Corporate & Financial Weekly Digest, Featuring Articles on FINRA's Regulatory Notice on Policies and Procedures for Low-Priced Securities Fraud, SEC's Comment Letter on Securities Offerings During Market Volatility and FCA's Updates on Changes to Regulatory Reporting During COVID

SEC/CORPORATE -

SEC Staff Releases Sample Comment Letter on Securities Offerings During Periods of Market and Price Volatility -

On February 8, the staff of the SEC’s Division of Corporation Finance (the Staff) published a sample comment letter that the Staff might send to companies that conduct securities offerings during periods of extreme stock price volatility. In its statements accompanying the sample comment letter, the Staff acknowledged the necessity of capital formation, even when the financial markets and stock prices are volatile, while also cautioning that unpredictability in the market can prove hazardous to investors and companies alike. The Staff noted the risks are “particularly acute” when companies attempt to raise capital during times of “recent stock run-ups or recent divergences in valuation ratios relative to those seen during traditional markets,” “high short interest or reported short squeezes,” and “reports of strong and atypical retail investor interest (whether on social media or otherwise).” The Staff indicated that those risks may be exacerbated “when companies are in distress, face ‘going concern,’ or liquidity challenges or have smaller public floats.”

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Katten Muchin Rosenman LLP
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