[Federal Register Volume 62, Number 40 (Friday, February 28, 1997)]
[Proposed Rules]
[Pages 9276-9287]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4669]
[[Page 9276]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 228, 229, 230
[Release No. 33-7393; S7-9-97]
RIN 3235-AG86
Delayed Pricing for Certain Registrants
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rules.
-----------------------------------------------------------------------
SUMMARY: The Securities and Exchange Commission (``Commission'') is
publishing for comment proposed amendments to Rule 430A under the
Securities Act to permit certain smaller reporting companies to price
securities on a delayed basis after effectiveness of a registration
statement, if they meet specified conditions. These proposals are
intended to enhance flexibility and efficiency for qualified companies,
consistent with investor protection, by enabling them more easily to
time their offerings to advantageous market conditions.
DATES: Comments should be submitted on or before April 29, 1997.
ADDRESSES: All comments concerning the rule proposals should be
submitted in triplicate to Jonathan G. Katz, Secretary, U.S. Securities
and Exchange Commission, Mail Stop 6-9, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Comments also may be submitted electronically
at the following e-mail address: rule-comments@sec.gov. All comment
letters should refer to File Number S7-9-97; this file number should be
included on the subject line if e-mail is used. Comment letters will be
available for inspection and copying in the public reference room at
the same address. Electronically submitted comment letters will be
posted on the Commission's Internet Web site (http://www.sec.gov).
FOR FURTHER INFORMATION CONTACT: Barbara C. Jacobs, Office of Small
Business, Division of Corporation Finance, at (202) 942-2950.
SUPPLEMENTARY INFORMATION: The Commission today is proposing amendments
to Rules 415,1 424,2 430A,3 and 434 4 under the
Securities Act of 1933 (``Securities Act'').5 In addition,
amendments are being proposed to Items 512 and 601(b) of Regulations S-
B 6 and S-K.7
---------------------------------------------------------------------------
\1\ 17 CFR 230.415.
\2\ 17 CFR 230.424.
\3\ 17 CFR 230.430A. In the release adopting the Phase One
Recommendations of the Task Force on Disclosure Simplification, the
Commission rescinded the special filing rules for competitive
bidding, recognizing that Rule 430A could be used for these purposes
in accordance with staff interpretation. Release No. 33-7300 (May
31, 1996) [61 FR 30397]. Technical changes also are being proposed
today to remove references to competitive bidding in paragraph (d)
of current Rule 430A and to remove Item 512(c) of Regulation S-B [17
CFR 228.512(c)] and Item 512(d) of Regulation S-K [17 CFR
229.512(d)].
\4\ 17 CFR 230.434.
\5\ 15 U.S.C. 77a et seq.
\6\ 17 CFR 228.601(b).
\7\ 17 CFR 229.601(b).
---------------------------------------------------------------------------
I. Executive Summary
The Commission today is publishing for comment proposals to permit
certain smaller companies, including small business issuers, to delay
pricing of primary offerings after the registration statement becomes
effective in order to provide them enhanced flexibility in the
marketplace. By having more control over the timing of their offerings,
these companies could take advantage of desired market conditions. Such
flexibility could enable such companies to raise equity capital on more
favorable terms or to obtain lower interest rates on debt. The
proposals also would permit a company to vary certain terms of the
securities being offered upon short notice,8 in order to meet the
requirements of the public securities markets. This increased
flexibility could result in smaller companies raising more capital
through the public markets rather than through exempt offerings
conducted in the domestic and offshore markets.
---------------------------------------------------------------------------
\8\ The securities would have to be described in the
registration statement, but certain price-related and other terms
could be omitted until the price was determined. See n. 16, below.
---------------------------------------------------------------------------
There are significant regulatory constraints on the flexibility of
smaller companies to time their primary offerings to avail themselves
of advantageous market conditions. Under the current rules, smaller
companies must coordinate the effectiveness of their registration
statements with the time that they would like to offer and sell
securities. They then must price the securities promptly after
effectiveness, subject to the limited flexibility provided by current
Rule 430A. Smaller companies may face risks associated with changing
market conditions during the pendency of possible Commission staff
review. Larger companies have much more flexibility because they are
allowed to use ``shelf'' registration, which permits them to register
in advance of offerings and take the securities ``off the shelf''
either in one offering or in segments (i.e., tranches) without further
staff review when market conditions are right.9
---------------------------------------------------------------------------
\9\ Rule 415, the shelf registration rule, enumerates the types
of offerings that may be offered on a delayed or continuous basis.
Unless the securities fall within one of the provisions of Rule 415
detailing the various traditional shelf offerings, for example,
securities to be offered and sold pursuant to a dividend or interest
reinvestment plan, a company must be eligible to use short form
registration statement Form S-3 [17 CFR 239.13] or F-3 [17 CFR
239.33].
For primary offerings on Form S-3, a company must: (1) be
subject to the reporting requirements of Section 13 [15 U.S.C. 78m]
or 15(d) [15 U.S.C. 78o(d)] of the Securities Exchange Act of 1934
(``Exchange Act'') [15 U.S.C. 78a et seq.]; (2) have filed all
material required to be filed pursuant to Section 13, 14 [15 U.S.C.
77j(a)] or 15(d) for 12 calendar months immediately preceding the
filing of the registration statement; (3) have filed in a timely
manner all required reports; (4) have satisfied certain fixed
obligations; and (5) have $75 million or more in public float.
General Instruction I to Form S-3.
---------------------------------------------------------------------------
The Commission understands that the timing concerns of smaller
companies have led some of these companies to forego registered
offerings. The Commission is considering whether additional flexibility
could be given to smaller companies without sacrificing investor
protection. The proposals would not go so far as to extend full shelf
registration to smaller companies. They would, however, permit certain
smaller companies to price on a delayed basis after effectiveness,
subject to important registrant and offering requirements designed to
ensure that adequate company disclosure is available to the public
securities markets. There would be no reduction in the information
required to be disclosed or delivered to investors or in the issuer's
liabilities under the federal securities laws. There would, however, be
a change in the timing of delivery of information to investors, namely,
information would have to be delivered to investors at least 48 hours
before delivery of the confirmation of sale. This would be analogous to
the preliminary prospectus delivery requirement for initial public
offerings.10
---------------------------------------------------------------------------
\10\ Exchange Act Rule 15c2-8 [17 CFR 240.15c2-8].
---------------------------------------------------------------------------
This delayed pricing proposal is one of four Commission initiatives
being issued today. Two of these releases relate to Rule 144,11
the non-exclusive safe harbor for resales of ``restricted'' securities
and securities held by affiliates of the issuer. The Commission is
shortening the holding period requirements in Rule 144 to reduce the
costs of private capital formation.12 In addition, the Commission
proposes to amend Rule 144 to simplify and clarify the rule and to
codify staff interpretations.13 Finally, the Commission is
proposing amendments
[[Page 9277]]
to Regulation S, 14 the Securities Act safe harbor for offshore
offerings or resales, in order to curtail Regulation S abuses.15
---------------------------------------------------------------------------
\11\ 17 CFR 230.144.
\12\ Release No. 33-7390 (February 20, 1997). Under the
amendments, the holding period for resales of limited amounts of
securities by any person is reduced from two years to one year, and
the holding period for resales by non-affiliates is reduced from
three to two years.
\13\ Release No. 33-7391 (February 20, 1997).
\14\ 17 CFR 230.901-904.
\15\ Release No. 33-7392 (February 20, 1997).
---------------------------------------------------------------------------
II. Proposals
A. Proposed Rule 430A(e)
1. Overview and General Considerations
Current Rule 430A permits companies, if specified conditions are
satisfied, to omit information concerning the public offering price,
other price-related information and the underwriting syndicate from the
prospectus contained in the registration statement at the time that the
registration statement is declared effective.16 Typically, this
information is provided in a supplemented prospectus within fifteen
business days after the effectiveness of the registration
statement.17
---------------------------------------------------------------------------
\16\ Current Rule 430A eliminates the need for pre-effective
amendments to registration statements filed solely to provide this
information. This information consists of information with respect
to the public offering price (e.g., interest rate, dividend rate,
day of month of redemption), underwriting syndicate, underwriting
discounts or commissions to dealers, amount of proceeds, conversion
rates, call prices and other items dependent upon the offering
price, delivery dates, and terms of the securities dependent upon
the offering date.
As with a current Rule 430A prospectus, under the proposal a
prospectus used after effectiveness but prior to pricing would have
to be clearly marked on the cover page to indicate that it is
subject to completion or amendment. Items 501(a)(8) of Regulation S-
K [17 CFR 229.501(a)(8)] and Regulation S-B [17 CFR 228.501(a)(8)].
\17\ Rule 430A(a)(3). When a supplemented prospectus is not
filed within the prescribed time, a post-effective amendment to the
registration statement is filed. This post-effective amendment
either restarts the 15-day pricing period or contains the omitted
information.
---------------------------------------------------------------------------
The purpose of today's proposal is to provide pricing flexibility
beyond that permitted by current Rule 430A. The rule would be amended
to add a new paragraph providing an alternative procedure--a ``delayed
pricing'' procedure with no fifteen day requirement.18 To be
eligible to use the new procedure, a company would have to satisfy the
requirements of current Rule 430A, 19 and could omit the same
information from the prospectus before pricing.20 In addition,
expanded Rule 430A would permit the company to omit the name of the
managing underwriter, if any, from the registration statement that is
declared effective.21 The company ultimately would provide all
omitted information in a supplemented prospectus, but would not be
required to do so within any specified time period--only when it
decided to price and offer the securities.22
---------------------------------------------------------------------------
\18\ Proposed Rule 430A(e). For purposes of this release, Rule
430A as it stands today is referred to as ``current Rule 430A''
while this proposal is referred to as ``expanded Rule 430A'' or
``delayed pricing.'' Registrants not eligible to use expanded Rule
430A could continue to use current Rule 430A.
The genesis for this delayed pricing proposal is a
recommendation from the Report of the Task Force on Disclosure
Simplification, which was published on March 5, 1996.
\19\ For example, current Rule 430A is limited to offerings of
securities for cash and to registration statements that are declared
effective.
\20\ As with current Rule 430A, a complete description of
securities would be required to be set forth in the prospectus
contained in the registration statement declared effective. Item 202
of Regulation S-K [17 CFR 229.202].
Only S-3 eligible companies are permitted to register aggregate
amounts of securities without allocation among classes. (General
Instruction II.D of Form S-3 pertains to unallocated shelf
registration statements.)
\21\ Current Rule 430A permits a registration statement to be
declared effective that contains a prospectus that omits information
on the underwriting syndicate. Information on the managing
underwriter must be disclosed. See Rule 430A(a) and Release No. 33-
6714 (May 27, 1987) [52 FR 21252] at Section II.A.2. See Section
II.A.2.b.1, below, for further information regarding identifying
managing underwriters. Expanded Rule 430A could be used for self-
underwritten offerings.
\22\ In addition to supplying the omitted information, the
supplemented prospectus would be updated as needed. In addition to
the information expressly required in any federal securities law
document, there must be added such further material information, if
any, as may be necessary to make the required statements, in light
of the circumstances under which they were made, not misleading. See
Securities Act Rule 408 [17 CFR 230.408] and Exchange Act Rule 12b-
20 [17 CFR 240.12b-20].
---------------------------------------------------------------------------
To be eligible for this flexibility in timing, the company would
have to satisfy the following registrant and offering requirements:
Registrant requirements.
The company would have to have been subject to the
reporting provisions of the Exchange Act during the most recent 12
months preceding the filing of the registration statement and have
filed all required reports for this period. In addition, the company
would have to have filed all required reports at the time of
offering and sale.
The company would have to be a domestic issuer, except
that a foreign private issuer could rely upon the rule if it had
filed the same Exchange Act reports as domestic issuers.
The company could not be an investment company
registered under, or a business development company regulated under,
the Investment Company Act of 1940.23
---------------------------------------------------------------------------
\23\ 15 U.S.C. 80a-1 et seq.
---------------------------------------------------------------------------
The company could not be a blank check company or a
company that issues penny stock.
The company would have to have satisfied specified
electronic filing provisions under the Commission's electronic
filing rules.24
---------------------------------------------------------------------------
\24\ These rules are generally found in Regulation S-T [17 CFR
Part 232].
---------------------------------------------------------------------------
Offering requirements
The company would be required to file a post-effective
amendment to its registration statement to: provide annual audited
financial statements; furnish financial statements for probable
acquisitions over the 50% materiality level and pro forma financial
information; and satisfy the undertakings for updating a
registration statement as required by Item 512(a) of Regulation S-K
or Regulation S-B, as applicable.25
---------------------------------------------------------------------------
\25\ 17 CFR 229.512(a) and 228.512(a). For purposes of this
release, references to specific items of Regulation S-K [17 CFR
229.10 et seq.] also pertain to analogous provisions of Regulation
S-B [17 CFR 228.10 et seq.].
---------------------------------------------------------------------------
Each time a prospectus was delivered, it would be
accompanied by the most recent Form 10-Q 26 or 10-QSB 27
and Forms 8-K 28 (or a supplement would provide the information
included in those reports). All forms of the prospectus filed with
the Commission pursuant to Securities Act Rule 424 in connection
with the offering as well as the Exchange Act information would be
deemed part of the registration statement for liability purposes as
of the date of first use. In addition, the Exchange Act information
would be deemed to be a part of the prospectus as of the date of
first use.
---------------------------------------------------------------------------
\26\ 17 CFR 249.308a.
\27\ 17 CFR 249.308b.
\28\ 17 CFR 249.308.
---------------------------------------------------------------------------
The supplemented prospectus containing any updating
information and the name of the managing underwriter(s), if any,
together with any quarterly and Form 8-K information, would be
delivered to any person who is expected to receive a confirmation of
sale at least 48 hours before the sending of any confirmation of
sale. Further, the supplemented prospectus containing any updating
information and all the omitted information, along with any
quarterly and Form 8-K information, would accompany or precede any
confirmation of sale.
These requirements are designed to assure that investors have
adequate and current disclosure available to them to be able to make
informed investment decisions at the time the securities are offered
and sold.
The proposed new procedure would not reduce the level of liability
under the Securities Act that applies to the information on which the
investment decision is based; all information delivered would be deemed
to be part of the registration statement for liability purposes and a
part of the prospectus as of the date of first use. Informational
requirements of a final prospectus meeting the requirements of Section
10(a) of the Securities Act 29 would remain the same. 30
Further, the rule
[[Page 9278]]
proposal is not intended to permit ``generic'' registration statements
that contain only minimum information about a proposed offering.
---------------------------------------------------------------------------
\29\ 15 U.S.C. 77j(a).
\30\ The proposal would not affect requirements concerning the
age of financial statements contained in the registration statement
at the time of effectiveness or the exhibits required to be filed as
part of the registration statement before effectiveness. Rule 3-12
of Regulation S-X [17 CFR 210.3-12] and Item 601 of Regulation S-K
[17 CFR 229.601].
As with current Rule 430A, trust indentures would not have to be
filed in executed form at the time of effectiveness of the
registration statement. The filing requirement may be satisfied by
submission of the final form of the document to be used; the form
must be complete, except that signatures and related matters could
be omitted.
---------------------------------------------------------------------------
The due diligence efforts performed by underwriters, accounting
professionals and others play a critical role in the integrity of our
disclosure system. Under the current offering process for smaller
companies, ample time exists for these ``gatekeepers'' to carry out due
diligence activities. Concerns have been raised that the expedited
access to the markets that would be provided by these proposals could
make it difficult for gatekeepers, particularly underwriters, to
perform adequate due diligence for the smaller companies that would be
eligible to use expanded Rule 430A. 31 This may be particularly
true if a company is able to seek aggressive competitive bids from
several underwriters in a very short time frame immediately before
offering its securities. While the nature of the due diligence
investigation will vary considerably from one company to another
because of the nature of the company, the underwriter's or other
gatekeeper's involvement with the company over time, and the type of
security being offered, is due diligence practical for offerings under
these proposals? Could an underwriter perform the same quality of due
diligence in a much shorter period of time? If not, should reliance on
underwriters' due diligence continue if it would slow down the rapid
access to the capital markets for smaller companies contemplated by
these proposals? Has there been a change in the role other parties play
concerning smaller companies, such as analysts or rating agencies, that
should be considered? Should a waiting period between the company's
determination to sell its securities and the commencement of the
offering be imposed to permit greater time for due diligence? The rule
proposal includes a number of safeguards and comment is solicited on
whether additional safeguards should be included. Commenters should
address whether these safeguards would adequately address the due
diligence issues.
---------------------------------------------------------------------------
\31\ The Commission estimates that at least 3,200 companies
would qualify to use these proposals that do not qualify to use
shelf registration. The average eligible company has a market
capitalization of $27.5 million, assets of $80.1 million, and annual
sales of $57.8 million. The median eligible company has a market
capitalization of $22.3 million, assets of $27.0 million, and annual
sales of $20.9 million.
---------------------------------------------------------------------------
In addition, comment is solicited as to whether all the items of
information that are permitted to be omitted under current Rule 430A(a)
are appropriate for an offering under expanded Rule 430A. Is additional
flexibility to omit information needed? In this regard, should certain
terms of preferred or debt securities, such as financial covenants, be
permitted to be omitted, or would this flexibility be inappropriate for
smaller issuers? 32 Is it likely that expanded Rule 430A would be
used for such securities, or is it likely that only common equity would
be sold under this rule? Should the new provision be limited to common
equity?
---------------------------------------------------------------------------
\32\ Under the proposal, as under current Rule 430A, the pricing
terms of preferred stock that may be set by the board of directors
under state law, such as the timing of an interest rate reset, could
be set forth at the time of pricing.
---------------------------------------------------------------------------
2. Conditions for Use of Expanded Rule 430A
Today's proposal would permit smaller companies to delay pricing
their offerings so long as they otherwise met the requirements of
current Rule 430A, other than the requirement to identify the managing
underwriter(s) at the time the registration statement is declared
effective, and they satisfied certain registrant and offering
requirements. These latter requirements would assure that investors
receive accurate and current information and the liabilities of the
parties remain the same.
a. Registrant Requirements
First, expanded Rule 430A would be available only to a company that
has been subject to the reporting provisions of Section 13(a) or 15(d)
of the Exchange Act during the most recent twelve calendar months
immediately preceding the filing of the registration statement and has
filed all the material required to be filed pursuant to Section 13(a),
14 or 15(d) for this period.33 In addition, the company must have
filed all such required material at the time of offering and
sale.34 This proposed condition should help assure adequate and
current public information concerning these companies. Comment is
solicited as to whether a shorter (e.g., six months) or longer (e.g.,
two years) reporting period would be preferable. Should expanded Rule
430A be available in initial public offerings?
---------------------------------------------------------------------------
\33\ Proposed Rule 430A(e)(1)(i). The provisions of this rule
would be available to a successor registrant. Proposed Instruction
to Rule 430A(e) uses the same definition as General Instruction
I.A.7 of Form S-3 and General Instruction I.F. of Form S-2 [17 CFR
239.12].
\34\ Proposed Rule 430A(e)(1)(i). This requirement would need to
be met at the time of using both the 48-hour prospectus and the
pricing prospectus discussed below.
---------------------------------------------------------------------------
Comment also is solicited as to whether there should be qualitative
conditions on the use of expanded Rule 430A. For example, to use Form
S-2 or Form S-3, a company must be timely as well as current in its
reporting obligations.35 In addition, a company must not have
failed to pay any dividend or sinking fund installment on preferred
stock or defaulted on any installment or installments of indebtedness
or on any rental on one or more long-term leases.36 Should a
company using the rule be required to satisfy any of these conditions,
any combination of these conditions, or all of these conditions? Are
such conditions necessary, given the other protections of expanded Rule
430A?
---------------------------------------------------------------------------
\35\ General Instruction I.C. to Form S-2 and General
Instruction I.A.3 of Form S-3.
\36\ General Instruction I.D. to Form S-2 and General
Instruction I.A.5 to Form S-3.
---------------------------------------------------------------------------
In addition, comment is solicited as to whether there are certain
significant events (e.g., a company, a majority shareholder, director,
or executive officer found by a court or administrative body to have
violated the federal securities laws) that should disqualify a company
from using delayed pricing even though the expanded Rule 430A
registration statement had been declared effective? Should a company be
precluded from using expanded Rule 430A if it chooses a managing
underwriter that was the underwriter of securities covered by any
registration statement that is the subject of any pending proceeding or
examination under Section 8 of the Securities Act,37 or was the
subject of any refusal order or stop order entered thereunder within 5
years? Should a company be permitted to use expanded Rule 430A where it
names a managing underwriter that is, or was, subject to a permanent
injunction for federal securities law violations? Comment also is
solicited as to whether a company should be precluded from using the
rule if its audited financial statements contain a ``going concern''
opinion from its accountants.
---------------------------------------------------------------------------
\37\ 15 U.S.C. 77h.
---------------------------------------------------------------------------
Second, the proposal would be available to foreign private issuers
only if they file the same reports under Section 13(a) or 15(d) of the
Exchange Act and meet the same disclosure requirements as domestic
companies.38 This limitation appears appropriate, given that
foreign private issuers can file
[[Page 9279]]
periodic reports less frequently than domestic companies.39 To
permit smaller companies to delay pricing, there must be sufficient and
current public information available in the marketplace and delivered
to investors to assure investor protection. Comment is solicited as to
whether there are alternative conditions that could be placed on
foreign private issuers not eligible to use Form F-3 so that they could
rely upon the proposals.
---------------------------------------------------------------------------
\38\ Proposed Rule 430A(e)(1)(ii).
\39\ Under the foreign integrated disclosure system, reporting
foreign private issuers file an annual report on Form 20-F [17 CFR
249.220f]. All other interim financial information required to be
made public is based upon home-country rules and practices.
Consequently, foreign private issuers are not required to file
quarterly reports on Form 10-Q or current reports on Form 8-K in
accordance with U.S. disclosure practices. Rule 13a-16 [17 CFR
240.13a-16].
---------------------------------------------------------------------------
Third, investment companies registered under, and business
development companies regulated under, the Investment Company Act of
1940 would be excluded from the use of expanded Rule 430A since these
companies have special flexibility and restrictions on their securities
that make delayed pricing unnecessary.40 Comment is solicited,
however, as to whether there are circumstances under which the
flexibility of delayed pricing would be a useful tool for certain types
of registered investment companies and business development companies.
---------------------------------------------------------------------------
\40\ Proposed Rule 430A(e)(1)(iii).
---------------------------------------------------------------------------
Fourth, blank check and penny stock issuers would be ineligible to
use the proposed rule, given the substantial abuses that have arisen in
such offerings.41 Are there any additional classes of issuers that
should be excluded from expanded Rule 430A either because of the nature
of the investment vehicle (e.g., partnership or other similar programs)
or potential for abuse (e.g., blind pools that will not commit a
material portion of the net proceeds of the offering to specified
assets)? Should the same securities law violation disqualification
provisions that are used in the Private Securities Litigation Reform
Act of 1995 42 preclude the use of this rule?
---------------------------------------------------------------------------
\41\ Proposed Rule 430A(e)(1)(iv). A ``blank check'' company is
defined at Securities Act Rule 419(a)(2) [17 CFR 230.419(a)(2)],
while ``penny stock'' is defined at Exchange Act Rule 3a51-1 [17 CFR
240.3a51-1].
\42\ Pub. L. No. 104-67, 109 Stat. 737 (December 22, 1995). As
part of the Act, Section 27A was added to the Securities Act [15
U.S.C. 77z-2] and Section 21E was added to the Exchange Act [15
U.S.C. 78u-5] to create a statutory safe harbor from private
liability for certain forward-looking statements. Among other
matters, the 1995 Act excludes from the safe harbor statements made
by the issuer and certain persons if the statements were made within
three years after the maker of the statement had been found
responsible for certain securities law or related violations. See
Section 27A(b)(1)(A) of the Securities Act and Section 21E(b)(1)(A)
of the Exchange Act.
---------------------------------------------------------------------------
The final registrant condition would pertain to the Electronic Data
Gathering, Analysis, and Retrieval (``EDGAR'') system of the
Commission. As of May 6, 1996, the Commission has required all domestic
companies to file most of their documents electronically via EDGAR,
43 absent a hardship exemption. One of the advantages of EDGAR is
that it facilitates the dissemination of time-sensitive information to
the nation and the world in a matter of minutes, giving investors and
financial markets the benefit of immediate access to the information.
In September 1995, the Commission established its own Internet Web site
and began to post EDGAR filings and other materials on a 24-hour
delayed basis.44
---------------------------------------------------------------------------
\43\ Forms SB-1 [17 CFR 239.9] and SB-2 [17 CFR 239.10] relating
only to initial public offerings may be filed in paper at the
Commission's Headquarters until May 5, 1997. Release No. 33-7373
(December 16, 1996) [61 FR 67200].
\44\ The Commission's Internet Web site address is http://
www.sec.gov.
---------------------------------------------------------------------------
Since the proposals would extend the flexibility of delayed pricing
to companies not eligible for Form S-3, adequate and current
information regarding these companies must be broadly disseminated and
available to the public. As EDGAR filings help assure such
dissemination, the proposals would require that the company satisfy the
same two EDGAR-related eligibility requirements as for Forms S-2 and S-
3.45 First, the company must have filed all required electronic
filings, including confirming electronic copies of documents submitted
in paper pursuant to a hardship exemption.46 Second, the company
must have submitted all required financial data schedules.47 In
addition, to ensure that company-related information about these non-S-
3 eligible companies is on the EDGAR database and thus widely
disseminated, the proposals also would require that the company not
have obtained a continuing hardship exemption under Rule 202(a) of
Regulation S-T from the electronic filing requirements of the
Commission during the 12 months immediately preceding the filing of the
registration statement.48 These EDGAR requirements would apply
both at the time the registration statement is filed and the time of
offer and sale.
---------------------------------------------------------------------------
\45\ General Instructions I.H to Form S-2 and I.A.8 to Form S-3.
\46\ Proposed Rule 430A(e)(1)(v).
\47\ Proposed Rule 430A(e)(1)(v). Financial data schedules are
required to be submitted as exhibits to filings containing updated
annual or interim financial information, other than by incorporation
by reference. Item 601(c) of Regulation S-K [17 CFR 229.601(c)].
\48\ Proposed Rule 430A(e)(1)(v).
---------------------------------------------------------------------------
Comment is solicited as to whether these EDGAR-related conditions
are necessary to permit delayed pricing. The continuing hardship
exemption condition would be limited to Rule 202(a) hardship exemptions
since under this provision a registrant is not required to follow up
the paper filing, which was the subject of the request, with an
electronic confirming copy. If a registrant obtained a Rule 202(d)
hardship exemption, however, then it would be required to file an
electronic confirming copy of its paper filing within some agreed-upon
period of time. Should this continuing hardship exemption condition be
expanded to encompass Rule 202(d) hardship exemptions where the
required electronic confirming copy was filed a significant period of
time after the paper filing to which it relates? Is the one-year period
for not having received a continuing hardship exemption under Rule
202(a) warranted? Or should a longer (e.g., two years) or shorter
(e.g., six months) period be required?
b. Offering Requirements
(1) Post-Effective Amendments
In addition to the above registrant requirements, expanded Rule
430A would require the company to file a post-effective amendment to
its registration statement under certain circumstances.49 The
purpose of this requirement is to assure that the staff has an
opportunity to review the revised disclosure before the company
proceeds with additional offerings.
---------------------------------------------------------------------------
\49\ In contrast, Form S-3 (and F-3) registrants may incorporate
by reference certain information rather than filing a post-effective
amendment. These registrants do not have a requirement to file post-
effective amendments in the same set of circumstances.
---------------------------------------------------------------------------
Today's proposals would require the company to file a post-
effective amendment to its registration statement in three
circumstances. First, no later than 90 days after its fiscal year end,
the company would have to file a post-effective amendment to its
registration statement to update the document \50\ and provide annual
audited financial statements.\51\ This requirement would
[[Page 9280]]
assure that Commission staff has the opportunity to review information
regarding the company and the offering on an annual basis and that
prospectus information distributed to investors is current. Comment is
solicited as to whether this safeguard is needed, and if so, whether
the time frame for filing the post-effective amendment should be tied
to the filing of the Form 10-K (or Form 10-KSB) so that if the
registrant determines to file its Form 10-K before its due date, the
post-effective amendment would be required at the same time.
---------------------------------------------------------------------------
\50\ Each post-effective amendment would contain a completely
updated prospectus, which would supersede all prior prospectuses.
Proposed Rule 430A(e)(2)(i).
\51\ Proposed Rule 430A(e)(2)(i). This requirement would be in
addition to its requirement under Section 13(a) or 15(d) to file its
10-K or 10-KSB with the Commission.
If a company changes its fiscal year end, it must file a
transition report on Form 10-K where the transition period is six
months or more. For transition periods of less than six months,
companies have the option to file transition reports on either Form
10-Q or Form 10-K. See Exchange Act Rules 13a-10 [17 CFR 240.13a-10]
and 15d-10 [17 CFR 240.15d-10]. With respect to expanded Rule 430A,
a post-effective amendment would have to be filed by the due date of
the transition report on Form 10-K, namely, within 90 days of the
close of the transition period or the date of the determination to
change the fiscal year end, whichever is later.
---------------------------------------------------------------------------
Second, a company would be required to file a post-effective
amendment when it was required to file audited financial statements for
significant probable business acquisitions pursuant to Rule 3-05 of
Regulation S-X \52\ and Item 310(c) of Regulation S-B \53\ and pro
forma financial information.\54\ Under recent amendments, this would
occur where the pending acquisition exceeds the 50% significance
level.\55\ The post-effective amendment would be filed as soon as the
acquisition was probable.\56\ Again, this requirement would assure that
Commission staff has the opportunity to review the information.
---------------------------------------------------------------------------
\52\ 17 CFR 210.3-05.
\53\ 17 CFR 228.310(c). Proposed Rule 430A(e)(2)(i).
\54\ Article 11 of Regulation S-X [17 CFR 210.11-01 et seq.] and
Item 310(d) of Regulation S-B [17 CFR 228.310(d)].
\55\ Rule 210.01-02(w) of Regulation S-X and Rule 310(c)(2) of
Regulation S-B [17 CFR 210.1-02(w) and 228.310(c)(2)]. In October
1996, the Commission adopted amendments to streamline financial
statement requirements of significant acquisitions to facilitate the
Securities Act registration process. Release No. 33-7355 (October
10, 1996) [61 FR 203].
\56\ Within 15 days of consummation of the significant
acquisition, a company must file a Form 8-K reporting the event.
Pursuant to staff position, the Form 8-K need not include more
recent financial statements of the acquired business if no more than
two interim periods have passed since the latest balance sheet date
of the previously filed financial statements. However, audited
financial statements must be updated in the Form 8-K to the
company's most recently completed fiscal year pursuant to Item
310(g) of Regulation S-B [17 CFR 228.310(g)] and Rule 3-12(b) of
Regulation S-X [17 CFR 210.3-12(b)].
---------------------------------------------------------------------------
To the extent that the pending acquisition falls below the 50%
threshold level, the company would be required by Form 8-K to file
audited financial statements of each significant acquired business
within 75 days of consummation of the acquisition.\57\ Comment is
solicited as to whether under the proposed delayed pricing procedure, a
company should be required to file a post-effective amendment in
addition to a Form 8-K, where the acquisition falls below the 50%
significance criterion. For example, should a 20% significance test be
used?
---------------------------------------------------------------------------
\57\ Items 2 and 7 of Form 8-K. The Form 8-K would contain: an
accountant's report as required by Rule 2-02 of Regulation S-X [17
CFR 210.2-02]; and an accountant's consent to having his or her
opinion deemed to be a part of the expanded Rule 430A registration
statement. Section II.B, below, sets forth proposed amendments to
the exhibit requirements of Regulations S-K and S-B to facilitate
the filing of consents.
---------------------------------------------------------------------------
Finally, since the proposal would permit delayed pricing, the rule
would require the company to furnish the undertakings for updating
registration statements required by Item 512(a) of Regulation S-K or
Regulation S-B, as applicable. These undertakings require a post-
effective amendment to be filed in specific circumstances, and would be
in lieu of the similar undertakings required by Item 512(i) of
Regulation S-K for other Rule 430A offerings. These undertakings would
be as follows:
The company must file a post-effective amendment to: (1)
include any updated prospectus required by Section 10(a)(3) of the
Securities Act; \58\ (2) reflect any facts or events that represent a
fundamental change in the information set forth in the registration
statement; and (3) include any new or changed material information with
respect to the plan of distribution.\59\
---------------------------------------------------------------------------
\58\ Under Section 10(a)(3) of the Securities Act [15 U.S.C.
77j(a)(3)], where a prospectus is used more than nine months after
the effective date of the registration statement, the information
contained therein must be of a date not more than sixteen months
old. The nine-month period is calculated from the effective date of
the registration statement, not of any later post-effective
amendment.
\59\ Item 512(a)(1) of Regulation S-K [17 CFR 229.512(a)(1)].
---------------------------------------------------------------------------
The company must state that each post-effective amendment
``shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.''
\60\
---------------------------------------------------------------------------
\60\ Item 512(a)(2) of Regulation S-K [17 CFR 229.512(a)(2)].
---------------------------------------------------------------------------
Finally, the company must deregister by means of a post-
effective amendment any securities that remain unsold at the
termination of the offering.\61\
---------------------------------------------------------------------------
\61\ Item 512(a)(3) of Regulation S-K. Foreign issuers would be
ineligible to use the proposed delayed pricing procedure unless they
filed the same forms as domestic issuers, as discussed in Section
II.A.2.a. As a result, paragraph (a)(4) of Item 512, which relates
to foreign private issuers, would generally be inapplicable.
---------------------------------------------------------------------------
Comment is solicited as to whether these undertakings, coupled with
the other conditions of the proposed rule, would assure that investors
receive adequate and current information. Are there any other
circumstances that should require a post-effective amendment to be
filed?
As noted above, under the proposal, a company would not need to
name the managing underwriter(s) in its expanded Rule 430A registration
statement. Given the important role of underwriters in an offering,
should a company be required to identify the underwriter in the
registration statement if it is known? Should a company be required to
file a post-effective amendment to its registration statement when a
managing underwriter has been selected? \62\ A requirement to file a
post-effective amendment could help assure that underwriters have
necessary time to conduct a due diligence investigation before the
securities are sold. Alternatively, when a managing underwriter was
selected, would a supplemented prospectus be sufficient, as proposed?
\63\ If only a supplemented prospectus is required, should the form of
underwriting agreement be filed in a post-effective amendment that
becomes effective automatically or should it be filed in a required
Form 8-K?
---------------------------------------------------------------------------
\62\ Rule 415 at one time required a post-effective amendment to
the registration statement to be filed when a managing underwriter
was added or deleted. The Commission removed this requirement in
Release No. 33-6423 (September 2, 1982) [47 FR 39799].
As with delayed shelf filings, a company using expanded Rule
430A could (but would not be required to) name a group of possible
underwriters in the preliminary prospectus. (See n. 63, below, for
when a company must identify any managing underwriter.) All of the
other information required by Item 508 of Regulation S-K [17 CFR
229.508] regarding the plan of distribution would be included in the
preliminary prospectus before requesting acceleration of the
registration statement.
\63\ As discussed below, at least 48 hours before sending any
confirmation of sale, the supplemented prospectus containing any
updating information along with the Exchange Act information would
be required to be delivered. This supplement would have to name any
managing underwriter. Proposed Rule 430A(e)(2)(iii).
---------------------------------------------------------------------------
If a change in the managing underwriter(s) occurs from that
initially disclosed in the registration statement that had been
declared effective, should the company be required to file a post-
effective amendment, or would a supplement suffice? If only a
supplement is needed either to add the managing underwriter or reflect
a change in the managing underwriter, should there be a waiting period
before the company can sell its securities? Should a change in the
managing underwriter solely to add or delete a co-manager necessitate a
post-effective
[[Page 9281]]
amendment or a supplement? Is the term ``managing underwriter''
sufficiently clear based upon industry practice or should a definition
be developed for delayed pricing?
(2) Delivery of Information
The final proposed delayed pricing conditions would pertain to
delivery of updated company-related information. The company would be
required to deliver a supplemented prospectus containing the omitted
information and/or any updating information, together with its Form 10-
Q or Form 10-QSB as of the end of the most recent fiscal quarter not
included in the registration statement. The company also would be
required to deliver all Forms 8-K filed since effectiveness of the
registration statement, other than those solely relating to Item 5 of
that form that are voluntary filings.\64\ Instead of delivering such
Exchange Act reports as separate documents at no charge, the company
could elect to integrate all Exchange Act information into a single
supplement to the prospectus that would include pricing and/or updated
company information.\65\
---------------------------------------------------------------------------
\64\ Rule 430A(e)(2)(ii). Exhibits that had been filed with the
Commission with these reports would not have to be delivered to
security holders.
A registrant using delayed pricing would not need to deliver its
Form 10-K [17 CFR 249.310] or Form 10-KSB [17 CFR 249.310b], since
it would be required to file a post-effective amendment to the
registration statement to include a new prospectus with the new
annual audited financial statements each fiscal year. Proposed Rule
430A(e)(2)(i).
\65\ The complete package would have to be delivered any time
the prospectus was delivered.
---------------------------------------------------------------------------
This information delivery condition, which is substantially similar
to that required in Form S-2,\66\ would assure that potential investors
receive adequate and current information about the registrant and its
offering.\67\ The delivered information would be deemed a part of the
registration statement and the prospectus as of the date that the
information is first used in the offering of securities, and thus have
liability under Sections 11 and 12(a)(2) of the Securities Act.\68\
---------------------------------------------------------------------------
\66\ Form S-2 does not require the delivery of Forms 8-K; it
does, however, require a company to describe any and all material
changes to its affairs that have occurred since the end of the
fiscal year for which certified financial statements were included
in the information delivered to security holders and not described
in the Form 10-Q, 10-QSB or quarterly report to security holders
delivered to investors. Item 11 of Form S-2.
One of the recommendations of the Commission's Task Force on
Disclosure Simplification was to eliminate Form S-2/F-2, and permit
smaller companies that have been timely reporting for 12 months, to
deliver, along with their prospectuses, periodic reports in lieu of
restating information regarding themselves in the prospectuses
contained in registration statements filed on Form S-1/F-1 [17 CFR
239.31]. This recommendation may be considered at a later time. If
it were implemented, it could operate together with delayed pricing
to reduce the costs of registration by eliminating printing and
other costs associated with the preparation of the traditional
prospectus and give even greater flexibility to registrants to time
their offerings with favorable market conditions.
\67\ Electronic media may be used as a means of delivering this
information to security holders in certain circumstances. See
Release Nos. 33-7233 (October 6, 1995) [60 FR 53458] and 33-7288
(May 9, 1996) [61 FR 24644], in which the Commission expressed its
views with respect to the use of electronic media for information
delivery under the federal securities laws.
\68\ Proposed Rule 430A(e)(3). Proposed Rule 430A(e)(3) would
maintain liability on all forms of prospectus filed with the
Commission pursuant to Rule 424 in connection with the offering by
deeming them to be part of the registration statement at the date of
first use. This would be true for the delivered Exchange Act
information as well. The rule also would provide that the Exchange
Act reports that are deemed to be a part of the registration
statement would be a part of the prospectus as of the date of first
use.
The documents also would be subject to anti-fraud liability
under Securities Act Section 17(a) [15 U.S.C. 77q(a)], Exchange Act
Section 10(b) [15 U.S.C. 78j(b)] and Rule 10b-5 [17 CFR 240.10b-5]
thereunder.
---------------------------------------------------------------------------
To assure that investors have time to review the information in
connection with making the investment decision, a supplemented
prospectus containing any updating information and the name of the
managing underwriter, if any (but not necessarily the other omitted
information), would have to be delivered with the Exchange Act
information referenced above to potential investors at least 48 hours
before sending the confirmation of sale.\69\ The quarterly and Form 8-K
information would be a part of the package. This would be analogous to
the preliminary prospectus delivery requirement in Rule 15c2-8 for
initial public offerings. Comment is solicited on whether this
condition would be practicable for issuers and whether it would afford
advantages to the investing public. Would these potential benefits
justify the possible reduction in flexibility provided by the new
procedure? If such a requirement is justified, should a longer period
be required, such as five or ten business days?
---------------------------------------------------------------------------
\69\ Proposed Rule 430A(e)(2)(iii). Of course, the supplemented
prospectus containing any updating information and all the omitted
information, including the name of the managing underwriter(s), if
any, along with the quarterly and Form 8-K information, would
accompany or precede any confirmation of sale. Proposed Rule
430A(e)(2)(iv).
---------------------------------------------------------------------------
Comment is solicited as to whether voluntary Item 5 Forms 8-K
should be required to be delivered to each person who receives a
prospectus and the other information specified by the rule.
Alternatively, are there specified matters that should be required to
be included in the supplemented prospectus itself rather than in the
other delivered materials? Should the quarterly report to shareholders
be permitted to be delivered in lieu of the Form 10-Q or Form 10-QSB if
it includes the information required by those forms? If voluntary Forms
8-K are not required to be delivered, should they still be incorporated
by reference into the registration statement in order to maintain
liability, as would be true for Form S-3 offerings?
In this regard, companies are reminded that in addition to the
information expressly required to be included in any federal securities
law document, there must be added such further material information, if
any, as may be necessary to make the required statements, in light of
the circumstances under which they were made, not misleading.70
Comment is solicited as to whether there should be an express
requirement for a company using delayed pricing to describe any and all
material changes in the company's affairs that were not described in
the updated information delivered with the prospectus.71
---------------------------------------------------------------------------
\70\ Securities Act Rule 408 and Exchange Act Rule 12b-20.
\71\ This would be analogous to the Item 11 line item
requirement in Form S-2, discussed above.
---------------------------------------------------------------------------
c. Additional or Alternative Conditions
Comment is solicited as to whether other conditions to delayed
pricing are needed. For example, should a company be required to file a
supplemented prospectus with the omitted information within a certain
period of time after effectiveness of the registration statement? If
the company did not price and offer its securities within this period,
then a post-effective amendment could be required, as in current Rule
430A.72 If a definite period for filing an expanded Rule 430A
supplemented prospectus is needed, would three months be sufficient?
Or, would a shorter (e.g., one month) or longer period (e.g., six
months) be sufficient?
---------------------------------------------------------------------------
\72\ Rule 430A(a)(3).
---------------------------------------------------------------------------
Should a minimum time period be imposed between the filing of
Exchange Act reports, such as a Form 10-Q or 10-QSB or other updating
information with material developments, and the offering of securities
even though this information would be delivered to investors? If such a
waiting period between the filing of an Exchange Act report and the
offering of securities is warranted in order to assure dissemination of
information to the marketplace, would a sufficient time be five
business days? Alternatively, should a shorter (e.g., three business
days) or longer period of time (e.g.,
[[Page 9282]]
seven business days) be imposed? Or would any required delay
significantly reduce the flexibility that the rule is designed to
provide?
Another condition to assure that adequate and current information
regarding the company is widely available could be to require a waiting
period between the company's determination to sell its securities and
the commencement of the offering. For example, a company could be
required to file a Form 8-K announcing its intent to offer its
securities within a specified period of time. Since the trading market
for certain smaller issuers may be relatively illiquid, this condition
could give the market time to respond to this news. If such a period
were to be imposed, would five business days be sufficient? Or would a
shorter (e.g., two business days) or longer (e.g., seven business days)
period of time be needed? Should the length of any waiting period be
tied to the average daily trading volume of the company so that a
longer waiting period could be required if the company has a low
average daily trading volume, and thus less liquidity? Should average
daily trading volume for such a test be determined in a manner
consistent with recently adopted Regulation M? 73 If an average
daily trading volume test is incorporated into expanded Rule 430A,
should a public float component also be used as in Regulation M?
74 Actively-traded companies could be excluded from any waiting
period. If a waiting period is desirable, should it be structured so
that an announcement of the offering could not be made more than a
certain period of time before the commencement of the offering?
---------------------------------------------------------------------------
\73\ 17 CFR 242.100 et seq. Release No. 34-38067 (December 20,
1996) [62 FR 520].
\74\ See 17 CFR 242.101 and 102.
---------------------------------------------------------------------------
As proposed, the rule would not limit the number of offerings that
could be done from the registration statement. Like Form S-3, the
delayed offering may be done as one offering or in several tranches.
Should the rule be limited to a single delayed offering? Or should some
other limit be placed on the number of offerings?
The Commission recently adopted Regulation M to prevent
manipulative conduct by persons interested in a securities offering. At
that time, the Commission modified the application of anti-manipulation
regulation to shelf-registered distributions. The Commission explained
that, for purposes of Regulation M, each takedown off a shelf is to be
individually examined to determine whether the offering of that tranche
constitutes a distribution (i.e., whether it satisfies the
``magnitude'' and ``special selling efforts and selling methods''
criteria of a distribution).75 This position is intended to
provide greater flexibility to participants in shelf-registered
distributions, which for primary offerings are now limited to larger
issuers.76
---------------------------------------------------------------------------
\75\ Release No. 34-38067, 62 FR at 526.
\76\ Under prior Commission interpretation, if the aggregate
amount of securities registered on the shelf and the possibility of
using special selling efforts existed, each takedown was deemed to
be part of a single distribution, regardless of the amount of the
securities sold or the manner of their sale. See Release No. 34-
23611, 51 FR 33242.
---------------------------------------------------------------------------
The Commission has considered the appropriate application of anti-
manipulation regulation to offerings with delayed pricing under
proposed Rule 430A(e). Because the proposed rule is expected to be used
principally by smaller issuers, many of which are less-seasoned and can
have relatively illiquid markets for their securities, the Commission
proposes to require compliance with the full applicable restricted
period of Regulation M prior to pricing of each offering relying on
proposed Rule 430A(e). Thus, issuers and underwriters participating in
an offering using delayed pricing would be subject to a restricted
period of one or five business days before pricing of each tranche.
Commenters are invited to provide their views on this interpretation.
Is it necessary to expressly amend Rules 101 and 102 of Regulation M to
incorporate this position?
Additionally, Rule 105 of Regulation M is intended to preclude
manipulative short selling in anticipation of a public offering.77
The rule prohibits the covering of a short sale with offered securities
purchased from an underwriter or broker or dealer participating in the
offering, if the short sale occurred during the period commencing five
business days before pricing the offering. The rule excludes offerings
filed under Rule 415. It is uncertain whether offerings relying on
proposed Rule 430A(e) and the accompanying amendment to Rule 415 will
be conducted similarly to primary offerings off the shelf by larger
issuers. Accordingly, the Commission seeks comment on whether to revise
Rule 105 of Regulation M to exclude offerings filed under Rule 415,
other than those filed pursuant to proposed Rule 415(a)(1)(xii).
---------------------------------------------------------------------------
\77\ 17 CFR 242.105.
---------------------------------------------------------------------------
Finally, comment is solicited as to whether a company should have
the market flexibility to proceed under either expanded Rule 430A or
current Rule 430A so long as it includes both sets of undertakings
78 in the initial filing or in a pre-effective amendment. At the
time of requesting acceleration of the registration statement, the
company could advise the staff as to which rule it would use.
---------------------------------------------------------------------------
\78\ Items 512(a) and 512(i) of Regulation S-K, respectively.
---------------------------------------------------------------------------
The conditions discussed above are intended to strike a balance
between the needs of certain smaller companies to price their
securities on a primary delayed basis and the needs of investors to
have adequate and current information regarding these registrants
available to them to be able to make informed investment decisions.
Comment is solicited as to whether the foregoing conditions, taken
together, accomplish this objective or whether only certain
combinations of these conditions are needed. If the latter, commenters
are requested to specify the combinations that would be desirable and
the reasons for their views.
B. Other Proposed Amendments
Corresponding amendments to Securities Act Rules 415, 424 and 434
79 and Item 601(b) of Regulations S-K and S-B 80 also are
being proposed. Securities Act Rule 415 would be amended to add a new
paragraph permitting delayed pricing under Rule 430A(e).81
---------------------------------------------------------------------------
\79\ One minor conforming change is being proposed to Rule 434.
Paragraph (b)(2) would be amended to add a reference to Rule 430A(e)
to the existing reference to Rule 430A(b).
\80\ Item 601 of Regulations S-K and S-B would be amended to
state that where the filing of a written consent is required with
respect to material deemed to be a part of an expanded Rule 430A
registration statement, the consent may be filed as an exhibit to
the material that is deemed to be a part of the registration
statement (e.g., a Form 8-K containing financial statements for
acquisitions below the 50% threshold). See Section II.A.2.b, above.
\81\ Proposed paragraph (a)(1)(xii) to Rule 415. Paragraph
(a)(2) of Rule 415, which provides that securities may only be
registered in an amount which, at the time the registration
statement becomes effective, is reasonably expected to be offered
and sold within two years from the date of the registration, would
be amended to add a reference to Rule 430A(e) offerings. Finally,
paragraph (a)(3) of Rule 415 would be revised to add a reference to
Item 512(a) of Regulation S-B, which relates to the Rule 415
undertakings. This reference was inadvertently omitted from this
paragraph when Regulation S-B was adopted in 1992. Release No. 33-
6949 (July 30, 1992) [57 FR 36442].
Since Rule 430A(e) would be a type of Rule 415 offering, a
registrant relying on the rule would have to check the Rule 415 box
on the facing page of the registration statement.
---------------------------------------------------------------------------
Securities Act Rule 424, which pertains to the filing of
prospectuses, would be revised to add two new paragraphs (8) and (9)
relating to the filing of delayed pricing prospectuses so as to
facilitate access and use of the
[[Page 9283]]
information. If a company elected to use delayed pricing, supplemented
prospectuses would be filed under Rule 424(b)(8) or (b)(9). Any
prospectus filed under paragraph (b)(8) would reflect information,
facts, or events that would constitute a substantive change from, or
addition to, the information set forth in the last form of prospectus
filed with the Commission under Rule 424 or as part of the expanded
Rule 430A registration statement.82 ``Substantive,'' as in current
Securities Rule 424, refers to additions or modifications that
supplement, update or correct the content and substance of the
information contained in a prospectus, except for typographical,
grammatical, format, and clarifying changes that do not affect an
investor's understanding of the information.83
---------------------------------------------------------------------------
\82\ Proposed paragraph (b)(8) to Rule 424. For example, where a
company determined to update its prospectus supplement to include a
recent developments section, it would file such supplement under
proposed paragraph (b)(8) of Rule 424.
\83\ Release No. 33-6714 (May 27, 1987) [52 FR 21252] at Section
II.B.
---------------------------------------------------------------------------
Also under paragraph (b)(8), a company would file any supplemented
prospectus containing any updating information and the name of the
managing underwriter(s), if any, that it delivers to any person, with
quarterly information and Forms 8-K, who is expected to receive a
confirmation of sale at least 48 hours before the sending of any
confirmation of sale. Any prospectus filed under Rule 424(b)(8) would
be required to be filed no later than the second business day following
the date it is first used after effectiveness in connection with a
public offering or sale, or transmitted by a means reasonably
calculated to result in filing with the Commission by that date.84
Comment is solicited as to whether a shorter period is needed--either
one business day after first use, or on the day of first use in order
for the market to have this information.
---------------------------------------------------------------------------
\84\ Proposed paragraph (b)(8) to Rule 424.
---------------------------------------------------------------------------
The supplemented prospectus containing any updating information and
all omitted price and price-related information that was omitted from
the registration statement at the time of effectiveness would be
required to be filed with the Commission under Rule 424(b)(9) no later
than the second business day following the earlier of the date of the
determination of the offering price or the date it is first used after
effectiveness in connection with a public offering or sales, or
transmitted by a means reasonably calculated to result in filing with
the Commission by that date.85 This short period, which is the
same as for current Rule 430A, coupled with the fact that the filing
would be made via EDGAR, would facilitate prompt availability of the
information to the investing public and the Commission. Comment is
solicited as to whether this time frame should be shorter (e.g., one
business day) or longer (e.g., three business days).
---------------------------------------------------------------------------
\85\ Proposed paragraph (b)(9) to Rule 424. This time frame
would mirror that of current Rule 430A offerings. Rule 424(b)(1).
---------------------------------------------------------------------------
Comment is solicited as to whether expanded Rule 430A prospectuses,
like current Rule 430A prospectuses, warrant separate classification
for purposes of Rule 424. Alternatively, existing paragraphs of Rule
424 could be revised to reflect the filing of expanded Rule 430A
prospectuses; however, ready identification by the Commission staff and
public of these prospectuses could be hampered.
With respect to the tracking or monitoring of new delayed pricing
offerings in general, would separate EDGAR submission form types for
these registration statements be warranted? Currently, Rule 430A
registration statements are not separately identified for purposes of
EDGAR.
III. General Request for Comment
Any interested persons wishing to submit comment on any of the
proposals set forth in this release are invited to do so by submitting
them in triplicate to Jonathan G. Katz, Secretary, U.S. Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549.
Comments also may be submitted electronically at the following e-mail
address: rule-comments@sec.gov. All comment letters should refer to
File Number S7-9-97; this file number should be included on the subject
line if e-mail is used. Comments received will be available for public
inspection and copying in the Commission's public reference room, 450
Fifth Street, N.W., Washington, D.C. 20549. Electronically submitted
comment letters will be posted on the Commission's Internet Web site
(http://www.sec.gov). Comments are solicited from the point of view of
issuers, underwriters and the investing public.
IV. Cost-Benefit Analysis
To assist the Commission in evaluating the costs and benefits that
may result from these proposals, commenters are requested to submit
their views and empirical data relating to any costs and benefits
associated with these proposals. It is anticipated that expanded Rule
430A, if adopted, could facilitate the capital-raising efforts of
smaller companies that meet certain conditions by permitting them to
delay pricing their offerings after the registration statement becomes
effective so as to take advantage of favorable market conditions. Such
flexibility could enable such companies to raise equity capital on more
advantageous terms or to obtain lower interest rates on debt. In
addition, issuers would be able to vary certain terms of the securities
being offered upon short notice, enabling them to more efficiently meet
the competitive requirements of the public securities markets.
There would be certain costs associated with expanded Rule 430A,
but they should be more than offset by its benefits. A company would be
required to file a post-effective amendment to its registration
statement at least annually until the offering is terminated. In
addition, a company would be required to deliver its most recent Form
10-Q and non-voluntary Forms 8-K to investors along with its
supplemented prospectus. This updated information could either be
included in the supplemented prospectus itself or be set forth in
separate documents that are delivered along with the prospectus. As
noted in the release, the supplemented prospectus containing any
updating information and the name of the managing underwriter(s), if
any, along with the quarterly and Form 8-K information, would be
delivered to any person who is expected to receive a confirmation of
sale at least 48 hours before the sending of any confirmation of sale.
These costs are necessary safeguards to the use of the rule in order to
assure investor protection. The benefits of pricing flexibility should
outweigh these costs.
The Commission is aware that many companies that may want to use
delayed pricing may also be subject to state regulation. It is possible
that the full benefits of this rule may not be available unless some
modifications to state regulation are made.
Over 1,700 companies filed registration statements for securities
offerings on Forms S-1, SB-2, and S-11 in 1996. Approximately half of
these companies would have qualified for expanded Rule 430A if the rule
had been in effect at that time. Of those companies that would not have
qualified under the rule, 99% were disqualified because they were
making their initial public offering (``IPO'').
Based on an analysis of 100 non-IPO securities offerings, the
Commission estimates that 860 companies would have met the proposed
eligibility criteria for expanded Rule 430A in
[[Page 9284]]
1996. The 860 companies registered securities with an estimated
offering value of $52 billion. The Commission estimates that
approximately 11% of these offerings might have availed themselves of
the expanded Rule 430A had it been available. This estimate is based
upon the Commission's experience with the number of registrants that
file Form S-3 for shelf offerings.
Expanded Rule 430A should not result in a major increase in costs
or prices for consumers or individual industries; likewise, it should
not have significant adverse effects on competition, investment, or
innovation. However, comment is requested on these preliminary views.
Commenters are asked to provide empirical data or other facts to
support their views.
Comment is requested on whether the proposed rules are likely to
have a $100 million or greater annual effect on the economy. Commenters
should provide empirical data or other facts to support their views.
The Commission requests comment on the foregoing analysis and its
preliminary views. Commenters are encouraged to provide their own
analysis and views on these issues and any empirical data that would
help the Commission assess the costs and benefits of these proposals.
Commenters also are encouraged to suggest alternative or additional
ways of providing more pricing flexibility to smaller companies,
consistent with investor protection.
V. Summary of Initial Regulatory Flexibility Analysis
An Initial Regulatory Flexibility Analysis (``IRFA'') has been
prepared in accordance with 5 U.S.C. 603 concerning expanded Rule 430A
and other amendments discussed in this release. The analysis notes that
expanded Rule 430A, if adopted, would benefit certain smaller
companies, including small entities, in connection with their needs to
raise capital. This goal would be accomplished by giving these
companies flexibility to delay pricing after their registration
statement becomes effective, thus permitting them to time their
offerings to advantageous market conditions.
As discussed more fully in the IRFA, the Commission is aware of
approximately 1019 Exchange Act reporting companies that currently
satisfy the definition of ``small entity'' under Securities Act Rule
157. These Exchange Act reporting companies could potentially avail
themselves of expanded Rule 430A assuming that the other conditions of
the rule are satisfied (e.g., having reported under the Exchange Act
for at least a year, not being a blank check company or penny stock
issuer, etc.). It is estimated that approximately 734 of these 1019
companies would be eligible to use the rule, if adopted. There is no
reliable way to determine how many of these entities will want to use
expanded Rule 430A or how many businesses may become subject to
reporting obligations in the future.
As noted in the IRFA, it is not anticipated that increased
recordkeeping burdens would result from expanded Rule 430A. To the
extent that a small entity uses expanded Rule 430A, there would be an
increase in its reporting obligations since it would be required to
file a post-effective amendment to its registration statement at least
annually until the offering is terminated. Compliance burdens also
would increase since the company would be required to deliver updated
company-related information along with the supplemented prospectus.
This Exchange Act information could be included in a supplement to the
prospectus or delivered in separate documents along with the
prospectus. In addition, the supplemented prospectus containing any
updating information and the name of the managing underwriter(s), if
any, along with the quarterly and Form 8-K information would be
delivered to any person who is expected to receive a confirmation of
sale at least 48 hours before the sending of any confirmation of sale.
The IRFA also indicates that there are no current federal rules that
duplicate, overlap or conflict with the rules to be amended.
As more fully discussed in the IRFA, other possible significant
alternatives to the proposals were considered, including establishing
different compliance or reporting requirements for small entities.
These alternatives are not appropriate since they would be inconsistent
with the goals of the Securities Act as they relate to the protection
of investors. Another alternative would be to exempt small entities
from all, or a part, of expanded Rule 430A. Small entities would
benefit from the pricing flexibility from the rule so they would not
want to be exempt from its coverage. To exempt small entities from
certain conditions of expanded Rule 430A, for example, the requirement
to file post-effective amendments under specified circumstances would
be contrary to the goals of the Securities Act since investors in small
entities should have the same protections as investors in larger
companies. The opportunity for staff review of these post-effective
amendment filings is considered to be an important safeguard to the use
of the rule.
Written comments are encouraged with respect to any aspect of the
IRFA. In particular, comment is solicited on the number of small
entities that would be affected by the proposed rules and the
determination that the proposed rules would not increase recordkeeping
but would increase reporting and other compliance requirements. If
commenters believe that the proposals would significantly impact a
substantial number of small entities, the nature of the impact and an
estimate of the extent of the impact should be provided. For purposes
of the Small Business Regulatory Enforcement Fairness Act of 1996, the
Commission also is requesting information regarding the potential
impact of the proposed rules on the economy on an annual basis.
Commenters should provide empirical data to support their views.
Comments will be considered in the preparation of the Final Regulatory
Flexibility Analysis if the proposed amendments are adopted. A copy of
the IRFA may be obtained by contacting Barbara C. Jacobs, Division of
Corporation Finance, Mail Stop 7-8, 450 Fifth Street, N.W., Washington,
D.C. 20549.
VI. Paperwork Reduction Act
The staff has consulted with the Office of Management and Budget
(``OMB'') and has submitted the proposals for review in accordance with
the Paperwork Reduction Act of 1995 (``the Act'') (44 U.S.C. 3501 et
seq.). The titles to the affected information collections are: ``Form
S-1,'' ``Form SB-2,'' ``Form S-11,'' ``Form SB-1,'' ``Regulation S-K,''
and ``Regulation S-B.'' The specific information that must be included
is explained in the forms themselves, and generally relates to the
issuer and the securities being offered. The information is needed for
prospective investors to make informed investment decisions.
The proposals, if adopted, would permit certain smaller companies
to delay pricing of primary offerings after the registration statement
becomes effective in order to provide them flexibility in the
marketplace. By having more control over the timing of their offerings,
these companies could take advantage of desired market conditions, thus
enabling them to raise equity capital on more favorable terms or to
obtain lower interest rates on debt. This increased flexibility could
result in smaller issuers raising more capital through the public
markets rather than through exempt offerings conducted in
[[Page 9285]]
the domestic and offshore markets. Consequently, it is anticipated that
the proposals, if adopted, would result in companies filing Forms S-1,
SB-2, S-11, and SB-1 rather than making exempt offerings.
The collections of information in the four forms and two
regulations are required for the registration of various securities for
sale to the public. The likely respondents to each form are: (i) for
Form S-1, generally all issuers registering offerings of securities
under the Securities Act that are not eligible to use other forms; (ii)
for Form SB-2, generally small business issuers, as defined in Rule 405
of the Securities Act, registering securities offerings under the
Securities Act; (iii) for Form S-11, generally real estate companies
registering offerings of securities under the Securities Act; and (iv)
and for Form SB-1, generally small business issuers registering up to
$10 million of securities under the Securities Act in a continuous 12-
month period. While the Commission cannot estimate the number of
respondents that may use expanded Rule 430A, there are approximately
1,210 Forms S-1, 471 Forms SB-2, 58 Forms S-11, and 8 Forms SB-1 filed
each year.86 If expanded Rule 430A is adopted, the estimated
burden for responding to the collections of information in each form is
expected to increase given the requirement to file post-effective
amendments to the registration statements under the three circumstances
specified. The former estimates per respondent were as follows: (i) for
Form S-1, 1,267 burden hours; (ii) for Form SB-2, 877 burden hours;
(iii) for Form S-11, 858 burden hours; and (iv) for Form SB-1, 711
burden hours. The new estimates per respondent are as follows: (i) for
Form S-1, 1,290 burden hours; (ii) for Form SB-2, 894 burden hours;
(iii) for Form S-11, 873 burden hours; and (iv) for Form SB-1, 740
burden hours. For Form S-1, this would result in an estimated per year
increase burden of 27,426 hours in the aggregate. For Form SB-2, this
would result in an estimated per year increase burden of 8,242 hours in
the aggregate. For Form S-11, this would result in an estimated per
year increase burden of 10,309 hours in the aggregate. For Form SB-1,
this would result in an estimated per year increase of 236 in the
aggregate. Regulations S-K and S-B will continue to show an estimated
burden hour of one. The information collection requirements imposed by
the forms and regulations are mandatory to the extent that a company
elects to do a registered offering. The information is made publicly
available. The Commission may not require a response to the collection
of information if the forms and regulations do not display a currently
valid OMB control number.
---------------------------------------------------------------------------
\86\ These estimates are based on the number of such filings
made in calendar year 1996 and assume that there are no increases or
decreases each year.
---------------------------------------------------------------------------
In accordance with 44 U.S.C. 3506(c)(2)(B), the Commission solicits
comment on the following: whether the proposed changes in the
collection of information is necessary; on the accuracy of the
Commission's estimate of the burden of the proposed changes to the
collection of information; on the quality, utility and clarity of the
information to be collected; and whether the burden of collection of
information on those who are to respond, including through the use of
automated collection techniques or other forms of information
technology, may be minimized.
Persons desiring to submit comments on the collection of
information requirements should direct them to the Office of Management
and Budget, Attention: Desk Officer for the Securities and Exchange
Commission, Office of Information and Regulatory Affairs, Washington,
D.C. 20503, and should also send a copy of their comments to Jonathan
G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, with reference to File No. S7-9-
97. The Office of Management and Budget is required to make a decision
concerning the collection of information between 30 and 60 days after
publication, so a comment to OMB is best assured of having its full
effect if OMB receives it within 30 days of publication.
VII. Statutory Basis for the Proposals
The foregoing amendments are proposed pursuant to Sections 6, 7, 8,
10 and 19(a) of the Securities Act.
List of Subjects in 17 CFR Parts 228, 229, and 230
Registration requirements, Reporting and recordkeeping
requirements, Securities.
Text of the Proposals
In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is proposed to be amended as follows:
PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS
1. The authority citation for Part 228 continues to read as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss,
78l, 78m, 78n, 78o, 78w, 78ll, 80a-8, 80a-29, 80a-30, 80a-37, 80b-
11, unless otherwise noted.
2. In Sec. 228.512 (Item 512 of Regulation S-B), remove paragraph
(c) and redesignate paragraphs (d) through (f) as paragraphs (c)
through (e).
3. In Sec. 228.601, revise the second note to the Exhibit Table of
Item 601(a) under paragraph (a) and amend paragraph (b)(23)(ii) by
revising the heading and first sentence to read as follows:
Sec. 228.601 (Item 601) Exhibits.
* * * * *
Exhibit Table
* * * * *
* * * Where the opinion of the expert or counsel has been
incorporated by reference or has been deemed to be a part of a
previously filed Securities Act registration statement.
* * * * *
(b) * * *
(23) Consent of experts and counsel. * * *
(ii) Exchange Act reports. If required to file a consent for
material incorporated by reference into or deemed to be a part of a
previously filed registration statement under the Securities Act, the
dated and manually signed consent to the material incorporated by
reference or deemed to be a part of. * * *
* * * * *
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K
4. The authority citation for Part 229 continues to read in part as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn,
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78w, 78ll (d), 79e, 79n,
79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise noted.
* * * * *
Sec. 229.512 [Amended]
5. In Sec. 229.512 (Item 512 of Regulation S-K), remove paragraph
(d) and redesignate paragraphs (e) through (j) as paragraphs (d)
through (i).
6. In Sec. 229.601, revise footnote 2 to the Exhibit Table of Item
601 and amend paragraph (b)(23)(ii) by revising the first sentence to
read as follows:
Sec. 229.601 (Item 601) Exhibits.
* * * * *
Exhibit Table
* * * * *
[[Page 9286]]
2. Where the opinion of the expert or counsel has been incorporated
by reference or has been deemed to be a part of a previously filed
Securities Act registration statement.
* * * * *
(b) * * *
(23) * * *
(ii) Exchange Act reports. Where the filing of a written consent is
required with respect to material incorporated by reference in or
deemed to be a part of a previously filed registration statement under
the Securities Act, such consent may be filed as an exhibit to the
material incorporated by reference or deemed to be a part of. * * *
* * * * *
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
7. The authority citation for Part 230 continues to read in part as
follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c,
78d, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30,
and 80a-37, unless otherwise noted.
* * * * *
8. By amending Sec. 230.415 by adding paragraph (a)(1)(xii) and
revising (a)(2) and (a)(3) to read as follows:
Sec. 230.415 Delayed or continuous offering and sale of securities.
(a) * * *
(1) * * *
(xii) Securities registered (or qualified to be registered) that
are to be offered and sold on a delayed basis pursuant to
Sec. 230.430A(e) by or on behalf of the registrant, a subsidiary of the
registrant or a person of which the registrant is a subsidiary.
(2) Securities in paragraphs (a)(1) (viii) through (x) and (xii) of
this section may only be registered in an amount which, at the time the
registration statement becomes effective, is reasonably expected to be
offered and sold within two years from the initial effective date of
the registration.
(3) The registrant furnishes the undertakings required by Item
512(a) of Regulation S-K (Sec. 229.512 of this chapter) or Regulation
S-B (Sec. 228.512 of this chapter) as applicable.
* * * * *
9. By amending Sec. 230.424 by adding paragraphs (b)(8) and (b)(9)
before Instructions 1 and 2 to read as follows:
Sec. 230.424 Filing of prospectuses, number of copies.
* * * * *
(b) * * *
(8) A form of prospectus used in connection with a primary offering
of securities on a delayed basis pursuant to Sec. 230.415(a)(1)(xii)
that discloses information, facts, or events that constitute a
substantive change other than those covered in paragraph (b)(9) of this
section shall be filed with the Commission no later than the second
business day following the date it is first used after effectiveness in
connection with a public offering or sales, or transmitted by a means
reasonably calculated to result in filing with the Commission by that
date.
(9) A form of prospectus used in connection with a primary offering
of securities on a delayed basis pursuant to Sec. 230.415(a)(1)(xii)
that discloses information previously omitted from the prospectus filed
as part of an effective registration statement in reliance upon
Sec. 230.430A(a) shall be filed with the Commission no later than the
second business day following the earlier of the date of the
determination of the offering price or the date it is first used after
effectiveness in connection with a public offering or sales, or
transmitted by a means reasonably calculated to result in filing with
the Commission by that date.
* * * * *
10. By amending Sec. 230.430A by removing paragraph (d) and
redesignating paragraph (e) as paragraph (d) and adding paragraph (e)
before the Note to read as follows:
Sec. 230.430A Prospectus in a registration statement at the time of
effectiveness.
* * * * *
(e) A registrant that complies with all the requirements of this
section other than the requirements to identify the managing
underwriter(s) in the registration statement that is declared effective
pursuant to paragraph (a) of this section and the fifteen business day
period of paragraph (a)(3) of this section may offer and sell
securities on a delayed basis if the following registrant and offering
requirements are satisfied.
(1) Registrant requirements. (i) The registrant has been subject to
the reporting provisions of Section 13(a) (15 U.S.C. 78m(a)) or 15(d)
(15 U.S.C. 78o(d)) of the Exchange Act during the most recent twelve
calendar months immediately preceding the filing of the registration
statement and has filed all the material required to be filed pursuant
to Sections 13(a), 14 (15 U.S.C. 77j(a)) or 15(d) for this period. The
registrant also must have filed all material required to be filed by
Sections 13(a), 14 or 15(d) at the time of first use of the prospectus
supplements required by paragraphs (e)(2)(iii) and (e)(2)(iv) of this
section.
(ii) The registrant is organized under the laws of the United
States or any State or Territory or the District of Columbia and has
its principal business operations in the United States or its
territories, except that a foreign issuer, other than a foreign
government, that satisfies all of the provisions of this section except
for this one shall be deemed to have met the eligibility requirements
of this section if such foreign issuer files the same reports with the
Commission under Section 13(a) (15 U.S.C. 78m(a)) or 15(d) (15 U.S.C.
78o(d)) of the Exchange Act as domestic registrants pursuant to
paragraph (e)(1)(i) of this section.
(iii) The registrant is not an investment company registered under,
or a business development company regulated under, the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.).
(iv) The registrant is not a blank check company as defined in
Sec. 230.419 or a company that issues penny stock as defined in Section
3(a)(51) (15 U.S.C. 78(c)(a)(51)) of the Exchange Act and
Sec. 240.3a51-1 of this chapter.
(v) The registrant has: filed with the Commission all required
electronic filings, including confirming electronic copies of documents
submitted in paper pursuant to a hardship exemption; not obtained a
continuing hardship exemption from electronic filing pursuant to
Sec. 232.202(a) of this chapter during the twelve months immediately
preceding the filing of the registration statement; and submitted all
Financial Data Schedules required by Item 601(c) of Regulation S-K or
S-B (Sec. 229.601(c) or Sec. 228.601(c) of this chapter), as
appropriate. These requirements must be met at the time of filing the
registration statement and at the time of first use of the prospectus
supplements required by paragraphs (e)(2)(iii) and (e)(2)(iv) of this
section.
(2) Offering requirements. (i) A registrant shall file a post-
effective amendment to its registration statement to: provide annual
audited financial statements for its latest fiscal year as required by
Secs. 210.3-01, 210.3-02, and 210.3-04 of this chapter no later than 90
days after the fiscal year end of the registrant; provide financial
statements and pro forma information for probable acquisitions over the
50% materiality level as required by Sec. 210.3-05 of this chapter and
Sec. 228.310 of this chapter as soon as the acquisition is probable;
and satisfy any of the undertakings of Item 512(a) of Regulations S-K
or S-B (Sec. 229.512(a) or Sec. 228.512(a) of this chapter). Each post-
effective amendment shall be deemed to be a new registration statement
relating to the
[[Page 9287]]
securities offered therein and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof. Each
such post-effective amendment shall contain a completely updated
prospectus that supersedes all prior prospectuses.
(ii) To each person to whom the registrant delivers its
supplemented prospectus containing the omitted information and/or any
updating information, the registrant also shall deliver: its Form 10-Q
(Sec. 249.308a of this chapter) or Form 10-QSB (Sec. 249.308b of this
chapter) for the end of the most recent fiscal quarter not reflected in
the registration statement; and Forms 8-K (Sec. 249.308 of this
chapter) filed after the effectiveness of the registration statement,
other than those solely relating to Item 5 of that form that are
voluntary filings. Exhibits to such forms need not be provided except
upon request. In lieu of delivering the quarterly or Form 8-K
information as separate documents at no charge, the registrant may
elect to include this information in any prospectus supplement
delivered.
(iii) The supplemented prospectus containing any updating
information and the name of the managing underwriter(s), if any, along
with the quarterly and Form 8-K (Sec. 249.308 of this chapter)
information set forth in paragraph (e)(2)(ii) of this section, shall be
delivered to any person who is expected to receive a confirmation of
sale at least 48 hours before the sending of any confirmation of sale.
(iv) The supplemented prospectus containing any updating
information and all the omitted information, including the name of the
managing underwriter(s), if any, along with the quarterly and Form 8-K
(Sec. 249.308 of this chapter) information set forth in paragraph
(e)(2)(ii) of this section, shall accompany or precede any confirmation
of sale.
(3) For purposes of determining liability under the Act, the
following shall be deemed to be a part of the registration statement as
of the date of first use in connection with an offering of securities:
all forms of prospectus filed with the Commission pursuant to
Sec. 230.424(b) in connection with the offering; and all Forms 10-Q (17
CFR 249.308a), 10-QSB (17 CFR 249.308b), and 8-K (17 CFR 249.308)
(other than those solely relating to Item 5 of Form 8-K that are
voluntary filings) filed before the date the offering is terminated. In
addition, the Forms 10-Q, 10-QSB, and Forms 8-K that are deemed to be a
part of the registration statement shall also be a part of the
prospectus as of the date of first use.
Instructions to Paragraph (e)
1. If the registrant is a successor registrant, it shall be
deemed to have met the conditions of paragraph (e)(1) if: (a) its
predecessor and it, taken together, do so, provided that the
succession was primarily for the purpose of changing the state of
incorporation of the predecessor or forming a holding company and
that the assets and liabilities of the successor at the time of the
succession were substantially the same as those of the predecessor,
or (b) all predecessors met the conditions at the time of succession
and the registrant has continued to do so since the succession.
2. Registrants who use Rule 430A(e) shall provide the
undertakings of Item 512(a) of Regulation S-K or S-B
(Secs. 229.512(a) or 228.512(a) of this chapter) in lieu of those
specified in Item 512(i) of Regulation S-K or S-B (Sec. 229.512(i)
or Sec. 228.512(i) of this chapter).
11. By amending Sec. 230.434 by revising paragraph (b)(2) to read
as follows:
Sec. 230.434 Prospectus delivery requirements in firm commitment
underwritten offerings of securities for cash.
* * * * *
(b) * * *
(2) Such prospectus subject to completion and term sheet, together,
are not materially different from the prospectus in the registration
statement at the time of its effectiveness or an effective post-
effective amendment thereto (including, in both instances, information
deemed to be a part of the registration statement at the time of
effectiveness pursuant to Sec. 230.430A(b) or (e)); and
* * * * *
By the Commission.
Dated: February 20, 1997.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4669 Filed 2-27-97; 8:45 am]
BILLING CODE 8010-01-P
