Certified Equity Professional Institute

Transcription

1 Exam Overview Webinars Certified Equity Professional Institute L2 Exam Overview Webinar Corporate and Securities Law Certified Equity Professional Institute The information presented herein is of a general nature and has been simplified for presentation to a large audience. It is not a complete discussion of all aspects the laws, rules, regulations, standards, and principles that govern equity compensation plans. The contents are neither designed nor intended to be relied upon, and should not be considered, as legal, tax or accounting advice. Your specific situation may involve circumstances that cause the laws, rules, regulations, standards and principles described herein to apply differently. You should consult your own advisors before deciding what, if any, course of action to take in your own particular situation.

2 Corporate & Securities Law = 28% of test = Responsible for topics covered in Level One -2-

3 Board of Directors = Directors independence SRO rules = Board determination = No material relationship (directly or indirectly) 3-year period Includes immediate family Corporate governance rules = Clawbacks = Pay ratio disclosure -3-

4 Registration Requirements = Securities Act of 1933 Stock sold by a company to investors must be registered with the SEC = Form S-1 is used to register shares sold in an IPO = Form S-8 is used to register shares sold pursuant to a stock plan Only available to public companies for stock sold through a benefit plan or arrangement Generally covers issuances of stock to anyone providing services to the company (except for consultants involved in capital-raising activities) Prospectus summarizing material terms of the plan must be provided to anyone receiving an award Does not cover acquisitions by charitable foundations and some extended family members = Prohibits fraud, misstatements, and material omissions in the registration statement = Includes a number of exemptions from registration -4-

5 Registration Exemption = Rule 144 requirements Company must be current in reporting Shares to be resold must have been held for specified periods = Reporting company six-months for affiliates and non-affiliates = Nonreporting company one year for affiliates and non-affiliates Shares resold in three-month period may not exceed the greater of: = 1% of the company's outstanding stock = average trading volume of preceding four weeks Shares must be sold through registered stock broker or market maker Form 144 filed with SEC at sale (or prior) = 5,000 shares = $50,000-5-

6 Registration Exemption = Rule 701 Rule 701 exempts shares sold by a privately held company through a compensatory arrangement = Only available to privately held companies for stock sold via compensatory arrangements = Limits the amount of stock that can be sold in a 12-month period to whichever of the following is highest: $1 million 15% of outstanding stock 15% of assets = Requires additional disclosures if sales within a year exceed $5 million -6-

7 Registration Exemption = Employee resales of Rule 701 stock Nonaffiliate = 90 days after IPO only broker requirement applies = One year after purchase, shares freely tradable Affiliate = Shares must be sold under Rule 144 = 90 days after IPO, Rule 144 holding period stops applying -7-

8 Registration Requirements Rule 701 exercise exercise Reg. D exercise IPO Lock-Up Ends grant Form S-8 exercise Shares are restricted Special resale provisions apply 90 days after IPO Form S-1 filed Shares are restricted All requirements of Rule 144 must be met Form S-8 filed Shares are freely tradable *Affiliates still sell under Rule 144 Form S-8 covers Shares available for grant Options outstanding (optional) -8-

9 Form S-8 = Can be used anytime after becoming subject to reporting requirements. = Filed with SEC Fixed number of shares. Effective immediately Incorporates other documents by reference Covers offers and sales of securities under an employee equity incentive plan to consultants, advisors, employees, officers and directors Shares can be transferred to family members without affecting registration status Permits all plan participates except affiliates to sell stock freely once vesting restrictions lapse = Affiliates may sell pursuant to Rule

10 Securities Exchange Act of 1934 Regulates the public securities markets Ensures that all investors participate on an equal footing and have adequate information Has many different provisions = Section 10 prohibits using deceptive or manipulative practices to sell stock = Section 12 requires registration of stock that will be traded in the securities markets = Section 13 requires publicly traded companies to file ongoing reports (10K, 10Q, annual reports) = Section 14 governs proxy solicitation = Section 16 governs officers and directors -10-

11 Disclosure Requirements = Reg S-K, Item 402 and 405 Clear, concise, and understandable information on all compensation paid to named executive officers (NEOs) Proxy tables = Disclosure format required in proxy solicitation statements = Summary compensation table and CD&A = Form 10-K and proxy statements If compensation plans submitted for shareholder approval Stock plan tables = Shareholder approved = Non-shareholder approved = Shares to be issued upon exercise = Weighted average exercise price of outstanding options = Number of shares available for issuance Late Section 16 filings -11-

12 Regulation S-K = Named Executive Officers Any person serving as CEO or CFO during the last fiscal year Three most highly compensated executive officers whose total compensation* (not just salary and bonus) exceeds $100,000 = serving at the end of the last completed fiscal year Up to two former executive officers for whom disclosure would have been required had they not terminated * Total compensation as disclosed in the Summary Compensation table, exclusive of specified compensation -12-

13 Regulation S-K = Disclosures Compensation Discussion & Analysis (CD&A) Summary Compensation table Grants of Plan-Based Awards table Outstanding Equity Awards at Fiscal Year-End table Option Exercises and Stock Vested table Director Compensation (narrative disclosure and table) -13-

14 Section 16 = Application to stock options Cancellation = No value received: exempt from matching and non-reportable = Value received: Exempt from matching if one of the following conditions is met Approved by board Approved by committee of non-employee directors Approved by shareholders Reportable on Form 4 within two business days = Repricing is considered a cancellation for value Replacement grant needs to meet standard grant requirements for exemption and is reportable on Form 4 within two business days -14-

15 Section 16 = Application to ESPP Purchase is considered a purchase = Exempt under Rule 16b-3, if pursuant to a tax-conditioned plan: Plan meeting coverage and participation requirements of Section 423 = Purchase is non-reportable, if exempt = However, total shares purchased need to be reflected in Form 4 footnote or Form 5 year end -15-

16 Transfer Agent = Role of the transfer agent = Record keeping = Balances -16-

17 Educational Courses to Assist In Exam Preparation NASPP = NCEO = Although the CEP Institute makes this information available to candidates, we do not endorse educational programs. The candidate must determine whether the program is suitable for his/her needs. -17-