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U.S. Securities and Exchange Commission

Division of Corporation Finance

Outdated or Superseded Compliance and Disclosure Interpretations

The following interpretations originally appeared in the Division's Compliance and Disclosure Interpretations, but were removed when they became outdated or superseded. The first bracketed date following each interpretation was the last date of its publication or revision. The second bracketed date following each interpretation is the date on which it was moved to Archives.

Securities Act Sections

Question 103.04 and Question 139.01

Question: Where the offer and sale of convertible securities or warrants are being registered under the Securities Act, and such securities are convertible or exercisable within one year, must the underlying securities be registered at that time if there is no available exemption from registration for such conversion (such as Section 3(a)(9)) or exercise?

Answer: Yes. If such securities are not convertible or exercisable within one year, the issuer may choose not to register the underlying securities at the time of registering the convertible securities or warrants. However, the underlying securities must be registered no later than the date such securities become convertible or exercisable by their terms, if no exemption for such conversion or exercise is available. Where securities are convertible only at the option of the issuer, the underlying securities must be registered at the time the offer and sale of the convertible securities are registered since the entire investment decision that investors will be making is at the time of purchasing the convertible securities. The security holder, by purchasing a convertible security that is convertible only at the option of the issuer, is in effect also deciding to accept the underlying security. [Nov. 26, 2008] [Added to Archives Aug. 14, 2009]

Question 139.13

Question: When may a company file a registration statement for the resale by the investors of securities sold in a private equity line financing?

Answer: In many equity line financings, the company will rely on the private placement exemption from registration to sell the securities under the equity line and will then register the "resale" of the securities sold in the equity line financing. In these types of equity line financings, the delayed nature of the puts and the lack of market risk resulting from the formula price differentiate private equity line financings from financing PIPEs (private investment, public equity). We, therefore, analyze private equity line financings as indirect primary offerings.

While we analyze private equity line financings as indirect primary offerings, we recognize that the "resale" form of registration is sought in these financings. As such, we will permit the company to register the "resale" of the securities prior to its exercise of the put if the transactions meet the following conditions:

  • the company must have "completed" the private transaction of all of the securities it is registering for "resale" prior to the filing of the registration statement;
  • the "resale" registration statement must be on the form that the company is eligible to use for a primary offering; and
  • in the prospectus, the investor(s) must be identified as underwriter(s), as well as selling shareholder(s). [Nov. 26, 2008] [Added to Archives May 16, 2013]

Question 139.29

Question: May an issuer contemplating a registered debt exchange offer execute a lock-up agreement (or agreement to tender) with a note holder before the filing of the registration statement?

Answer: The execution of a lock-up agreement (or agreement to tender) may constitute a contract of sale under the Securities Act. If so, the offer and sale of the issuer's securities would be made to note holders who entered into such an agreement before the exchange offer is made to other note holders.

Recognizing the legitimate business reasons for seeking lock-up agreements in this type of transaction, the staff will not object to the registration of offers and sales when lock-up agreements have been signed in the following circumstances:

  • the lock-up agreements are signed only by accredited investors;
  • the persons signing the lock-up agreements collectively own less than 100% of the outstanding principal amount of the particular series of notes;
  • a tender offer will be made to all holders of the particular series of notes; and
  • all note holders eligible to participate in the exchange offer will receive the same amount and form of consideration.

When lock-up agreements are executed before the filing of a registration statement and the circumstances noted above are not satisfied, the subsequent registration of the exchange offer on Form S-4 may be inappropriate. An exchange offer is a single transaction, and a transaction that has commenced privately must be completed privately. Similarly, if a note holder actually tenders its notes — for example, by signing a transmittal form — before the filing of the Form S-4, the staff has objected to the subsequent registration of the exchange offer on Form S-4 for any of the note holders because offers and sales have already been made and completed privately. An issuer seeking to lock up note holders must also consider whether such efforts represent the commencement of a tender offer. [Nov. 16, 2009] [Added to Archives Aug. 11, 2010]

Question 139.30

Question: In a negotiated third-party exchange offer, may an acquiring company execute a lock-up agreement (or agreement to tender) before the filing of the registration statement to obtain a commitment from management and principal security holders of a target company to tender their shares in the exchange offer?

Answer: The execution of a lock-up agreement (or agreement to tender) may constitute a contract of sale under the Securities Act. If so, the offer and sale of the acquiror's securities would be made to persons who entered into such an agreement before the exchange offer is made to other target security holders.

Recognizing the legitimate business reasons for seeking lock-up agreements in the course of negotiated third-party exchange offers, the staff will not object to the registration of offers and sales where lock-up agreements have been signed in the following circumstances:

  • the lock-up agreements involve only executive officers, directors, affiliates, founders and their family members, and holders of 5% or more of the subject securities of the target company;
  • the persons signing the lock-up agreements collectively own less than 100% of the subject securities of the target;
  • a tender offer will be made to all holders of the subject securities of the target; and
  • all holders of the subject securities of the target eligible to participate in the exchange offer will receive the same amount and form of consideration.

When lock-up agreements are executed before the filing of a registration statement and such agreements exceed the circumstances noted above, the subsequent registration of the exchange offer on Form S-4 may be inappropriate. An exchange offer is a single transaction, and a transaction that has commenced privately must be completed privately. Similarly, if a holder actually tenders its subject securities — for example, by signing a transmittal form — before the filing of the Form S-4, the staff has objected to the subsequent registration of the exchange offer on Form S-4 for any of the holders of the subject securities because offers and sales have already been made and completed privately. An acquiring company seeking to lock up holders of the subject securities must also consider whether such efforts represent the commencement of a tender offer. [Nov. 16, 2009] [Added to Archives Aug. 11, 2010]

Securities Act Rules

Question 179.01 and Question 255.47

Question: Under Section 413(a) of the Dodd-Frank Act, the net worth standard for an accredited investor, as set forth in Securities Act Rules 215 and 501(a)(5), is adjusted to delete from the calculation of net worth the “value of the primary residence” of the investor. How should the “value of the primary residence” be determined for purposes of calculating an investor’s net worth?

Answer: Section 413(a) of the Dodd-Frank Act does not define the term “value,” nor does it address the treatment of mortgage and other indebtedness secured by the residence for purposes of the net worth calculation. As required by Section 413(a) of the Dodd-Frank Act, the Commission will issue amendments to its rules to conform them to the adjustment to the accredited investor net worth standard made by the Act. However, Section 413(a) provides that the adjustment is effective upon enactment of the Act. When determining net worth for purposes of Securities Act Rules 215 and 501(a)(5), the value of the person’s primary residence must be excluded. Pending implementation of the changes to the Commission’s rules required by the Act, the related amount of indebtedness secured by the primary residence up to its fair market value may also be excluded. Indebtedness secured by the residence in excess of the value of the home should be considered a liability and deducted from the investor’s net worth. [July 23, 2010] [Added to Archives February 27, 2012]

Question 198.08

Question: An issuer not subject to Regulation AB disclosure requirements has a registration statement on Form S-3 or Form F-3 that was declared effective before July 22, 2010 and includes or incorporates by reference ratings information that is not limited to issuer disclosure-related ratings information. Can the issuer continue to use its registration statement without filing a consent by the credit rating agency?

Answer: Yes. In this fact pattern, the staff would not object to reliance upon Rule 401(a) under the Securities Act to allow continued use of the registration statement for the limited period permitted under Rule 401(a). This would be applicable only until the next post-effective amendment to such registration statement and only if no subsequently incorporated periodic or current report contains ratings information that is not limited to issuer disclosure-related ratings information. Note that the filing of the issuer’s next annual report on Forms 10-K, 20-F or 40-F is deemed to be the post-effective amendment of such registration statement for purposes of Securities Act Section 10(a)(3), so that in accordance with Rule 401(a), the registration statement could no longer be used after the annual report is filed without the filing of the consent. [July 22, 2010] [Added to Archives July 27, 2010]

Question 212.05

Question: Can a registration statement under Rule 415 be made effective without an opinion of counsel as to the legality of the securities being issued when no immediate sales are contemplated?

Answer: No. However, when sales are not expected in the near future, the registrant may file a qualified opinion of counsel and have its registration statement be made effective, subject to the understanding that an unqualified opinion will be filed prior to the time any sales are made or contracts of sale are entered into with regard to securities covered by the registration statement. An updated opinion of counsel with respect to the legality of the securities being offered may be filed in a Form 8-K report rather than a post-effective amendment to a Form S-3 shelf registration statement. [Jan. 26, 2009] [Added to Archives Aug. 14, 2009]

Question 212.21

Question: For a registration statement offering securities immediately exchangeable into securities of another issuer, must there be a registration statement to register the offer and sale of the securities that would be received in exchange and if so, what provision of Rule 415 may be relied on to cover such exchange?

Answer: The offer and sale of securities to be received in exchange for registered exchangeable securities must be registered, unless an exemption from registration is available. If no exemption from registration is available, the offer and sale of the securities to be issued in exchange could be registered as a continuous offering in reliance on Rule 415(a)(1)(ix) or as an offering of securities upon conversion of outstanding securities pursuant to Rule 415(a)(1)(iv). [Jan. 26, 2009] [Added to Archives June 4, 2010]

Question 233.04

Question: For a company not subject to Regulation AB disclosure requirements, when would a consent by a credit rating agency be required if information about a company’s credit ratings is included in, or incorporated by reference into, a Securities Act registration statement or a Section 10(a) prospectus?

Answer: A consent would be required if the company includes the credit rating in its registration statement or Section 10(a) prospectus (directly or through incorporation by reference), unless the rating information is included only for the purpose of satisfying disclosure requirements as described below.

If the disclosure of a credit rating in a filing with the Commission is related only to changes to a credit rating, the liquidity of the registrant, the cost of funds for a registrant or the terms of agreements that refer to credit ratings (“issuer disclosure-related ratings information”), then a consent by the credit rating agency would not be required. For example, some companies note their ratings in the context of a risk factor discussion regarding the risk of failure to maintain a certain rating and the potential impact a change in credit rating would have on the registrant. A company also may refer to, or describe, its ratings in the context of its liquidity discussion in Management’s Discussion and Analysis of Financial Condition and Results of Operations. Companies may also need to discuss ratings when they describe debt covenants, interest or dividends that are tied to credit ratings or potential support to variable interest entities. See Release No. 33-9070 (Oct. 7, 2009) [74 FR 53086]. [July 22, 2010] [Added to Archives July 27, 2010]

Question 233.05

Question: For a company not subject to Regulation AB disclosure requirements, would a consent by a credit rating agency be required if ratings information, other than issuer disclosure-related ratings information, is included in, or incorporated by reference into, a prospectus or prospectus supplement first filed on or after July 22, 2010?

Answer: Yes. [July 22, 2010] [Added to Archives July 27, 2010]

Question 233.06

Question: For a company not subject to Regulation AB disclosure requirements, if ratings information is included in a free writing prospectus that complies with Securities Act Rule 433 or in a term sheet or press release that complies with Securities Act Rule 134, is a consent from a credit rating agency required?

Answer: No. Securities Act Rule 436, which requires the filing of written consents by experts, applies only to “registration statements” and to “prospectuses.” A Rule 433 free writing prospectus is not part of a registration statement, nor, as a Section 10(b) prospectus, is it included in the definition of “prospectus” in Securities Act Rule 405. Communications that are in compliance with Rule 134 are not prospectuses. If any of these documents are also filed as prospectuses under Rule 424, a consent would be required. [July 22, 2010] [Added to Archives July 27, 2010]

Question 233.07

Question: An issuer not subject to Regulation AB disclosure requirements has a registration statement on Form S-3 or Form F-3 that was declared effective before July 22, 2010 and includes or incorporates by reference ratings information that is not limited to issuer disclosure-related ratings information. Can the issuer continue to use its registration statement without filing a consent by the credit rating agency?

Answer: Yes. In this fact pattern, the staff would not object to reliance upon Rule 401(a) under the Securities Act to allow continued use of the registration statement for the limited period permitted under Rule 401(a). This would be applicable only until the next post-effective amendment to such registration statement and only if no subsequently incorporated periodic or current report contains ratings information that is not limited to issuer disclosure-related ratings information. Note that the filing of the issuer’s next annual report on Forms 10-K, 20-F or 40-F is deemed to be the post-effective amendment of such registration statement for purposes of Securities Act Section 10(a)(3), so that in accordance with Rule 401(a), the registration statement could no longer be used after the annual report is filed without the filing of the consent. [July 22, 2010] [Added to Archives July 27, 2010]

Question 233.08

Question: For a company not subject to Regulation AB disclosure requirements, if a registration statement or post-effective amendment becomes effective on or after July 22, 2010 and includes or incorporates by reference ratings information that is not limited to issuer disclosure-related ratings information, is a consent by a credit rating agency required to be filed with the registration statement or post-effective amendment?

Answer: Yes. [July 22, 2010] [Added to Archives July 27, 2010]

Question 255.13

Question: In calculating net worth for purposes of Rule 501(a)(5), may the investor include the estimated fair market value of his or her principal residence as an asset?

Answer: Yes. Rule 501(a)(5) does not exclude any of the purchaser’s assets from the net worth needed to qualify as an accredited investor. [Jan. 26, 2009] [Added to Archives July 22, 2010]

Question 257.08

Question: Will a Rule 506 offering lose "covered security" status under Section 18 of the Securities Act if an issuer fails to file a notice of the exempt offering with the SEC or a state securities regulator?

Answer: No. "Covered security" status under Section 18 of the Securities Act is not conditioned upon the filing of a notice of exempt offering with the SEC or a state securities regulator. [Jan. 26, 2009] [Added to Archives September 14, 2009]

532.01 A pledgor who is an affiliate defaults on a loan that is secured, in a bona fide pledge situation, by stock acquired in the open market. The pledgee may sell the stock without regard to the holding period requirement of Rule 144. A new holding period for the pledgee is not necessary because the securities were acquired solely by operation of the pledge agreement and therefore are not deemed to have been "sold" to the pledgee by the affiliate. [Jan. 26, 2009] [Added to Archives May 16, 2013]

Securities Act Forms

Question 118.02

Question: If an automatic shelf registration statement initially registers one or more classes of securities and a separate class of securities is subsequently added to that automatic shelf registration statement by post-effective amendment, when must the Exhibit 5 legality opinion for the separate class of securities be filed? More generally, when must the Exhibit 5 legality opinion for the specific securities sold in a particular offering be filed?

Answer: A form of Exhibit 5 legality opinion must be filed at the time a class of securities is first included in an automatic shelf registration statement, whether as part of the initial registration statement or in a post-effective amendment to the registration statement. The signed opinion covering the specific securities sold in a particular offering must be filed as part of the registration statement or incorporated by reference into the registration statement no later than the time of the offering of such securities. [Feb. 27, 2009] [Added to Archives Aug. 14, 2009]

215.04 Defaults in periods prior to the end of the last fiscal year for which audited financial statements of the registrant and its consolidated subsidiaries were included in a report filed pursuant to Section 13(a) of the Exchange Act would not bar use of Form S-3. A default that continues in periods after the end of the last fiscal year for which audited financial statements of the registrant and its consolidated subsidiaries were included in a report filed pursuant to Section 13(a) of the Exchange Act would bar use of Form S-3, provided that such default is material to the financial position of the registrant and its subsidiaries, taken as a whole. [Feb. 27, 2009] [Added to Archives June 4, 2010]

Regulation S-K

Question 116.08

Question: If Item 401(a) and Item 401(e) director information is omitted from a proxy statement pursuant to Instruction 3 of Item 401(a), is this information nevertheless required to be included in a Form 10-K that otherwise provides its Part III information by incorporation by reference from the proxy statement?

Answer: Yes. Instruction 3 of Item 401(a) applies only to proxy statements and information statements. [Mar. 4, 2011] [Added to Archives July 8, 2011]

Question 119.03

Question: Instruction 2 to Item 402(c)(2)(iii) and (iv) provides that companies are to include in the Salary column (column (c)) or the Bonus column (column (d) any amount of salary or bonus forgone at the election of a named executive officer under which stock, equity-based, or other forms of non-cash compensation have been received instead by the named executive officer. In a situation where the value of the stock, equity-based or other form of non-cash compensation is the same as the amount of salary or bonus foregone at the election of the named executive officer, does this mean the amounts are only reported in the Salary or Bonus column and not in any other column of the Summary Compensation Table?

Answer: Yes, under Instruction 2 to Item 402(c)(2)(iii) and (iv) the amounts should be disclosed in the Salary or Bonus column, as applicable. The result would be different if the amount of salary or bonus foregone at the election of the named executive officer was less than the value of the equity-based compensation received instead of the salary or bonus, or if the agreement pursuant to which the named executive officer had the option to elect settlement in stock or equity-based compensation was within the scope of FAS123R (e.g., the right to stock settlement is embedded in the terms of the award). In the former case, the incremental value of an equity award would be reported in the Stock Awards or Option Awards columns, and in the latter case the award would be reported in the Stock Awards or Option Awards columns. In both of these special cases, the amounts reported in the Stock Awards and Option Awards columns would be the dollar amounts recognized for financial statement reporting purposes with respect to the applicable fiscal year, and footnote disclosure should be provided regarding the circumstances of the awards. Appropriate disclosure about equity-based compensation received instead of salary or bonus must be provided in the Grants of Plan-Based Awards Table, the Outstanding Equity Awards at Fiscal Year End Table and the Option Exercises and Stock Vested Table. [Aug. 8, 2007] [Added to Archives May 17, 2013]

Question 119.04

Question: The Instruction to Item 402(c)(2)(v) and (vi) provides that a company disclose the assumptions made in the valuation for awards reported in the Option Awards column (column (e)) and the Stock Awards column (column (f)) by reference to a discussion of those assumptions in the registrant's financial statements, footnotes to the financial statements, or discussion in the Management's Discussion and Analysis. Is the disclosure of valuation assumptions limited to awards made in the covered fiscal year or does it include any award reported in column (e) or (f) even if granted in an earlier fiscal year?

Answer: The disclosure of valuation assumptions should relate to any award reported in the Option Awards column (column (e)) or the Stock Award column (column (f)). [Jan. 24, 2007] [Added to Archives March 1, 2010]

Question 119.05

Question: If an equity award is made after the end of the fiscal year but relates to services performed in that completed fiscal year, when should that equity award be reported in the Summary Compensation Table and the Grants of Plan-Based Awards Table?

Answer: Under Item 402(c)(2)(v) and (vi), the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year must be reported in the Summary Compensation Table for stock and option awards. With respect to the Grants of the Plan-Based Awards Table, under Item 402(d)(1), information as to the awards is to be reported in the fiscal year in which the award was made. In preparing the Compensation Discussion and Analysis under Item 402(b), companies should consider the application of Instruction 2 to Item 402(b) with respect to awards granted after the end of the fiscal year but relating back to service in that completed fiscal year. [Jan. 24, 2007] [Added to Archives March 1, 2010]

Question 119.11

Question: An equity award subject to disclosure pursuant to Item 402(c)(2)(v) or (vi) may be disclosed as a negative number because the expense is reversed under FAS 123R, such as when an award is forfeited during the fiscal year, achievement of a performance-based condition becomes no longer probable, or when liability accounting applies to an award such as a cash-settled stock unit program and the stock price declines during the year. What portion of the award that was previously expensed and is reversed under FAS 123R may be deducted from the amount reported in, or shown as a negative number in, the Stock Awards or Option Awards column?

Answer: Only the previously expensed portions of awards that were previously reported in the Summary Compensation Table may be reversed in the Summary Compensation Table. Therefore, an expensed amount that relates to periods before effectiveness of the 2006 Executive Compensation rules or before the person became a named executive officer should not be deducted from the amount reported in, or shown as a negative number in, the Stock Awards or Option Awards column. [Aug. 8, 2007] [Added to Archives March 1, 2010]

Question 119.12

Question: Is the interpretive position in Question 119.11 taken into account in determining whether an executive who was not previously in the Summary Compensation Table is a named executive officer under Item 402(a)(3)(iii) or Item 402(a)(3)(iv) for the last completed fiscal year? Specifically, can any amounts reversed under FAS 123R during the last completed fiscal year that were expensed in previous years be considered, although the previously expensed portions of the awards were not reported previously in the Summary Compensation Table?

Answer: Compensation for all executive officers should be computed on the same basis in order to determine the named executive officers. The reversal of a previously expensed amount that would have been reported if the executive had been included in the Summary Compensation Table for the prior year in which the award was expensed may be considered in determining whether the executive is a named executive officer under Item 402(a)(3)(iii) or Item 402(a)(3)(iv) for the last completed fiscal year. For example, during 2007, for both Executive A (who was in the Summary Compensation Table for 2006) and Executive B (who was not), the same amount of equity compensation that had been expensed in 2006 under FAS 123R was reversed. The amount of this reversal would be taken into account for both Executives A and B in determining whether they are among the company's named executive officers for 2007 under Item 402(a)(3)(iii) or Item 402(a)(3)(iv). [July 3, 2008] [Added to Archives March 1, 2010]

Question 119.15

Question: The instruction to Item 402(c)(2)(v) and (vi) requires disclosure of assumptions made in the valuation by reference to a discussion of those assumptions in the registrant's financial statements, footnotes to the financial statements, or discussion in the Management's Discussion and Analysis section. To provide this assumption information for the amounts recognized during the company's most recent fiscal year, what financial statements (or associated footnotes) should be referenced?

Answer: For a stock or option award that was recognized during the company's most recent fiscal year, the required assumption information generally will be in the financial statements (or associated footnotes) for the year in which that award was granted. It is not sufficient to reference financial statements (or associated footnotes) that contain only assumptions for the company's grants during the most recent fiscal year if awards granted in prior fiscal years were recognized during the most recent fiscal year. [July 3, 2008] [Added to Archives March 1, 2010]

Question 119.16

Question: May a company provide the assumption information required by the Instruction to Item 402(c)(2)(v) and (vi) for equity awards granted in the company's most recent fiscal year by reference to the Grants of Plan-Based Awards Table if the company chooses to report that assumption information in that table?

Answer: Yes. However, as noted in Question 119.15, the Summary Compensation Table must reference assumption information for each award that was recognized during the company's most recent fiscal year. [July 3, 2008] [Added to Archives March 1, 2010]

Question 120.05

Question: An incentive performance plan will pay out at different levels depending upon the actual performance results over the relevant performance period. Is the grant date fair value reportable in column (l) of the table determined based on threshold, target or maximum performance?

Answer: The grant date fair value reportable in column (l) is determined based on maximum performance, so that investors can see the maximum grant date fair value numbers that were authorized in granting the award. [May 29, 2009] [Added to Archives March 1, 2010]

220.01 Where a named executive officer exercises "reload" options and receives additional options upon such exercise, the registrant is required to report the additional options as an option grant in the Grants of Plan-Based Awards Table. In the Summary Compensation Table, the registrant would report the dollar amount recognized for the additional options for financial statement purposes with respect to the fiscal year in accordance with FAS 123R. [Jan. 24, 2007] [Added to Archives March 1, 2010]

230.07 X is a director of the registrant. X's child is employed by the registrant and receives yearly compensation exceeding $120,000. The child's compensation is not reported under Item 402 since the child is not one of the registrant's named executive officers, nor is the child an officer or director. The registrant was advised that the child's compensation should be disclosed under Item 404(a) as a transaction in which the director has a material interest. [Mar. 13, 2007] [Added to Archives Aug. 14, 2009]

Exchange Act Forms

Question 105.05

Question: A filer reporting on domestic forms is evaluating when it must begin submitting the interactive data under the phase-in provisions. What date should it use to compute its public float when it has a November 30 year-end date?

Answer: The filer's public float is measured on the last business day of the filer's most recently completed second fiscal quarter. Therefore, in assessing whether it must begin submitting interactive data in the first phase-in group, i.e., for the quarterly report on Form 10-Q for the fiscal period ending on or after June 15, 2009, the measurement date is May 30, 2008 (the last business day of the filer's most recently completed second quarter). If the filer does not fall into the first phase-in group, it should measure its public float at May 29, 2009 in assessing whether it falls into the second phase-in group, i.e., for the quarterly report on Form 10-Q for the fiscal period ending on or after June 15, 2010. [May 29, 2009] [Added to Archives Sept. 17, 2010]

Question 105.06

Question: A large accelerated filer with a calendar year end had a public float of $6 billion on June 30, 2008. Accordingly, the filer falls into the first phase-in group and must submit its interactive data with its Form 10-Q for the quarter ended June 30, 2009. Would the filer's obligation to submit its interactive data be affected if its public float declined to $2 billion after the June 30, 2008 measurement date?

Answer: No. [May 29, 2009] [Added to Archives Sept. 17, 2010]

Exchange Act Section 16 and Related Rules and Forms

Question 133.08

Question: Where a transaction is executed in increments at different prices on the same day, or a series of transactions are executed at different prices on the same day, must the number of securities transacted at each price be reported in Column 4 of Form 4 or Form 5?

Answer: Yes. The number of securities transacted at each price on the same day must be reported in Column 4. It is not acceptable to report the aggregate number of securities and a weighted average price. For example, a sale of 500 shares is executed with 150 shares sold at $10.00 per share, 220 shares sold at $10.25 per share, and 130 shares sold at $10.15 per share. The Form 4 must report the number of securities sold at each price. In addition, securities that are sold at the same price on different days may not be aggregated. [May 23, 2007] [Added to Archives June 26, 2008]

Exchange Act Form 8-K

Question 106.01

Question: Item 2.02 contains a conditional exemption from its requirement to furnish a Form 8-K where earnings information is presented orally, telephonically, by webcast, by broadcast or by similar means. Among other conditions, the company must provide on its website any financial and other statistical information contained in the presentation, together with any information that would be required by Regulation G. Would an audio file of the initial webcast satisfy this condition to the exemption?

Answer: Yes, provided that: (1) the audio file contains all material financial and other statistical information included in the presentation that was not previously disclosed, and (2) investors can access the audio file and replay it through the company's website. Alternatively, slides or a similar presentation posted on the website at the time of the presentation containing the required, previously undisclosed, material financial and other statistical information would satisfy the condition. In each case, the company must provide all previously undisclosed material financial and other statistical information, including information provided in connection with any questions and answers. Regulation FD also may impose disclosure requirements in these circumstances. [April 2, 2008] [Added to Archives Jan. 11, 2010]

Question 106.02

Question: A company issues its earnings release after the close of the market and the 5:30 p.m. EDGAR deadline, and holds a properly noticed conference call to discuss its earnings two hours later. That conference call contains material, previously undisclosed, information of the type described under Item 2.02 of Form 8-K. Because of this timing, the company is unable to furnish its earnings release on a Form 8-K before its conference call. Accordingly, the company cannot rely on the exemption from the requirement to furnish the information in the conference call on a Form 8-K. What must the company file with regard to its conference call?

Answer: The company must furnish the material, previously non-public, financial and other statistical information required to be furnished on Item 2.02 of Form 8-K as an exhibit to a Form 8-K and satisfy the other requirements of Item 2.02 of Form 8-K. A transcript of the portion of the conference call or slides or a similar presentation including such information will satisfy this requirement. In each case, all material, previously undisclosed, financial and other statistical information, including that provided in connection with any questions and answers, must be provided. Regulation FD also may impose disclosure requirements in these circumstances. [April 2, 2008] [Added to Archives Jan. 11, 2010]

Question 106.03

Question: Item 2.02 contains a conditional exemption from its requirement to furnish a Form 8-K where earnings information is presented orally, telephonically, by webcast, by broadcast or by similar means. Among other conditions, the company must provide on its website any material financial and other statistical information not previously disclosed and contained in the presentation, together with any information that would be required by Regulation G. When must all of this information appear on the company's website?

Answer: The required information must appear on the company's website at the time the oral presentation is made. In the case of information that is not provided in a presentation itself but, rather, is disclosed unexpectedly in connection with the question and answer session that was part of that oral presentation, the information must be posted on the company's website promptly after it is disclosed. Any requirements of Regulation FD also must be satisfied. A webcast of the oral presentation would be sufficient to meet this requirement. See also Exchange Act Form 8-K Question 106.01. [April 2, 2008] [Added to Archives Jan. 11, 2010]

Question 106.04

Question: Company XYZ issues its earnings release after the close of the market on Tuesday. Company XYZ then files its earning release as an exhibit to its Form 10-Q on Wednesday morning, prior to holding its conference call Wednesday afternoon. Must Company XYZ also furnish a Form 8-K under Item 2.02 in order to rely on the Item 2.02 exemption for its conference call?

Answer: No. Assuming that all of the other conditions are met, Company XYZ's filing of the earnings release as an exhibit to its Form 10-Q before the conference call takes place would be sufficient for it to rely on the Item 2.02 exemption for the conference call. [April 2, 2008] [Added to Archives Jan. 11, 2010]

Question 106.05

Question: Does a company's failure to furnish to the Commission the Form 8-K required by Item 2.02 in a timely manner affect the company's eligibility to use Form S-3?

Answer: No. Form S-3 requires the company to have filed in "a timely manner all reports required to be filed in twelve calendar months and any portion of a month immediately preceding the filing of the registration statement . . ." Because an Item 2.02 Form 8-K is furnished to the Commission, rather than filed with the Commission, failure to furnish such a Form 8-K in a timely manner would not affect a company's eligibility to use Form S-3. While not affecting a company's Form S-3 eligibility, failure to comply with Item 2.02 of Form 8-K would, of course, be a violation of Section 13(a) of the Exchange Act and the rules thereunder. [April 2, 2008] [Added to Archives Jan. 11, 2010]

Question 106.06

Question: Company ABC issued a press release on April 3, 200X that contained previously non-public material information. Specifically, Company ABC announced that it would not meet its previous earnings estimates for the fiscal period ended March 31, 200X. The press release also stated that it expected its adjusted earnings (a non-GAAP financial measure) for the fiscal period ended March 31, 200X to be in the range of $1.20 to $1.25. Does Company ABC have to furnish its press release pursuant to Item 2.02 of Form 8-K and satisfy the requirements of Item 2.02 applicable to non-GAAP financial measures?

Answer: Company ABC's press release would be subject to Item 2.02 of Form 8-K because it contained non-public material information regarding its results of operations for a completed fiscal period. The adjusted earnings range presented also would be subject to the requirements of Item 2.02 applicable to non-GAAP financial measures. [April 2, 2008] [Added to Archives Jan. 11, 2010]

Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting

Question 103.05

Question: Rule 13d-1(a) states that a Schedule 13D must be filed within 10 days after the acquisition of more than five percent of a class of equity securities registered under Section 12 of the Exchange Act. Is the Schedule 13D due 10 days after the trade date or the settlement date of a securities transaction that creates the reporting obligation?

Answer: The Schedule 13D beneficial ownership report must be filed within 10 days of the trade date of the securities transaction. Although under contract law the date on which the ownership of the shares is transferred may be the settlement date, an investor may, at a minimum, exercise investment power over the securities that were acquired through the trade as of the trade date. For purposes of calculating the 10-day time period, the trade date counts as day number one. [Sep. 14, 2009] [Added to Archives November 16, 2009]

Non-GAAP Financial Measures

Question 105.04

Question: A company issues its quarterly earnings release within 48 hours of its quarterly earnings conference call. However, on the conference call the company discloses material non-public information relating to its results of operations for the quarter that was not disclosed in the earnings release, and thus does not satisfy the exemption in Item 2.02(b) of Form 8-K with respect to that information. Is the company required to furnish an Item 2.02 Form 8-K with respect to all responsive information disclosed on the conference call, or just the information omitted from the earnings release?

Answer: The company will have an Item 2.02 Form 8-K filing obligation only with respect to the material non-public information relating to its results of operations for the quarter that was disclosed on the earnings call but not disclosed in the earnings release. A transcript of this portion of the conference call will satisfy this requirement. Regulation FD also may impose disclosure requirements in these circumstances. [Jan. 11, 2010] [Added to Archives Jan. 15, 2010]

 

http://www.sec.gov/divisions/corpfin/guidance/outdated.htm

Modified: 05/17/2013