Enter to open, tab to navigate, enter to select
SEC Adopts Interim Final Rules Implementing Certain FAST Act Accommodations for EGCs and Smaller Reporting Companies
Practical Law Legal Update w-001-3380 (Approx. 5 pages)
SEC Adopts Interim Final Rules Implementing Certain FAST Act Accommodations for EGCs and Smaller Reporting Companies
by Practical Law Corporate & Securities
| Published on 14 Jan 2016 • USA (National/Federal) |
The SEC adopted interim final rules required under the FAST Act, which revise Forms S-1 and F-1 to permit emerging growth companies to omit financial information for certain historical periods, and revise Form S-1 to permit forward incorporation by reference for smaller reporting companies.
On January 13, 2016, the SEC announced its adoption of interim final rules (IFRs) that implement Sections 71003 and 84001 of the Fixing America's Surface Transportation Act (FAST Act). Sections 71003 and 84001 require the SEC to:
- Revise Forms S-1 and F-1 to permit emerging growth companies (EGCs) to omit financial information for certain historical periods.
- Revise Form S-1 to permit forward incorporation by reference for smaller reporting companies (SRCs).
The IFRs take effect on January 19, 2016. The SEC is accepting comments on the IFRs until February 18, 2016.
Revisions to Forms S-1 and F-1 to Permit EGCs to Omit Financial Information for Certain Historical Periods
Section 71003 of the FAST Act requires the SEC to revise Forms S-1 and F-1 to indicate that a registration statement filed (or confidentially submitted) by an EGC before an IPO may omit financial information for historical periods that are otherwise required by Regulation S-X as long as both:
- The omitted financial information relates to a historical period that the issuer reasonably believes will not be required to be included in the Form S-1 or F-1 at the time of the contemplated offering.
- Before the issuer distributes a preliminary prospectus to investors, the registration statement is amended to include all financial information required by Regulation S-X at the date of that amendment.
These changes to Forms S-1 and F-1 effectively permit EGCs to exclude historical financial statements that will be superseded by more recent financial statements during the SEC review process. For example, an issuer that files a registration statement near the end of its fiscal year may omit the oldest year of required financial statements if it reasonably believes that during the SEC review process those financial statements will be replaced in the registration statement by financial statements for its most recent fiscal year.
Despite the requirement that the SEC amend Forms S-1 and F-1 to reflect these changes, the changes were self-executing and took effect 30 days after the enactment of the FAST Act. The SEC later issued guidance stating that the Division of Corporation Finance would not object if EGCs take advantage of these changes immediately. The IFRs revise the general instructions to Form S-1 and Form F-1 to reflect these changes.
Update: The SEC has updated Forms S-1 and F1 to reflect these changes.
For more information on Regulation S-X and the financial statements required to be included in Forms S-1 and F-1, see the following Practice Notes:
Revisions to Form S-1 to Permit Forward Incorporation by Reference for SRCs
Section 84001 of the FAST Act requires the SEC to revise Form S-1 to permit an SRC to incorporate by reference into its registration statement any documents filed by the issuer after the effective date of the registration statement. The IFRs add a new paragraph to Item 12 of Form S-1 to effect this provision.
Currently, all issuers must meet certain eligibility requirements to use historical incorporation by reference on Form S-1 for documents filed before the effective date of the registration statement. The IFRs will not affect these requirements.
Under the IFRs, SRCs must meet each of the existing eligibility requirements and conditions in order to use forward incorporation by reference on Form S-1. For example, SRCs must have filed:
- An annual report for its most recently completed fiscal year.
- All required Exchange Act reports and materials during the 12 months immediately preceding filing of the Form S-1 (or a shorter period during which the SRC was required to file the reports and materials).
In addition:
- SRCs that are blank check companies, shell companies (other than those related to business combinations), or issuers for offerings of penny stocks will not be permitted to forward incorporate by reference into a Form S-1.
- In order to forward incorporate by reference, an SRC must:
- make its incorporated Exchange Act reports and other materials readily available and accessible on a website maintained by or for the issuer; and
- disclose in the prospectus that the materials will be provided upon request.
The IFRs also make a conforming change to Item 512(a) of Regulation S-K to provide for forward incorporation by reference of Exchange Act reports filed or furnished after the effective date of the registration statement on Form S-1.
Update: The SEC has updated Form S-1 to reflect these changes.
For more information on smaller reporting companies, see Practice Note, Determining Smaller Reporting Company Status and Understanding Key Differences in Its Disclosure and Reporting Requirements.