relies on these rules for the first time would be permitted to provide reviewed rather than audited financial statements, unless its audited financial statements are available.  The Form C will also require disclosures about the company’s officers, directors and any beneficial owners of 20% or more.  Each required disclosure has a specific description as to what needs to be included in the Form C, so be sure to read each rule and each instruction to each rule once the Form C becomes available. 
  1. Intermediary Requirements.  If you’re interested in crowdfunding from the perspective of the intermediary, this is where your ears perk up.  Any person acting as an intermediary in a crowdfunding transaction must register with the SEC as either a broker or funding portal.  These registration requirements are also very detailed and include registering with applicable self-regulatory organizations in addition to the SEC.  The crowdfunding rules also prohibit an intermediary’s directors, officers or partners from having any financial interest in any company using its services, so be careful to do your research before getting involved in a crowdfunding transaction. 

The crowdfunding rules are rather extensive and the above summary is intended only to give some quick answers to the questions we’ve received so far.  Remember that the crowdfunding rules, while making it easier for companies to raise capital, are designed with the intention of preventing fraud and protecting investors.  Stay tuned as these rules are put to the test. For more information about the JOBS Act, go to our portal below. 

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Topics: the JOBS Act, crowdfunding, SEC

About the Blog


The SEC Pulse provides updates and commentary from our Capital Markets Group on issues affecting publicly traded and privately owned businesses, investment banks and foreign companies who trade or raise capital in the United States, and boards of directors and company officers in securities transactions and corporate governance matters. 

The material on this site is for general information only and is not legal advice. No liability is accepted for any loss or damage which may result from reliance on it. Always consult a qualified lawyer about a specific legal problem.

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