Today, the Securities and Exchange Commission (“SEC”) proposed two sets of rule amendments aimed at overhauling how public companies access the capital markets and meet their ongoing reporting obligations.  The first rulemaking proposal, “Registered Offering Reform,” seeks to modernize the registered offering framework by, among other things, broadening eligibility for streamlined registration forms and extending communication safe harbors to a wider universe of issuers.  We address the second rulemaking proposal in a separate post.

The SEC’s registered offering reform proposal would:

  • Expand Form S-3 eligibility by removing the $75 million public float requirement and the 12-month reporting seasoning condition, potentially increasing the number of issuers that may conduct shelf offerings by over 60%.
  • Extend key registration and communication benefits, such as automatic shelf registration and free writing prospectus use, to any issuer eligible to use a registration statement on Form S-3 with exchange-listed common equity.  The SEC estimates this could result in an over 200% increase in the number of eligible issuers.
  • Define “qualified purchaser” under Securities Act Section 18(b)(3) in order to preempt state registration and qualification requirements for all registered offerings, including those involving unlisted securities that currently lack federal preemption.
  • Maintain parity for business development companies (“BDCs”) and registered closed-end funds filing on Form N-2, in part by removing seasoning and public float requirements for short-form shelf registration.
  • Amend Rule 482 to permit broad-based advertising for registered index-linked annuities and market value adjustment annuities.
  • Modernize Form S-1 by expanding both backward and forward incorporation by reference, with an estimated increase of up to 106% in the number of issuers eligible to forward incorporate.

In a statement, SEC Chair Paul Atkins noted that the proposals “build upon the legislative and regulatory concepts that have proven successful in the past and aim to extend that success to more companies – particularly small and mid-sized companies – and incentivize them to go and stay public.”

The public comment period for the proposal will remain open for 60 days following publication of the proposing releases in the Federal Register.

Many of the changes that are contemplated in this release and in the accompanying release were considered by the House of Representatives in connection with the INVEST Act, which was adopted with strong bipartisan support. 

Read the SEC’s press release, fact sheet and proposing release.  We note that the proposing release is lengthy and detailed.  A client alert will follow in short order analyzing these significant changes.