SEC has modified application of its Securities Act rules based on a new  scheme to categorize issuers

• Per Securities Offering Reform 2005

An issuer is either a:

• Well-known seasoned issuer ("WKSI")
• Seasoned issuer
• Unseasoned issuer
• Non-reporting issuer

Based on category, application of Securities Act rules
vary for:

• Registering securities
• Restrictions on communications during an offering

Categorization builds on existing SEC rules

• Primarily by adding the WKSI category
• Which is basically an S-3/F-3 eligible issuer that meets a heightened public float / debt issuance requirement
• Ineligible issuers are excluded from benefits of rules

SEC has a separate parallel scheme for Exchange Act

• An issuer is either a:

• Large accelerated filer
• Accelerated filer
• Non-accelerated filer

• Classification affects when periodic reports are due

• See Issuer Categories - Exchange Act

Definition - Rule 405

General requirements

• Required to file Exchange Act reports
• Current in Exchange Act reporting
• Timely in Exchange Act reporting
  for prior 12 calendar months

• Form S-3 eligible (or Form F-3)
• Has $700 million in public float, or
  has issued $1 billion in registered debt during past 3 years

Ineligible for WKSI status:

• Ineligible issuers
• Asset-backed issuers
• Voluntary filers

Benefits of WKSI status

• Automatic shelf registration:
  Form S-3 / Form F-3 become effective upon filing
  See Automatic Shelf Registration

Majority-owned subsidiaries can be a WKSI, if:

WKSIs represent substantial share of US capital markets

SEC final release commentary

SEC proposal release commentary

SEC FAQs

Form S-3 / F-3 eligible for primary offerings

• See Form S-3 Gen. Instr. 1.B.1
• See Form F-3 Gen. Instr. I.B.2
• Includes majority-owned subsidiaries otherwise eligible to use Form S-3 / Form F-3

SEC final release commentary

SEC proposal release commentary

Required to file Exchange Act reports

But not Form S-3 / F-3 eligible for primary offerings

• See Form S-3 Gen. Instr. 1.B.1
• See Form F-3 Gen. Instr. I.B.2

Includes voluntary filers

SEC final release commentary

SEC proposal release commentary

Neither required to file Exchange Act reports
nor a voluntary filer

• e.g., an IPO filer

• Note: many Sarbanes-Oxley Act requirements apply to companies from the time they file a registration statement
• See SOX Act §2 definition of issuer

SEC final release commentary

SEC proposal release commentary

Rule 405 definition

Specified kinds of issuers are excluded from benefits of Securities Offering Reform, including:

• Not current in Exchange Act reports for the prior 12 months
• Have filed for bankruptcy in prior three years
• Blank check, shell company or penny stock issuers
• Limited partnerships

• Unless using a firm commitment underwriting

• During past three years:

• Convicted of a specified felony or misdemeanor
• Violated securities law anti-fraud provisions
• Subject of a judicial or administrative decree or order (including a settled claim or order) prohibiting violations of the securities law anti-fraud provisions

SEC final release commentary

SEC FAQs

General FAQs 11.30.05

• Well-known seasoned issuer definition
• Ineligible issuers

Law firms

• Protecting WKSI status - Fried Frank 10.21.05

Securities Offering Reform 2005

Foreign Private Issuers