The Bass, Berry & Sims Corporate & Securities Practice Group kicked off the new year by participating as a sponsor of the 47th Annual Securities Regulation Institute, which is held annually in San Diego by Northwestern University. Jay Knight, head of the firm’s Capital Market Subgroup, was featured as a speaker in a well-attended panel discussing recurring disclosure challenges faced by public companies and their advisors. Each year, the conference draws SEC staffers and many of the leading practitioners of the public company industry, and the keynote speaker for this year’s conference was SEC Commissioner Jay Clayton.

Our key takeaways from the conference follow:

1. ESG: With the August 19, 2019 revision of the Business Roundtable’s Statement of Purpose and the continuing movement by market players generally, there has been a significant shift over the past year among investors in favor of ESG and ESG disclosures, and in favor of the topics of “stakeholder” value and “healthy environment” in particular. Registrants would be well advised to review their ESG disclosures carefully.
2. Non-GAAP Financial Measures: As highlighted by Commissioner Clayton in his address, non-GAAP financial measures remain a primary focus of the SEC, with non-GAAP financial measures meant to serve as marketing metrics (as opposed to metrics used by management in running the business) remaining under the closest scrutiny. Further, plaintiff firms have recently taken a particular interest in non-GAAP financial measures, with a considerable increase in actions alleging that companies have run afoul of applicable equal prominence rules.
3. MD&A Modernization: The SEC is in the process of amending applicable rules to simplify, modernize and enhance the MD&A requirements of Item 303 of Regulation S-K (proposed amendments were released the day after the conference concluded). If adopted, the proposed amendments would require registration, among others, to include a new “Objectives” section while reducing certain overlaps of current disclosure obligations.
4. Proxy Reform: Proxy “reform” is among the highest priorities for current rulemaking projects, and the re-proposal thresholds of Rule 14a-8 are under close review by the SEC.
5. Amendment to Accredited Investor Definition: Panelists discussed the recently proposed update to the definition of an accredited investor, which would add additional means for individuals to qualify to participate in private capital markets transactions. In particular, if adopted, the proposed amendments would add categories, among others, to permit individuals with certain professional certifications and designations to qualify, and would include a “catch-all” category for an entity owning more than $5 million in investments.