SEC Issues New C&DIs on Eligibility to Use Form S-3 and Submission of Annual Reports to SEC | Practical Law

SEC Issues New C&DIs on Eligibility to Use Form S-3 and Submission of Annual Reports to SEC | Practical Law

The SEC's Division of Corporation Finance issued two new compliance and disclosure interpretations (C&DIs) that address an issuer's eligibility to use Form S-3 and the submission of annual reports to the SEC.

SEC Issues New C&DIs on Eligibility to Use Form S-3 and Submission of Annual Reports to SEC

by Practical Law Corporate & Securities
Published on 03 Nov 2016 • USA (National/Federal)
The SEC's Division of Corporation Finance issued two new compliance and disclosure interpretations (C&DIs) that address an issuer's eligibility to use Form S-3 and the submission of annual reports to the SEC.
On November 2, 2016, the SEC's Division of Corporation Finance (Division) issued two new compliance and disclosure interpretations (C&DIs) that address:
  • Eligibility to use Form S-3. New Question 116.25 of the Securities Act Forms C&DIs clarifies that securities registered for resale on Form S-3 in reliance on Instruction I.B.3 of Form S-3 should be counted against the issuer's available capacity under Instruction I.B.6 of the form. Instruction I.B.6 permits an issuer with less than $75 million in public float to use Form S-3 for a primary offering, provided the issuer sells no more than one-third of its public float within a 12-month period. The C&DI uses as an example an issuer that sells securities to the same investors:
    • with a portion coming from a takedown from its shelf registration statement for which the issuer relies on Instruction I.B.6; and
    • a portion coming from a separate private placement that the issuer concurrently registers for resale on a separate Form S-3 in reliance on Instruction I.B.3.
    The C&DI clarifies that the issuer may not rely on Instruction I.B.3 to register the resale of the balance of the securities on Form S-3 unless it has sufficient capacity under Instruction I.B.6 to issue that amount of securities at the time of filing the resale registration statement. If it does not have capacity, the issuer will need to either:
    • register the resale on Form S-1; or
    • wait until it has sufficient capacity under Instruction I.B.6 to register the resale on Form S-3.
    To learn more about Form S-3, see Practice Note, Registration Statement: Form S-3.
  • Submission of annual reports to the SEC. A new C&DI under the Proxy Rules and Schedule 14A C&DIs addresses:
    • the requirement in Rule 14a-3(c) and Rule 14c-3(b) under the Exchange Act that registrants mail seven copies of the annual report sent to security holders to the SEC "solely for its information"; and
    • the similar requirement in Form 10-K that certain Section 15(d) registrants furnish to the SEC "for its information" four copies of any annual report to security holders.
    The C&DI states that the Division will not object if a company posts an electronic version of its annual report to its corporate website by the dates specified in Rule 14a-3(c), Rule 14c-3(b), and Form 10-K, respectively, instead of mailing paper copies or submitting the annual report on EDGAR. If the report remains accessible for at least one year after posting, the Division's staff will consider the report available for its information.
    To learn more about annual report requirements, see Practice Note, Annual Report to Stockholders.