/>iOn March 3, the US Securities and Exchange Commission’s (SEC) Division of Corporation Finance announced that it is expanding the accommodations available to issuers submitting nonpublic draft registration statements for staff review.
Initially, as part of the Jumpstart Our Business Startups Act, enacted in 2012, only emerging growth companies (EGCs) could take advantage of submitting nonpublic draft registration statements. Subsequently, in 2017, the SEC extended this accommodation to allow all issuers to voluntarily submit a draft registration statement for nonpublic staff review prior to the first year following their initial public offering (IPO).
In connection with the announcement, the Division stated that [it believed] further enhancing the accommodation to extend to any offering under the Securities Act of 1933, regardless of how much time has passed since the issuer’s IPO, would promote and facilitate capital formation without decreasing investor protections.
New Enhancements
Previously, the SEC would only review subsequent draft registration statements if they were submitted prior to the end of the 12-month period following the effective date of the initial registration statement. The expanded accommodation permits issuers to submit draft registration statements regardless of how much time has passed since originally becoming subject to SEC reporting requirements under Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. The SEC will continue to limit its nonpublic review in these cases to the initial draft registration statement and an issuer responding to staff comments on such a draft registration statement will need to do so with a public filing, not with a revised draft registration statement. The SEC will also continue to publicly release staff comment letters and issuer responses on EDGAR, the SEC’s public filing website.
Issuers may omit the name of the underwriter(s) from their initial draft. However, the underwriter(s) must be named in any subsequent submissions and public filings. While issuers are encouraged to submit completed or substantially completed drafts, SEC staff will not delay reviewing drafts if financial information is omitted and the issuer reasonably believes that omitted financial information will not be required at the time of public filing.
In de-special purpose acquisition companies (SPAC) transactions where the target company is a private company and the SPAC is the surviving entity, nonpublic draft initial registration statements may be submitted. In some de-SPAC transactions, the target company may be required to be a co-registrant. If so, the co-registrant target must be otherwise independently eligible to submit a draft registration statement.
Foreign private issuers may submit nonpublic draft registration statements either per the enhanced accommodations or EGC procedures.
Cover Letter Requirements for Nonpublic Review
With respect to IPOs, in the cover letter submitted with the draft initial registration statement, issuers must confirm that it will publicly file on EDGAR its registration statement and nonpublic draft registration statement at least 15 days prior to any road show or the requested effective date of the registration statement.
With respect to subsequent draft registration statements submitted once an issuer is public, the cover letter must confirm that the issuer will file its registration statement and nonpublic draft registration statement on EDGAR for public review at least two business days prior to any requested effective time and date.
Key Takeaways
These changes are effective as of the date of the SEC’s announcement. The enhancements widen the scope of the accommodation to include de-SPAC transactions and allow for draft registration statements over a year after the issuer became subject to Exchange Act reporting requirements.
Issuers should carefully evaluate their eligibility to use the expanded procedures to avoid liability under the Securities Act and Exchange Act. If an issuer chooses to use the accommodation, it should follow all requirements carefully.
