MD&A Lessons Learned from Broadwind Energy

On February 5, 2015, the Securities and Exchange Commission charged Broadwind Energy, Inc. (Broadwind), its former Chief Executive Officer and its Chief Financial Officer for accounting and disclosure violations that, as the SEC stated in its press release, “prevented investors from knowing that reduced business from two significant customers had caused substantial declines in the company’s long-term financial prospects.”  The penalties were not earth-shattering: subject to the court’s approval, Broadwind agreed to pay, $1 million penalty and its former CEO and its CFO agreed to pay approximately $700,000 in combined disgorgement and penalties.

The SEC brought various charges, including, but not limited to, the violation of Section 17(a)(2) of the Securities Act (in connection with an offering conducted by Broadwind) and the violation of Section 13 of the Exchange Act and Rule 13a-14 under such act, but this case is interesting because it deals with the eternal question that public company management and their securities lawyers are dealing with every day: how much disclosure is enough disclosure for the investors to make a reasonable decision whether to buy or sell the company’s securities?

Broadwind’s fact pattern, as outlined in the SEC’s complaint filed in the U.S. District Court for the Northern District of Illinois, makes it clear that during the third quarter of 2009, Broadwind began to plan more definitively for the impairment of its subsidiary’s intangible assets related to contracts with two major customers and Broadwind’s internal documents identified an expected impairment charge of $48 million related to the contract with one of such customers.  Broadwind shared this expectation and these documents with its outside audit firm, its investment bankers and the subsidiary’s primary lender. Broadwind also incorporated impairment in its planning for the upcoming audit of 2009 financial results. Broadwind’s revenues from the two major customers declined 43% and 25%, respectively, for the nine months ended September 30, 2009 compared to the same period ended September 30, 2008.

The SEC argued that Broadwind’s disclosure in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) section of its Form 10-Q for the third quarter of 2009 was materially misleading.  Such disclosure read, in part, as follows:

[A] continued economic slowdown may result in impairment to our fixed assets, goodwill and intangible assets. We perform an annual goodwill impairment test during the fourth quarter of each year, or more frequently when events or circumstances indicate that the carrying value of our assets may not be recovered. The recession that has occurred during 2008 and 2009 has impacted our financial results and has reduced purchases from certain of our key customers. We may determine that our expectations of future financial results and cash flows from one or more of our businesses has decreased or a decrease in stock valuation may occur, which could result in a review of our goodwill and intangible assets associated with these businesses. Since a large portion of the value of our intangibles has been ascribed to projected revenues from certain key customers, a change in our expectation of future cash from one or more of these customers could indicate potential impairment to the carrying value of our assets.

Item 303 of Regulation S-K requires a public company to disclose in its MD&A “any known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the registrant’s liquidity increasing or decreasing in any material way.”  MD&A also requires a description of “any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations.”

The SEC’s position outlined in the complaint is that, based on the revenue decline combined with the customers’ lower forecasts of revenue and other developments, Broadwind and its CEO (the CFO started at Broadwind in mid-August 2009) “should have known that the intangible assets were impaired.” However, Broadwind “failed to disclose the impairment of its assets in Form 10-Q” for the quarter ended September 30, 2009, but instead used a “generalized risk disclosure of the possibility of such a charge.”  The SEC also stated in its complaint that if Broadwind had conducted impairment testing in connection with its Form 10-Q for the 3rd quarter 2009, Broadwind would have concluded that its contracts with two significant customers were fully impaired and recorded impairment charges of approximately $60 million in connection with such contracts.” Broadwind ultimately disclosed the impairment in its Form 10-K for the fiscal year ended December 31, 2009. Following the disclosure of the impairment charge, the stock price declined by 29%.

Putting aside the speculation about when it was the right time for Broadwind to conduct the impairment testing, it has been the SEC’s position for more than a decade that MD&A “trends” disclosure should include the “[q]uantification of the material effects of known material trends and uncertainties,” which can promote better understanding of whether the company’s past performance is indicative of future performance.  The SEC’s 2003 Interpretive Release: Commission Guidance Regarding MD&A (Release No. 33-8350) made it clear that “[a]scertaining this indicative value depends to a significant degree on the quality of disclosure about the facts and circumstances surrounding known material trends and uncertainties in MD&A. … Quantitative disclosure should be considered and may be required to the extent material if quantitative information is reasonably available.”

In light of the current 10-K season, the SEC’s complaint in SEC v. Broadwind is a timely reminder that “boiler plate” generalized MD&A disclosure regarding known trends may be inadequate and misleading if management had an opportunity to provide more detailed and meaningful information.

SEC Proposes Rules for Hedging Disclosure

On February 9, 2015, the Securities and Exchange Commission, as required by Section 955 of the Dodd-Frank Act[1] , issued proposed rules requiring enhanced proxy disclosure of a company’s hedging policies for its directors, officers and other employees. The proposed rules would require a company to disclose, in any proxy statement or information statement relating to an election of directors, whether its directors, officers or other employees are permitted to hedge or offset any decrease in the market value of equity securities that are either granted by the company as compensation, or held (directly or indirectly) by the individual.

Currently, companies are required to make disclosures regarding their hedging policies in the company’s Compensation Discussion and Analysis (“CD&A”) section of their proxy. In the CD&A section of a proxy, companies are required to disclose material information necessary to an understanding of a company’s compensation policies and decisions regarding its named executive officers. Item 402(b)(2)(xiii) provides that, if material, disclosure regarding a company’s equity or other security ownership requirements or guidelines (specifying applicable amounts and forms of ownership), and any company policies regarding hedging the economic risk of such ownership should be included in the CD&A. The CD&A disclosure requirement does not apply to smaller reporting companies, emerging growth companies, registered investment companies or foreign private issuers. The new proposed rules would expand both the disclosure requirements regarding hedging policies and the types of companies required to make disclosure regarding hedging policies.

The proposed rules would add paragraph (i) to Item 407 of Regulation S-K and would require companies to disclose whether the registrant permits any employees (including officers) or directors, to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) or otherwise engage in transactions that are designed to or have the effect of hedging or offsetting any decrease in the market value of a company’s equity securities. Companies that permit hedging by certain employees would be required to disclose the categories of persons who are permitted to engage in hedging transactions and those who are not. In addition, companies would also be required to disclose the categories of hedging transactions that they permit and those that they prohibit. The new disclosure would apply to all issuers registered under Section 12 of the Exchange Act, including smaller reporting companies, emerging growth companies, and listed closed-end funds, but excluding foreign private issuers and other types of registered investment companies.

The proposed rules do not require a company to prohibit its directors, officers or other employees from engaging in hedging transactions in the company’s securities or to adopt hedging policies. Rather, the proposed rules, consistent with the SEC’s view[2] of the statutory purpose of Section 14(j) of the Exchange Act, are intended to provide investors with additional information, enabling them to ascertain whether a company’s directors, officers or other employees, through hedging transactions, are able to avoid any requirements that they hold stock long-term, and thereby receive their compensation even if their company underperforms. The disclosure aims to give stockholders a better understanding of whether the interests of a company’s directors, officers and other employees are aligned with their own interests.

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[1] Section 955 of the Dodd-Frank Act added Section 14(j) to the Exchange Act. Section 14(j) directs the SEC to require, by rule, each issuer to disclose in any proxy or consent solicitation material for an annual meeting of the shareholders of the issuer whether any employee or member of the board of directors of the issuer, or any designee of such employee or director, is permitted to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of equity securities either (1) granted to the employee or director by the issuer as part of the compensation of the employee or director; or (2) held, directly or indirectly, by the employee or director.

[2] The proposing release cites a report issued by the Senate Committee on Banking, Housing, and Urban Affairs which stated that Section 14(j) is intended to “allow shareholders to know if executives are allowed to purchase financial instruments to effectively avoid compensation restrictions that they hold stock long-term, so that they will receive their compensation even in the case that their firm does not perform.”  In this regard, the SEC explained “we infer that the statutory purpose of Section 14(j) is to provide transparency to shareholders, if action is to be taken with respect to the election of directors, about whether employees or directors are permitted to engage in transactions that mitigate or avoid the incentive alignment associated with equity ownership.”

Withdrawal of Whole Foods No-Action Letter Leaves a Hole in Proxy Access Proposal Defense

On January 16, 2015, the Securities and Exchange Commission (SEC) announced  that, for the 2015 proxy season, the Division of Corporation Finance will not express any views as to whether a company may exclude a shareholder proposal from its annual meeting proxy statement based on Exchange Act Rule 14a-8(i)(9).   The announcement was issued in connection with a statement issued by Chair White that, in light of questions about the proper scope and application of the Rule, she directed the SEC staff to review the rule and report to the Commission.  As a result the Whole Foods no-action letter, discussed below, was withdrawn and issuers will not have an easy path in addressing “proxy access” proposals from their shareholders for the 2015 proxy season (and perhaps in subsequent proxy seasons).

Rule 14a-8(i)(9) permits a company to exclude a shareholder proposal that “directly conflicts with one of the company’s own proposals to be submitted to shareholders at the same meeting.”  The Staff has historically granted no-action relief under Rule 14a-8(i)(9) where a shareholder proposal and a company/management proposal present alternative and conflicting decisions for shareholders and where the inclusion of both proposals could lead to inconsistent and ambiguous results.

The SEC’s action comes on the heels of a letter, published  on January 4, 2015, by the Council of Institutional Investors asking the SEC staff to review the application of Rule 14a-8(i)(9) in light of the SEC staff’s issuance of the Whole Foods no-action letter.  In that letter, the SEC Staff took a no-action position to the exclusion of a shareholder proxy access proposal under Rule 14a-8(i)(9).  The shareholder proposal would have amended Whole Foods’ governance documents to allow shareholders holding 3% of the company’s stock for a period of three years to include in the annual meeting proxy statement nominees for up to 20% of Whole Foods’ directors. Whole Foods’ competing proposal would have provided shareholders holding 9% of the company’s stock for a period of five years the right to include such nominees.  Conveniently for Whole Foods, its proposal would have significantly limited the universe of its shareholders who would be entitled, in 2015 and in the future, to proxy access under its amendment. Following the issuance of the Whole Foods no-action letter, a number of companies sought no-action relief from the Staff in connection with similar shareholder proxy access proposals; however, the Whole Foods no-action letter was subsequently withdrawn in connection with the Staff’s announcement of its review of Rule 14a-8(i)(9) and the staff noted in its responses to the other Rule 14a-8(i)(9) requests that it could not express a view in light of the recent announcement.

Despite the lack of no-action relief from the SEC staff for the 2015 proxy season, companies may still utilize a number of mechanisms to exclude shareholder proposals:

  • A company may continue to rely on Rule 14a-8(i)(9) – including complying with the timing and notice requirements of Rule 14a-8 – to exclude the shareholder’s proposal, but without the comfort of a SEC no-action letter.
  • A company may seek judicial relief to exclude the shareholder’s proposal – a challenging path that will involve potentially significant expense and could also result in negative publicity.
  • In addition, a company could, in theory, choose to include its own proposal and the shareholder’s proposal in its annual meeting proxy. This, however, is a novel approach involving significant considerations (including practical and disclosure considerations).
  • Lastly, a company could adopt its own proxy access mechanism (assuming that the company’s board has the authority to amend the relevant portions of the company’s governance documents) and seek to exclude a shareholder’s proposal under Rule 14a-8(i)(10) on the grounds that the Company “has already substantially implemented the proposal.”  This exception is not subject to the SEC’s current suspension of no-action relief for Rule 14a-8(i)(9) matters; however this  alternative may strike some as waiving the white flag.

Consistent with Rule 14a-8, a company seeking to exclude a shareholder proposal under Rule 14a-8(i)(9) or (10) must still submit a no-action request to the SEC staff (technically, the company is required to submit to the SEC its reasons for excluding the proposal), with a copy of the request provided simultaneously to the proposing shareholder, at least 80 days before the company files its definitive proxy statement and form of proxy. A company seeking such relief should also be mindful that proposing shareholders may challenge the company’s exclusion of their proposals in federal court. Courts often give deference to SEC staff positions, including no-action letters, and, in the absence of such no-action letters for the 2015 proxy season, an institutional shareholder whose proposal is excluded from a company’s annual meeting proxy under Rule 14a-8(i)(9) may be more likely to initiate litigation to challenge the exclusion.

Boards Should Put Time and Resources into Cybersecurity Issues – It Is Good for Business and Works as a Defense Strategy

We have previously blogged about Commissioner Aguilar’s recommendations at a NYSE conference, “Cyber Risks and the Boardroom” on what boards of directors should do to ensure that their companies are appropriately considering and addressing cyber threats. On October 20, 2014, the United States District Court for the District of New Jersey dismissed a derivative lawsuit (Palkon v. Holmes, Case No. 2:14-CV-01234) filed against directors and certain officers, including General Counsel, of Wyndham Worldwide Corporation (WWC). The Court’s opinion can be viewed as a real life validation of the principles outlined in the Commissioner’s speech. Continue reading

ISS Guidelines for 2015 Proxy Season – More Holistic Review of Board Leadership Structure

On November 6, 2014, ISS released its 2015 proxy voting guidelines which update its benchmark policy recommendations. The updated policies will be effective for shareholder meetings held on or after February 1, 2015. Benchmark policy changes include ISS’ adoption of a more holistic approach to shareholder proposals calling for independent board chairs. ISS has focused on board leadership because shareholder proposals related to this issue have become quite frequent. ISS also cited a recent study finding that “retention of a former CEO in the role of chair may prevent new CEOs from making performance gains by dampening their ability to make strategic changes at the company” as one of the reasons for the policy update.

ISS has updated its “Generally For” policy with respect to such proposals to add new governance, board leadership, and performance factors to the analytical framework and to look at all of the factors in a holistic manner. Factors, which are not explicitly considered under the current policy, include the “absence/presence of an executive chair, recent board and executive leadership transitions at the company, director/CEO tenure, and a longer (five-year) total shareholder return (TSR) performance period.”

Under the new policy, ISS would recommend to generally vote “FOR” shareholder proposals requiring that the chairman’s position be filled by an independent director, taking into consideration the following:

  • The scope of the proposal (i.e., whether the proposal is precatory or binding and whether the proposal is seeking an immediate change in the chairman role or the policy can be implemented at the next CEO transition);
  • The company’s current board leadership structure (ISS may support the proposal under the following scenarios: the presence of an executive or non-independent chair in addition to the CEO; a recent recombination of the role of CEO and chair; and/or departure from a structure with an independent chair);
  • The company’s governance structure and practices (ISS will consider the overall independence of the board, the independence of key committees, the establishment of governance guidelines, board tenure and its relationship to CEO tenure; the review of the company’s governance practices may include, but is not limited to, poor compensation practices, material failures of governance and risk oversight, related-party transactions or other issues putting director independence at risk, corporate or management scandals, and actions by management or the board with potential or realized negative impact on shareholders);
  • Company performance (ISS’ performance assessment will generally consider one-, three, and five-year TSR compared to the company’s peers and the market as a whole); and
  • Any other relevant factors that may be applicable.

Board Oversight of Political Contributions Is Gradually Becoming a Corporate Governance Standard

On September 24, 2014, the Center for Political Accountability and the Zicklin Center for Business Ethics Research published their fourth annual index of corporate political disclosure and accountability (2014 Index), which focuses on political spending disclosure of the top 300 companies in the S&P 500 Index. The 2014 Index reviews companies’ political transparency and oversight practices and policies disclosed on their websites and describes:

 

  • the ways that companies manage, oversee and disclose political spending;
  • the specific spending restrictions that many companies have adopted; and
  • the policies and practices that need the greatest improvement.

The 2014 Index demonstrates that a majority of reviewed companies continues to have some level of board oversight of their political contributions and expenditures; however, the percentage of such companies is going down as the number of reviewed companies increases (the 2014 Index reviewed 300 top companies in the S&P 500 Index compared to 200 reviewed companies in 2012 and 2013). For example,

  • 55% of companies said that their boards of directors regularly oversee corporate political spending compared to 62% of companies in 2013 and 56% in 2012;
  • 37% of companies said that a board committee reviews company policy on political spending compared to 57% of companies in 2013 and 49% in 2012; and
  • 44% of companies said that a board committee reviews company political expenditures compared to 56% of companies in 2013 and 45% in 2012.

SEC Approves PCAOB’s Auditing Standard No. 18, Related Parties

On October 21, 2014, the SEC approved Auditing Standard No. 18, Related Parties of the Public Company Accounting Oversight Board (PCAOB), as well as amendments to certain PCAOB auditing standards regarding significant unusual transactions and other related amendments to PCAOB auditing standards. Auditing Standard No. 18 supersedes the PCAOB’s auditing standard AU sec. 334, Related Parties, which was issued in 1983. Auditing Standard No. 18 is designed to “strengthen auditor performance requirements for identifying, assessing, and responding to the risks of material misstatement associated with a company’s relationships and transactions with its related parties.”

The new auditing standard requires the auditor to:

  • Perform specific procedures to obtain an understanding of the nature of the relationships between the company and its related parties and of the terms and business purposes, if any, of transactions involving related parties.
  • Evaluate whether the company has properly identified its related parties and relationships and related party transactions by testing the accuracy and completeness of management’s identification, taking into account information gathered during the audit.
  • Perform specific procedures if the auditor determines that a related party or relationship or transaction with a related party previously undisclosed to the auditor exists.
  • Perform specific procedures regarding each related party transaction that is either required to be disclosed in the financial statements or determined to be a significant risk (i.e., a “risk of material misstatement that requires special audit consideration”).
  • Communicate to the audit committee the auditor’s evaluation of the company’s identification of, accounting for, and disclosure of its relationships and transactions with related parties, and other significant matters arising from the audit regarding the company’s relationships and transactions with related parties.

The new auditing standard and amendments are effective for audits of financial statements for fiscal years beginning on or after December 15, 2014.

Broker-Dealers Ignoring Red Flags Lead to SEC Releases and Enforcement Action

In October 2014, the SEC’s Division of Trading & Markets issued FAQs to remind broker-dealers of their obligation to conduct a reasonable inquiry when selling securities in an unregistered transaction in reliance on Section 4(a)(4) of the Securities Act. The FAQs explain that “[i]n order to rely on the Section 4(a)(4) exemption, a broker-dealer must conduct a “reasonable inquiry” into the facts surrounding a proposed unregistered sale of securities before selling the securities to form reasonable grounds for believing that a selling customer’s part of the transaction is exempt from Section 5.  . . . [W]hen conducting a reasonable inquiry into whether the transaction would violate Section 5, it is not sufficient for the broker-dealer merely to accept self-serving statements of his sellers and their counsel without reasonably exploring the possibility of contrary facts.  Nor, where there are indicia of an illegal distribution of securities, can a broker-dealer claim that its sales of a security were exempt from registration simply because the stock certificates lack a restrictive legend or a clearing firm or transfer agent raises no objections to the sales.” The FAQs provide a list of factors that the SEC will consider in assessing the reasonableness of a broker-dealer’s inquiry and its reliance on the Section 4(a)(4) exemption.

Simultaneously with the issuance of the FAQs, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert which summarized deficiencies which OCIE observed in examining 22 broker-dealers. Among other matters, the examinations uncovered deficiencies related to controls put in place to comply with obligations related to sales of securities, including the performance of a reasonable inquiry in connection with unregistered sales of securities in reliance on Section 4(a)(4) of the Securities Act.

In conjunction with the FAQs and the Risk Alert, the SEC announced an enforcement action against certain current and former E*Trade subsidiaries (the “Subsidiaries”) for ignoring red flags in connection with the sale of unregistered penny stocks. The SEC’s order finds that the Subsidiaries were not entitled to rely on the Section 4(a)(4) exemption because they did not perform a “reasonable inquiry.” The Subsidiaries agreed to settle the SEC’s charges by paying back more than $1.5 million in disgorgement and prejudgment interest from commissions they earned on the improper sales. They also must pay a combined penalty of $1 million.

In light of the above, broker-dealers should reexamine their policies and procedures related to the sale of unregistered securities and provide training to their personnel concerning what constitutes a “reasonable inquiry.”

NYSE Proposes New Global Market Capitalization Test for Listing Companies

On September 30, 2014, the SEC published an NYSE amendment, effective as of such publication, to adopt a new initial listing standard, and to eliminate all but one of the current NYSE initial listing standards, for US operating companies.

The amendment provides for a global market capitalization test to serve as a new initial listing standard for US operating companies. The global market capitalization test requires that a listing operating company have a minimum total global market capitalization of $200 million at the time of initial listing. A company that is already publicly traded at the time it applies to list on the NYSE must meet the $200 million global market capitalization requirement for at least 90 consecutive trading days immediately preceding the date on which it receives clearance to submit an application to list on the NYSE.

The amendment also eliminates four of the NYSE’s five current initial listing standards for US operating companies: (1) the valuation/revenue with cash flow test, (2) the pure valuation/revenue test, (3) the affiliated company test, and (4) the assets and equity test.

Despite the proposed global market capitalization test, companies listing must also meet both the existing distribution requirements of Section 102.01A, and the stock price and market value of publicly-held shares requirements of Section 102.01B, of the Listed Company Manual. In addition, companies listing under the proposed global market capitalization test must comply with all other applicable NYSE listing rules.

The notes relating to the amendment highlight that Nasdaq and Nasdaq Global Market have a competitive advantage over the NYSE under existing listing standards, particularly with respect to pre-revenue research and development companies. The amendment, and the implementation of the global market capitalization test, is the NYSE’s attempt to level the playing field.

Is the SEC Doing Enough to Promote Capital Formation?

If you believe Commissioner Daniel M. Gallagher, the answer is an emphatic “no”, at least with respect to small businesses. On September 17, 2014, at a Heritage Foundation event, Commission Gallagher gave a speech criticizing the Securities and Exchange Commission’s failure to adequately promote capital formation by small businesses:

[S]adly, we at the SEC are not doing nearly enough to ensure that small businesses have the access to capital that they need to grow. We layer on rule after rule until it becomes prohibitively expensive to access the public capital markets.

After noting that not all of the regulatory burden is the SEC’s fault as “much of the ever-growing rulebook is a direct result of congressional mandates,” Commissioner Gallagher makes a number of recommendations for the SEC. Highlights include recommendations to:

  • Withdraw the proposed amendments to Regulation D. (Commission Gallagher did not support the proposed amendments as he stated in the SEC’s July 10, 2013 open meeting.)
  • Consider more deeply Regulation D, including considering broadening the blue sky exemption to help make the choice between the various exemptions available under Regulation D more meaningful.  According to Commissioner Gallagher, nearly all Regulation D offerings are conducted under Rule 506, even though 2/3 of the offerings are small enough that they could have been conducted pursuant to Rule 504 or 505, because Rule 506 offerings are exempt from blue sky regulations.
  • Analyze the secondary market for private company shares, where innovation has slowed. “We need more facilities to improve trading among accredited investors in the private secondary market.”
  • Finish implementing the JOBS Act’s reforms to Regulation A and couple the reforms with the formation of venture exchanges (national exchanges with listing rules tailored for smaller companies, including those issuing shares issued pursuant to Regulation A). Commission Gallagher noted that the SEC had proposed a robust set of rules, including blue sky preemption in certain larger Regulation A Offerings. (Commissioner Gallagher also noted, with respect to the proposal for blue sky exemption, that an “outpouring of anger from state regulators . . . wasn’t unexpected. After all, state regulators have been “protecting” investors from investment opportunities that are too risky for decades – I’m sure the Massachusetts residents who missed out on the offering of Apple Computer in 1980 because of their regulator’s concerns about the risk know this all too well.”)
  • Reconsider the current thresholds for scaled disclosure and the amount of disclosure that is required at each level – including having two tiers of scaling: significant scaling of disclosure for “nanocap” companies (i.e., companies with market capitalizations of up to $50 million) and moderate scaling for “microcap” companies with market capitalizations of $50 million to $300 million.

Coincidently, the SEC released its 2014 – 2018 Strategic Plan on September 19, 2014, two days after Commissioner Gallagher’s speech. Featured on the cover of the Strategic Plan is the SEC’s mission statement – “Protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation” (emphasis added).

But, judging by the SEC’s own Strategic Plan and its current rulemaking agenda, it is unlikely that the SEC will be vigorously addressing many of Commissioner Gallagher’s concerns regarding capital formation for small businesses in the near future.