A few days ago, the SEC proposed major changes to the registered public offering process in an effort to dramatically increase the number of issuers eligible for shelf offerings and enhanced registration benefits – which combined with the proposal to simplify disclosure that I blogged about yesterday is one of the most significant reforms in decades. Here’s the 511-page proposing release – and here’s the fact sheet. There is a 60-day comment period.
Here are five things to know:
- Expanded Form S-3 Eligibility – The SEC’s proposed reforms would significantly broaden access to Form S-3, allowing more public companies to conduct shelf offerings and access capital markets more quickly.
The proposal removes the current 12-month Exchange Act reporting requirement and eliminates the $75 million public float threshold for unlimited offerings- while still requiring timely SEC reporting and excluding certain “ineligible issuers.” - Modernization of Form S-1 Incorporation by Reference – The proposal would expand both backward and forward incorporation by reference on Form S-1. Issuers would no longer need to have filed their latest annual report to backward incorporate – and forward incorporation would no longer be limited to smaller reporting companies (SRCs).
- Broader Access to WKSI-Style Benefits – The proposal would extend many registration and communication advantages currently reserved for “well-known seasoned issuers” (WKSIs) to a much larger group of issuers.
Companies eligible to use Form S-3 and listed on a national exchange could access most WKSI benefits – even without the current $700 million public float or $1 billion debt issuance thresholds. - Federal Preemption of State Blue Sky Requirements – The proposal would preempt state securities registration and qualification requirements for all registered offerings, including offerings of unlisted securities. This change is intended to reduce compliance costs and streamline the registered capital raising process across multiple states.
- Expanded Flexibility for BDCs and Closed-End Funds – The proposal would to extend short-form shelf registration eligibility and certain communication benefits to more business development companies (BDCs) and registered closed-end funds by easing seasoning and public float requirements.
Authored by
Broc Romanek