Registered Offering Reform

FACT SHEET

Registered Offering Reform

The Securities and Exchange Commission proposed amendments to significantly enhance

public companies’ ability to conduct registered offerings. The proposed amendments would:

•

Revise Form S-3’s eligibility criteria to enable a greater number of public companies to

conduct shelf offerings, which allow quicker access to the public capital markets.

•

Extend registration and offering communication flexibilities, many of which currently are

reserved only for “well-known seasoned issuers,” to a broader set of issuers.

•

Preempt state securities law registration and qualification requirements for all registered

offerings.

•

Maintain parity between certain Form N-2 filers and operating companies across

registration, offering, and communication provisions.

•

Expand access to broad-based advertising for certain insurance products.

•

Modernize Form S-1 by expanding the ability to incorporate information by reference

into that form.

Background

The public securities markets offer benefits to issuers and investors alike. Issuers often can raise

capital through the public markets on more favorable terms as compared to private markets, and

investors in offerings registered under the Securities Act of 1933 (Securities Act) can benefit from

the required disclosures and protections provided under the federal securities laws. The

proposed amendments are intended to promote the benefits associated with increased capital

formation in the public markets in a manner that is consistent with investor protection.

Form S-3 Eligibility

The proposed amendments would revise Form S-3’s eligibility requirements by, among other

changes, removing the requirement that issuers be subject to the reporting requirements of the

Securities Exchange Act of 1934 (Exchange Act) for 12 months before using the form and

eliminating all of the form’s transaction requirements, including the instruction that requires

issuers to have at least $75 million in public float to register an unlimited amount of securities on

the form. Form S-3 would continue to require that issuers be current and timely in their Exchange

Act reporting requirements and would prohibit certain “ineligible issuers” from using the form.

Taken together, the proposed amendments are intended to allow a greater number of issuers

flexibility to access the public securities markets quickly by using Form S-3 while also ensuring

that investors remain appropriately protected. The release states that, under the proposed

amendments, there could be an increase of over 60 percent in the number of issuers eligible to

offer an unlimited amount of securities on Form S-3. These newly eligible issuers would benefit

from the cost savings and capital raising efficiencies and flexibilities associated with the ability to

use Form S-3 and conduct shelf offerings.

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FACT SHEET | Registered Offering Reform

Enhanced Registration and Communication Benefits

Currently, certain registration and communication benefits are reserved for “well-known

seasoned issuers” (WKSIs). In order to qualify as a WKSI, an issuer must have at least $700

million in public float or have issued at least $1 billion of debt securities in registered offerings.

Under the proposed amendments, issuers would not be required to meet either of these metrics

in order to qualify for the enhanced registration and communication benefits. Instead, under the

proposed amendments, issuers would qualify for all of those benefits — other than the ability to

use an automatic shelf registration statement — if they are eligible to use Form S-3 and have at

least one class of common equity securities listed on a national securities exchange. Issuers

would have to be subject to the Exchange Act’s reporting requirements for 12 months before

being able to use an automatic shelf registration statement.

These proposed amendments are intended to provide a greater number of issuers the flexibility

to access the public securities markets on demand using automatic shelf registration statements

and to benefit from other offering-related flexibilities while also ensuring that investors remain

appropriately protected. The release states that, under the proposed amendments, there could

be an increase of over 200 percent in the number of issuers eligible for all of the enhanced

registration and communication benefits.

Preemption of State Securities Law Registration and Qualification

Requirements

The proposed amendments would define “qualified purchaser” under Section 18(b)(3) of the

Securities Act and preempt state securities law registration and qualification requirements with

respect to any registered offering. Such preemption currently applies to registered offerings in

which the securities being offered and sold are listed or approved for listing on a national

securities exchange. Preemption currently does not, however, apply to registered offerings of

unlisted securities.

The proposed amendments, therefore, would eliminate the costs associated with complying with

numerous states’ registration and qualification requirements for registered offerings of unlisted

securities. The proposed amendments are intended to lower the cost of a registered offering of

unlisted securities and, as a result, facilitate capital formation in a manner that is consistent with

investor protection.

Business Development Companies and Closed-End Funds

Consistent with the proposed amendments relating to operating companies, other proposed

amendments would extend to a broader group of business development companies (BDCs) and

registered closed-end funds eligibility to use short-form shelf registration statements on Form N2, in part by removing related seasoning and public float requirements. Other proposed

amendments would extend certain enhanced registration and communication benefits that

currently are primarily reserved for a WKSI to a broader set of BDCs and closed-end funds.

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FACT SHEET | Registered Offering Reform

Insurance Product Advertising

The proposed amendments would amend the advertising rule available for variable annuities

(Rule 482) to permit its use by insurance companies advertising registered index-linked

annuities and registered market value adjustment annuities under certain circumstances. This

proposal would permit the use of that rule for broad-based advertising, and provide for a

consistent advertising framework, for these products.

Incorporation by Reference on Form S-1

The ability to incorporate by reference information into Form S-1 filed before the effective date

of the registration statement (backward incorporate) currently is limited to issuers that, among

other things, have filed an annual report for their most recently completed fiscal year. Further,

the ability to incorporate by reference information filed after the effective date of a Form S-1

(forward incorporate) currently is limited to issuers that are smaller reporting companies (SRCs).

Under the proposed amendments, issuers would be able to backward incorporate regardless of

whether they had filed an annual report for their most recently completed fiscal year and forward

incorporate regardless of whether they are an SRC. The proposed amendments would,

therefore, allow a greater number of issuers to enjoy the cost savings associated with

incorporation by reference, with an estimated increase of up to 106 percent in the number of

issuers eligible to forward incorporate on Form S-1.

Additional Information:

The public comment period will remain open for 60 days following publication of the proposing

release in the Federal Register.

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