Release No. 33-6424

September 2, 1982

Interpretative Release Relating to Continuous and Delayed Offerings by Foreign Governments or Political Subdivisions Thereof

ACTION: Publication of Staff Interpretation.

SUMMARY: In conjunction with the extension of the period of effectiveness of Rule 415 concerning delayed and continuous offerings of securities by corporations, the Commission is authorizing the publication of a revised staff interpretation regarding the use of a registration statement for continuous and delayed offerings of securities by foreign governments or political subdivisions thereof to be consistent with Rule 415 to the extent practicable.

FOR FURTHER INFORMATION CONTACT: Carl T. Bodolus or Ronald Adee (202/272-3246), Division of Corporation Finance, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.

SUPPLEMENTAL INFORMATION: Securities issued by a foreign government ¹ are registered under Schedule B of the Securities Act of 1933 (the "Securities Act") 15 U.S.C. 77a et seq.. Often a foreign government will guarantee the principal and interest of securities issued by another entity, such as a state-owned utility company. The guarantee and the guaranteed securities are also registered under Schedule B.

In Release No. 33-6240 (September 10, 1980) 45 FR 61609, the Commission announced an interpretative position of the Division of Corporation Finance (the "Division") permitting seasoned foreign governments ² to use a shelf procedure for delayed offerings. The procedure has generally worked well and all commentators in the recent hearings on Rule 415 addressing the point concurred and urged extensions of that procedure. The Commission has authorized the Division to announce in this release some revisions to the procedure described in Release No. 33-6240. These revisions would permit foreign governments to use shelf registration in a manner substantially similar to that specified in Rule 415 17 CFR 230.415. The Division intends to reconsider these revisions in conjunction with the final action taken with respect to Rule 415.

The procedure described in Release No. 33-6420 (the "Original Procedure") required the annual filing of a registration statement to register the amount of securities to be offered on a "firm commitment" basis during a period of twelve months from the effective date. The Division believes foreign governments should be permitted to register an amount of securities ³ which, at the effective date, is reasonably expected to be offered and sold within two years from the initial effective date. This is the same amount that can be registered under Rule 415. The Division also believes that the requirement of a "firm commitment" underwriting is no longer necessary.

The Original Procedure specified that the registration statement would contain a basic prospectus disclosing the standard general political, economic, and statistical information with regard to the foreign government as well as the specific information required by Schedule B. In connection with a specific offering, at least two post-effective amendments each containing a prospectus supplement would be filed. These supplements resemble a Form S-3 prospectus and contain the following information: the distribution spread, use of proceeds, plan of distribution, description of securities offered, summary information, and recent material developments. One supplement would function as a preliminary prospectus because it would omit pricing information and the names of underwriters but include a legend similar to the one in Item 501(c)(8) of Regulation S-K 17 CFR 229.501(c)(8). No sales would be made until a post-effective amendment containing the pricing amendment in the form of a final prospectus supplement had been filed and declared effective. The preliminary prospectus supplement would be circulated publicly before the effective date of the post-effective amendment containing the final prospectus supplement. The basic prospectus would accompany both the preliminary and final prospectus supplements.

The Division believes that delivering the basic prospectus with both the preliminary and final prospectus supplements is expensive and unnecessary. Many foreign governments distribute their basic prospectus in advance of any offering; the Division has no objection to this practice. Therefore, if a foreign government has previously furnished a person with a copy of its current basic prospectus, then the government need only deliver prospectus supplements to that person. The prospectus supplements should contain a statement that a copy of the basic prospectus will be promptly furnished, without charge, upon request. ⁴

The Division will not object to a procedure of including in the basic prospectus all the information included in the prospectus supplements under the Original Procedure except price, maturity, and related information that would be furnished by a Rule 424(c) sticker 17 CFR 230.424(c) instead of a post-effective amendment. A condition of using this procedure is that the basic prospectus is adequately disseminated to the public a reasonable period before the offering. Foreign governments are required to file annual reports under the Securities Exchange Act of 1934 (the "Exchange Act") 15 U.S.C. 78a et seq. (1976 and Supp. III 1979) only if their securities are listed on a U.S. exchange. Therefore, the basic prospectus is intended to serve the same function as periodic reports under the Exchange Act filed by U.S. registrants.

Under the Original Procedure, registration statements contain the necessary undertakings to implement the procedure and undertakings similar to those in Item 512(a) of Regulation S-K. The Division believes such undertakings, revised to implement the new procedures, are necessary.

Although this release is an announcement of current Division policy, interested persons are invited to send comments or suggestions to the Commission which may be addressed to the staff members mentioned in the forefront of the release.

Registrants should also designate all registration statements made in conformity with Schedule B as a Schedule B filing and should indicate on the facing page whether the registration statement is a shelf registration statement. This will assist the Commission in its recordkeeping and monitoring. Registrants may rely on this interpretation immediately upon its publication in the Federal Register.

List of Subjects in 17 CFR 231

Reporting Requirements

Securities

Accordingly, 17 CFR Part 231 is amended by adding a reference to this release (Release No. 33-6424) thereto.

By the Commission.

¹ Rule 405 (17 CFR 230.405) defines foreign government as "... the government of any foreign country or of any political subdivision of a foreign country."

² According to Division practice, foreign governments that have registered their securities (or guarantees of the securities of another issuer) under the Securities Act within five years and have not defaulted on any principal or interest are seasoned. No-action letter to the Republic of Venezuela (Nov. 23, 1980).

³ Securities to be issued upon the exercise of warrants can also be registered.

⁴ See, for example, Item 512(f)(1) of Regulation S-K 17 CFR 229.512.