# Announcements by the Division of Corporation Finance

The Division of Corporation Finance from time to time posts announcements to address topics of interest to public companies and others who follow developments related to the SEC’s full and fair disclosure program.

- Division of Corporation Finance Actions In Advance of a Potential Government Shutdown In the event of a government shutdown, the Division’s activities will be extremely limited. In particular, the Division will not be able to accelerate the effectiveness of registration statements. Regardless of our operating status, EDGAR will accept registration statements, offering statements and other filings; however, as discussed below, during a shutdown we will not be able to declare registration statements effective nor qualify Form 1-A offering statements.The following Questions and Answers may address many of the questions you have.			Number									Question									Answer								General								1									How will I know whether the Division’s operating status has changed?									Updates on our operating status will be posted on the SEC website.								Pre-Shutdown								2									If the Division’s operating status changes to closed, will the staff be able to grant a request for acceleration of the effective date of my pending registration statement or for qualification of my offering statement?									No.								During a Shutdown								3									What happens if I have an effective registration statement and I determine that I must update the information in my prospectus before commencing my offering?									You should not go forward with your offering before updating your prospectus. The company and its representatives will have to decide whether the company can update the prospectus without filing a post-effective amendment. If you file a post-effective amendment on EDGAR, the staff will not be in a position to declare that amendment effective.								4									What happens if I have a previously qualified Form 1-A and I determine that I must update the information in my offering statement before commencing or continuing my offering?									You should not go forward with your offering before updating your offering statement. The company and its representatives will have to decide whether the company can update the offering statement without filing a post-qualification amendment. If you file a post-qualification amendment on EDGAR, the staff will not be in a position to qualify that amendment.								5									If my registration statement was declared effective prior to the shutdown (my effective date was September 30, 2023, or earlier) what happens if I don’t price my offering within the 15-day time period provided in Rule 430A?									Post-effective amendments filed pursuant to Rule 462(c) are effective upon filing. Therefore, regardless of the Division’s operating status, you may file post-effective amendments under Rule 462(c) to restart the 15-business-day period so that, at the time of pricing, you will be able to include the pricing information in a Rule 424(b) prospectus supplement.						You cannot rely on Rule 462(c) if the post-effective amendment includes substantive changes from, or additions to, the prospectus in the effective registration statement.								6									Now that the shutdown is in effect, can I file an amendment to my current registration statement to remove the delaying amendment so my registration statement will be effective in 20 days?									As a technical matter, you may. All companies, especially those conducting initial public offerings of securities, should consider carefully the risks of this course of action and should evaluate their particular facts and circumstances before doing so. Factors to consider may include, but are not limited to, whether the company is Form S-3 eligible, whether it is a repeat issuer, whether the registration statement is subject to review, and whether significant unresolved staff comments remain outstanding.						The liability and antifraud provisions of the federal securities laws apply to all registration statements, including those that go effective by operation of law pursuant to Section 8(a) of the Securities Act. The company and its representatives should ensure that the registration statement does not contain any material misstatements or omissions of material information required to be stated therein or necessary to make the statements therein not misleading.						If you choose to remove the delaying amendment described in Rule 473(a), your registration statement will not become effective until 20 days have passed. If you further amend your registration statement before it has become effective, the 20-day period will restart.						Simply omitting the delaying amendment from an amendment will not begin the 20-day period. A company that intends to remove the delaying amendment must amend its registration statement to include the following language provided by Rule 473(b) – “This registration statement shall hereafter become effective in accordance with the provisions of section 8(a) of the Securities Act of 1933.” The registration statement must also be final: you must amend to include all information required by the form, including the price of the securities to be sold.						If our operational status does not change and you wish to further delay the effective date of your registration statement, you may file another pre-effective amendment during the 20-day period. The registration statement would not become effective until 20 days after the latest pre-effective amendment that does not include a delaying amendment.						If our operating status changes to operational and your registration statement is not yet effective, we may ask you to amend the registration statement to include the delaying amendment.						Rule 430A is not available in the absence of a delaying amendment because Rule 430A is only available with respect to registration statements that are declared effective by the Commission or the staff.						During the shutdown the SEC may issue a stop order under Section 8(d) of the Securities Act or take other emergency actions if necessary. Once the SEC resumes operations, the staff may request that you amend your registration statement even if it has become effective by operation of Section 8(a).								7									Can I amend to remove the delaying amendment while I have outstanding, unresolved staff comments on my filings?									As a technical matter, you may, but companies that remove their delaying amendment with outstanding staff comments should carefully consider the material issues raised by the staff and not remove their delaying amendments prior to making the necessary changes to the registration statement. You should also consider the risks and factors described in the response to Question 11 above, among others.						If you amend your filing to remove the delaying amendment and our operating status changes to operational prior to your effective date, we may ask you to amend your filing to include the delaying amendment so that we may work with you to resolve outstanding comments.								8									Can I file a new registration or offering statement during a shutdown?									Yes. Regardless of our operating status, EDGAR will accept registration statements, offering statements and other filings.								9									Can I file a new registration statement without a delaying amendment during the shutdown?									As a technical matter, you may. However, if our operating status changes during the 20-day period, we may ask you to amend the document to include a delaying amendment. You should also consider the risks and factors described in the response to Question 11 above, among others.								10									Will the Division consider a request for emergency relief under Rule 3-13 of Regulation S-X? 									During a lapse in appropriations, the Division’s activities are limited. The Anti-Deficiency Act generally prohibits agencies from continued operation in the absence of appropriations, but contains narrow exceptions, one of which is for emergencies involving the protection of property. Thus, an agency may act where there is some reasonable likelihood that the protection of property would be compromised, in some significant degree, by delay in the performance of the function in question.						In an emergency where Rule 3-13 may provide relief for registrants, the Division may consider a request where consistent with the limitations discussed above. Submit requests to CFEmergency@sec.gov and describe the emergency and the significant property interest to be protected.								11									Do I need to hear from the staff regarding my preliminary proxy statement or preliminary information statement before filing the definitive materials?									No. Rule 14c-5 only requires that the preliminary proxy or information statement be filed at least 10 calendar days prior to the date definitive copies are first sent or given to security holders.						The staff may review your preliminary proxy statement or preliminary information statement after our operating status changes.								12									Can I undertake a shelf takedown during the shutdown from an already effective shelf registration statement?									Yes. A prospectus supplement does not need to be declared effective by the staff.								13									Are days during which the government is shut down “business days” for purposes of rules involving day counting?									Yes. The term business day means any day other than a Saturday, Sunday, or federal holiday.											14									Will the Division provide a response to my Rule 14a-8 no-action request if I need to print my proxy materials during the shutdown?									No. The staff will not be able to review or respond to 14a-8 materials during a shutdown. We ask that companies and proponents work together to resolve questions to the best of their ability. It is important to note that the staff’s no-action responses to Rule 14a-8(j) submissions reflect only informal staff views.						The staff will return to reviewing no-action requests when our operating status changes.								15									Will the Division respond to other requests for written or oral guidance on legal and interpretive questions under the federal securities laws?									No. The staff will not be able to review or respond to other requests for written or oral guidance on legal and interpretive questions during a shutdown. This includes any written requests for no-action, interpretive, and exemptive letters relating to legal issues under the federal securities laws.								Post-Shutdown								16									If I removed a delaying amendment from a registration statement or filed a new registration statement without a delaying amendment and the Division’s status changes to operational before the end of the 20-day period, may I request effectiveness of that registration statement on a date prior to the end of that period?									We will consider requests to accelerate the effective date of such registration statements if they are amended to include a delaying amendment prior to the end of the 20-day period and acceleration pursuant to Rule 461 is appropriate.								17									If I removed a delaying amendment or filed a new registration statement without a delaying amendment, do I need to add a delaying amendment when the Division’s operating status changes to operational?									In cases where we believe it would be appropriate for a registrant to amend to include a delaying amendment, we will notify that registrant.						We remind registrants that Rule 430A is only available with respect to registration statements that we declare effective and is not available to registration statements that go effective as a result of the passage of time.
- Further Announcement Regarding Share Repurchase Disclosure Modernization Rule On December 19, 2023, the U.S. Court of Appeals for the Fifth Circuit issued an opinion in Chamber of Com. of the USA v. SEC, No. 23-60255 (5th Cir.) vacating the Share Repurchase Disclosure Modernization rule (the “Final Rule”).[1]  As a result of the vacatur, the disclosure requirements revert to those in effect prior to the Final Rule’s effective date. For convenience, the prior disclosure requirements can be found here: Item 703 of Regulation S-KForm 10-KForm 10-QForm 20-FPlease direct any questions to the Division of Corporation Finance at (202) 551-3100.[1] Share Repurchase Disclosure Modernization, Rel. No. 34-97424 (May 3, 2023), 88 Fed. Reg. 36002 (June 1, 2023).
- Announcement Regarding Share Repurchase Disclosure Modernization Rule On October 31, 2023, the U.S. Court of Appeals for the Fifth Circuit issued an opinion in Chamber of Com. of the USA v. SEC, No. 23-60255 (5th Cir.), in which petitioners challenge the Share Repurchase Disclosure Modernization rule (“Repurchase Rule”), which became effective on July 31, 2023.[1] The court granted the petition for review and remanded to the Commission “to correct the defects” the court identified in the Repurchase Rule by November 30, 2023.In light of the court’s decision, the Commission today issued an order postponing the effective date of the Repurchase Rule pursuant to Section 705 of the Administrative Procedure Act.[2] As a result, the Repurchase Rule is stayed pending further Commission action.Questions about this announcement should be directed to the Division of Corporation Finance at (202) 551-3100.[1] Share Repurchase Disclosure Modernization, Rel. No. 34-97424 (May 3, 2023), 88 Fed. Reg. 36002 (June 1, 2023).[2] 5 U.S.C. § 705 (“When an agency finds that justice so requires, it may postpone the effective date of action taken by it, pending judicial review.”).
- New Intake System for Rule 14a-8 Submissions and Related Correspondence The Division of Corporation Finance receives requests from companies to provide informal, non-binding staff views regarding companies’ intentions to exclude shareholder proposals from their proxy statements under Exchange Act Rule 14a-8. For information on the Division's processing of Rule 14a-8 submissions, see our informal procedures regarding shareholder proposals.Rule 14a-8 submissions and related correspondence now must be submitted using our online shareholder proposal form, available at https://www.sec.gov/forms/shareholder-proposal.  Emailed materials will no longer be accepted.For questions related to this announcement, contact the Division’s Office of Chief Counsel at shareholderproposals@sec.gov or 202-551-3500.
- Division of Corporation Finance Actions In Advance of a Potential Government Shutdown In the event of a government shutdown, the Division’s activities will be extremely limited. In particular, the Division will not be able to accelerate the effectiveness of registration statements. We understand that the uncertainty regarding the Division’s operating status in the event of a federal government shutdown raises concerns for registrants that plan to request acceleration of their registration statements or qualification of their offering statements in the near future. Given this uncertainty, registrants with pending registration or offering statements that are substantially complete, and that have met all statutory requirements to request acceleration of the effective date (including the dissemination of any draft registration statement for the required periods under Securities Act Section 6(e) or the related Division accommodations) or qualification, may want to consider requesting effectiveness or qualification while the Division continues its normal operations.During the time we remain open, we will conduct ordinary business. If a change in our operating status looks imminent, we will provide as much advance notice as possible. Regardless of our operating status, EDGAR will accept registration statements, offering statements and other filings; however, as discussed below, during a shutdown we will not be able to declare registration statements effective nor qualify Form 1-A offering statements.The following Questions and Answers may address many of the questions you have.			Number									Question									Answer								General								1									How will I know whether the Division’s operating status has changed?									Updates on our operating status will be posted on the SEC website.								Pre-Shutdown								2									If the Division’s operating status changes to closed, will the staff be able to grant a request for acceleration of the effective date of my pending registration statement or for qualification of my offering statement?									No. You may wish to consider submitting a request for acceleration or qualification, as applicable, while the Division is open and operating.						When the Division is open and operating, it is our normal procedure to consider all requests for acceleration or qualification, but depending on the circumstances we may not act upon your request.								3									How far in advance should I request acceleration or qualification?									If you think you might request acceleration or qualification in advance of a shutdown, it would be helpful for us to know as soon as possible. We can then work with you to resolve any outstanding issues. We will consider granting requests for acceleration or qualification the day they are submitted.								4									Should I request acceleration or qualification now if I don’t know when I want to commence my offering?									The staff will not advise on this question. The company and its representatives will have to decide how to proceed.								5									Can I request acceleration of my pending registration statement if I have not yet received a “no objections” statement from FINRA with regard to my underwriting compensation arrangements?									If you have not yet obtained the required “no objections” statement from FINRA, we will consider granting acceleration requests if the underwriters confirm in their request for acceleration that they will not execute the underwriting agreement or confirm sales of the securities from the registration statement until they receive that statement from FINRA. If you find yourself in this situation, please let FINRA know of your plan to request acceleration as soon as possible.								6									Can I request qualification of my pending Form 1-A offering statement if I have not yet received a “no objections” statement from FINRA with regard to my underwriting compensation arrangements?									If you have not yet obtained the required “no objections” statement from FINRA, we will consider granting qualification requests if the company confirms that the underwriters will not execute the underwriting agreement or confirm sales of securities offered pursuant to the applicable Form 1-A until they receive that statement from FINRA. If you find yourself in this situation, please let FINRA know of your plan to request qualification as soon as possible.								7									Can I file a new registration statement without a delaying amendment in anticipation of a shutdown?									As a technical matter, you may. However, if our operating status remains open, you should expect that we would ask you to amend the document to include a delaying amendment.								During a Shutdown								8									What happens if I have an effective registration statement and I determine that I must update the information in my prospectus before commencing my offering?									You should not go forward with your offering before updating your prospectus. The company and its representatives will have to decide whether the company can update the prospectus without filing a post-effective amendment. If you file a post-effective amendment on EDGAR, the staff will not be in a position to declare that amendment effective.								9									What happens if I have a previously qualified Form 1-A and I determine that I must update the information in my offering statement before commencing or continuing my offering?									You should not go forward with your offering before updating your offering statement. The company and its representatives will have to decide whether the company can update the offering statement without filing a post-qualification amendment. If you file a post-qualification amendment on EDGAR, the staff will not be in a position to qualify that amendment.								10									If my registration statement was declared effective prior to the shutdown (my effective date was September 30, 2023, or earlier) what happens if I don’t price my offering within the 15-day time period provided in Rule 430A?									Post-effective amendments filed pursuant to Rule 462(c) are effective upon filing. Therefore, regardless of the Division’s operating status, you may file post-effective amendments under Rule 462(c) to restart the 15-business-day period so that, at the time of pricing, you will be able to include the pricing information in a Rule 424(b) prospectus supplement.						You cannot rely on Rule 462(c) if the post-effective amendment includes substantive changes from, or additions to, the prospectus in the effective registration statement.								11									Now that the shutdown is in effect, can I file an amendment to my current registration statement to remove the delaying amendment so my registration statement will be effective in 20 days?									As a technical matter, you may. All companies, especially those conducting initial public offerings of securities, should consider carefully the risks of this course of action and should evaluate their particular facts and circumstances before doing so. Factors to consider may include, but are not limited to, whether the company is Form S-3 eligible, whether it is a repeat issuer, whether the registration statement is subject to review, and whether significant unresolved staff comments remain outstanding.						The liability and antifraud provisions of the federal securities laws apply to all registration statements, including those that go effective by operation of law pursuant to Section 8(a) of the Securities Act. The company and its representatives should ensure that the registration statement does not contain any material misstatements or omissions of material information required to be stated therein or necessary to make the statements therein not misleading.						If you choose to remove the delaying amendment described in Rule 473(a), your registration statement will not become effective until 20 days have passed. If you further amend your registration statement before it has become effective, the 20-day period will restart.						Simply omitting the delaying amendment from an amendment will not begin the 20-day period. A company that intends to remove the delaying amendment must amend its registration statement to include the following language provided by Rule 473(b) – “This registration statement shall hereafter become effective in accordance with the provisions of section 8(a) of the Securities Act of 1933.” The registration statement must also be final: you must amend to include all information required by the form, including the price of the securities to be sold.						If our operational status does not change and you wish to further delay the effective date of your registration statement, you may file another pre-effective amendment during the 20-day period. The registration statement would not become effective until 20 days after the latest pre-effective amendment that does not include a delaying amendment.						If our operating status changes to operational and your registration statement is not yet effective, we may ask you to amend the registration statement to include the delaying amendment.						Rule 430A is not available in the absence of a delaying amendment because Rule 430A is only available with respect to registration statements that are declared effective by the Commission or the staff.						During the shutdown the SEC may issue a stop order under Section 8(d) of the Securities Act or take other emergency actions if necessary. Once the SEC resumes operations, the staff may request that you amend your registration statement even if it has become effective by operation of Section 8(a).								12									Can I amend to remove the delaying amendment while I have outstanding, unresolved staff comments on my filings?									As a technical matter, you may, but companies that remove their delaying amendment with outstanding staff comments should carefully consider the material issues raised by the staff and not remove their delaying amendments prior to making the necessary changes to the registration statement. You should also consider the risks and factors described in the response to Question 11 above, among others.						If you amend your filing to remove the delaying amendment and our operating status changes to operational prior to your effective date, we may ask you to amend your filing to include the delaying amendment so that we may work with you to resolve outstanding comments.								13									Can I file a new registration or offering statement during a shutdown?									Yes. Regardless of our operating status, EDGAR will accept registration statements, offering statements and other filings.								14									Can I file a new registration statement without a delaying amendment during the shutdown?									As a technical matter, you may. However, if our operating status changes during the 20-day period, we may ask you to amend the document to include a delaying amendment. You should also consider the risks and factors described in the response to Question 11 above, among others.								15									Will the Division consider a request for emergency relief under Rule 3-13 of Regulation S-X? 									During a lapse in appropriations, the Division’s activities are limited. The Anti-Deficiency Act generally prohibits agencies from continued operation in the absence of appropriations, but contains narrow exceptions, one of which is for emergencies involving the protection of property. Thus, an agency may act where there is some reasonable likelihood that the protection of property would be compromised, in some significant degree, by delay in the performance of the function in question.						In an emergency where Rule 3-13 may provide relief for registrants, the Division may consider a request where consistent with the limitations discussed above. Submit requests to CFEmergency@sec.gov and describe the emergency and the significant property interest to be protected.								16									Do I need to hear from the staff regarding my preliminary proxy statement or preliminary information statement before filing the definitive materials?									No. Rule 14c-5 only requires that the preliminary proxy or information statement be filed at least 10 calendar days prior to the date definitive copies are first sent or given to security holders.						The staff may review your preliminary proxy statement or preliminary information statement after our operating status changes.								17									Can I undertake a shelf takedown during the shutdown from an already effective shelf registration statement?									Yes. A prospectus supplement does not need to be declared effective by the staff.								18									Are days during which the government is shut down “business days” for purposes of rules involving day counting?									Yes. The term business day means any day other than a Saturday, Sunday, or federal holiday.											19									Will the Division provide a response to my Rule 14a-8 no-action request if I need to print my proxy materials during the shutdown?									No. The staff will not be able to review or respond to 14a-8 materials during a shutdown. We ask that companies and proponents work together to resolve questions to the best of their ability. It is important to note that the staff’s no-action responses to Rule 14a-8(j) submissions reflect only informal staff views.						The staff will return to reviewing no-action requests when our operating status changes.								20									Will the Division respond to other requests for written or oral guidance on legal and interpretive questions under the federal securities laws?									No. The staff will not be able to review or respond to other requests for written or oral guidance on legal and interpretive questions during a shutdown. This includes any written requests for no-action, interpretive, and exemptive letters relating to legal issues under the federal securities laws.								Post-Shutdown								21									If I removed a delaying amendment from a registration statement or filed a new registration statement without a delaying amendment and the Division’s status changes to operational before the end of the 20-day period, may I request effectiveness of that registration statement on a date prior to the end of that period?									We will consider requests to accelerate the effective date of such registration statements if they are amended to include a delaying amendment prior to the end of the 20-day period and acceleration pursuant to Rule 461 is appropriate.								22									If I removed a delaying amendment or filed a new registration statement without a delaying amendment, do I need to add a delaying amendment when the Division’s operating status changes to operational?									In cases where we believe it would be appropriate for a registrant to amend to include a delaying amendment, we will notify that registrant.						We remind registrants that Rule 430A is only available with respect to registration statements that we declare effective and is not available to registration statements that go effective as a result of the passage of time.
- Sample Letter to Companies Regarding Their XBRL Disclosures The Division of Corporation Finance has posted a sample letter to Companies regarding their XBRL disclosures.
- Sample Letter to Companies Regarding China-Specific Disclosures The Division of Corporation Finance has posted a sample letter to Companies Regarding China-Specific Disclosures.
- Staff Statement on the Holding Foreign Companies Accountable Act and the Consolidated Appropriations Act, 2023 Division of Corporation Finance and Division of Trading and Markets[1]April 6, 2023In December 2022, Congress amended the Holding Foreign Companies Accountable Act (“HFCAA”) to shorten the timeframe before certain issuers face a trading prohibition from three to two consecutive years, and to clarify that any foreign authority impeding Public Company Accounting Oversight Board (“PCAOB”) inspections or investigations can trigger the provisions of the Act.The HFCAA requires that, every year, the SEC identify any public companies (“Commission-Identified Issuers” or “CIIs”) that file annual reports with financial statements audited by an auditor located in a foreign jurisdiction where the PCAOB has determined it is unable to inspect or investigate completely because of a position taken[2] by a foreign authority (a “PCAOB-identified jurisdiction”). Under the amended HFCAA, once a company is identified as a CII for two consecutive years, the Commission must apply certain trading prohibitions to that CII’s securities.In addition, all CIIs are listed on the SEC website at www.sec.gov/HFCAA, and each CII must provide certain disclosures to investors and the Commission for each year it is identified as a CII. For foreign issuers that are CIIs, the required disclosures include the percentage of shares owned by foreign government entities, whether government entities in the foreign jurisdiction control the issuer, identification of all Chinese Communist Party ("CCP") officials who are on the board of the issuer or the operating entity for the issuer, and whether the issuer’s articles of incorporation contain any “charter” of the CCP.Shortened Timeline before Trading ProhibitionAs initially enacted, the HFCAA required the Commission to prohibit trading in the securities of an issuer if it is a CII for three consecutive years. On December 29, 2022, Congress took action to shorten the timeframe before the Commission must impose an initial trading prohibition on a CII’s securities to two consecutive years. In the December 2021 adopting release for the Commission’s final rules implementing the HFCAA,[3] the Commission stated that issuers that are CIIs for the period specified in the HFCAA are subject to an initial trading prohibition. Accordingly, the shorter, consecutive two-year period will apply to trigger the trading prohibition.Updated PCAOB Determination and Ongoing Issuer ObligationsAs of the date of this statement, there are no “PCAOB-identified jurisdictions.”[4] Therefore, there are no issuers currently at risk of having their securities subject to an initial trading prohibition under the HFCAA. This will remain the case unless and until the PCAOB issues a new determination.The PCAOB has, however, previously identified jurisdictions pursuant to its Rule 6100[5] leading to 174 issuers becoming conclusively identified[6] CIIs, as listed on the Commission’s website. Those CIIs must comply with the HFCAA and Commission rules for submission and disclosure requirements for the year in which they are identified. Those CIIs will continue to be included on the Commission’s website and Division of Corporation Finance staff will review the relevant filings for compliance with these submission and disclosure requirements.Additionally, we note that the PCAOB could, in the future, make a new determination that it is unable to inspect or investigate completely registered public accounting firms in one or more jurisdictions because of positions taken by a foreign authority.[7] At that time, Commission staff would continue to follow the procedures described in the December 2021 adopting release to identify issuers as CIIs. As noted above, should any issuers be identified as CIIs for two consecutive years in the future, an initial trading prohibition on the issuer’s securities would be imposed. Staff will continue to monitor developments related to the HFCAA, including any changes in PCAOB determinations related to inspections and investigations.Other Disclosure Obligations for China-based IssuersIn July 2021, Chair Gensler issued a Statement on Investor Protection Related to Recent Developments in China. [8] In that regard, we highlight that China-based issuers should consider their disclosure obligations as a whole, in addition to those disclosures required by the HFCAA and related Commission rules. To that end, we remind issuers that the Division of Corporation Finance has issued a Sample Letter to China-Based Companies,[9] as well as earlier disclosure guidance to China-based issuers.[10] The Division of Corporation Finance will monitor disclosures by China-based issuers and may provide additional guidance to assist these issuers in meeting their disclosure obligations under the federal securities laws.[1] This statement and the other staff statements referenced herein represent the views of the staff of the Division of Corporation Finance and the Division of Trading and Markets. They are not rules, regulations, or statements of the Securities and Exchange Commission (“Commission”). The Commission has neither approved nor disapproved their content. Staff statements have no legal force or effect: they do not alter or amend applicable law, and they create no new or additional obligations for any person. References herein to the “Securities Act” refer to the Securities Act of 1933 and references to the “Exchange Act” refer to the Securities Exchange Act of 1934.[2] The adopting release for PCAOB Rule 6100 (Board Determinations Under the Holding Foreign Companies Accountable Act) states that “position” for purposes of Rule 6100 includes “all of the various positions taken by authorities in the jurisdiction that, when aggregated together, collectively constitute the position of authorities in the jurisdiction.” See https://assets.pcaobus.org/pcaob-dev/docs/default-source/rulemaking/docket048/2021-004-hfcaa-adopting-release.pdf?sfvrsn=f6dfb7f8_4).[3] See Holding Foreign Companies Accountable Act Disclosure, Release No. 34-93701 (“December 2021 adopting release”).[4] On December 15, 2022, the PCAOB vacated its 2021 determinations that the positions taken by authorities in mainland China and Hong Kong prevented it from inspecting and investigating completely registered public accounting firms headquartered in those jurisdictions. See the PCAOB determinations at https://assets.pcaobus.org/pcaob-dev/docs/default-source/international/documents/2022-hfcaa-determination-report.pdf?sfvrsn=1345a530_4.[5] On March 28, 2023, the PCAOB adopted amendments to Rule 6100 (Board Determinations Under the Holding Foreign Companies Accountable Act) to conform its rule to an amendment of Section 104(i)(2)(A)(ii) of the Sarbanes-Oxley Act of 2002 set forth in the Consolidated Appropriations Act, 2023. See https://assets.pcaobus.org/pcaob-dev/docs/default-source/rulemaking/docket-050/pcaob-release-no.-2023-002---rule-6100-amendments.pdf?sfvrsn=c4c270d0_4. The rule is subject to Commission approval.[6] The SEC “provisionally” identifies a registrant as a Commission-Identified Issuer on the SEC’s website at www.sec.gov/HFCAA. For 15 business days after this provisional identification, a registrant may email the SEC if it believes it has been incorrectly identified, providing evidence supporting its claim. After reviewing the information, the registrant will be notified whether the SEC will “conclusively identify” the registrant as a Commission-Identified Issuer.[7] Pursuant to the Consolidated Appropriations Act, 2023, the determination can be based on the positions of any foreign authority, not only an authority in the location in which the firms are headquartered or in which they have a branch or office.[8] Chair Gary Gensler, Statements on Investor Protection Related to Recent Developments in China (July 30, 2021), available at https://www.sec.gov/news/public-statement/gensler-2021-07-30.[9] Division of Corporation Finance, Sample Letter to China-Based Companies (last modified Dec. 20, 2021) available at https://www.sec.gov/corpfin/sample-letter-china-based-companies.[10] Division of Corporation Finance, CF Disclosure Guidance: Topic No. 10 Disclosure Considerations for China-Based Issuers (Nov. 23, 2020) available at https://www.sec.gov/corpfin/disclosure-considerations-china-based-issuers (including disclosure considerations regarding whether “Chinese governmental authorities have significant discretion that can be used to influence how the company conducts its business operations”).
- Announcement Regarding Extension of EDGAR Filing Hours and Notice of End of Email Filing Option for Form 144 On February 21, 2023, the Commission issued Release No. 33-11159 which amended Regulation S-T to extend the filing deadline for Forms 144 filed electronically from 5:30 p.m. to 10 p.m., Eastern Standard Time or Eastern Daylight Saving Time, whichever is currently in effect, on Commission business days. The release also included technical amendments to enhance the consistency of recently revised provisions related to the filing format of Form 144. The new filing deadline and other amendments are effective on March 20, 2023, and the Form 144 electronic filing requirement will begin on April 13, 2023. The Division encourages reporting persons who do not have EDGAR accounts to apply for access to EDGAR as soon as possible.In addition, as of April 13, 2023, the Division’s Statement Regarding Requirements for Form 144 Paper Filings in Light of COVID-19 Concerns (June 25, 2020) will no longer be in effect and Forms 144 will no longer be accepted via email. After that time, Forms 144 that relate to the sale of securities of issuers not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act must be filed in paper.
- Statement of Renee Jones on her Tenure as Director of the Division of Corporation Finance Renee Jones, Director. Division of Corporation FinanceFebruary 3, 2023On my final day as Division Director, I would like to extend my appreciation to the extraordinary staff of the Division of Corporation Finance for their hard work and steadfast dedication to the agency’s mission of protecting investors, promoting capital formation, and maintaining the fair, orderly, and efficient functioning of the capital markets.It has been an incredibly busy 20 months for us, and I am proud of all that we have accomplished together. From the 13 rulemaking proposals and 9 final rules approved by the Commission during my tenure, to obtaining enhanced disclosure from China-based issuers and on matters such as climate-related risks, the Russia-Ukraine conflict, and risks related to crypto asset securities, our work will contribute to greater market transparency and a higher quality of information to allow investors to make better informed investment decisions. The results of these efforts will continue to benefit investors and the securities markets for many years to come. Beyond these high-profile matters, I want to thank the staff for all they do on a daily basis to keep the Division running, and to ensure that we are able to deliver on our critical mission.I would also like to thank Chair Gensler and Commissioners Peirce, Crenshaw, Uyeda and Lizárraga, and former Commissioners Lee and Roisman for the confidence they placed in me. I would also like to thank my talented leadership team, Erik Gerding, Cicely LaMothe, Lindsay McCord, Tomeka Gilbert, Jessica Kane, Betsy Murphy, Michael Seaman, Barbara Jacobs, Dan Harty and Ted Yu, for their support and guidance over the past two years. I am especially proud to be succeeded by my Deputy, Erik Gerding. I am confident that the Division will continue to thrive under his leadership.As I to return to teaching, I look forward to sharing what I have learned with the next generation of securities lawyers. I will also be spreading the word about the incredible group of talented professionals in the Division, people who have devoted their careers to protecting investors and ensuring that the US securities markets remain the envy of the world. It has been an honor and a pleasure to serve as the Division’s leader. I will miss working alongside my colleagues here each and every day.
- New update to Non-GAAP Financial Measures Compliance & Disclosure Interpretations Questions The Division of Corporation Finance has posted an update to to Non-GAAP Financial Measures Compliance & Disclosure Interpretations Questions 100.01, 100.04 – 100.06, and 102.10(a)(b)(c)
- Sample Letter to Companies Regarding Recent Developments in Crypto Asset Markets The Division of Corporation Finance has posted a sample letter to Companies Regarding Recent Developments in Crypto Asset Markets.
- Sample Letter to Companies Regarding Disclosures Pertaining to Russia’s Invasion of Ukraine and Related Supply Chain Issues The Division of Corporation Finance has posted a sample letter to Companies Regarding Disclosures Pertaining to Russia’s Invasion of Ukraine and Related Supply Chain Issues
- The Divisions of Corporation Finance and Investment Management Ask that Paper “Courtesy Copies” No Longer Be Provided Unless Requested by the Staff Many persons and entities mail or otherwise provide to the Divisions of Corporation Finance and Investment Management paper "courtesy copies" of materials that are filed or submitted via EDGAR, email, online form or other electronic method of communication. Registrants often send copies of electronically filed registration statements or marked copies of amendments to registration statements showing changes from previously submitted or filed versions. The Divisions request that paper courtesy copies no longer be sent as a matter of course. Such paper copies should only be furnished at the request of the staff.
- Sample Letter to China-Based Companies The Division of Corporation Finance has posted a sample letter to China-Based Companies.
- Announcement Regarding Personally Identifiable and Other Sensitive Information in Rule 14a-8 Submissions and Related Materials Rule 14a-8 submissions and related materials frequently include personally identifiable and other sensitive information about shareholder proponents, companies and other parties that is not relevant to the staff’s consideration of a no-action request.  This includes information such as brokerage account numbers, physical addresses, email addresses and telephone numbers of individual shareholders.  While the Division seeks to redact, to the extent practicable, this information before making the materials publicly available, this process can result in delays in the public dissemination of these materials.Beginning immediately, companies and shareholder proponents should redact all personally identifiable and other sensitive information from Rule 14a-8 submissions and related materials prior to submitting them to the Division.  For example, companies should redact personally identifiable information from an individual shareholder’s cover letter accompanying the proposal.  Shareholder proponents should also limit the personally identifiable and sensitive information in the materials they provide to companies by including only the information that is necessary to establish their eligibility to submit the proposal and for the company to communicate with them.  The staff may require parties to resubmit any materials we receive that contain personally identifiable or sensitive information, in which case the staff will not consider the substance of those materials until they are resubmitted.We understand that while attempting to comply with Item G.7 of Staff Legal Bulletin No. 14,[1] Item F.3 of Staff Legal Bulletin No. 14B[2] and Item G of Staff Legal Bulletin No. 14C,[3] companies often submit to us all of the information that shareholder proponents provide to them.  We note that these bulletins call for all relevant correspondence.  We believe that the amount of personally identifiable and sensitive information sent to us would be reduced dramatically if companies did not submit documents that are not relevant to our consideration of a no-action request.  For example, unless a company is contesting a proponent’s eligibility to submit a proposal under Rule 14a-8(b), it should not submit to us a shareholder proponent’s proof of ownership documents.  Accordingly, to reduce the amount of personally identifiable and sensitive information we receive, we ask companies and shareholder proponents to submit to the Division only information that is directly relevant to the no-action request and to redact any personally identifiable or sensitive information from those materials. [1]      Division of Corporation Finance Staff Legal Bulletin No. 14 (July 13, 2001), available at https://www.sec.gov/interps/legal/cfslb14.htm.[2]      Division of Corporation Finance Staff Legal Bulletin No. 14B (Sept. 15, 2004), available at https://www.sec.gov/corpfin/staff-legal-bulletin-14b-shareholder-proposals.[3]      Division of Corporation Finance Staff Legal Bulletin No. 14C (June 28, 2005), available at https://www.sec.gov/corpfin/staff-legal-bulletin-14c-shareholder-proposals.
- Announcement Regarding Staff Responses to Rule 14a-8 No-Action Requests In 2019, the Division’s staff discontinued the longstanding practice of responding to each shareholder proposal no-action request with a written letter.[1]  During the last two proxy seasons, the staff instead responded with a written letter only in limited instances and communicated the vast majority of responses via notations to a chart maintained on the Division’s website.We have reconsidered this approach, and after review of the practice we believe that written responses will provide greater transparency and certainty to shareholder proponents and companies alike.  Beginning with the publication of this announcement, we will return to our prior practice and the staff will once again respond to each shareholder proposal no-action request with a written letter, similar to those issued in prior years.  Our response letters will be posted publicly on the Division’s website in a timely manner.  We will no longer communicate our responses via a chart, but we expect to publish a chart upon completion of the proxy season. [1]  See “Announcement Regarding Rule 14a-8 No-Action Requests” (Sep. 6, 2019), available at https://www.sec.gov/corpfin/announcement/announcement-rule-14a-8-no-action-requests.
- Shareholder Proposals: Staff Legal Bulletin No. 14L (CF) Division of Corporation FinanceSecurities and Exchange CommissionAction: Publication of CF Staff Legal BulletinDate: November 3, 2021Summary: This staff legal bulletin provides information for companies and shareholders regarding Rule 14a-8 under the Securities Exchange Act of 1934.Supplementary Information: The statements in this bulletin represent the views of the Division of Corporation Finance (the “Division”). This bulletin is not a rule, regulation or statement of the Securities and Exchange Commission (the “Commission”). Further, the Commission has neither approved nor disapproved its content. This bulletin, like all staff guidance, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.Contacts: For further information, please contact the Division’s Office of Chief Counsel by submitting a web-based request form at https://www.sec.gov/forms/corp_fin_interpretive.A. The Purpose of This BulletinThe Division is rescinding Staff Legal Bulletin Nos. 14I, 14J and 14K (the “rescinded SLBs”) after a review of staff experience applying the guidance in them. In addition, to the extent the views expressed in any other prior Division staff legal bulletin could be viewed as contrary to those expressed herein, this staff legal bulletin controls.This bulletin outlines the Division’s views on Rule 14a-8(i)(7), the ordinary business exception, and Rule 14a-8(i)(5), the economic relevance exception. We are also republishing, with primarily technical, conforming changes, the guidance contained in SLB Nos. 14I and 14K relating to the use of graphics and images, and proof of ownership letters. In addition, we are providing new guidance on the use of e-mail for submission of proposals, delivery of notice of defects, and responses to those notices.In Rule 14a-8, the Commission has provided a means by which shareholders can present proposals for the shareholders’ consideration in the company’s proxy statement. This process has become a cornerstone of shareholder engagement on important matters. Rule 14a-8 sets forth several bases for exclusion of such proposals. Companies often request assurance that the staff will not recommend enforcement action if they omit a proposal based on one of these exclusions (“no-action relief”). The Division is issuing this bulletin to streamline and simplify our process for reviewing no-action requests, and to clarify the standards staff will apply when evaluating these requests.B. Rule 14a-8(i)(7)1. BackgroundRule 14a-8(i)(7), the ordinary business exception, is one of the substantive bases for exclusion of a shareholder proposal in Rule 14a-8. It permits a company to exclude a proposal that “deals with a matter relating to the company’s ordinary business operations.” The purpose of the exception is “to confine the resolution of ordinary business problems to management and the board of directors, since it is impracticable for shareholders to decide how to solve such problems at an annual shareholders meeting.”[1]2. Significant Social Policy ExceptionBased on a review of the rescinded SLBs and staff experience applying the guidance in them, we recognize that an undue emphasis was placed on evaluating the significance of a policy issue to a particular company at the expense of whether the proposal focuses on a significant social policy,[2] complicating the application of Commission policy to proposals. In particular, we have found that focusing on the significance of a policy issue to a particular company has drawn the staff into factual considerations that do not advance the policy objectives behind the ordinary business exception. We have also concluded that such analysis did not yield consistent, predictable results.Going forward, the staff will realign its approach for determining whether a proposal relates to “ordinary business” with the standard the Commission initially articulated in 1976, which provided an exception for certain proposals that raise significant social policy issues,[3] and which the Commission subsequently reaffirmed in the 1998 Release. This exception is essential for preserving shareholders’ right to bring important issues before other shareholders by means of the company’s proxy statement, while also recognizing the board’s authority over most day-to-day business matters. For these reasons, staff will no longer focus on determining the nexus between a policy issue and the company, but will instead focus on the social policy significance of the issue that is the subject of the shareholder proposal. In making this determination, the staff will consider whether the proposal raises issues with a broad societal impact, such that they transcend the ordinary business of the company.[4]Under this realigned approach, proposals that the staff previously viewed as excludable because they did not appear to raise a policy issue of significance for the company may no longer be viewed as excludable under Rule 14a-8(i)(7). For example, proposals squarely raising human capital management issues with a broad societal impact would not be subject to exclusion solely because the proponent did not demonstrate that the human capital management issue was significant to the company.[5]Because the staff is no longer taking a company-specific approach to evaluating the significance of a policy issue under Rule 14a-8(i)(7), it will no longer expect a board analysis as described in the rescinded SLBs as part of demonstrating that the proposal is excludable under the ordinary business exclusion. Based on our experience, we believe that board analysis may distract the company and the staff from the proper application of the exclusion. Additionally, the “delta” component of board analysis – demonstrating that the difference between the company’s existing actions addressing the policy issue and the proposal’s request is insignificant – sometimes confounded the application of Rule 14a-8(i)(10)’s substantial implementation standard.3. MicromanagementUpon further consideration, the staff has determined that its recent application of the micromanagement concept, as outlined in SLB Nos. 14J and 14K, expanded the concept of micromanagement beyond the Commission’s policy directives. Specifically, we believe that the rescinded guidance may have been taken to mean that any limit on company or board discretion constitutes micromanagement.The Commission has stated that the policy underlying the ordinary business exception rests on two central considerations. The first relates to the proposal’s subject matter; the second relates to the degree to which the proposal “micromanages” the company “by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment.”[6] The Commission clarified in the 1998 Release that specific methods, timelines, or detail do not necessarily amount to micromanagement and are not dispositive of excludability.Consistent with Commission guidance, the staff will take a measured approach to evaluating companies’ micromanagement arguments – recognizing that proposals seeking detail or seeking to promote timeframes or methods do not per se constitute micromanagement. Instead, we will focus on the level of granularity sought in the proposal and whether and to what extent it inappropriately limits discretion of the board or management. We would expect the level of detail included in a shareholder proposal to be consistent with that needed to enable investors to assess an issuer’s impacts, progress towards goals, risks or other strategic matters appropriate for shareholder input.Our recent letter to ConocoPhillips Company[7] provides an example of our current approach to micromanagement. In that letter the staff denied no-action relief for a proposal requesting that the company set targets covering the greenhouse gas emissions of the company’s operations and products. The proposal requested that the company set emission reduction targets and it did not impose a specific method for doing so. The staff concluded this proposal did not micromanage to such a degree to justify exclusion under Rule 14a-8(i)(7).Additionally, in order to assess whether a proposal probes matters “too complex” for shareholders, as a group, to make an informed judgment,[8] we may consider the sophistication of investors generally on the matter, the availability of data, and the robustness of public discussion and analysis on the topic. The staff may also consider references to well-established national or international frameworks when assessing proposals related to disclosure, target setting, and timeframes as indicative of topics that shareholders are well-equipped to evaluate.This approach is consistent with the Commission’s views on the ordinary business exclusion, which is designed to preserve management’s discretion on ordinary business matters but not prevent shareholders from providing high-level direction on large strategic corporate matters. As the Commission stated in its 1998 Release:[In] the Proposing Release we explained that one of the considerations in making the ordinary business determination was the degree to which the proposal seeks to micro-manage the company. We cited examples such as where the proposal seeks intricate detail, or seeks to impose specific time-frames or to impose specific methods for implementing complex policies. Some commenters thought that the examples cited seemed to imply that all proposals seeking detail, or seeking to promote time-frames or methods, necessarily amount to ‘ordinary business.’ We did not intend such an implication. Timing questions, for instance, could involve significant policy where large differences are at stake, and proposals may seek a reasonable level of detail without running afoul of these considerations.While the analysis in this bulletin may apply to any subject matter, many of the proposals addressed in the rescinded SLBs requested companies adopt timeframes or targets to address climate change that the staff concurred were excludable on micromanagement grounds.[9] Going forward we would not concur in the exclusion of similar proposals that suggest targets or timelines so long as the proposals afford discretion to management as to how to achieve such goals.[10] We believe our current approach to micromanagement will help to avoid the dilemma many proponents faced when seeking to craft proposals with sufficient specificity and direction to avoid being excluded under Rule 14a-8(i)(10), substantial implementation, while being general enough to avoid exclusion for “micromanagement.”[11]C. Rule 14a-8(i)(5)Rule 14a-8(i)(5), the “economic relevance” exception, permits a company to exclude a proposal that “relates to operations which account for less than 5 percent of the company’s total assets at the end of its most recent fiscal year, and for less than 5 percent of its net earnings and gross sales for its most recent fiscal year, and is not otherwise significantly related to the company’s business.”Based on a review of the rescinded SLBs and staff experience applying the guidance in them, we are returning to our longstanding approach, prior to SLB No. 14I, of analyzing Rule 14a-8(i)(5) in a manner we believe is consistent with Lovenheim v. Iroquois Brands, Ltd.[12] As a result, and consistent with our pre-SLB No. 14I approach and Lovenheim, proposals that raise issues of broad social or ethical concern related to the company’s business may not be excluded, even if the relevant business falls below the economic thresholds of Rule 14a-8(i)(5). In light of this approach, the staff will no longer expect a board analysis for its consideration of a no-action request under Rule 14a-8(i)(5).D. Rule 14a-8(d)[13]1. BackgroundRule 14a-8(d) is one of the procedural bases for exclusion of a shareholder proposal in Rule 14a-8. It provides that a “proposal, including any accompanying supporting statement, may not exceed 500 words.”2. The Use of Images in Shareholder ProposalsQuestions have arisen concerning the application of Rule 14a-8(d) to proposals that include graphs and/or images.[14] The staff has expressed the view that the use of “500 words” and absence of express reference to graphics or images in Rule 14a-8(d) do not prohibit the inclusion of graphs and/or images in proposals.[15] Just as companies include graphics that are not expressly permitted under the disclosure rules, the Division is of the view that Rule 14a-8(d) does not preclude shareholders from using graphics to convey information about their proposals.[16]The Division recognizes the potential for abuse in this area. The Division believes, however, that these potential abuses can be addressed through other provisions of Rule 14a-8. For example, exclusion of graphs and/or images would be appropriate under Rule 14a-8(i)(3) where they:make the proposal materially false or misleading;render the proposal so inherently vague or indefinite that neither the stockholders voting on the proposal, nor the company in implementing it, would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires;directly or indirectly impugn character, integrity or personal reputation, or directly or indirectly make charges concerning improper, illegal, or immoral conduct or association, without factual foundation; orare irrelevant to a consideration of the subject matter of the proposal, such that there is a strong likelihood that a reasonable shareholder would be uncertain as to the matter on which he or she is being asked to vote.[17]Exclusion would also be appropriate under Rule 14a-8(d) if the total number of words in a proposal, including words in the graphics, exceeds 500.E. Proof of Ownership Letters[18]In relevant part, Rule 14a-8(b) provides that a proponent must prove eligibility to submit a proposal by offering proof that it “continuously held” the required amount of securities for the required amount of time.[19]In Section C of SLB No. 14F, we identified two common errors shareholders make when submitting proof of ownership for purposes of satisfying Rule 14a-8(b)(2).[20] In an effort to reduce such errors, we provided a suggested format for shareholders and their brokers or banks to follow when supplying the required verification of ownership.[21] Below, we have updated the suggested format to reflect recent changes to the ownership thresholds due to the Commission’s 2020 rulemaking.[22] We note that brokers and banks are not required to follow this format.“As of [date the proposal is submitted], [name of shareholder] held, and has held continuously for at least [one year] [two years] [three years], [number of securities] shares of [company name] [class of securities].”Some companies apply an overly technical reading of proof of ownership letters as a means to exclude a proposal. We generally do not find arguments along these lines to be persuasive. For example, we did not concur with the excludability of a proposal based on Rule 14a-8(b) where the proof of ownership letter deviated from the format set forth in SLB No. 14F.[23] In those cases, we concluded that the proponent nonetheless had supplied documentary support sufficiently evidencing the requisite minimum ownership requirements, as required by Rule 14a-8(b). We took a plain meaning approach to interpreting the text of the proof of ownership letter, and we expect companies to apply a similar approach in their review of such letters.While we encourage shareholders and their brokers or banks to use the sample language provided above to avoid this issue, such formulation is neither mandatory nor the exclusive means of demonstrating the ownership requirements of Rule 14a-8(b).[24] We recognize that the requirements of Rule 14a-8(b) can be quite technical. Accordingly, companies should not seek to exclude a shareholder proposal based on drafting variances in the proof of ownership letter if the language used in such letter is clear and sufficiently evidences the requisite minimum ownership requirements.We also do not interpret the recent amendments to Rule 14a-8(b)[25] to contemplate a change in how brokers or banks fulfill their role. In our view, they may continue to provide confirmation as to how many shares the proponent held continuously and need not separately calculate the share valuation, which may instead be done by the proponent and presented to the receiving issuer consistent with the Commission’s 2020 rulemaking.[26] Finally, we believe that companies should identify any specific defects in the proof of ownership letter, even if the company previously sent a deficiency notice prior to receiving the proponent’s proof of ownership if such deficiency notice did not identify the specific defect(s).F. Use of E-mailOver the past few years, and particularly during the pandemic, both proponents and companies have increasingly relied on the use of emails to submit proposals and make other communications. Some companies and proponents have expressed a preference for emails, particularly in cases where offices are closed. Unlike the use of third-party mail delivery that provides the sender with a proof of delivery, parties should keep in mind that methods for the confirmation of email delivery may differ. Email delivery confirmations and company server logs may not be sufficient to prove receipt of emails as they only serve to prove that emails were sent. In addition, spam filters or incorrect email addresses can prevent an email from being delivered to the appropriate recipient. The staff therefore suggests that to prove delivery of an email for purposes of Rule 14a-8, the sender should seek a reply e-mail from the recipient in which the recipient acknowledges receipt of the e-mail. The staff also encourages both companies and shareholder proponents to acknowledge receipt of emails when requested. Email read receipts, if received by the sender, may also help to establish that emails were received.1. Submission of ProposalsRule 14a-8(e)(1) provides that in order to avoid controversy, shareholders should submit their proposals by means, including electronic means, that permit them to prove the date of delivery. Therefore, where a dispute arises regarding a proposal’s timely delivery, shareholder proponents risk exclusion of their proposals if they do not receive a confirmation of receipt from the company in order to prove timely delivery with email submissions. Additionally, in those instances where the company does not disclose in its proxy statement an email address for submitting proposals, we encourage shareholder proponents to contact the company to obtain the correct email address for submitting proposals before doing so and we encourage companies to provide such email addresses upon request.2. Delivery of Notices of DefectsSimilarly, if companies use email to deliver deficiency notices to proponents, we encourage them to seek a confirmation of receipt from the proponent or the representative in order to prove timely delivery. Rule 14a-8(f)(1) provides that the company must notify the shareholder of any defects within 14 calendar days of receipt of the proposal, and accordingly, the company has the burden to prove timely delivery of the notice.3. Submitting Responses to Notices of DefectsRule 14a-8(f)(1) also provides that a shareholder’s response to a deficiency notice must be postmarked, or transmitted electronically, no later than 14 days from the date of receipt of the company's notification. If a shareholder uses email to respond to a company’s deficiency notice, the burden is on the shareholder or representative to use an appropriate email address (e.g., an email address provided by the company, or the email address of the counsel who sent the deficiency notice), and we encourage them to seek confirmation of receipt.[1] Release No. 34-40018 (May 21, 1998) (the “1998 Release”). Stated a bit differently, the Commission has explained that “[t]he ‘ordinary business’ exclusion is based in part on state corporate law establishing spheres of authority for the board of directors on one hand, and the company’s shareholders on the other.” Release No. 34-39093 (Sept. 18, 1997).[2] For example, SLB No. 14K explained that the staff “takes a company-specific approach in evaluating significance, rather than recognizing particular issues or categories of issues as universally ‘significant.’”  Staff Legal Bulletin No. 14K (Oct. 16, 2019).[3] Release No. 34-12999 (Nov. 22, 1976) (the “1976 Release”) (stating, in part, “proposals of that nature [relating to the economic and safety considerations of a nuclear power plant], as well as others that have major implications, will in the future be considered beyond the realm of an issuer’s ordinary business operations”).[4] 1998 Release (“[P]roposals . . .  focusing on sufficiently significant social policy issues. . .generally would not be considered to be excludable, because the proposals would transcend the day-to-day business matters and raise policy issues so significant that it would be appropriate for a shareholder vote”).[5] See, e.g., Dollar General Corporation (Mar. 6, 2020) (granting no-action relief for exclusion of a proposal requesting the board to issue a report on the use of contractual provisions requiring employees to arbitrate employment-related claims because the proposal did not focus on specific policy implications of the use of arbitration at the company).  We note that in the 1998 Release the Commission stated: “[P]roposals relating to [workforce management] but focusing on sufficiently significant social policy issues (e.g., significant discrimination matters) generally would not be considered to be excludable, because the proposals would transcend the day-to-day business matters and raise policy issues so significant that it would be appropriate for a shareholder vote.”  Matters related to employment discrimination are but one example of the workforce management proposals that may rise to the level of transcending the company’s ordinary business operations.[6] 1998 Release.[7] ConocoPhillips Company (Mar. 19, 2021).[8] See 1998 Release and 1976 Release.[9] See, e.g., PayPal Holdings, Inc. (Mar. 6, 2018) (granting no-action relief for exclusion of a proposal asking the company to prepare a report on the feasibility of achieving net-zero emissions by 2030 because the staff concluded it micromanaged the company); Devon Energy Corporation (Mar. 4, 2019) (granting no-action relief for exclusion of a proposal requesting that the board in annual reporting include disclosure of short-, medium- and long-term greenhouse gas targets aligned with the Paris Climate Agreement because the staff viewed the proposal as requiring the adoption of time-bound targets).[10] See ConocoPhillips Company (Mar. 19, 2021).[11] To be more specific, shareholder proponents have expressed concerns that a proposal that was broadly worded might face exclusion under Rule 14a-8(i)(10).  Conversely, if a proposal was too specific it risked exclusion under Rule 14a-8(i)(7) for micromanagement.[12] 618 F. Supp. 554 (D.D.C. 1985).[13] This section previously appeared in SLB No. 14I (Nov. 1, 2017) and is republished here with only minor, conforming changes.[14] Rule 14a-8(d) is intended to limit the amount of space a shareholder proposal may occupy in a company’s proxy statement.  See 1976 Release.[15] See General Electric Co. (Feb. 3, 2017, Feb. 23, 2017); General Electric Co. (Feb. 23, 2016).  These decisions were consistent with a longstanding Division position.  See Ferrofluidics Corp. (Sept. 18, 1992).[16]Companies should not minimize or otherwise diminish the appearance of a shareholder’s graphic.  For example, if the company includes its own graphics in its proxy statement, it should give similar prominence to a shareholder’s graphics.  If a company’s proxy statement appears in black and white, however, the shareholder proposal and accompanying graphics may also appear in black and white.[17] See General Electric Co. (Feb. 23, 2017).[18] This section previously appeared in SLB No. 14K (Oct.16, 2019) and is republished here with minor, conforming changes.  Additional discussion is provided in the final paragraph.[19] Rule 14a-8(b) requires proponents to have continuously held at least $2,000, $15,000, or $25,000 in market value of the company’s securities entitled to vote on the proposal for at least three years, two years, or one year, respectively.[20]Staff Legal Bulletin No. 14F (Oct. 18, 2011).[21]The Division suggested the following formulation: “As of [date the proposal is submitted], [name of shareholder] held, and has held continuously for at least one year, [number of securities] shares of [company name] [class of securities].”[22] Release No. 34-89964 (Sept. 23, 2020) (the “2020 Release”).[23] See Amazon.com, Inc. (Apr. 3, 2019); Gilead Sciences, Inc. (Mar. 7, 2019).[24] See Staff Legal Bulletin No.14F, n.11.[25] See 2020 Release.[26] 2020 Release at n.55 (“Due to market fluctuations, the value of a shareholder’s investment in a company may vary throughout the applicable holding period before the shareholder submits the proposal.  In order to determine whether the shareholder satisfies the relevant ownership threshold, the shareholder should look at whether, on any date within the 60 calendar days before the date the shareholder submits the proposal, the shareholder’s investment is valued at the relevant threshold or greater.  For these purposes, companies and shareholders should determine the market value by multiplying the number of securities the shareholder continuously held for the relevant period by the highest selling price during the 60 calendar days before the shareholder submitted the proposal.  For purposes of this calculation, it is important to note that a security’s highest selling price is not necessarily the same as its highest closing price.”) (citations omitted).
- CF Sample Letter to Companies Regarding Climate Change Disclosures The Division of Corporation Finance has posted a sample letter to companies regarding climate change disclosures.
- Staff Guidance on EDGAR Filing of Form C Updated In connection with the effectiveness of certain rule changes as set forth in Release No. 33-10884, the Division of Corporation Finance provides the following guidance with respect to the filing of Form C with the SEC. The statements in this guidance represent the views of the Division of Corporation Finance. This guidance is not a rule, regulation or statement of the Securities and Exchange Commission. Further, the Commission has neither approved nor disapproved its content. This guidance, like all staff guidance, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.EDGAR Filing of Form C for Regulation Crowdfunding Offerings Exceeding $1,070,000Effective March 15, 2021, a company issuing securities in reliance on Regulation Crowdfunding is permitted under Rule 100(a)(1) to raise a maximum aggregate amount of $5 million in a 12-month period. Before the amendments, the limit was $1.07 million. As of the effective date of the amendments, the changes to the “Offering Information” section of the Cover Page of Form C to permit issuers to indicate an offering amount over $1.07 million had not yet been implemented on the eXtensible Markup Language (XML)-based fillable form available on EDGAR.Effective May 10, 2021, the changes to the XML-based fillable form have been implemented and issuers are now able to, and must, provide accurate offering amounts in the XML-based fillable form and in the offering document attached as an exhibit to the Form C.  An issuer that previously completed the offering amount fields by including $1,070,000 in the XML-based fillable form in reliance on prior staff guidance must update its Cover Page to provide the actual offering amounts if it files an amendment to the Form C after May 10, 2021.EDGAR Filing of Form C by Crowdfunding Issuers and Crowdfunding Vehicles Jointly Filing a Form CBeginning March 15, 2021, the use of certain special purpose vehicles (“crowdfunding vehicles”) is permitted in Regulation Crowdfunding. Investment Company Act Rule 3a-9 includes conditions for crowdfunding vehicles that are designed to ensure that the vehicle acts solely as a conduit for investments in a crowdfunding issuer. When a crowdfunding vehicle is used, the crowdfunding issuer and the crowdfunding vehicle are co-issuers under the Securities Act and both are required to comply with the requirements of Regulation Crowdfunding and other applicable securities laws.For background on the use of crowdfunding vehicles, consult the adopting release at https://www.sec.gov/rules/final/2020/33-10884.pdf.Is a crowdfunding vehicle required to file its own Form C, separate from the Form C filed by the crowdfunding issuer? Response: No. Under Regulation Crowdfunding Rule 203(a)(1), the crowdfunding issuer and crowdfunding vehicle are required to jointly file one Form C, providing all of the required Form C disclosure with respect to the offer and sale of the crowdfunding issuer’s securities to the crowdfunding vehicle and the offer and sale of the crowdfunding vehicle’s securities to investors.However, if the crowdfunding issuer is offering securities both through a crowdfunding vehicle and directly to investors, Rule 203(a)(1) requires the crowdfunding issuer to file two Forms C: its own Form C covering the securities offered directly to investors, and a second Form C jointly with the crowdfunding vehicle for the securities offered through such vehicle.Does the crowdfunding vehicle need to have its own filer identification number (called a “Central Index Key” or “CIK” number) and EDGAR access codes?Response: No. The jointly filed Form C will be filed under the crowdfunding issuer’s CIK. However, if the crowdfunding vehicle does have a CIK based on some other filing obligation, the crowdfunding vehicle should disclose the CIK as part of its co-issuer disclosure.What information about the crowdfunding vehicle is required to be provided in the XML-based portion of the Form C? Response: The XML-based fillable portion of Form C includes the following fields to provide identifying information for the crowdfunding vehicle: name; legal status; jurisdiction of incorporation/organization; date of organization; physical address; and website. All other fields in the XML-based fillable portion of the form should be completed only with information about the crowdfunding issuer and the crowdfunding issuer’s securities.The information required by Form C with respect to the crowdfunding vehicle and its securities should be provided in an exhibit to the Form C. Consistent with the information required with respect to the crowdfunding issuer and its securities, such information may be provided in the optional Question and Answer format included in Form C or in any other format included on the intermediary’s platform, including copies of screen shots of the relevant information, as appropriate and necessary. Information about both the crowdfunding issuer and the crowdfunding vehicle may be included in the same exhibit to the Form C.The crowdfunding vehicle and its principal executive officer or officers, its principal financial officer, its controller or principal accounting officer and at least a majority of the board of directors or persons performing similar functions are required to sign the Form C. How should those signatures be provided?Response: The XML-based fillable portion of Form C only includes fields to provide certain identifying information for the crowdfunding vehicle. Therefore, the crowdfunding vehicle, as co-issuer, should provide the signatures required by Form C in a document filed as an exhibit to the Form C. The signatures should be conformed to the signature requirements of Rule 302 of Regulation S-T.Examples of conformed signatures:HERBERT JONES			HERBERT JONES			OR			HERBERT JONES			HERBERT JONES			CHIEF FINANCIAL OFFICER
- Staff Statement on Select Issues Pertaining to Special Purpose Acquisition Companies Division of Corporation Finance[1]March 31, 2021This staff statement addresses certain accounting, financial reporting and governance issues that should be carefully considered before a private operating company undertakes a business combination[2] with a special purpose acquisition company (a “SPAC”). Shell Company RestrictionsAs shell companies,[3] SPACs are subject to certain limitations that should be considered by the SPAC and the private companies engaging in business combinations with SPACs before undertaking in such a transaction.[4]  These include:Financial statements for the acquired business must be filed within four business days of the completion of the business combination pursuant to Item 9.01(c) of Form 8-K.  The registrant is not entitled to the 71-day extension of that Item;	The combined company will not be eligible to incorporate Exchange Act reports, or proxy or information statements filed pursuant to Section 14 of the Exchange Act, by reference on Form S-1 until three years after the completion of the business combination;[5]	The combined company will not be eligible to use Form S-8 for the registration of compensatory securities offerings until at least 60 calendar days after the combined company has filed current Form 10 information;[6] and	The combined company will be an “ineligible issuer” under Securities Act Rule 405 for three years following the completion of the business combination, which has consequences during that period that include that the combined company:	cannot qualify as a well-known seasoned issuer;		may not use a free writing prospectus;[7]		may not use a term sheet free writing prospectus available to other ineligible issuers;[8]		may not conduct a roadshow that constitutes a free writing prospectus, including an electronic roadshow;[9] and		may not rely on the safe harbor of Rule 163A from Securities Act Section 5(c) for pre-filing communications.[10]	Books and Records and Internal Controls RequirementsIssuers with Exchange Act reporting obligations are subject to two requirements that are among the most important for effective and reliable financial information for investors and our markets.  The first, often referred to as the “books and records” provision, requires issuers to maintain books, records, and accounts in reasonable detail that accurately and fairly reflect the issuer’s transactions and dispositions of its assets.[11]  The second, often referred to as the “internal controls” provision, requires that issuers must devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances about management’s control, authority, and responsibility over the issuer’s assets.[12]Other fundamental requirements for effective and reliable financial reporting include management’s responsibility to establish and maintain adequate internal control over financial reporting (“ICFR”) and disclosure controls and procedures (“DCP”).[13]  Management is also required, except for its first annual report, to evaluate the effectiveness of the issuer’s ICFR at the end of its fiscal year and disclose such assessment in the annual report.[14]  Management must evaluate and disclose the effectiveness of DCP more frequently, quarterly for domestic issuers.[15]These books and records and internal control requirements apply to SPACs before the business combination.  These requirements generally also apply to the combined company after the business combination.[16]  It is important for a SPAC and the private operating company to consider these requirements when planning for a business combination because the private operating company may not have prior experience, among other things, with the following:Annual or interim reporting;	Application of SEC rules and disclosure requirements, including reporting deadlines, filer status and its impact on disclosure, predecessor determination, the form and content of financial statements, and when other entity financial statements and pro forma financial information are required by Regulation S-X; and	Adoption of new accounting standards in the financial statements required in the business combination filing or the subsequent Form 8-K that are not yet effective for private companies.[17]Upon consummation of the business combination, the combined company will need the necessary expertise, books and records, and internal controls to provide reasonable assurance of its timely and reliable financial reporting.  A private operating company may have viewed the necessity for those capacities differently prior to the business combination, and may not be able to develop those capacities without advance planning and investment in resources.Initial Listing Standards of National Securities ExchangesIf the SPAC is listed on a national securities exchange, such as the New York Stock Exchange LLC or The NASDAQ Stock Market LLC, in order to remain listed after the merger, the combined company must satisfy quantitative and qualitative initial listing standards upon consummation of the business combination,[18] which include certain corporate governance requirements.[19]  A private company merging with a SPAC should consider how it will maintain a listing throughout and after the merger.  Any material risks associated with delisting, such as the likelihood of the commencement of delisting proceedings by an exchange or the failure to maintain a listing, could trigger disclosure requirements for the combined company.  The quantitative standards are designed to ensure that a company has sufficient public float, investor base, and trading interest to provide the depth and liquidity necessary to promote fair and orderly markets.[20]  A company seeking to list must meet minimum standards, such as the number of round lot holders, publicly held shares, market value of publicly held shares, and share price.[21]  For example, if the SPAC lost round lot holders through redemptions prior to the business combination, the combined company should consider whether it would meet the round lot holder requirement upon consummation of the business combination.The combined company also must meet qualitative standards regarding corporate governance, such as requirements regarding a majority independent board of directors, an independent audit committee consisting of directors with specialized experience, independent director oversight of executive compensation and the director nomination process, and a code of conduct applicable to all directors, officers, and employees.[22]  There is a risk that a private operating company that has not prepared for an initial public offering and is quickly acquired by a SPAC may not have these elements in place in order to meet the listing standards at the time required.  Advance planning may be necessary to identify, elect, and on-board a newly-constituted independent board and audit committee, and for them to adequately oversee the preparation and audit of the company’s financial statements, books and records, and internal controls.If the combined company fails to satisfy a listing standard or receives a notice regarding non-compliance from the national securities exchange, it will need to consider certain disclosure requirements.  The combined company must file an Item 3.01 Form 8-K to report, among other things, receipt of the notice and any action or response that it has determined to take in response to the notice.  Non-compliance with a listing standard may also present a material risk requiring disclosure under Item 105 of Regulation S-K. [1] The statement represents the views of the staff of the Division of Corporation Finance.  It is not a rule, regulation, or statement of the Securities and Exchange Commission (“Commission”).  The Commission has neither approved nor disapproved its content.  This statement, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.  References herein to the “Securities Act” refer to the Securities Act of 1933 and references to the “Exchange Act” refer to the Securities Exchange Act of 1934.[2] The term “business combination” in this statement relates to type of transaction and not the accounting for the transaction.[3] Shell companies have no or nominal operations, and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets.  See Securities Act Rule 405 and Exchange Act Rule 12b-2. [4] These limitations do not apply to “business combination related shell companies”—that is, shell companies that are used in certain change of domicile or business combination transactions.  See Securities Act Rule 405 and Exchange Act Rule 12b-2.  However, any exceptions to the Commission’s shell company limitations designed for business combination related shell companies do not apply to SPACs and any shell company formed to facilitate a merger with a SPAC.  Neither a SPAC nor any such entity formed to facilitate a merger with a SPAC meets the definition of a business combination related shell company because neither of these entities is a shell company formed solely for the purpose of changing the corporate domicile solely within the United States or formed solely for the purpose of completing a business combination transaction among one or more entities other than the shell company, none of which is a shell company.[5] See General Instruction VII.D.1(b) to Form S-1.[6] See General Instruction A.1 to Form S-8.[7] See Securities Act Rule 164(e)(1).[8] See Rule 164(e)(2).[9] See Rule 433(a)-(b).[10] See Securities Act Rule 163A(b)(3)(ii).[11] See Section 13(b)(2)(A) of the Exchange Act.[12] Section 13(b)(2)(B) of the Exchange Act requires that the internal accounting controls are sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. [13] See Section 404(a) of the Sarbanes Oxley Act of 2002, and Exchange Act Rules 13a-15 and 15d-15.[14] See Exchange Act Rules 13a-15 and 15d-15 and Item 308 of Regulation S-K.[15] See Exchange Act Rules 13a-15 and 15d-15 and Item 308 of Regulation S-K.[16] In some instances, management of the combined company may be unable to assess internal control over financial reporting in the fiscal year in which the transaction was consummated.  In those instances, the staff would not object if the combined company were to exclude management’s assessment of internal control over financial reporting in the Form 10-K covering the fiscal year in which the transaction was consummated.  For a discussion of those limited circumstances, see Compliance and Disclosure Interpretation for Regulation S-K, Question 215.02.[17] For example, the adoption date of the new U.S. GAAP lease accounting standard is January 1, 2022 for a private calendar year-end company.  In contrast, the adoption date for calendar year-end issuers that are not emerging growth companies was January 1, 2019.  See FASB ASU 2020-05 – Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities.  A private company that applies U.S. GAAP and has revenue over $1.07 billion for its most recently completed fiscal year may be required to adopt the new lease standard in the financial statements included in the business combination filings. [18] See NYSE Listed Company Manual Sections 102, 802.01,and Section 3; Corporate Responsibility as well as Nasdaq Rule 5300, 5400 or 5500 Series and Rule 5600 Series; Corporate Governance Requirements.[19] See, e.g., Release No. 34-90995 (stating that “all initial listing requirements apply to the combined company upon consummation of a business combination . . .”)[20] See id. at 5-6 and accompanying footnotes. [21] See NYSE Listed Company Manual Sections 102.01A, 802.01 and, for example, for the Nasdaq Global Select Market, Nasdaq Rule 5315(e), (f)(1), (f)(2).[22] NYSE Listed Company Manual Sections 303A.01, 303A.04-.07, 303A.10; Nasdaq Rules 5605(b)(1), (c)(2), (d), (e)(1); Nasdaq Rule 5610.
- Disclosure Guidance Updated: Options Relating to Expiring Confidential Treatment Orders The Division of Corporation Finance has revised CF Disclosure Guidance Topic No. 7 to update the options available to companies whose confidential treatment orders are about to expire.
- CF Sample Letter to Companies Regarding Securities Offerings During Times of Extreme Price Volatility The Division of Corporation Finance has posted a sample letter to companies regarding securities offerings during times of extreme price volatility.
- CF Disclosure Guidance Topic: Special Purpose Acquisition Companies The Division of Corporation Finance has posted CF Disclosure Guidance Topic: No. 11 to provide its views regarding certain disclosure considerations for SPACs in connection with their initial public offerings and subsequent business combination transactions.
- CF Disclosure Guidance Topic: Disclosure Considerations for China-Based Issuers The Division of Corporation Finance has posted CF Disclosure Guidance Topic: No. 10 to provide its views regarding certain disclosure considerations relevant to companies based in or with a majority of their operations in the People's Republic of China.