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Release No. 33-8591 Release No. 34-52056 Release No. IC-26993 Financial Reporting Rel. No. 75 International Series Rel. No. 1294 70 Fed. Reg. _____ - ____
Securities Offering ReformV. Securities Act Registration Rules and AmendmentsA. OverviewAs discussed above and in the Proposing Release, enhanced requirements for reporting under the Exchange Act for public issuers have been intended to improve the quality and currency of disclosure under the Exchange Act. Together with technological advances, these developments provide the basis for the rules we are adopting today to modernize many procedural aspects of securities offerings registered under the Securities Act. Our new rules cover the registration procedures for seasoned and unseasoned issuers, and seek to streamline the registration process for most types of reporting issuers. These rules include:
B. Procedural Rules1. Procedural Changes Regarding Shelf Offeringsa. OverviewWe are adopting changes to the operation of the shelf registration system under the Securities Act. These new provisions involve:
Commenters strongly supported the proposed procedural changes to the Securities Act registration process.433 A number of commenters on these proposed changes, while supporting the automatic shelf registration proposals for well-known seasoned issuers, believed that all seasoned issuers should be able to use certain of the elements of automatic shelf registration such as identification of selling security holders in prospectus supplements, omission of most information from base prospectuses, and addition of new securities and new registrants by automatically effective post-effective amendments.434 As discussed in greater detail below, we are adopting the procedural changes with some modifications. b. Information in a Prospectusi. Mechanics(A) Rule 430BRule 415 provides for continuous or delayed offerings and is, therefore, the foundation for shelf registration. Primary offerings on a delayed basis may be registered by certain seasoned issuers only. A number of other delayed or continuous offerings may be undertaken or registered by any issuer, including offerings on a continuous basis of securities issued on exercise of outstanding options or warrants or conversion of other securities, offerings on a continuous basis under dividend reinvestment plans, offerings on a continuous basis under employee benefit plans, and offerings solely on behalf of selling security holders. Rule 415 also permits registration by any issuer of a continuous offering that will commence promptly and may continue for more than 30 days from the date of initial effectiveness.435 Many of the types of offerings contemplated by Rule 415 can be accomplished using a prospectus that is complete at the time of effectiveness of the related registration statement and therefore may not require a supplement because there may be no additional information to include in the prospectus.436 There are a number of offerings contemplated by Rule 415, however, such as a delayed offering, in which the prospectus included in the related registration statement at the time of effectiveness, usually referred to as a “base prospectus,” must be supplemented to reflect the final terms of the security and offering for each particular offering of securities. In addition, in continuous or delayed offerings employing shelf registration under Rule 415, there may be circumstances where a prospectus will be supplemented other than at the time of a takedown. Rule 424 provides the framework for the filing of each type of prospectus and prospectus supplement. There currently is no rule, however, that specifies the relationship between the base prospectus and prospectus supplements and the information that may be omitted from or included in one or the other. We are adopting with some clarifications from the proposals a new rule, Rule 430B, which we intend to achieve that purpose by codifying existing practice in most respects and liberalizing the framework for the registration process in certain areas.437 We also are adopting Rule 430C which addresses the treatment of prospectuses and prospectus supplements for all registered offerings not covered by Rule 430B and for prospectuses not covered by Rule 430A. Rule 430B is a shelf offering corollary to existing Rule 430A, in that it describes the type of information that primary shelf eligible and automatic shelf issuers may omit from a base prospectus in a Rule 415 offering and include instead in a prospectus supplement, Exchange Act report incorporated by reference, or a post-effective amendment.438 Rule 430B covers the following types of offerings: • offerings by well-known seasoned issuers registered on automatic shelf registration statements; • immediate, delayed, and continuous primary offerings by primary shelf eligible issuers pursuant to Rule 415(a)(1)(x), including asset-backed issuers eligible to register their offerings on Form S-3; • secondary offerings by certain primary shelf eligible issuers, including for the purpose of adding information regarding the identities of and amounts of securities to be sold by selling security holders; and • offerings of mortgage-backed securities permitted by Rule 415(a)(1)(vii) that generally are registered on Form S-11.439 Rule 430C covers all registered offerings that are not covered by Rule 430B and prospectuses that are not covered by Rule 430A.440 Rule 430B generally is consistent with current requirements and practice for shelf registration statements for delayed offerings on Forms S-3 and F-3.441 Under Rule 430B, a base prospectus in a shelf registration statement must comply with the applicable form requirements but can, as has been the case before today’s new rules, continue to omit information that is unknown or not reasonably available to the registrant pursuant to Rule 409.442 Rule 430B provides that a base prospectus that omits information as provided in the Rule will be a permitted prospectus.443 Thus, after a registration statement is filed, offering participants can use a base prospectus that omits information in accordance with the Rule. In addition, issuers can communicate using Rule 134 notices, and issuers and other offering participants can use free writing prospectuses under Rules 164 and 433. Commenters supported proposed Rule 430B because of the level of certainty it would provide for delayed offerings off of shelf registration statements.444 (B) Means for Providing InformationA base prospectus that omits statutorily required information is not a Securities Act Section 10(a) final prospectus, and today’s rules do not change that fact. To satisfy the requirements of Securities Act Section 10(a), as is the case with shelf registration statements today, an issuer must include the information omitted from the base prospectus in:
Information included in a base prospectus or in an Exchange Act periodic report incorporated into a prospectus is included in the registration statement. Rule 430B makes clear that prospectus supplements and information in them also will be deemed to be part of and included in the registration statement.445The rules we are adopting today provide primary shelf eligible issuers and well-known seasoned issuers with automatic shelf registration statements the ability to add to a prospectus, by means other than a post-effective amendment to the registration statement, more additional or omitted information than is currently the case.446 We are adopting amendments to Forms S-3 and F-3 to permit all information required in the prospectus about the issuer and its securities to be incorporated by reference from Exchange Act reports.447 Such information also can be contained in the prospectus or a prospectus supplement.448 For example, material changes in the plan of distribution, which currently are required to be included in post-effective amendments, can be amended under our new rules by incorporated Exchange Act reports or prospectus supplements.449 Rule 430B also requires that a prospectus supplement be prepared and filed pursuant to Rule 424 if omitted information about an offering, such as the terms of the offering, the securities, the plan of distribution, or the selling security holders, is included in an Exchange Act report incorporated by reference. The prospectus supplement filed pursuant to Rule 424 must disclose the Exchange Act report or reports containing such information. This disclosure will assist investors and the markets in locating this offering-related information and will also be consistent with the treatment of other prospectus supplements filed for these purposes. (C) Identification of Selling Security Holders Following Effectiveness(1) Scope of Provision As we discussed in the Proposing Release, transfers of restricted securities can occur after a private placement is completed so that the identities of the holders of those restricted securities at the time of filing the resale registration statement may not be known to the issuer.450 Filing post-effective amendments to add new or previously unidentified security holders can impose delays. To alleviate the timing concern arising from an issuer’s inability to identify selling security holders prior to effectiveness, we are including provisions to allow issuers eligible to use Form S-3 or Form F-3 for primary offerings in reliance on General Instruction I.B.1 to those Forms451 to identify selling security holders and the amounts of securities to be registered on behalf of each of them after effectiveness. Rule 430B and amendments to Form S-3 and Form F-3, as adopted, permit eligible seasoned issuers to add the identities of the selling security holders and all information about them, as required by Item 507 of Regulation S-K,452 to the registration statement covering the resale of their securities after effectiveness by:
We have revised this provision from the proposal to clarify that this ability to identify selling security holders after effectiveness will be available only if:
An issuer registering the resale of securities sold in a private offering may not rely on this provision to identify after effectiveness selling security holders who will acquire the securities directly from the issuer if the securities are not yet issued in the private offering, even where the investors are contractually bound to acquire the securities.456 The issuer can still register the resale of the not-yet-issued securities, but it must identify the selling security holders in the registration statement at the time of filing and prior to effectiveness because the issuer will know the identities of the selling security holders who will acquire the securities from it. We believe that it is important for issuers to be able to satisfy their contractual registration obligations to selling security holders in registering their resales, while also assuring that offerings are properly registered and the selling security holders and the securities to be sold by them are identified in the registration statement. The purpose of this provision of Rule 430B is to provide a more convenient method to identify selling security holders in registration statements, and not to change the existing responsibilities and liabilities of issuers and these selling security holders under the federal securities laws. (2) Comments on Identification of Selling Security Holders Commenters expressed support for the proposals to allow seasoned issuers the ability to identify selling shareholders after effectiveness.457 As with many of the other proposals, some believed that this flexibility also should be extended to unseasoned issuers.458 In addition, one commenter suggested that we eliminate the proposed requirement that the issuer identify any known selling security holders prior to effectiveness, because some selling security holders known to the issuer may not have consented to the inclusion of their names in the prospectus.459 In response to commenters’ suggestions, we have clarified that the initial transaction that the issuer must disclose in the resale registration statement must be the initial offering transaction in which the securities were initially sold, not a resale transaction in which any particular selling security holder may have acquired the securities. The goal of the disclosure is to clearly link the securities being registered for resale to a completed initial offering. Moreover, we have revised the instructions to Form S-3 and Form F-3 to eliminate any requirement to name any selling security holders prior to effectiveness if the conditions of Rule 430B are satisfied. Commenters also suggested that we should allow all issuers to be able to identify selling security holders after effectiveness.460 We have determined not to extend this flexibility to all issuers. We believe that issuers that are not eligible to file a primary offering on Form S-3 or Form F-3 are more prone, in general, to engage in transactions some of which have raised disclosure and registration issues.461 As a result, we believe it is important to have complete selling security holder information and be able to review that information in registration statements to assure compliance with Section 5 and our disclosure rules in connection with these offerings. ii. Information Deemed Part of Registration Statement We are adopting provisions in Rule 430B that will make clear that information contained in a prospectus supplement required to be filed under Rule 424, whether in connection with a takedown or otherwise, will be deemed part of and included in the registration statement containing the base prospectus to which the prospectus supplement relates. We also are adopting new Rule 430C that has similar provisions regarding the treatment of prospectus supplements, which applies to offerings not covered by Rule 430B and prospectuses not covered by Rule 430A. As a result of Rule 430B and Rule 430C, prospectus supplements required to be filed under Rule 424 or Rule 497(b), (c), (d), or (e) will, in all cases, be deemed to be part of and included in registration statements for purposes of Securities Act Section 11. iii. Date of Inclusion of Prospectus Supplements in Registration Statements and New Effective Dates of Registration Statements (A) Scope of Provisions Rule 430B and Rule 430C, as adopted, deem information contained in prospectus supplements to be part of and included in the registration statement as follows:
We have chosen the triggering dates for prospectus supplements to be deemed part of and included in registration statements for a number of reasons. First, under Rule 430B and Rule 430C, for a prospectus supplement filed other than in connection with a takedown, we have chosen the date of first use as the appropriate date for it to be deemed part of and included in the registration statement because that is the date on which the prospectus supplement updates the information in the registration statement.464 Second, under Rule 430B, a prospectus supplement filed in connection with a takedown pursuant to Rule 424 will be deemed part of and included in the registration statement as of the earlier of when it is first used or the date and time of the first contract of sale of the securities to which the prospectus supplement relates. This timing, combined with the new effective date provisions discussed below, provides the appropriate timing for assessing liability under Section 11 for issuers and underwriters. (B) New Effective Date for Section 11 Purposes Rule 430B also establishes a new effective date for a shelf registration statement for Section 11 liability purposes only for the issuer and for a person that is at the time an underwriter.465 That new effective date will be the date a prospectus supplement filed in connection with the takedown or takedowns is deemed part of the relevant registration statement.466 For purposes of liability under Section 11 of the issuer and any underwriter at the time only, the new effective date will be as to the part of the registration statement relating to the securities to which such prospectus relates. The part of the registration statement will consist of all information included in the registration statement and any prospectus relating to the offering of the securities as of the new effective date and all information included in reports and materials incorporated by reference into the registration statement and prospectus as of such date relating to the offering, and in each case, not modified or superseded pursuant to Rule 412. The part of the registration statement will include information relating to the offering in a prospectus already included in the registration statement. This includes, for example, a form of prospectus containing information relating to the offering and previously filed pursuant to Rule 424(b)(3) other than in connection with the takedown in question, where the information has not been modified or superseded. These provisions also will reconcile the effective date for shelf offerings for issuers and underwriters with a comparable date for non-shelf offerings. We believe the Rule also will eliminate the unwarranted, disparate treatment of underwriters and issuers under Section 11.467 At the same time, we believe that for other persons, including directors, signing officers, and experts, the filing of a form of prospectus should not result in a later Section 11 liability date than that which applied prior to our new rules.468 Therefore, under Rule 430B, except for an effective date resulting from the filing of a form of prospectus for purposes of updating the registration statement pursuant to Section 10(a)(3) or reflecting fundamental changes in the information in the registration statement pursuant to the issuer’s undertakings, the prospectus filing will not create a new effective date for directors or signing officers of the issuer. Any person signing any report or document incorporated by reference in the prospectus that is part of the registration statement or the registration statement, other than a document filed for the purposes of updating the prospectus pursuant to Section 10(a)(3) or reflecting a fundamental change, is deemed not to be a person who signed the registration statement as a result. The new effective date also does not apply to a person that becomes an underwriter after that effective date; in that case Securities Act Section 11(d) provides that the date the person became an underwriter is its effective date.469 We also are not changing the effective date for auditors who provided consent in an existing registration statement for their report on previously issued financial statements or previous reports on management’s assessment of internal control over financial reporting, unless a prospectus supplement (and any Exchange Act report incorporated by reference into the prospectus and registration statement) or post-effective amendment contains new audited financial statements or other information as to which the auditor is an expert and for which a new consent is required.470 As to any other expert, the filing of the prospectus supplement also will not trigger a new effective date, and thus will not require the filing of a consent, unless the prospectus supplement (including incorporated Exchange Act reports) includes a new report or opinion of an expert whose consent is required pursuant to Section 7 and who will have liability pursuant to Section 11. For example, a prospectus supplement filed in connection with one or more takedowns of securities that did not include other disclosure (including through incorporated Exchange Act reports) for which the consent of an expert is required pursuant to Securities Act Section 7 and Securities Act Rule 436 will not require consents to be filed. Including information contained in prospectus supplements in registration statements and triggering new effective dates for the issuer and underwriter will provide and preserve important investor protections under the Securities Act. We believe that these modifications are appropriate to ensure issuer liability for information included in the registration statement at the time of the prospectus supplement filing. (C) Comments on Prospectus Supplements and New Effective Dates A number of commenters addressed the provisions providing for new effective dates of registration statements at the time of filing of prospectus supplements for takedowns off shelf registration statements.471 Commenters supporting these proposals agreed that, as to shelf registration statement takedowns, the liability of issuers under Section 11 should be brought into line with the liability of underwriters.472 A number of commenters were concerned with the liability of auditors, other experts, and outside directors that would arise under Section 11 as of the new effective date of the registration statement.473 While some commenters believed that the Rule should provide that a new auditor’s consent is not required in connection with the takedown and new effective dates, others believed that unless the Rule was clear that the takedown would not be a new effective date for auditors and other experts, we should require that consents of these experts be provided at the new effective date.474 We have revised Rule 430B in response to commenters’ concerns about new effective dates as we discuss above. We believe that these changes should provide clarity for auditors, among others, that a new effective date for them is not created and that new consents and corresponding procedures are not required as a result of Rule 430B. iv. Amendments to Rule 415 (A) Elimination of Limitation on Amount of Securities Registered (1) Revised Provisions Prior to today’s amendments, Rule 415(a)(2) limited the amount of securities that could be registered where the registration statement pertained to offerings pursuant to Rule 415(a)(1)(viii), (ix), and (x). Rule 415(a)(2) limited the amount of securities that could be registered in these offerings to an amount which, at the time the registration statement became effective, was reasonably expected to be offered and sold within two years from the initial effective date of a registration statement. For offerings under Rule 415(a)(1)(x) and continuous offerings under Rule 415(a)(1)(ix) in each case that are registered on Form S-3 or Form F-3, we are eliminating the provision in Securities Act Rule 415(a)(2) that limits the amount of securities registered. The two-year limitation was designed to ensure that the issuer had a bona fide intention to offer and sell securities in the proximate future.475 We are eliminating this requirement for these offerings because we do not believe that it provides any significant investor protection.476 However, under the amendments to Rule 415 we are adopting today, that shelf registration statement can only be used for three years (subject to a limited extension) after the initial effective date of the registration statement.477 Under the revised rule, new shelf registration statements must be filed every three years, with unsold securities and fees paid thereon allowed to be included on the new registration statement, where the shelf registration statement relates to:
Automatic shelf registration statements are immediately effective, as discussed below. In other cases, as long as the new shelf registration statement is filed within three years of the original effective date of the old registration statement the issuer may continue to offer and sell securities from the old registration statement for up to six months thereafter until the new registration statement is declared effective.479 Prior to effectiveness of the new registration statement (including at the time of filing for an automatic shelf registration statement), the issuer can amend the later registration statement to include any securities (and fees attributable to such securities) remaining unsold on the older registration statement. We believe that allowing issuers to continue to offer and sell securities off the old registration statement for an additional six months after filing the new registration statement pending effectiveness of the new registration statement, and then including any securities remaining unsold on the new registration statement, will preserve the ability of these issuers to continue to use their shelf registration statements to access the capital markets. The additional six-month time period will not impact adversely our decision to have new shelf registration statements filed every three years. In addition, continuous offerings begun prior to the end of the three years can continue on the old registration statement until the effective date of the new registration statement if they are permitted to be made under the new registration statement. We believe that, especially with our liberalization of procedures for shelf registration, particularly automatic shelf registration as described below, the precise contents of shelf registration statements may become difficult to identify over time, and that markets will benefit from a periodic updating and consolidation requirement.480 The new registration statement will include the disclosures then required under the applicable form and our rules. (2) Comments on Elimination of Limitation on Amount of Securities Registered Commenters supported most of the proposed changes to Rule 415.481 Some commenters were concerned that the requirement to file a new shelf registration statement every three years could result in a blackout period between the end of the three years and effectiveness of the new registration statement, during which issuers could not continue to sell securities off their old registration statements.482 As noted above, we are maintaining the three-year requirement, but we are allowing the issuer to continue to offer and sell securities off its old registration statement until the earlier of the effectiveness of the new registration statement or six months after the timely filing of the new registration statement. We believe that this provision will eliminate any inappropriate blackout periods. (B) Immediate Takedowns From a Shelf Registration Statement Filed Under Rule 415(a)(1)(x) We are amending Securities Act Rule 415(a)(1)(x), as proposed, to allow primary offerings on Form S-3 or Form F-3 to occur immediately after effectiveness of a shelf registration statement.483 With respect to immediate offerings from an effective registration statement, our current rules permit omission of information from the prospectus at the time of effectiveness only in reliance on Securities Act Rule 430A.484The changes we are adopting today affecting the treatment of prospectus supplements provides sufficient protection to investors to allow, in an immediate offering, omission of information under Rule 415 and Rule 430B.485 Commenters on this provision expressed support for allowing immediate takedowns off of shelf registration statements in reliance on Rule 415.486 (C) Eliminating “At-the-Market” Offering Restrictions for Seasoned Issuers The restrictions on primary “at-the-market” offerings of equity securities currently set forth in Rule 415(a)(4) were adopted initially to address concerns about the integrity of trading markets.487 As discussed in the Proposing Release, we are eliminating these restrictions for primary shelf eligible issuers because they are not necessary to provide protection to markets or investors. The market today has greater information about seasoned issuers than it did at the adoption of the “at-the-market” limitations, due to enhanced Exchange Act reporting. Further, trading markets for these issuers’ securities have grown significantly since that time. Requiring the involvement of underwriters and limiting the amount of securities that can be sold imposes artificial limitations on this avenue for these issuers to access capital. Under our revised Rule, an issuer that is registering a primary equity shelf offering pursuant to Rule 415(a)(1)(x) can register an “at-the-market” offering of equity securities without identifying an underwriter in its registration statement488 and without a limitation on the amount of the offering. Issuers who are not eligible to register primary equity offerings using Rule 415(a)(1)(x) will still not be eligible to register “at-the-market” equity securities offerings. Commenters generally supported the removal of the restrictions on “at-themarket” offerings.489 v. Rule 424 Amendments In conjunction with our other procedural rules, we are adopting certain companion modifications to Securities Act Rule 424. We are adding a separate new paragraph (b)(8) to Rule 424 for forms of final prospectuses not filed within the required timeframe under Rule 424. As we discuss below, this provision of Rule 424 will allow us to identify more readily final prospectuses not filed timely.490 As noted above, we also are adding a separate new paragraph (b)(7) under Rule 424 for filing of prospectuses identifying selling security holders. Commenters supported the amendments to Rule 424.491 Some commenters suggested additional revisions to Rule 424, including deleting references to paper copies492 and defining the phrase “date it is first used.493 We are adopting the changes to Rule 424 essentially as proposed.494 vi. Elimination of Rule 434 In the Proposing Release, we requested comment as to whether we should eliminate Rule 434 in its entirety.495 The commenters who responded to this request believed that the Rule is superfluous and should be eliminated.496 Because we believe that Rule 434 has been used only very rarely, and because our new rules regarding free writing prospectuses permit the use of written descriptions of the terms of the issuer’s securities or of the offering, such as term sheets, under more flexible circumstances, we are eliminating Rule 434.497 vii. Issuer Undertakings We are adopting conforming revisions to the issuer undertakings that are required in connection with a shelf registration statement. These revisions reflect the issuer’s agreement regarding the inclusion of information contained in prospectus supplements in registration statements and new effective dates of the registration statement on filing of a prospectus supplement. (A) Treatment of Information in Prospectus Supplements Item 512(a) of Regulation S-K currently requires an issuer that has registered securities pursuant to Rule 415 to undertake to file a post-effective amendment to the registration statement to:
Currently, shelf issuers can satisfy the first two of these obligations by filing Exchange Act periodic reports that are incorporated by reference into the registration statement. We are amending the Item 512(a) undertaking as proposed to clarify that, in shelf registration statements filed on Forms S-3 and F-3, all the disclosures required by this undertaking also may be contained in any filed prospectus supplement deemed part of and included in a registration statement or any Exchange Act report, instead of only in periodic reports, that an issuer files that is incorporated by reference into the registration statement.499 As discussed below, we also are adopting as proposed the undertaking to allow automatic shelf issuers to include in this manner all other information that has been omitted from the base prospectus, subject in the case of a takedown of securities to the filing of a prospectus supplement. In the event that satisfaction of any element of the undertaking requires the filing by any of the permitted methods of a consent of an expert, that consent may be filed by post-effective amendment to Part II of the registration statement or by filing of an Exchange Act report, such as an annual report on Form 10-K or a report on Form 8-K or Form 6-K, that is incorporated by reference into the registration statement.500 (B) Prospectus Supplements Deemed Part of a Registration Statement and New Effective Dates To reflect the issuer’s understanding of and agreement to the changes described above regarding inclusion of prospectus supplements in registration statements and new effective dates, we are including a new undertaking in which the issuer will agree that, consistent with Rules 430B and 430C, information in prospectus supplements is deemed part of and included in registration statements and that, consistent with Rule 430B, new effective dates as to the issuer and underwriter will occur in respect of prospectuses related to certain shelf takedowns.501 The new undertaking will assure that the issuer agrees that it has liability for information that is included in or deemed part of the registration statement, that the liability of the issuer will be assessed as of the date such a prospectus supplement is deemed part of and included in the registration statement.502 Because closed-end management investment companies use Securities Act Rule 415 to make shelf offerings under certain circumstances and provide an undertaking similar to that required by Item 512(a) of Regulation S-K in their registration statements on Form N-2, we are including a new undertaking in Form N-2 similar to that which we are including in Item 512(a) of Regulation S-K.503 We also are amending Rule 415 to clarify that investment companies filing on Form N-2 that use the Rule must provide the undertaking required by Form N-2, rather than the undertaking required in Item 512(a) of Regulation S-K.504 c. Changes to Form S-3 and Form F-3 In addition to adopting changes that will allow additional Form S-3 or Form F-3 disclosures to be included through prospectus supplements and Exchange Act reports, we are amending Form S-3 and Form F-3, as proposed, to expand the categories of majority-owned subsidiaries that will be eligible to register their non-convertible securities, other than common equity, or guarantees under General Instruction I.C. of Form S-3 or General Instruction I.A.5 of Form F-3. The permitted circumstances are the same as those provided for majority-owned subsidiaries to be well-known seasoned issuers.505 We believe that this expansion is appropriate in that it recognizes the various types of subsidiary guarantees that may be employed in registered offerings of such non-convertible securities, other than common equity, of related entities. Whether information regarding the subsidiary will have to be included in the registration statement will depend, as today, on whether the subsidiary meets the conditions of Rule 3-10 of Regulation S-X and Exchange Act Rule 12h-5. 2. Automatic Shelf Registration for Well-Known Seasoned Issuers In addition to the updating of the shelf registration process described above, we are adopting rules to establish a significantly more flexible version of shelf registration for offerings by well-known seasoned issuers. This version of shelf registration, which we refer to as “automatic shelf registration,” involves filings on Form S-3 or Form F-3. The automatic shelf registration rules are in addition to the communications exemptions we are adopting today and will allow eligible well-known seasoned issuers substantially greater latitude in registering and marketing securities. The automatic shelf registration process will continue to enable the issuer, as with other shelf registrants, to take down securities off a shelf registration statement from time to time.506 Automatic shelf registration is not mandatory; a well-known seasoned issuer may continue to file any other registration statement it is eligible to use or engage in any exempt offering or offerings of exempt securities available to it.507 For well-known seasoned issuers, we believe that the modifications we are adopting will facilitate immediate market access and promote efficient capital formation, without at the same time diminishing investor protection. Most significantly, the new rules will provide the flexibility to take advantage of market windows, to structure securities on a real-time basis to accommodate issuer needs or investor demand, and to determine or change the plan of distribution of securities as issuers elect in response to changing market conditions. We hope that providing these automatic shelf issuers more flexibility for their registered offerings, coupled with the liberalized communications rules we are adopting, will encourage these issuers to raise their necessary capital through the registration process.508 Under our automatic shelf registration process, eligible well-known seasoned issuers may register unspecified amounts of different specified types of securities on immediately effective Form S-3 or Form F-3 registration statements. Unlike other issuers registering primary offerings on Form S-3 or Form F-3, the automatic shelf registration process allows eligible issuers to add additional classes of securities and to add eligible majority-owned subsidiaries as additional registrants after an automatic shelf registration statement is effective. They also can freely accommodate both primary and secondary offerings using automatic shelf registration. Thus, these issuers have significant latitude in determining the types and amounts of their securities or those of their eligible subsidiaries that can be offered without any potential time delay or other obstacles imposed by the registration process. Issuers using an automatic shelf registration statement will be permitted, but not required, to pay filing fees at any time in advance of a takedown or on a “pay-as-you-go” basis at the time of each takedown off the shelf registration statement in an amount calculated for that takedown. The rules as adopted also permit more information to be excluded from the base prospectus in an automatic shelf registration statement than from a regular shelf registration statement. The omitted information can then be included at or before the time of filing a prospectus supplement. The automatic shelf registration process, together with the loosening of the restrictions on communications, permits well-known seasoned issuers with maximum flexibility to use free writing prospectuses to structure transactions. ii. Comments on Automatic Shelf Registration Commenters strongly supported the concept of automatic shelf registration for well-known seasoned issuers.509 Commenters also believed that automatic shelf registration should be optional and, in addition, should allow issuers to control the timing of effectiveness of their registration statements, if they did not want immediate effectiveness.510 A number of commenters on the procedural changes, while supporting the automatic shelf registration proposals for well-known seasoned issuers, believed that all seasoned issuers should be able to use certain of the elements of automatic shelf registration such as identification of selling security holders in prospectus supplements, omission of most information from base prospectuses, and addition of new securities and new registrants by automatically effective post-effective amendments.511 The rules we are adopting today continue to provide the greatest flexibility to well-known seasoned issuers. We have not expanded the automatic shelf provisions to other issuers.512 As we discussed in the Proposing Release, we believe that limiting the benefits of automatic shelf registration to well-known seasoned issuers is appropriate, at this point, as these issuers have an established Exchange Act record and a significant following in the market. As we discuss above, we are directing the staff of the Division of Corporation Finance and OEA to undertake a study in three years after the full implementation of the rules as to the operation of the definition of well-known seasoned issuers.513 We are not mandating that automatic shelf registration be used by any issuer meeting the conditions for being a well-known seasoned issuer and we are not modifying the immediate effectiveness provisions to permit a well-known seasoned issuer to defer effectiveness. Rather, well-known seasoned issuers may continue to file a registration statement on any form for which it is eligible if they either do not wish to file an automatic shelf registration statement or otherwise desire to delay the effective date of their registration statements. b. Automatic Shelf Registration Mechanicsi. EligibilityThe automatic shelf registration procedure can be used in connection with registration statements on Form S-3 or Form F-3 for all primary and secondary offerings of securities of well-known seasoned issuers.514 In general, securities of majority-owned subsidiaries of a well-known seasoned issuer parent can be included on the automatic shelf registration statement of the parent if the subsidiary satisfies the conditions for being considered a well-known seasoned issuer described above.515 Under automatic shelf registration, as adopted, a registration statement can be amended by post-effective amendment to add an eligible subsidiary as an issuer.516Under the rules we are adopting today, an issuer can file an automatic shelf registration statement if it meets the eligibility criteria for well-known seasoned issuer on the initial filing date. Thereafter, the issuer also must determine its eligibility at the time of each amendment to its shelf registration statement for purposes of providing its update under Securities Act Section 10(a)(3) (or on the due date thereof). If an issuer is no longer eligible to use an automatic shelf registration statement at the time of its determination of eligibility, it will have to either post-effectively amend its registration statement onto the form it is then eligible to use or file a new registration statement on such a form. For example, a well-known seasoned issuer that is initially eligible for automatic shelf registration, that is not eligible at the time of its annual report filing, but that retains its eligibility to file a shelf registration statement under Rule 415 on Form S-3, can file a post-effective amendment or a new registration statement on Form S-3 that designates an amount of securities to be registered and otherwise complies with requirements for seasoned issuers that are not well-known seasoned issuers.ii. Information in a Registration Statement(A) Information That May be Omitted From the Base ProspectusOur rules as adopted will allow well-known seasoned issuers using automatic shelf registration statements to omit more information from the base prospectus in an automatic shelf registration statement than is the case currently or than is the case in a regular shelf offering registration statement under new Rule 430B. A base prospectus included in an automatic shelf registration statement can, as today, omit information pursuant to Securities Act Rule 409 that is unknown and not reasonably available and, as adopted, can omit the following additional information:
Omitting this additional information from the base prospectus will not affect the information that an investor will be provided in connection with a particular sale.517 (B) Mechanics for Including Information We believe that our new rules to broaden the means by which issuers may include information in an automatic shelf registration statement will benefit both issuers and investors. These new rules provide issuers with automatic shelf registration statements the ability to add omitted information to a prospectus by means of:
Examples of the types of information that can be added in this manner for automatic shelf registration statements include:
The principal exceptions to this complete flexibility will be that an issuer adding new types of securities519 or new eligible issuers, including guarantors, and the securities they may issue to a registration statement must do so by post-effective amendment, which will be effective immediately upon filing.520 New issuers and requisite officers and directors are required to be signatories to the post-effective amendment.521 (C) Registration of Securities to be Offered An eligible well-known seasoned issuer may register on an automatic shelf registration statement an unspecified amount of securities to be offered, without indicating whether the securities are being sold in primary offerings or secondary offerings on behalf of selling security holders. Issuers that are well-known seasoned issuers based only on their registered non-convertible security issuances can register on automatic shelf registration statements only non-convertible securities, other than common equity, unless they also are primarily eligible to use Form S-3 or Form F-3 for a primary offering because they have a public float of $75 million or more.522 The calculation of registration fee table in the initial registration statement will not need to include a dollar amount or a specific number of securities, unless a fee based on an amount of securities is paid at the time of filing, but that table must at least list each class of security registered and indicate if the filing fee will be paid on a pay-as-you-go basis. The issuer can specify the number or dollar amount of securities in a prospectus supplement at the time it pays a fee in advance of or for each offering.523 The base prospectus in the initial registration statement must identify in general terms the names or classes of securities registered.524 In addition, we are expanding the unallocated shelf procedure to allow automatic shelf issuers to register classes of securities without allocating the mix of securities registered between the issuer, its eligible subsidiaries, or selling security holders.525 Allowing registration without separately allocating the registered classes of securities will provide, we believe, greater flexibility to well-known seasoned issuers in conducting registered securities offerings. We are adopting revisions to remove the current restriction that would prevent well-known seasoned issuers from adding classes of securities to an automatic shelf registration statement after effectiveness.526 Under the amended rules, a well-known seasoned issuer can add new classes of securities or securities of an eligible subsidiary to an automatic shelf registration statement at any time before the sale of those securities. In order to add new classes of securities, an issuer must file a post-effective amendment, which will be immediately effective, to register an unspecified amount of securities of the new class of security.527 This requirement will cause the registration statement to include each new class of securities to be offered. An issuer can provide the disclosure about the new class of securities of the issuer in:
(D) Pay-as-You-Go Registration Fees We are adopting rules to permit, but not require, issuers using automatic shelf registration statements to pay filing fees at the time of a securities offering – commonly known as “pay-as-you-go” – or prior to that time. Under the new rules, for issuers electing to use the pay-as-you-go arrangement, the issuer will not have to pay any filing fee at the time of filing the initial registration statement.529 We have eliminated the requirement in the proposal to pay a nominal ($100) initial filing fee. The triggering event for a required fee payment is a takedown off a shelf registration statement. For each takedown, the issuer can file a prospectus supplement for the takedown that includes a calculation of registration fee table or can file a post-effective amendment including the same information. The rules provide that the issuer must pay the appropriate fee calculated in accordance with Securities Act Rule 457 within the time required to file the prospectus supplement pursuant to Rule 424, but provide an ability to cure a failure to pay the fee. The cure is available if the issuer made a good faith effort to pay the fee timely and then pays the fee within four business days of the original fee due date. The rules we are adopting today also require that the issuer file the prospectus supplement, including the fee table reflecting payment of the fee on the cover page, pursuant to Rule 424. In addition, at any time before one or more takedowns in the future (for example, in the case of a medium-term note program), the issuer can pay a filing fee in advance and file such a prospectus supplement with a fee table reflecting payment of the fee on the cover.530 (2) Comments on Pay-as-You-Go Fees Commenters supported a pay-as-you-go filing fee approach.531 Some commenters were concerned about the effect of an inadvertent failure to pay the filing fee in a timely manner.532 Commenters also believed that issuers should continue to be able to pay filing fees in advance of an offering.533 Some commenters requested guidance on the time at which automatic shelf issuers using the pay-as-you-go system should calculate the amount of the filing fee.534 We have adopted the pay-as-you-go filing fee provisions substantially as proposed, but with certain modifications to address commenters’ concerns. In response to commenters’ concerns, we have provided a cure provision that will allow an issuer to pay a filing fee after its original payment due date if it made a good faith effort to pay timely and then paid the fee within four business days of the original fee due date. We also have clarified that automatic shelf issuers may use any of the methods available to pay their filing fees, including paying the filing fees in advance, or paying the filing fees on a pay-as-you-go basis. We have eliminated the initial fee requirement. As a result of this clarification and the cure provisions, we believe that we have addressed commenters’ concerns in this area. With regard to the time when the amount of the filing fee is calculated, as today, the amount of the filing fee is calculated based on the fee schedule in effect at the time of payment (upon filing in advance, or at the time of a takedown) in accordance with the provisions of Rule 457. Thus, the fee amount may be different depending on the time of payment.535 (E) Registration under Securities Act Sections 5 and 6 As we discussed in the Proposing Release, under our new rules for automatic shelf registration, compliance with Securities Act Sections 5 and 6 is tied to the timing of the necessary filings and the content of the automatic shelf registration statement (including, as we have described, amendments, incorporated documents, and prospectus supplements). Securities Act Section 5 requires registration of each securities offering unless an exemption is available. Securities Act Section 6 governs how securities may be registered, including the filing of registration statements and the payment of filing fees. Any securities offered and sold off an effective automatic shelf registration statement will satisfy the requirements of Securities Act Section 5(c) if the registration statement, as amended if applicable, includes that class of securities and is filed prior to sale and will satisfy the requirements of Securities Act Section 5(a) if such registration statement, as amended if applicable, includes that class of securities and is effective prior to sale. The securities sold in the takedown will be registered for purposes of Securities Act Section 6 if:
Under the automatic shelf registration statement rules we are adopting today, all automatic shelf registration statements and post-effective amendments thereto will become effective immediately upon filing.536 In addition, we are adopting the proposed amendments to Securities Act Rule 401(g) to provide that an automatic shelf registration statement will be deemed to be filed on the proper form unless we notify the issuer after filing of our objection to the use of such form.537 Therefore, until an issuer is notified by us, it can conduct offerings with certainty that it has registered the securities on the proper form. After we notify an issuer of our objection, the issuer cannot proceed with subsequent offerings (those offerings not in progress), unless it amends the registration statement to the proper form, or otherwise resolves the issue with us. If we notify an issuer that it is ineligible to use an automatic shelf registration statement, securities sold prior to our notification will not have been sold in violation of Section 5. For ongoing offerings, the issuer, once notified by us, will promptly have to file a post-effective amendment or a new registration statement to reflect that it is not an automatic shelf registration statement. Pending effectiveness of the post-effective amendment or a new registration statement, the ongoing offering could continue if such offering is permitted by the post-effective amendment or new registration statement. Immediate effectiveness of automatic shelf registration statements will not raise, we believe, significant investor protection concerns. As with shelf registration statements today, most, if not all, information about the issuer is included in shelf registration statements through incorporation by reference of Exchange Act reports. Such shelf registration statements permit issuers to sell securities off the shelf registration statement without previous staff review of each offering.538 We expect issuers to evaluate disclosure or accounting issues in Exchange Act filings before filing registration statements, including automatic shelf registration statements, and at the time of filing incorporated Exchange Act reports. Because we believe it is important that issuers address unresolved staff comments as part of its evaluation of these issues, we are adopting, as we discuss below, substantially as proposed the requirement for accelerated filers and well-known seasoned issuers to disclose written staff comments received 180 days before an issuer’s fiscal year end that the issuer believes are material and that have remained unresolved at the time of filing of the Form 10-K or Form 20-F.539 An automatic shelf registration statement will become effective immediately and will cover an unspecified amount of securities. The open-ended nature of such registration statements could result in a large number of post-effective amendments. We are, therefore, adopting as proposed a requirement for issuers to file new automatic shelf registration statements every three years that will, in effect, restate their then-current registration statement and amend it, as they deem appropriate. As adopted, issuers will be prohibited from issuing securities off an automatic shelf registration statement that is more than three years old. Our rules provide, however, that, so long as eligibility for automatic shelf registration is maintained, the new registration statement will be effective immediately and will carry forward to the new registration statement, at the issuer’s election, either any unused fees paid or unsold securities registered and fees paid attributable to such registered securities under the old registration statement. As a result, an issuer’s securities offerings under the registration statement can be uninterrupted.540 3. Unseasoned Issuers and Non-Reporting Issuers a. OverviewWe are adopting as proposed procedural changes that will affect reporting issuers that are not seasoned issuers. These include:
The provisions of Rule 430C also apply to prospectuses and prospectus supplements used in offerings by non-reporting issuers and unseasoned reporting issuers.542 b. Amendments to Form S-1 and Form F-1 – Expanded Use of Incorporation by Referencei. EligibilityAs we stated in the Proposing Release, as part of our initiatives to integrate further the Exchange Act and the Securities Act, we are adopting as proposed amendments to Form S-1 and Form F-1 to permit a reporting issuer that has filed at least one annual report and that is current in its reporting obligation under the Exchange Act to incorporate by reference into its Form S-1 or Form F-1 information from its previously filed Exchange Act reports and documents. Successor registrants can incorporate by reference if their predecessors were eligible.543 In a change from the proposals, only the following issuers will not be able to incorporate by reference into a Form S-1 or Form F-1:
In addition, as proposed, to enhance the availability to investors of incorporated information, the ability to incorporate by reference is conditioned on the issuer making its incorporated Exchange Act reports and other materials readily accessible on a web site maintained by or for the issuer. By conditioning the ability to incorporate by reference on the ready accessibility of an issuer’s incorporated Exchange Act reports and other materials on its web site, we are providing investors the ability to obtain the information from those reports and materials at the same time that they would have been able to obtain the information if it was set forth directly in the registration statement. Issuers may satisfy this condition by including hyperlinks directly to the reports or other materials filed on EDGAR or on another third-party web site where the reports or other materials are made available in the appropriate time frame and access to the reports or other materials is free of charge to the user.545 ii. Procedural RequirementsUnder the amendments we are adopting today, the prospectus in the registration statement at effectiveness must identify all previously filed Exchange Act reports and materials, such as proxy and information statements, that are incorporated by reference. There will be no permitted incorporation by reference of Exchange Act reports and materials filed after the registration statement is effective – known as “forward incorporation by reference.” Under the amended Forms, an issuer eligible to incorporate by reference its Exchange Act reports and other materials into its Securities Act registration statement must include the following in the prospectus that is part of the registration statement:
iii. Comments on Form S-1 and Form F-1 AmendmentsCommenters on this aspect of the proposals strongly supported the changes to allow issuers to incorporate by reference historical filings into Forms S-1 and F-1.546Some commenters suggested that Form S-1 and Form F-1 should allow forward incorporation by reference as well for filings made after effectiveness of a registration statement.547 Some commenters did not believe that issuers should, as a condition to incorporating by reference into their Forms S-1 or F-1, be required to make their Exchange Act reports and other materials readily accessible on their web sites.548 As we discuss above, we have adopted the proposals substantially as proposed. We have narrowed the categories of ineligible issuers that can use incorporation by reference because the amended provisions still permit only incorporation of previously filed reports. Because the purpose of the proposal was not to extend short-form registration to all reporting issuers, but to further integrate disclosures under the Securities Act and Exchange Act without impacting investor protection, we have not adopted the suggestion that Form S-1 and Form F-1 permit “forward incorporation by reference” of Exchange Act reports that are filed in the future. As adopted, we also are retaining the condition that the reports and other materials that are incorporated by reference must be readily available and accessible on a web site maintained by or for the issuer and containing issuer information. c. Elimination of Form S-2 and Form F-2As we discussed in the Proposing Release, the purposes underlying the disclosure and delivery requirements of Form S-2 and Form F-2 are to minimize duplicative reporting, while still requiring that the incorporated information be delivered with the prospectus. It appears that the premises underlying Form S-2 and Form F-2 have become outdated in view of the introduction of EDGAR, other technological developments, and the rapid dissemination of information in the market. Also, these forms have not been widely used, particularly for the purposes they were intended.549 Expanding the types of issuers that may incorporate by reference through our amendments to Form S-1 and Form F-1, without requiring delivery of the incorporated documents (except on request), makes Form S-2 and Form F-2 superfluous. Several commenters supported the elimination of Form S-2 and Form F-2.550 We are, therefore, rescinding Form S-2 and Form F-2.551 433 See, e.g., letters from ABA; Alston; Citigroup; Cleary; Davis Polk; Fried Frank;IBAA; NYCBA; NYSBA; S & C; SIA; and TBMA. 434See, e.g., letters from ABA; Alston; Citigroup; Cleary; Davis Polk; NYCBA; NYSBA; S & C; SIA; and TBMA. 435 See Securities Act Rule 415(a)(1)(ix) [17 CFR 230.415(a)(1)(ix)]. 436 The terms of the securities being offered and the plan of distribution are often complete at the time of effectiveness and not subject to change. Where the offering is not registered on Form S-3 or Form F-3, updating information in the registration statement regarding the issuer cannot be included in future periodic reports filed under the Exchange Act and incorporated by reference, and therefore must be included in the prospectus contained in the registration statement by a post-effective amendment. In that case, the new form of prospectus included in the amended registration statement is then complete at the new effective date and therefore also does not require a supplement. 437 We also are making conforming changes to Rule 424. 438 Issuers cannot rely on Rule 430B for offerings made in reliance on other provisions of Rule 415(a). For example, issuers that are not primary shelf eligible, but that are eligible to register securities for resale on behalf of selling security holders in reliance on General Instruction I.B.3 of Form S-3 or register the issuance of securities on exercise or conversion of outstanding securities pursuant to General Instruction I.B.4 of Form S-3, would not be eligible to rely on this Rule, but would instead be subject to Rule 430C. 439 17 CFR 239.18. 440 As we discuss below, Rule 430C provides that all prospectuses and prospectus supplements filed pursuant to Rule 424 and Rule 497(b), (c), (d), and (e) (other than for offerings relying on Rule 430B or prospectuses covered by Rule 430A) are deemed part of and included in the related registration statement as of the date of first use. Rule 430C applies to prospectuses filed in offerings made in reliance on Rule 430A to the extent the prospectus or prospectus supplement is not covered by Rule 430A. 441 Rule 430B liberalizes current requirements in certain respects, and significantly liberalizes requirements for automatic shelf registration statements, as discussed in Section V.B.2 below under “Automatic Shelf Registration for Well-Known Seasoned Issuers.” 442 See Rule 430B and Rule 409 [17 CFR 230.409]. The base prospectus still must include, for other than automatic shelf registration statements, general descriptions of the types of securities and possible plans of distribution.
443 The Rule codifies that such a prospectus will satisfy the requirements of Securities Act Section 10 for purposes of Securities Act Section 5(b)(1).
444See, e.g., letters from Alston; NYCBA; and NYSBA. 445 In the 1998 proposals, we expressed our belief that prospectus supplements and the information contained in them are subject to liability under Section 11. The rules we adopt today codify that position. See 1998 proposals, note 30, at Section V.C.1. 446 Issuers still have the flexibility to file post-effective amendments to include the information. 447 The amendments to Forms S-3 and F-3 explicitly permit information otherwise required in the prospectus directly pursuant to Item 3 through Item 11 of Form S-3 and Item 3 through Item 5 of Form F-3 to be included in this manner. 448 The changes to Form S-3 and Form F-3 are intended to allow the disclosure requirements to be satisfied through incorporation by reference, or through a filed prospectus or prospectus supplement, not to change the timing of when the information must be included. 449 As noted above, under today’s rules, prospectus supplements and the information contained in them are deemed to be part of and included in the registration statement. 450Currently, the staff in the Division of Corporation Finance requires all issuers registering securities for the benefit of selling security holders to include the names of selling security holders in the registration statement either prior to effectiveness or through a post-effective amendment to the registration statement, with limited exceptions for the identities of security holders owning a de minimis amount of the issuers securities (less than 1%) or receiving the securities as a result of a donative transfer. 451 General Instruction I.B.1 to Form S-3 and Form F-3 permits reporting issuers that are current and timely in their periodic and current reporting obligations under the Exchange Act and that have $75 million in non-affiliate voting and non-voting common equity market capitalization to register securities offerings for cash on Form S-3 and Form F-3 for the benefit of the issuer or selling security holders. Blank check companies, shell companies, and penny stock issuers are not eligible to rely on this provision. 452 17 CFR 229.507. 453 As we are amending Rule 424 today, prospectus supplements may be filed in connection with selling security holders offerings, to add selling security holders omitted pursuant to Rule 430B and to provide supplemental or additional information. The filing of a prospectus supplement to include the identity of omitted selling security holders pursuant to Rule 424(b)(7) will be deemed to be a new effective date of the registration statement for Section 11 liability purposes of the issuer and underwriter. Under the Securities Act, selling security holders may be underwriters in connection with the distribution of the securities being registered for resale on their behalf. 454 See Section V.B.2 below under “Automatic Shelf Registration for Well-Known Seasoned Issuers.” 455 The Rule requires disclosure of the initial offering transaction pursuant to which the sales were made, not any subsequent resale transactions. 456 These types of offerings include PIPE transactions discussed in note 182 above. 457 See, e.g., letters from Alston; ABA; and Davis Polk. 458See, e.g., letters from ABA; NYCBA; NYSBA; and TBMA. 459 See letter from Fried Frank. 460 See, e.g., letters from ABA; NYCBA; NYSBA; and TBMA. 461 See note 182 above. 462 We already have made clear that the date of first use for purposes of Securities Act Rule 424 is not the date that the prospectus supplement is given to a purchaser in connection with a sale. Rather, it refers to the date that the prospectus is available to the managing underwriter, syndicate member, or any prospective purchaser. See Elimination of Certain Pricing Amendments and Revision of Prospectus Filing Procedures, Release No. 33-6714 (May 27, 1987) [52 FR 21252]. 463 These new provisions determine when a prospectus supplement is deemed part of the registration statement for Securities Act Section 11 purposes. They do not affect the determination of when information is conveyed to a purchaser for Section 12(a)(2) liability purposes. 464 See amendments to Securities Act Rule 412(a) [17 CFR 230.412(a)]. 465 We also are amending Rule 158 to include conforming changes to the effective date for purposes of the last paragraph of Securities Act Section 11(a). Under Rule 430C, the filing of prospectus supplements will not trigger new effective dates of the registration statement. 466 The new effective date will not, however, be considered the filing of a new registration statement for purposes of Form eligibility. See Securities Act Rule 401. 467 Currently, there can be a mismatch between issuers and underwriters in the time that liability is assessed. For example, in an offering off a shelf registration statement, an issuer could have its liability assessed as of the date of the registration statement’s initial effectiveness (or post-effective amendment) or the most recent updating required under Securities Act Section 10(a)(3), while the liability of an underwriter would be assessed at the later time when it became an underwriter. In such a case, underwriters in takedowns occurring after the date of initial effectiveness (or post-effective amendment) or the Section 10(a)(3) update would be subject to liability under Section 11 for an issuer’s Exchange Act reports incorporated by reference into the prospectus included in the registration statement after that date while issuers would not. Rule 430B results in most cases in the date of effectiveness of a registration statement for an issuer and underwriter in a particular offering being close in time. 468 Prior to today’s amendments, Rule 158(c) provided that, for purposes of the last paragraph of Section 11(a), a new effective date is deemed to be the latest to occur of (1) the effective date of the registration statement, (2) any post-effective amendment next preceding a particular sale of registered securities by the issuer filed to update the registration statement pursuant to Section 10(a)(3) or to reflect in the prospectus fundamental changes in the information in the registration statement or add any material information about or reflect any material changes in the plan of distribution; or (3) the date of filing of the last report of the issuer incorporated by reference into the prospectus and relied on in lieu of filing a post-effective amendment to effect a Section 10(a)(3) update to the registration statement or to reflect a fundamental change in the information in the registration statement, next preceding a particular sale by the issuer of registered securities. 469 Securities Act Section 11(d) provides in part, “If any person becomes an underwriter with respect to the security after the part of the registration statement with respect to which his liability is asserted has become effective, then … such part of the registration statement shall be considered as having become effective with respect to such person as of the time when he became an underwriter.”
470 New audited financial statements or other information as to which the accountant is an expert and for which a new consent is required under Securities Act Section 7 [15 U.S.C. 77g] or Securities Act Rule 436 [17 CFR 230.436] includes any financial statements filed pursuant to Article 3 of Regulation S-X [17 CFR 210.301 et seq.] after the date of the last consent by the accountant, including those that are restated. Examples of such audited financial statements and financial information are (1) a restatement of the issuer’s or a guarantor’s financial statements, (2) financial statements required under Rule 3-05 of Regulation S-X [17 CFR 210.3-05], and (3) financial statements that are required under Rule 3-14 of Regulation S-X [17 CFR 210.3-14]. In addition, a new consent is required when the accountant’s report on management’s assessment of the registrant’s internal control over financial reporting is changed.
471 See, e.g., letters from ABA; AICPA; Alston, BDO Seidman; Deloitte; E & Y; KPMG; PwC; and SIA. 472 See, e.g., letters from ABA and SIA. 473 See, e.g., letters from ABA; AICPA; Alston, BDO Seidman; |
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