SEC Expands Access to Forms S-3 and F-3, Adopts Amendments to Form D Information Requirements and Mandates Electronic Filing of Form D
December 13, 2007
At its open meeting on December 11, 2007, the SEC approved rule amendments designed to allow smaller public companies to benefit from the streamlined shelf registration procedures afforded by Forms S-3 and F-3. It also adopted revisions to Form D information requirements and approved amendments to require mandatory electronic filing of Form D following a phase-in period where electronic filing will be voluntary.
Expanded Access to Forms S-3 and F-3 for Smaller Public Companies
Under the amendments to the eligibility requirements of Forms S-3 and F-3, companies that do not meet the current $75 million public float requirement will be permitted to use the forms to register primary offerings of their securities provided they:
- meet the other registrant eligibility conditions for the use of the respective form;
- are not shell companies and have not been shell companies for at least 12 calendar months before filing the registration statement;
- have a class of common equity securities listed on a national securities exchange; and
- do not sell more than the equivalent of one-third of their public float in primary offerings pursuant to the new instructions in any period of 12 calendar months.
As originally proposed, the amended eligibility requirements would have limited the amount of securities that could be sold annually under the new rules to 20% of an issuer’s public float. In response to comments, the final rules increase this cap to one-third of an issuer’s public float.
The final rules also add a requirement that the issuer have at least one class of common equity securities listed on a national securities exchange. This requirement was added to minimize potential abuses by ensuring that registrants using the new eligibility rules are subject to the added protection afforded by the stock exchange listing rules and other requirements.
The effective date for these amendments will be 30 days after their publication in the Federal Register.
Revisions to Form D Information Requirements
The Commission also voted to adopt amendments to revise and update the information requirements of Form D. Form D is a notice required to be filed by companies that have sold securities without registration under the Securities Act of 1933 in reliance on Regulation D or Section 4(6) of the Securities Act. Most states also require Form D filings. Specific revisions will include, among other changes:
- requiring filers to identify all issuers in a multiple-issuer offering;
- deleting the current requirement to identify as “related persons” owners of 10 percent or more of a class of equity securities;
- replacing the current requirement to provide a business description with a requirement to provide industry group information from a pre-established list of industry group classifications;
- providing for disclosure of revenue range information for operating companies and net asset value information for hedge funds (subject to an option to decline to disclose);
- requiring reporting of the date of first sale;
- specifying that material mistakes of fact or errors in a previously filed Form D require an amendment and clarifying when changes in a previously filed Form D or the passage of time require amendments;
- requiring that amendments contain current information in response to all information requirements;
- revising the minimum investment amount disclosure requirement to specify that it relates to outside investors only;
- replacing the current requirement to disclose information on a wide variety of expense and use of proceeds items with a requirement to disclose sales commissions and finders’ fees and information regarding the amount of gross proceeds used or proposed to be used for payments to related persons; and
- permitting filers to include a limited amount of explanatory text to the extent necessary to clarify responses.
The changes in information requirements will become effective on Sept. 15, 2008.
Electronic Filing of Form D
The SEC also voted to adopt provisions that will require mandatory electronic filing of Form D information after an initial phase-in period during which electronic filing will be voluntary. The phase-in period for Form D electronic filing will begin on Sept. 15, 2008. Electronic filing will become mandatory on March 16, 2009.
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CLEARY GOTTLIEB STEEN & HAMILTON LLP