|
 
| |
SECURITIES AND EXCHANGE COMMISSION
SEC Votes To Adopt Securities Act Rule Reform and Shell
Company Regulations; Considers Matters Remanded by Court of
Appeals
FOR IMMEDIATE RELEASE
2005-99
Washington, D.C., July 1, 2005 - On June 29, 2005, the
Commission voted to adopt changes to rules regarding various
processes regulated under the provisions of the Securities Act
of 1933; voted to adopt regulations to deter fraud and abuse in
the securities markets through the use of shell companies; and
considered matters remanded to the Commission by the U.S. Court
of Appeals for the District of Columbia Circuit.
1. Rules Regarding Securities Offering Reform
The Commission voted to adopt modifications to the
registration, communications, and offering processes under the
Securities Act of 1933.
Categories of Issuers
In many cases, the amount of flexibility granted to issuers
under the reforms is contingent on the characteristics of the
issuer, including the type of issuer, the issuer's reporting
history, and the issuer's equity market capitalization or amount
of previously registered non-convertible securities, other than
common equity. The rules divide issuers into four categories.
 | A well-known seasoned issuer is a new class of issuer
that is current and timely in its Exchange Act reports for
at least one year and has either $700 million of worldwide
public common equity float or has issued $1 billion of
non-convertible securities, other than common equity, in
registered offerings for cash, in the preceding three years.
|
| A seasoned issuer is a primary shelf eligible issuer.
|
| An unseasoned issuer is an issuer that is required to
file reports pursuant to Sections 13 or 15(d) of the
Exchange Act, but is not a primary shelf eligible issuer.
|
| A non-reporting issuer is an issuer that is not required
to file reports pursuant to Sections 13 or 15(d) of the
Exchange Act.
|
The most significant revisions to the Commission's
communications rules and registration processes apply to
well-known seasoned issuers.
Liberalizing Communications Around the Time of Registered
Offerings
The rules update and liberalize permitted offering activity
and communications to allow more information to reach investors
by revising the "gun-jumping" provisions under the Securities
Act. The cumulative effects of these rules are:
| Well-known seasoned issuers are permitted to engage at
any time in oral and written communications, including use
at any time of a new type of written communication called a
"free writing prospectus," subject to enumerated conditions
(including, in some cases, filing with the Commission).
|
| All reporting issuers are, at any time, permitted to
continue to publish regularly released factual business
information and forward-looking information.
|
| Non-reporting issuers are, at any time, permitted to
continue to publish factual business information that is
regularly released and intended for use by persons other
than in their capacity as investors or potential investors.
|
| Communications by issuers more than 30 days before
filing a registration statement will be permitted so long as
they do not reference a securities offering that is the
subject of a registration statement.
|
| All issuers and other offering participants will be
permitted to use a free writing prospectus after the filing
of the registration statement, subject to enumerated
conditions (including, in some cases, filing with the
Commission). Offering participants, other than the issuer,
will be liable for a free writing prospectus only if they
use, refer to, or participate in the planning and use of the
free writing prospectus by another offering participant who
uses it. Issuers will have liability for any issuer
information contained in any other offering participant's
free writing prospectus as well as any free writing
prospectus they prepare, use, or refer to.
|
| The exclusions form the definition of prospectus are
expanded to allow a broader category of routine
communications regarding issuers, offerings, and procedural
matters, such as communications about the schedule for an
offering or about account-opening procedures.
|
| The exemptions for research reports are expanded.
|
A number of these new rules include conditions of
eligibility. Most of the rules, for example, are not be
available to blank check companies, penny stock issuers, or
shell companies.
The rules address the treatment under the Securities Act of
electronic communications, including electronic road shows and
information located on or hyperlinked to an issuer's website.
The rules define written communication as any communication that
is written, printed, a radio or television broadcast, or a
graphic communication. The definition of graphic communication
and, thus, electronic road show excludes communications that are
carried live and in real-time to a live audience, regardless of
the means of transmission. Electronic road shows for initial
public offerings of common equity or convertible equity
securities will have to make a bona fide electronic road show
readily available to an unrestricted audience to avoid filing
the electronic road show with the Commission. No other road
shows will be subject to filing.
Liability Timing Issues
The Commission addressed the liability provisions under the
Securities Act. In this regard, the Commission:
| Reaffirmed the interpretation and adopted an
interpretive rule that, for purposes of disclosure liability
under Section 12(a)(2) and Section 17(a)(2) of the
Securities Act, when assessing whether a statement to an
investor prior to or at the time of sale by a seller
includes or represents a material misstatement or omits to
state a material fact necessary to make the statement in
light of the circumstances under which it was made, not
misleading, information conveyed to the investor only after
the time of the contract of sale should not be taken into
account.
|
| Approved changes to the Securities Act procedures for
shelf registration that will ensure that prospectus
supplements filed after the initial effective date of a
registration statement will be included in the registration
statement for Securities Act Section 11 liability purposes.
|
| Approved rules that will establish a new Section 11
effective date for each takedown off a shelf registration
statement for issuers and underwriters, and not for experts,
directors, and signing officers. If an expert provides a new
report or opinion in an Exchange Act report or in connection
with the takedown that would require a consent, however,
there would be a new effective date for that expert.
|
Improvements to Registration Procedures
The rules will make improvements to the shelf registration
provisions that will modernize the operation of the shelf
registration process under the Securities Act. The changes will:
| Codify in a single rule the information that may be
omitted from a base prospectus in a shelf registration
statement at effectiveness and included later;
|
| Replace the requirement that issuers register only
securities they intend to offer within two years with a
requirement that the issuer update the registration
statement with a new registration statement that is filed
every three years;
|
| Eliminate restrictions on "at-the-market" equity
offerings by seasoned issuers with a $75 million public
float;
|
| Permit immediate takedowns of securities off of shelf
registration statements;
|
| Permit issuers to use prospectus supplements (rather
than post-effective amendments) to make material changes to
the plan of distribution described in the base prospectus;
|
| For seasoned issuers with a $75 million public float,
revise the requirement to identify selling security holders
by permitting selling security holders to be identified in
prospectus supplements (rather than post-effective
amendments), where the securities to be sold (or securities
convertible into such securities) are outstanding when the
registration statement is filed; and
|
| Establish a significantly more flexible version of shelf
registration, referred to as "automatic shelf registration"
for offerings by well-known seasoned issuers. Automatic
shelf registration permits automatic effectiveness,
pay-as-you-go registration fees, and the ability to exclude
additional information from base prospectuses.
|
The rules also contain procedural changes that will allow
reporting issuers that are current in filing their Exchange Act
reports to incorporate by reference previously filed Exchange
Act reports and other materials into a Securities Act
registration statement on Form S-1 or Form F-1.
Prospectus Delivery Reforms
The rules will change the way in which the final prospectus
delivery obligations under the Securities Act are satisfied. The
change will create an "access equals delivery" model for final
prospectuses. Under this model, filing a final prospectus with
the Commission and complying with other conditions will enable
offering participants to conduct securities offerings without
printing and actually delivering final prospectuses. A cure
provision for inadvertent failures to file is included. In
addition, the rules include a separate requirement to notify
investors that they purchased securities in a registered
offering.
Required Disclosure in Exchange Act Reports
The rules require issuers to include the following in their
Exchange Act periodic reports:
| For Form 10-K filers, disclosure of risk factors, where
appropriate;
|
| Disclosure regarding the issuer's status as a
"voluntary" filer of Exchange Act reports; and
|
| For "accelerated filers" and well-known seasoned
issuers, disclosure in their reports of written staff
comments that were issued more than 180 days before the end
of the fiscal year to which the annual report relates, where
those comments remain unresolved at the time of filing the
annual report and the issuer believes those comments to be
material.
|
The effective date of the rules will be 120 days following
publication in the Federal Register. |
|
|
