Beginning on July 10, 2017, the Securities and Exchange Commission’s (“SEC”) Division of Corporation Finance will accept nonpublic draft registration statements from all issuers relating to IPOs and initial registrations under Section 12(b) of the Securities Exchange Act of 1934 (“Exchange Act”).
The confidential submission and review process is beneficial to issuers because it provides them with control of information surrounding their IPO while the issuer is likely to still be in the planning process, and it allows the issuer to identify, on a confidential basis, whether there will be significant issues in getting the registration statement approved.
Up to this point, such a submission of a draft registration statement for nonpublic review was a benefit permitted solely to “emerging growth companies” (“EGCs”) pursuant to the JOBS Act of 2012. As of July 10, 2017, any issuer may submit the following registration statements in draft form for nonpublic review:
- A Securities Act of 1933 (“Securities Act”) registration statement for an IPO;
- An Exchange Act registration statement for the initial registration of a class of securities under Section 12(b), which relates to the listing of the class on a national securities exchange; and
- A Securities Act registration statement submitted prior to the end of the twelfth month following the effective date of an issuer’s initial Securities Act registration statement or an issuer’s Exchange Act Section 12(b) registration statement.
Securities Act registration statements for IPOs may be submitted for nonpublic filing by any issuer so long as the issuer confirms in a cover letter that it will publicly file its registration statement and nonpublic draft submissions at least 15 days prior to any road show or, in the absence of a road show, at least 15 days prior to the requested effective date of the registration statement.
It should be noted that, as the guidance is currently written, a non-EGC issuer can not pre-market or make or accept offers for the securities until the registration statement is public. This differs from the treatment of EGCs under Section 5(d) of the Securities Act and well-known seasoned issuers (“WKSIs”) under Rule 163, which permit pre-filing offers. This discrepancy may be cleared up through further rule-making.
Initial Registration Under Section 12(b)
Exchange Act draft registration statements and related revisions may be submitted on a nonpublic basis so long as the issuer confirms in a cover letter that it will publicly file its registration statement and nonpublic draft submissions at least 15 days prior to the anticipated effective date of the registration statement for its listing on a national securities exchange.
Initial Submissions of Registration Statements Within One Year of an IPO of Exchange Act 12(b) Registration
Securities Act draft registration statements may be submitted prior to the end of the twelfth month following the effective date of an issuer’s initial Securities Act registration statement or an issuer’s Exchange Act Section 12(b) registration statement for nonpublic review, so long as the issuer confirms in its cover letter that it will publicly file its registration statement and nonpublic draft submission such that it is publicly available on the EDGAR system at least 48 hours prior to any requested effective time and date.
This change is particularly beneficial for issuers who are not yet able to be classified as a WKSI (such classification cannot be granted until one year after the IPO). A WKSI can file a shelf that is automatically effective which allows the WKSI to announce a transaction at filing. However, under the previous scheme, a non-WKSI was instead required to file a registration statement that is public for a period of time before a deal is launched, thereby risking the creation of downward selling pressure on the stock price. Now, any non-WKSI will have the benefit of a non-public filing within one year of an IPO to hedge that risk.
Foreign Private Issuers
Foreign Private Issuers may elect to proceed in accordance with the above procedures or those available to EGCs (if the issuer qualifies as an EGC) or follow the guidance for nonpublic submissions from foreign private issuers released by the SEC on May 30, 2012.
Content of Draft Registration Statements and Staff Processing
The staff announced that an issuer should take all steps to ensure that a draft registration statement is substantially complete when submitted, but they will not delay processing if an issuer reasonably believes omitted financial information will not be required at the time the registration statement is publicly filed. In addition, the staff will consider reasonable requests to expedite processing of draft and filed registration statements and encourages issuers and their advisors to review their transaction timing with the staff assigned to the filing review.
Because the SEC’s willingness to accept draft registration statements on a nonpublic basis is not pursuant to any statute, the statements are likely subject to discovery under the Freedom of Information Act by the public, including competitors. If a company wants to ensure confidentiality of its draft registration statement, it should follow the procedures for confidential treatment under SEC Rule 83.
The staff will continue to monitor practices under the expanded nonpublic review process and may make modifications to or terminate the procedures. A copy of the staff’s announcement regarding the expanded confidential process is available here, and a copy of the SEC’s answers to FAQs is available here.
KMK Law articles and blog posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. The laws/regulations and interpretations thereof are evolving and subject to change. Although we will attempt to update articles/blog posts for material changes, the article/post may not reflect changes in laws/regulations or guidance issued after the date the article/post was published. Please consult with counsel of your choice regarding any specific questions you may have.
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Chris Brinkman practices in the firm's Business Representation & Transactions Group with a concentration in venture capital transactions, start-ups & growth companies, securities, and mergers and acquisitions.
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