On March 4, 2011, the Division of Corporation Finance of the SEC issued nine new Compliance and Disclosure Interpretations, or CDIs. CDIs are interpretations that reflect the views of the staff of the Division, and are not rules, regulations or statements of the SEC, and are not binding on the SEC due to their highly informal nature. Nevertheless, they provide an invaluable resource to practitioners with respect to interpretive guidance on many areas of securities law. The new CDIs are as follows:
- An issuer who includes material non-public information in its offering memorandum when conducting an offering pursuant to Rule 144A and Regulation S does not satisfy Regulation FD by filing the entire offering memorandum as an exhibit to Form 8-K at the time of distribution of the offering memorandum to potential investors. The issuer could instead file a Form 8-K setting forth the specific material non-public information with the limited information about the offering pursuant to Rule 135c of the Securities Act of 1933.
- With respect to a company that sells mandatorily exchangeable notes in a private offering, pursuant to which the notes can be exchanged for shares of an affiliate of the issuer at the issuer's option or upon the occurrence of certain events, the holding period under Rule 144 upon the exchange of the notes will begin to run at the time the investor purchased the notes from the issuer, as the exchange was outside of the investor's control. If the exchange would have been at the option of the investor, the holding period would begin on the date of the exchange. If the investor had the option to exchange the notes, but nevertheless the exchange took place because of the issuer's decision or the occurrence of events outside of the investor's control, then the holding period would begin at the time the notes were originally acquired.
- Under Rule 144(h), "concurrently" means that the Form 144 required pursuant to that rule should be transmitted for filing on the same day as the placing of a sale order or execution of the sale.
- A primary shelf-eligible issuer that is not a "Well-Known Seasoned Issuer" may not file a resale registration statement for a dollar amount of common stock and make a general statement that the registration statement covers common stock previously sold by the company in unregistered transactions. The resale registration statement must identify the initial transaction.
- A free writing prospectus may not be dispensed with under Rule 433(f)(2)(i) if the substance thereof was previously furnished (and not filed) with the SEC. In order to dispense with a free writing prospectus under Rule 433(f)(2)(i), the substance of the free writing prospectus must have previously been filed with, rather than furnished to, the SEC.
- A package of written materials consisting only of an issuer's SEC filings, provided to unaffiliated and uncompensated media participants for possible use in media publication, need not be filed as a free writing prospectus because the package only includes information previously filed with the SEC. The media publication need not be filed as a free writing prospectus, either.
- Director information omitted from a proxy statement because the term of office of the director in question will not continue after the meeting to which the proxy relates, must still be included in a Form 10-K that otherwise provides its Part III information by incorporation by reference from the proxy statement.
- Companies are required to include information about a director's business experience in their SEC filings even if the director is appointed by holders of a class of preferred stock. In this situation, the company may either provide the same information about this director as it would about directors nominated by the board or disclose that the director was appointed by preferred stockholders and provide the information about the director's business experience that such preferred stockholders provided to the company pursuant to Item 401(e) under Regulation S-K.
A company is not required in its Compensation Discussion and Analysis to discuss executive compensation, including performance target levels, to be paid in the current year or in future years. The CD&A covers only compensation "awarded to, earned by, or paid to the named executive officers." Although Instruction 2 to Item 402(b) provides that the CD&A should also cover actions regarding executive compensation that were taken after the company's last fiscal year end, such disclosure requirement is limited to those actions or steps that could "affect a fair understanding of the named executive officer's compensation for the last fiscal year."