SEC Expands Nonpublic Draft Registration Statement Processing Procedures

August 29, 2017Alerts Capital Markets Alert

Beginning July 10, 2017, the Division of Corporation Finance of the Securities and Exchange Commission (SEC) will permit all companies to submit draft registration statements relating to initial public offerings (IPOs) for review on a nonpublic basis.

Prior to this announced change in review procedures, only emerging growth companies (EGCs) and, in certain circumstances, foreign private issuers, were permitted to submit draft registration statements.

The change allows all issuers to submit a registration statement in draft form for an initial registration, as well as for offerings made within the first year after a company has become an SEC reporting company.

Previously Available Only for EGCs

Under Section 6(e) of the Securities Act of 1933, a company that qualifies as an EGC prior to its initial public offering date may submit to the SEC a draft registration statement for confidential, nonpublic review by the SEC staff prior to public filing. The EGC filer status was created by the Jumpstart Our Business Startups Act of 2012 (JOBS Act).

The Securities Act and the Securities Exchange Act of 1934 define an EGC as an issuer with “total annual gross revenues” of less than $1 billion during its most recently completed fiscal year. This year the $1 billion threshold was increased to adjust for inflation. EGCs receive favorable accommodations during the IPO process, including the confidential submission and review of IPO registration statements.

Submitting a Draft Registration Statement

Now, all companies may take advantage of the confidential review process previously available only to EGCs. Issuers may submit the following registration statements in draft form:

  • A Securities Act registration statement for an IPO
  • An Exchange Act registration statement for registration of a class of securities under Section 12(b), relating to the listing of that class on a national securities exchange
  • A Securities Act registration statement submitted prior to the end of the 12th month following the effective date of an issuer’s initial Securities Act registration statement or an issuer’s Exchange Act Section 12(b) registration statement

Foreign private issuers may elect to proceed in accordance with the new guidance, the procedures available to EGCs (if they so qualify) or the Division of Corporation Finance staff guidance issued on May 30, 2012.

Issuers submit drafts of the initial registration statement and exhibits to the SEC on a confidential basis through the SEC’s EDGAR system. An issuer submitting a draft registration statement in these circumstances must include a cover letter confirming that the issuer will publicly file its registration statement and nonpublic draft submissions:

  • In the case of an IPO, at least 15 days before the date on which the issuer conducts a road show, as defined in Securities Act Rule 433(h)(4).
  • In the case of an initial registration statement under Exchange Act Section 12(b), at least 15 days prior to the anticipated effective date of the registration statement.
  • In the case of a follow-on offering within the first 12 months following the effective date of the IPO or Section 12(b) registration statement, at least 48 hours prior to any requested effective time and date.

For non-EGC companies pursuing an IPO or registration of a class of securities under Exchange Act Section 12(b), the SEC will review, on a nonpublic basis, the initial submission of a draft registration statement and related revisions.

However, for non-EGC issuers conducting a follow-on offering within 12 months of an IPO or Section 12(b) registration, the SEC will limit its nonpublic review to the initial submission, and issuers responding to SEC staff comments on a draft registration statement must do so with a public filing and not with a revised, nonpublic draft registration statement.

SEC Guidance on New Procedures

The SEC released frequently asked questions relating to these new procedures. These FAQs clarify the processes concerning the submission of a draft registration statement on the SEC’s EDGAR system.

The FAQs also explain that an issuer may seek confidential treatment when it submits its responses to staff comments on draft registration statements, and direct the issuer to appropriately identify information for which it intends to seek confidential treatment upon public filing to ensure that the staff does not include that information in its comment letters.

In addition, the FAQs address public communications made in connection with the submission of draft registration statements. The SEC clarified that the Securities Act Rule 134 safe harbor for public communications is not available until the issuer files a registration statement that satisfies the requirements of Rule 134. The issuer may make a public communication about its draft registration statement in reliance on Securities Act Rule 135, but a public statement about its offering may affect whether the SEC can withhold the draft registration statement in response to a request under the Freedom of Information Act.

The SEC’s FAQs are available here.

If you have any questions about this alert, please contact Brian V. Caid at 303.446.3870 or [email protected] or Patrick J. Pazderka at 612.607.7557 or [email protected].