On March 4, 2011, the SEC’s Division of Corporation Finance issued new Compliance and Disclosure Interpretations (CDIs) covering a variety of matters, including one on the CD&A, two on Rule 144, two on free writing prospectuses and two on director disclosures, as well as two others.

  • CDI 116.08 provides that if director information is omitted from a proxy statement because the director’s term of office will not continue after the shareholder meeting, this information is 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.
  • CDI 116.09 provides that a company is required to include in the proxy statement the Item 401(e) information about a director’s business experience even if the director is appointed by holders of a class of preferred stock.
  • CDI 118.07 provides that a company is not required to discuss in the CD&A executive compensation to be paid in the current year or in future years, including performance target levels. The CD&A covers only compensation “awarded to, earned by, or paid to the named executive officers.” Although Instruction 2 to Item 402(b) of Regulation S-K provides that the CD&A should also cover actions regarding executive compensation that were taken after the registrant’s last fiscal year’s 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.”
  • CDI 132.18 relates to the commencement of the running of the holding period for restricted securities under Rule 144(d), where Company A sells mandatorily exchangeable notes to an investor in a private placement transaction and under the terms of the notes, the notes can be exchanged for a fixed number of shares of Company B, an affiliate of Company A, either at Company A’s option or upon the occurrence of certain events outside the investor’s control.
  • CDI 136.09 provides guidance as to Rule 144(h)’s provision that Form 144 must be transmitted for filing “concurrently” with either the placing of a sale order with a broker or the execution of the sale directly with a market maker. The term “concurrently” is satisfied, for example, if a person is filing a Form 144 by mail, where the form is mailed on the same day as the placing of a sale order or the execution of the sale.
  • CDI 139.32 provides that an Exchange Act reporting company conducting an exempt offering pursuant to Regulation S and Rule 144A that intends to include material non-public information in the offering memorandum to be distributed to investors in the exempt offering cannot satisfy its obligations under Regulation FD by filing the complete offering memorandum as an exhibit to an Item 7.01 Form 8-K during the time the offering memorandum is distributed to potential investors in the exempt offering. Instead, to comply with Regulation FD, the company could file a Form 8-K that sets forth the material non-public information that is included in the offering memorandum, including information about the offering of the type permitted to be disclosed pursuant to Securities Act Rule 135c.
  • CDI 228.03 addresses whether, under Rule 430B of the Securities Act, a primary shelf-eligible issuer that is not a well-known seasoned issuer (WKSI) may 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 issuer may not register the resale of unspecified common shares and then, after the effectiveness of the registration statement, specify the common shares registered.
  • CDI 232.13 relates to free writing prospectuses and clarifies that an issuer or offering participant does not have to file a free writing prospectus if the substance of that free writing prospectus has “previously been filed” with the SEC and that “filed” for these purposes does not include substance that has been furnished, not filed, with the SEC (e.g., Item 2.02 of Form 8-K).
  • CDI 232.14 relates to free writing prospectuses and provides that, where an officer participates in an interview with unaffiliated and uncompensated media and provides, as part of the interview, a package of written materials consisting only of the issuer’s SEC filings for possible use in the media publication, the package of written materials or a copy of the media publication does not need to be filed as a free writing prospectus, so long as it includes only information that has previously been filed with the SEC.

Section 116. Item 401 of Regulation S-K - Question 116.08

Section 116. Item 401 of Regulation S-K - Question 116.09

Section 118. Item 402(b) - CD&A - Question 118.07

Section 132. Rule 144(d) - Holding Period for Restricted Securities - Question 132.18

Section 136. Rule 144(h) - Notice of Proposed Sale - Question 136.09

Section 139. Securities Act Section 5 - Question 139.32

Section 228. Rule 430B - Prospectus After Effective Date - Question 228.03

Section 232. Rule 433 - Free Writing Prospectuses - Question 232.13

Section 232. Rule 433 - Free Writing Prospectuses - Question 232.14