HSE Securities and Capital Markets Newsletter – Winter 2023

McClean_Alex_2022-Roc-WebReadyEditor’s Message

Happy New Year and 2023 everyone! I hope you all enjoyed the holiday season with your friends and family. The fourth quarter of 2022 was a forgettable quarter from a capital markets perspective. The number and size of public securities offerings remained at historical lows and many companies continued to see low valuations and stock prices during the fourth quarter.

As described in greater detail elsewhere in this newsletter on December 14, 2022, the SEC adopted final rules making changes to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. While the change to Rule 10b5-1 and the ubiquitous trading plans of the same name will be of interest to corporate executives and other insiders, the biggest news was that the final rules were adopted unanimously rather than by a 3-2 partisan vote as had become the norm. Notably, several substantive changes were made from the proposed rules, including a reduction in the mandated cooling off period (removed entirely for issuers) and permitting issuers to use multiple overlapping plans. In other words, the Commissioners met together, discussed their differences and compromised to adopt bipartisan rules. In recent years partisan acrimony has grown across the federal government, even infiltrating the sleepy confines of the SEC as evidenced by the number of 3-2 partisan rulemakings regardless of which party was in power. This is a welcome deviation and hopefully a sign of things to come. In the corporate world it would be unusual to go into negotiations for a transaction expecting the other side to acquiesce to every demand the company has. The art of compromise is to end up in a place where both parties leave the negotiations believing the compromise reached is positive to their interests and helps solve the problem that led to the negotiations in the first place. This is critically important in public policy negotiations where certainty in regulatory rulemaking can allow companies to plan with an understanding of the future regulatory environment. This can allow investments to be better made and gives companies confidence that investment in regulatory compliance is worthwhile. When regulations are constantly changing and are in a state of flux it is difficult for companies to plan for the future, which isn’t good for our economy and doesn’t allow the regulatory purposes of the agency in question to be achieved. With all of that in mind, here is hoping that this is a sign of a return to compromise and more bipartisan rulemaking during 2023. Better yet, here is hoping that 2023 reflects a return to more compromise and coming together and less acrimony and divisiveness across all US society – after the last several years, I think that would be welcomed by many.

Waxing less poetic, I should also mention that included in this newsletter is a very helpful article on preparations year-end companies should be making to prepare for the upcoming Form 10-K and proxy statement filings. The time to understand upcoming changes to the Form 10-K and proxy statement disclosures is now and I would urge all fiscal-year end companies to review the article.

With that said, I hope you enjoy our Winter newsletter and stay warm this winter.

Alex McClean
Practice Group Leader, Securities and Capital Markets Group 

Legal Insights

We regularly provide insight on a range of important securities and regulatory developments through our LEGALcurrents. Below are links to some of our recent articles and some additional content that may be of interest:

    Past Events

    LD Micro Main Event XV
    October 24-27, 2022
    Los Angeles, CA

    C. Christopher Murillo and Kayla E. Klos attended the LD Micro Main Event XV, one of the world’s leading industry conferences in the investment community. Chris presented on “Uplisting to an Exchange in a Difficult Market: Process Overview, Practical Advice and Common Pitfalls to Avoid.”

    Buffalo Business First “Expert Panel: Women in Law”
    December 9, 2022
    Buffalo, New York

    Kayla E. Klos was a participant in a recent Buffalo Business First “Expert Panel: Women in Law” roundtable discussion on the challenges and opportunities facing women in the legal industry.  Click here to read a summary of the discussion that was published on December 30, 2022.

    In The News

    C. Christopher Murillo Named Partner

    Securities & Capital Markets team member, C. Christopher Murillo was elected to the Harter Secrest & Emery partnership effective January 1, 2023. Chris joined HSE in 2020 after practicing with Loeb & Loeb LLP and Proskauer Rose LLP in New York City for over nine years and founding the first post-prohibition distillery company in Queens, New York. Today, he plays a key leadership role with many of HSE’s public company clients. Click here to read the announcement.

    Looking to Raise Capital?

    As part of the Buffalo Business First (BBF) Panel of Experts: Accessing Capital Markets event on September 28, 2022, Alexander R. McClean and Margaret K. Rhoda contributed a column titled “Looking to Raise Capital? Avoid These Mistakes” that was published in the Buffalo Business First on October 21. Click here to download the column and the entire BBF section on Accessing Capital Markets.

    Executive Compensation Forum

    Practical Approach to Pay Versus Performance
    by Christopher M. Potash, Kayla E. Klos, Luke A. Catalano 

    On August 25, 2022, the Securities and Exchange Commission  adopted final rules on pay versus performance disclosure which require a new approach to disclosing executive compensation. Read article.

    Final SEC Rules on Executive Compensation Clawbacks 
    by Christopher M. Potash, Siddharth Bahl, Luke A. Catalano

    On October 26, 2022, the Securities and Exchange Commission (the “SEC”) approved new rules requiring clawback provisions under Section 954 of the Dodd-Frank Act Wall Street Reform and Consumer Protection Act of 2010. Listed companies that do not adopt and comply with the new requirements will be subject to delisting. Read article.

    Attorney Advertising. Prior results do not guarantee a similar outcome. This publication is provided as a service to clients and friends of Harter Secrest & Emery LLP. It is intended for general information purposes only and should not be considered as legal advice. The contents are neither an exhaustive discussion nor do they purport to cover all developments in the area. The reader should consult with legal counsel to determine how applicable laws relate to specific situations. ©2023 Harter Secrest & Emery LLP